Ottawa Citizen

Brazil’s CVRD wins Inco to create top world nickel miner

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SAO PAULO • Brazilian mining giant CVRD said yesterday it had won control of Canadian group Inco, creating the world’s second- biggest mining concern and the biggest nickel miner in a $ 15.8- billion U. S. deal.

The announceme­nt appeared to seal CVRD’s bid for Inco and came as big mining companies seek fresh supplies in a global contest over precious metals.

Companhia Vale do Rio Doce ( CVRD) said it had acquired 75.66 per cent of Inco’s shares at $ 86 ($ 76.90 U. S. ) per share. In addition, CVRD “ intends to take steps to acquire the remaining Inco common shares,” it said in a statement.

In September, Inco Ltd., the world’s second- biggest nickel mining company, pulled out of a plan to merge with U. S. mining behemoth Phelps Dodge so it could continue talks with CVRD.

On Aug. 14, CVRD made a hostile bid for Inco worth about $ 17.5 billion, after Vancouver- based Teck Cominco abandoned its bid, and Inco lost a tussle with Anglo- Swiss firm Xstrata for Canadian rival Falconbrid­ge in July.

The 104- year- old Inco had planned earlier this year to merge with Falconbrid­ge and Phelps Dodge to forge the world’s largest nickel and copper producer.

Inco chief executive Scott Hand welcomed the merger yesterday, saying in a statement that Inco’s board and management believe the combinatio­n “ presents a great opportunit­y to create value.”

“ We plan to assist CVRD in every way we can to ensure a smooth integratio­n of our two companies, to create a new global leader in the metals and mining industry,” Mr. Hand said.

CVRD noted in its statement that it would extend the expiration date for its offer until midnight Nov. 3 “ in order to provide Inco security holders who have not yet accepted the offer with the opportunit­y to analyse and accept the offer.”

It added that it will “ seek to reconstitu­te the Inco board of directors and to de- list the shares from the New York Stock Exchange as promptly as practicabl­e, and, upon meeting the relevant requiremen­ts, from the Toronto Stock Exchange.”

Inco reported its highest earnings earlier this month, with earnings on an adjusted basis for the third quarter amounting to more than four times those for the third quarter of 2005.

CVRD promised to boost investment­s in exploratio­n, research and de- velopment in Canada over three years in order to reinforce CVRD Inco’s position as a leader on the nickel market.

It also vowed to adhere to the strictest environmen­tal standards.

One of the greatest challenges CVRD faces will be to launch production at the major Goro nickel mine starting next year. The $ 2.15- billion mine will be capable of producing 60,000 tonnes of nickel a year, representi­ng 4.5 per cent of the world’s projected production for 2006.

Meanwhile, Phelps Dodge Corp., Inco’s failed suitor, said third- quarter profit more than doubled as prices rallied.

Net income rose to $ 888 million, or $ 4.36 a share, from $ 366.1 million, or $ 1.81, a year earlier, Phoenix- based Phelps Dodge said yesterday in a statement. Excluding items such as losses on copper hedges, profit was $ 4.73. Analysts expected $ 4.80, based on the mean of 12 estimates in a Thomson Financial survey.

The gain was the first in a year for chief executive officer Steven Whisler, after the company made wrong- way bets copper prices would fall and failed in its bids to acquire Inco Ltd. and Falconbrid­ge Ltd. A doubling of prices on average more than made up for a drop in mine output.

“ Operating results were somewhat below our estimate, driven by slightly lower sales volumes,” Crédit Suisse analysts said in a report.

“ We do not believe this is significan­t,” given today’s decline in copper prices, he said.

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