UPDATE 1-Xstrata Sudbury labor talks go down to the wire

* Company, union in talks ahead of Sunday deadline

* Analyst expects strike at Xstrata operations

* Vale’s Sudbury operations on strike since July
(Adds details, comments. In U.S. dollars)

By Cameron French

TORONTO, Jan 29 (BestGrowthStock) – Contract talks between Xstrata
(XTA.L: ) and workers at its main Canadian mining operation look
set to go down to the wire ahead of Sunday’s strike deadline.

A walkout at the nickel operations in Sudbury, Ontario,
would likely give a boost to nickel prices, while a deal ahead
of the deadline is expected by some to help facilitate the
resolution of a strike at cross-town rival Vale (VALE5.SA: ) that
is now in its seventh month.

“We are at the negotiating table and we are hopeful that we
can successfully conclude a renewed agreement prior to the
deadline,” Dominique Dionne, vice-president of corporate
affairs at Xstrata’s nickel division, said on Friday.

Talks to renew the main contract at the Sudbury nickel
operation began in mid-December. The Anglo-Swiss miner acquired
the asset when it bought Canada’s Falconbridge in 2006.

Unionized workers — represented by the Canadian Auto
Workers — voted two weeks ago to give the union a strike
mandate if a deal was not reached.

Richard Paquin, president of CAW Local 598, which
represents the 570 workers covered by the contract, said both
sides had exchanged monetary proposals and would continue
talking ahead of the deadline.

A labor stoppage would further choke off nickel production
at the historic Sudbury mining camp, as workers at Vale’s
operations there have been on strike since July. Brazil’s Vale
took over Sudbury miner Inco in 2006.

Terry Ortslan, an analyst at TSO and Associates, said a
quick deal with Xstrata could pave the way for Vale to resolve
its walkout, as historically Inco and Falconbridge followed the
same deal pattern in negotiating.

“If the union settles with Xstrata, there’s not much of an
excuse for Vale or its union to have another model, he said.

However, others note that Vale and Xstrata are much larger
parent companies than Inco and Falconbridge, and may not follow
the same patterns.

“I don’t think there’s going to be a material pressure one
way or another in the event that Xstrata did settle early,”
said Desjardins Securities analyst John Hughes, adding that he
doubts Xstrata will avoid a strike.

The expiration of the labor contracts has come at an
inconvenient time for workers, as the price of nickel has only
partially rebounded from last year’s crash.

Spot nickel (MNI0: ) was around $8.50 a pound on Friday, down
from an all-time high of just under $25 a pound hit in May
2007, but up from a low of around $4 a pound in December 2008.

Nickel inventories are high, which has kept demand low and
gives producers little incentive to try to meet union demands.

Both Xstrata and Vale produced just under 90,000 tonnes of
nickel from Sudbury in 2008, but both reduced operations last
year due to weak demand, with Xstrata cutting nearly 700 jobs.

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(Reporting by Cameron French; editing by Rob Wilson)

UPDATE 1-Xstrata Sudbury labor talks go down to the wire