The Appin and west Cliff mines have been merged underground and South32 says it expects increased productivity as it tries to present a leaner profile to confront poor market conditions for coal.

In news described by Shellharbour MP Anna Watson as “a hammer blow”, the company announced 14 per cent of positions would be cut from its Illawarra metallurgical coal operations. This was part of 770 jobs to go Australia-wide.

The cuts will involve permanent employees and contractors, and will happen quickly, with most of the cuts to take place before the end of June.

South32 said the restructures were intended to “reset the cost base” of its Australian operations.

This was an attempt to “reduce cash costs in response to continued weakness in commodity markets”

The cuts were announced to accompany a grim half-year result for South32, with earnings of just $36 million and an overall loss after substantial impairments were taken into account.

South32 announced a loss of US$1.7 billion for the half-year to December 2015, mostly due to writedowns of its assets. Underlying earnings were US$26 million.

The Illawarra workforce would be cut by “at least 300” employees and contractors, as more than 770 jobs get the axe Australia-wide.

South32 said the new structure can result in improved productivity, up to 9.5 million tonnes in 2016-17.

And it said the concentration of procurement activities to the local area could cut costs by $50 million, possible delivering benefits to the Illawarra as well.

“The refinement of our regional operating model allows us to remove additional layers of management while further aggregating functional support,” CEO Graham Kerr said. “As a result, we expect another significant increase in labour productivity and a corresponding reduction in cash costs.”

CFMEU district vice-president Bob Timbs said the company had not said which jobs would go. But he believed the impact on permanent unionised workers would be minimised.

“I’m of the understanding that it will be predominantly contract workers who hold CFMEU membership, and non-CFMEU South32 staff,” he said. “We’re not aware of the full effects on our membership at the moment.”

The 300 jobs were a reduction of 14 per cent of the Illawarra workforce, from 2100 people to 1800. South32 had already cut operating costs by 34 per cent over the 18 months to December. It now wants to cut another 37 per cent in 2016-17.

This week the NSW Minerals Council released figures showing mining expenditure with Illawarra businesses in 2014-15 dropped by almost $600 million compared with the previous year.

The Illawarra cuts announced on Thursday are part of deep cuts that will cut more than 700 people from South32 Australia-wide.

Labor MPs said it was up to the Federal Government to do more to help the region. Member for Cunningham Sharon Bird said the Illawarra Local Employment Co-ordinator position needed to be re-instated to assist retrenched workers.

“The job losses keep coming and the Turnbull Government is doing nothing to help,” she said.

Shellharbour MP Anna Watson said the move was a “hammer blow” to the region and said the NSW Government needed to invest in two projects in the Shellharbour area.

“I call on the State Government to use its next two State Budgets to start $800 million in public investment to the region by commencing the $250 million upgrade of the Shellharbour hospital by 1 July 2016,” she said.

“The $550 million construction of the Albion Park Rail bypass is expected to gain planning approvals by the end of this year and could start by 1 July 2017.

“This region cannot continue to take hammer blows on job cuts while the State Government just sits back and waits to start two projects for political headlines closer to the next state election in 2019.

“It’s time to stop playing politics with the two projects and start getting that $800 million public investment flowing into the Illawarra.”