Andrew Forrest's Fortescue Metals Group yesterday axed hundreds of WA jobs and slashed $1.6 billion in capital spending, amid growing signs that the State's iron ore boom has fallen victim to slowing economic growth in China.
Australia's third-largest iron ore miner admitted it would delay its much-vaunted plan to export iron ore from the Pilbara at a rate of 155 million tonnes a year by the middle of next year.
Fortescue chief executive Nev Power said the company would sack staff and contractors in a bid to save operating costs of $300 million a year as part of an effort to keep FMG profitable after a crash in iron ore prices.
He said the measure was temporary, to counter volatility in the iron ore markets, and Fortescue planned to get its expansion back on track when prices recovered.
With iron ore prices falling below $US90 per tonne ($87.86), after sitting above $US135/tonne in July, analysts had cast doubt on whether Fortescue's operations were profitable enough to support its $US8.5 billion debts and the $US6.2 billion it planned to spend on expansion projects this financial year.
Mr Power would not say how deep the job cuts would be, but said "several hundred" employees would be laid off along with a similar number of contractors and consultants. It is understood about half the estimated 300 to 600 job losses would come from the Perth office.
The announcement sparked tears and "emotional outbursts" from affected staff when they were told of the cuts yesterday morning, sources say, with some told to pack their belongings and prepare to leave immediately.
Fortescue also called for volunteers to take up to a year in unpaid leave to help preserve their jobs, and told staff that bonuses due to be paid next month would be deferred.
The iron ore giant's move angered unions, who said the decision had shocked workers.
Secretary of the Construction, Forestry, Mining and Energy Union's mining division, Gary Wood, said gloom was setting into the sector with fears of a bigger drop-off in mining job opportunities, after cutbacks and project delays at other major miners.
"You get lured into a false sense of security when you look at all the work in the pipeline, but all of a sudden the rug has been pulled from under the workers," he said. "The penny has dropped . . . all of a sudden it feels like the boom is over."
In Perth to address a mining conference, Prime Minister Julia Gillard denied that Fortescue's decision was a sign of weakness in the Australian economy.
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