Labor dispute cited as cause for closing B.C.’s Sullivan mine

The surprise announcement by Cominco (TSE) to suspend production at the Sullivan mine has raised speculation the decision was partly the result of a smoldering labor dispute and not strictly a matter of the mine’s profitability, say two provincial cabinet members.

Cominco recently announced it will close the aging underground lead-zinc-silver mine near Kimberley, B.C., on Jan. 31 for an indefinite period. The company cited an increase in production costs and a decrease in the price of zinc as the reasons for the closure. The decision will affect about 700 workers.

A “town-hall” meeting was held in Kimberley on Jan. 22, five days after the shutdown was announced. It was attended by Howard Dirks, provincial secretary and MLA for Nelson/ Creston, and Stan Hagen, minister of regional and economic development. As a result of the meeting, the two ministers determined there was a widespread feeling in the community that one of the iss ues in the shutdown was an ongoing labor-management conflict.

The ministers said they would be briefing Cabinet on the subject and stated: “It would be wrong to look at any long-term shutdown issues while there is any suspicion in the community that this is really a labor dispute.”

Cominco noted that the mine, which had made $14 million to Oct. 31, lost $2.3 million in November and $2.6 million in December. Losses of $3 million were also projected for January.

Ted Fletcher, Cominco senior vice-president, attributed the losses to higher mining costs as the deeper pillars were mined, a drop in silver and lead grades as depth increases, and an increase in milling costs as the nature of the ore changes with depth.

He also noted a decrease in productivity which increased the cost per ton of ore mined. These factors, coupled with a drop in zinc prices, were cited as the reason for the losses. He emphasized that the closing was not the result of a labor dispute, but was based strictly on the economics of mining the deposit.

Jeff Moore, vice-president of the United Steel Workers Union Local 651, said the drop in productivity was directly related to the expiry of the miners’ bonus contract on Oct. 31. When the union rejected Cominco’s offer of a new contract, Moore said the company refused to negotiate, opting to pay the miners a base rate for a day’s work with no bonus for production.

Cominco expected a production rate equal to two-thirds of the historic rate when the mine was on a bonus system. Moore said that the quota was not met.

In December, Cominco went before the Industrial Relations Council charging that the miners’ work slowdown was equivalent to an illegal strike. The IRC agreed and gave the union a reprimand.

Ron McLean, mine manager, noted that ore milled in November was 35% of that milled on average during the preceding months. McLean points to a 160% increase in the cost of production from fiscal 1988 to the first ten months of 1989, as well as the drop in zinc prices, as the major factors in the closure of the mine.

But he also stressed that even if production levels returned to normal levels and the previous bonus system was reinstated, the mine would not be economic at current metal prices.

The provincial government’s role in the affair has not yet been determined, although Moore said the closure might also be a bargaining chip in a company attempt to obtain a decrease in the provincial water taxes at the Trail smelter.

Kimberley Mayor Jim Ogilvie believes the closure was a business decision. He said if the Trail smelter (where Sullivan concentrate is smelted) can obtain concentrates from other sources at a lower price, the closing makes obvious business sense.

However, he quickly points out that when Cominco was negotiating loans from the government in the early 1980s for up-grades to the Trail smelter, it was believed that the loans would ensure the continued operation of both Trail and the mine. Because of this, Ogilvie contends that Cominco does have some obligation to keep the mine operating.

The Sullivan mine was discovered in 1892. Cominco bought into the mine in 1909 when production began in earnest. In 1913, Cominco bought the mine outright. It is believed to have sufficient reserves for production to continue for another 10 years. Cominco recently began producing concentrates at the Red Dog zinc-lead-silver mine in Alaska. They are expected to supply feed for the Trail smelter for the next 50 years.

The manner in which Cominco’s announcement to close the mine was made — by way a terse news release — also drew widespread criticism. British Columbia P remier William Vander Zalm criticized Cominco, saying the company demonstrated “a clear breach of good corporate behavior.”