Macmahon Holdings is expected to lose 75 per cent of its Argyle Diamonds' revenue and possibly lose 200 of its contractors as Rio Tinto scales back production and development work at the Kimberley mine.
Macmahon Holdings is expected to lose 75 per cent of its Argyle Diamonds' revenue and possibly lose 200 of its contractors as Rio Tinto scales back production and development work at the Kimberley mine.
In a statement to the market, Macmahon said it had been notified by Rio that it intends to "slow down" the underground development activities at the mine.
"Macmahon advises that its contract with be re-aligned to take into account the revised development program now being pursued by Argyle Diamonds, effective immediately," the company said.
Rio had been working on a $1.86 billion underground expansion at the mine which in October last year was some 24 per cent complete and $670 million had been spent so far.
The global miner today said an underground expansion would be "slowed to only critical development activities", resulting in a reduction in the workforce and demobilization of contractors.
"Given global market conditions, we will also reduce diamond production by taking an extended maintenance shutdown of the diamond processing facilities for up to three months, commencing in March," Argyle Diamonds chief operating officer Kevin McLeish said in a statement.
Rio did not quantify the number of job cuts or the output reduction and spokesperson Amanda Buckley was not immediately available for comment.
Macmahon said that as a result of the slow down, its yearly contract revenue will slump from some $80 million to below $20 million.
A Macmahon spokesperson told WA Business News that as a result of the slowdown, some 200 contractors may be made redundant.
The company has around 360 of its contractors working at the site.
Macmahon is the second known publicly listed company to be affected by the slowdown at Argyle, with VDM Group last month announcing that it expects a $15 million hit to revenue after Rio scaled back its contract work.
The latest news follows a series of cut backs announced by the mining giant, which yesterday delayed plans for its $US371 million automated train program in the Pilbara.
The company has also suspended a $236 million underground mine development in New South Wales and shelved plans for a $3 billion expansion at its iron ore mine in Brazil, among other cut backs. .
The string of cancellations and delays is part of Rio's bid to conserve cash and reduce its $US39 billion debt.
The miner said it plans to reduce capital spend from some $9 billion to around $4 billion, increase its asset sales and cut some 14,000 jobs worldwide.
Details of Rio's strategy will be unveiled in its report due next month.
Shares in Rio were down 20 cents at $40.15 while Macmahon dipped 2.5c to37.5c at 15:00 AEDT.
