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REPORT: BHP Billiton to Cut 700 Jobs at Coal Mines in Australia

Mining giant BHP Billiton Ltd.(ASX:BHP) (NYSE:BHP) announced on Tuesday it plans to cut roughly 700 jobs from its metallurgical coal business in central...

|Sep 23|magazine6 min read

Mining giant BHP Billiton Ltd. (ASX:BHP) (NYSE:BHP) announced on Tuesday it plans to cut roughly 700 jobs from its metallurgical coal business in central Queensland due to high operating costs and declining prices.

BHP Billiton Mitsubishi Alliance, a joint venture between BHP and Mitsubishi Corp., said it plans to cut the jobs from its Bowen Basin coal mines in Australia. The job cuts will account for about seven percent of the joint venture’s total workforce.

"The coal industry continues to face challenging market conditions and had to act to ensure the long-term viability of the business," the BHP Billiton-Mitsubishi Alliance (BMA) said in a statement.

Coking coal prices have been trading at their lowest levels in seven years as supply for the commodity outpaces demand. Prices for the black gold have fallen 20 percent this year alone.

"When we started looking at cost restructuring we were around $150 a ton, coming down from $200, and now we are down around $110," said Dean Dalla Valle, president of BHP’s coal division. 

"And we've had a pretty sticky forex rate in this country. This all follows a period of pretty inflationary cost growth over the past four or five years."

BHP and other Australian miners have invested billions of dollars over the past decade in new projects as prices for iron ore and coal have been on the rise. The drop in price and slowdown in demand, however, has caused many companies to cut jobs and cancel expansion plans.

"A slowdown in China's manufacturing marks low demand from an economy which Australia relies on heavily for commodity exports," a spokesperson from CMC Markets said.

Like other Australian mining companies, BHP is continuously reviewing its coal division, looking for additional ways to cut costs as it attempts to push every operation to function independently.

"It comes back to the world sets our price but Australia sets our costs so we've just got to make sure we are matching them up," said Dalla Valle.

Despite the 700 job cuts, BHP Billiton is sticking to its guidance of increasing metallurgical coal output by four percent to a record 47 million tons in 2015.