500 jobs being cut — Fighting to save Trail smelter

Management of Cominco (TSE) released details of a restructuring plan aimed at ensuring the continued operation of its zinc-lead smelting and refining complex at Trail, B.C., which lost over $100 million during the last two years.

It was expected that the company would have to make some tough decisions to stanch losses at the Trail complex which treats concentrates from the company’s mines and from outside sources.

Cominco is one of the world’s largest producers of zinc and lead, and like most metal producers, its bottom line is being affected by low metal prices and a high Canadian dollar.

At Trail, losses in recent years also reflect operating problems at the new lead smelter, costs associated with recent zinc plant modifications, and costs related to ongoing efforts to improve environmental conditions. “Our zinc and lead production was way down in 1990 because of major construction in our zinc and lead operations,” said Cominco spokesman Richard Fish. “Metal prices weren’t bad that year, but we weren’t able to take advantage of them.”

Fish said production levels improved in 1991, but that year’s losses reflect a decline in metal prices.

Cominco has spent about $85 million in the last three years at its zinc smelter where modifications were required to treat the more metallurgically complex ores from its Red Dog mine in Alaska. Those modifications were completed in early 1991, and Red Dog ore currently accounts for 50% of zinc feed. The company’s Sullivan mine near Kimberley, B.C., is another major source of feed.

A new lead smelter using QSL technology was completed in 1990, but had to be shut down several months later because of operating problems. The old lead smelter was restarted, and is still in production until Cominco management comes down with a decision on whether to modify QSL or replace it with alternate technology such as the KIVCET process developed in Russia. “We are expecting a decision on this issue in the second quarter,” Fish said. “But the problem we have to deal with now is that we still have to reduce costs. It is costing us too much to make a pound of zinc or lead.” Cominco management is working closely with the Job Protection Act Commissioner to develop the Trail restructuring program which will be put into place when detailed planning is completed by mid-February. It is expected to take up to a year to implement the program, which will result in the loss of about 500 jobs.

Roger Watson, Cominco’s operating vice-president at Trail, said the objective was to ensure “community economic stability” and “job security” for over 2,000 people.

Despite media reports to the contrary, Fish said the layoffs will come from all sectors. The company is looking at ways to reduce the overall impact through early retirement and voluntary severance packages.

Doug Swanson, president of Local 480 of the United Steelworkers of America, said his members have concerns that blue-collar workers will be harder hit than white-collar workers employed at Trail.

“We think the company would be more competitive if they focused on chopping some of those positions instead of the bluecollar workers,” Swanson said. The restructuring plan includes cost-cutting initiatives aimed at reducing annual costs by about $50 million. These involve measures to reduce energy, transportation and other purchasing costs, plus continued efforts to reduce the Water License Tax and property taxes imposed by provincial and municipal governments.

Fish said Cominco has a new agreement with West Kootenay Power to sell its surplus power at a better rate this year. “This will improve revenues from this source,” Fish said.

Most smelters are located on tidewater in order to reduce water and transportation costs. Trail is in south-central British Columbia, so Cominco generates its own electricity to help offset its transportation costs. But Fish says those benefits are being taken away by the water tax. He pointed out that this tax went up 15% this year which brings the fee to over $10 million. The company is continuing discussions with the provincial government to have the tax reviewed, without much success so far. “When we began our modernization in 1977, the Water License Tax was $200,000 per year, and we made it clear it was important for our plans that this stays stable,” Fish said. “That didn’t happen, and the tax is taking away the benefits we get by generating our own power. This will be one of the things the Job Protection Commissioner will be looking at.”

Fish also said the company is currently paying the lion’s share in regional and municipal taxes, and would like to see a more equitable distribution of the tax load.

The company has also opened up discussions with transportation companies and suppliers to lower rates, through such measures as bulk purchasing. The company hopes to achieve its target of lowering costs by $50 million, 50% through job reductions, 25% by initiatives aimed at lowering energy, transportation and purchasing costs, and 25% by lowering the Water License Tax and other taxes.