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Inco and Falconbridge History

A War of Words or a War of Worlds: Brazilian Vale versus North American USWA – by Kim T. Morris (Part 1 of 3)

Kim Morris won third place in the 2011 Arthur W. Page Society and Institute for Public Relations case study competition – business school category.

Her case study entry was on the Vale Sudbury year long strike – A War of Words or a War of Worlds: Brazilian Vale versus North American USWA.  She  is a senior adviser of communications and public affairs at the North East Community Care Access Centre.

Final Case Study

Abstract

In July 2009, USWA Local 6500, the union representing the employees of Vale’s Sudbury operations went on strike. This was to become the longest and most acrimonious strike in Sudbury mining history. Both sides in the dispute were responsible for less than flattering behavior, including leaking of documents, bullying, making racist comments, and even criminal activity. The final result of this strike is a community that has lost respect for both organizations.

This case study offers an opportunity to study how actions taken during a strike impact on the reputation of both parties. It also highlights the communication breakdown between not only both parties but also with their key stakeholders.

Overview

“We are very happy with the results of the ratification vote. The agreement establishes a newworking relationship with our employees and the union and allows us to move forward with our long-term, sustainable growth plans. We look forward to returning to normal production andbuilding the future together with employees.”

Tito Martins, Vale’s Executive Director for Base Metals
Vale news release, July 9, 2010 [1]

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Sustainability In Nickel Projects: 50 Years of Experience at Vale Inco – by S.W. Marcuson, J. Hooper, R.C. Osborne, K. Chow and J. Burchell (December 1, 2009)

The principal author, Dr. Sam Marcuson ( Sam.Marcuson@valeinco.com ) is vice-president, business improvement for Vale Inco Limited, Mississauga, ON, Canada. This article was adapted from a plenary speech made at the CIM Conference of Metallurgists held August 2009 in Sudbury, Ontario. The full paper is available from the author or the conference proceedings.

Looking at the industry’s past and present with a view to projecting into the future can be a valuable exercise for executing and maintaining sustainable development

The first eight years of this century saw rapid growth in the consumption and production of nickel and related commodities. In response to growth in the BRIC countries, but especially China, new projects, many in under-developed countries, were initiated. Nickel pig iron, produced in aging Chinese blast furnaces, unexpectedly emerged. Simultaneously, scientists concluded that global warming is “unequivocal” and human activity is the main driver, “very likely” (>90%) causing most of the rise in temperatures since 1950[1]. These factors point to a future in which sustainable development becomes of paramount interest to the mining and metallurgy industry.

To the practicing metallurgist and operator, “sustainability” may appear as keeping employees safe, meeting prevailing environmental regulations and contributing to social programs contractually agreed to, while maintaining a low-cost operation that meets production and financial targets. But this is a highly simplified view that ignores many of the sustainability concepts.

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The Arrogance of Inco – by Val Ross (Originally Published in May 1979 – Part 4 of 4)

“The Arrogance of Inco” was originally published as the cover story in the May, 1979 issue of Canadian Business. Reporter Val Ross, who died in 2008, spent two and a half months researching and writing this lengthy expose of the then Inco Limited. It has become a “classic must read” for anyone wishing to understand the often bitter history between Sudbury and the company that defined the Canadian mining industry.

4-Troubles in the Province of Ontario

Nineteen hundred and fifteen was a rather wet year in the Sudbury district. The sulphur dioxide fumes from the open-air roasting heaps hung in sickening mists and low clouds over the region. In increasing numbers the local farmers brought damage suits against the nickel producers, Mond and International Nickel. In desperation the nickel companies turned to the Ontario Ministry of Lands, Forests and Mines for protection. They begged the government to remember nickel’s contribution to the defence of the Empire (this was the year before the Deutschland’s two trips to pick up nickel supplies for Germany).

Charging opportunism, they protested, “Lands are being taken up and a pretence of farming made…in the hope and the expectation that the same may be damaged or appear to be damaged so that a claim against the company may be made.”

