PERTH (miningweekly.com) – Diversified spin-off South32 has announced significant job cuts across its Australian and Colombian assets as it works to reset its cost base at these assets.

At its Worsley alumina operation, in Western Australia, South32 would cut about 390 employees and contractors before the end of 2016, amounting to about 15% of the current employee and contractor numbers.

Staff numbers at the Illawarra metallurgical coal operation, in New South Wales, would also be reduced by 300 employees and contractors before the end of 2016, while a further 82 employees and contractors would be made redundant at the Australia manganese operations.

At the Cerro Matoso ferro-nickel operations, in Colombia, South32 would reduce employee and contractor numbers by 350 by the end of 2016.

The latest round of staff layoffs was in addition to the 620 employees made redundant at the company’s South African manganese assets earlier this year.

South32 CEO Graham Kerr said that the restructuring initiatives at the Australian and Colombian assets were central to the company’s strategy, adding that the continued optimisation of its high-quality operations would strengthen underlying cash flows in what remained a challenging environment.

In addition to the staff cuts at Worsley alumina, South32 would also look to reorganise the mining and refining into two operations, and to remove layers of management and functional support.

The miner was hoping to lift refinery availability and use by 3% over 2016, while reducing sustaining capital expenditure (capex) to about $41-million in 2017. During the 2017 financial year, South32 was also hoping to deliver $65-million in cost savings from the continued aggregation of its procurement activities.

At Illawarra, the project would also be reorganised into two operations, with an increase in longwall use at the Appin and Dendrobium mines, as well as the completion of the Appin Area 9 project expected to increase production to some 9.5-million tonnes by 2017.

The Appin Area 9 project was slated for completion in the March quarter of this year.

South32 was also targeting a 58% reduction in sustaining capital at the Illawara operations during 2017, with some $108-million targeted, while cost savings of $50-million would be achieved in the same period from aggregation of procurement activities.

At the Australia manganese assets, a revised ramp-up of the premium concentrate ore project would be implemented, targeted for completion in the June quarter of this year, with the company also targeting a 6% increase in the productivity of the mining fleet.

Sustaining capex would be halved to $40-million in 2017, with South32 targeting cost savings of up to $10-million through the aggregation of procurement activities at the manganese operations.

At Cerro Matoso, South32 was hoping to save about $37-million by 2017 through the aggregation of procurement activities, while also reducing its sustaining capex by 56%, to $16-million.

“Operating unit costs, including sustaining capex, will move sharply lower at our Illawarra metallurgical coal, Cerro Matoso and Worsley alumina operations, mitigating cash outflows and solidifying their position at the low end of the industry cost curve,” Kerr said on Thursday.

“In addition, the reconfiguration of our leading Australia manganese mine will ensure it becomes a positive contributor to free cash flow at current prices.”

South32, meanwhile, reported a 616% decline in after-tax profit, with the miner reporting a loss of $1.7-billion for the six months ended December, compared with a profit of $339-million in the previous corresponding period.

The statutory loss reported at the end of the interim period included a noncash impairment charge of $1.7-billion. The impairment charge included a $916-million impairment at the Australia manganese operations, $97-million from the South African manganese operations, $518-million from the South African energy coal division and $97-million from the Brazil alumina operations.

Revenue for the six months under review declined by 27%, compared with the previous corresponding period, reaching $2.9-billion, while underlying earnings before interest, taxes, depreciation and amortisation declined by 52%, to $542-million.

Looking ahead, South32 has lowered its capex guidance by some $150-million, to $550-million, with the restructuring initiatives expected to underpin a $300-million reduction in controllable costs in 2016.