Suddenly strapped for cash and forced to penny pinch as
Australia's decade-long mining boom fades, resources
companies are sending a new message to staff: The gravy train
Gone are free fruit baskets, weekly barbecues and the
Australian "smoko", or unscheduled work breaks, at some
Frantic demand from China for commodities over the last
decade shielded Australia from the global downturn and
prompted $400 billion in investment. Desperate to retain
staff, six-figure salaries and elaborate extras for everyone
from truck drivers to kitchen help became commonplace.
Private suites with daily linen changes and cable television
replaced pre-boom bunk beds and gang showers.
"I loved my time working in the nickel mine," said Eloise
Martin, who quit a job as a florist to work as a geologist's
assistant just long enough to put together a down payment on
"In my off hours at the mine, I learned French, took computer
classes and became an expert in four-wheel drives, all paid
But with the boom past its peak, companies are cutting out
many perks, a move they say is needed to offset lower returns
and the high cost of doing business in Australia.
Fortescue Metals Group, an iron ore miner whose stock split
10-for 1 in 2007 and made a multi-billionaire out of its
founder, has scrapped weekly staff barbecues. Gone too, is
free coffee and ketchup from the canteens, according to a
In the past week, a contracting company overseeing work on
Chevron's $52 billion Gorgon gas project, even banned sitting
during working hours in a bid to keep productivity up.
The contractor's leaked memo, published by the Australian
Financial Review, was criticised by Australia's Workplace
Relations Minister, Bill Shorten, a former union official.
"Presumably the person who typed up that communication has
got be sitting down when they said it," Shorten said.
The resources industry is full of anecdotes of how firms are
penny-pinching: A coal mine that no longer provides free
fruit in its canteen. Or the chief executive who insists on
personally approving purchases of new office supplies and
Labour unions complain the actions undermine staff morale and
are really designed to tell workers they need to curb
expectations of what employers will provide outside of a
The Construction, Forestry, Mining and Energy Union (CFMEU)
said management at one Outback mine warned staff if they got
sick over Christmas they would have to fund their own flight
"Some of the cuts might seem silly, but it is the companies
firing a warning shot, letting workers know they are looking
for more productivity," a CFMEU spokesman said.
In September, Australia's richest woman, Gina Rinehart,
complained about the cost of mining in Australia, contrasting
it with the jobs market in Africa, where she said workers
could be hired for under $2 a day.
Some jobs have vanished altogether.
Rio Tinto has spent more than $500 million on driverless
trains to cart iron ore from its mines and is experimenting
with 150 driverless trucks.
Australia is already the biggest producer of iron ore and
coking coal and aims to soon overtake Qatar as the world's
top exporter of liquefied natural gas.
But cost overruns are now threatening the viability of that
A report by the Minerals Council of Australia, an
industry-backed association, showed high labour, transport
and energy costs meant iron ore projects were 30 percent more
expensive in Australia compared to the global average, while
thermal coal projects were 66 percent more expensive.
"Within highly competitive markets for thermal coal, coking
coal, copper and nickel, more than half of Australia's mines
have costs above global averages," Minerals Council chief
executive Mitch Hooke told Reuters.
"The cause is increased labour, energy and transport costs,
and a high exchange rate. Even in iron ore, we have lost our
operating cost advantage for all but established Pilbara
Rio Tinto is believed to be the lowest cost iron ore producer
in Australia with a cash cost for the first half of 2012 of
around $24.50 a tonne. Iron ore sells for around $120 a tonne
but has fallen as low as $90 during the year.
Mining costs only represent the average expense of mining a
tonne of iron ore. Additional costs, such as spending on
exploration and equipment and royalties, need to be covered
before a mining company can make a profit.
In thermal coal, six years ago 63 percent of Australia's
mines fell within the cheaper half of the global cost curve.
By 2012, this has fallen to 28 percent, according to sector
consultants Jackson Partners said.
In copper and nickel, an already-weak cost position shows no
sign of improvement. In both metals, nearly half of
Australia's production is now in the most expensive 25
percent of mines globally, the firm's research shows.