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Cornering Canadian Nickel PDF Print E-mail
Earth News
Thursday, 14 September 2006 13:24
Cornering Canadian Nickel

CBC News
- From hunter to hunted. Inco's fortunes spun on a dime this month when Swiss-based Xstrata walked away with what was supposed to be the jewel in Inco's crown ? fellow Toronto-based miner Falconbridge Ltd.

www.cbc.ca

Consolidation in Canada's mining industry

CBC News Online 
August 25, 2006



Until that point, Inco, along with its corporate white knight, Arizona-based Phelps Dodge Corp., were planning to come together and form the world's largest nickel producer and publicly traded copper producer. The megadeal, announced on June 26, 2006, would be worth $56 billion US and would represent the biggest merger in Canadian history.

It would also fulfil a longtime corporate goal of Inco, to be the world's reigning nickel giant. Alas, it looks like it will be doing that now as part of someone else's portfolio.

Falconbridge shareholders chose a richer, more cash-filled offer from Xstrata, which already owned almost 25 per cent of Falconbridge. And that decision put Inco in play at the same time.

Inco was already fending off an unwanted takeover bid from Vancouver-based Teck Cominco Ltd., one of the world's larger zinc miners. So it positioned itself to accept a friendly merger with Phelps Dodge, largely through a share swap that was valued at $20.1 billion.

But then another suitor entered the play on Aug. 11. Brazil mining giant Companhia Vale do Rio Doce (CVRD) stepped up with a $19.4-billion, all-cash offer. And Teck dramatically stepped up its bid, leading to a high-stakes showdown.

Teck's $20-billion bid, however, was based on it being able to raise an astounding $5.7 billion in a new share offering, which would have been the largest offering of its kind to date. Within a day of making this announcement, however, Teck had a change of heart and withdrew the stock plan. It said it would be reverting to its original $16.5-billion offer for Inco, which in light of the others on the table virtually ensures Inco will end up in foreign hands.

Here are some quick facts about the companies involved:

Companhia Vale do Rio Doce

Products: It is the largest global producer of iron ore and pellets. It also produces nickel, aluminum (bauxite, alumina and primary aluminum) kaolin (a material used for paper coating), potash (a raw material for the fertilizer industry), coal, and has reserves of iron ore, bauxite, copper/gold, kaolin, manganese, nickel and potash. It also owns and operates three railroads and eight ports.

History: It was created by the Brazilian government in 1942 and privatized in 1997.

Where it operates: Based in Brazil, but has operations and offices in offices and operations in 17 countries: Angola, Argentina, Australia, Brazil, Chile, China, France, Gabon, India, Japan, Mozambique, Mongolia, Norway, Peru, South Africa, Switzerland and the United States.

Employees: About 33,000.

Key financial stats:

Market capitalization as of Aug. 11, 2006: $55 billion US.
Gross Revenues in 2005: $18.1 billion Brazil Reais
Net income in 2005: $10.4 billion Brazil Reais

INCO

Products: Its primary product is nickel, but it also produces copper, precious metals, cobalt, sulphuric acid and liquid sulphur dioxide.

History: The Canadian company has been in business for more than 100 years, since July 1901, when the first ore was shipped from Creighton Mine near Sudbury, Ont.

Where it operates: Inco's corporate office is in Toronto, but it has operations in more than 40 countries, including Hong Kong and England.

Employees: More than 10,000.

Key financial stats:

Market capitalization as of June 26, 2006: $14.4 billion (about $12.8 billion US).
Net sales in 2005: $4.5 billion US.
Net earnings in 2005: $836 million US.

Falconbridge Ltd.

Products: More than 80 per cent of its assets come from producing copper and nickel. It also produces zinc, aluminum, cobalt, lead, molybdenum, silver, gold and sulphuric acid. It also recycles and processes metal-bearing materials.

History: The Canadian company has been in operation for more than 80 years, since Edward Horne of Noranda (which eventually amalgamated with Falconbridge Ltd. in 2005) purchased mining claims in northwestern Quebec in 1920.

Where it operates: Based in Toronto, but has operations and offices in 18 countries in Africa, Asia, Europe, North America, South America and the Caribbean.

Employees: About 14,500.

Key financial stats:

Market capitalization as of June 26, 2006: $21.9 billion Cdn. (about $19.5 billion US).
Revenues in 2005: $8.1 billion US.
Net income in 2005: $872 million US.

Phelps Dodge Corp.

Products: Phelps Dodge Corp. produces copper, molybdenum, molybdenum-based chemicals and continuous-cast copper rod. Also processes other minerals as byproducts, such as gold, silver and rhenium.

History: Founded in 1834 as a New York City-based mercantile company.

Employees: About 15,500 employees worldwide between the company's two divisions, Phelps Dodge Mining Co. and Phelps Dodge Industries.

Where it operates: Based in Arizona, but has mines and processing facilities in North America, South America, Europe and China.

Key Financial Stats:

Market capitalization as of June 26, 2006: $15.7 billion US.
Sales and other revenues in 2005: $8.3 billion US.
Net income in 2005: $1.6 billion US.

Teck Cominco

Products:

Teck Cominco produces zinc, metallurgical coal, copper, gold and specialty metals.
Employees:

In 2005, it had about 7,103 employees worldwide, with more than 4,000 in Canada.
Where it operates:

It is based in Vancouver, with facilities in Canada and worldwide, including the U.S. and Peru.
Key Financial Stats:

Sales and other revenues in 2005: $4.4 billion Cdn.
Profits in 2005: $2.0 billion Cdn.
Xstrata

Products: Xstrata produces copper, coking coal, thermal coal, ferrochrome, vanadium and zinc.

Employees: It has about 24,000 employees worldwide, including contractors.

Where it operates:

It is based in Zug, Switzerland, but has operations and projects in nine countries: Australia, South Africa, Spain, Germany, Argentina, Peru, Colombia, the U.K. and Canada.

Key Financial Stats:

Sales and other revenues in 2005: $8 billion US.
Profits in 2005: $1.7 billion US.


http://www.cbc.ca/news/background/mergers/phelps-dodge-inco.html

Last Updated on Thursday, 14 September 2006 13:24
 

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