Xstrata To Shut Kidd Smelter

Xstrata (XSRAF-O, XTA-L) has shocked the town of Timmins, Ont., with its decision to permanently close its copper and zinc metallurgical plants, cutting 670 direct positions in the process.

Xstrata Copper Canada, a subsidiary of Zug, Switzerland-based Xstrata, will begin to ramp down operations at the Kidd metallurgical site in May. The company’s nearby Kidd Creek mine and concentrator, which employs about 1,000, will continue operations.

Ben Lefebvre, chair of the Canadian Auto Workers Local 599 who has worked at the site for 23 years, was taken aback by the news.

“People are walking around a little bit dazed right now, trying to figure out what their future is going to be like,” Lefebvre says.

Xstrata made the decision after conducting an investigation on how to improve financial performance. The company cited global smelting overcapacity, record low treatment and refining charges, higher operating costs and lower demand and sales prices for sulphuric acid as reasons.

On top of that, the appreciation of the Canadian dollar has only made matters worse.

Xstrata Copper spokesman Louis-Philippe Gariepy says the investigation showed hard evidence that the Timmins sites were not going to be economically viable in the near, mid, or long term.

“These are sites that have been financially challenged for a number of years,” Gariepy says. “We’ve been studying all types of avenues to try to help us keep these sites alive and running.”

The news came just one week after the copper smelter was brought back online from a shutdown that began after Labour Day related to a shortage of third-party copper concentrate.

And last spring the copper smelter was shut down when the market for sulphuric acid crashed. Sulphuric acid is produced at both the zinc and copper plants.

Xstrata says the remaining Kidd assets will be integrated with the smelting and refining assets of Xstrata’s Horne smelter in Rouyn- Noranda, Que., and the CCR refinery in Montreal. This will improve the overall financial competiveness of the Canadian division of the company and balance concentrate supply with smelting and refining capacity in the region.

This year’s finances won’t look so good though — Xstrata has reassessed the fair value of its assets and will take a US$2.45-billion impairment charge for its nickel businesses and copper-zinc smelting business.

The biggest hit comes from Xstrata Nickel, which will write down US$1.9 billion after the restructuring that included the closure of high-cost, end-of-life operations in Sudbury, the suspension of the Falcondo operation in the Dominican Republic and the Montcalm mine near Timmins, major reductions in costs and the deferral of two significant growth projects.

Impairment charges for the Kidd site total US$375 million.

Timmins Mayor Tom Laughren says Kidd has been an integral part of the community over the last 40 years. He says Xstrata and its predecessor Falconbridge were good corporate citizens.

“I was very much surprised even though people will always say that when you are in a resource-based community, the writing is on the wall,” Laughren says.

The announcement came just an hour before the city council meeting on Dec. 7 and he sprung into action immediately talking to government ministers, the local MP and MPP, and representatives of the government program Employment Ontario, about training and retraining.

“It will be important that we meet with the Xstrata people over the next week or two to see how we can work with them to mitigate or improve the situation,” Laughren says.

Laughren is also in close contact with other miners in the area, including Lake Shore Gold (LSG-T) and Detour Gold (DGC-T). Lake Shore is in the process of bringing its Timmins gold mine into production and upgrading its mill in the near term, while Detour Gold has just finished a prefeasibility study on its Detour Lake project, outlining a plan to build a 45,000-tonne-per- day, open-pit mine that would produce 560,000 oz. gold per year over 14.5 years.

But right now the jobs aren’t exactly plentiful. Lefebvre says that Timmins won’t be the only community affected. Many of the workers at Kidd come from neighbouring towns, some more than an hour away after cutbacks and closures in the struggling forestry and pulp and paper industries a few years ago caused people looking for work to turn to mining.

“It’s not a good scene for northeastern Ontario,” he says.