Nickel producer
The earnings, which amount to 20 per share, did not include a US$173-million non-cash benefit, taken out of deferred taxes, which arose from decreases to tax rates in Ontario and Manitoba. Including the tax benefit, the company posted a profit of US$184 million, or US95 per share.
Revenue for the three months ended June 30 were US$583 million. During the second quarter of 2000, the company made US$106 million on revenue of US$837 million. Lower metal prices cut deeply into revenue in the recent quarter, though production from mines and smelters was fractionally higher.
The company realized an average of US$7,065 per tonne on nickel in the recent quarter, down from US$9,979 a year before, and realized prices for copper fell to US$1,707 from US$1,830 per tonne. During the quarter, average London Metal Exchange prices were US$6,681 for nickel and US$1,652 for copper.
The Ontario Division, centred on the Sudbury mines and smelter complex, posted quarterly operating earnings of US$76 million, down from US$147 million in the second quarter of 2000. The Thompson mines and smelter in Manitoba earned US$29 million, down from US$60 million a year before, and Inco’s interest in International Nickel Indonesia earned the company US$17 million, down from US$52 million in the second quarter of 2000.
On its balance sheet, Inco had US$1.3 billion in current assets, including US$299 million in cash. Current debt was US$547 million, and long-term liabilities totalled US$3.5 billion.
Inco did get some good news on another front, with the announcement of a tax holiday granted to the Goro project in the French Pacific territory of New Caledonia. The territory’s assembly approved a government proposal for a 15-year tax-free period for new nickel development projects, with a 5-year extension where the tax rate is halved. Under a separate provision, the full tax rate kicks in after the project is making a prescribed return.
The tax holiday would also apply to the Koniambo project, in which
The US$1.4-billion Goro project is currently being financed, and should be under construction late this year and in production in late 2004. Inco has an 85% interest, with the remainder held by Bureau de rcherches geologiques et minires (BRGM), a French government agency.
Goro has a reserve of 47 million tonnes grading 1.59% nickel and 0.17% cobalt. A further resource of 219 million tonnes grading 1.57% nickel and 0.18% cobalt is still outside the reserve.
The current development plan has the project producing 54,000 tonnes of nickel (as a 78%-nickel ferro-alloy) and 5,400 tonnes cobalt (in cobalt carbonate) annually.
The project would use pressure-acid-leach (PAL) technology to strip nickel from nickel oxide in the laterite. Other producers have had considerable difficulty with PAL metallurgy, which is currently employed at three laterite mines in Western Australia. Inco insists its PAL system, which uses a different extractant, will perform better, having been proved in a US$50-million pilot plant project at Goro over the past two years.
Inco says feasibility studies indicate that the cash production cost will be less than US$2,200 per tonne of nickel, and an assumed nickel price of US$6,600 (US$3 per lb.) gives the project an internal rate of return of 15%.
The project will employ 800 people and is expected to put about US$100 million a year into the territory’s economy.
BRGM is looking to dispose of its holding in Goro, and the New Caledonian government has expressed a preference for seeing the share go to Socit Le Nickel, a subsidiary of nickel producer
Inco’s president, Scott Hand, said the company is discussing partnerships with several nickel producers, including Eramet. In late June, Eramet’s director of nickel operations, Patrick Andre, said the company would consider taking over the BRGM share.
Inco has already awarded the principal contract for construction of Goro to a joint venture of the French construction-management firm Technip and U.S.-based Bechtel Overseas, with technical subcontracting by metallurgical consulting firm Hatch Associates.
Opposition to the project has come from environmental groups, some of which are seeking to have the offshore areas declared World Heritage Sites by the United Nations. Speaking through a translator at a news conference in Toronto, the territory’s president, Pierre Frogier, observed that the opponents of the project were largely from outside New Caledonia, and that the project design had satisfied the territory’s environmental regulators. “We are going to be most vigilant to assure the rules are respected . . . There is no reason [opposition] should stand in the way of this project.”
The New Caledonian tax measures and the political support underscore the hazards faced by the Voisey’s Bay nickel project in Labrador. Inco’s Hand refused to discuss Voisey’s at the news conference, but talks continue between the company and the Newfoundland government, which wants Inco to build a smelter-refinery complex or a hydrometallurgical plant to produce refined nickel metal on the island. Inco’s insistence that the plant would have to meet the company’s economic criteria to be built derailed the project’s development in mid-1998, and despite sporadic negotiations and a series of new development proposals from Inco, the government has yet to agree to grant a mining lease.
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