Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Molten copper is poured at Xstrata's Kidd Creek facility in Timmins, Ont.
Molten copper is poured at Xstrata's Kidd Creek facility in Timmins, Ont.


Broken promises mark foreign mining deals Add to ...

Just a few months later, however, in March of 2001, Billiton and BHP Ltd. of Australia agreed to a blockbuster $28-billion (U.S.) merger to create one of the world's largest resource companies. BHP already had a significant base metals division with major mines in Chile and elsewhere. Once the deal closed in June, it was decided that Billiton's Toronto base metals headquarters would be moved to Houston, Tex., where it would share back office facilities with the merged company's oil and gas division.

"The idea was that Toronto was going to be the headquarters for the copper division of what was then Billiton. Then the BHP merger happened and, of course, they had a much bigger copper division already. So it was a case of Mohammed and the mountain," said Paul Blythe, CEO of Canada's Quadra FNX and a former Billiton employee.

Like the majority of the staff at the Toronto office, Mr. Blythe was offered a job in Houston, but elected not to go.

"I wasn't very interested in that move ... basically we were offered positions in Houston but most people didn't take them," he said.

Undertakings made under the Investment Canada Act are supposed to be binding even if the foreign company that made them falls under new ownership. So how was a merged BHP Billiton able to close the Toronto office? According to BHP, changes were made to the original undertakings after the acquisition was completed.

"These changes were made with the full agreement of the Investment Review Division and Minister of Industry and were the result of the significant changes that arose from the combination of the BHP and Billiton businesses," BHP spokesman Ruban Yogarajah said in a statement.

Reached on a business trip in China, Brian Tobin, who served as Canada's industry minister at the time, said he didn't recall the changes that were made to Billiton's original undertakings. But he said the amendments would have been made "inside the department," and, he added, "it would not have been a political decision."

According to Mr. Yogarajah, BHP agreed to "maintain an exploration presence" in Vancouver in exchange for moving the Billiton base metals office to the U.S. Even before the Billiton merger, however, BHP already had an exploration office in Vancouver with about 35 to 40 staff, former employees have told The Globe and Mail.

More recently, foreign mining giants Xstrata, Vale and Rio Tinto have been able to close mines, shutter production and lay off workers, even though all had committed to Ottawa that they would maintain previous staffing levels.

Citing the financial crisis and plunging prices for nickel, Xstrata cut 700 jobs in Sudbury and closed nickel mines in February, 2009. Xstrata had paid $18-billion for Falconbridge in the summer of 2006 and made an undertaking to Industry Canada not to cut jobs for three years.

Industry Minister Tony Clement allowed Xstrata to cut the jobs after the company said it would spend $250-million to build a new mine in Sudbury. The funds, however, were not the "new money," as the minister had insisted. Xstrata had already said it would spend the money on the Nickel Rim South mine in Sudbury in its annual financial statements, which had been published a few weeks earlier.

Brazil's Vale was also able to lay off mine workers in Sudbury and cut Canadian jobs to counter the global economic downturn, even though it had made commitments to Industry Canada to maintain staffing levels for three years after taking over Inco. In March, 2009, Vale cut 463 jobs in Canada, including 261 in Sudbury.

Mr. Clement initially demanded answers from the company and vowed to investigate. But in June of that year, the Industry Minister said he was satisfied that Vale had lived up to its commitments in the face of the market downturn, and that the pain had been felt equitably across the company's operations.

Report Typo/Error
Single page

Follow on Twitter: @iamandyhoffman


Next story




Most popular videos »

More from The Globe and Mail

Most popular