TORONTO — The federal government will provide up to US$1 billion in financing to Vale SA, raising the ire of workers embroiled in a 14-month strike against the international mining giant.
The loan from Export Development Canada, announced Monday, includes $250 million for a nickel processing plant in Newfoundland and Labrador where the Brazilian-based company is locked in a contract dispute with 130 striking members of the United Steelworkers at its Voisey’s Bay operations.
“It is unacceptable that the federal government, after 16 months of sitting on the sidelines and making unhelpful comments while Canadian communities are ravaged by Vale, is now offering this massively profitable multinational $1 billion in financing,” commented Ken Neumann, the Steelworkers’ national director for Canada.
“It is an insult to the workers in Labrador and to Canadians who think the government should stand up for working families.”
Export Development Canada said the financing package for Vale would create “hundreds of millions” of dollars in opportunities for Canadian supply and services companies.
“EDC’s relationship with Vale provides for significant potential benefits for Canada, both in Canadian mining and processing projects and in international opportunities for Canadian equipment suppliers and engineering firms,” said Eric Siegel, president and CEO of the Crown corporation.
“The recent global recession has emphasized that diversification of markets will be key to growing Canada’s exports in the coming years. Vale’s global operations provide opportunities for Canadian companies to gain a foothold in key emerging markets like Brazil,” he added.
Siegel said Vale has nearly doubled its Canadian procurements over the past few years.
About half of the $1-billion loan will be available for future purchases of Canadian goods and services by Vale for its operations outside this country, or to support Vale exports involving signed contracts with Canadian suppliers.
An additional $250 million will be available for projects slated for development in Ontario.
Terms of the loan weren’t released, but EDC said it was underwritten at market rates.
The Canadian Taxpayers Federation also criticized the loan, questioning why taxpayers were “lending precious money to a firm that says it already has so much excess cash.”
“If corporate welfare worked at creating jobs, every Canadian would have two by now,” said Kevin Gauden, the organization’s federal director. “This loan should be scrapped and fast.”
Vale (NYSE:VALE) said it presented its fifth settlement proposal on Sunday to workers in Voisey’s Bay, but talks with union negotiators ended without an agreement despite the assistance of a provincial mediator.
The mining company issued a statement expressing its disappointment on the labour front about the same time that EDC announced its financing commitment.
Vale accused the Steelworkers of being “unwilling or unable to commit to meaningful negotiations.”
“The union has shown no desire to address the outstanding issues in a constructive manner,” said Tom Paddon, general manager of Vale’s operations in Newfoundland and Labrador. “In fact, USW’s bargaining committee keeps changing its mind on the outstanding issues — their list of issues changes every time we meet.”
One of the major issues in the strike is a proposal to reduce a bonus tied to the price of nickel. No further talks are scheduled.
Vale, which bought the former Inco for C$19 billion in 2006, resolved another dispute involving more than 3,000 workers at its Sudbury, Ont., operations in July after a year-long strike.
The disputes raised questions about how the federal government regulates foreign companies with operations in Canada, particularly a key provision of the Investment Canada Act that says any foreign takeovers of Canadian companies must be of net benefit to the country.
Vale has more than 100,000 employees around the world and is a global leader in the production of iron ore pellets, aluminum, coal, nickel, copper, steel and other resources. It earned US$5.3 billion in 2009.