Time For Miners to Cut Costs

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Wednesday, February 11th, 2015
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Pilbara iron ore miners are among the nation’s best paid workers, but Rio Tinto has told its workers that employee costs are one of a range of areas that must be cut.

A current hiring freeze would be extended and wages and service and supply contracts reviewed in response to the halving in the iron ore price to below $US60 a tonne, division chief Andrew Harding told staff in a memo.

Employee and labour-related costs had to “reflect market conditions”, he said.

Organisational structures were also being reviewed, including maintenance times, and warehouse and stockpile inventories had to be significantly reduced, Mr Harding said.

“To maintain favourable cash cost earnings, we must substantially and quickly decrease our operating costs and, in effect, devise a new plan,” he said.

Chief executive Sam Walsh made similar comments in a memo to staff last month, saying costs had to be reined in and wasteful working capital removed.

CFMEU mining and energy secretary Gary Wood said he could understand Mr Harding’s sentiments but was concerned it would mean job cuts.

The comments come as ANZ downgraded its 2015 and 2016 iron ore price forecasts by 24 per cent and 30 per cent to $US58 and $60 a tonne.

It blamed persistent production from high cost Chinese producers and expansions from big miners including Rio, predicting a slight firming by 2018 as supply fell.

The consensus forecast of analysts is for Rio to post a 13 per cent fall in full year underlying net profit to $US8.9 billion on Thursday.

 

By Greg Roberts
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