SYDNEY, June 25 (Reuters) - Workers at the $10 billion Roy Hill iron ore mining project owned by Australian billionaire Gina Rinehart face a drop in salaries as a way of preserving jobs as the sector reels from low commodity prices.
Iron ore prices have slumped as much as 70 percent since construction of the mine began four years ago in partnership with South Korean steelmaker POSCO, Japan’s Marubeni Corp and Taiwan’s China Steel Corp.
“We felt it was more important for our people to retain their jobs rather than pursue workforce reductions as a cost-saving strategy in response to market conditions,” Barry Fitzgerald, chief executive of Roy Hill Holdings Pty Ltd, said in an email to Reuters.
Analysts blame the downturn on a massive rise in production due to overestimates of China’s appetite for imported ore by sector titans Vale of Brazil and Australians Rio Tinto and BHP Billiton .
Amid the supply glut, Roy Hill is set to release a further 55 million tonnes of ore into the market, starting in September.
The salary cuts will range from 5 to 10 percent, according to the statement.
Executives and senior management will take the biggest cuts, but there would be no salary reductions for employees on lower pay scales, who account for about half the workforce.
Fitzgerald said the pay cuts would enable the company to retain “family-friendly” work rosters preferred by staff flying in and out of the mine site, where work was 85 percent complete.
Other Australian miners already in production, including Atlas Iron, BC Iron and Arrium, have cut jobs to reduce costs in response to the downturn.
Fortescue Metals Group - three times the size of Roy Hill - refinanced $2.3 billion of $9 billion in gross debt in April after agreeing to pay a higher yield amid investor concern about the state of the iron ore market.
A fall in stockpiles at China’s ports has fuelled a recovery in iron ore prices from a low of $46.70 a tonne in April to around $62 a tonne. .IO62-CNI=SI.
However, Goldman Sachs expects prices to slip again below $50 a tonne because of the continuing oversupply. (Editing by Alan Raybould)