Glencore, Canada Near Deal to Save Threatened Copper Facility

(Bloomberg) — The governments of Canada and Quebec are pushing to save the country’s only copper smelter after Glencore Plc threatened to shut it down over new pollution-control requirements.

The Horne Smelter, about 390 miles northwest of Montreal, is one of small number of facilities in North America that can process copper concentrate and recyclable materials such as electronic waste. The Swiss resources company said last month it was suspending plans to invest nearly C$1 billion ($720 million) in its Quebec copper operations after hitting an impasse in talks with the province over measures to reduce harmful arsenic emissions.

Without a deal, the facility would have to be wound down, impacting North America’s already constrained capacity to process copper into useful products. But Quebec has now proposed legislative changes to address some of Glencore’s main concerns. If passed, the metals company would get more time to reaching tougher emissions targets.

Meanwhile, the Canadian government is considering a financial aid request for about C$150 million to help pay for new pollution-control systems, according to people familiar with the matter, asking not to be identified because the matter is private.

“While awaiting regulatory certainty, we are open to evaluating other mechanisms, particularly financial ones, for sharing risks,” Glencore said in an emailed statement.

The office of Canadian Industry Minister Melanie Joly declined to comment the ongoing discussions with the company. Gabrielle Landry, a spokesperson for Joly, said the smelter at Rouyn-Noranda, Quebec, is “a strategic asset within our industrial base and an important part of our domestic capabilities.”

Landry added: “Protecting our industrial backbone matters, just as the health and safety of Canadians does.”

The copper smelter represents about 16% of North America’s annual production capacity with approximately 215,000 metric tons of copper concentrate and copper scrap, according to the US Geological Survey. There are only four operating smelters in the US and one in Mexico.

Closing the smelter would also jeopardize Glencore’s copper refinery in Montreal, which is supplied by it. About 3,200 direct and indirect jobs could be impacted, the company has said.

Charles Cooper, Wood Mackenzie Ltd.’s head of copper research, said the Horne Smelter has been “absolutely instrumental” in North America’s copper market, as US smelting and refining capacity doesn’t meet its domestic needs. The facility also produces byproducts such as gold, silver, platinum, palladium and other metals, along with sulfuric acid used in fertilizers, according to Glencore.

“If you lose the Horne Smelter, you lose all of that ecosystem, and then you lose your ability to recover those critical metals that governments now consider important for strategic purposes,” Cooper said.

France’s Nexans SA, which makes materials for electricity production, heavily relies on Glencore’s refinery to feed its copper rod mill in the Montreal region. Nexans has historically bought as much as half of the refinery’s copper cathode output, according to Cooper.

Nexans didn’t respond to requests for comment. But the president of the union representing workers there, Jonathan Pohu, said about 100 workers at the plant “have no idea what the future holds” because of Glencore’s closing threat.

“In the short term, we can source supplies from elsewhere, such as Mexico, Chile, and even the Congo,” Pohu said. “However, in the medium and long term, this could complicate matters, especially since the decline in our US customer base is already making things difficult for our plant.”

The White House imposed 50% tariffs last year on US imports of semi-finished copper products, such as pipes, wires, rods and sheets.

Quebec’s proposed legislative change would delay a new arsenic emissions limit of 15 nanograms per cubic meter for the Horne smelter by about two years, to 2029, and leave it there until at least 2033.

The proposed new limit is one third of current permitted levels. But it’s still five times higher than the provincial standard safe level, sparking outrage among many concerned residents. The company deems the standard unrealistic.

To reduce those emissions, Glencore must do major upgrades at Horne, which has been at the center of controversy for years after medical data showed the population of Rouyn-Noranda had a higher incidence of chronic obstructive pulmonary disease than the provincial average.

The decision about the smelter’s future is an important one for Glencore, especially given remediation expenses and lawsuits that would potentially add to any closing costs. A class-action lawsuit seeking damages for residents near the smelter was certified last year.

Glencore has already spent around C$180 million as part of its emission reduction program in the Rouyn-Noranda community, including buying more than 50 homes to create a buffer zone around the plant. A total of 82 must be destroyed.

–With assistance from James Attwood.

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