Codelco’s chief executive Nelson Pizarro is following through with his promise of cutting costs “to the bone” as the Chile-owned miner announced it has cut almost 3,900 jobs, including contractors, in response to low prices and weak demand.
Until now, the world’s top copper producer had only disclosed the layoff of about 400 employees, mostly staff members in top positions.
The fresh and massive cuts bring the number of layoffs to over 4,000, making of Codelco the mining company that has let go the highest amount of workers in Chile since metal prices began their decline over a year ago.
According to Pizarro, the “painful, but necessary” move has not affected production, local newspaper El Mercurio reports (in Spanish). “What’s more, the company’s output has grown 5.5% during the last year, and costs have dropped by about 11%,” he told the paper.
Last week, the country’s Finance Ministry announced it would give the miner $600 million in funds to help fund a five-year spending plan.
The capital injection, which will come from government bond sales, was announced after Pizarro presented an updated investment plan that reduced to $21 billion or $22 billion an original proposal of $25 billion, which aims to avoid a slump in output as existing deposits run out of profitable ore.
Codelco is not the only copper player taking drastic measures. Plunging prices have forced other top producers to consider cutting production, delaying new projects and slashing jobs to save money and mitigate oversupply.
In August, Freeport-McMoRan (NYSE:FCX), the world’s largest publicly traded copper miner, said it would slash its mining employees and contractors by 10%. It also said it would suspend operations at a mine named Miami in Arizona and decrease output at both its Tyrone mine in New Mexico and its majority-owned El Abra mine in Chile.
Mining and commodities giant Glencore (LON:GLEN) followed in September, unveiling a $10 billion package of debt-reduction measures, which included issuing up to $2.5bn of new shares, cutting dividends, selling assets and looking to offload a stake in its agricultural business to a third party.
Glencore also decided to suspend production at its copper mines in the Democratic Republic of Congo and Zambia, in a move that it says will take 400,000 tonnes out of the market and potentially provide a boost to prices.
The cuts are the deepest announced yet in the copper market, but they do add to a growing producer response to low prices, which dropped below $2.30 a pound ($5,070 a tonne) on Monday in New York. The industrial metal has fallen more than 5% in the last two weeks alone and it is down 17% so far this year, after falling to six year lows in August.