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Canadian union wants govt investigation of Xstrata closure

9th February 2010

By: Liezel Hill

  

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TORONTO (miningweekly.com) – The Canadian Auto Workers (CAW) union wants the government to investigate whether international miner Xstrata has good enough reasons for closing its Kidd metallurgical site, in Timmins, Ontario.

The provincial and federal governments should probe Xstrata's decision and should force it to sell its Timmins assets if the answers are not convincing enough, the CAW urged on Monday.

But Xstrata Copper spokesperson Emily Russell said the company has nothing to hide.

"We have been very transparent about why we took the difficult decision to permanently close the Kidd metallurgical plants," she said.

"Global smelting overcapacity has driven treatment and refining charges to near all time lows, and that, together with increasing operating costs, means that our Kidd met plant is no longer profitable."

According to the Investment Canada Act, the federal Industry Minister retains the power to review the implementation of an investment by a foreign company and determine whether it varies from the original application and still results in a "net benefit" to Canada, the union noted on Monday.

However, it may have difficulty getting the government on board with its argument, as Industry Minister Tony Clement said last year that Xstrata's closure and job cuts did not violate its investment agreement with the government, because the three-year agreement expired in August.

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

The company announced in December it would permanently close down the copper and zinc metallurgical plants from May 1, and said the decision would affect about 670 workers.

The Kidd mine and concentrator will continue to operate, but Xstrata is shifting processing to smelters and refineries in Quebec.

At the time, the company cited global smelting overcapacity, record low treatment and refining charges and weak prices and demand for sulphuric acid as reasons for the closure, while the appreciation of the Canadian dollar against the US dollar had made matters even more difficult, it said.

"The outlook for custom smelting remains challenging in an environment where the gap between constrained concentrate supply growth and installed concentrate smelting capacity continues to widen," Russell said on Monday.

She confirmed that the closure remains scheduled for May 1.

But the CAW maintains that the decision is “wholly unnecessary”.

"Xstrata must not be allowed to extract local resources without creating local jobs," said union president Ken Lewenza.

"We're calling on the federal and provincial government to enforce a moratorium on the closure, until this matter can be properly investigated," he said.

The union argued that metal demand has improved sharply in the last couple of months, and that prices are expected to continue to strengthen.

The CAW quoted a study by the Timmins Economic Development Corporation, which calculated that the closure of the metallurgical site could result in the loss of as many as 4 428 jobs and $152-million in annual taxes.

It also pointed to Xstrata's announcement of a $2,77-billion profit for 2009, as evidence that the company has the financial muscle to continue running the plants.

Edited by Liezel Hill

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