The Ontario government agreed with the nickel men’s interpretation of events and dealt with the “smoke farmers,” as Inco dubbed the victims, accordingly. Whole townships near Copper Cliff and Sudbury were withdrawn from sale to settlers. When the remaining lots changed hands, “smoke easement clauses” were written in which denied the buyers the right to sue mining companies. These clauses, reviewed in 1942 during another spate of farmers’ and residents’ complaints, have been retained. To this day, no owner of Sudbury real estate has the right to sue mining companies for property damage.

There were, and remain, variants on the sulphur dioxide pollution problems in the Sudbury area.

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The Arrogance of Inco – by Val Ross (Originally Published in May 1979 – Part 3 of 4)

“The Arrogance of Inco” was originally published as the cover story in the May, 1979 issue of Canadian Business. Reporter Val Ross, who died in 2008, spent two and a half months researching and writing this lengthy expose of the then Inco Limited. It has become a “classic must read” for anyone wishing to understand the often bitter history between Sudbury and the company that defined the Canadian mining industry.

3-Foreign Wars, Foreign Conquests

World War One boosted International Nickel up fortune’s wheel. The demands of World War Two and the Cold War arms race would put the company over the top – and heading down.

In the second half of the century Inco reaped the consequences of what it had sowed in the first the demand it had created for nickel ultimately exceeded its capacity to produce it – and left a vacuum for new producers to fill. Its booming good health attracted envy from customers, who might, had Inco been less arrogant, have felt more loyalty to the company when the chips were down; and it also attracted the critical attention of governments, consumer groups and environmentalists.

No one foresaw this, of course. The company’s chairman and president during World War Two, Robert Crooks Stanley, the man who’d spent four decades of his life convincing the world of nickel’s place in civilian life, made the necessary adjustments to war in a spirit of confident responsibility. “The first obligation of every corporation,” he noted serenely, “is to give the utmost support to his [sic] government in the prosecution of the war.” He plowed $38.5 million of the company’s money into boosting production by 20% and expanding the Huntington rolling mill facilities. Just as in World War One, the company nearly doubled its nickel output. But to do so it sacrificed costs, efficiency and profits, which dropped from $37 million in 1939 to $25 million in 1945.

Meanwhile, Stanley’s friend and fellow board member, John Foster Dulles, was creating a niche for himself in the postwar world. Dulles chaired the corporate heavyweight Committee for a Just and Durable Peace sponsored by the National Council of Churches of Christ in America; advised the American delegation at the United Nations conference, and made more and more friends with the Republican party establishment. It must have seemed to the board of directors that the company’s postwar position would surely be enhanced by friends with such political power.

They were wrong.

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The Arrogance of Inco – by Val Ross (Originally Published in May 1979 – Part 2 of 4)

“The Arrogance of Inco” was originally published as the cover story in the May, 1979 issue of Canadian Business. Reporter Val Ross, who died in 2008, spent two and a half months researching and writing this lengthy expose of the then Inco Limited. It has become a “classic must read” for anyone wishing to understand the often bitter history between Sudbury and the company that defined the Canadian mining industry.

2-The Monopoly Years

Whether the 20th century would belong to Canada, as Laurier had promised, was anybody’s guess, but it was clear from the start that it would have a place for the nickel from Canada.

No one was under the illusion that its control wasn’t solidly in American hands. The International Nickel Company’s chief executives were American, its refining operations were located in America, and so were its marketing policymakers.

When, in 1890, US Navy tests demonstrated that nickel-steel plate was impervious to shells fired at a velocity of 1,700 feet per second, the Glasgow Herald prophesized the dawn of a new age. “When irresistible nickel-plated breach loader confronts the impenetrable nickel-plated ironclad [vehicle], then…war as a fine art will have come to an end.”

On the contrary, nickel flourished in war-making and war-making flourished with the help of nickel. The Spanish-American War of 1898 demonstrated the invincibility of US nickel-steel-plated ships. Soon nickel was almost entirely a military material. Demand for it quickened in the dreadnought-building races between the Great Powers. Then, in 1914, the guns of war sounded, and nickel boomed. Between 1914 and 1918, the output of the Sudbury area mines more than doubled.

