Will Mines Survive Cost Cuts - February 2016

Will Mines Survive Through Cost‐Cuts?

February 2016​

The challenges facing the iron ore industry are far from being new news at this point and potential legislative solutions are slow in making progress through the international courts that might offer import and export regulations to help; because of this, the mines will have to get creative in their approaches to staying resilient and remaining open. Cutting costs is a logical answer but can be tricky to incorporate. Some larger mining companies like Fortescue Metals and Rio Tinto continue plans to expand while smaller companies including Atlas Iron are facing greater struggles in keeping their operations in production.

Prudent spending cuts take many different forms and, for some, the best approach to cut non‐essential spending will mean the local economies that have ridden the successes of the Iron Range mining boom will need to be open to giving back in order to protect the longevity of the industry. In the Iron Range alone over 3,600 workers in the mining and supporting industries are now unemployed.

Proposed by the Minnesota Power company with support from the Minnesota Public Utilities Commission, a rate change would return electricity rates to more normal pricing in the Duluth and Iron Range communities. The area’s rates have remained low thanks to the local mining operations paying an amount above that of their own production expenses; however, now that the industry is in trouble, the ability for such measures could result in further mine closures, while rate changes should add the leniency the companies need to stay open and continue employing and supporting the surrounding community.