Gina Rinehart
Australian mining heiress and Chairman of Hancock Prospecting group Gina Rinehart awards medals to competitors at the Australian Synchronised Swimming Championships in Sydney, Australia, April 25, 2015. Rinehart's company is a major sponsor of the event. Reuters/Jason Reed

Australia’s richest person has told her employees to take a pay cut or lose their jobs. Gina Rinehart’s Roy Hill project will cut pay rates for its employees to avoid job losses.

The $10 billion company will be deducting 5 to 10 percent from the salaries of about 60 percent of its workforce in a bid to save its employees. It will also offer lower salaries to new workers. The move is expected to affect about 540 workers, with the upper management group taking the biggest cut, though it will spare existing employees in the lower remuneration bands.

According to Barry Fitzgerald, the company’s chief executive, the decision was made after reviewing the cost base. The pay cuts, which he said was approved by the workers through a survey, was to maintain the “family-friendly roster,” which is 14 days on with 10 days off, and 14 days on with 11 days off. He said the roster was what attracted a number of people to join the company recently.

“We felt it was more important for our people to retain their job rather than pursue workforce reduction as a cost-saving strategy in response to market conditions,” Fitzgerald, who will be getting a 10 percent cut from his pay, said. He further explained that cutting salaries was a practical decision they agreed on to keep the company competitive over the long term.

The iron ore mining project’s labour costs eat up about 30 percent. About 600 people are currently employed in the company, with the number expanding to 2,000 during operation.

The oversupply of iron ore and the waning demand from the Chinese market triggered the downward drive of the company and the Australian mining sector as a whole. In 2011 when supply was tight and demand was unquenchable, iron ore registered around $200 per tonne. It was a far cry from the industry’s current situation. It fell to an all-time low of $58 per tonne in March, and has just recovered slightly on Tuesday when it traded at US$62.53 [$81.16] a tonne, almost 40 percent higher than the dismal figures in April.

The upturn of the steel-making commodity will not last long, however, according to global investment banking company Goldman Sachs Group. According to CNBC, Goldman cut its iron ore forecasts by 18 to 33 percent for 2015 to 2018. Prices are expected to drop to US$52, US$44, US$40 and US$40 a tonne respectively.

Rinehart’s family company Hancock Prospecting is the majority stakeholder of the ambitious Roy Hill project. It was projected to become the fourth largest iron ore producer in Australia, behind Rio Tinto, BHP and Fortescue.

Contact the writer: a.lu@ibtimes.com.au

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