A six-month-long strike at miner Vale Inco's Canadian operations appeared Wednesday to be progressing towards a resolution in one part of the country, while labour relations worsened in another.

Striking workers at Vale's nickel-copper-cobalt mine in Voisey's Bay, N.L., could be back at the bargaining table as early as this weekend after the company sent a proposal that the United Steelworkers have called "conciliatory."

Meanwhile, the restart of a company smelter in Sudbury using non-striking workers only served to increase bitterness in the northern Ontario city, with one union official accusing the company of lying to undermine workers' resolve.

The Brazil-based miner's use of non-striking office, clerical and technical workers at two mines and a mill in Sudbury is already the subject of a labour grievance working its way through the Ontario Labour Relations Board. The company's Sudbury smelter is now part of the restarted operations, running at 50 per cent capacity to help process the ore that's being mined, company spokesman Cory McPhee said Wednesday.

Wayne Fraser, Steelworkers director for Ontario and Atlantic Canada, confirmed that he could see smoke coming out of the smelter's stack on Wednesday, but accused the company of trying to put pressure on the union.

"We know for a fact there's no way they'd be anywhere near 50 per cent capacity in the smelter. They don't have enough ore. They don't have enough people. So a lot of this has been what Vale's been doing from day one with respect to this dispute, and that is trying to undermine the morale of our members."

Vale's Sudbury operations -- which include six nickel mines, a mill, a smelter and a refinery -- represent about three-quarters of its 4,000 striking workers as well as the bulk of its production. Although progress is being made in Voisey's Bay, McPhee said the situation is "completely different" in Sudbury.

"In Sudbury we went through a full formal process of negotiations and ended up at an offer that we feel is a very fair offer, and that was put forward following three months of intense negotiations, give and take on both sides," McPhee said, adding that Vale Inco has not yet "had the opportunity to have the give and take with the union in Voisey's Bay."

In addition, one of the major points of contention in the Sudbury dispute -- the company's desire to put new employees on a defined contribution pension plan, rather than the existing defined benefit plan -- isn't an issue in Voisey's Bay, where a defined contribution plan is already in place.

But Fraser accused Vale of trying to "divide and conquer" by negotiating with one set of workers and not the others.

"We've got a document that says that they think our members are weak in Voisey's Bay, that they can go around the bargaining committee and get to them. I don't believe that's the case at all," Fraser said.

While neither side was willing to discuss the details of the company's new proposal to Voisey's Bay workers, the union said it falls short in some areas, but provides enough of a starting point to head back to the bargaining table.

However, Fraser said the company hasn't changed its position on reducing workers' bonuses tied to the price of nickel -- another major issue in the ongoing strike -- and said he isn't holding his breath for a resolution in Voisey's Bay.

"There's a tough road ahead for the negotiating team for the Steelworkers in Voisey's Bay. I'm not optimistic that there's going to be any settlement," he said.

Another factor undermining labour relations in Sudbury Wednesday was a document obtained by the Steelworkers that they say shows the company is considering a "drastic reduction in the workforce from over 3,000 employees to 1,800 employees," according to an application filed to the Ontario Labour Relations Board that accuses the company of bad-faith bargaining.

McPhee said the union misinterpreted the document. He said the 1,800 number refers only to the Sudbury mining operations, which currently employ about 2,000 workers, and was simply a "hypothetical planning exercise."

"This was simply a blue-sky session looking at our mining operations, so you're starting from a base of maybe 2,000 employees and with attrition we may be at or below the 1,800 already," he said.

"There was nothing nefarious about it and it certainly was not part of any company collective bargaining strategy," he added.

This is the first major strike at Vale's Canadian operations since Brazil-based Companhia Vale do Rio Doce bought the former Inco Ltd. for $19 billion in October 2006. Previous work stoppages at Inco have been lengthy, including a three-month strike in Sudbury in 2003 and a two-month strike at Voisey's Bay in 2006.

Vale's Canadian operations include six nickel mines, a mill, a smelter and a refinery in Sudbury; a refinery in Port Colborne, Ont.; a nickel-cobalt-copper mine in Voisey's Bay; and three nickel mines, a mill, a smelter and a refinery in Thompson, Man. The strike affects all of the company's operations except those in Thompson.

Vale has more than 100,000 employees around the world and is a global leader in the production of iron ore pellets, aluminum, coal, nickel, copper, steel and other resources.

It was set up by the Brazilian government in 1942 but is now privately run and trades on the Brazilian and New York stock exchanges.