Vale loan angers mine workers

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Workers at Vale mines in Ontario and Quebec are angered that the federal government is lending the Brazilian company as much as $1-billion (U.S.).

The loan, first reported in The Globe and Mail on Monday, was officially announced on the same day the company said talks broke down between Vale and 130 mine workers who have been on strike for 14 months at the miner's operation in Voisey's Bay, Nfld.

Vale has also battled miners in Ontario, where workers were on strike for 12 months in an acrimonious fight before reaching a deal with the company in July.

"It is shocking that the Conservative government would reward a foreign corporation that has provoked two of the longest and most bitter labour disputes in Canadian history," said Ken Neumann, national director of the United Steelworkers, which represents the striking workers.

Rio de Janerio-based Vale bought iconic nickel miner Inco Ltd. in 2006. It later dropped the Inco name.

Export Development Canada, in a new lending strategy, has offered Vale as much as $500-million to help the company develop its operations in Canada.

The deal is tied to another $500-million for Vale's operations outside Canada, if the company uses Canadian goods and services, or for Vale exports if it uses Canadian suppliers.

The loan is one of the largest in the 65-year history of the federal government's export credit agency. It did not spark any upset among Vale's rival miners in Canada, who hope they, too, can have access to EDC money.

EDC has lent money to foreign companies in the past, to support Canadian suppliers. In one example, loans to Chilean miner Codelco increased the number of Canadian suppliers used by that company to 80 from five.

But lending money to a foreign company for operations in Canada is a new move, said Eric Siegel, EDC's chief executive officer. Up to $250-million is available for Vale's Long Harbour nickel processing plant in Newfoundland and another $250-million is on the table for projects in Ontario.

Vale provides Canadian companies a chance "to gain a foothold in key emerging markets like Brazil," Mr. Siegel said.

Jim O'Rourke, CEO of Copper Mountain Mining Corp., said EDC's move to lend to foreign firms isn't unique. His Vancouver company, for example, is developing a $438-million (Canadian) copper mine in British Columbia. Japan's Mitsubishi Materials is a minority investor in the mine, to secure copper for its operations, and the Japanese agency equivalent to EDC has provided Copper Mountain $160-million (U.S.) to help build the mine.

Mr. O'Rourke also said he is "quite impressed" by EDC's recent decision to lend money to Canadian-backed domestic projects that have export ambitions.

Scott Hand, who led Inco from 2002 to 2007 and is now chairman of Royal Nickel Corp., said he hopes Canadian companies will see the same access to financing as Vale. His company wants to build a $2-billion mine in Quebec. "There's no reason why Vale should be the only ones" getting financing to expand within Canada, he said.

"I always assumed EDC did mostly external, outside-of-Canada financing. It's nice to see they're doing this but … my question is, will EDC now be a source of financing for us? We're creating a new mine, new investment and new employment."

Some junior miners were pleased by the move. Alar Soever, who runs exploration company Wallbridge Mining Co., said the industry needs more investment, especially in northern Canada. He's hoping to see spinoff benefits of the deal in the form of potential joint ventures with Vale and increased investor interest.

Notions of nationality have changed in today's global economy, said David Sharp, who holds the chair in international trade at the Richard Ivey School of Business. Vale may be Brazilian but "for me, Vale is a global corporation but it's also a Canadian corporation and we should be treating it as such," said Mr. Sharp.

The Mining Association of Canada said the investment in Vale mines in Canada is good for the country. "The benefit will accrue to Canadians," said Paul Hebert, an association vice-president.