Vale Inco cutting Sudbury output; one-month shutdown for Voisey's Bay
ANDY HOFFMAN
Globe and Mail Update
December 4, 2008 at 10:21 AM EST
Nickel giant Vale Inco Ltd. is shutting down its Copper Cliff south mine in Sudbury, Ont., in January in response to plunging base metal prices.
The company is idling the plant “for an undetermined period” of time, it said Thursday. It was not immediately known how many job cuts, if any, would come as a result of the move, but the company said it will offer early retirement packages to some workers.
A planned development in Sudbury, the Copper Cliff Deep project, has been shelved for a year.
The company's Voisey's Bay operation in Newfoundland and Labrador, also will be shut down The cuts come amid a devastating drop in the price of nickel and just two years after Brazil's Companhia Vale do Rio Doce (Vale) won control of Toronto-based Inco and its flagship Sudbury assets with a $19.4-billion takeover in a frenzied bidding war. The Vale bid topped rival offers from Vancouver's Teck Cominco and U.S. copper miner Phelps Dodge.
With more than 5,000 employees, Vale Inco is Sudbury's largest employer. It operates six mines in and around the Sudbury region as well as a mill, a smelter and a refinery.
The production cuts follow a series of layoffs and mine closings by other Sudbury mining companies.
First Nickel Inc. suspended operations at its Lockerby mine and cut 150 jobs in October in response to the “challenging financial environment.” The next day, Toronto's FNX Mining Co. Inc. shut down its Levack mine.
Last month, Xstrata Nickel, a subsidiary of Swiss-based Xstrata PLC, said it would close two of its Sudbury mines earlier than planned because of the nickel price crash. The company hopes to avoid layoffs in Sudbury by offering 250 workers early retirement packages.
From a high of more than $22 (U.S.) a pound in May, 2007, the price of nickel has plummeted to less than $5 a pound as demand for the metal, which is used to make stainless steel, has dried up amid a global economic slowdown. “At $4.25 [a pound] nickel, nobody is making much money in Sudbury right now,” said David Constable, vice-president of investor relations at FNX Mining.
The mine closings and job losses represent an abrupt reversal of fortune for Sudbury where, despite attempts at economic diversification, the city's financial health remains closely tied to nickel mining.
Vale's rich bid for Inco and Xstrata's $18-billion (Canadian) takeover crosstown rival Falconbridge had helped foster a strong sense of optimism in Sudbury. Indeed, as the nickel price climbed to record levels following the takeovers, Sudbury's economy boomed as it never had before. Housing prices soared and many local businesses thrived, thanks in part to the lofty nickel bonuses – which are tied to the metal's price and company profit – being paid to workers by both Xstrata and Inco.
Yet for the first time in more than eight years, Xstrata workers employed at the former Falconbridge operations did not receive a nickel bonus in the third quarter. Vale Inco did pay out a nickel bonus to its Sudbury employees last month, but future payouts could be in doubt as metal prices are showing few signs of a recovery any time soon.
In a separate development, Vale said Wednesday that it is laying off 1,300 workers and putting 5,500 more on paid leave because of the global credit crisis and plunging demand for its metals. The bulk of the layoffs will be in Brazil at the company's iron ore operations. Vale is the world's largest miner of iron ore, which is used to make steel.
The company has already cut nickel output at operations in Indonesia and China and has slowed down development projects in Brazil and New Caledonia. Earlier this year, it stopped an open-pit mining operation in Sudbury that employed contract workers.