Editorial: Mining Sector Layoffs Pick Up Steam

Quite a few miners across Canada and beyond rang in the new year with layoff notices, as the autumn commodities bust worked its way into the employment scene.

• Once-proud Teck continues to shrivel before the industry’s eyes. The diversified miner is chopping 1,400 people from its payroll, or 13% of its workforce, as it grapples with a multi-billion-dollar, short-term debt load and clamps down on every kind of spending across its business units.

The company said it would roll back its coal production next year to 20 million tonnes, a reduction of about 4 million tonnes compared to its 2008 production target.

How much longer till we start seeing some big assets sold?

• Tracking the sharp decline in global auto production, the aluminum producers have suffered a severe case of whiplash as soaring third-quarter profits were quickly followed by steep fourth-quarter losses and deep cuts to personnel and production.

Down from a mid-2008 high of US$44.77, Alcoa is now trading below US$10 after tabling a US$1.2-billion fourth-quarter loss. The world’s third-largest aluminum producer will chop 15,000 jobs, or 13%, of its global workforce by the end of 2009, further reduce production, and sell four subsidiaries.

Russia’s Rusal has also announced it will reduce output by 4% this year, while China’s Chalco plans cuts of 18%.

Aluminum major Rio Tinto announced in December it was axing 14,000 positions worldwide and reducing its aluminum output by roughly 5%.

But this week came news that Dick Evans, chief executive of Rio Tinto Alcan, would retire in April. He’ll be replaced by Jacynthe Ct, currently president and CEO of Rio Tinto Alcan’s Primary Metal division. She joined Alcan in 1988 and has worked in all aspects of the aluminum industry in Canada and overseas. Ct has a bachelor’s degree in chemistry from Quebec’s Laval University.

• Big job losses have also arrived on the doorstep of Saskatchewan’s potash mines, taking some of the shine off the Prairie province’s commodities-powered renaissance. Minnesota’s Mosaic Co. lowered the boom on Jan. 12, as it laid off 1,000 workers at its Esterhazy and Colonsay operations.

Mosaic’s moves come on the heels of Potash Corp. of Saskatchewan’s eight-week layoff of 940 local employees and Agrium’s issuance of layoff notices to 380 employees at its potash operation in Vanscoy, Sask.

However, unlike the recent layoffs at aluminum, zinc and nickel operations, which were prompted by plummeting prices for those metals, the steep cutbacks in potash production are an attempt by producers to maintain the current high prices for potash by scaling back output by some 20%.

Anyone who still thinks high commodity prices automatically guarantee mining jobs might want to rethink their model.

• Manitoba saw its share of mining job losses, too, as HudBay Minerals will soon suspend operations at its Chisel North mine and concentrator in Snow Lake, Man., due to depressed base metals prices. Some 100 employees will be affected.

• Things are rosier on the gold side of the business. Industry leader Barrick Gold is entering a new era with the ascension of wunderkind Aaron Regent as the new president and CEO, replacing Greg Wilkins. An accountant by training, Regent, 43, made a name for himself in this industry with the sale of Falconbridge, where he was president, to Xstrata in 2006. This is his big chance to show he can be a mining-company builder and not just someone skilled at selling out to the highest bidder.

• There was some significant movement in the drawn-out adoption of a new mining code in Ecuador — a delay that has caused exploration and development activities to grind to a halt there. A year ago, the Ecuadorian government instituted a new 70% windfall tax on miners and revoked hundreds of mining licences, and by April had suspended all mining and exploration activity in the country until a new mining law is put in place.

However, in mid-January, the Ecuadorian congress held its second debate on the new mining law and approved it by a vote of 50-15. Cornerstone Resources reported that 11 revisions were made to the statute during the debate but these had not yet been made public.

The law now goes to the Ecuador’s executive branch, which may approve or veto the legislation. If approved, the law would be published in the government register, probably at the end of January.

At presstime, it’s still too soon to tell if this is good or bad news for foreign miners in Ecuador.

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