UPDATE: Rio Tinto Slows Argyle Project, Cuts Diamond Output
14 Gennaio 2009 - 5:57AM
Dow Jones News
Rio Tinto Ltd. (RTP) said Wednesday it will stop producing
diamonds from its Argyle mine in Western Australia state for three
months and slow work on the US$1.5 billion development of an
underground operation at the mine in response to global market
conditions.
The move is the latest in a steady stream of cutbacks the miner
is making in a drive to cut 14,000 jobs and reduce capital spending
by US$5 billion as it acts to pay down some of its US$38.9 billion
debt and respond to sagging demand for commodities.
The underground project is to be slowed to only critical
development activities, resulting in a workforce reduction and a
demobilization of contractors.
"Given global market conditions, we will also reduce diamond
production by taking an extended maintenance shutdown of the
diamond processing facilities for up to three months, commencing in
March," said Kevin McLeish, chief operating officer of Rio Tinto
subsidiary Argyle Diamonds.
The transformation of Argyle, in the remote Kimberley region of
Western Australia, from an open pit to an underground mine was due
for completion in December 2010 and designed to extend the life of
the mine beyond 2018.
The mine, which is one of the world's biggest and produces about
20 million carats of diamonds a year, is acknowledged in Australia
as a leader in providing employment to local indigenous people.
Rio Tinto would not say how many jobs would be lost at the mine
but said the vast majority would be among contractors, with its
employees to be redeployed to maintenance, training and other
activities where possible.
Engineering contractor Macmahon Holdings Ltd. (MAH.AU), which is
carrying out the work on the underground project, said it expects
to have to cut its workforce at the mine to about 140 from about
360 currently.
A spokeswoman for Macmahon said it would also look to redeploy
workers, but given the slowdown in the mining sector was expecting
about 200 redundancies.
Macmahon said its contract will be realigned to take into
account the revised development program now being pursued at Argyle
and this will reduce its contract revenue to just under A$20
million a year from A$80 million a year, until development
activities recommence.
News of the changes at Argyle saw Macmahon's shares fall 10% or
4 Australian cents to 36 Australian cents by 0435 GMT while Rio
Tinto was up 0.6% at A$40.61.
Rio Tinto is due to release its fourth quarter production report
Thursday and investors will be watching closely for any further
announcements of cuts to production and spending on growth
projects.
-By Alex Wilson, Dow Jones Newswires; 61-3-9671-4313;
alex.wilson@dowjones.com
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