The move has been blamed on the underperformance of Ballarat Goldfields' southern and central zones plus "the natural cycle of mining".

"While the gold is there, we have found it's not really of a size that's amenable to large, productive bulk mining techniques," Lihir Gold managing director Arthur Hood said at a press conference in Ballarat yesterday afternoon.

"Consequently, we are adjusting the way we are mining and because we are not getting the large volumes of ore out, we are not getting the revenue that we expected, so today we are taking measures to reserve capital and reduce the operating losses that we are currently experiencing at the mine."

The announcement will see Ballarat Goldfields' workforce decrease by 40 per cent from 500 to 300 employees.

Mr Hood said that of the 200 workers who will lose their jobs, two-thirds of those are contractors while one-third are permanent full-time employees.

He said the affected staff were notified of the news yesterday and would receive full entitlements.

"It's part of the natural cycle of mining," Mr Hood said.

"You start a project up, do a lot of construction work so you have a peak workforce and then it drops down as you settle into your long-term operating workforce and that's the point we are at at the moment."

Ballarat mayor Judy Verlin said there was a "very clear distinction" between Ballarat Goldfield's announcement and other recent job losses in the city's manufacturing industry.

"This one is a result of the end of the construction phase," Cr Verlin said.

"The explanation which has been given to me is it's because they haven't found the gold they were expecting ... and they said to me they can't continue to pay people to remove dirt."

"But having said that, the impact on the peoples' lives who have been retrenched is the same and we need to work to ensure that they are given the correct support and the skills to ensure they remain in our community and that they gain meaningful employment."

Australian Workers Union state secretary Cesar Melhem said the news comes as "another blow for Ballarat".

"Ballarat Goldfields was supposed to be a good news story for Ballarat but unfortunately it's not," Mr Melhem said.

"But obviously like anything in the resource sector, they are feeling the pinch."

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