Vale’s Manitoba Operations corporate affairs co-ordinator Penny Byer backs MP Niki Ashton [Vale Job Cutbacks] (November 20, 2010)

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.

“Today, Vale ripped the heart out of Thompson.” Ashton said: “Good job standing up for us Niki…” Byer writes on Facebook

November 20, 2010

By John Barker
editor@thompsoncitizen.net

In a public posting on Facebook Nov. 19 to NDP Churchill riding MP Niki Ashton’s “wall,” Penny Byer, co-ordinator of corporate affairs for Vale’s Manitoba Operations, writes, ” Good job standing up for us Niki…”

Byer is also a rookie Thompson city councillor, garnering 1,913 votes for second place in the Oct. 27 municipal election, finishing only behind veteran Coun. Stella Locker.

Byer is a former CBC Radio journalist, who spent time in Churchill, and a long-time veteran of the corporate affairs, or public and government affairs department, as it has been also called in recent years, at Vale’s Manitoba Operations here in Thompson.

She was in charge of the four-page employee newsletter EXTRA, which Vale killed off with its Dec. 19, 2008 issue, and its successor the four-page NickeLinks, which began publishing in April 2009.

Since David Markham’s departure as manager of corporate affairs for Vale’s Manitoba Operations here July 16, Byer has been the only one working in the department locally. Markham left Vale after less than three years to work for Suncor in Alberta.

While most of Ashton’s questions in the House of Commons over the last few days have been aimed more at federal Industry Minister Tony Clement than Vale directly, criticizing the Harper government for allowing Vale’s foreign takeover of Inco four years ago, in a question to Clement Nov. 17, Ashton prefaced it on the floor of the House of Commons by saying, “Today, Vale ripped the heart out of Thompson.”

Ashton, in a statement also released Nov. 17 and published by the Nickel Belt News Nov. 19 as her weekly “MP Report” column, criticized Vale, writing, “What is particularly unacceptable is the fact that they [Vale] have not come to the table to talk with governments, the union or stakeholders to talk about solutions whether it be in terms of the federal emissions regulations or other issues.

Brazilian mining giant Vale says it plans to phase out its smelting and refinery operations at Manitoba Operations by 2015, eliminating 500 jobs or 40 per cent of its local workforce, and focus on “developing new sources of ore as it transitions its operations to mining and milling….”

The estimated payroll hit to Thompson for job losses of that magnitude is at least $50 million annually, money which will no longer be circulating in the local economy as some of the city’s highest paid jobs vanish.

Thompson native Lovro Paulic has served as the general manager of Vale Inco’s Manitoba-based Mill, Smelter and Refinery Operations since 2006 and was assigned additional general management responsibilities in July 2009, after Vale abolished the position of president of Manitoba Operations and Brian Maynard, after just 14 months in that job, accepted a job working with Vale in a coalmine in Australia.

Paulic, the most senior local manager with “general site accountability,” told a public meeting of about 300 people — who only three-fifths filled Letkemann Theatre at R.D. Parker Collegiate for a meeting Nov. 21 — that he has known since 2001 — for nine years — that Thompson would only be processing Voisey’s Bay ore from Labrador until about 2013. “In my head, I knew,” Paulic admitted. Paulic says Thompson is only processing at about 80 per cent capacity right now.

The Winnipeg Free Press, in an editorial Nov. 20, blasted the NDP provincial government for being “Asleep at the wheel” for years and years on the Vale Thompson file. The paper said Manitoba NDP Premier Greg Selinger and Innovation, Energy and Mining Minister Dave Chomiak have been engaged in “frantic to-ing and fro-ing” since news broke Nov. 17 that “Manitoba’s third largest city was going to take a very hard economic hit.

“It might be that the hand-wringing and dashing-about is simply what politicians always do in the face of bad news – they must be seen to be “doing something,” no matter how ineffectual,” the paper editorialized. “Or it might be what it seems to be, that the government was caught completely off guard by the news. And that raises the question that Opposition Leader Hugh McFadyen has raised: Has the government been asleep at the wheel?

“It was, after all, only seven years ago that Inco Ltd., which was subsequently bought by Vale for $20 billion, threatened to shut down all operations in Thompson because the price of nickel had fallen so low that the Thompson operations were no longer viable. So it might have been expected that the government was keeping a close eye on Thompson, which has long been represented by Steve Ashton. The government, too, should have known that the smelter and refinery in Thompson were only viable because Vale was bringing ore in from Labrador, where Vale is building a $2.8-billion smelting and refining operation to service its massive nickel find at Voisey’s Bay. In fact, as Mr. McFadyen points out, the Free Press reported five years ago that the Thompson smelter would shut down as soon as the new smelter was completed. And finally, the government should have been aware that Vale would soon run into the same problems that shut down the HudBay smelter in Flin Flon – the economics of meeting modern emissions standards. Vale says it will cost $1 billion to upgrade operations in Thompson to meet federal sulphur dioxide requirements that come into effect in 2015.

