, SYDNEY, Jan 23- Australian miner Arrium Friday said it was shutting one of its iron ore operations with 580 jobs set to be lost, as plunging commodity prices continue to hurt higher cost producers.
Arrium, one of Australia’s largest iron ore producers, said it would “mothball” the higher cost Southern Iron mining operation in South Australia while continuing to operation its lower cost Middleback Range mine in the same state.
The miner said it was also set to record a writedown of Aus$1.3 billion (US$1 billion) for the six months to December 31, mostly from the closure of the mine and lower iron ore prices.
“The re-design results from the substantial fall in iron ore prices over the last-half, as well as increased uncertainty around the timing and extent of any price recovery,” the company said in a statement.
“Iron ore prices are currently at five year lows, and down approximately 45 percent on prices for the prior financial year.
“The extent of this fall has moved Arrium Mining to a position where it is absorbing cash, despite significant work and achievements in reducing costs and capital expenditure.”
Some 200 full time jobs and 380 contract positions will be cut.
Shares in Arrium closed 8.89 percent lower to 20.5 AUS cents Friday.
Iron ore prices slumped 47 percent in 2014, pulled lower by a global supply glut and weaker demand from a slowing China.
The plunging prices have hurt higher cost producers, while resource giants such as BHP Billiton and Rio Tinto — which enjoy lower costs — have added to the supply glut by boosting output.
The restructure will see production costs for iron ore drop from Aus$71 per dry metric tonne in the 2014 financial year to an average of Aus$57 per dry metric tonne.
Arrium chief executive Andrew Roberts said the restructure was due to be completed by the end of June and would leave the miner “well positioned for maximizing cash generation and returning cash to the Arrium group in (the 2016 financial year)”.