Mining giant Rio Tinto has confirmed it is cutting more jobs across its iron ore division in Western Australia.

Key points: 500 jobs are expected to be cut, many from Perth

500 jobs are expected to be cut, many from Perth Rio is blaming tough market conditions

Rio is blaming tough market conditions Last week's iron ore price recovery is predicted to be temporary

The company will not confirm numbers, but it is understood 500 jobs, or 4 per cent of its workforce, will go.

The company told the ABC "rolling reductions" were underway, with jobs at head office in Perth to be targeted first.

Rio has released a one-line statement acknowledging tough conditions for iron ore.

"The market outlook remains challenging and we currently have 1,000 initiatives underway across our business to reduce costs, improve productivity and ensure we remain internationally competitive," it said.

The iron ore price hit almost $US80 a tonne on Friday, but has fallen to $US72 over the weekend.

Rio Tinto said most analysts were forecasting the iron ore price to average $US40–50 a tonne next year.

Rio Tinto cut 170 jobs from its Pilbara operations in March.

The latest cuts come in the wake of a proposal by West Australian Nationals leader Brendon Grylls to hit big mining companies with a $5-per-tonne iron ore tax.

The tax has been widely criticised by Rio Tinto and BHP Billiton and the Chamber of Minerals and Energy on the grounds it is unfair and would cost jobs.

It has also been dismissed by the Premier Colin Barnett, but the mining companies claim it is causing uncertainty in the industry in the lead-up to the state election in March.

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Grylls claims London boardroom 'disconnect'

Mr Grylls today indicated he would stand firm on his plans to increase the fee, instead lambasting the company for cutting its workforce in the face of increased margins.

"There just seems to be now a massive disconnect between what the London boardroom of Rio Tinto's doing and what's happening on the ground locally," he said.

"Any other business that had tripled its clear margin in the last six months would probably not be looking to lay off workers."

He said the company's push to increase automation in production would likely see more jobs go.

And he said the Government had no influence over job losses at the miner.

"The fact that in this debate that's happening at the moment, that Rio would lead into this debate that [there's] potentially 500 jobs at risk, and not seek to correct the record today, means that the London head office's of Rio has no weather eye on what's happening here in Western Australia," he said.

Don't risk losing public support: Premier

Rio Tinto in August posted a more than double its first half net profit to $US1.7 billion, but its underlying earnings were halved, reflecting the crash of the iron ore price compared to a year ago.

Mr Barnett urged the state's biggest iron ore miners to preserve jobs and retain their workforce, despite volatile commodity prices, saying they risk losing public support.

Premier Colin Barnett has urged the state's miners not to slash jobs. ( ABC News: Andrew O'Connor )

"Only two years ago they were all saying they didn't have enough workers. The world hasn't changed that much," he said.

"But I think what the mining industry needs to be very careful about, is they could lose public support overall."

CME deputy chief executive Nicole Roocke said she believed a change of leadership and uncertainty surrounding Mr Grylls' proposal played a part in Rio's decision.

"What we certainly see is when new leadership come into organisations, they interrogate the way that business is done," she said.

"Mr Grylls' proposal certainly only heightens the concern of companies for the need to reduce costs, particularly when analysts are proposing that iron ore prices will drop again."

Higher prices 'temporary'

Mining analyst Tim Treadgold said the company did not believe a recovery in iron ore prices would last.

"I think they are battening down the hatches because they don't believe the price [of $US72] today," he said.

"They're pretty confident that the price over the next six months is going to retreat into the $US40–50 range and they are getting ready for that storm to arrive."

Mr Treadgold said the surge in prices "was largely due to the Chinese Government making alterations to the way its steel industry works."

Fortescue Metals Group chief executive officer Nev Power's take on where the iron ore price is headed is a little more optimistic than many.

"Certainly we've seen the iron ore price very volatile and driven high and low by speculative trading and derivatives trading by some very large speculative money flows coming in and out of the market," he said.

"If we look at the underlying trend though … it's been relatively consistent and over the last 18 months or so iron ore has generally traded somewhere between $40 and $60 a tonne, and if we look at the cost curve for iron ore, that's about where you'd predict it to be, perhaps a little higher than that."

Mr Power said although there were still some mines in Australia and Brazil that were continuing to ramp up, he believed the market had well and truly taken those into account already.

Any link to proposed tax a 'furphy'

Australian Manufacturing Workers Union state secretary Steve McCartney said it was a furphy to suggest Rio was cutting jobs in response to Mr Grylls' "thought bubble mining tax that hasn't even happened yet".

"Whilst those comments time nicely with the TV advertising campaign they're running against Grylls' proposal, we should be talking about a real commitment and plan to create and save full-time jobs for Western Australians," he said.

"These cuts are just part of Rio's bigger long-term plan to casualise their iron ore workforce."