“And yet, no one seemed more surprised, more needy of direct talks with Vale to get to the bottom of what is happening, than Mr. Chomiak and Mr. Selinger.”

Selinger, Chomiak and Steve Ashton, Thompson NDP MLA and minister of infrastructure and transportation and Innovation, met Nov. 17 with hundreds of angry USW Local 6166 unionized surface and underground mining workers packed in the Centennial Hall of Royal Canadian Legion Branch 244 on Elizabeth Drive.

In response to a question from a USW member, Mayor Tim Johnston said while he has good relations with local Vale management, when it comes to senior Vale management in Brazil, “I don’t trust them and I don’t like them.”

Johnston said if the refining and smelting jobs leave Vale here as planned he doesn’t believe they’re ever coming back in any other form at Manitoba Operations.

A number of miners challenged Selinger in their questions on the NDP provincial government’s long-standing refusal to bring in anti-scab legislation.

“Are you willing to take your balls in your hands and put your job on the line?” for anti-scab legislation another miner asked Selinger to thunderous applause from other miners.

The premier replied that he is concerned anti-scab legislation doesn’t enjoy sufficient support provincewide and another government of the day would simply repeal it. Selinger said he believes the NDP’s “expedited arbitration” model accomplishes many of the same ends.

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 that appears in the Nov. 19 Nickel Belt News, Ashton, who is also 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 in the Nov. 17, 1981 provincial election. He is second in order of cabinet precedence to 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.”

In a Nov. 17 statement, Murray Nychyporuk, president of USW Local 6166 at Vale’s Manitoba Operations here in Thompson said, “Regrettably, Vale has announced the refinery and smelter operations will be closing as of 2015. As of right now, the union has been told there will be no layoffs.

“This announcement is not about wage or benefit concessions,” Nychyporuk said. “The company has stated it is about S02 federal emissions. It is also about the Voisey’s Bay feed, which will no longer be processed in Thompson in 2013, the planned start up of Long Harbour. The company wants to achieve this reduction in the workforce by attrition.

“We are extremely disappointed to be receiving zero capital money to avoid being able to bring our emissions down to federal 2015 limits. We are also equally disappointed in the federal government’s announcement of lending Vale $1 billion, none of which is earmarked for the Manitoba Operation to avoid surface closure. USW Local 6166 and the provincial government are extremely frustrated with the systematic corporate machine that is Vale. They have removed the human element from this decision.”

Selinger also blasted Vale in a news release, calling on the owners of Vale’s Thompson operations to work with the Province of Manitoba, the City of Thompson and the United Steelworkers union to immediately seek alternative solutions to closing the smelter and refinery in Thompson by 2015.

“This decision comes without due notice or proper consultation with our government and the City of Thompson,” said Selinger.

“Vale’s intended course of action is unacceptable and our government stands firmly with the people of Thompson in saying this job loss will have a significant impact on the community and the province.”

The proposed shutdown of the Thompson smelter and refinery would result in a loss of about 500 jobs or 40 per cent of the current Vale Thompson workforce.

“We have a long and very successful history of supporting the mining industry through initiatives such as training, taxes and geoscience,” said Innovation, Energy and Mining Minister Dave Chomiak. “I know the company, the province, the workers and the city can find a solution to this if all the players agree to come to the table.”

Chomiak on Thursday said he feared what job losses will do to what is “basically a one-industry town.” There is already talk of elementary schools closing and Chomiak said there is worry about the end of smelting and refining “destroying” Thompson, the Globe and Mail reported.

“The City of Thompson is disappointed in the direction that Vale has taken,” Johnston said in a press release Nov. 17 – remarks he repeated in person at the noon-hour Thompson Chamber of Commerce lunch meeting after making an emergency flight back from Winnipeg where he was ironically getting ready for the annual Manitoba Mining and Minerals Convention, which opened Nov. 18.

“As a city we are focused on finding solutions for our community and the region. We understand the concerns of families and businesses, and we will continue to build a strong and sustainable future for Thompson,” Johnston said.

“The city is in the process of evaluating the situation and is developing a comprehensive plan to address the issues and concerns of residents and the impact this announcement will have on Thompson,” he added.

Under a special agreement signed Dec. 3, 1956 between the Province of Manitoba’s F.C. Bell, minister of mines and natural resources, and International Nickel Company of Canada Limited’s R.D. Parker, vice-president and general manager, and secretary William F. Kennedy, Vale has the unique power in Thompson to set its own municipal tax rate – or hypothetically pay nothing at all – through the voluntary grant-in-lieu of taxes.

