Denison cutting 400 jobs at high-cost elliot Lake mine

Fears that Elliot Lake, Ont., will soon become a ghost town were heightened recently after Denison Mines (TSE) announced that it is laying off 400 employees this summer and reducing production at its uranium operation. Denison says annual production at Elliot Lake will drop to 1.4 million lb. annually from 2.7 million lb. to reflect the amount of uranium the company is required to deliver under long-term contracts with Ontario Hydro.

Sources close to the company say Denison is still selling uranium to utilities in Japan. But the Japanese contracts no longer require that uranium to be produced at Denison’s Elliot Lake mine.

Designed to reduce manpower levels to 660 from 1,060, the layoffs are scheduled to take effect June 28 at the beginning of a 7-week maintenance shutdown. The operation will also be shut down for six weeks starting March 15.

Harry Johns, president of the union which represents Denison’s office and technical staff, said the announcement came as a shock and that Elliot Lake, with a population of around 12,000, will become a ghost town.

“I can envision a town of 4,000 with rows of empty houses,” said Johns, one of approximately 30 office and technical staff to lose his job.

While Denison President Bill James says he has already pointed out the consequences of any further layoffs to Ontario Premier Bob Rae, he admitted that the mine will close if Ontario Hydro elects not to renew a contract that expires in 1992.

Under the 14-year-old price contract, now up for renewal, Ontario Hydro is believed to be paying Denison over twice the amount it could pay for uranium bought from lower-cost mines elsewhere in Canada and the U.S. Uranium was selling for around US$10 per lb. recently on the spot market.

Sources at Ontario Hydro – Denison’s only remaining customer – say the utility is paying too much for Elliot Lake uranium. But they won’t say what they are prepared to pay until the uranium miner is served with an official notice at the end of this month.

While Hydro is expected to ask for a price that is well below Denison’s US$40 per lb. production costs, James said the two sides would continue to work toward reaching an agreement.