JOHANNESBURG AND TORONTO (miningweekly.com) – Diversified miner Xstrata will permanently close down its copper and zinc metallurgical plants at the Kidd Metallurgical site, in Timmins, Ontario, from May 1, 2010, the firm announced on Tuesday.

The decision will affect about 670 workers.

The group also announced it would record a total of around $2,4-billion in impairment charges related to restructuring and revaluation of its nickel and copper businesses.

The Kidd mine and concentrator will continue to operate, but the metallurgical plants will be halted as part of a broader plan to restructure the group's Canadian metallurgical operations.

Xstrata acquired the Kidd assets as part of its $18,1-billion acquisition of Canadian nickel-miner Falconbridge, in 2006.

The company cited global smelting overcapacity, record low treatment and refining charges, increasing operating and capital costs and lower demand and sales prices for sulphuric acid, which had impacted on the financial performance of the plants, while the appreciation of the Canadian dollar against the US dollar made matters even more difficult.

The Kidd metallurgical plant closure would result in impairment charges of $375-million, Xstrata said.

The firm plans to offer an early retirement incentive to all eligible employees who will be affected at the Kidd plant, and unionised employees will be treated in accordance with the collective agreement, the company said.

Where possible, employees will be offered the possibility to work at other Xstrata operations and the company "will continue to honour existing commitments to communities in the region".

The remaining Kidd assets will be integrated with the smelting and refining assets of the Horne smelter, in Quebec, and the Canadian Copper Refinery, in Montreal, Quebec.

Xstrata CEO Mick Davis said that the company expected the custom smelting market to remain challenging going forward.

The company expects to take an impairment charge of $170-million on Xstrata Copper’s Altonorte smelter, in northern Chile, and Xstrata Nickel has started a "full assessment" of the fair value of its assets, after closing mines and curtailing operations over the last year.

In February, Xstrata announced it would put its Fraser complex, in nickel-rich Sudbury, on care and maintenance, shelve the Fraser Morgan 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, as it battled weak nickel prices.

Elsewhere, the company has suspended the Falcondo operation, in the Dominican Republic, and the Montcalm operation, in Canada, while the Sinclair project, in Australia was also deferred.

Altogether, Xstrata expects to record impairment charges of $1,9-billion, after tax, on its Australian, Norwegian and Canadian nickel assets.

“The successful restructuring of our nickel business undertaken during 2009 has transformed the cost and competitive positioning of Xstrata Nickel, while preserving the growth options within this business. These accounting measures do not impact [on] the underlying financial performance of the group’s operations or Xstrata’s strong growth potential,” Davis commented.

INVESTMENT AGREEMENT ENDED

Both Xstrata and larger rival Vale, which also acquired a Canadian nickel producer - Inco - earlier this decade, have come under criticism for their decisions to curtail operations and cut jobs after demand and prices for the metal fell last year.

Both companies signed agreements with the government in exchange for approval of the respective acquisitions.

The foreign-investment deals included commitments limitting layoffs, among other things, but the full details of the agreements have not been published, despite calls from opposition politicians and unions leaders.

However, Xstrata's three year agreement ended in August this year, so it is no longer restricted by the terms.

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