Australia’s mining sector is facing more job losses and a halt on investment after Newcrest Mining flagged cuts to its workforce.
After last week’s dramas when the gold price plummeted at record rates to two-year lows, Newcrest revealed a sharp nearly one-third jump in its costs from a year ago.
The company, Australia’s largest goldminer and among the 20 biggest on the share market, would be stingy from now on, chief executive Greg Robinson told analysts.
It cut 150 jobs in March, mostly from its Brisbane and Melbourne offices as it halted exploration, scoping studies and growth.
“We will be looking carefully at head counts,” he said, flagging more cuts.
“We will be doing everything we can around contracts with our major suppliers … re-negotiating them on an annual basis.”
The company’s shares fell 56 cents, or 3.3 per cent, to $16.45 and are at near eight-year lows.
The Reserve Bank tips a boom in mining investment to sustain Australia for decades.
There is doubt about that as major resources giants such as BHP Billiton and Woodside Petroleum cancel major projects while thousands have already lost their jobs.
Mr Robinson’s comments come a day after copper-gold miner Oz Minerals admitted it barely broke even in the March quarter and was freezing pay rises and bonuses and renegotiating with suppliers.
Morningstar analyst Matthew Hodge said the entire Australian economy would be impacted by this and had to lift productivity.
Productivity in WA’s iron ore industry was down 30 per cent from 2005 in terms of tonnes per employee, with salaries having tripled in that time in US dollars, he said.
“I think those days are gone, the only thing that has been propping the whole thing up is big expenditure on Queensland coal seam gas to LNG and off WA that will start rolling off in 2015,” he told AAP.
Employees and mining contractors or mining services no longer had pricing power to command high pay, he said.
“I’m glad Newcrest are focussing on productivity and getting costs down, their cost performance has not been great the past few years,” Mr Hodge said.
Mr Robinson said Newcrest was reviewing the future of higher-cost mines and hinted at delaying development of its highly rated but expensive Wafi-Golpu project in Papua Guinea until a way to reduce an estimated $9.8 billion cost was found.
The company’s most expensive mine, the small hidden Hidden Valley project, would be used as a base for Wafi-Golpu but is losing money, cost $1,790 per ounce of gold in the latest quarter.
The spot price of gold is currently only just above $US1,400.
Newcrest maintained its guidance for the year of 2.0 to 2.15 million ounces of gold.
It produced 2.29 million ounces last year.
It produced 514,421 ounces in the three months to the end of March, down three per cent on the previous quarter, and at a cost of $799 an ounce, a 31 per cent jump on $609 an ounce of a year ago.
Production and maintenance problems at the Lihir mine contributed to the cost jump.
