Rio Tinto’s iron ore business is set to engage in a heavy cost cutting campaign, involving renegotiation of service contracts, reduction of scheduled maintenance task times, and changes to staff pay which will “reflect market conditions”.
An internal document leaked to Australian Mining this week showed Rio Tinto iron ore chief executive Andrew Harding had outlined a series of cost cutting requirements, including an immediate hiring freeze, which he said must be performed to maintain business success.
The document was distributed by email to members of management, and was read aloud to workers on all Rio Tinto iron ore sites in Western Australia.
The areas said to require urgent attention include:
- Cost-outs and capital reductions that are significantly below the existing plan;
- The renegotiation of significant service and supply contracts;
- Reflecting market conditions for employees and labour related costs;
- The extension of an immediate hiring freeze and review of organisational structures;
- Revamping of the way we schedule maintenance – by intervals and task times;
- A significant reduction in warehouse and stockpile inventories.
Harding stressed that “the whole business will be called to contribute to this work, with a degree of urgency”.
The document also said that all site superintendents will be subject to quarterly reviews, which would help to identify “pinch points” in the business.
“These will cover safety, cost and productivity performance, as well as commitments for the forthcoming quarter,” Harding said.
“I do not intend that any of these actions, and the extra efforts required on safety, will compromise our objective of continuing to be the best iron ore company in the world.
“Indeed, I expect that they will actually ensure that we can continue to be ‘the best’.”
Harding said the agenda was a large one, but “not unmanageable”.
Australian Mining contacted Rio Tinto to discuss the details of these adjustments, however a spokesperson for Rio Tinto said no further details could be disclosed at this point, and made the following statement:
“We remain focused on maintaining our market competitiveness in very challenging industry conditions. For some time now our people have been pursuing cost and productivity improvements. We are constantly examining all parts of our business in order to remain strong and globally competitive.”
Recent rumours among staff on Rio Tinto sites around Western Australia suggest plans to cut the Australian iron ore workforce by 10 to 15 per cent, however Rio Tinto said these claims were incorrect.
Rio Tinto will release their 2014 Full Year Report on Thursday evening, February 12.
Image: The Australian