The world’s biggest mining group, BHP Billiton, is scaling back operations in Australia and cutting 6000 jobs globally as the sector suffers from the global fall in metal prices.

The Anglo-Australian company has said it will halt operations at its Ravensthorpe nickel mine and cut production at its Mount Keith nickel mine, both located in Western Australia.


Falling demand for commodities in China has depressed metal prices and is causing havoc for multinational mining companies as the global downturn deepens. In November last year, China’s industrial output was at its slowest growth rate since February 2002 and in December, exports fell for the first time in more than seven years.

The job cuts will affect BHP’s operations in the US and Chile as well as Australia, and will cost the company a one-off expense of $500m to execute.

Alex Vanselow, BHP’s chief financial officer, told the Financial Times that there had been a very steep and dramatic change since October 2008 and, despite China representing 30% of global consumption, much of the uncertainty is coming from OECD countries.

Though BHP is planning to cut coal production by about 10% to 15%, iron ore operations are performing well, with production targets unlikely to decrease.

“We will continue to invest in iron ore and petroleum,” said Mr Vanselow. He added that in some parts of the business the group was increasing production.

BHP is one of the last multinational mining companies to make large production cuts. Competitor Rio Tinto announced similar measures in December, which included cutting 13% of its workforce, $5bn off its capital expenditure and the sale of mines. In January 2009, Rio Tinto agreed a deal to sell assets in Argentina, Brazil and Paraguay for $1.6bn towards achieving its target of reducing borrowings by $10bn this year.

Mexican firm Fresnillo, the world’s largest producer of silver, also announced it would cut its capital expenditure for 2009 to reflect “difficult market conditions”. But it added that falling costs in the mining sector would protect its profit margins. Fresnillo said capital expenditure would fall to $285m in 2009, $25m less than 2008. Most of the cuts would come from early stage exploration projects, it said.