Rio Tinto Iron Ore chief executive, Sam Walsh, said the decision was purely based on market conditions as the slump in the demand was not enough to justify operating the mine.
He stated: "This is a tough decision, but unfortunately one that relates directly to the current market conditions and the uncertainty of a market recovery in the near term.”
The plant operating in Kiwana, Western Australia, since 2006 would be placed into care and maintenance work until 2010. A team of 40 employees would be retained for property projects and matters relating to the upkeep of the mine.
The step taken by the mining giant for the closure is expected to affect a large number of employees. Nevertheless, the group is giving options to around 100 workers to apply for deployment elsewhere in the company.
Sam Walsh said “We retain every confidence in the viability of the HIsmelt technology, which is proven and successful, and we remain hopeful for an upswing in the market to enable a restart in the future.”
The Kwinana HIsmelt plant uses a revolutionary direct smelting technology to smelt high phosphorous iron ore and non-coking coal to produce a premium grade iron product. It has the potential capacity of 800,000 tons a year, although it has been producing well below this since production started.
With a sag in demand amidst global recession, commodity prices have touched an all time low, forcing many producers to cut output and shed jobs to remain competitive.
The world's second largest producer of iron ore delivered 31.759 million tons in the quarter ended Dec. 31 last year. The company demonstrated a loss of $56 million in 2008, a significant drop in comparison to the previous year. The decline in production was attributed to a slump in Chinese demand, which in turn accelerated the unit costs.
Tom Albanese, the chief executive, said, "We are taking firm action in response to the global economic downturn and, given the resilience of Rio Tinto's low cost assets, expect to remain well positioned when recovery comes.”
The plant is 60 percent owned by Rio Tinto, with Nucor Corporation, Mitsubishi Corporation and Shougang Corporation holding the remaining equity of the mine.
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