The world’s biggest miner, BHP Billiton, said yesterday it would cut about 6,000 jobs because of the global economic downturn and weakening demand for its products.
“These are very serious types of decisions and we don’t take them lightly, but at the end they are necessary and they are the correct decisions,” chief financial officer Alex Vanselow said.
The cuts represent about six percent of the Anglo-Australian miner’s global work force of 41,000 employees and 60,000 contractors.
They include 3,400 jobs in Australia mostly in coal and nickel production, 2,000 base metals jobs in Chile and 550 positions at the Pinto Valley copper mine in the US, Vanselow told reporters in a conference call.
BHP, which recently walked away from its hostile takeover bid for Rio Tinto, citing the impact of the global financial crisis, said the cuts would mean a one-off cost of US$500 million, without elaborating.
The group said it would indefinitely suspend operations at its Ravensthorpe nickel project in Western Australia, citing “diminished prospects for profitability” as the outlook for nickel continued to deteriorate.
A total 2,100 jobs will be lost as a result of the shutdown and the scaling back of operations at the Mount Keith nickel mine, with another 200 going at the Olympic Dam copper-uranium expansion project.
Vanselow said BHP would also cut coal production in Australia by between 10 and 15 percent, at the expense of 1,100 jobs.
Australian Treasurer Wayne Swan said the job losses were a “tragedy” and a reminder that the country, which has benefitted from years of strong demand for commodities from Asia, was not immune to the global economic slowdown.
“What we are seeing today is a sober reminder of the unwinding of the mining boom, caused by the global financial crisis and in particular the slowing of the economy in China,” Swan said.
But Vanselow said BHP remained confident of China’s longer term growth prospects and the impact of Beijing’s stimulus efforts in the medium term.
“Our biggest concern is not China, which alone is 30 percent of global consumption,” he said.
“The OECD, and other developing countries, is the core of the uncertainty that we are seeing,” he said.
Releasing its half-year production results, BHP said the global economic environment deteriorated sharply in the last quarter of the last year, and it expected the market to remain “weak and uncertain.”
But CEO Marius Kloppers said the miner’s production performance was strong and the group was well positioned to weather the challenging conditions.
“We have also been quick to take appropriate action to respond to market conditions, such as the previously announced production adjustments and project withdrawals, and we will continue to do so if required,” he said.
Aluminum and copper output were both weaker than a year ago, down 8 percent and 11 percent respectively on the same period last year.
Falling copper prices were expected to erode earnings by US$1.3 billion, BHP said, with an additional US$300 million lost because of price fluctuations and unplanned interruptions at its Escondida mine.