BGC Contracting is set to cut 125 jobs as it scales back mining at both Iron Knob and South Middleback Ranges iron ore mines.
Production decreases at the sites means BGC will only require one day shift to meet volume targets.
Changes are expected to come into place by October 1, with 65 jobs to go from Iron Knob and 60 at South Middleback.
BGC’s CEO Greg Heylen blamed the job losses on the volatile iron ore market.
"This is an unfortunate outcome of the current market," Heylen said.
"It is hoped that when the market improves we will be in a position to re-evaluate the requirements of the mines and look to re-engage employees."
Arrium owns both the Iron Knob and South Middleback Ranges mines.
In its June quarterly report, Arrium revealed ore mined for export in the Middleback Ranges was 2,342k (wmt) for the quarter, down 2 per cent on the prior quarter.
A major shake-up earlier this year saw Arrium mothball is Southern Mining operation.
The company announced it was redesigning its South Australian based mining operation to provide sustainable cash flow in light of falling iron ore prices.
As part of the plan, Arrium said it would focus on its lower cost Middleback Ranges operation and close the Southern Iron mine complex.
The company also said it will be recording an asset impairment charge of $1.3 billion.