Maybe this release explains the drop: Inco postpones Voisey's
Miner responds to Newfoundland's attempts to play hardball by halting engineering and procurement work on the project, abandoning plan to begin production by 2001
Tuesday, July 28, 1998
By PAUL BAGNELL
Mining Reporter The Financial Post
After months of secrecy, Inco Ltd. yesterday threw the doors open on its stalled negotiations with Newfoundland over the Voisey's Bay mine project. The province has rejected Inco's proposal that would see it spend $1.1 billion and create 1,750 direct and indirect jobs there,
president Scott Hand said yesterday. Also yesterday, the company warned it will probably close more mines in Sudbury, Ont. Hand said Inco was going public with details of the Voisey's Bay talks because of press leaks about Newfoundland's tough stance. On Saturday, The Financial Post published details of a letter to Inco from Newfoundland
Premier Brian Tobin, in which he said the province will not resume talks until the company agrees to deliver on earlier plans to build a full smelter and refinery in Argentia, Nfld., near St. John's.
Yesterday, Inco said it has halted engineering and procurement work on the project and abandoned a plan to begin production at Voisey's Bay by 2001. "Today, of course, processing of ore in Newfoundland on the scale desired by the government is not economically feasible," Hand said, citing low nickel prices.
He said Inco is willing to build a mine and mill at the Voisey's Bay site in Labrador, but insists mineral concentrate from the mill be shipped to Sudbury and Thompson, Man., for further processing. The mine, mill and related infrastructure would cost $1.1 billion.
At Noranda Inc.'s new Raglan copper mine in northern Quebec, Hand noted, concentrate is shipped to Sudbury, then to Norway for processing. Inco needs to operate in the same way to stay competitive.
At Argentia, Inco is now willing to contemplate only the "concept" of a scaled-down smelter, compared with December 1996 plans to build a smelter-refinery to process all concentrate from Voisey's Bay.
The smelter would handle 55% of concentrate produced in Labrador. In addition, Inco would only proceed with the smelter if it received subsidies and tax breaks from Newfoundland and the federal government.
The scaled-down smelter plan, which Newfoundland has also rejected, would involve $2 billion in capital spending and would create 2,300 direct and spinoff jobs.
Hand said Inco is considering writing down its carrying value of the Voisey's Bay project, a move long anticipated by analysts.
Also yesterday, the miner reported a loss of US$5 million (US3› a share) on revenue of US$494 million in the second quarter ended June 30. This compares with profit of US$8 million (US5›) on revenue of US$645 million the year before. For the first half, it had a loss of US$53 million (US32›) on revenue of US$994 million, compared with a profit of US$57 million (US34›) on revenue of US$1.3 billion. Before paying dividends of US$7 million, Inco had second-quarter earnings
from operations of US$2 million.
Chief executive Michael Sopko attributed the small operating profit to cost-cutting announced late last year and in February.
Inco has closed two mines and plans to idle five more, all in Ontario. Still, additional mine closings in the province are likely, another Inco executive said yesterday. The Garson mine and the low-grade area of the large Stobie mine may be closed, said Peter Jones, vice-president of project development. Inco plans to pare another US$50 million in costs a year over the next two to three years.
Inco shares (N/TSE) have been trading near a 10-year low. They closed yesterday at $18.65, up 25›.
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