As Mining Profits Fade, So Do Luxuries

Kinross Gold workers in Mauritania, in West Africa, are seeing the impact of China’s cooling demand for minerals in an unlikely place: their break rooms. To cut costs, the Toronto-based miner’s African employees are losing their posh Nespresso coffee machines, the ones advertised by George Clooney. That comes on the heels of Rio Tinto cutting back on the number of meat pies for workers at its Australian mines.

Prices for raw materials are falling after increasing almost fourfold in a decade, sending mining companies scurrying for cost savings. After cutting billions of dollars on the big stuff, they’re scratching for savings wherever they can find them, from renegotiating rubber contracts for tires to adopting driverless trucks and trains. Free food for employees isn’t exempt, either. “The focus absolutely has to be on cost-cutting and to cut out the excesses of the past five years,” says Rob Clifford, a Deutsche Bank analyst in London. “And you need to focus on the small stuff. Every pie counts.” That’s why Rio Tinto, with more than $50 billion in revenue last year, worked hard to save about $60,000 by reducing its servings of hot meat pies and sausage rolls, part of a broad effort that stripped $2.3 billion from costs last year.