How awkward when it was learned in the middle of the war that some of this product was destined for German guns!

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The Arrogance of Inco – by Val Ross (Originally Published in May 1979 – Part 1 of 4)

“The Arrogance of Inco” was originally published as the cover story in the May, 1979 issue of Canadian Business. Reporter Val Ross, who died in 2008, spent two and a half months researching and writing this lengthy expose of the then Inco Limited. It has become a “classic must read” for anyone wishing to understand the often bitter history between Sudbury and the company that defined the Canadian mining industry.

A century of power and profit – and now a sea of troubles

NICKEL, INCO. Clack the consonants of these two words on your tongue, and they sound similar. They used to be synonymous – nickel, Inco – in the public mind undoubtedly, in the company’s mind, indelibly.

The International nickel Co. (it was renamed Inco Ltd. In 1976) was in up to its elbows at the birth of the nickel industry, almost as responsible for nickel’s development as nickel was responsible for making Inco Ltd. the billion-dollar multinational empire it is today. Inco was nickel. And the company men and the metal left their characteristic mark on each other’s fate.

The metal, element 28, is greyish-white. You might describe the company’s subdued, Anglo-Saxon character in the same way. Among the metal’s most important properties are resistance to oxidization and corrosion, and insolubility in water. Alone, nickel us brittle, but it merges promiscuously with iron and other metals into a host of tough alloys. The company is tough too, resistant to change, at times rigid. And the men of Inco have forged some odd business and political alliances to increase their company’s strength and lustre.

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[Vale Strike] In Sudbury it’s Restive, Not Festive – by Tony Van Alphen (Toronto Star-December 19, 2009)

Tony Van Alphen is a Business Reporter for the Toronto Star, which has the largest circulation in Canada. The paper has an enormous impact on Canada’s federal and provincial politics as well as shaping public opinion. This article was originally published on Saturday, December 19, 2009.

Workers’ mettle gets test as Vale Inco strike drags into bitter northern winter , It’s a war zone here. Their tactics are designed to provoke us like never before. They’re not interested in getting back to bargaining.

SUDBURY–Led Zeppelin’s “Whole Lotta Love” is blasting from a satellite radio in the tent’s makeshift living room.

A couple of plush La-Z-Boy rockers and a couch surround a blazing wood stove. The fresh Christmas tree in the corner gives the place a cozy holiday feeling.

Three hearty men in heavy overcoats and toques hover around the stove, slap their gloves and exchange brotherly greetings. The song ends and they step outside into another world.

There’s not a lot of love or warmth there. They’re on the picket line just after sunrise a few days before Christmas at Vale Inco’s Clarabelle Mill.

It’s a flashpoint in the five-month standoff between some 3,100 workers and one of the world’s biggest mining companies.

The workers face a bitter wind, -20C temperatures and a company spending millions of dollars to keep them in line. Strikers walk the line and delay trucks and cars for 12 to 15 minutes before allowing them through to the sprawling mill up the road. Then, they walk some more.

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“The Great Canadian Mining Disaster” -by Jacquie McNish (November 25, 2006) – Globe and Mail’s Report on Business Inco Mining Story

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous impact and influence on Canada’s political and business elite as well as the rest of the country’s print, radio and television media.

This article was the cover story of the Saturday, November 25, 2006 edition of the Globe and Mail’s Report on Business Section. Jacquie McNish’s 16,000-word article on the failed Inco/Falconbridge merger has become the definitive account of this Canadian business tragedy.

THE GREAT CANADIAN MINING DISASTER

Scott Hand had a dream, to keep Inco Ltd. in Canadian hands. But he didn’t count on corporate betrayal, political apathy, a new bread of shareholders, and a lack of boardroom bravado

Introduction

The horizon clears

Inco sees its future

After days of murky weather, a wool fog lifted off central Labrador, revealing the bald rugged terrain explorer Jacques Cartier dismissed as “the land God gave to Cain.” The momentary clearing allowed a clutch of travellers to dash to two turbo props marooned at Happy Valley Goose Bay airport.

