Metro’s dramatic steps to slash costs as market confidence collapses
Metro Mining will sack workers and bring forward its wet season shut down of its Cape York bauxite mine as market confidence disappears.
Bauxite is used in the production of aluminium.
A cost cutting program has been implemented, including a reduction in directors’ fees and executive salaries, that it has forecast will reduce administration costs by about 39 per cent. An unspecified number of jobs have also been cut from staff as well as contractors.
Although prices have softened, Metro said the strong production profile from Bauxite Hills, north of Weipa, in 2020 had generated solid cash flows.
It said travel restrictions related to COVID-19 had impacted its bauxite marketing and sales program making it more difficult to finalise off-take contracts.
“By making these changes, Metro will be in a sound financial position and have sufficient cash to begin operations again as planned in April 2021, where 2.3 million tonnes of planned production is already contracted,” the company said.
Metro anticipates that 2021 will see considerably improved trading conditions given the Macro-economic indicators in China suggest the aluminum supply chain is now recovering and the primary aluminum price and the alumina price are both returning to near pre-COVID levels.
Its expansion plans at the Bauxite Hills site could also be delayed and confidence in the sector was low and customers were reluctant to enter into new off-take agreements. Bauxite is the raw material used in the production of aluminium.
Managing director Simon Finnis said the company was “extremely disappointed” that despite a record performance from the teams on-site, and the efforts of our marketing team we have been unable to secure further sales that would have meant a very successful operating year for Metro.
“We live in very challenging times with many factors outside of our control. This decision has not been taken lightly and we will do all we can to assist our people and all stakeholders. This includes ongoing discussions with both federal and state governments.
“The market does appear to be recovering and our marketing efforts are continuing as aggressively as ever in order to secure additional sales for this and for following years. However, we also have the responsibility to protect the interest of our shareholders and all stakeholders, so the decision to accelerate the move into the wet season shut-down had to be made.”