Xstrata’s Ernest Henry Mining halts magnetite production at Cloncurry site

GlencoreXstrata’s Ernest Henry Mining will halt magnetite production at its Cloncurry operation, east of Mount Isa.

Magnetite production will be suspended from the middle of August, the ABC reports.

The company said the business case for magnetite production at the Queensland site is not strong enough for current market conditions.

Xstrata said margins have been eaten away by falling revenue, rising production and transport costs, and the drop of iron ore prices.

Cutting production will see “about a dozen workers” and an unknown number of contractors be impacted by the decision.

“This decision wasn’t made overnight,” an Xstrata spokesperson told Australian Mining.

"We started talking to our workforce and stakeholders yesterday."

The mid August shutdown date was chosen so the company could meet current shipping arrangements, but parts of the magnetite circuit will be put into care and maintenance mode by the end of July.

Xstrata only began shipping magnetite in 2011, and the move to shut down production will see the company focus on producing copper concentrate, a spokesperson explained.

Xstrata spokesman Steve De Krujiff said the employees will be offered redeployment opportunities.

"It's not been an easy decision over the past couple of years," he said.

"We've seen an erosion of the price of iron ore which has got to a point where we're now in negative margins and we can't make the magnetite production profile that we have make any money.

"The main problem is the high logistics costs in getting our production from mine to market."

Australian Mining spoke to Xstrata about the news last week but the miner refused to provide confirmation.

A company spokesperson said the current economic climate was causing “a lot of rumours” and that scaling back operations at Ernest Henry was one of them.

“We are subject to the same pressures of a tough market and no decisions have been made,” the spokesperson said when asked about scaling back production at the Ernest Henry operation.

“Everything is under review.”

However, an Ernest Henry Mining spokesperson today said the company is "certainly not scaling back underground production" and that the Mount Margaret mine is not impacted by this announcement.

"We are still on track for shaft commissioning next year and focusing on our core business."

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