21/01/2009 - 08:32

BHP axes over 2000 WA jobs

21/01/2009 - 08:32

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BHP Billiton has today announced plans to cut 2100 jobs in Western Australia as it suspends operations at its Ravensthorpe nickel mine indefinitely and scales back production at its Mt Keith nickel mine on the back of a falling metal price.

BHP axes over 2000 WA jobs

BHP Billiton has today announced plans to cut 2100 jobs in Western Australia as it suspends operations at its Ravensthorpe nickel mine indefinitely and scales back production at its Mt Keith nickel mine on the back of a falling metal price.

In a conference call to journalists this morning, chief financial officer Alex Vanselow said the decision to suspend Ravensthorpe was made this morning and people responsible for the development of the operation were no longer with the company.

He declined to give names.

BHP said the workforce at Ravensthorpe will be reduced by around 800 employees and 1000 contractors by June this year, despite the operation reaching nameplate capacity last week.

Mr Vanselow said although the operation had reached production capacity, it was a question of whether the operation was economically viable.

A BHP spokesperson told WA Business News that some 150 employees at Ravesnthorpe will be retained to look after the mine should it be brought back into operation.

Late last year, Ravesnthorpe, together with the Yabulu nickel refinery suffered an impairment charge of $US2.1 billion. Following today's news, both operations have undergone a further pre-tax impairment charge of approximately $US1.2 billion.

Today, Mr Vanselow said the book value of Ravensthorpe had been written down to zero.

He added the Ravensthorpe nickel mine was not likely to be cash positive in the medium term.

He also declined to speculate as to when Ravensthorpe could be back on line and did not give a ball park figure of where nickel prices needed to be to make the mine economically viable.

Nickel prices have dropped from its highs of some $US52,000 per tonne in May 2007 to around $US15,000 at the end of September, and then to around $US10,000/t at the end of last month.

At Mt Keith, some 100 employees and 200 contractors will be let go by the end of February as operations are scaled back.

The miner said the rate of mining at Mt Keith will be reduced in order to preserve its economic viability however the overall rate of concentrate production will remain largely unchanged.

BHP said all affected employees will be supported through the implementation of these changes.

"We also recognise that any local communities will have concerns about how this will impact them," BHP stainless steel materials president Jimmy Wilson said.

"We will honour any agreements we have made and continue to keep the communities updated throughout the process."

BHP has long stayed silent as to how falling commodity prices will affect their operations, with rival Rio Tinto preparing to release details of 14,000 job cuts worldwide and how capital spend will be reduced from $US9 billion to $4 billion.

Today's WA job cuts are part of BHP's plan to axe 6000 people from its global workforce amid the economic downturn, with 3400 jobs to be cut in Australia. Around 200 jobs will go at the miner's Olympic Dam expansion project in South Australia and 1100 jobs will be slashed from coal operations in Queensland.

The company said the 6000 job cuts represents a 6 per cent reduction to its 101,000 strong global workforce.

"This is 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," Mr Vanselow said.

In addition, the company will slash about 550 jobs at Pinto Valley in the US, 200 jobs at the Olympic Dam expansion project in South Australia and 2000 jobs at base metals in Chile.

BHP has estimated the job cuts will result in a one-off total cost of about $US500 million ($A772.56 million).

The miner is also cutting coking coal production in Queensland by about 10 to 15 per cent in response to reduced demand.

"It will be something like four to six million tonnes (per year), our share," Mr Vanselow told reporters.

There was uncertainty in the medium term outlook, he said.

But BHP had a strong balance sheet to see out the turmoil in financial and commodity markets, he said.

"The balance sheet allows us to continue investing like we're doing in iron ore, in petroleum, in other commodities, and we are prepared for, on an opportunistic basis, to look at acquisitions," Mr Vanselow said.

BHP today released its second quarter report for the 2009 financial year and delivered an increase in iron ore output.

Shares in the company were down 88 cents, or 3.04 per cent, at $28.07 at 1047 AEDT.

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