Thursday, May 29, 2014

Rio Tinto share price: Miner to cut jobs at Mongolian mine

iNVEZZ.com, Wednesday, May 28: Rio Tinto Plc (LON:RIO), the world's second largest diversified mining company, plans to make job cuts at its Oyu Tolgoi copper and gold mine in Mongolia, Reuters reported today. The newswire cited an internal memo, sent out by Rio to Oyu Tolgoi staff. The miner is attempting to cut costs amid challenging market conditions in the copper industry.

The news follows an announcement by larger rival BHP Billiton Plc (LON:BLT), which yesterday hinted at possible job cuts at its Worsley Alumina operations in Western Australia (BHP share price: Miner to cut jobs at Worsley Alumina).

In today’s trading, Rio Tinto shares were down 0.8 percent at 3,210.50p as of 10:46 BST. The company’s stock has fallen nearly six percent since the start of the year.

Crucial for success

“Given where we are now in the lifecycle of our project and the urgent need to reduce our costs, it is critical to the success of the business to address this now,” Rio Tinto said in the memo seen by Reuters.

The document did not mention how many jobs would be cut. However, the newswire cited an unnamed Oyu Tolgoi employee, according to whom the cuts would amount to just under five percent of the workers at the mine. According to Rio Tinto’s website, there were 7,500 staff and contractors on the Oyu Tolgoi project as of December 31, most of whom were Mongolian.

Rio Tinto emphasised the need for savings in light of soft copper prices, which are hovering just above four-year lows.

"Copper operations around the world are facing significant challenges with volatile markets and prices. Oyu Tolgoi is no different," the memo said.

Rio has already slashed $2.3 billion worth of costs in 2013 and is aiming to cut a further $1 billion this year.

Dispute

Job cuts have previously been the subject of controversy at the Oyu Tolgoi, which is 66 percent owned by Rio Tinto's Turquoise Hill Resources unit, with the rest of the shares owned by the Mongolian government. A long-running dispute with the government over the funding a $5 billion-plus expansion of the mine led to the loss of 1,700 jobs last year, after Rio stopped work on the project. Tensions seems to have eased, with both parties now expecting issues to be resolved by September.

Turquoise posted net revenue of $108 million from the mine in the first quarter.

As of 12:27 BST buy Rio Tinto shares at 3,217.00p

As of 12:27 BST sell Rio Tinto shares at 3,216.00p

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