CAW Asks Gov’t To Keep Kidd Open

The Canadian Auto Workers union has called on both the Ontario and the federal governments to investigate Xstrata’s (XTA-L, XSRAF-O) decision to close the Kidd metallurgical site in Timmins, Ont., this coming May.

The CAW says the closure of the Kidd smelter will put 670 of its union members out of work, and could cause the loss of up to 4,400 spinoff jobs and $152 million in annual provincial taxes. The union believes the closure is unnecessary and that Xstrata could be violating parts of the Investment Canada Act.

The act says foreign corporations operating in Canada must provide a net benefit to the economy. Xstrata, based in Switzerland, acquired the Kidd smelter when it bought out Canadian miner Falconbridge in 2006.

Ben Lefebvre, chairman of CAW Local 599, which represents Xstrata workers in Timmins, says the union isn’t looking for protectionist measures to be put in place to keep the smelter open.

“We are looking at having these jobs preserved in northern Ontario in the most environmentally-friendly, and cost-effective copper and zinc plants in Canada,” Lefebvre says. “Why would we shut it down in favour of one that is far less productive, less cost-effective and less environmentally-friendly?”

An Industry Canada spokesman says any agreements between Xstrata and the government would have expired in August 2009. But the CAW says federal Industry Minister Tony Clement, still has the power to force a foreign corporation no longer benefiting the local economy to remedy the situation or even sell some of its assets.

“I would go further,” Lefebvre says. “I think Xstrata should divest all of their Canadian assets.”

Lefebvre says the Xstrata facilities in Sudbury and Timmins, Ont., and Rouyn-Noranda, Que., are already an integrated group of facilities in terms of feed supplies.

“There is enough concentrate feed in the immediate region to keep us full,” he says.

The union also points out that the Ontario Mining Act says ore mined in Canada should be treated and refined here too. Xstrata plans to start redirecting Kidd copper concentrate to the Horne smelter in Rouyn-Noranda, and the CCR refinery near Montreal, once the Timmins operation has been closed. And although Xstrata cited a world surplus in smelting capacity as one of the reasons to close Kidd, the CAW says that over the last two years both the Horne and the Kidd smelters have operated at close to capacity (they also take in custom feed). The CAW says closing Kidd could create a situation where Canadian miners have no option but to ship concentrate elsewhere to be refined.

Anne-Marie Flanagan, a spokeswoman for the Ontario Ministry of Northern Development, Mines and Forestry, says that Minister Michael Gravelle will be meeting with Xstrata in the near future, but she says it would be difficult for the government to force Xstrata to keep the Kidd smelter running.

“I’m not sure how you force a company to do something that’s unprofitable for them,” Flanagan says. “We have to keep an environment here, that makes companies want to invest and do business,” Flanagan says.

Emily Russell, a spokeswoman for Xstrata’s copper division, says the company has been very transparent about the reasons behind the decision to close the Kidd metallurgical plants.

The primary reason is due to a serious challenge of global smelting overcapacity, Russell says.

“Global smelting capacity now far exceeds the availability of concentrate due to the rapid expansion of Chinese smelting capacity, driving treatment and refining charges near all-time lows,” Russell says.

The situation is compounded by a strong Canadian dollar, lower revenue from key smelting by-products such as sulphuric acid, and the requirement for further investments in these plants, she says.

However, the CAW views it differently. The union says the recent drop in profit that Xstrata has experienced appears worse than it is because of the boom years of 2006-2008 when metals prices were high. The union points out that during the sharp downturn in late 2008 and early 2009, Xstrata was still able to remain profitable.

For 2009, Xstrata reported profits of US$2.8 billion, down from US$4.7 billion in 2008. The company reports that the Canadian operations were severely impacted by reduced metal production and sales, as a result of two temporary shutdowns of the Kidd metallurgical site. But, CEO Mick Davis sees world demand for commodities soon outpacing supply, as in 2007-2008.

On top of that, the CAW says Xstrata has been criticized by analysts for taking on too much debt to acquire Falconbridge in the first place, noting the company has had to focus on reducing debt levels ever since, to improve its net asset position.

“After reaping the benefits of one of the industry’s strongest booms and seeing strong profit levels through the downturn, Xstrata has no excuse to betray its workforce and the community,” says a CAW statement.