FINANCIAL problems affecting bauxite mining and exporting company Noranda Jamaica Bauxite Limited (NJBL), St Ann, could force the company to further limit operations, or pull out of Jamaica, the head of one of the trade unions representing workers has argued.

Last week’s announcement by the company, which is 51 per cent owned by the Jamaican Government, and 49 per cent by Noranda Aluminum Holding Corporation based in Franklin, Tennessee, in the United States, said that to match its mining activities with seasonal bauxite demand, it has temporarily suspended bauxite mining operations in St Ann until January 4.

It informed stakeholders, including the three trade unions representing its workers — the Bustamante Industrial Trade Union (BITU), University and Allied Workers Union, and the Union of Technical, Administrative and Supervisory Personnel — that it would continue its drying and shipping operations from its bauxite plant in Discovery Bay.

The company said that the overall impact on its operations would result in a lay-off of over 100 workers, in consultation with the three unions, but explained that the majority of workers currently affected were on contracts.

“Some have been sent on vacation leave, and others have been offered an advance to assist them over the next two weeks,” the company said.

However, the release of this information midweek was followed by Friday’s announcement that a team of arbitrators in the United Kingdom, who had been agreed on by the Government and the company to arbitrate the issue of whether Noranda should pay the full bauxite levy, which was restored by the Government earlier this year, had decided in favour of the Government.

The arbitrators, after examining the establishment agreement between the Government of Jamaica and NJBL, said that the company’s argument in favour of a reduction of the bauxite levy charged on its operations could not stand.

The London-based panel felt that the contract terms for 2015 and beyond were not fixed, but open to negotiation.

“I am very happy. We won on all the three points we put forward. We do not want to pressure the companies, but notwithstanding the difficulties of the industry, they need to realise that the Jamaican people need something more,” mining minister Phillip Paulwell responded in a release issued by his ministry on Friday afternoon.

“We are still evaluating the specifics of the tribunal’s decision to determine its impact to our bauxite mining operations,” John Parker, VP of communication and investor relations at Noranda Aluminium Holding Corporation, responded.

But, according to BITU President Senator Kavan Gayle, the result of this latest episode in the bauxite/alumina story shows that the Government is being “penny wise and pound foolish”.

Senator Gayle thinks that instead of pushing for Noranda to pay the full levy starting this year, which may amount to a few million US dollars, the Government should consider the long-term effects of not only loss of other revenue streams, but also the effect on the lives of over 600 workers employed to the company, their families and communities, which would be indirectly affected.

“In my mind it doesn’t make a lot of sense, because if the company closes down, the Government will lose access to other revenues, including income and company tax. I hope the minister’s excitement won’t turn out to be a disappointment for the workers,” Gayle said.

He stated that it is also very important to consider the fact that Noranda has not closed down operations, despite the reduction in world prices since 2009.

Noranda Aluminum Holding, NJBL’s parent company, has reported losses in the third quarter of 2015, with prices at their lowest levels since the global recession of 2008-2009.

The company said that, in response to this problem, it has been aggressively pursuing strategies to reduce operating costs at all its locations.

According to NJBL’s General Manager Antoine Liddell, “Preserving jobs, particularly at this time of the year, is of concern to us. But, the current and critical situation poses difficult and hard decisions that have to be made, with possible further adjustments to consider, depending on the ongoing state of the industry.”

Noranda has pointed out that the price of alumina on the London Metal Exchange (LME) has continued to decline from over US$1 per lb to approximately 65 cents per pound in 2012.

Other issues, according to the company, include: one of its customers, Sherwin Aluminum, has already reduced bauxite orders by 1.15 million tons in 2016; the unplanned increase in the bauxite levy by the Jamaican Government this year, from US$2.50 to US$5 per ton and the uncertainty of the levy to be paid after the arbitration settlement in 2016; high cost of production of bauxite, now at US$26 per ton vs a break-even cost of US$22 per ton; the entire Noranda is suffering from negative cash flow; over the past 15 years, 15 of 20 US Aluminum refinery plants have been closed; decline in the Chinese economy, resulting in reduced aluminum demand; China has added significant aluminum capacity over the past 10 years, producing it at very low prices; low LME prices, high alumina inventory, low aluminum demand and higher operating costs; and the high debt ratio affecting the parent company.

Finance and Planning Minister Dr Peter Phillips, in reference to the Noranda situation, while closing the budget debate in March, said that the dispute was in relation to Noranda’s non-payment of the full bauxite levy for the period beginning January 1, 2015, as required under the Bauxite Levy Act.

He said that the “clear understanding was that this arrangement would cover the period 2008/2009 to December 31, 2014 and that Noranda would revert to the standard regime on January 1, 2015”.

He said that Noranda is insisting on a five-year extension of the concession, but the Government was not in a position to grant an extension.

“We must collect taxes due from all taxpayers, be they small, medium or large. This is a matter that will go to arbitration,” he added

He also noted that UC Rusal, owner of Alpart, had agreed to pay the bauxite levy at the standard (non-concessional) rate this year.