Mining Job Cuts Imminent if Australian Dollar Remains Strong Says BHP, Rio
The strong Australian dollar had done a number on the coal mining sector in Australia in the past few years, and things look like they will continue in much of the same vein for the short term. BHP’s global coal president Dean Dalla Valle and Rio’s energy CEO Harry Keynon-Slaney cite not only the strong Australian dollar, but the added pressure of high costs and equally high taxes as problems plaguing the industry.
The $60 billion coal sector has already cut 12,000 jobs in the past two years, and further mine closures and job losses are expected this year. Companies like BHP and Rio, and Glencore, Vale and Peabody energy are all experiencing similar trouble in these tough times, and many operators are not making money at current prices.
Rio's Keynon-Slaney commented on the state of the industry, saying that "the big established and high-quality resource bases where there are efficient and effective operations will have to continue this relentless cost drive – they will probably survive, but there are going to be some operations that are challenged."
For example, industry experts believe that around 10 percent of mines in Queensland are in a delicate position, specifically in regards to lower-grade coking and thermal coal. The state's output is currently producing at a loss, including half of all thermal coal production. New South Wales is seeing similar numbers.
To combat the tough market, decisions regarding the long-term goals of the company need to be made. The tight situation has become even tighter in the last six months, and the relief is not yet on the horizon.
Miners are remaining relatively confident regarding the long-term outlook. And for BHP and Rio, belts have had to be brought in, but both are operating at a profit as the lowest cost producters in the country. Rio is looking to deliver record-level productions with their thermal operations, and BHP is also running at capacity.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.