Low metal prices could shut down mine

Troy Mine workers put on 6-day notice

By NANCY KIMBALL/Daily Inter Lake

Workers at the Troy Mine received a verbal 60-day notice on Thursday that the mine could shut down temporarily because of low prices for copper and silver. A written notice followed by mail.

Of the 181 workers, all but 10 or 20 of them would be out of a job if the mine stops operating and goes into the care and maintenance mode that owners expect in early February. Equipment and facilities would be maintained during that time so production could gear back up quickly if markets improve.

When that may happen is anybody's guess.

"Our hope is by midyear [2009], but obviously that's very difficult to predict," Revett Silver Co. Vice President of Operations Carson Rife said from corporate headquarters in Spokane. The Troy Mine is operated by Genesis, Inc., a subsidiary of Revett Silver.

"The [global economic] decline occurred very abruptly," Rife said. "If the financial markets can get squared away, hopefully manufacturing and construction can start up again."

He said current prices have been ranging between $9 and $10 an ounce for silver and around $1.40 to $1.60 for copper.

"At those price ranges we are reaching what it costs us to produce," he said. "However, we have seen significant decreases in fuel prices in the last several months."

Lower prices on diesel to run the milling equipment could translate into lower operation costs and a quicker return to profitable production. The company also instituted a 10 percent wage cut starting Dec. 1 and is working toward lower refinery costs.

The company plans to continue operations until early February 2009, and continue after that as long as operations are profitable.

The facility crushes and grinds the rock hauled out of the underground mine, then uses flotation equipment to recover the metals. Revett sells the resulting concentrate - a mixture of silver and copper with the consistency of sand - to a metals trader that currently is shipping it to Canadian refineries.

Depressed metals prices can be attributed to several factors. Most of the speculation on copper has been affected by the gradual slowdown of manufacturing and development in China, Rife said. The recent uncertainty in the automotive industry's future also has put a damper on copper prices.

Rife said silver can be affected by the price of gold on the precious metals market, but sometimes is more affected by manufacturer demands. Demand for silver, too, could be curtailed by the decline in manufacturing.

Troy Mine workers received their 60-day notice this week under requirements of the federal Worker Adjustment and Retraining Notification Act that took effect in 1989.

Of the 181 total workers there, 113 work in the mine and 49 in the mill, with 14 in administration, four in engineering and one environmental manager. Rife said quite a few of the employees have been with the mine since it restarted in December 2004.

Wages average around $45,000 a year, he said, with benefits adding another 25 to 30 percent for the overall compensation package.

Workers at the mine, a nonunion work site, already took a 10 percent pay cut effective Dec. 1.

"We would like to restore that 10 percent when the plant comes back," Rife said.

Corporate employees took a 20 percent pay cut, he added. Owners also are working with vendors to negotiate lower fuel prices and with customers to reduce final costs for refinement, hoping to pare back production costs.

If Revett goes through with the shutdown, a few maintenance workers would continue to turn the grinding mills to keep the bearings in good condition and generally preserve the operating level of all equipment.

"The company is extremely disappointed in having to take such action given that the mine is currently operating at the best production levels it has experienced since commercial operations resumed in [early] 2005," Interim President and Chief Executive Officer John Shanahan said in a prepared statement.

Rife explained that the balance between tons of ore hauled out of the ground and the mine's fixed labor costs determine that optimal production level.

"We continue to believe in the future at Troy given its existing reserve base and our expectation that copper and silver prices will return to higher levels," Shanahan's statement continued.

The company already set aside a trust fund when the mine reopened to pay for reclaiming the land after mining operations cease, easing the drain on today's balance sheet.

The underground copper-silver mine is located 15 miles southwest of Troy in Lincoln county.

Revett is progressing with the permitting of the Rock Creek Mine, located nearby in Sanders County. Like Troy, Rock Creek will be an underground copper-silver mine, but it will employ about 250 to 300 workers.

Reporter Nancy Kimball can be reached at 758-4483 or by e-mail at nkimball@dailyinterlake.com