A multinational mining company will give hundreds of workers the chop as it prepares to recoup $5 billion in savings.
Rio Tinto plans to shed 500 iron ore jobs at its Paraburdoo Operation in Western Australia’s Pilbara region. It comes as the mining giant announces a long-term strategy to generate billions of dollars in cash revenue.
QMEB understands iron ore sales represent almost 90 per cent of company earnings. However, the prolonged oversupply and sluggish commodity prices mean Rio’s current business model is unsustainable.
A Rio Tinto spokesperson confirmed “rolling reductions” have begun that are widely expected to bring a 4 per cent drop in the company’s ore division’s workforce.
The redundancies represent the third time Rio has reduced staff numbers since 2014. The company sacked 700 workers earlier in 2016 and a further 800 last year.
“We have placed our assets at the heart of the business to drive improved performance and ensure our resilience through the cycle. We are well on track to meet our target of $2 billion of cash cost savings by the end of next year. We are also taking advantage of any opportunity to generate value from mine through to market,” Rio chief executive J-S Jacques says.
“Our strategy plays to our strengths: World-class assets, a strong balance sheet along with commercial and operating excellence. A relentless focus on generating cash, together with capital discipline – prioritising value over volume – means that investors can expect us to deliver superior shareholder returns whilst continuing to invest through the cycle.”
Improved productivity in the company’s $50 billion asset base is promised to deliver an additional $5 billion of free cash flow over the next five years.
However, State Premier Colin Barnett suggested the redundancies were irresponsible, iron ore prices have improved and Rio has a “responsibility to maintain [its] workforce”.
Iron ore prices recently reached nearly $80 a tonne, according to the Metal Bulletin Index. However, BHP Billiton, Rio Tinto and Fortescue Metals Group predict iron ore prices will fall in the New Year.