The Reminder is making its archives back to 2003 available on our website. Please note that, due to technical limitations, archive articles are presented without the usual formatting.
Jonathon Naylor Editor Hudbay and its second-largest union are again at odds, this time over how cash from the upfront sale of certain 777 mine metals should be shared with employees. Hudbay recently entered into an agreement to sell all remaining silver, as well as some gold, from 777 for a locked-in price. The same deal includes all silver from Hudbay's Constancia mine, due to open in Peru. Silver Wheaton Corp., a major metals streaming company, is to pay Hudbay $500 million in a lump sum, likely before the end of September, and another $250 million in two installments as Constancia progresses. At issue now is how the upfront sale of the 777 metals should be calculated as part of Hudbay's profit-sharing deal with Flin Flon and Snow Lake employees. David Bryson, Hudbay's senior vice-president and chief financial officer, said the initial payment of $500 million will not be counted as a profit in 2012. '...instead it will be gradually included in revenues as gold and silver is delivered to Silver Wheaton,' Bryson said, adding that he does not expect the arrangement to 'to have a significant effect on profit-sharing.' But Blair Sapergia, vice-president of the machinists' union, does not believe the profit-sharing language allows a lump sum to be spread out over time. 'I don't understand where he's (Bryson) coming from,' said Sapergia. 'Why do they think they should be able to amortize that over a number of years? If it's paid upfront, it should be paid upfront. It's profits for that year.' Sapergia said his and other unions could potentially agree to spread the lump sum out over time but Hudbay has 'had no discussion with us whatsoever' on the matter. See'Unaware...' pg. 6 Continued from pg. 1 Sapergia said he was not aware of Bryson's position until The Reminder contacted him for comment. He said unions will discuss Bryson's statements and go from there. A representative of Hudbay's largest union, the United Steelworkers, could not be reached for comment. In its news release announcing the Silver Wheaton deal, Hudbay did not break down the $750 million in upfront payments between 777 and Constancia, though at this point Constancia is by far the larger of the two mines. Through the deal, Silver Wheaton purchases all remaining silver from 777. It also buys all gold produced until either the end of 2016 or the satisfaction of a completion test at the Constancia mine, whichever comes later. After 2016 or the Constancia test, half of the gold from 777 will go to Silver Wheaton until the mine closes. Silver Wheaton also buys all silver from Constancia, a massive mine whose primary product will be copper. The Vancouver-based Silver Wheaton is betting the locked-in price will mean big profits, while Hudbay wanted cash in advance to develop Constancia and finish the Snow Lake area's Lalor and Reed mines. Along with the upfront payments, for gold and silver delivered to Silver Wheaton Hudbay will receive the lesser of the market price and US$400 per ounce (for gold) and US$5.90 per ounce (for silver), subject to a one per cent annual escalation after three years. Debate The debate over how the upfront payments fit into profit-sharing is just the latest disagreement between Hudbay and the machinists. The machinists are the only Hudbay union that has not signed a three-year contract extension beyond Dec. 31, 2011. They are still working under the terms of their last deal. The union is opposed to a Hudbay offer that would commit apprentices to the company for the same length of time as their apprenticeships. For example, a machinist whose apprenticeship lasts four years would be expected to work at Hudbay for at least four years after becoming certified. The union _ formally known as the International Association of Machinists and Aerospace Workers Local 1848 _ calls this return-for-service proposal unfair and a way for Hudbay to staff Lalor with apprentices. But Brad Lantz, vice-president of Hudbay's Manitoba business unit, defends the plan, saying the company a 'very effective apprenticeship program' and that several other companies, like nickel miner Vale, have return-for-service agreements in place. The machinists have threatened a strike vote unless Hudbay presents a better offer, but again there is a disagreement over when a strike could take place. The union believes it gained the right to strike as of July 1, 2012, but Hudbay says that cannot happen until after 2014. As for Constancia, initial production is now anticipated in late 2014, with full production in the second quarter of 2015 _ earlier than previously forecast. The low-cost mine has a projected lifespan of 16 years and an average annual copper output of some 90,000 tonnes. At $1.5 billion, Constancia represents a far larger investment for Hudbay than even its highly touted Lalor mine.
