xstrata cuts sudbury jobs, curtails operations

http://www.miningweekly.com/article.php?a_id=152946

JOHANNESBURG (miningweekly.com) – Xstrata Nickel will put its Fraser complex, in nickel-rich Sudbury, Northern Ontario, on care and maintenance, shelve a development project and cut 686 permanent jobs, the group announced on Monday.

Xstrata, which cited "ongoing challenging market conditions", bought the assets when it acquired Canadian nickel-miner Falconbridge in late 2006.

The firm has already announced early closures of the Craig and Thayer-Lindsley underground mines, which were nearing the end of their productive lives, as it battles weak nickel prices.

Production at the Thayer-Lindsley mine was scheduled to cease at the end of January, while the Craig mine would have been placed on care-and-maintenance by June. However, Xstrata Nickel said on Monday that production at the Craig mine would also cease with immediate effect.

Work shifts at the 2,7-million tons a year Strathcona mill will also be halved to two work shifts a day, owing to the reduced feed.

Nickel traded above $22/lb in 2007 but has since fallen sharply, and was trading at around $5,2/lb on Monday, as slowing global economic activity dampens demand for the metal, which is used to make stainless steel.

Commenting on the announcement, the Canadian Auto Workers (CAW) Local 598, which represents the Xstrata employees, said it was "surprised" by the magnitude of this announcement.

The news was "devastating", commented CAW president Ken Lewenza.

"Our elected officials must move quickly to stem these devastating job losses," he urged. The CAW wants the Federal goverment to force Xstrata to abide by commitments it made in a July 2006 agreement.

When Xstrata bought Falconbridge in 2006, the group made several commitments to the Canadian government in exchange for approval for the deal, including that Xstrata would not make any layoffs of operating staff at any of Falconbridge's operating facilities for a three-year period.

Canadian Industry Minister Tony Clement told reporters in Ottawa on Monday that Xstratra had agreed to make hundreds of millions of dollars of new investment in the Sudbury nickel district after holding discussions with government on whether Monday's announcement violated the investment agreement, Reuters reported.

According to the CAW, the job cuts will result in a drain of almost C$50-million in direct income to the local Sudbury economy.

Xstrata also announced on Monday that the Fraser Morgan development project, which would have produced 7 200 t/y of refined nickel, has been shelved, until economic conditions would allow for the project’s continuation.

“The continued decline of the economic environment and deteriorating commodity markets, coupled with high operating costs particularly at our older mines, are negatively impacting on our Sudbury operations,� stated Xstrata Nickel CE Ian Pearce.

He added that the restructuring actions were aimed at repositioning the Sudbury complex into “the bottom quartile of the cost curve� and at ensuring that the operations remained financially “robust�.

Further, Pearce commented that the complex remained important for the miner, with the Nickel Rim South development project remaining a top priority.

The project remained on schedule to ramp up to 60% of its ultimate 1,25-million tons a year production capacity in 2009.

The project was expected to become a low-cost operation in Sudbury, producing 18 000 t/y of nickel by 2010.

Meanwhile, Xstrata said that production from the Sudbury smelter would remain flat at the 2008 production levels, with any shortfalls from the closure of the Sudbury mines to be offset by concentrates from Nickel Rim South and Xstrata Nickel Australasia.

Xstrata's main rival in Sudbury, Vale Inco, closed its Copper Cliff South mine, in Sudbury, in January, also because of weak nickel prices and slumping demand.

The mine, which produces 8 000 t/y of finished nickel, will be closed “for an undetermined period of time�, while a $814-million capital project, to replace the shafts in the mine and the neighbouring Copper Cliff North operation with a single shaft, has also been deferred for a year, Vale said in December.

Another Sudbury miner, FNX Mining, has stopped nickel-ore mining at its Levack and McCreedy West mines, and said in December that it would reduce its Sudbury work force by 307 people.