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The Globe and Mail

Vale reveals $10-billion spending plan in Canada

The Inco superstack is silhouetted against the sunset in Sudbury, Ont., on Oct. 11, 2005.

Brazil's Vale has unveiled a $10-billion spending spree in Canada, including a multibillion-dollar potash project in Saskatchewan, just two weeks after a rival's bid to acquire the province's largest mining company was rejected by Ottawa.

Vale, which secured its spot in Canada in 2006 with the takeover of nickel miner Inco Ltd., laid out a mix of new and already planned investments over five years at its operations across the country. However, the announcement also included a controversial move to close its smelting operation in Manitoba, which will cost 500 jobs.

Vale said the investments highlight its "bright future" in Canada. But it also comes as the federal government is preparing to review its rules for foreign investment and amid increasing scrutiny of multinational resource companies operating in Canada. On Sunday night, BHP Billiton Ltd. walked away from its $38.6-billion (U.S.) bid for Potash Corp. of Saskatchewan Inc., saying it had failed to convince Ottawa that the deal would be a "net benefit" to the country under the Investment Canada Act.

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During the three-month saga of BHP and Potash, Vale took a public relations bruising of its own. Its actions after the Inco takeover -- such as cutting jobs in Sudbury, Ont., after it had promised not to -- were repeatedly cited by those who argued that a foreign-controlled mining company shouldn't be allowed to take over Potash Corp.

Indeed, even Wednesday's announcement of billions in new spending was blunted by the job losses in Manitoba and the 15-month-old strike at its operations in Newfoundland. The year-long labour dispute at Vale's operations in Ontario, which ended in July, has also weighed on the company's reputation.

Vale said it endured that recent strike so that it could strengthen its balance sheet and make its future investments in Canada.

"Canada is a big and important operation for our organization. We want to stay here for decades," Vale Canada chief executive officer Tito Martins said in an interview.

Vale said the money being spent will make it more efficient, improve its environmental performance and strengthen its global competitiveness.

However, Manitoba Premier Greg Selinger was caught off guard by the news of the smelter shut down in Thomson, Man., calling the plan "unacceptable" because it will mean the loss of 500 jobs or about 40 per cent of the local work force.

"This is a big blow to the community," Mr. Selinger said in an interview.

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He said Vale mentioned its plans for the Manitoba operations last week, but ignored the province's request for more time to discuss options to prevent jobs cuts.

Vale said phasing out of refining operations will mean a drop in staffing to about 1,000 workers from 1,500, but that it expects to manage it through attrition and no layoffs.

A union representing Vale workers in Canada said the investment announcement is a campaign to improve the company's image.

"Vale's announcement today is perhaps the most cynical public relations exercise we have seen yet from this foreign corporation," said Ken Neumann, of the United Steelworkers.

Vale said the spending follows a review of its Canadian operations and will deal with inefficiencies such as aging infrastructure and environmental performance to keep its operations running long-term.

Vale's potash plans in Saskatchewan include a potash development project valued up to $3-billion, which is now in the pre-feasibility stage. A decision on whether to build a mine is expected in 2012.

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If the project goes ahead, Vale said it will create 1,500 new construction jobs over four years, and leave behind about 500 permanent positions.

Saskatchewan Energy and Resources Minister Bill Boyd said Vale's plans validate its argument that investment will continue to flow into the province despite its decision to reject BHP's bid for Potash Corp.

"It doesn't support the argument that the province has somehow close the door to business investment," Mr. Boyd said. "This is further evidence that argument is not valid."

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