Vale pays a voluntary grant-in-lieu of taxes annually, which is divvied up between the City of Thompson, Local Government District of Mystery Lake and the School District of Mystery Lake. The current grant-in-lieu of taxes agreement runs from Jan. 1, 2005 to Dec. 31, 2012.

The city’s share in 2009 of $6.220 million was 71.201 per cent, or about $4.43 million, which amounted to about 17.37 per cent of last year’s $25.497-million budget – up from $24.537 in 2008.

The issue of how much Vale Inco should pay the city in grant-in-lieu of taxes is a sensitive file. On Jan. 21, 2008, the City of Thompson proposed Vale contribute an additional $5.5 million over next three years to help cover infrastructure costs and fund sustainable growth projects. On April 11, 2008, Vale flatly turned down the City of Thompson’s proposal and further talks have gone nowhere over the last two years.

Johnston told the Steelworkers Nov. 17 that, in fact, Vale is paying less for a voluntary grant-in-lieu of taxes now than it was in 2001 — and less for that matter than it was almost 20 years ago in 1991.

During the last bitter labour dispute at Vale Inco’s Manitoba Operations – an 11-week long lockout by the company of unionized employees between September and December 1999 – the company midway through the dispute threatened to reduce its annual grant-in-lieu by $1.7 million over the next three years.

Former mayor Bill Comaskey estimated a reduction of that magnitude of the grant-in-lieu would be equivalent to a 10 per cent municipal tax increase. Eliminating the grant altogether would have resulted in 2000 of a property tax increase of 144 per cent, Comaskey estimated at the time.

In February 2000, a provincial mediator was brought in to help resolve the dispute.

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.

Martins, a former Vale communications executive, was appointed as president and CEO of its Vale nickel subsidiary in December 2008. Martins replaced Murilo Ferreira who retained his position as nonferrous minerals executive director. Martins, who has worked for Vale since 1985, was previously executive director for corporate affairs and energy.

In her Nov. 19 “MP Report,” Niki Ashton also wrote, “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.”

Johnston said Nov. 18 that Martins has committed to meet with the City of Thompson this week.

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.

Vale, however, has said several times over the last three years that they expect to wrap up their nickel mining in Thompson sometime between 2027 and 2030, meaning at the longest 20 years from now.

“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.”

Two key issues underpin the operating changes in Manitoba,” Martins said. “Mineral reserves in Thompson have not been sufficient to operate the smelter and refinery at full capacity for some time. To account for this shortfall, Vale has been importing as much as 45 per cent of the nickel processed in Thompson from sources outside Manitoba. This external feed is no longer available after 2013.

“Also contributing to the change,” Martins said, “are new federal SO2 emission standards expected to come into effect in 2015. The new standards require a reduction in airborne emissions of approximately 88 per cent from current levels at the Thompson operation. Vale has concluded that it cannot practically meet this new regulatory standard in Manitoba.”

Vale is taking steps” to develop the next generation of ore sources needed to create a long-term, sustainable mining base” in Northern Manitoba, Martins said.

“The 1-D Project is currently examining alternatives to exploit a significant mineral resource base in the existing Thompson Mine,” Martins said. “Currently in the pre-feasibility stage, the 1-D Project represents a potential investment of more than $1 billion in Manitoba’s mining future.

“The Pipe-Kipper Project is examining the mining potential of a metallurgically complex ultramafic ore resource. Concentrate qualities and recoveries achieved to date with a conventional milling flowsheet indicate a business case that warrants continued study,” Martins said. “Pipe-Kipper is a high-volume, low-grade resource with the potential for many more years of mining activity in Thompson.”

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 is expected to produce about 75 million pounds of plating grade nickel next year, well down from 130 million pounds a year not long ago.

Vale expects to mine 198 million pounds of nickel at its flagship operations in Sudbury in 2011. The Thompson 1-D Project mine expansion, currently at the pre-feasibility study stage, could produce 33 million pounds annually, while potential output at the longer-term Pipe-Kipper Project, which has an abundance of low grade ore is still unknown.

The benchmark cash nickel price on the London Metal Exchange (LME) hit a record high of US$25.51 per pound in May 2007.

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 on 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.

Seven 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.

As well as the grant-in-lieu of taxes Vale Inco pays the city, the company is also providing an additional $250,000 per year for $2.5 million in special funding over 10 years until 2013 in its separate Thompson Unlimited community development initiative. Thompson Unlimited, the city’s economic development corporation, was established seven years ago in 2003 based on a simple premise: Diversification in the face of the end of nickel, expected around 2013 then.

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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