Brazilian Miner Vale Plans to Eliminate 500 Jobs in Thompson, Manitoba by 2015 — A Third of its Local Workforce – by John Barker

Vale's Thompson, Manitoba Operations - Photo by Jeanette Kimball

This article was originally published in the Thompson Citizen which was established in June 1960. The Citizen covers the City of Thompson and Nickel Belt Region of Northern Manitoba. The city has a population of about 13,500 residents while the regional population is more than 40,000.

Thompson NDP MLA Steve Ashton denounces Vale’s ‘arrogance’ in blistering words

November 17, 2010 – BY JOHN BARKER
EDITOR@THOMPSONCITIZEN.NET

Brazilian mining giant Vale said today it plans to phase out its smelting and refinery operations at Manitoba Operations by 2015, eliminating 500 jobs or a third of its local workforce, and focus on “developing new sources of ore as it transitions its operations to mining and milling….”

Vale dropped Inco from its name May 27 and its global nickel business is simply known now as Vale. It had operated around the world as Vale Inco since Companhia Vale do Rio Doce (CVRD) re-branded itself less than three years ago on Nov. 29, 2007. “Vale” is pronounced (vah-lay) and literally means “valley” in Portuguese.

In a blistering “MLA Report” weekly column filed today at noon that will appear in print in Friday’s Nickel Belt News, Steve Ashton, Thompson NDP MLA and minister of infrastructure and transportation, as well as the minister responsible for emergency measures and the minister charged with the administration of the Manitoba Lotteries Corporation Act, says “Vale’s announcement that they are eliminating the surface operation here in Thompson is unacceptable.”

Ashton is the longest serving MLA in the Manitoba legislature, first elected 29 years ago today in the Nov. 17, 1981 provincial election. He is second in order of cabinet precedence to Premier Greg Selinger.

“Since the 1950’s Thompson has had a fully integrated mining operation. The development of the refinery and smelter were integral parts of the 1956 agreement that established Thompson …Vale’s announced shut down of the surface operations in Thompson came without any discussion about solutions with key stakeholders or the provincial government. I have never seen a more arrogant and insensitive move.”

Ashton goes on to say, “A lot of blood sweat and tears have gone into building Thompson. We owe it to those that built this community and to future generations to fight to keep all aspects of the Thompson operation open.”

The Nov. 17 announcement, part of Vale’s vision for the future of all its Canadian operations was made by Tito Martins, chief executive officer of Vale Canada and executive director of base metals for the international parent company.

In her weekly “MP Report” column, which will also run in Friday’s Nickel Belt News, but was filed shortly before noon today, Churchill NDP MP Niki Ashton says, “It is time we as a country stand up to fight for our communities and our country. This was the clear message that comes out of Vale’s announced plan to shutdown the surface operations in Thompson.

Three years ago the federal government allowed Vale to take over Inco. They promised more jobs. They committed to growing our communities. Now they are saying they will completely shut down surface operations in Thompson by 2015.”

“The transition is still four to five years away and we will use that time wisely,” Martins said in reference to the company’s Thompson operations. “We are committed to partnering with the provincial government, the community, our employees and other stakeholders to manage all aspects of the transition as effectively as possible and minimize potential impacts. This includes participating fully in the workforce adjustment process that has proven effective in similar situations elsewhere.”

Martins is reported as telling The Canadian Press in an interview the company will work with the community over the next five years to minimize the economic impact of the smelter and refinery closure here in Thompson.

“The idea is let’s grow in mining,” Martins said in the interview. “What we want to do over the next five years is work together with our employees, with the local authorities and even the federal authorities.”

“The mines there are very important for us, so we need to find out ways to keep the city alive.”

“Current plans at the company’s Birchtree Mine see operations continuing well beyond 2020,” Martins said.

“We see a strong and long-term future for our operations in Manitoba,” said Martins. “It’s a future that will look different than it does today, but it is one that we believe will allow our operations to continue there for many, many years to come and one that will allow Thompson to remain a vibrant and important contributor to the northern Manitoba economy.”

Rio de Janeiro-based Companhia Vale do Rio Doce, commonly known simply as Vale purchased Inco in a $19.9-billion all-cash hostile tender takeover offer deal in October 2006. Valepar SA, the company that controls Vale, is owned by Previ, the employee pension fund of state-controlled Banco do Brasil SA; Bradespar SA, an industrial holding company; Mitsui & Co, Japan’s second-largest trading company; and BNDES Participações SA. Created on June 1, 1942 by the Brazilian government, Vale was privatized on May 7, 1997.

Manitoba Operations produces about 130 million pounds of plating grade nickel a year.

The benchmark cash nickel price on the London Metal Exchange (LME) hit a record high of US$25.51 per pound in May 2007. It was trading on the LME at US$10.2013 per pound this morning.

Manitoba Operations also mines copper, cobalt, as a byproduct of nickel mining, and several other metals for use by industry.

Cobalt is a specialty metal in a thinly traded-market. It is not traded on an exchange. Much of the trading in the metal is considered opaque. Cobalt is used to make super alloys, chemical compounds for a variety of applications, cemented carbides and diamond tools, magnetic alloys and specialty steels and metallic alloys. It is found in cell phones, notebook computers and car batteries.

The current three year collective agreement between Vale and Local 6166 of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, better known simply as the Steelworkers, or USW, is set to expire in 10 months Sept. 15 next year.

