Vale Inco Strike Spreads To Labrador

The intensification of the strike by many of Vale’s Canadian workers stood out as news during the 30th trading week of the year.

• Some 120 unionized workers at the Voisey’s Bay nickel-copper-cobalt mine in Labrador joined their striking brothers and sisters at Inco’s Ontario operations, and walked out on Aug. 1.

This was the same day the Voisey’s Bay personnel were scheduled to resume work after a one-month planned shutdown that was conceived during the period of low nickel prices witnessed earlier in this year.

Last year, the concentrate shipped from Voisey’s Bay eventually yielded 77,500 tonnes of finished nickel, or 28% of the company’s total production. The site also produced 55,000 tonnes of copper in concentrate and 1,695 tonnes of cobalt, or 18% and 60% of Vale’s total output, respectively, in 2008.

The Voisey’s Bay union members have rejected Vale’s latest offer for a new three-year collective bargaining agreement that reportedly would have cancelled a bonus tied to the price of nickel and closed Vale’s defined-benefit pension plan to new employees.

The “nickel bonus” has been a particularly juicy benefit in the past few years, amounting to tens of millions of extra dollars annually in workers’ pockets.

With a recession-chastened Vale in no great hurry to produce at full capacity and significant issues and dollars to fight over, the strike looks set to be a long one.

Or, at least metal traders seem to think so: the spot nickel price has surged US$2 per lb. in less than a month and it now trades at US$8.73 per lb., or more than double the price seen just five months ago.

Caught in the crossfire between workers and mine owner is Denver-based International Royalty Corp., which has an effective 2.7% net smelter return royalty on the Voisey’s Bay mine.

IRC says its bottom line may start getting hit by the strike in the fourth quarter, and that “insofar as the Voisey’s Bay and Sudbury strikes help boost nickel prices in the market, the strike may actually have a positive impact on IRC’s third-quarter revenues.”

• Gold consultancy GFMS, in partnership with Socit Gnrale, has released some intriguing numbers that show a big change in official-sector activity on the gold market.

GFMS estimates that net official-sector gold sales in the first half of 2009 totalled 39 tonnes (1.26 million oz.), down by a hefty 73% year-on-year, as a result of gross sales of 95 tonnes offset by gross purchases of 56 tonnes. Moreover, with most of the sales taking place in the first quarter, there was in fact a modest net purchase overall by the official sector in the second quarter.

Behind the sales drop-off were the actions of the Central Bank Gold Agreement (CBGA) signatories, which saw their sales drop 43% year-over-year to 92 tonnes in the first half of 2009. This is on track to be the lowest levels of sales since the first CBGA was forged in 1999. The countries outside the CBGA remain net buyers of gold.

GFMS noted a further fall in the amount of bullion being lent to the market by the official sector, owing to both less-favourable gold lease rates and heightened concerns over counterparty credit risk.

GFMS reckons that net official-sector sales this year could be about 140 tonnes, which would be the lowest tally since the 1994 trough of 130 tonnes.

• In a new wrinkle in stock market swindles, the U. S. Securities and Exchange Commission charged a trader located in Kuwait, named Hazem Khalid Al-Braikan, and three related foreign entities for engaging in an illicit scheme through which they reaped millions of dollars in profits by trading around hoax offers to acquire U. S. companies.

These hoax offers, in this case for Harman International and Textron, were faxed to media outlets and posted on the Internet.

On July 23, the SEC obtained an emergency order from the U. S. District Court for the Southern District of New York to freeze more than US$5 million in trading profits held in various U. S. accounts in their names.

The SEC’s complaint alleges that Al-Braikan, who is or was associated with each of the three foreign entities, traded in an account in his own name. Accounts in the names of the three entities also traded, and they are United Gulf Bank (B. S. C.); KIPCO Asset Management Co. (KAMCO); and Al-Raya Investment Co.

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