By Northern Ontario Business staff
It is hard to say what kind of impact two mine closures and 686 job cuts at Xstrata Nickel will have on the mining service and supply industry in Sudbury, says the head of its association.
“We will certainly have two less opportunities,” says Dick DeStefano executive director of Sudbury Area Mining Service and Supply Association (SAMSSA).
Despite Xstrata Nickel cancelling supply orders, his membership will not speak out and rock the boat, realizing opportunities lay ahead with the new Nickel Rim Mine coming into production this year.
Xstrata's flagship $1 billion Nickel Rim South project will ramp to 60 per cent of its expected 1.25 million tonne-per-year production capacity this year.
“Yes, we will likely see a reduction in volume and productivity,” says DeStefano, but Xstrata Nickel is a separate company from Xstrata Copper or Xstrata Zinc. Business activity in one may not be the same as business in the other, not like Vale Inco where all the mineral divisions are under one roof.
Fred Castron, founder of Cast Resource Equipment Ltd. has had little business dealings with Xstrata Nickel, but Vale Inco has become a significant contract.
The company has back orders that will last them through half this year, Castron says and “hopefully, (the economy) will turn sometime later this year.”
His mining supply company has laid off eight people and one new contract has been cancelled from Diavick.
“This is a pretty sad situation,” he says.
Inco used to make up a large part of the their business, close to 70 per cent in the 1990s, but in 2000-01 that changed to 20 per cent as work began to flow in from other international mining companies.
DeStefano has put out a survey to all its SAMSSA members to determine the short and long term impact of the local shutdowns. The results have yet to be tabulated, but if they are anything like another Sudbury mining supplier Driftech, the impact will be very little.
Mark Allen, who heads up Driftech's underground division, says the community and economy will be affected by this no doubt, but his company doesn't have business in Sudbury.
He aim is on a more international base and they are still on a roll.
“Business has not slowed for us. I know worldwide everyone is being affected though.”
Allen learned to diversify his clientele base in the 1970s when he opened the doors. Yes, he admits 1982 onward for about seven years was tight, but it turned around.
It seems what suppliers have to do is tighten up again because for the last eight years or so, there has been so much production and an onslaught of contracts. He says giant miners also have a part to play in this because they have some accountability to the community's economy.
But Marc Boissonneault, vice-president of Xstrata Nickel Sudbury Operations said "we simply can't carry on with business as usual, and these actions are absolutely necessary.”
"Essentially, demand for our products has collapsed. We're having to make these changes to structure ourselves to survive the bottom of the economic cycle, so it's about survival in the short-term and putting ourselves in the position to have a foundation to be successful in the longer term as well."
As part of the Feb. 9 announcement, the Fraser Mine Complex is being placed on care and maintenance, while the Strathcona Mill will be reduced from four shifts to two due to the reduction in feed.
The Craig and Thayer-Lindsley mines, which were to be closed February 2009 and second-quarter 2009 respectively, are instead being ceased immediately.
The Fraser Morgan development project, which is connected to the existing Fraser Mine Complex, is also being deferred. As "a more marginal mining opportunity," the project requires an improved market to be reconsidered, which is unlikely to occur by 2010, says Boissonneault.
Local operations shut down for three days while company officials hammered out details of the job cuts with union representatives, though some have already been established by collective agreements.
For production and maintenance workers, this would likely mean a severance package allowing for a settlement for $1,000 per year of service with a minimum of $4,000 and a maximum of $40,000, and termination pay "in the neighborhood of approximately four months," says Boissonneault.
The job cuts are "heavily weighted" towards production and maintenance workers, along with office and clerical positions.
Boissonneault says it was not something the company did easily, particularly with the loss of many experienced and valued personnel.
"It's a very difficult decision for us, and it's not been taken lightly. A lot of the employees leaving us over the next few days have been a big part of our success in the last few years, so it's a really tough time for us and for all of them."
Dwight Harper, president of Canadian Auto Workers (CAW) Local 598 in Sudbury, helped hammer out a package with Xstrata officials resulting in termination pay in lieu of adequate notice.
"They're going to be paid for 16 weeks (ending June 3) as if they're were receiving a regular pay cheque," said Harper.
The possibility of a work sharing deal was discussed several times,"but there wasn't an appetite on the company's part to even look at it."
Harper said some laid off workers with trade skills may be recalled for a few weeks to install a copper production line at Xstrata's Strathcona mill and for construction at Nickel Rim.
"(Xstrata) assured us that if we have people that are (laid) off with the skills that they require, they will be hired in lieu of a contractor."
Under the gun is federal Industry Minister Tony Clement, who contacted CAW president Ken Lewenza to set up a meeting in mid-February, but the details were uncertain at press time. Clement was scheduled to travel to India for a six-day visit to Delhi and Mumbai.
Regardless, Xstrata workers were organizing a bus trip last month to demonstrate at Clement's constituency office in the Parry Sound-Muskoka riding.
"We're going to embarrass him if nothing else," said Harper and urge Clement to press Xstrata to live up to its summer 2006 pledge of no layoffs for three years.
Though skeptical of that happening, "we need to pursue it as far as we can," he said.
The matter has been referred to the CAW's legal department at the national office in Toronto.
Minister of Northern Development and Mines Minister Michael Gravelle said the Nickel Rim development represents the sole bright spot out of the cuts.
In his discussion with Xstrata chief executive Ian Pearce, Gravelle was assured the company was still committed to moving forward with the Nickel Rim South project.
"This is devastating news, no question," says Gravelle. "But if there's any silver lining at all, it's the continued commitment to [Nickel Rim South], which speaks to the company's belief that things will turn around, and in its continued presence in this province."
The anticipated impact on the community is still being gauged as shock waves continue to roll throughout the city.
"We're disappointed," says DeStefano. "The impact will be dramatic, and while the impact has not filtered through to our suppliers, but there will be an impact on the amount of supplies that are purchased. We haven't evaluated how that will affect us, but there will be discussions with Xstrata's management group in the next month or so to see how that translates to our members in Northern Ontario."
While acknowledging the enormity of the loss of nearly 700 skilled, high-paying jobs, mayor John Rodriguez remained optimistic and downplayed the long-term effect on the city.
"We've been keeping our fingers crossed, praying and hoping that what's happening in the world will somehow pass us by, but it's landed on our doorstep. Thankfully, while these mining companies are an integral economic element in the city's outlook, they're not absolutely crucial to the city's economy."
Rodriguez says the city must continue its search for additional wealth-generating opportunities to further increase the community's ability to look beyond the mining sector.