canoe.ca
February 8, 1998
Inco set to combine operations with
Falconbridge, says Maclean's
TORONTO (CP) - Inco Ltd., the world's largest nickel producer, will
announce drastic production cuts this week and plans talks with its main rival
to combine operations in Sudbury, Ont., says Maclean's magazine.
Facing a supply glut, plunging nickel prices and huge costs to develop its
proposed Voisey's Bay mine in Labrador, Inco will start talks with
Falconbridge Ltd. about scaling back its Canadian production, Maclean's
says in today's weekly edition.
A combination of production to cut operating costs would primarily affect
Sudbury, the centre of the two companies operations, says the magazine.
The plunge in nickel prices caused by Asia's economic crisis and the
dumping of nickel on world markets by Russia have hammered the industry
since last summer, producing losses and lower stock prices.
Share prices for Inco, which owns large nickel and copper deposits in
Sudbury, Thompson, Man., and Voisey's Bay, fell last week to $24.70 on
the Toronto Stock Exchange, from a 1997 high of $51.25.
Meanwhile, nickel prices are at a four-year low and Inco is struggling to
finance the massive Voisey's Bay mine and smelter project.
Both Inco and Falconbridge have mines and mills in Sudbury, but one
processing plant could handle the nickel and copper output from both
producers in the area.
The downsizing could lead to further operational mergers and eventually a
takeover by Falconbridge, the world's second largest nickel producer, says
Maclean's.
Falconbridge, controlled by resources giant Noranda Inc. of Toronto, is not
performing at its peak either. Its 1997 profit was $137 million - half the
previous year's earnings.
Inco has already cut about 500 jobs in Sudbury and Thompson and is said
to be preparing to reduce its management and supervisory ranks as well in a
bid to reverse fourth-quarter losses and a big profit plunge for the year.
Maclean's says other cost cutting measures due to be announced this week
are the closing of Inco's New York office, which employs about 100
people, as well as slashing overhead costs at the Toronto head office and in
Sudbury and other operating mines.
Rumors have been circulating for months that Inco could become a
takeover target for a bigger company now that its low share price makes it a
much more attractive buy.
The nickel company is widely owned, mostly by big institutional investors
across North America. Noranda, meanwhile, is a cash-rich company that
recently sold its Norcen Energy unit for $1.8 billion US as part of a plan to
focus on its mining and metals businesses.
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