Rio slashes jobs in bid to tame Mongolia costs

RIO Tinto is slashing about 300 jobs at its Oyu Tolgoi copper and gold mine in Mongolia to cut costs in a move that is unlikely to make negotiations with the government over a mine expansion any easier.

In a letter to staff, seen by The Australian, Oyu Tolgoi boss Craig Kinnell said costs needed to be cut and an unspecified number of jobs would go.

“Workforce reductions are part of the life cycle of a mining business,” Mr Kinnell said. “Given where we are in the life cycle of our project, and the urgent need to reduce our costs, it is critical to the success of the business to address this now.”

It is understood about 300 jobs, out of a combined 6000 employees and contractors, will go. The cuts follow the loss of about 1700 jobs last year when Rio mothballed work on a $US5 billion ($5.4bn) expansion of the mine because of disagreements with the government, which owns 34 per cent of Oyu Tolgoi.

“We continue to focus on building a strong and resilient business, agile enough to face tough market conditions and make the most of opportunities ahead,” Mr Kinnell said. “The future for copper is good, we just have to find ways to be more competitive and to safely increase our productivity.”

Rio and the government have asked for an extension to project financing that expired in March after they were unable to come to an agreement on Mongolia’s take from the project, access to water and how to address a $US2bn cost blowout on the first stage of the mine. The second stage is an underground mine and will be more profitable than the first, which is an open-pit operation that includes a concentrator designed to be used in an expansion.

Separately yesterday, Rio said it would replace its Montreal-based aluminium chief Jacynthe Cote with an outsider, former BP executive Alfredo Barrios.

Mr Barrios, who is a dual Spanish-US citizen, is the second recent major poaching from BP.

The other was Andrew Mackenzie, who subsequently was poached by BHP Billiton and is now its chief executive.

“We are delighted to welcome Alfredo, who will undoubtedly bring renewed vigour and experience to our aluminium business,” Rio chief Sam Walsh said. “I am confident he will build on the foundations Jacynthe and her team have put in place and drive further improvement in delivering increased value from the business.”

Mr Walsh praised Ms Cote, who has a critically ill adult daughter and is stepping down for personal reasons. “The ongoing improvement in the performance of the aluminium business is testimony to her commitment to the business throughout her career,” he said.

Matt Chambers

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