WHYALLA-based miner Arrium’s decision to halve its mining operations in South Australia will lead to the loss of more than 500 jobs, including contractor positions.

Arrium is closing one of its two South Australian mining precincts in response to falling iron ore prices and will writedown more than $1.3 billion in costs.

The iron ore miner, formerly known as OneSteel, will mothball the Southern Iron mining operations, which includes its Peculiar Knob iron ore mine and a processing site at Wirrida, to focus on its lower-cost Middleback Ranges operations.

“It’s a difficult decision but we see it as one that ensures the ongoing viability and sustainability of the business and remaining jobs in the long term,” chief executive Andrew Roberts told The Advertiser.

“The business is able to move to a lower cash cost operation through its flexibility to alter volumes, grade and costs.”

A presentation detailing the restructure shows a workforce reduction of about 200 full-time equivalent jobs from Arrium (nearly 30 per cent of its mining workforce) and a reduction of 380 contractor positions at Southern Iron.

Arrium employed about 1920 workers in SA at the start of the year.

Most of the Peculiar Knob mine workforce flies in from Whyalla, Coober Pedy, Adelaide and other locations and 50 per cent of the contractors are from outside South Australia, Mr Roberts said.

The mine is situated 90kms south of Coober Pedy and 600kms north of the Whyalla Port.

Arrium will also mothball its Outer Harbour operations at the Whyalla port with the Inner Harbour operation catering to the lower volume exports.

Exports will fall from about 12.5 million tonnes of 60 per cent iron to about nine million tonnes of 69 per cent iron.

Mineral Resources and Energy Minister Tom Koutsantonis said he had expressed his disappoinment to Arrium chief executive Andrew Roberts but said the state was not immune to the iron ore industry’s adjustments to a collapse in global prices.

“My thoughts are with the affected workers, contractors and their families who are receiving the news today.”

“Arrium has indicated it will honour all employee entitlements and look at opportunities for deployment of affected workers, where possible.

“The Department of State Development will provide assistance to workers affected by the announcement,” he said.

The company said it was working with contractors to mitigate costs and will provide full support to affected employees including redundancy packages, outplacement and personal assistance.

Arrium also said it would look to cut total production costs by 20 per cent to around $57 per tonne by 2016.

As a result of the shutdown, Arrium will take a one-off $1.335 billion hit to its half year result, including a $1.17 billion impairment charge related to Southern Iron and $130 million charge linked to its Steel and Recycling business.

Arrium expects its underlying earnings for the six months to December 31 to be between $180 million and $190 million.

Iron ore prices have more than halved in the past 12 months to due weaker demand from China and over-production.

Mr Roberts said the company had sought to “preserve” the Southern Iron operations rather than sell assets in a difficult environment if and when there is a recovery in iron ore prices.

South Australian Chamber of Mines & Energy chief executive Jason Kuchel said he expected Arrium to boost exports over the long term.