These were no ordinary tourists. Leading the parka-clad pack was Scott Hand, patrician chief executive officer of the world’s second-largest nickel producer, Inco Ltd. Behind him, eager to explore Cain, were an elite corps of international executives. Rick Waugh, CEO of Bank of Nova Scotia, a man who is gobbling up more Latin American banks than Butch Cassidy and the Sundance Kid, was here. So was David O’Brien, chairman of EnCana Corp. and Royal Bank of Canada. Joining them were Glen Barton, retired chief of Illinois’ Caterpillar Inc.; John Mayberry, onetime CEO of Hamilton steel maker Dofasco Inc.; and Francis Mer, retired boss of European steel maker Arcelor SA and a former finance minister of France. Inco directors one and all, they scrambled to the Dash 8s under an uncertain sky to see for themselves the 21st century’s first great mining startup: Voisey’s Bay.

Mr. Hand, however, wanted his directors to see more than a prosperous mine on the afternoon of Sept. 20, 2005. Although Inco was still digesting the $4-billion, 1996 purchase of Voisey’s Bay, he believed it was time to deal again. Rival Falconbridge Ltd. was in play, presenting Inco with an opportunity to forge a global powerhouse by bringing some of the world’s richest copper and nickel deposits under one corporate entity.

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[Sudbury/Vale strike]Nickelled and Damned -by John Gray (Globe and Mail- March 26, 2010)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous impact and influence on Canada’s political and business elite as well as the rest of the country’s print, radio and television media.

This article was the cover story of the March 26, 2010 edition of the Globe and Mail’s monthly Report on Business magazine.

Down the road from the Copper Cliff smelter, where the Inco Superstack reaches 380 metres into a clear winter sky, striking Steelworkers stamp their heavy boots and feed a smoking fire pit with scrap wood. Massive ore trucks, engines growling, wait for permission to drive through the picket line. It is a familiar ritual; after 10 or 15 minutes, the picket captain signals the drivers to proceed and go about their business at the smelter—their business being strikebreaking.

When Local 6500 of the United Steelworkers walked off the job at the Vale Inco nickel mines, it was mid-July. The progression from agreeable summer weather to minus 20 C has been brutal. The best to be said about minus 20 is that it’s better than minus 30, just like strike pay of $200 a week is better than no pay at all. It’s hardly surprising that there’s little of the bravado that usually sustains picket lines.

The downbeat atmosphere may also reflect a sense among the strikers that the world has changed and that their strike has not been noticed by Canadians. There have been many strikes in Inco’s history—but every other one was decided in Canada. Now Inco is a subsidiary of a company based far away.

If the long stalemate in Sudbury had a sound, it might be that of the other shoe falling. When the takeover binge of the mid-2000s saw many of Canada’s pre-eminent companies disappear into foreign hands, the debate over the “hollowing out” of the domestic economy was muted. After all, Vale, like other acquisitors, made undertakings to preserve jobs and, in fact, to carry on much like before.

Now, it appears, things look very different to Vale.

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Hacks, Flacks and Superstacks: Inco and the Sudbury Media in the 1970s – by Mick Lowe (Part 3 of 3)

This article (original title – Hacks, Flacks and Superstacks) was first published in the August 1976 issue of Content magazine. Mick Lowe is a well-known retired Sudbury journalist with a keen insight on labour issues. From 1975 to 1988 he worked as a freelance journalist, becoming a frequent contributor to the Globe and Mail.

In 1977 he became a staff reporter for CBC Radio News where he helped to open the network’s Northeastern Ontario News Bureau. From 1995 – 2002 Mick Lowe was a regular columnist for Northern Life.

I make a point of watching both local TV newscasts tonight. CKSO has Steelworker president Mickey Maguire on first. Shot in his office with available light, Maguire appears angry and concerned for the safety of his members at Frood. Convincing. Hoskins follows, reading the same statement I heard earlier at CHNO, relying heavily on Harvey Judges to back him up.
With his heavy beard, bad studio lighting, and rehearsed delivery, Mr. Inco presents a haggard image, remindful of the Nixon-Agnew talking heads staring hypnotically into the cameras during the 1972 U.S. presidential campaign.

