Trains haul iron ore
from Rio Tinto’s Pilbara
mines in West Australia
 
Sydney, Australia — MININGREVIEW.COM — 14 January 2009 – Australia’s metals industry has suffered another round of production cutbacks this week with three major mining companies mothballing operations and shelving expansion plans in an effort to cope with falling demand and prices.

Reuters reports from here that global miners Rio Tinto and Xstrata – along with Australian base-metals miner OZ Minerals – have announced cutbacks to copper, zinc and iron ore operations as they seek to rein in costs and protect profit margins.

“Given the current environment these cuts are quite expected,” said Michael Bentley, a portfolio manager at Sydney funds management firm Northward Capital.

Rio Tinto has shelved a US$229 million (R2.3 billion) plan to extend its Northparkes copper mine in New South Wales state, and has also delayed a US$371 million (R3.75 billion) project to automate trains that haul iron ore from its Pilbara iron ore mines in Western Australia. The company revealed that 26 Northparkes staff would lose their jobs, and a further 320 contractors at the project would be laid off.

Reuters says Rio Tinto is cutting costs, curtailing expansion and selling assets to tackle nearly US$40 billion (R404 billion) of debt built up during the resources boom when it went on an acquisition spree. In announcing the cost-cutting plan last month, the firm said it would axe 14 000 jobs, or about 13% of its workforce.

London-listed Xstrata, which also borrowed to expand during the boom, is also now trimming costs and production.

The company announced this week that it was restructuring lead-zinc operations at its Mount Isa mining and metals-processing complex in the northeastern state of Queensland, and its Handlebar Hill open-cut zinc-lead mine, north of Mount Isa, was being mothballed. The US$61 million (R616 million) project that began last year aimed to produce 1.75 million tonnes of ore per annum.

“These operational changes are being made to reposition Xstrata Zinc’s Mount Isa operations and secure their long-term future in the face of very challenging market conditions,” said Xstrata’s Mount Isa zinc boss Kevin Hendry.

Oz Minerals – struggling to refinance heavy debts – said it would suspend operations at one of its west Australian mines and cut zinc production in 2009 in favour of copper. It has idled the Scuddles mine at its Golden Grove project, cutting zinc production there in 2009 by 25 000 tonnes to 55 000-60 000 tonnes.

Since July 1, zinc prices have fallen nearly 65% and copper prices about 60%.