Kagara and Panoramic Resources cut 230 to save on costs Matt...

Kagara and Panoramic Resources cut 230 to save on costs


Matt Chambers | January 30, 2009
Article from: The Australian

BASE metals miners Kagara and Panoramic Resources have revealed more than 230 additional job losses.

Kagara executive director Joseph Treacy said yesterday his north Queensland workforce had been cut by about 200 contractors and 20-30 employees, after deferral of its Mungana base metal plant, mining cutbacks and a decision to stop all exploration after next week.

West Australian nickel miner Panoramic said cost reductions had resulted in a limited, but unspecified, number of redundancies.

Remaining employees took a 10 per cent pay cut and gave up benefits such as private health cover and additional superannuation contributions offered to lure workers during the recent boom and skills shortage.

The global economic downturn and credit freeze have so far cost more than 9000 jobs in the mining sector, as low metals demand has slashed prices.

"No base metal mining company in Australia is profitable at present and Kagara is no exception," executive chairman Kim Robinson said yesterday in the second-quarter report.

The company was producing a modest positive cash flow at current copper prices of about $US3400, he said. Because of the downturn, all exploration would be stopped after resource drilling was finished at the Lounge Lizard nickel deposit, Mr Robinson said.

"With assets that are cash-flow positive and with an outstanding portfolio of development opportunities in Lounge Lizard, Admiral Bay and the Chillagoe gold assets that are second to none, we are well placed to see through this downturn," he said.

Kagara reported record copper production of 11,828 tonnes in the quarter but said earnings would be hit by downward pricing adjustments on concentrate sales.

If Kagara can remain cash-positive, its next hurdle is repaying or refinancing a fully drawn $50 million debt facility with Westpac that matures in March.

An option for Kagara could be the sale of its Admiral Bay zinc, lead and silver deposit in Western Australia.

The company has received several expressions of interest in the project and early stage discussions are progressing.

Perth-based Panoramic said it would defer all discretionary capital projects and associated expenditure and reduce exploration spending.

Answering speculation that BHP Billiton's Nickel West operations were in danger after the closure of the $US3 billion ($4.57 billion) Ravensthorpe nickel operation, Panoramic said it had been told it was "business as usual" at the Kambalda nickel concentrator that buys its ore.

Panoramic reduced its full-year production forecast by up to 3600 tonnes of nickel to between 18,000 and 19,000 tonnes.