Lately the industry is abuzz following news that Xstrata Nickel is cutting almost 700 jobs in Sudbury, Ont. Two of CMJ’s faithful readers have weighed in on the situation.
In response to Bill Wolfe’s comments about whether mining companies should be required to preserve jobs during economic downturns (he said no), Dr. Wm. Gordon Bacon wrote from Kamloops, BC:
“Mr. Wolfe is indeed correct. The miners do not own the mine, the shareholders do. The miners jobs can not, and should not, be maintained at the ruin of the shareholders’ asset base.
“I am a past vice-president of Inco Ltd., VP engineering and technology, and have 45 years experience in the mining/metallurgical industries. When metal prices decline operating mines have to raise their cutoff grades and this usually means reduced production from higher cost mining areas with the resultant layoffs of personnel. There is no point in losing money on non-paying muck at low prices when it will be profit generating at higher metal prices.
“The cycles will always ebb and flow, as will the prices and the jobs. Unfortunately it is called reality and is the result of the demand and supply or if one dare use the word today: the market,” Bacon concluded.
Considering last week’s Hot Topic asking for speculation on whether so many layoffs would have been necessary had Falconbridge’s assets remained in Canadian hands, Karl Reimer, senior corporate consultant for Franze Environmental, raised the interesting question: Were the wrong mergers made in 2006?
“The merger … should have been between Inco and Falconbridge, plain and simple. Two of Canada’s most respected mining companies talking about a merger, and then it peters out into a whimper. We watch them drive off into the sunset, as it were, with foreign companies.
“Where was Ottawa in this? How was it, that during the proposed merger between Inco and Falconbridge, the deal hit a road block in Europe? And then it was left to flounder. What did the Europeans have to do with a decision to merge two Canadian companies?” he asked.
“It can be summed up succinctly by a comment made by Peter Munck shortly after both mergers occurred, (I recall perhaps the fall of 2006). Peter said (loosely paraphrased here) ‘Canadian firms didn’t have the balls to put this deal together.’ Timorous is a word that describes management of both entities at the time.
“So, imagine for a moment both having merged,” Reimer continued, “with a Canadian head office. Imagine the synergy within the Sudbury Basin. Imagine a consolidated mining giant, centered in Canada being able to weather the downturn in the market.
“On the local level in Sudbury, imagine for a moment just the savings of combining and sharing infrastructure. No, apparently that cannot be. We have to let the Brazilians and Swiss tell us how they will handle historic operations in Canada. Painful, simply painful,” noted Reimer.
Reimer’s parting thought leads us to this week’s Hot Topic …