Seven years ago, Inco Ltd. told Thompson, Man., that it was going to close all of its operations there by 2013.
Then the price of nickel soared, plans to shutter its business in the city that Inco founded in 1956 were shelved and, along the way, Vale SA bought Inco for almost $20-billion.
Now Vale is the villain in Thompson, with 13,450 residents the province's third-largest city, located 765 kilometres north of Winnipeg. While the Brazilian company is set to spend more than $1-billion on mining operations in Thompson, it also plans to shut down an old smelting and refining facility by 2015. That means a loss of 500 jobs - more than a third of the work force.
In a fiery union meeting on Wednesday night, Thompson Mayor Tim Johnston, responding to a question, flatly expressed his feelings about Vale management in Rio de Janeiro: "I don't trust them and I don't like them."
Vale, however, said its moves reflect a recommitment to Thompson, rather than a withdrawal.
"This issue of Thompson and its future certainly predates Vale," said Cory McPhee, a vice-president at Vale Canada in Toronto and Inco veteran. "The old Inco looked at being out by 2013 - that means out, processing, mining, out of everything. This is certainly a much more palatable situation."
Mr. McPhee noted that Vale has 160 job openings in Thompson - positions that have been difficult to fill because of the city's remote, northern location.
Vale's strategy in Thompson, announced Wednesday, is part of a broader $10-billion investment plan in Canada (a third of which had been previously announced).
Thompson's loss of its smelting-refining plants has to do with Newfoundland's gain at Voisey's Bay, where $2.8-billion is being spent by Vale on new "state-of-the-art processing facilities" in Long Harbour - with 500 new jobs once it opens in 2013.
Right now, ore mined at Voisey's Bay is shipped to Thompson for processing. When that stops, the Thompson facilities will be operating at roughly half-capacity. The company says it would need to spend a further $1-billion to reduce sulphur dioxide emissions to adhere to new federal rules in 2015, an expenditure for which Vale said there is no business case.
Vale expects to mine 75 million pounds of nickel in Thompson in 2011, compared with 198 million pounds at its flagship operations in Sudbury. The Thompson 1-D mine expansion, currently at the prefeasibility study stage, could produce 33 million pounds annually; output at a longer-term project called Pipe-Kipper - where the ore is low grade but there's a lot of it - hasn't been determined.
Both expansions would extend mining in Thompson, which would otherwise end around 2030, Vale has said.
"They're very serious about the expansions," said analyst John Hughes at Desjardins Securities.
Nickel prices continue to support the industry. While more than 50 per cent below the bubble peak of 2007, they are well above historical levels and have risen about 25 per cent in the past year. Mr. Hughes said current prices appear to be sustainable.
The announcement presents the governing Manitoba New Democrats with a major loss of jobs in the province's keystone northern community. Premier Greg Selinger on Wednesday told The Globe that the smelting-refining shutdown was "unacceptable."
Innovation, Energy and Mines Minister Dave Chomiak on Thursday said he feared what job losses will do to what is "basically a one-industry town." There is already talk of the elementary school closing its doors and Mr. Chomiak said there is worry about the end of smelting and refining "destroying" Thompson.
The province thinks it "might" have legal leverage under the original 1956 agreement signed between Manitoba and Inco. (Thompson is named after Inco's chairman at the time.) But Mr. Chomiak, most of all, believes a different outcome can be had through negotiation with Vale.
"We've got to get to the table with them and we have to have a chance to negotiate," Mr. Chomiak said. "We think we can work with them creatively. We have a shot at persuading them to alter their decision."Report Typo/Error