South32 warns of job cuts at its Worsley alumina refinery

South32 has warned of job losses at its Worsley alumina operation in the South West after announcing big staffing cuts at its South African manganese operation and flagging a writedown of $US1.7 billion.

The BHP spin-off employs about 1800 workers at its bauxite mine near Boddington, its alumina refinery near Collie and port operations at Bunbury. The Perth-headquartered company's Worsley operation is one of the largest and lowest-cost alumina refineries in the world. But sagging commodity prices have forced the company to review its activities worldwide.

“Our teams are currently finalising plans that will deliver a meaningful reduction in costs at Illawarra Metallurgical Coal (NSW), Cerro Matoso (Colombia), Worsley Alumina (WA) and Australia Manganese (NT and Tas),” South32 said in a statement. These initiatives are expected to result in a substantial reduction in employee numbers during the remainder of full-year 2016 and will be detailed in our December 2015 half-year financial results.”

South32 announced today immediate job cuts of 620 at its South African manganese operations, because of plunging prices for the commodity.

South32 chief executive Graham Kerr said the completion of the South Africa manganese strategic review was important for the company as it would allow it to re-base manganese ore production at a significantly lower level while reducing Rand-denominated mine gate costs by a commensurate amount.

“When combined with the restructuring initiatives that are currently being finalised at many operations across our portfolio, we expect to further strengthen our financial position and increase our cash generating capacity through the cycle,” he said.

“We will continue to focus on the things that we can control; safety, volume, costs and capital expenditure, as we seek to optimise the performance of our operations. This strategy to maximise value rather than volume, our high quality operations and well-defined financial policies underpin our resilience at current commodity prices and we remain exceptionally well positioned for any improvement in industry fundamentals.

“We are, however, not immune to external influences and the significant change in the outlook for commodity prices is expected to result in non-cash charges of approximately $US1.7 billion when we report our December 2015 half year financial results.”

In October, Mr Kerr promised to slash South32’s $US130 million corporate overheads by 25 per cent and hinted the global miner would shelve more production in response to commodity price falls.

Investors welcomed news of the job cuts, sending South32 shares were up 15 cents, or 15.79 per cent, to $1.08 shortly before the close.