Voisey’s deal, 3-way merger highlight trading

The report period ended June 11 was a blockbuster, with two major corporate developments taking place in the Canadian mining sector.

In the first, after almost six years of haggling and weeks of substantive leaks, Inco and the province of Newfoundland and Labrador finally announced an agreement to develop the Voisey’s Bay nickel-copper-cobalt project in Labrador.

The deal provides for construction of a US$470-million, 6,000-tonne-per-day mine and mill/concentrator at Voisey’s Bay and a US$120-million hydrometallurgical research facility, including a US$85-million demonstration plant, at Argentia in Newfoundland.

Development of the site at Argentia and land clearing at Voisey’s Bay will begin in July, with the first nickel-concentrate shipment expected in 2006. If the demonstration plant proves successful, and following a bankable feasibility study in 2008, Inco will undertake construction of a US$530-million 50,000-tonne-per-year commercial hydrometallurgical plant.

As a concession to Inco, the major may temporarily ship concentrate (through 2011) to its smelters in Manitoba and Ontario.

Among the unresolved issues are: the possible introduction of new partner for Voisey’s; the size of Inco’s writedown on the project, rumoured to be at least US$1 billion; and the status of Inco as a takeover target. Over the week, Inco plummeted $2.75 to $33.10.

In the second big deal, Kinross Gold, Echo Bay Mines and TVX announced their intentions to form the world’s seventh-largest producer. Trading volumes subsequently jumped for all three companies, with Kinross and TVX taking top honours in the volume department and Echo Bay seeing a respectable 14.5 million shares change hands. Kinross finished the period at $3.58, for a loss of 60, TVX, at $2.23, for a gain of 50, and Echo Bay, at $1.80, for a loss of 11.

Spot gold prices fell below US$320 during the period, after holding tenaciously above US$322 per oz. for most of June. The resulting selloff in gold stocks hit hard: Barrick Gold fell $2.60 to $31.20; Placer Dome dropped $1.24 to $19.77; Cambior was off 50 to $1.95; Goldcorp shed $1.97 to hit $15.90; Meridian Gold fell $3.19 to $26.44; and Agnico-Eagle Mines declined $1.35 to $20.35.

Gabriel Resources fell 50 to $5.65 as President Cliff Davis resigned for personal reasons. He is being replaced by Gabriel director Robin Hickson, who formerly worked for consulting firm Kvaerner and miner Cyprus Amax.

Among the base metal majors: Falconbridge was up 35 to $20; Noranda eased up 3 to $19.60; Teck Cominco‘s B shares sank 80 to $13.95 as President Steven Dean unexpectedly resigned; Aur Resources slipped 15 to $4.90; Breakwater Resources was up a penny to 20; Boliden was steady at $6; and plucky Inmet Mining rose 26 to hit $6.75.