Miners Mount Gibson Iron, Atlas Iron and Sinosteel Midwest Corporation have announced plans to slash spending and reduce the size of their workforces in response to recent iron ore market uncertainty.
The cutbacks coincide with solid production performances from Mount Gibson and Atlas, which both reported significant increases in iron ore shipped over the September quarter.
Mount Gibson today announced it had launched a comprehensive operational restructure – including putting off up to $150 million in spending and laying off 270 jobs - to ensure it remains profitable in the face of the falling value of iron ore.
The company initially announced in August that it had been reviewing its options to reduce expenditure and maximise cash flow, in response to recent volatility in iron ore prices.
Today, Mount Gibson said it would eliminate or defer between $120 million and $150 million in capital and operating expenditure originally mooted for financial year 2013.
Mount Gibson said it would continue to target sales of between 8 million and 8.5 million tonnes or iron ore for the financial year.
It shipped 1.76 million tonnes of iron ore in the September quarter, up 52 per cent on the previous corresponding period.
The company said the most significant changes would be at its Koolan Island operation, with planned waste stripping activities to be scaled back.
Mining activity at Extension Hill will continue at its current reduced rate, while at Tallering Peak Mount Gibson said it had revised its mining schedule to also operate on a single-shift basis.
The company said the changes would result in approximately 270 redundancies, including 140 contractors.
Most of the job losses will occur at the Koolan Island facility, while some planned redundancies at Tallering Peak will be brought forward.
Mount Gibson chief executive Jim Beyer said the operational changes were a prudent course of action in an uncertain market.
“The initiatives we have announced today will maximise our cash flow and preserve our financial capacity in volatile and challenging conditions,” Mr Beyer said.
“Nonetheless, it is always a difficult decision to reduce your workforce, and we will be providing as much assistance as we can to those people affected by the changes we have announced today.”
At close of trade, Mt Gibson Iron stocks finished up 18.5 per cent, trading at 78.5 cents.
Also today, Atlas Iron announced it would cut up to 27 jobs and defer long-term exploration plans as a result of iron ore market uncertainty.
Atlas said a further 23 full-time workers would be redeployed to other parts of its operations, as it cuts back on exploration and evaluation.
The iron ore miner said its full year earnings guidance remained unchanged.
Managing director Ken Brinsden said a wide-ranging expenditure review had identified savings that would flow through to reductions in operating and capital costs.
“This tight focus on cost control means Atlas can maximise shareholder returns while also pursuing its expansion strategy, which will see our production capacity grow to 12Mtpa by the end of next year,” Mr Brinsden said in a statement.
“While iron ore prices have been volatile, Atlas continues to receive strong demand for its standard product from a range of customers both inside and outside China.
“Atlas will continue to take advantage of opportunities to sell its lower-grade value fines product, which otherwise would be mines and stockpiled as mineralised waste.”
Atlas reported that it shipped a record 1.59Mt of iron ore during the September quarter.
At close of trade today, Atlas shares were up 5.3 per cent, trading at $1.58.
Meanwhile, Perth-based mining contractor MACA announced today that it had received notification from Sinosteel Midwest that it had decided to delay the start-up of the Blue Hills hematite DSO project due to the continued uncertainty.
The mine was originally scheduled to commence operations early in 2013, following shut down at Sinosteel’s Koolanooka hematite mine.
MACA said it expected to take a $15 million hit to its revenue as a result of Sinosteel delaying startup at Blue Hills, but due to recent contract wins, its full-year guidance of $400 million-plus in revenue would not be affected.
“Sinosteel Midwest’s Blue Hills would be one of the smallest of MACA’s operations by annualised revenue, and the small mining fleet can be utilised on other projects to reduce forecast capital spend pending further direction from Sinosteel Midwest,” MACA said in a statement.
“Sinosteel Midwest has been most honourable in all dealings with MACA and both parties have enjoyed a very positive working relationship at Koolanooka.”
At close of trade today, MACA shares were up 0.79 per cent, trading at $1.92.
