BHP Billiton, the world's largest mining company says it will cut 6,000 jobs from its global workforce and close the Ravensthorpe Nickel mine due to the weakening demand for its products brought on by the global economic slowdown.
Out of a global workforce strength of 101,000, the 6,000 job cuts constitute nearly 6 per cent with about 3,000 Australians losing their jobs mainly in the coal and nickel production units, 2,000 Chileans from its base metal plant and 550 Americans from Pinto Valley copper mine and seventy per cent of the job losses will come from the company's contractors.
The job cuts will result in a one-off total cost of approximately $500 million for the miner.
"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,'' BHP Billiton chief financial officer Alex Vanselow said in a statement today.
BHP said there would be no job losses at Olympic Dam but it would reduce the staff by 200, mainly those who are involved in the expansion project. The Olympic Dam holds the world biggest known deposit of uranium and the fourth biggest copper reserves.
Production adjustments which was announced by BHP Billiton late last year, was limited to Samarco (Brazil) and the Samancor manganese operations while in the Western Australia, iron ore and metallurgical coal operations, the company had received requests for deferrals from some long term contract customers.
At the end of November 2008, in response to weak demand Samarco announced the temporary suspension of two of its three pellet plants to mid-January 2009. Following a subsequent reassessment of the market conditions, the company said that the suspension will continue until the end of March 2009, at which time Samarco management will reassess the situation.
BHP Billiton also announced today the closure of the Ravensthorpe Nickel Operation and cut production at Yabulu mines, which processes the mixed nickel cobalt hydroxide product.
The company said that ''The global economic environment deteriorated sharply in the last quarter of the 2008 calendar year and we expect the market to remain weak and uncertain. However, we do expect the longer term fundamentals to remain healthy for our commodities.''
BHP Billiton CEO, Marius Kloppers, said the company's performance and market position meant that it was strongly placed for both the current market conditions and the longer term market recovery.
He also said that the company was well positioned to weather the challenging conditions, and stood ready to make production adjustments if necessary.
The closure and cut back in production will result in a $1.2 billion impairment charge, on top of $2.1 billion provision announced at last year's annual meeting.
After the frenzied demand for mineral raw materials by emerging Asian economic giants China, India and South Korea, and powerhouse Japan, the unprecedented boom in minerals seems to have become a thing of the past, at least for now, as the global economic slowdown has put Australian mining in the pits and the Australian government has slashed its mineral export earnings in 2008-2009 by nearly $30 billion to $192 billion. (See: Australian mineral export forecast down by $30 billion)
The value of Australia's minerals and energy exports is forecast to be around $159 billion in 2008-09, a downward revision from the $180 billion forecast in September. This updated forecast of minerals and energy export earnings still represents a rise of 37 per cent on the previous year.
BHP Billiton has so far refused to cut jobs and reduce production, but now it will join other miners like Vale of Brazil, the London based Rio Tinto Group, Mitsui Mining & Smelting and Anglo American Plc in reducing output and axing jobs as the global slowdown has forced miners to scale back.
Last month, Rio Tinto, axed more than 14,000 jobs globally, slashed $5 billion in spending and increased asset sales as part of an aggressive cost cutting campaign to reduce its debt by $10 billion from $42 billion by the end of 2009. (See: Major shake up at Rio Tinto to reduce debt)
The demand for iron ore has fallen over the cliff as nearly all global steel manufacturers have cut production and idled plants and prices of steel has declined by half and the aluminium business has been a dent to Rio's ambitions of being a major player in this market with global demand slowing along with the demand for commodities.