HomeBase MetalsBHP hit by global recession

BHP hit by global recession

Part of BHP’s
Ravensthorpe nickel
operation in Australia
Sydney, Australia — MININGREVIEW.COM — 21 January 2009 – The global recession has led the world’s largest mining company – BHP Billiton Limited (BHP) – to cut some 6% of its workforce, and to close its giant Ravensthorpe nickel mine in Australia with a US$1.6 billion (R16 billion) write-down, its biggest in nine years.

In a statement released here BHP chief financial officer Alex Vanselow warned that more mines could be closed, given the uncertainty in commodity markets, with the Australian metallurgical coal mines already slated to reduce output by 10 to 15%.

Reuters reports that  until now BHP has set itself apart from other miners by maintaining production, and just last month it said sales volumes were holding up despite the global downturn.

BHP said it was cutting some 6 000 jobs in total. “These are very serious types of decisions and we don’t take them lightly, but in the end they are necessary and they are the correct decisions,” Vanselow told a news conference.

Rival Rio Tinto is in the process of eliminating 14 000 workers, Brazil’s Vale has cut 1 300 jobs and put 5 500 workers on paid leave, and other miners have also warned that jobs are at risk.

The Reuters report quotes fund managers as saying that brokers are likely to cut their earnings forecasts for BHP, which had been expected to report a net profit around US$14 billion (R140 billion) for the year to June 2009.

Vanselow conceded the company got it wrong on Ravensthorpe, but analysts said it was doing the right thing to shut it down in face of weak nickel prices.

“Ravensthorpe was always going to be relatively high cost, and it has been a difficult operation from day one," said Tim Schroeders, a portfolio manager at Pengana Capital.

Besides some 2 100 jobs cuts in Australian nickel mining, Vanselow said another 4 000 jobs out of BHP’s 101 000-strong global workforce would go. He estimated that total job cuts would cost US $500 million (R5 billion).