BHP Billiton Limited (ASX: BHP) is reportedly getting set to swing the axe on more jobs for the third time in eight months with nearly 400 positions on the line.
The mining behemoth has already trimmed back its workforce this year, having cut roughly 140 jobs (mostly from its corporate office in South Australia) in June and even more from its Olympic Dam project in January this year. According to reports from the Fairfax press, the miner is now set to cut another 380 positions from its Olympic Dam copper mine in South Australia, with the miner under enormous pressure to cut costs and improve operating efficiencies.
Copper is one of BHP's four "pillar" commodities, with the others being iron ore, coal and petroleum. All four of those commodities are languishing around multi-year lows, constricting the miner's margins and overall profitability.
Copper is one of the most widely used metals on the planet and its price is traditionally linked with the health and growth of the global economy. As one would expect, China has been one of the key driving forces behind its strength in years gone by but with China's growth slowing down, copper prices have come under considerable pressure.
Indeed, BHP itself recently flagged between US$350 million and US$650 million in "additional charges" which mostly relate to its copper business, highlighting the damage being inflicted on those miners which produce the commodity. This included a charge of up to US$200 million in redundancies which does not include the redundancy charges that will relate to the latest round of job cuts.
You can read more about copper and its key drivers in Part 7 of my colleague Mitch Sonogan's 'Mining Investor's Handbook'.
In relation to the job cuts, Fairfax quoted BHP's Olympic Dam asset president, Jacqui McGill, as saying: "(The job cuts have been) driven by the global challenges in the resources sector, and the need to transform Olympic Dam into a sustainable operation that can contribute to the South Australian economy for many years."
In light of the tough operating environment, BHP Billiton is set to cut copper production over the coming 12 months by about 12% to 1.5 million tonnes with iron ore being the only commodity BHP will expand during the year. With strong headwinds facing the entire mining industry, investors would be wise to give the stock a wide berth and focus on some of the market's other, more attractive alternatives.
