Teck Cominco sees strike loom at Highland Valley

Vancouver – The clock is ticking down as Teck Cominco (TCK.B-T, TCK-N) looks at impending strike action at its 97.5%-owned Highland Valley copper mine located about 60 km southwest of Kamloops, British Columbia.

Strike notice has been served by Local 7619 of the United Steel Workers of America, which represents more than 800 workers at the massive open pit operation that produced 179,000 tonnes (395 million lbs.) of copper and 6.3 million lbs. of molybdenum in 2005. The mine generated a record operating profit of $613 million for Teck Cominco in 2005, largely due to soaring copper prices and increased metal output.

The current labour agreement expires on midnight of September 30 with 99.8% of union members having voted in favour of strike action. Unless a last minute agreement is struck, job action could commence as soon as October 1. Both sides failed to reach an agreement in contract negotiations leading up to the strike notice, with the union looking for wage increases reflective of the gains in metal prices reaped by the company.

Teck Cominco posted record earnings of $1.1 billion for the first half of this year based on soaring commodity prices (copper, zinc, lead, gold and coal).

Forecast output for Highland Valley in 2006 is 178,000 tonnes (392 million lbs.) of copper and 3.5 million lbs. of molybdenum. The company anticipates capital expenditures of about $65 million this year, comprised mostly of purchasing new mine equipment. Teck Cominco is also proceeding with a 5-year mine-life extension for Highland Valley, to 2013, costing about $40 million plus an estimated $150 million in stripping costs for the push back of the Valley pit wall.

Recent labour unrest significantly affected copper output from one Chile’s largest mines. A 25-day strike at the Escondida mine, owned 57.5% by BHP Billiton (BHP-N) and 30% by Rio Tinto (RTP-N), saw more than 2,000 workers shut down operations at the world’s largest copper producer that accounts for about 8% of worldwide output. With a number of upcoming labour negotiations slated for Chilean-state mining organization Codelco’s operations, any further disruption to the copper supply could push its price higher in the face of continued strong demand.