Rio commences Warkworth appeal

Mining giant warns of falling output, job cuts regardless of legal outcome.

Rio Tinto Ltd says it expects falling output and job cuts at its Warkworth coal mine in eastern Australia, regardless of its appeal against a court decision to block plans to extend the life of the operation.

Rio Tinto is disputing claims by some residents of Bulga, near the Warkworth mine in New South Wales state, that expanding the pit would wreck their community.

The Supreme Court in Sydney yesterday heard Rio Tinto's appeal against an earlier ruling in favor of the residents' case.

Harry Kenyon-Slaney, the head of Rio Tinto's energy division, said the outcome of the appeal won't be known for several months - too late to avoid cuts to its 1,300-strong workforce at Warkworth.

"The legal blow we were dealt in April is now forcing us to operate in a reduced footprint, which impacts productivity and drives up costs," Mr. Kenyon-Slaney said.

"If this continues, it will be impossible to maintain production levels at the mine which in turn means fewer jobs."

The dispute comes as Australia's coal industry struggles with a supply glut of the commodity and cooling economic growth in China (see John Abernethy's Tipping out Rio).

More than 10,000 coal-mining jobs have been lost in the past year as companies like Rio Tinto, BHP Billiton Ltd and Glencore Xstrata aggressively cut costs and closed unprofitable pits.

Rio Tinto early last year secured state government approval for a $600 million development of its Warkworth mine to extend its life by 12 years through 2033.

The mine is part of a larger operation producing close to 12 million metric tons a year of thermal and coking coal for the local market and customers in Asia.

However, the New South Wales Land and Environment Court in April overturned approval for the expansion because it wasn't convinced the economic benefits outweighed the environmental and social costs.

The state government, which supports Rio Tinto's appeal, last month proposed amendments to legislation that would limit the grounds for refusing an application for a mining permit.

If the company's appeal is successful, the case is likely to return to the Land and Environment Court.

"We have already spent close to four years trying to secure approval for this mine extension and it is unlikely the legal system can deliver an outcome in time to avoid impacts," Mr. Kenyon-Slaney said.

Still, some in the town of Bulga have said the risk of the mine closing is preferable to an extension of mining to within less than 3 kilometers of the town. They say they are worried about noise and dust from the mine as well as damage to sensitive forests and grassland.

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