BHP axes 6,000
Thousands of jobs are being lost as mining stalwart BHP Billiton cuts nickel production on slumping global demand.
The bad news is in marked contrast to the company’s first half financial report, released simultaneously, which hails a plethora of production records for the period.
The Melbourne-based outfit is also to book a combined $3.7bn impairment charge in its current financial year as a result of the wind-downs.
Wednesday’s announced cuts of a total of 6,000 jobs compound a disastrous few days for miners worldwide after rival Rio Tinto announced it was slashing another 1,100 of its workforce as demand dwindles.
BHP is also extending the previously announced temporary suspension of some iron ore production and further cuts could be on the cards before July as demand for coal falls off and the miner admits it is likely to “opportunistically adjust production”.
The “safe ramp-down and indefinite suspension” of the Ravensthorpe Nickel operation will also see the Yabulu plant, also in Australia, cease processing of mixed cobalt hydroxide. The combined moved will see 800 employees as well as 1,000 contractors axed by the end of June.
Nickel mining at the Mount Keith plant in Australia is to be reduced with the loss of 100 full-time jobs and 200 contractors, BHP continued.
CFO Alex Vanselow confirmed in a teleconference on Wednesday that the total number of job cuts is 6,000 with 70% of these contractors.
“The decisions announced today are largely the result of the diminished prospects for profitability of Ravensthorpe and Yabulu in the current environment, significant and continuing deterioration in the outlook for the nickel market, and the projected level of capital expenditure required in order to achieve and sustain projected production volumes at Ravensthorpe,” Tuesday’s announcement read.
“All affected employees will be supported through the implementation of these changes and BHP Billiton will work with suppliers, customers and the local communities to minimise the impact of these decisions.”
The cuts have seen an addition $1.2bn impairment charge entered in the first-half result for the six months to the end of December to go add to the $2.1bn previously announced. It is also likely that a further $400m charge will be entered as an exceptional item in the second half while more production cuts and possible jobs losses are on the horizon.
“We will likely have to opportunistically adjust our metallurgical coal production in line with the weaker demand, during the second half of the 2009 financial year.”
Demand for metallurgical coal will be weaker in the six months to the end of June while BHP warned full-year sales are likely to drop as production falls between 10% and 15%.
A temporary suspension of iron ore production at the Samarco mine in Brazil announced in November is now to be extended from mid January until the end of March, at which point BHP will reassess its options.
Next month the miner will place the Pinto Valley facility in the US “on care and maintenance” as it is “uneconomic in the current environment”.
Wednesday’s announced cuts are at odds with the accompanying first-half performance review which hailed the miner’s “robust production performance” with record production of iron ore and copper cathode and record half-year iron ore shipments.
Against this BHP warned: “The global economic environment deteriorated sharply in the last quarter of the 2008 calendar year and we expect the market to remain weak and uncertain. However, we do expect the longer term fundamentals to remain healthy for our commodities.”
In early December BHP announced it was “temporarily” cutting production of manganese ore at a partly-owned South African facility. The cut at Samancor reduces ore production by 21% and alloy production by 23% for the next financial year.
On Tuesday rival miner Rio Tinto announced it is axing a further 1,100 jobs having already said in December that it was to lay off 14,000. Facilities in Canada and Europe are to be shut or temporarily closed while the Australia and UK-listed group also puts its stake in a Chinese joint venture up for sale.