Diversified miner OZ Minerals will halt production at its Scuddles mine in Western Australia with 70 employee and contractor positions to be cut in an effort to conserve cash.
Diversified miner OZ Minerals will halt production at its Scuddles mine in Western Australia with 70 employee and contractor positions to be cut in an effort to conserve cash.
The mine is part of the company's Golden Grove operations, where zinc production has already been cut on the back of falling metal prices.
The production halt at Scuddles will further reduce this year's zinc production by 25,000 tonnes to between 55,000t and 60,000t while copper production is expected to increase by 5000t to between 40,000t and 45,000t.
Today OZ Minerals said the Scuddle mine, which has been placed into care and maintenance, will reduce operating costs at Golden Grove by $US15 million.
The miner said some of Scuddles' resources will be redeployed to the Gossan Hill mine, located within Golden Grove, however some 50 employees and 20 contractors will be cut, representing a decrease of around 8 per cent in the workforce.
OZ Minerals chief executive Andrew Michelmore said with global commodity prices continuing their decline, every part of the company's business needed to operate as efficiently as possible.
"What this decision means is that we will markedly improve the site's cost performance. This will allow us to ensure the long term sustainability of the operation," Mr Michelmore said.
Yesterday, OZ Minerals said it has made significant progress in arranging a bridging facility to cover expected cash shortfalls at a number of its operations.
The miner is seeking to refinance $1 billion in debt by February 27.
Lenders have not yet formally responded to OZ Minerals request.
Shares in the company have been in a trading halt since late November and last traded at 55 cents.
The announcement is below:
As part of its ongoing review of operations OZ Minerals announced today that it would put the Scuddles mine at its Golden Grove operations in Western Australia on care and maintenance. It is estimated that this will improve operating costs at Golden Grove by US$15 million, reducing total cash costs at the site.
Some of the Scuddles' resources have been redeployed to the site's Gossan Hill mine and the focus now will be on improving operations at this site. It is expected that this re-focusing will lead to a reduction in 2009 zinc production of approximately 25,000 tonnes to 55,000 - 60,000 tonnes and an increase in copper production of 5,000 tonnes to 40,000 - 45,000 tonnes.
With global commodity prices continuing their decline it is important that every part of the OZ Minerals business is operating as efficiently as possible said Chief Executive Officer Andrew Michelmore.
"What this decision means is that we will markedly improve the site's cost performance. This will allow us to ensure the long term sustainability of the operation," said Mr Michelmore.
In September last year OZ Minerals announced its plans to reduce zinc production in favour of copper at Golden Grove. The polymetallic nature of the operation provides the capability to vary the mix of copper and zinc produced and now reviewing the operational mix between the Scuddles and Gossan Hill mines has provided the capability to improve the overall operating cost position of the site.
This decision will unfortunately result in the loss of approximately 50 employees and 20 contractors from the site. Remaining employees will be redeployed on the site. This represents a decrease in the workforce of approximately 8%.
OZ Minerals will provide outplacement assistance and counselling services to any employees for whom there are no suitable alternative roles. Notice periods for employees departing will commence immediately.
"We are very conscious of the effects that this decision will have on employee and contractor numbers at the site, however given the current continued slump in commodity prices and the current financial challenges facing our business we have to make tough decisions across the board," said Mr Michelmore.
Golden Grove is located approximately 450 kilometres north-east of Perth and 280 kilometres east of Geraldton. Golden Grove zinc, copper and precious metal concentrates are exported through the nearby Port of Geraldton to smelters in China, Korea, Thailand and India.
