Published: February 5, 2016 |

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BHP Billiton spin-off South32 will slash 620 jobs and has flagged widespread job losses in Australia after revising down its commodity price forecasts.

South32 expects to book $US1.7 billion ($A2.37 billion) in writedowns as it slashes costs and production volumes at its South African manganese business in response to a sharp fall in manganese ore and alloy prices.

The company is preparing to take an axe to its Australian and Colombian workforce due to the recent collapse in commodity prices.

Still, shares in the Perth-based firm jumped 11 percent as investors welcomed the cost-cutting and a stronger performance on commodities markets overnight.

Chief executive Graham Kerr said South32 was finalizing cost-reduction plans for its Illawarra Metallurgical Coal operations, Worley Alumina Australia Manganese operations, and Cerro Matoso in Colombia.

“These initiatives are expected to result in a substantial reduction in employee numbers during the remainder of full year 2016 and will be detailed in our December 2015 half-year financial results,” Mr. Kerr said.

He said the company expected to strengthen its financial position and increase cash-generating capacity following the restructuring and downward revisions to its commodity price and demand forecasts.

“We are, however, not immune to external influences and the significant change in the outlook for commodity prices is expected to result in non-cash charges of approximately $US1.7 billion when we report our December 2015 half year financial results,” Mr. Kerr said.

South32 will restart its manganese operations at its Hotzel mines in South Africa, but mining activity will occur at a substantially reduced rate as it cuts capital expenditure by 80 percent following the completion of a strategic review.

The company expects Hotzel mines to ramp up to a saleable production rate of 2.9 million tonnes per annum and said the redundancies, optimized mine plans and restructuring initiatives were expected to reduce Rand-dominated mine gate costs.

Additional impairments were expected for its South African Manganese, South African Energy Coal and Brazil Alumina businesses, South32 said.

Fat Prophets resources analyst David Lennox said big writedowns had been expected and major job losses were looming in Australia.

“We’ve seen several hundred jobs coming out of a number of companies so it could be substantial because the commodity prices they’re selling into have collapsed,” Mr. Lennox said.

“I would imagine that any part-timers are gone and any contractors are in danger.”

The company will release its half-year results to the market on February 25.

Source: (February 3, 2016) Perth Now

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