Sopko retiring as Inco’s profit soars

Just hours after the company tabled a stellar US$400-million profit for 2000, Inco (N-T) Chairman and Chief Executive Officer Michael Sopko announced he will step down from both positions immediately following the shareholders’ annual meeting on April 25.

Sopko, 62, will serve as non-executive chairman for about a year, and then sit on Inco’s board in an advisory role.

A 37-year veteran at Inco, Sopko became chairman and CEO in 1992, a year after becoming president. He has been a central figure in a decade of transformation at the nickel giant, overseeing such high-profile changes as the acquisition of the Voisey’s Bay project in Labrador and the ensuing wrangling with the Newfoundland government, the modernization of Inco’s Sudbury operations, the expansion of Inco’s Indonesian operations, the development of the Goro laterite project in New Caledonia, and the growth of Inco’s high-margin, nickel-based specialty products.

“We are coming off a great year,” a serene Sopko told a gathering of analysts and media in Toronto. “Our strategies are working and our growth opportunities are coming together. From my perspective, the time couldn’t be better. Our shareholders should have every confidence that their interests will be looked after and that the company will be solidly managed.”

Filling the void will be Inco President Scott Hand, 58, who will become CEO and deputy chairman. Executive Vice-President of Operations Peter Jones, 53, will rise to president and chief operating officer.

Sopko leaves on a high note, with improved metal prices, increased production and low cash costs all combining to make 2000 Inco’s best year since 1990.

The company posted net earnings of US$400 million (US$1.97 per fully diluted share) in 2000 on sales of US$2.9 billion, compared with just US$12 million (a loss of US8) on sales of US$2.1 billion in 1999. The figures for 2000 include a unusual deferred tax benefit in Ontario of US$38 million.

Positive cash flow from operations totalled US$842 million in 2000, the third-highest in Inco’s history and up dramatically from 1999’s figure of US$128 million.

Inco reduced its debt over the year by US$314 million to US$1 billion on Dec. 31, 2000, and its cash-and-equivalents position rose US$155 million to US$193 million. Reflecting the improved balance sheet, Inco’s debt rating was recently restored to investment grade.

For the fourth quarter, Inco earned US$78 million (US38 per share) on sales of US$664 million, up from earnings of US$40 million (US18 per share) on sales of US$631 million during the corresponding period in 1999.

For 2000, Inco realized US$9,007 per tonne for its nickel and US$1,908 per tonne for its copper, compared with US$6,415 and US$1,631 per tonne, respectively, in 1999.

Deliveries for 2000 consisted of: 259,374 tonnes of nickel in all forms, 23% of which was purchased (compared with 258,088 tonnes in 1999); 118,025 tonnes copper (119,754 tonnes); 1,422 tonnes cobalt (1,568 tonnes); 171,000 oz. palladium, 153,000 oz. platinum and 20,000 oz. other platinum group metals (347,000 oz. total PGMs in 1999); 65,000 oz. gold (52,000 oz.); and 1.4 million oz. silver (1.5 million oz.).

Cash costs for nickel after byproduct credits fell to US$2,712 per tonne in 2000 from US$2,778 per tonne in 1999. Before byproduct credits, cash costs rose slightly to US$3,263 per tonne, owing mostly to higher oil and gas prices.

Finished nickel inventories were up slightly to 26,582 tonnes at year-end.

In 2001, Inco expects to produce 209,000 tonnes nickel, 127,000 tonnes copper, 216,000 oz. palladium, 170,000 oz. platinum and 30,000 oz. other PGMs at a cash cost of about US$2,800 per tonne nickel after byproduct credits. Capital expenses are pegged at US$300 million in 2001, up from US$227 million last year.

Using a US$3.20-per-lb. nickel price, Inco had year-end reserves of 447 million tonnes grading 1.65% nickel, comprising: 225 million tonnes of 1.3% nickel at the Ontario Division; 42 million tonnes of 2.26% nickel at the Manitoba Division; 32 million tonnes of 2.83% nickel at Voisey’s Bay; 101 million tonnes of 1.82% nickel in Indonesia; and 47 million tonnes of 1.59% nickel at Goro. A further 754 million tonnes grading 1.56% nickel lie in the resource category.

Commenting on Voisey’s Bay and the newly installed Newfoundland premier, Roger Grimes, Scott Hand said Inco is willing to return to the bargaining table. Developing the project, he said, is “not a question of whether, but when.”

Hand added that Voisey’s Bay and Goro could conceivably be developed at the same time, and that new partners may be brought in for both projects.

At Goro, where Inco will spend US$100 million this year, the company has reached an agreement-in-principle with the New Caledonian government on a 100% tax holiday for the first 15 years of production and a 50% tax holiday on the next five years. Sopko broadly hinted that a production decision at Goro could be made before he leaves.

Gordon Bacon, vice-president of technology and engineering, said the US$50-million pilot plant at Goro is working well, with overall recoveries of 96% for nickel and 94% for cobalt, adding that Inco’s growing expertise in hydrometallurgical techniques will likely benefit research into the treatment of Voisey’s Bay ore as well.

Regarding global nickel markets, Vice-President of Marketing Peter Goudie foresees “strong fundamentals” for nickel in both the medium and long term. In the near term, markets may soften with a slowing economy, but he still foresees a deficit of 10,000 tonnes nickel in 2001 if Russia’s Noril’sk exports 175,000 tonnes of nickel in 1999 (the latter’s official but unreliable target).

Goudie predicts world nickel demand will increase at a 4% rate from 1.1 million tonnes in 2000 to 1.3 million tonnes in 2004. Taking into account 152,000 tonnes of new production, this would generate a 52,000-tonne deficit in 2004.

“The world will be hungry for our Goro project,” commented Goudie.