70 jobs scrapped at Mount Owen coal mine

Mounting production costs will see more than 70 jobs go from GlencoreXstrata’s Mount Owen open-cut coal mine in the Hunter Valley.

Construction, Forestry, Mining and Energy Union district president Peter Jordan said 55 mineworker positions, six tradespeople and 12 contractor roles were on the chopping block, Newcastle Herald reported.

 ‘‘There’ll be a call for voluntary redundancies but I don’t think there’d be enough volunteers to accommodate those sorts of numbers,’’ Jordan said.

The mine, located halfway between Singleton and Muswellbrook is managed by mining contractor Theiss.

Already this year more than 1000 Hunter and Gunnedah miners have lost their jobs since last year, a figure which doesn’t include job losses in downstream suppliers.

According to the Australian Coal Association over the past 15 months about 9000 coal jobs have been lost in NSW and Queensland.

The Mount Owen site has approval to produce up to 10 million tonnes of coal a year; Jordan said Xstrata was cutting production by 5 per cent.

According to Xstrata’s numbers the 73 jobs equates to almost 20 per cent of the mine’s workforce.

An Xstrata spokesperson said the Mount Owen job cuts were a response to ‘‘difficult market conditions’’.

A spokesperson for Thiess said Mount Owen was ‘‘decreasing total coal production by scaling back some of its operating areas in response to industry-wide pressures, including a lower coal price’’.

The Thiess spokesperson added that some employees will be affected by the changes and that the company is “making every effort to proactively consult with the workforce to ensure they have a full range of support services’’.

Reducing production will confront current coal oversupply issues which are driving down prices below unprofitable levels.

By confirming the production cuts, GlencoreXstrata is directly confronting the oversupply of thermal coal that is helping drive down prices to unprofitable levels.

But figures from the Hunter Valley Coal Chain Co-ordinator, which oversees the movement of export coal, shows production is still up, with 55.9million tonnes of coal arriving at Newcastle, compared with 50.2million tonnes during the same period last year.

When faced with low coal prices, a traditional approach miners opt to take is to cut production, but merchant bank Morgan Stanley said the "high degree of take or pay" contracts with port and rail companies in the NSW and QLD coal sectors makes this a difficult play.

While the “take or pay” contracts offer "protection against miners' pursuit of lower costs" for rail companies Asciano (Pacific National) and Aurizon (formerly Queensland Rail National) it means coal companies are locked into paying an estimated average of $10 a tonne on millions of tonnes of rail and port capacity.

Capacity they are unlikely to use on current demand estimates.

Previously when coal companies were facing a downturn, production has been cut in an effort to lift prices, it’s the old supply and demand philosophy.

But adding “take or pay” contacts into the mix has upped the cost, making production cuts more expensive.

The coal downturn is already hitting the region hard a number of infrastructure and mine expansion projects in doubt, including Port Waratah Coal Services T4 loader which was put on hold at the start of the month.

PWCS at the time said revised forecasts mean the new loader is unlikely to be needed for at least five years.

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