Inco chairman in optimistic mood

If Inco’s (TSE) performance is any indication of the overall health of the industry, base metal mining may be on the verge of a turnaround. As Chairman Donald Phillips stressed at the opening of this year’s annual meeting, Inco shares are breaking the $40 level these days, a 36% increase since the last shareholder gathering at Toronto’s Royal York Hotel. By comparison, the TSE 300 index has gained less than 1% over the year.

“We must have been doing something right for a change,” Phillips joked with shareholders as he called an end to a less than provoking question period. Unlike more animated meetings in recent memory, this year shareholders seemed content to sit back and absorb the soothing words of an optimistic chairman.

And although the company’s first-quarter earnings — $53.6 million (50^ per share) compared with $67.7 million (64 cents per share) in 1990 — were relatively weak, analysts are beginning to flash buy signals for the nickel producer in light of a strengthening nickel price.

“Inco remains unquestionably our number one choice in the senior base metals,” says John Lydall of First Marathon Securities. “Higher prices for nickel seem inevitable in the year ahead.”

“We believe the medium and long-term horizon will be very profitable for Inco,” adds Oliver-Lennox King from Midland Walwyn. “Our share price target for the next 12 months is revised from $43 to $54.”

The bullish outlook for Inco, and for the nickel market in general, stems from a combination of falling supply and increasing demand. Supply disruptions in the Soviet Union are expected to intensify with increasing political turmoil in that country. Inco itself may inadvertently spark a price increase if Sudbury workers elect to strike when their contract expires on May 31. The Sudbury operations account for approximately 50% of Inco’s annual production.

Another point in Inco’s favor is its increasingly global reach, the result of a marketing strategy developed in recent years. To match spreading consumption, Inco has increased its market share in all the large industrial areas of the non-Communist world, Phillips told shareholders. In 1990, nickel deliveries were distributed almost evenly between Europe, Japan, the U.S. with 20% going to other countries, in particular Taiwan and South Korea. Inco(TSE) * 3 months ended March 31 1991 199 0 Revenue $845,000 $ 735,000 Net earnings 53,600 67,7000

per share 0.50 0.64