The world economic crisis and an oversupply of nickel has forced Vale Inco to temporarily shut down its Sudbury and Port Colborne mining and processing operations for eight weeks this summer.
The move affects 5,000 Ontario workers, mainly at five mines, smelting and milling operations in Sudbury, but also includes 180 at precious metal processing facility in the Niagara region.
Vale Inco spokesman Cory McPhee said the global financial situation is a contributing factor in the decision but also a "plugged product pipeline" in Sudbury.
"We're spending money to produce nickel that we are not able to sell."
The shutdown, which runs from June 1 to July 27, comes on the heels of a regularly scheduled maintenance shutdown in May.
McPhee could not say if the shutdown will be extended beyond eight weeks, but Vale will be monitoring the situation.
The April 15 announcement was made just as North American financial markets were closing. Nickel prices ended the day at US $5.58 a pound.
McPhee said the company's business fundamentals are found and by taking these measures during the summertime vacation months it should minimize the impact on employees and allow Vale Inco to clear out the inventory.
"We'll be in much better shape to resume operations after the eight-week shutdown."
Employees are required to use their paid vacation time. Those without vacation entitlements will be covered by employment insurance benefits and Vale Inco's own supplemental benefits.
McPhee could not say what percentage of wages would be lost but said the Sudbury operations have been producing at capacity up until this announcement and has curtailed production on a number of other fronts.
In December, Vale closed its Copper Cliff South Mine in Sudbury and has slowed production in Indonesia, New Caledonia and Brazil.
The company is delaying development of its major Onca Puma nickel project in Brazil by one year.
The company's five operating mines will continue to produce in May as the processing "hot metal" side goes down for maintenance, and then the entire operation will shut down.
The announcement comes just as contracts talks have started in Sudbury for a new three-year deal covering 3,500 Vale Inco employees with the United Steelworkers. The current deal expires May 31. The two sides exchanged initial proposals last week.
United Steelworkers Local 6500 president John Fera Also said there was no indication this stoppage was coming, but suspected his membership would not get through these economic period unscathed.
"I mean we read the papers and we see what's going on in the rest of the world and at some point we knew it was going to come to Sudbury for us. We're disappointed, but we knew we couldn't get out of thing unaffected."
Fera said contract negotiations would continue on scheduled. He was meeting with his executive board and bargaining committee prior to the weekend before requesting to meet with Vale Inco officials April 20.
Vale's Sudbury mining complex is one of the world's largest in producing 85,300 metric tons of finished nickel, amounting to 31 per cent of the Brazilian company's output.
Vale Inco's shutdown will have major ramifications on another Sudbury mid-tier miner.
FNX Mining, which relies on Vale Inco to process its Sudbury ore, is also considering temporary suspension of its mining operations.
"FNX is carefully considering several production alternatives and will provide more detailed guidance when it becomes available," said chairman and CEO Terry MacGibbon in a statement.
But it should not delay development of its high-grade copper-nickel Levack Footwall Deposit scheduled for production in 2010.
Other alternatives include continuing production and stockpiling ore until Vale Inco resumes operation, or exploring the possibility of sending ore to another processing facility.
MacGibbon said FNX remains well-financed and "will make every effort" to minimize the effect of the eight week Inco shutdown and still achieve its 2009 production targets.
The company plans to continue underground definition at its Podolsky mine and go ahead with an expanded surface program.
With files from Mandi Hargrave
