Rio to Cut Australia Jobs, Shut Office to Trim Costs

Date : 07/31/2012 @ 4:30AM
Source : Dow Jones News
Stock : Rio Tinto (RIO)
Quote : 40.08  0.0 (0.00%) @ 8:49AM

Rio to Cut Australia Jobs, Shut Office to Trim Costs

Rio Tinto (NYSE:RIO)
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-- Rio to shrink size of Melbourne headquarters, close Sydney office

-- Some jobs to be transferred to Brisbane and Melbourne

-- Move reflects cost-cutting drive across Australian operations

SYDNEY--Rio Tinto PLC (RIO) is cutting some jobs at its regional headquarters in Melbourne and will close an office in Sydney as the Anglo-Australian mining giant moves to contain costs amid falling prices for key commodities such as iron ore, two people familiar with the matter said Tuesday.

The restructuring is the latest sign that Australia's mining boom is running out of steam as China's economy slows and Europe struggles to resolve its debt crisis, with resources companies adopting an increasingly cautious approach to the timing of any recovery in demand and commodity prices. That approach has seen BHP Billiton Ltd. (BHP) shut a coal mine in Queensland state and Rio Tinto put another under review.

David Peever, Rio's managing director for Australia, recently told staff in internal emails that some roles in Melbourne will be cut while other workers will be transferred to offices in Perth and Brisbane, one of the people said.

Melbourne will remain a corporate head office for Rio Tinto, but is to be scaled back, the person said.

An office in Sydney where about 30 people work will be closed, and Rio Tinto intends to use leased serviced offices when it needs a presence in the city in future, the person said.

Mining companies are being forced to review their expansion plans and tackle rising operating costs as commodity prices have continued to weaken amid concerns over demand from key consumers such as China. Companies operating in Australia have also struggled with the strength of the local currency against the dollar, the currency in which they operate.

BHP Billiton, which has its headquarters in Melbourne, is also focusing on reducing overhead expenses and operating costs, and currently is reviewing contractor and staff numbers across its operations globally, a spokeswoman for the company said.

BHP is expected to decide at the end of the year whether to proceed with three US$10 billion-plus expansion projects in Australia and Canada. Shareholders and analysts widely expect at least one project will be deferred.

Major mining companies including BHP and Rio Tinto are forecast to report a drop in earnings this year as weaker prices eat into cash flow and are only partially offset by increases in some raw materials, such as iron ore from Western Australia state. Rio Tinto's underlying earnings before one-time items are expected to have dropped to US$4.94 billion for the six months through June from a record US$7.78 billion a year earlier, according to a consensus of 20 analysts' forecasts compiled by the company.

Rio Tinto Chief Executive Tom Albanese earlier this month said that global economic conditions and sentiment had dropped markedly in the second quarter of the year, and the company was keeping a close eye on the pace of the U.S. recovery, the ongoing eurozone crisis and efforts to stimulate the Chinese economy.

Less than two weeks ago, Rio Tinto said it expects to cut jobs at its Clermont coal mine in Queensland as part of a review triggered by prices of thermal coal, used as a fuel in power stations, slumping to their lowest level in nearly two years.

-Write to David Winning at david.winning@wsj.com and Robb M. Stewart at robb.stewart@wsj.com

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