21 November 2012

Namibia: More Cost Cutting for Rössing Mine

Rössing Uranium is high on the agenda of sites that Harry Kenyon-Slaney, Rio Tinto’s chief executive for energy, wants to visit early next year to see to it that costs are cut.

In a memorandum to the group’s energy managers, Kenyon-Slaney says that each site “has its own particular challenges which can’t be properly understood until you’ve been on site.”

A reduction in spending enjoys priority, his memorandum indicates.

According to Kenyon-Slaney, he recently presented the company’s energy 2013/14 business plan to the plan review committee of Rio Tinto.

“Our plan is all about productivity: how we will get more production for less cost. The 2013/14 plan also requires us to achieve best-ever rates and utilisation in our key mining processes. This must be our strong focus to ensure we remain a viable business.”

According to him, coal and uranium prices are unlikely to improve much in the near future.

“While there has been some very good business improvement work in all of our energy business units in the past 12 to 24 months, we cannot rest on this work.”

He singled out Namibia when he added that it was important to cut spending.

“We need to reverse the very large cost increase that we’ve seen during the resources boom over the last five years. This issue is most pressing in Australia but also applies to Mozambique and Namibia.”

Seeing that Rio Tinto’s commodity prices have dropped, the company needs to sharpen its focus on reducing operational expenditure.

Kenyon-Slaney said he had asked their energy chief financial officer, Matt Halliday, “to lead a programme of work to drastically reduce our operational spend rate over the next three months”.

Again, he singled out Rössing as one of the sites where this would be implemented. “This will be a structured programme in order to meet what is an aggressive timeframe.”

Some of the focus areas will be the prices Rio Tinto is paying, the amount of goods and services it is using, which items are ordered and received and where and from whom it acquires the goods and services.

“Improving our productivity and reducing our spending will require a mindset within all of us where we preface each task and each spending decision with the following questions: ‘Would you would spend this money in the same way if it was your own?’ ‘What can I do today/this week/this month to increase our operational performance?”

At the end of June, Rio Tinto group chief executive Tom Albanese dropped a bombshell when he announced that employee costs across the group would be slashed by ten percent, including at Rössing Uranium.

Then, Rössing Uranium spokesperson Jerome Mutumba said it was too early to say exactly what would happen at Rössing.

Asked whether there would be layoffs at the Arandis mine, he replied: “I cannot say that. Like others in the industry, Rio Tinto is facing the challenge of increasing costs. We are actively seeking ways to tackle this.”

This week, he said: “For the past months Rössing has stepped up its continuous improvement interventions aimed at containing costs and increasing savings. As a result of the company’s deliberate interventions, we have seen improvements in our safety performance, costs and overall operational productivity. We will continue to improve on our cost performance in all areas of our operations, with special focus this time on procurement value.”

When again asked yesterday whether layoffs were on the cards, Mutumba said: “At this stage, we plan to fully utilise and leverage on our current human capital.”

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