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Perilya to cut 440 employees

Friday, 22nd August, 2008

In a major blow to Broken Hill, Perilya is to slash 440 jobs from its local mining workforce next month in response to low metal prices.
The struggling company announced yesterday that it had decided to "resize" the mine - the city's single largest employer - following an extensive review of the operation.

As a result the workforce will be cut from 760 to 320 as the company winds back production to just 950,000 tonnes per annum - or almost half the current rate.

Mining will also be limited to just one area on the line of lode, the Southern Operation. The North and Potosi mines will be placed on care and maintenance.

Exploration expenditure within the Broken Hill region will also be cut.

The company said the changes were aimed at ensuring the mine remained "financially viable" and to allow it to "weather the current low metal prices" for the next two to three years.

Vice-president of the CFMEU in Broken Hill, Greg Braes, said the job cuts would have a devastating effect on the workers, their families and the wider community.

"This is going to hit the town," he said.

Mr Braes, who said Perilya informed him about the job cuts early yesterday morning, was present when managers informed mine workers during a change of shift at the Southern Operation.

He said the size of the jobs cuts shocked everyone.

"They were just numb.

"You could just see it on their faces."

The company was expected to inform more workers last night at meetings to be held at the Southern Operation and at the North.

Mr Braes, who has over 300 union members, said he was told positions would be cut across the entire operation and would include managers as well as daily paid employees.Perilya said a number of jobs would also go at the company's head office in Perth.

Executive chairman Patrick O'Connor said all affected workers would receive their full entitlements and be "supported in the transition".

"The decision to reduce our workforce has not been taken lightly and we are mindful of the impact upon individuals, their families and the community," Mr O'Connor said.

"We firmly believe that this is the best option to ensure continuity of operations and to preserve the mine for the long-term benefit of the community and the shareholders."He said should metal prices increase in the future, the company would be in a strong position to "ramp-up production" and to utilise the full potential of the local concentrator with ore sources from the Southern Operations, Potosi, the North Mine and Flying Doctor.

The company said permitting of the Flying Doctor open pit resource northeast of the city would continue, along with mine planning work to assess the potential of the North Mine and North Mine deeps mineral inventories.

But in a media conference held yesterday afternoon, Mr O'Connor would not rule out more drastic measures if metal prices continued to fall, including closing the mine altogether.

"There's no guarantees," he said.

But he said all of the options the company looked at focused on preserving the operation, not closing it, and it was confident a "robust plan" had been developed that would carry the mine through the current downturn.

"The focus wasn't looking at closure, the focus was looking at a plan to continue ..."

Perilya will use part of the $60.3 million in proceeds it gained from closing its hedging contracts to pay for workers' entitlements which the company said would cost $20m.

"The company will work closely with its employees and contractors, union officials and the community to assist in finding alternative employment for those affected," it said in a statement.

Redundancies are expected to begin on September 1, and the company is seeking expressions of interest in redundancy packages which close on August 29.

Mr Braes said it was important that everything possible was done to help the sacked workers find alternative employment.

"We've got to try and look at something, especially the younger fellows."

Perilya's executive general manager operation and development, Paul Arndt, said employees who applied for packages would not necessarily receive one.

He said selection would be "subject to suiting our needs" but would take into account employees' service record and "their attitude and behaviour towards safety.

"If we've got someone who we think is essential (we will keep them)," he said.

The company will also target employees who do not live in the city.

Mr Arndt said Perilya's local operation had a strong resident workforce and "that's where our focus lies".

But he said non-locals made up only a small percentage of the workforce and worked mainly for contractors, particularly drilling companies.

"There will be some very good people who we will be unable to keep."

Mr Arndt said there were plenty of jobs out there for skilled workers - provided they were prepared to leave Broken Hill.

"In the current market the issue won't be getting a job, it will be the prospect of relocation."

While drastic and harsh, Mr Arndt said the changes the company was making were about ensuring the long term future of the mine.

"Our first priority has to be preserving the operation."

He said the measures also preserved the "integrity" of the company's current Life of Mine Plan, which shows the Southern Operation can run for at least another seven years.

Mr Arndt said that was important because it meant the company could capitalise quickly when metal prices improved.

"We would have the capability, within a one year period, to double production."

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