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State of mining is bad, but it could get worse
Tuesday, January 20, 2009 3:56 PM


(Source: Associated Press/AP Online)trackingBy SANDY SHORE

DENVER - Withering cost cuts across the mining industry have left tens of thousands of people without jobs from the Arizona desert to the Andes - and there is a litany of evidence that the situation is growing worse.

International mining companies also have postponed or canceled projects and padlocked the gates to mines as consumers have cut spending on cars, jewelry and housing.

Global mining giant Rio Tinto announced last week that iron ore production, used to make steel, tumbled 18 percent in the fourth quarter and said Tuesday its aluminum subsidiary would double previously announced production cuts.

Unwanted copper, gold, bauxite (used in aluminum) and iron ore, is piling up or being left underground as the worst recession in at least a generation saps demand.

"Expect inventories to get bigger and expect this continuing process (of cutbacks)," said Andrew Martyn, a portfolio manager who specializes in mining for Toronto-based Davis-Rea Ltd. "It's going to go for quite some time here."

The effect on many communities worldwide that rely on mining has been immediate. Workers are protesting job cuts and others are expected to begin migrating in large numbers in search of work, some across international borders.

"A lot of the communities are remote so that when (mines) do shut down, the town actually collapses," Martyn said.

The bulk of the layoffs in the United States are in base metals such as copper and zinc, although major companies are scaling back production of metallurgical coal for use in steel manufacturing.

Coal companies have slowed production from Wyoming to Australia.

Coal jobs are among the highest paying in many rural U.S. communities, potentially creating a dire economic ripple effect. In the past, coal companies have been more recession proof, but the average price per ton for Appalachian coal has fallen more than 35 percent since the summer.

At least 700 job cuts are likely in Tennessee and Montana by Swiss-based Glencore International AG, a commodities company.

Still, job losses have been most severe outside the United States.

Glencore's Bolivian subsidiary recently announced it will layoff several hundred people, triggering labor protests.

Thousands of miners who dig primarily for zinc in Bolivia either have been laid off or left their jobs in the Andes, the poorest region in South America's poorest country. In the mines around the small cities of Potosi and Oruro, the work force of roughly 25,000 miners and refiners has been cut roughly in half.




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