On CKNC, Hoskins appears again in the studio, though with better lighting, reading the same statement. The Steelworkers have declined an opportunity to reply, but the reporter has located sources willing to give “the other side” of the story.

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Hacks, Flacks and Superstacks: Inco and the Sudbury Media in the 1970s – by Mick Lowe (Part 2 of 3)

This article (original title – Hacks, Flacks and Superstacks) was first published in the August 1976 issue of Content magazine. Mick Lowe is a well-known retired Sudbury journalist with a keen insight on labour issues. From 1975 to 1988 he worked as a freelance journalist, becoming a frequent contributor to the Globe and Mail.

In 1977 he became a staff reporter for CBC Radio News where he helped to open the network’s Northeastern Ontario News Bureau. From 1995 – 2002 Mick Lowe was a regular columnist for Northern Life.

Dropped into the safety office at the Steel Hall this afternoon. Tempers thee were high and rising over the death of James Cullen. I talked with John Higgison and Tom Gunn, the co-chairmen of the Local 6500 inquest committee. Both men really feel the rising fatality rate because theirs is the grim responsibility of investigating the accident scene, interviewing eyewitnesses, and doing what they can for the widows. (Cullen had a wife and four children.)

They show me colour Polaroid snaps of the accident. About all I can make out is the tram, a squat mining vehicle with the wheel-base of a five-ton truck, nearly buried under muck. Higgison tells me that Cullen was not crushed by the ore. He died of asphyxiation when the muck covered the back of his neck, forcing his chin against his chest and cutting off his wind. He died at the wheel of the scoop, pinned into the driver’s seat.

Higgison is shaken because a witness that he interviewed told him that Cullen was still alive after the cave-in. The witness came running when he heard the roof come down and he called out to Cullen in the darkness and the dust. Cullen revved the scoop’s engine three times to show that he was still alive. It took 10 minutes for the rescue party to clear a way into the tram. Cullen was dead when they got to him.

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Hacks, Flacks and Superstacks: Inco and the Sudbury Media in the 1970s – by Mick Lowe (Part 1 of 3)

This article (original title – Hacks, Flacks and Superstacks) was first published in the August 1976 issue of Content magazine. Mick Lowe is a well-known retired Sudbury journalist with a keen insight on labour issues. From 1975 to 1988 he worked as a freelance journalist, becoming a frequent contributor to the Globe and Mail.

In 1977 he became a staff reporter for CBC Radio News where he helped to open the network’s Northeastern Ontario News Bureau. From 1995 – 2002 Mick Lowe was a regular columnist for Northern Life.

Why, man, he doth bestride the narrow world like a Colossus; and we petty men walk under his huge legs, and peep about to find ourselves dishonorable graves. Men at some time are masters of their fates; the fault, dear Brutus, is not in our stars,but in ourselves, that we are underlings.
-Julius Caesar, Act 1, Scene 11

Sudbury, Ontario – Early on Good Friday morning, April 16, 1976, James D. Cullen was killed while working the graveyard shift at Sudbury’s Frood Mine. In itself, there was nothing unusual about Cullen’s death. He was, after all, the fifth worker to die on the job at Inco since the first of the year. But the cave-in that killed James Cullen triggered a chain of events that few could have foreseen.

The Good Friday accident, an angry union, and an alarming injury rate (3,000 reported accidents in the first half of the year) combined to touch a raw nerve somewhere in the upper regions of management at Inco, a company that is acutely sensitive to its public image, especially in Sudbury. The result was a bitter, behind-the-scenes battle for the hearts and minds of the people in this city.

 

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The Killings in Takeovers of Canadian Resources (The Loss of Inco and Falconbridge) – Donald Coxe

With 35 years of institutional investing and money management experience in the United States and Canada, Donald Coxe has a unique background in North American and global capital markets  http://www.coxeadvisors.com  This was originally written in May, 2007.

