MELBOURNE, June 11 BHP Billiton
may cut production at one of its biggest metallurgical coal
mines in Australia, after the Anglo-Australian miner said on
Wednesday it had terminated a mining service contract to cut
costs amid a sharp drop in coal prices.
BHP and its partner Mitsubishi Development Pty Ltd, a unit
of Japan's Mitsubishi Corp, said they had scrapped a
contract with mining services provider Downer EDI Ltd
for pre-strip work at the Goonyella Riverside mine in
Downer EDI said the remaining two years on the contract were
worth about A$360 million ($338 million). The termination,
effective September 9, would result in 427 contractors leaving
The Goonyella Riverside mine produced 12.4 million tonnes of
metallurgical coal in the year to June 2013. Output in the
current financial year would be unaffected by the contract
termination, BHP said.
"Any potential production impact for 2015 will be reported
in quarterly production reports at the time," BHP spokeswoman
Emily Perry said.
The world's top coal exporter to steel mills flagged further
cuts were likely as it continues to review all its coal
operations to ensure they do not make losses, with thermal and
coking coal prices having slumped to near five-year lows.
"The coal industry is undergoing a difficult transition and
to be globally competitive we have to reset the cost base of the
business," BHP's coal president, Dean Dalla Valle, said in a
statement. "This will continue to play out over the near term."
Downer EDI said it would seek compensation from BHP, which
declined to comment on how much would be paid.
($1 = 1.0662 Australian Dollars)
(Reporting by Sonali Paul; Editing by Muralikumar Anantharaman)