Swiss miner Xstrata PLC reported a 41 per cent drop in full-year profits Monday and came under pressure from Canada's largest industrial union for the base metals giant's plans to close a smelter in northeastern Ontario.
The company reported its profit fell to US$2.77 billion from $4.7 billion in the previous year as last year's recession and the weakness of the U.S. dollar affected global commodity sales.
Despite the lower profit, the miner said it would reinstate its dividend at eight cents a share and plans to increase those payments as the commodity outlook improves. Xstrata suspended its dividend during the economic downturn to conserve cash.
Meanwhile, the Canadian Auto Workers called on the federal and Ontario governments to investigate Xstrata's reasons for closing its smelter in Timmins, Ont.
Xstrata said in December that it plans to close its copper and zinc operations in Timmins in May, a move that would have a devastating economic impact on the community in northeastern Ontario.
The company said the "extremely challenging economics of the global smelting industry," combined with increasing costs to maintain the smelter, make the operation unprofitable and the closure necessary.
"Global smelting overcapacity, as a result of the emergence of the Chinese smelting industry, and constrained concentrate supply growth is driving treatment and refining charges to record lows," Xstrata spokeswoman Emily Russell said in an email.
"This situation is compounded by a strong Canadian dollar, lower revenues for key byproducts such as sulphuric acid, and the requirement for further capital investments in these plants."
The union said the closure of the Kidd Mine metallurgical site could cause the loss of up to 4,428 direct and spinoff jobs and $152 million in annual taxes.
"Northeastern Ontario cannot afford to lose these good, highly productive jobs," CAW president Ken Lewenza said in a release.
"Xstrata must not be permitted to exploit the region's resources and then leave it in dire straits when it's convenient to do so. This is the worst kind of abuse of corporate power and must be stopped."
The union said that if an investigation finds Xstrata has little reason to close the site, the miner should be forced by the government to sell its Timmins assets.
The union said the closure, which will see almost 700 direct jobs lost and production move to Quebec, is wholly unnecessary. The CAW said Xstrata's revenue held steady despite a sharp drop in resource prices in 2008 and 2009 and prices are now on the rise.
A spokeswoman for federal Industry Minister Tony Clement, who is also regional minister for northern Ontario, said the minister "is watching the situation closely" but wouldn't comment further.
The company still has other operations in Timmins, including a mine that employs between 600 and 700 people.
In Xstrata's earnings report, CEO Mick Davis portrayed the results as a success for Xstrata's strategy of scaling back output to match demand.
"Our business's rapid and comprehensive response to the downturn in the early part of the year enabled a creditable result in extremely challenging markets in 2009," Davis said in a statement.
"It has been matched by a swift resumption of investment in key growth projects that will drive substantial volume growth and reductions in operating costs."
The Anglo-Swiss company, based in Zug, Switzerland, hopes China will lead a global resurgence in demand for commodities.
"Many of the short-and medium-term leading indicators we monitor are showing signs of recovery, notwithstanding the fact that credit expansion in OECD economies remains sluggish," Davis said, referring to the 30-member club of industrialized nations.
Xstrata became a major player in Canada's mining industry after it acquired the former Falconbridge nickel miner in a multibillion-dollar deal in 2006.
In trading on the London Stock Exchange, Xstrata shares were up 4.8 per cent in London to 995.40 pence (US$15.51).