The Anglo-Australian coal miner, BHP Billiton, has announced it has terminated a mining service contract at one of its largest metallurgical coal mines in Australia.
Motivated by a desire to cut costs, the termination of the contract comes amid a sharp drop in coal prices. The mine may now see production of coal cut dramatically.
BHP and its partner Mitsubishi Development Pty Ltd, a unit of Japan's Mitsubishi Corp, said they had scrapped a contract with mining services provider Downer EDI Ltd for pre-strip work at the Goonyella Riverside mine in Queensland.
Downer EDI said the remaining two years on the contract were worth about AU$ 360 million (US$ 338 million). The termination, effective 9 September, would result in 427 contractors leaving the site.
The Goonyella Riverside mine produced 12.4 million t of metallurgical coal in Over FY12/13.
BHP Billiton said that, despite the termination, output in the current financial year would be unaffected. Any impact on production will be seen from 2015 onwards.
"Any potential production impact for 2015 will be reported in quarterly production reports at the time," BHP spokeswoman Emily Perry said.
Further cuts are likely at BHP’s operations, as it reviews all its operating platforms to ensure they do not make losses.
"The coal industry is undergoing a difficult transition and to be globally competitive we have to reset the cost base of the business," BHP's coal president, Dean Dalla Valle, said in a statement. "This will continue to play out over the near term."
Downer EDI said it would seek compensation from BHP, which declined to comment on how much would be paid.
Edited from various sources by Sam Dodson
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