Glencore Xstrata shelves $139 million copper mine expansion project
Mining titan Glencore Xstrata (LON:GLEN) may be shelving a $139 million expansion of its Australia Cobar copper mine, in New South Wales, as it confirmed contractor dismissed, Macmahon Holdings, had been originally hired for the project.
The decision comes a week after Australia's top commodities agency said investment in the resources industry had peaked and was set to decline.
When asked if the contract termination meant the firm was cancelling the project, Glencore's local representatives The Sydney Morning Herald the company was “considering its options with regard to the project."
In a statement, Macmahon said it was assessing the extent of the hit of Cobar Management's decision to its earnings. Glencore Xstrata’s project was expected to contribute the firm about $6 million of revenue for June 2013, and $80 million of revenue the next financial year.
Mining investment has been one of the key drivers of the Australian economy in recent years, and makes up about 8% of the economy.
But the world’s top miners, including Aussie giants such as BHP Billiton (ASX:BHP), Rio Tinto (ASX:RIO), Newcrest (ASX:NCM) and Fortescue (ASX:FMG), have been cutting costs in the last six months by shelving projects, dismissing workers and putting non-core operations up for sale.
Suppliers and contractors who managed to charge high prices during the boom, because of the intense competition for equipment and expertise, are now targets of companies' cost-cutting attempts.
In May, Glencore abandoned its $1 billion Balaclava Island coal terminal plan in Queensland, soon after acquiring it as part of its merger with Xstrata.