Union workers at Vale Inco's nickel operations in Sudbury, Ont., have rejected a contract offered by the company and are set to strike Sunday night at midnight.

More than 2,600 Vale mining and processing workers represented by the United Steelworkers in Sudbury voted on the company's contract offer Friday and Saturday.

Wayne Fraser, Steelworkers director for Ontario and Atlantic Canada and a member of the union's bargaining committee, said 85 per cent of the members who cast ballots rejected the offer.

"We told the company before we left that whenever they're willing and able to get back to the bargaining table and take off the concessions, we're willing to bargain," Fraser said shortly after the results were in.

"The strike looms tomorrow night at midnight."

At issue was Vale's proposal to reduce a bonus tied to the price of nickel. In addition, workers opposed a plan by the company to exempt new employees from its defined-benefit pension plan, which guarantees employees a reliable and steady income after retirement.

The company is proposing to provide them with a defined-contribution plan, which bases retirement benefits on investment returns.

Employees at the company's Voisey's Bay operations in Labrador voted 99 per cent against the same offer on Wednesday and will begin a strike on Aug. 1.

Vale calls Sudbury highest-cost operation

These were the first contract talks since Brazil-based Companhia Vale do Rio Doce bought the former Inco Ltd. for $19 billion in October 2006.

Vale's Sudbury operations produce 10 per cent of the world's nickel supply, meaning a strike could squeeze global supplies and rapidly push the price of nickel higher than $10 US per pound, analysts say.

However, because Vale already shut down its mining and processing operations in Sudbury for scheduled maintenance for eight weeks starting June 1, the strike won't have an impact until the end of the month.

Vale chief executive Roger Agnelli surprised the company's followers when he told reporters Tuesday in Rio de Janeiro that Sudbury is the company's highest-cost operation and isn't sustainable.

Like all miners, Vale has been squeezed by reduced demand for base metals such as copper, nickel, zinc and iron because the global recession has cut the need for stainless steel and other materials used in building houses, commercial buildings, factories and other capital projects.

On Thursday, Vale announced it would cut 60 white-collar jobs in Sudbury. These came after the company cut more than 400 white-collar jobs in Canada in March as part of a restructuring of its operations.

Sudbury has been particularly hard hit by the slump in base metals prices as the region relies on its nickel and copper mines, among others, for a large chunk of its employment. Miner Xstrata laid off 686 salaried and unionized employees at its Sudbury nickel mine in February.