Mining giant BHP Billiton announced plans Wednesday to slash 6,000 jobs, or about six per cent of its global workforce, as it rushes to cope with plummeting demand because of the global financial crisis.
The cuts and BHP Billiton's latest production forecasts underscore a sharp turnaround in the fortunes of big miners as the worldwide downturn bites into the previously insatiable appetite of China and other emerging economies for steel and other mineral-based products.
Treasurer Wayne Swan, the Australian government top finance official, warned that the mining boom that sustained the country's economy for more than a dozen years may be coming to an end.
In a release to the Australian Securities Exchange, BHP Billiton said it would immediately move to close its Ravensthorpe Nickel Operation indefinitely and cut production at its Mount Keith nickel mine, both of them in Western Australia state.
In total, 2,100 workers and contractors would lose their jobs at those sites by June.
BHP Billiton Chief financial officer Alex Vanselow later said that more jobs would be lost — about 550 in Pinto Valley, Arizona, 200 more at Olympic Dam in South Australia state, and 2,000 at its base metals operations in Chile.
"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," Vanselow said.
Swan described the job losses as a tragic consequence of the worldwide downturn.
"What we are seeing today is a sober reminder of the unwinding of the mining boom, caused by the global financial crisis and in particular the slowing of the economy in China," he told reporters.
BHP Billiton estimated the job cuts will result in a one-off total cost of about $500 million.
The wind-down at Ravensthorpe and Mount Keith will result in a $1.6-billion impairment charge in the company's earnings for the six months to Dec. 31, and an estimated pretax charge of about $400 million in the half-year to the end of June 2009.
Analysts said the announcement came as little surprise after competitors including Rio Tinto had previously announced big job cuts and shrinking production.
"They want to stay competitive and this is the way to do it — trim your employees and slow down your operations that are not profitable," said DJ Carmichael analyst James Wilson. "It reflects what is happening in the market at the moment."
Rio Tinto has launched plans to shed 14,000 jobs worldwide and slash spending this year to reduce its $40 billion US in debts.
The price of nickel, used primarily in the production of stainless steel, has dropped from highs of around $51,000 per tonne in May 2007 to about current prices around $11,550 a tonne.
BHP Billiton said production of iron ore and copper cathode reached record levels in the six months to Dec. 31, as did quarterly gas production at Australia's Northwest Shelf.
But the global economic environment had deteriorated sharply in the final three months of 2008 and the market would remain "weak and uncertain," the company statement said.
"Given the very challenging environment the whole industry has faced over the past few months, our production performance was particularly strong," chief executive Marius Kloppers said in the statement.
"We have also been quick to take appropriate action to respond to market conditions ... and we will continue to do so if required," he said.