Labor disputes unsettle Canadian mining industry

By Paul Simao, Reuters, Sunday August 15, 1999, 4:41 pm Eastern Time

TORONTO, Aug 15 (Reuters) - A series of strikes, lockouts and tense labor disputes have helped turn 1999 into the "year of living dangerously" for Canadian mining companies and their unionized workforces.

Thousands of Canadian miners, from the gold camps of northern Ontario to the copper pits of central British Columbia, put aside their picks and shovels this summer to rumble with some of Canada's most powerful corporate citizens.

Calls for higher wages, improved pensions and enhanced job security spread like wildfire at a time when many firms were just emerging from one of the worst crises to hit the mining sector in more than a decade.

Despite lingering fears that financial crisis in Asia and weak metals prices could continue to haunt all but the strongest producers, strikes and labor disputes erupted this summer at four major Canadian mining operations.

The strength of Canada's resource-dependent economy, which is expected to grow at a robust 3.4 percent this year, is one of the key factors in the growing militancy of Canadian miners.

Fast-paced domestic growth has emboldened unions in both the public and private sectors to regain ground conceded earlier this decade to deficit-fighting governments and recession-weary corporations.

"People are in a catch-up mood," said Terence Ortslan, mining analyst with TSO & Associates in Montreal.

"I think you're going to see a lot of problems this year. I think the markets are going to be caught by surprise."

More than 367,000 Canadians work for mining companies or related sectors.

With 40 percent of the industry already unionized, the mining sector has been a key focus for powerful unions such as the United Steelworkers of America and the Canadian Auto Workers.

The CAW scored a coup late last year when it successfully organized 750 workers at Canadian miner Falconbridge Ltd.'s (Toronto:FL.TO - news) Kidd Creek metallurgical division in Timmins, Ontario.

Production at the facility ground to a halt last month when those same workers walked off the job in a dispute over wages and job seniority. The 26-day strike was settled when the union agreed to a 5-percent wage increase over three years, modest benefit improvements and a one-time cost of living allowance.

The strike, which occurred just as Falconbridge was announcing its return to profitability after four consecutive quarterly losses, may have cost the company as much as C$4 million.

Most Canadian mining companies were hard-hit last year by the financial crisis in Asia, slumping demand for stainless steel and other products and the collapse of metal prices to lows not seen since the middle 1980s.

The turmoil shredded balance sheets, prompted mine closures and bankruptcies and forced many cost-conscious Canadian firms, determined to slash labor expenses, to adopt butchers' instincts toward restructuring.

Thousands of miners lost their jobs and hundreds of other were asked to swallow wage rollbacks as companies attempted to steer clear of the growing wreckage in Canada's mining sector.

The issue came to a head this summer in the rugged interior of British Columbia where 770 unionized workers at the Highland Valley copper mine refused to sign a new contract that would have tied wages to the price of copper.

The mine, a partnership of Canadian miners Cominco Ltd. (Toronto:CLT.TO - news), Rio Algom Ltd. (Toronto:ROM.TO - news), Teck Corp. (Toronto:TEKb.TO - news) and Highmont Mining Co., is Canada's largest open-pit base metals operation.

The concession would have slashed wages by 15 percent if copper fell to 60 cents a pound. The base metal currently trades at around 75 cents a pound.

Although management shut down the mine in May and has since threatened to mothball its operations if labor costs are not shrunk, the workers -- members of the powerful United Steelworkers of America -- have refused to budge.

Theirs is a position with much support in Canada's labor movement.

"I honestly don't know of any cases where labor costs pure and simple were the factor behind mine closures," said Jim Stanford, economist for the CAW in Toronto.

"Very rarely is it ever the case that wage concessions can do anything other than prolong the inevitable by a year or two and that's why wage concessions are not the solution to the troubles in this industry."

Despite a solid consensus that wage rollbacks and job concessions should be resisted, unions have in some cases played a dangerous game of chicken with equally determined employers.

Workers at the high-cost Con gold mine in Yellowknife, a frontier town in Canada's remote Northwest Territories, learned a painful lesson in economics over the past year as a "short" strike turned into a year-long shutdown.

The strike, prompted in part by Miramar Mining Corp.'s (Toronto:MAE.TO - news) demand for a 10-15 percent wage cut, coincided with a dramatic fall in the price of gold to $270 an ounce, about $60 an ounce below Con's pre-strike cost of production.

Those workers who stuck around long enough to see the end of the strike this summer returned to work a little leaner but still better off than their 100 or so colleagues at the Red Lake gold mine in northwestern Ontario.

Workers at Red Lake, owned by Canadian miner Goldcorp Inc. (Toronto:Ga.TO - news), have been on strike since June 23, 1996.

Their future did not become any clearer this summer when Goldcorp Chairman Robert McEwen told shareholders at the company's annual meeting that it was "conceivable production could start without a settlement," next summer.

The Red Lake strike began when gold was trading around $390 an ounce. Gold traded at $260.40 an ounce on Friday. ($1
.48 Canadian)