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THE nation's mining industry has had one of its darkest weeks in years as the global economic crisis bit harder.

More than 1000 workers were axed, or put on notice, and more than $US2 billion ($3 billion) of expansion shelved or slowed.

Plummeting mineral demand has combined with the drying up of credit to force previously high-flying miners like Rio Tinto, OZ Minerals and Xstrata to take the knife to growth, production and workers.

Since July, more than 5000 mining jobs, or 3.5 per cent of the nation's 140,000-strong mining workforce have been axed, with more job cuts to come in the next month.

Miners, who as recently as November were struggling to find workers in some sectors amid a boom-induced skills shortage, have been shocked at the speed with which the global credit crisis has hit the industry.

Rio is expected to have by far the biggest impact on the nation's mining workforce and growth programs, as the $US39 billion of debt it racked up in the 2007 purchase of Canada's Alcan cripples its growth plans and puts 14,000 workers out of a job worldwide.

Indicating how toxic the debt on a balance sheet has become, BHP Billiton -- which has little debt and similar operations to Rio -- has so far flagged minimal cuts to local operations and few overseas.

But it is not immune to the global economic slowdown and its overall production and financial figures are being affected.

BHP compounded Rio's problems in November when it walked away from its $140 billion hostile bid and sent the former target's share price plummeting.

So far, Rio has announced 600 workers and contractors will be out of a job at its Kestrel coal mine in Queensland, Northparkes copper mine in NSW and Argyle diamond mine in Western Australia.

If Rio's cuts are proportional to the total workforce it has here, however, the total could climb to 3000.

Rio chief executive Tom Albanese said conditions in the new year had shown few signs of sustained improvement and the miner was bracing for a long period of volatility.

"I think we'll see some improvements in some months and we should accept some setbacks in others," Mr Albanese said.

Rio is cancelling the vast majority of its growth projects by cutting back its 2009 capital spending budget by $US5 billion to $US4 billion.

Half of that $US4 billion will be on what Rio calls sustaining capital expenditure on postponed projects, meaning only $US2 billion will be spent on actual production expansion.

So far in Australia, Rio has suspended expansion programs at Northparkes and Pilbara iron ore operations as well as slowing the $US1.5 billion underground extension at Argyle.

Rio says it will announce where its job cuts and capital rein-in will come from with its full-year results on February 12.

Any prolonged downturn in the mining industry will flow on to the rest of the economy.

In a January research paper, the Reserve Bank said the mining sector had become so important to the Australian economy that the ripple effect from a downturn in its fortunes would be particularly pronounced.

"Other things equal, reduced spending by the mining sector, on both investment and inputs to production, would be expected to flow through to slower activity in other sectors of the economy," it said.

Mining investment over the past four years outstripped even the sector's revenue growth, pumping on average an extra $30 billion a year into the economy.

Last financial year, the sector accounted for about a quarter of all private business investment, surpassing the share recorded in previous booms in the early 1970s, early 1980s and mid-1990s.

ABN AMRO mining analyst Warren Edney said the mining sector was unlikely to show any signs of improvement until at least March and more production cuts could be on the way.

"Things have fallen a lot but companies and investors want some sign that at least things may have hit the bottom," Mr Edney said.

"There's a natural period of weakness in the first couple of months of the year from China where you don't get a clear picture of what's going on, so I think it's going to be March before we can say there's a reasonable case things are getting near the bottom," he said.

After Rio, the biggest job cuts so far have come from embattled local miner OZ Minerals and Swiss miner Xstrata, both of which are also struggling with debt problems.

OZ has flagged 559 staff and contractor job losses and its future is looking more and more questionable as it continues to miss deadlines to refinance debt and secure bridging loans.

Xstrata, whose shares slumped 80 per cent last year and which has $US17 billion of debt, has cut 580 local workers because of the global slowdown. Yesterday it threatened to lay off another 300 if the Rudd Government does not approve the stalled McArthur River zinc mine in the Northern Territory.

National Industry Skills Council chief executive Des Caulfield said the speed of the downturn had surprised nearly everyone.

"Nobody saw the depth of the cancer from the financial meltdown, just as when we spoke to people five or six years ago they hadn't seen the boom coming," Mr Caulfield said.

He said the outlook was not all bad for mine workers, especially in Queensland, where coal miners recently were concerned that civil infrastructure projects in Queensland would rob them of workers, and where the burgeoning coal seam gas sector is expected to require thousands of workers in coming years.


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4 comments
  1. onepeace March 23, 2010 at 12:01 AM  

    good news blog admin.
    Check my mining-news blog too..
    Keep blogging.. ^_^

  2. onepeace March 23, 2010 at 12:02 AM  

    good news blog admin.
    Check my mining-news blog too..
    Keep blogging.. ^_^
    http://mining-news.blogspot.com/

  3. Coal November 30, 2011 at 6:01 AM  

    It is a bit of juggling game in the coal industry and coal prices from underground mines to ensure enough electricity and steel capacity worldwide while making sure the impact on the environment and people is minimal. www.coalportal.com

  4. Coal March 6, 2012 at 7:47 AM  

    The investment into alternative power generating technologies such as nuclear energy may need to be measured against the potential cost when things turn against you as unfortunately happened this year in Japan. Coal prices and coal statistics show developing economies are more likely to increase their investment into & their use of coal mining in coming years because of coal's affordability and ability to quickly meet increasing demands for electricity and steel. www.coalportal.com