Xstrata, Rio shed jobs in coal divisions

Mining company Xstrata will shed about 100 head office jobs in its coal division as the industry continues to suffer from weak prices, rising costs and the high dollar.

Xstrata announced on Tuesday it would consolidate its NSW and Queensland divisions and close its Brisbane office, where most job losses would be felt.

A spokesman said coal production would be unaffected. Xstrata is the latest coalminer to announce cost cuts with Rio Tinto confirming reports it was looking to shed up to 100 jobs from its coal business.

A Rio spokesman said the company was taking steps to improve the long-term resilience of its Australian coal operations as the industry faced a "significant challenge to remain globally competitive".

Last week reports emerged that Brazilian giant Vale had appointed Bank of America Merrill Lynch to sell minority stakes in two Australian coal projects, the Belvedere and Eagle Downs deposits.

In last month's 2012 results presentation Vale took a $1 billion impairment of its Australian coal business and last week coal baron Nathan Tinkler - in a public examination over the wind-up of a private company, Mulsanne Resources - revealed he was in talks last year to buy Vale's coal assets for $400 million and roll them into listed junior Blackwood Corporation.

On Tuesday listed coalminer New Hope Corporation reported a 32 per cent drop in its first-half net profit to $69 million and said it was targeting $45 million in annualised cost savings without shedding jobs.

"We're well on the way," managing director Robert Neale told BusinessDay, citing productivity improvements, including running its wash plants for more than 8000 hours a year, diggers working at world's best practice rates with reconfigured buckets, mine trucks at 90 per cent availability and extending tyre life from 4000 to 5000 hours up to 13,000 hours.

New Hope said cuts to date amounted to a 12 per cent reduction in production costs per tonne , although Mr Neale would not reveal a figure. "I don't want to give that away or our prices will go down further," he said.

Mr Neale said the outlook for coal prices remained "challenging" and he did not expect there would be a return to the high prices of recent years.

"We had a massive boom over the last three to five years," he said. "We all enjoyed it. We're on the downside of that now."

Mr Neale said that as Asia continued to grow coal demand would return.

Coal production was reduced by wet weather in the six months to January 31, falling 5 per cent to 3 million tonnes compared with a year ago. New Hope expects to produce 5.8 million to 6 million tonnes in the 2012-13 financial year.

During the half, New Hope revenue fell 17 per cent to $323 million. The dividend was unchanged at 6¢ a share. New Hope shares rose 16¢ to $3.98.

Wilson HTM analyst Andrew Pedler said the result was in line with expectations and New Hope was making "steady going through fairly heavy weather".