Mining giant Rio Tinto orders wage review, extends hiring freeze as iron ore price crunch hits

PILBARA iron ore miners are among the nation’s best paid workers but Rio Tinto has told its workers that employee costs are one of a range of areas that must be cut.

A mine worker watches as a haul truck is loaded by a digger with material from the pit at Rio Tinto Group's West Angelas iron ore mine in Pilbara, Australia, on Sunday, Feb. 19, 2012. Rio Tinto Group, the world's second-biggest iron ore exporter, will spend $518 million on the first driverless long-distance trains to haul the commodity from its Western Australia mines to ports, boosting efficiency. Photographer: Ian Waldie/Bloomberg

PILBARA iron ore miners are among the nation’s best paid workers but Rio Tinto has told its workers that employee costs are one of a range of areas that must be cut.

A current hiring freeze would be extended, and wages and service and supply contracts reviewed in response to the halving in the iron ore price to below $US60 a tonne, division chief Andrew Harding told staff in a memo.

Employee and labour-related costs had to “reflect market conditions”, he said.

Organisational structures were also being reviewed, including maintenance times, and warehouse and stockpile inventories had to be significantly reduced, Mr Harding said.

“To maintain favourable cash cost earnings, we must substantially and quickly decrease our operating costs and, in effect, devise a new plan,” he said.

Chief executive Sam Walsh made similar comments in a memo to staff last month, saying costs had to be reined in and wasteful working capital removed.

CFMEU mining and energy secretary Gary Wood said he could understand Mr Harding’s sentiments but was concerned it would mean job cuts.

The comments come as ANZ downgraded its 2015 and 2016 iron ore price forecasts by 24 per cent and 30 per cent to $US58 and $60 a tonne.

It blamed persistent production from high cost Chinese producers and expansions from big miners including Rio, predicting a slight firming by 2018 as supply fell.

The consensus forecast of analysts is for Rio to post a 13 per cent fall in full year underlying net profit to $US8.9 billion on Thursday.

Rio Tinto has ordered a wage review as the iron ore price stays down, while Roy Hill is cutting up to 250 jobs.

Hundreds of Roy Hill jobs to go

ABOUT 250 jobs have been cut at Gina Rinehart’s Roy Hill iron ore project at Port Hedland.

But the company insists the termination of a multi-million dollar contract and job losses will not delay the $10 billion mine, port and rail project in the Pilbara.

Head contractor Samsung C&T has terminated a contract with subcontractor Laing O’Rourke to construct steel and mechanical, piping and electrical works for the port landside infrastructure.

The contract is believed to be worth around $200 million.

A Roy Hill spokeswoman said Laing O’Rourke workers and staff were advised of the decision to shed 150 blue collar jobs and 100 white collar jobs on Tuesday as a result of “commercial considerations”.

“Samsung is ultimately responsible for delivery of the project within budget and schedule and we respect their right and ability to make this decision,” the spokeswoman said.

“This change has not impacted the completion date as per the overall construction schedule.”

She said construction was progressing well, with more than 74 per cent of the project complete.

Up to 150 sacked workers will be able to express interest in working on the Port Hedland project with a new sub-contractor once it is appointed.

Roy Hill’s iron ore mine was recently issued two prohibition notices by Western Australia’s Department of Mines and Petroleum over safety concerns after several serious incidents at the site in the past 12 months.

A Samsung spokeswoman said construction of the project is progressing well and will be completed according to the plan.

“Samsung C&T is taking all the measures for the successful delivery of the project,” she said.

Originally published as Mining giant Rio Tinto orders wage review, extends hiring freeze as iron ore price crunch hits