Barely two weeks after Deliotte Access Economics predicted the end of the mining boom by 2014 or so, Rio Tinto announced its massive job cuts in its Sydney and Melbourne offices Tuesday.
Sky News reported the Sydney office with 30 employees will shut down, while about 240 administrative staff in Melbourne will go. Of the estimated 200 workers at the technology and innovation research centre in the Melbourne suburb of Bundoora, not a significant number will be affected. Some roles will also be relocated to operating division hubs in Perth and Brisbane.
Job cuts is the way to deal with falling commodity prices and soaring costs, a spokesperson said.
The warning came in June when Rio Tinto chief executive Tom Albanese and Australian boss David Peever emailed their staff about plans to cut support and service costs by 10 per cent around the globe. They said they are building resilience and controlling costs during a difficult time, which includes commodity price falls and Europe’s debt crisis.
“This includes a program of reductions in service and support costs across the organisation, which have been rising sharply in recent times….Miners are complaining about rising input costs, leading in to this month’s earnings season, including wages, equipment, energy and new taxes.”
Rio’s first half net profit is tipped to fall to about $US4.9 billion ($A4.69 billion) from $US7.78 billion ($A7.44 billion) last year.
Another mining giant, BHP Billiton, is also experiencing the pinch. Its earnings have been also forecast to drop, similar with the world’s biggest iron ore miner, Vale, which posted lower than expected second quarter earnings at two year lows in the recent weeks.
Deloitte Access Economics issued the sternest warning of troubled times ahead for the mining sector. It said the boom will end in two years or so.
Access’s Chris Richardson admitted the boom significantly boosted Australia’s economic growth, “but the peak of the project pipeline is already in sight.”
Investment in resources projects – the key driver of the boom – is looking “less certain the further out you look”, Richardson said.
Access, Australia’s leading private-sector economics advisory said, “Mining companies are making it clear the current spike in investment is due to decisions taken a while back, whereas we are getting few new mining mega-projects across the line.”