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Vale Reaches Pact With Mine Workers

September 30, 2011

“Brazilian mining company Vale SA said Thursday it struck a two-year collective labor accord with all of the country’s mining workers’ unions. The accord will give Vale employees an 8.6% pay rise effective November and a further 8% pay increase in November 2012, Vale said in a statement. In addition, the employees will get a bonus each year of 1,400 Brazilian reais ($744.68), the company said.

Also, employees who stay in their posts during the next two years will gain a special one-off bonus equivalent to 1.7 times their monthly salary under the agreement. This is designed to keep employees from leaving Vale to join rival iron-ore producers in Brazil, which is suffering from a shortage of skilled manpower in the mining and metals industry.”

Source: Wall Street Journal, September 22 2011

Observations:

  • Out of 71 thousand of Vale’s employees (Dec 31 2010) approx. 60 thousand work in Brazil.
  • The agreement holds the middle between Vale’s initial 7.5%/y offer and the union’s ‘15%/y plus bonuses’ demands. In previous years Vale gave a 7% increase annually. Inflation rate in Brazil has been around 5-6% over the past years.

Implications:

  • Creative bonus systems will become a more important part of the mining remuneration policies because skilled resources and talent are becoming increasingly scarce in the mining industry.
  • Brazil’s National Mining Plan foresees growth of the domestic iron ore production of 58% from 2011 to 2015. Current high ore prices will help to finance aggressive expansion, but the legislative processes around development and the shortage of workers form two important obstacles to realize this objective.

©2011 | Wilfred Visser | thebusinessofmining.com

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