A major shakeup at Arrium will see its Southern Iron mining operation mothballed.
The company announced today 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 will focus on its lower cost Middleback Ranges operation and close the Southern Iron mine complex.
Southern Iron incorporates the Peculiar Knob project as well as the Buzzard and Tui DSO hematite and magnetite deposits.
Arrium said the move would reduce cash costs by 20 per cent from $71 per dry metric tonne in 2014 to $57/dmt in 2016.
The company has also targeted a $200 million reduction in its capital expenditure.
Arrium’s CEO Andrew Roberts said the redesign is scheduled for completion by the end of June 2015.
The company said it will be recording an asset impairment charge of $1.3 billion. This includes an impairment of $1.7 billion in the company primarily related to the impact of low iron ore prices and the mothballing of Southern Iron, and $130 million in steel and recycling.
The announcement by Arrium comes on the same day the price of iron ore edges closer to a fresh five-year low.
The new five-year low is expected to take its toll on smaller iron ore miners with high cash costs.
Arrium said it would work to support employees who were facing job cuts.
Contractor MACA Mining employs around 125 people at the site.
MACA downgraded its full-year profit guidance as a result of lost contract. It said guidance for the 2015 financial year would change from an excess of $650 million to $620 million.