TORONTO (miningweekly.com) – Contract negotiations have broken down between nickel-miner Vale Inco and the biggest union at its Sudbury, Ontario, operations, with less than a week to go before the current collective agreement expires at midnight on July 12.

Both sides exchanged settlement proposals at the weekend and talks broke off on Monday, said Vale Inco spokesperson Cory McPhee.

In May, union members voted in favour of a mandate to strike if negotiations with the company fail.

As things stand, the United Steelworkers (USW) union will meet with members this week, and a vote is scheduled for July 10 and 11.

The previous collective agreement was to have expired on May 31, but both sides agreed to extend the contract deadline to mid-July, to allow more time to reach an agreement.

Vale has also implemented an eight-week shutdown at its Sudbury mining and processing operations, until July 27, in response to weak demand and prices for for the metal, which is used to make stainless steel.

Vale in the biggest employer in nickel-rich Sudbury.

“I think it's probably fair to say we find ourselves still far apart,” McPhee said on Tuesday afternoon.

“At this point in time, there are no new talks scheduled, but the settlement offer has been put forward to the union and we will wait and see how the employees vote.”

The key issues yet to be resolved include bonuses and pension structures.

The USW said on the weekend that it looked “very unlikely” that a collective agreement would be reached before the strike deadline.

"Vale is attempting to force concessions in several major areas of our collective agreement,” said USW District 6 director Wayne Fraser.

“Our membership has told us clearly that they will not accept concessions. That is our mandate.”

The union represents about 3 300 Vale Inco Sudbury workers, out of a total of around 4 700.

McPhee said that the company is still hopeful of reaching an agreement.

"But, at the same time, we have to be sure that the collective agreement we put in place is one that helps us to structure the business so that it is competitive in all price cycle," he said.

"We really are about implementing that kind of a structure across our operations."

In Rio de Janeiro on Tuesday, Vale CEO Roger Agnelli CEO said that Sudbury is the group's highest cost operation, Bloomberg News reported.

The current situation at the Sudbury operations is "not sustainable," Agnelli said.

Vale, the world's biggest iron-ore producer, bought Canadian nickel-miner Inco in 2007.

However, while nickel traded above $22/lb two years ago, it has since fallen sharply, as slowing global economic activity dampened demand.

The price fell to around $4/lb in the fourth quarter of last year, but has since recovered to $7,03/lb.

In an effort to cut costs and improve margins, Vale Inco said in March it would cut 900 jobs around the world, including 423 in Canada.

In December, it announced it would indefinitely close the Copper Cliff South mine, in Sudbury, and deferred a $814-million capital project, to replace the shafts in the mine and the neighbouring Copper Cliff North operation with a single shaft.

OFFTAKE AGREEMENT

A strike at Vale's Sudbury operations would also have implications for smaller rival FNX Mining, which has an offtake agreement to send all its ore for processing to Vale.

FNX CEO Terry MacGibbon said last month that the company was prepared to continue mining and stockpiling at its own assets for the eight-week shutdown, but has looked at the possibility of shipping ore to the other large nickel miner in Sudbury, Xstrata Nickel.

Like Vale, both Xstrata and FNX have curtailed operations in the region since nickel prices dropped last year.

In February, Xstrata Nickel said it would put its Fraser complex in Sudbury on care-and-maintenance, shelve a development project and cut 686 permanent jobs.

The firm had already announced early closures of the Craig and Thayer-Lindsley underground mines, which were nearing the end of their productive lives.

FNX has suspended nickel-ore mining at its McCreedy West and Levack mines, although it continues to mine higher-margin copper and precious-metals rich areas at McCreedy, Levack and the new Podolsky mine.

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