Curragh, union far apart, Faro workers go on strike

Curragh Resources (TSE) Chairman Clifford Frame says he feels sorry for the families of 400 striking employees at the company’s lead-zinc operation at Faro, Y.T. But given the current state of metal prices, Frame says the company can’t afford to offer its employees any more than the $2.40-per-hour wage increase, tabled before negotiations broke off April 4. The offer, which represents a 17% increase over three years and includes a $500 signing bonus, is about $1.10 below the level that the United Steelworkers of America union is asking for. After failing to agree on a number of other issues, including transportation and health and safety issues, a representative of the union (Local 1051) said employees are preparing for a long strike.

“The company is making money and workers were thanked for recent improvements in productivity, but unfortunately we can’t live on that,” said Stephen Arkley, a member of the Steelworkers’ bargaining team.

If and when negotiations resume, the union will ask Curragh to cover the cost of busing employees to the mine site from their homes in Faro Twp. The round trip costs $6.50, so employees who work seven days per week are spending approximately $2,500 on transportation, said Arkley.

When asked about the busing situation, Frame said the possibility of paving the gravel road connecting Faro town site to the mine was discussed when negotiations began last October. But he doesn’t favor funding the cost of transporting employees back and forth to the mine where non-union staff are operating the plant on a limited basis. “Busing represents a bottomless pit for us. We deal in wages.” Production of lead and zinc concentrates at Faro, where the Faro open pit is being mined out and replaced by ore from the Vangorda deposit increased to 548,484 tonnes in 1990 from 487,048 tonnes in 1989.

The fact that Frame didn’t mention the labor negotiations at Curragh’s annual meeting in Toronto April 4 surprised one of the many analysts in attendance. “It makes you wonder what else you are not hearing about,” said the analyst who asked not to be identified.

A decidedly blue-chip affair, Curragh’s first annual meeting as a public company was attended by former prime minister John Turner and ex-Citibank Corp. chairman George Moore. They are now directors of the company.

Analysts say a strike wouldn’t affect Curragh’s expansion plans unless it turned out to be lengthy and coincided with a problem at the company’s new Mt. Hundere lead-zinc and Westray coal projects.

“With long-term debts of $192.6 million and $74.7 million in cash, the company has a moderately strong balance sheet,” said Julian Baldry, a base metals analyst at Nesbitt Thomson Deacon in Toronto. However, as planned capital expenditures are set at $177 million this year, Baldry expects Curragh’s debt to grow.

In his address, Frame paid tribute to work crews who have constructed the Mt. Hundere lead-zinc mine in just nine months. “I don’t know of any mines that have been built any quicker,” he said.

An 80% Curragh and 20% Hillsborough Resources (TSE) joint venture, Mt. Hundere was built at a cost of $70 million and Frame said he expects production at the Yukon project to begin in July and accelerate to 100,000 tonnes annually.

A month after Mt. Hundere comes on stream, commercial production will commence at the $130-million Westray coal project in Pictou County, N.S. The largest private-sector coal mine in the Atlantic provinces, Westray should produce more than one million tonnes of low-sulphur coal annually for 15 years, Curragh shareholders were told.

Nova Scotia Power Corp. (NSPC) has signed a 15-year contract to purchase 80% of mine production for use at NSPC’s power generating station at Trenton, N.S.

Curragh’s 20% owned Spanish affiliate Asturiana de Zinc, owner of what will eventually be the world’s largest zinc smelter, recently fulfilled its promise to purchase a 5% stake in Curragh for $14.4 million.

Proceeds were used to fund underground exploration at the Cirque lead-zinc deposit in northeastern British Columbia where reserves now stand at 52 million tonnes of grade 8% zinc and 2% lead.

Having recently decided that the name Cirque, which means circus in French, has the wrong connotations, Frame recently renamed the project Stronsay to reflect what he called “one of the best orebodies he has seen in a long time.” Assuming that all environmental and economic qualifications can be met, Frame said there is no technical reason why the joint venture of Curragh (70%) and Asturiana (30%) can’t be in commercial production in 1992.

He told reporters he hopes to complete negotiations for a $130-million project financing package in June and begin pouring the foundations in August or September before freeze-up.

If and when all those goals are met, 80% of concentrates will be shipped to Asturiana’s smelting complex in Spain where an expansion should increase the capacity to 320,000 tonnes of zinc metal annually.

“At an annual production rate of 1.3 million tonnes, Stronsay will have a mine life of at least 20 years and perhaps double that as future work is carried out on the plunge,” Frame said.

The strike at Faro comes at the tail end of what Frame described as a difficult year for Curragh. High dollar and low zinc prices have made the past six months a real struggle, he told reporters after the annual meeting. Curragh reported net earnings of $1.12 a share in 1990, down from $2.43 in the previous year. Every 1 cents change in the Canadian dollar, he said, adds or subtracts $2.3 million from Curragh’s annual cash flow.

On an aggregate per-pound basis for zinc and lead, Curragh’s production costs at Faro (including administrative costs and gold and silver production revenues) increased to 22 cents in 1990 from 20 cents the previous year.

In 1990, the company realized an average US69 cents per lb. for its zinc output compared with US77 cents in 1989. The average realized lead price was US36 cents in 1990, up from US31 cents a year earlier.

Zinc was trading recently at US55 cents on the spot market and lead at US28 cents. Frame expects to see higher prices in the latter half of this year.