BHP Billiton spinoff South32 said Thursday it plans to restructure its Illawarra mining operation for metallurgical coal in the Australia's New South Wales and cut 300 jobs by the end of the fiscal year in June.
The job reduction is equivalent to 14% of the 2,140 people employed in the Illawarra coal business unit at the end of the June 2015 fiscal year, and follows a cut of 100 jobs from the unit in the 18-month period ended December.
"To mitigate the impact of lower prices, a number of restructuring initiatives are being implemented in order to reduce operating costs, including sustaining capital expenditure and underground development by 37% [from the 2015 fiscal year] to approximately $66/mt in the 2017 financial year," said South32.
South32 plans to reorganize Illawarra Metallurgical Coal's three mine operations into two, remove tiers of management and support functions, expand of its Appin mine's production to 9.5 million mt/year by fiscal 2017, and reduce capital spending on underground development by 58% to $108 million in the next fiscal year.
In July-December, the Illawarra Metallurgical Coal unit booked a loss before interest and tax expenses of $37 million on revenue of $284 million, the company said in its first published financial statements since its spinoff from BHP Billiton last year.
Average realized sales price for Illawarra's metallurgical coal was $82/mt in July-December, down from $110/mt a year earlier.
The unit produced 3.3 million mt of metallurgical coal in July-December, down from 3.85 million mt a year earlier.
Some 658,000 mt of thermal coal was produced at Illawarra's mines that fetched an average price of $43/mt in July-December, compared with production of 799,000 mt that sold for an average price of $57/mt a year earlier.
Operating costs for Illawarra's coal mines were $62/mt in July-December, compared with $71/mt a year earlier.
SOUTH AFRICAN COAL
Separately, South32's South African operations for thermal coal achieved earnings before interest and tax expenses of $46 million on revenue of $542 million in July-December.
The average realized price for export sales of South32's South African thermal coal in July-December was $46/mt, compared with $60/mt a year earlier.
The South African thermal coal business unit reduced its production costs to $25/mt in July-December, down from $35/mt a year earlier.
South32 CEO Graham Kerr said he expects to achieve a significant increase in labor productivity and reduction in cash costs as a result of fine-tuning its regions-based business model.
For July-December, South32 reported an after-tax loss of $1.75 billion, including impairment charges of A$1.7 billion, compared with a notional after-tax loss of $83 million in the 2015 fiscal year when its businesses were still part of BHP Billiton.
Among the impairment charges was $518 million related to South32's South African thermal coal operations.
July-December revenue was $2.98 billion, compared with $649 million a year earlier.
