Ensham Resources is continuing legal action against its Japanese insurer to recover $450 million for losses it suffered in 2008.
Ensham Resources is continuing legal action against its Japanese insurer to recover $450 million for losses it suffered in 2008.

Ensham slashes jobs in coal slump

ABOUT 100 contractors have lost their jobs at Ensham mine, east of Emerald, with the threat of more staff cuts to come if depressed thermal coal prices don't bounce back.

Ensham chief executive Peter Westerhuis was yesterday unapologetic about making tough business decisions to maintain the company's competitive position.

"We have to make sure we are producing the lowest cost coal … and unfortunately some parts of our mine are less cost competitive than others so we have had to close them down," Mr Westerhuis said.

"Regrettably that has had an impact on resources required and at this point there's about 100 contractors gone.

"Quite frankly, if the price stays as low as it is, we will have to review further parts of the business with strong prospects of further reductions in the human resources required.

"We haven't quantified that figure yet, but it's not good news."

The mine has about 900 employees.

Thermal coal prices have slumped about 30% in the past year to about $80 a tonne due to increased exports out of Indonesia and the United States, compounded by low demand from China and India.

"The price of thermal coal has essentially collapsed in the last five, six months and an operation like Ensham, which is mature at nearly 20 years old with a deep strip ratio and the low prices coupled with escalating input costs, means we have to be very careful to maintain the business on a profitable footing," Mr Westerhuis said.

Last week, Rio Tinto blamed the volatile market for looming staff cuts at its Clermont mine.

An operational review of the mine is under way with the extent of redundancies to be revealed when a report into its cost-effectiveness is completed.

The 900-strong workforce has been told significant savings must be found.

US giant Peabody Energy, who bought Macarthur Coal for US $5 billion last year and operates in the Bowen Basin, supported the fear of industry bloodletting with its latest quarterly report.

The company said continued challenges existed at its Australian mines, including performance at contractor-operated mines, a longwall move, lower thermal coal pricing, a temporary shift in the mix of metallurgical coal and the introduction of the carbon tax.

Ensham remains locked in a court battle with Japan's AIOI Insurance which has refused to pay out a claim for more than $450 million as a result of the disastrous January 2008 flood event which saw the mine inundated when levee banks on the Mackenzie River failed.

It was estimated the removal of mud from the pits cost about $60 million, on top of the $10 million to dewater the mine and undisclosed losses from the interruption to mining.

"Let's just say it is a very complex matter … which is in dispute for a variety of reasons, but it is playing out as we anticipated," Mr Westerhuis said.

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