After almost a year on the picket line, striking Steelworkers at Local 6500 in Sudbury and Local 6200 in Port Colborne voted about 75 per cent July 9 to ratify a five-year deal with Vale, four days short of a year of going on strike.

The 1,250 United Steelworkers Local 6166 workers here at Manitoba Operations in Thompson inked their last collective agreement with Vale Sept. 15, 2008 – the very day Wall Street investment bank Lehman Brothers collapsed. Workers voted 65.5 per cent in favour of the contract, which included wage increases in each year of the agreement consistent with their last contract, and pension improvements.

Vale’s nickel business has more than 11,000 employees worldwide and net sales in 2009 of US$3.26 billion, accounting for 13.6 per cent of Vale’s overall global revenue.

International Nickel Company was first incorporated in New Jersey in April 1902. It was a combination of R.M. Thompson’s New Jersey-based Orford Copper Company, American Samuel Ritchie’s Cleveland, Ohio-based Canadian Copper Company, and the other major American refinery, the Joseph Wharton Company.

For $10 million, J. Pierpont Morgan, one of the late 19th and early 20th century’s legendary so-called robber baron industrialists, and the financial interests behind U.S. Steel acquired Canadian Copper Company, Orford Copper Company and the Joseph Wharton Company and formed the International Nickel Company. The impetus for founding Inco was simple; the Steel Manufacturers Syndicate, known as the “steel trust,” needed a stable, profitable and guaranteed supply of nickel.

In December 1928, Inco would become a Canadian company, exchanging shares between the former New Jersey parent and the Canadian subsidiary, to keep U.S. anti-trust regulators at bay.
Vale is the second largest diversified metals and mining company in the world, the world’s largest producer of iron ore, and the world’s second largest producer of nickel. Vale also produces manganese, ferroalloys, thermal and coking coal, bauxite, alumina, aluminum, copper, cobalt, platinum group metals, potash and kaolin. Vale is the largest private sector company in Latin America with a market capitalization of around US$150 billion and more than 500,000 shareholders.

Five years ago, under Inco ownership, the company set in motion the formal legal steps to begin 10-year notice of mine closure. The Thompson Community Development Corporation, founded in 2003 before changing its name in 2005 to Thompson Unlimited, is a direct result of that.

In a May 13, 2008 legally required Form 20-F filing with the United States Securities and Exchange Commission in Washington, from Rio de Janeiro, Brazil, Companhia Vale Do Rio Doce, still parent company Vale’s legal corporate name, said its Thompson operations, landholdings or mining rights, consist of 2,947 order-in-council (OIC) leases, mineral leases and mining claims “negotiated as part of an agreement entered into in 1956 between Vale Inco and the Province of Manitoba covering the development of the Thompson nickel deposits.”

The United States government requires Vale to file the 203-page Form 20-F annually as a matter of public record, pursuant to the Securities Exchange Act of 1934. The 2008 filing covers the fiscal year ended Dec. 31, 2007.

“We currently hold a total of 2,947 OIC Leases, 29 of which are held by Mystery Lake Nickel Mines Limited, which is owned 82.6 per cent by Vale Inco and 17.4 per cent by Newmont Exploration of Canada and the remainder of which are held by Vale Inco,” the company said at the time. Newmont Exploration of Canada Limited is engaged in diamond and gold mining and production services and is based in Toronto. It operates as a subsidiary of Newmont USA Limited, a Delaware corporation and wholly owned subsidiary of Newmont Mining Corporation, headquartered in Denver.

All of the order-in-council leases, according to a similar March 15, 2004 U.S. Securities and Exchange Commission 10-K SEC filing by Inco, “were initially surveyed and made effective over a six year period over the 1957 to 1962 period.”

The leases “entitle the lessee to explore for, and mine, all minerals in the subsurface (except hydrocarbons, industrial minerals and superficial deposits that are not incidental to the mining, milling, smelting and refining processes).”

The leases provide for an initial 21-year term and two subsequent guaranteed renewals of 21 years each, for a total guaranteed lease period of 63 years. Subsequent lease renewals beyond the three guaranteed 21-year terms can be granted at the discretion of the provincial government.

“All of our current OIC Leases have now been renewed twice (each is in its third guaranteed 21-year term) and remain in effect through the 2022-2024 period,” Companhia Vale Do Rio Doce says in its filing.

“Mineral leases are issued by the Province of Manitoba and convey (i) the exclusive right to the minerals (other than quarry minerals) that occur on or under the land covered by the lease and (ii) access rights to erect buildings and structures (including shafts) to mine within the limits of the lease. The duration of mineral leases is 21 years and they are renewable at the discretion of the province’s minister of science, technology, energy and mines. We hold six mineral leases that cover 4,151.21 hectares in the Thompson nickel belt. These mineral leases remain in effect until April 1, 2013.”

Vale went on in the filing to note, “We also hold 37 mining claims, a right issued by the Province of Manitoba under provincial legislation, which conveys to the holder exclusive rights to the minerals (other than quarry minerals) that occur on or under the land covered by the claim and access rights to explore for and develop minerals owned by the province.

“A mining claim does not, however, entitle the holder to extract minerals from the land covered by the claim. In order to extract minerals from the land covered by a mining claim, the holder must obtain a mineral lease from the Province of Manitoba.”

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