Rio warning job cuts loom at coalface

THE aura of invincibility continues to fade from the mining industry, with Rio Tinto confirming that redundancies are afoot at one of its Queensland mines.

By InvestSMART · 20 Jul 2012

By InvestSMART ·
20 Jul 2012

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THE aura of invincibility continues to fade from the mining industry, with Rio Tinto confirming that redundancies are afoot at one of its Queensland mines.

The resource major said a review of the Clermont thermal coalmine in central Queensland had not been completed but was certain to lead to redundancies.

Rio has been conducting a cost review across its global business in recent months, which has led to reform suggestions for corporate and operational levels of the company.

It was unclear yesterday whether the focus on Clermont was an aspect of the global review or something more specific, but a spokesman said the company was committed to keeping its workers informed.

"Rio Tinto is looking at ways to reduce costs at Clermont mine, to improve its competitiveness in an environment of significantly lower thermal coal prices," he said.

Rio reported this week that the Clermont mine a joint venture with several Japanese companies had produced thermal coal at an elevated level over the past three months, offsetting production cuts suffered during a weather-affected first quarter.

But sliding thermal coal prices have been eroding the profitability of the sector recently. Rio is also expected to shelve $2 billion in expansion spending for another Australian thermal coalmine, the Mount Pleasant mine in New South Wales.

The company has also been increasing its coal operations in Mozambique, where it is now producing thermal and coking coal.

Earlier this year, BHP Billiton confirmed it was closing the Norwich Park mine in Queensland, in what was believed to be the first coalmine closure in Australia since the global financial crisis.

The peak of the mining boom appears to have passed, with most commodity prices and most resources stocks fetching significantly lower prices than they were several months ago.

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Frequently Asked Questions about this Article…

What has Rio Tinto said about job cuts at the Clermont thermal coal mine?

Rio Tinto confirmed redundancies are afoot at its Clermont thermal coal mine in central Queensland. The company says a review of the mine hasn’t been completed but is certain to lead to redundancies, and it has committed to keeping workers informed as it looks to reduce costs.

Why is Rio Tinto conducting a cost review at Clermont and across its business?

Rio has been doing a global cost review and is looking for ways to reduce costs at Clermont to improve competitiveness. The move is driven by significantly lower thermal coal prices, which have been eroding sector profitability.

How has Clermont mine performed recently and who owns it?

Rio reported Clermont, a joint venture with several Japanese companies, produced thermal coal at an elevated level over the past three months, which helped offset production cuts suffered during a weather-affected first quarter.

Is Rio Tinto delaying any coal expansion projects in Australia?

Yes. The article says Rio is expected to shelve about $2 billion in expansion spending for the Mount Pleasant thermal coal mine in New South Wales.

Is Rio investing in coal operations elsewhere?

Rio has been increasing its coal operations in Mozambique, where it is now producing both thermal and coking coal.

How might these mining developments affect everyday investors in resources stocks?

The article notes the peak of the mining boom appears to have passed, with most commodity prices and resources stocks significantly lower than months ago. Cost reviews, redundancies, shelved projects and sliding thermal coal prices can weigh on company earnings, investor sentiment and share prices—factors investors should monitor.

Have other major miners recently closed coal mines in Australia?

Yes. Earlier this year BHP Billiton confirmed it was closing the Norwich Park mine in Queensland, which was believed to be the first coalmine closure in Australia since the global financial crisis.

What should investors watch next regarding Rio Tinto and the coal sector?

Everyday investors should watch Rio’s ongoing cost-review announcements, any updates on redundancies at Clermont, changes to capital spending like the Mount Pleasant decision, and thermal coal price trends—since these will influence profitability and sector outlook.