Timmins Walloped By Kidd Closure

Riding high in recent years on the back of new gold projects in the region, the Ontario mining town of Timmins was given a body blow in early November as Xstrata announced it will close the Kidd metallurgical plant — for four decades a fixture of the local economy and a source of hundreds of steady, high-paying jobs.

At a cost of US$375 million, Xstrata in May will permanently close the copper and zinc metallurgical plants at the Kidd metallurgical site, with 670 employees being affected, or roughly half of Xstrata’s employees in the Timmins area.

The major says the decision stems from global smelting overcapacity combined with rising operating costs at Kidd, which have been exacerbated by a stronger Canadian dollar. Xstrata said the plants’ viability was also hurt by their need for capital investments, and a soft market for byproducts such as sulphuric acid.

Located 27 km away, the Kidd Creek copper-zinc mine and concentrator will remain open, and be folded into Xstrata Copper’s smelting and refining assets in Quebec, which include the Horne smelter in Rouyn-Noranda and the CCR refinery in Montreal.

Xstrata emphasized that it will keep investing more than $100 million to deepen the Kidd Creek mine to extend its life to 2017.

The Kidd Creek discovery in 1964 by Texas Gulf Sulphur was one of the high points of Canadian exploration in the 1960s. Xstrata acquired the Kidd assets by buying Falconbridge in November 2006.

When Xstrata acquired Falconbridge, the Swiss-based major signed a pledge with the Canadian government that it would not engage in massive layoffs for three years. That agreement expired last August.

The Falco acquisition at the top of the nickel market is now taking its toll on Xstrata’s balance sheet, with subsidiary Xstrata Nickel announcing it would take an impairment charge of about US$1.9 billion for fiscal 2009 in relation to its Australian, Norwegian and Canadian nickel assets.

That’s not all: Xstrata is also writing down by US$170 million the value of another former Falco asset: the Altonorte smelter in Chile.

• Building a preliminary deal struck in June, BHP Billiton and Rio Tinto have signed binding agreements to form a production joint venture covering all their iron ore assets in Western Australia’s Pilbara region, and filed submissions to European and Australian competition commissions.

The envisaged JV, which the partners hope to have in place by mid-2010, would see all their current and future Western Australian iron ore assets and liabilities divvied up 50:50 by the pair. The partners expect the move to save them a combined US$10 billion per year through a myriad of production synergies, from reduced shipping costs to better ore blending.

In an update to their original proposal, the partners say they will now market their production separately, presumably to assuage any competition bureau’s concerns over collusion in iron ore pricing.

But that move doesn’t satisfy the World Steel Association, which quickly called for competition authorities to dig deeper into the proposed JV. The association’s director general, Ian Christmas, said the JV “carries a great danger of restricting competition thus reducing consumers’ choice, as it would create an entity whose controlling position in the world’s seaborne iron ore market would become even less fair than the unsatisfactory position that exists today. The proposed JV would simply turn an oligopoly of three players (Vale, BHP and Rio) into a duopoly.”

• For years, Democrats in Washington, D.C., have been proposing various cap-and-tax schemes to impose on the country’s carbon emitters in response to the phony problem of anthropogenic global warming.

However, this week, the U.S. government doubled down on the crazy, with the U.S. Environmental Protection Agency issuing an endangerment finding on carbon dioxide, methane and other “greenhouse gasses.” Building as it does on a landmark U.S. Supreme Court ruling in 2007, this new finding provides federal regulators with the basis they need to regulate greenhouse gases under the Clean Air Act.

It’s basically an anti-democratic end run by the EPA around Congress, where climate-change legislation is faltering as more of the general public wakes up to the proposed legislation’s enormous costs in taxes and liberty, and its basis in junk science.

What do Democrats have in store for U.S. miners? As Barack Obama himself told the San Francisco Chronicle early last year: “Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket.”