February 8, 2010 / 9:46 PM / in 8 years

UPDATE 1-Canadian union calls for action against Xstrata

* Asks government to probe Xstrata’s plans to shut plants

* Questions Xstrata’s right to close certain operations

* Canada Investment Act does not apply, government says (Adds response from Canada’s industry ministry)

TORONTO, Feb 8 (Reuters) - The Canadian Auto Workers union (CAW) is calling on the Canadian government to investigate international mining giant Xstrata’s XTA.L, plans to close its copper and zinc metallurgical plants at Timmins Kidd in northern Ontario.

While a mine and concentrator at the site will continue to operate, the plan to shut down the metallurgical plants on May 1 will result in about 670 job cuts. Xstrata currently plans to shift production from Kidd to smelters and refineries in Quebec.

The union is calling on the Canadian federal and provincial governments to investigate Xstrata’s move.

“Should this investigation conclude that Xstrata has little reason to close the Timmins site, both levels of government must force Xstrata to divest their Timmins assets,” the CAW said in a statement.

Last year, the Canadian government took U.S. Steel (X.N) to court over production cutbacks at its Hamilton, Ontario-based Stelco subsidiary. A court ruling in the matter is expected shortly. [ID:nN17497083]

According to the Investment Canada Act, the government has the power to review a foreign company’s investment in Canada and determine whether it varies from the original application and still results in a “net benefit” to Canada.

If this is not the case, the federal government can take legal action against the company to remedy the situation, or even force it to sell some of its assets.

The union is calling on the government to enforce a moratorium on the proposed plant closures until the matter is fully investigated.

However, Canada Industry Minister Tony Clement said in December that Xstrata’s decision to close Kidd did not violate any federal investment agreements, and a ministry spokesman reiterated that point on Monday.

“While Xstrata did make public a commitment related to employment in 2006, this commitment has expired and the Investment Canada Act is no longer a factor here,” said Erik Waddell, Clement’s director of communications.

A spokesman for the company was not available for comment.

Earlier on Monday, Xstrata announced plans to reinstate dividends, reflecting a growing confidence in the strength of commodities demand and its own finances. [ID:nLDE61326M]

CAW-represented workers at Xstrata’s Sudbury mining operations only last week agreed to a new three-year labor contract, after frantic last-minute bargaining averted a strike. [ID:nN02101067] (Reporting by Euan Rocha and Cameron French; editing by Peter Galloway)

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