We have been asked by several Canadian clients for clarification about our strong opposition to some of the takeovers of Canadian resource companies. This is our detailed response. (The opinions contained herein are those of Donald Coxe and do not necessarily represent the opinions of BMO Capital Markets.) The material is primarily for Canadian clients, but others who were forced to tender their Inco or Falconbridge shares, or who fear being forced to sell their oil sands holdings, should find the analysis of interest.

We opposed the takeovers of Inco and Falconbridge, and have for two years expressed strong concern that Big Oil’s Reserve Life Index problems would lead to takeovers of publicly-traded oil sands companies at unrealistically low prices—because they tend to trade in line with spot oil prices.

Last September, we gave a speech to the 30th Annual Meeting of the Canadian Council of Chief Executives (whose membership includes the CEOs of Canada’s biggest companies) in which we ridiculed the prices at which Inco and Falconbridge were sold and warned that takeovers of oil sands companies would probably be next. (We had a polite exchange of views with the Brazilian Ambassador about his government’s holding in CVRD during the question period.

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The Unknown Giant of Canadian Mining – Thayer Lindsley – by Fred Bodsworth (Part 2 of 2)

Maclean’s Magazine – August 15, 1951

Lindsley is a rare combination of the four “musts” of mine-making success.

The first “must,” and Lindsley’s greatest asset, is his phenomenal insight into problems of geology and vein structure.

Second, he has an uncanny sense of economics and financing.

Third, Lindsley, though self-effacing in his personal life, is a striking contrast as a businessmen. He is willing to gamble hard and boldly with million-dollar stakes and long odds.

And fourth, he can work hard, physically and mentally, with a power of concentration so keen that he is amusingly absent-minded at times regarding matters outside his business affairs in which he has no interest.

Knack for Rock Jigsaws

Lindsley’s ability to work out complex problems of geological structure and decide whether a property is a potential mine or just another “teaser” has become a legend in Canadian mining circles. But he has made mistakes. For example, he pulled out of Red Lake, Ontario, in its early days because he was convinced the area had no promise, then had to watch with embarrassment as it developed into one of Canada’s richest gold camps.

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The Unknown Giant of Canadian Mining – Thayer Lindsley – by Fred Bodsworth (Part 1 of 2)

A shy, elderly and virtually anonymous man named Thayer Lindsley personally controls a fabulous international kingdom of gold, silver, copper, zinc and iron. With a genius for geology and finance he has made millions but he has never got around to buying a car.

Maclean’s Magazine – August 15, 1951

The financial pages of Canadian newspapers in the past few months have heralded the discovery of new high-grade ore at Giant Yellowknife, Canada’s lusty gold-producing youngster of the Northwest Territories; they have announced that United Keno, the Yukon’s big silver-lead-zinc producer, chalked up a two-and-a-half-million-dollar profit in 1950; that Falconbridge Nickel of Sudbury and its expanding overseas refinery in Norway will spend millions of dollars to boost output for defense; the “big two” of Canadian mining exploration, Ventures Ltd. and Frobisher Ltd. are pushing the search for titanium in Quebec, uranium in northern Saskatchewan, iron in British Columbia.

Mining editors have headlined a proposed thirty-three-million-dollar project to develop a fabulous copper-cobalt property in Uganda; they have announced that an American firm will reopen ancient silver mines in Greece; that Latin America’s biggest gold mine, the La Luz of Nicaragua, has acquired substantial interests in a Californian tungsten mine, and in promising mining properties of the Philippines, Costa Rica, Honduras and the state of Nevada.

There have been reports too of an exciting iron discovery in the western Sahara, of a Venezuelan move to expropriate the Guyana gold mine, and of mounting production from Southern Rhodesia’s Connemara gold mine.

It is almost inconceivable, yet every one of these enterprises is directed and financially controlled by one person, a reclusive mystery man whose genius for evading the limelight is exceeded only by his genius for geology and mining finance. He is Thayer Lindsley, undisputed No. 1 figure in Canadian mining, who carved out Canada’s biggest mineral empire and then went on to create another international empire just as great.

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