Expensive power, low prices cause copper cuts

Due to high electricity costs and low metal prices, Phelps Dodge (PD-N), the world’s second-largest copper producer (behind Chile’s Codelco), will, for an indefinite period, lay off about 80 workers, or 15% of the workforce, at its copper operation in Tyrone, New Mexico.

The layoffs will be immediate.

The company says it will also extend worker adjustment and retraining notification (WARN) act notices to the remaining 480 employees at Tyrone and to employees at the mining and leaching operations of its Chino facility. Phelps Dodge will not extend the notices for employees working at the Chino smelter and the Sierrita operation.

In March, operations at the Chino facility were curtailed at least through the end of 2001. This impacted 130 workers.

The WARN notices were issued to the three operations on Jan. 25 and were extended at the end of March. The act, which went into effect in February 1989, requires employers to provide 60 days advance notice of mass layoffs or closing at plants with more than 100 employees.

Tyrone will maintain its total copper leach production through the processing of previously mined material. The company says it will, through modified schedules and use of paid vacations, curtail production at its other facilities this summer.

Suffering the same market conditions, Kennecott Utah Copper (KUC), a subsidiary of Rio Tinto (RTP-N) and the third-largest U.S. copper producer, plans to cut annual ore output by 18% and lay off 235 employees at its older, higher-cost North concentrator plant near Magna, Utah.

The company issued WARN act notices on May 25. Operations, including rail haulage, will be suspended for 18 months, beginning around June 1.

The North is Kennecott’s oldest concentrator. Its Bonneville crushing and grinding facility was built in 1966 and its Magna flotation facility was upgraded in 1982. Following the modernization of one of the company’s other plants, the concentrator was to be closed. However, operations continued thanks to high copper prices. In 2000, because it was unable to process it on site, KUC sold about 30,000 tons of copper in concentrate from North to independent smelting and refinery facilities.

Kennecott’s overall cathode output will be unchanged, based on a surplus of concentrates and higher ore grade at the Bingham Canyon mine.

“This action will be only a part of an ongoing drive to reduce costs and improve efficiencies,” said Bruce Farmer, Kennecott’s CEO, in a prepared statement.Shares of Phelps Dodge were off US6 at US$46.57 in afternoon trading on the New York Stock Exchange. Rio Tinto shares were US$1.45 lower at US$78.90.