Some of the uncertainty felt by 575 employees at Rio Algom’s (TSE) Stanleigh uranium mine at Elliot Lake, Ont., was removed recently when the company agreed to amend its long-term supply contracts with Ontario Hydro.
After months of negotiations, Ontario Hydro says it will pay a premium of about $160 million above market prices to continue to purchase uranium from Rio Algom until December, 1996.
The deal is part of the Ontario Ministry of Northern Development’s $250-million rescue package designed to diversify an economy devastated by 1,700 layoffs resulting from the closure of Rio Algom’s Quirke and Panel uranium mines.
After fulfilling its remaining obligations to Hydro, Elliot Lake’s other main employer, Denison Mines (TSE), will shut down its uranium operation next year and lay off an additional 660 workers.
Under the amended contract, Rio Algom will deliver 9.6 million lb. uranium before the second half of 1996 and increase the mine production rate from 1.2 million to 1.8 million lb. annually by 1992. To cope with the production increase, Rio Algom will begin recalling 75 workers within the next few months.
“The amendment takes some uncertainty out of the mix and allows the company more time to seek out other contracts before the Hydro deal expires,” a Rio Algom spokesman told The Northern Miner.
The original contracts, signed when uranium was selling for US$43.40 per lb. on the spot market, allowed Hydro to terminate by December, 1993. Uranium was selling at US$9.10 on the spot market recently.
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