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Gold/Mining/Energy : Donner Minerals (DML.V) -- Ignore unavailable to you. Want to Upgrade?

To: roro who wrote (4130)	4/20/1998 8:20:00 AM
From: Mr Metals	Read Replies (1) \| Respond to of 11676

April 19, 1998 Inco's Voisey's Bay project not feasible - analyst TORONTO, April 18 (Reuters) - Slumping nickel prices are taking their toll on Inco Ltd's plans to develop a major base metals project in Labrador, an analyst said on Sunday. Goldman Sachs analyst Amy Gassman believes the Voisey's Bay project no longer makes economic sense. And an Inco spokesman conceded on Sunday that the deposit is less attractive than when the company won it in 1996. "When you do a return calculation and you include the acquisition cost, the initial capital cost, plus the sustaining capital that will be required over the life of the mine to develop the additional ore bodies at depth, you are unlikely to be able to achieve acceptable returns on the project," Gassman told Reuters. She said she issued a report recently stating that the bleak outlook for nickel prices and uncertainties surrounding mining taxes, power costs and royalties mean that the project cannot generate adequate returns for Inco as it stands. "When we bought (Voisey's Bay) in March 1996, the price of nickel was US$3.75 (a pound) and Friday it was US$2.41. Of course it's less attractive at US$2.41 than at US$3.75," Jerry Rogers, Inco spokesman, said in a telephone interview. Inco has had a rocky road recently. The Toronto-based company shut four high-cost mines and cut nearly 1,200 jobs at its Ontario and Manitoba operations in the past year in an attempt to stay in the black as nickel prices sagged. Rogers said Inco is conducting an internal review of all aspects of Voisey's Bay. Inco paid C$4.3 billion for the deposit after besting Falconbridge Ltd in a bidding war just over two years ago. It has since wrestled with a number of delays. Aboriginal land claims remain a thorny issue and Newfoundland is demanding major concessions, particularly that the ore concentrate be refined and smelted in the province. Gassman said that because of complexities surrounding Inco's negotiations with Newfoundland, it will find it tough to take a write-down on the project. She said one sensible course of action would be to halve its size, extending the life and deferring huge capital costs. Flexibility from the province on the smelting issue would help as well, Gassman added. "One possible resolution might be for Inco to develop the mine at the scale that was initially suggested in the feasibility study that Teck (Corp) did. That was half the size of the current project," Gassman said. If Newfoundland let Inco shift ore to Sudbury, Ontario, for smelting for the first couple of years, that would help cut the cost of the project. Nickel prices have taken a drastic downturn since Inco won what seemed a glittering prize in 1996. Gassman said back then, an analyst would have expected an average long-term nickel price of US$3.75 to US$4.00 a pound. "If you asked people now what they think the average long-term nickel price is, what they would tell you is US$2.75 or US$3.00," she said. And things could worsen for the nickel market if deposits of laterite nickel, once seen as an uneconomic type of the metal, are successfully developed. Laterite nickel -- as opposed to the sulfide nickel of Inco's Sudbury and Labrador projects -- is now becoming more of an economic prospect because of new technologies. ($1 $1.43 Canadian) Mr Metals PS. It looks like Robert Friedland was the only one that came out of this deal a Billionaire.