Inco takes US$1.6-billion Voisey’s writedown, sells 25% of Goro

Finally facing the inevitable, Inco (N-T) today wrote down the carrying value of the Voisey’s Bay nickel project in Labrador by US$1.6 billion.

The write down reduces the US$3,753-million net-carrying value of the Voisey’s Bay project to US$2,201 million.

The announcement came as the nickel major posted a net loss for the second quarter of US$1.6 billion (US$8.70 per diluted share) on revenues of US$591 million. This compares with a profit of US$192 million (US95 cents) on revenues of US$583 million.

Inco also recorded a second-quarter, non-cash charge of US$61 million, net of income and mining taxes of $15 million, to reduce the carrying values of certain plant, equipment and non-core assets.

The company describes these writedowns as being primarily related to capitalized exploration and development costs relating to the Victor Deep exploration project in the Sudbury camp, which will be shelved now that Voisey’s Bay is going forward.

Total nickel deliveries in the second quarter soared to 62,083 tonnes from 57,141 tonnes a year earlier, reflecting greater demand for Inco nickel, particularly in the stainless steel sector.

Other deliveries in the quarter were: 30,691 tonnes copper (35,095 tonnes last year); 386 tonnes cobalt (365 tonnes); 121,000 oz. platinum group metals (125,000 oz.); 19,000 oz. gold (20,000 oz.); and 410,000 oz. silver (480,000 oz.).

During the recent quarter, Inco received US$7,296 per tonne nickel and US$1,673 per tonne copper, compared with last year’s realized US$7,065 and US$1,707 per tonne, respectively. These figures represent a slight premium to the average cash prices of the two metals on the London Metal Exchange.

At the Goro nickel-cobalt laterite project in New Caledonia, Inco has reached an agreement in principle to sell a 25% interest to a consortium of Japanese companies to be led by Sumitomo Metal Mining.

As part of the deal, expected to close next quarter, Inco is arranging to buy the 15% stake in Goro still held by the Bureau de Recherches Geologiques et Minieres (BRGM).

Financial terms of the two deals have not yet been released.

Inco says if it can soon get government approval of an operating permit, then it will keep on schedule for first production at Goro in late 2004.

At full capacity, Goro will be producing 55,000 tonnes of nickel and 4,500 tonnes of cobalt per year.

At Voisey’s Bay, Inco plans to spend about US$35 million in Labrador and Newfoundland between July 2002 and March 2003.

The company says funds are being earmarked for: building access roads; expanding the Voisey’s Bay exploration camp; clearing land for the mine and mill/concentrator processing plant; preparing for a demonstration plant at Argentia; advancing the hydrometallurgical processing research and development program; and working on the Innovation Centre at Memorial University in St. John’s.

Meanwhile, cross-town rival Falconbridge (FL-T) checked in with its own second-quarter financials today, reporting consolidated earnings of C$41.1 million (21 cents per share) on revenues of $634.4 million,

This compares with last year’s second-quarter profit of C$55.8 million (30 cents) on revenues of $569.9 million.