The cuts come fresh off Rio writing off $US3 billion ($A2.9 billion) from its troubled coal investments in Mozambique and an announcement late last year from Xstrata that it would be retrenching 600 contractors and employees as part of a restructure of its Australian coal business.

Each company is expected to retrench about 100 people.

For Rio, the move is part of a concerted push to get the global resources giant back into profitability by new chief executive Sam Walsh after it recorded a $3 billion loss for the six months to December.

"The Australian coal industry is facing a significant challenge to remain globally competitive due to the combination of high costs, lower coal prices and the strong Australian dollar," a Rio Tinto Coal spokesperson said in a statement.

"Rio Tinto is working to ensure the long-term resilience of its Australian coal operations by taking steps to improve productivity and significantly reduce costs in a range of areas."

Newly appointed Rio Tinto energy head Harry Kenyon-Slaney is running a ruler over the company's Australian coal operations from its Brisbane office and is expected to cut contractor and staff numbers for any mine that goes cashflow negative.

Kenyon-Slaney has also been given open slather to cut 15% from the operating cost base of Rio's Australian operations over the next two years through smarter procurement, including a renewed push into emerging markets for sourcing goods and services.

Xstrata's new Australia-wide operations, meanwhile, will leverage off the existing structure and systems in place in New South Wales and will be headed up the company's current chief operating officer Ian Cribb, effective from yesterday.

"As a result of this decision, Xstrata Coal's divisional head office in Brisbane will close," Xstrata said in a statement.

"In parallel to this, Xstrata Coal is taking the opportunity to review corporate services delivered to the divisions out of its Sydney office.

"These initiatives will lead to a reduction of Xstrata Coal's office-based roles in Australia."

Xstrata's involvement in Australian coal has been under scrutiny as its parent company prepares to merge with commodities giant Glencore next month.

Glencore is believed to be concerned about the profitability of the Australian coal business and the need for developing greenfield minesites, favouring instead extensions to existing operations.

Xstrata's proposed Wandoan coal project slated for Queensland's Surat Basin now looks set to be canned.

Union reactions to the cutbacks have been negative.

Mineworkers in central Queensland and the Hunter Valley are "disgusted" Rio Tinto has resorted to slashing jobs following management bungles, the Construction Forestry Mining and Energy union said yesterday.

CFMEU Queensland district president Stephen Smyth said it was disappointing for workers to hear of the cuts in the media.

Smyth said it was shocking to see the company target mineworkers for issues that have "largely been created by short-term thinking from company management"

"It was not mineworkers who have let corporate costs skyrocket and refused to invest in local training and apprenticeships, creating a massive trade skills shortage across the country," Smyth said.

"In recent months the fundamentals of Rio's coal operations have remained the same - the coal price has not suddenly nosedived - to our knowledge the company has not lost any major supply contracts, and the Aussie dollar has been high for years.

"What has changed in the past few weeks is Rio management's scrambling to cut costs after making public their dire annual report."

Rio Tinto Coal closed its Blair Athol mine in Queensland last year and will delay a decision on its proposed Mt Pleasant project in New South Wales as the impact of high operating costs and low coal prices eat into operating margins for the giant miner.

There is growing speculation that the company will even sell its entire Hunter Valley coal assets to help improve its balance sheet.

Rio shares were down 3% to $56.88 this morning