Australian mining giant Rio Tinto (ASX: RIO) announced on Thursday that it will declare some redundancies on its Clermont Mine in central Queensland which has a total of 770 workers and opened only in 2010.

The reduction of manpower is being blamed on drop in coal prices in the global market, which has plummeted to $83 a tonne from $115 a year ago due to higher coal production from the U.S. and lower-than-expected demand from China. The cost-cutting measure is also due to new taxes, rising fuel and equipment bills, and higher costs of operations faced by mining firms.

"A review is under way and although the details are to be worked out, it will unfortunately mean redundancies will be required. We do not take this decision lightly and are committed to keeping our employees informed," Rio said in a statement.

Michael Roche, the chief of the Queensland Resources Council, described as a perfect storm the double whammy of falling coal prices and rising costs which hit coalmining firms that are planning to open new mines in Bowen Basin and Surat Basin in the state.

"There's no doubt that the proponents of these projects will be reviewing the medium- and long-term outlook for thermal coal prices as they come to a final view about whether or not to proceed with those projects," The Australian quoted Mr Roche.

One bit of good news for coalminers is that analysts believe prices will not further drop, but they are neither anticipating an improvement in prices in the short term.

"U.S. and Russian miners have the highest cost and their competition for European market share will provide a floor price, which we think has already been reached, we don't expect an improvement in prices until later this year," Reuters quoted Wood Mackenzie coal analyst Rudi Vann.

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