BHP Billiton Ends Deal With Mining Contractor Downer EDI

BHP Billiton Ltd. has now decided to end their current contract with Downer EDI Ltd. which was in place to clear ground at its Goonyella Riverside mine in eastern Australia. This was a segment of the larger effort to cut the costs of its Australian coal operation. This call to end the contract embodying what’s known as pre-strip work on land around the existing mine creates the significant aftermath of 427 contractors being cut from work. BHP reported that this action was necessary in the name of the continued viability of its coal business.

While rich in resources, Australia is up against a severe slowing in mining investment. This slowdown is made all the more severe as it comes off the decade-long resources boom Australia had been enjoying. Thousands of jobs have been cut across the industry, particularly in mining-focused states such as Queensland and Western Australia, prompting the central bank to cut interest rates to a record low to support other parts of the economy. The combination of China’s economic growth tailing back from its previously blazing pace in addition to Australia’s surge in supplies continues to put extra pressure on Australian mining companies maintaining the viability of their operations.

Dean Dalla Vale, president of BHP's coal division, said the termination of the contract with Downer continued cost-cutting measures underway for more than 18 months. “Further measures to address wage and other costs are being undertaken at all mines in Queensland and New South Wales as we continue our detailed reviews of every aspect of our coal operations to ensure every operation remains operating cash positive,” Mr. Dalla Vale said. “The coal industry is undergoing a difficult transition and to be globally competitive we have to reset the cost base of the business…Coal producers face challenging decisions.”