Inco plans production push

Strong demand for nickel has Inco (TSE) planning to increase output in 1995 by some 85 million lb. to 430 million lb.

Problems in Russia, at the huge Norilsk operation and with declining domestic consumption, have turned Inco and other nickel producers bullish. The price of nickel on the London Metal Exchange (LME) topped US$4 per lb. in early December.

Nickel production by the Commonwealth of Independent States (CIS) has dropped significantly during the past four years, to a projected 152,000 tonnes this year from about 311,000 tonnes in 1990. During the same period, CIS nickel exports rose, to the point where most of the nickel production is now exported.

Inco, the world’s largest nickel supplier (constituting about one-third of the Western World market), is projecting nickel output of 345 million lb. for 1994 from its Canadian and Indonesian operations.

Management told analysts in Toronto recently that the company expects to deliver more than 500 million lb. of the metal this year to its customers; the balance of the shipments will be made up through outside purchases. According to Inco statistics, the stainless steel sector accounts for about 63% of Western World nickel consumption.

Chairman Michael Sopko, in listing company highlights for the year, included reduced production costs (for the third consecutive year), the signing of a 3-year labor agreement at the company’s Ontario division, and the re-opening of the Garson mine in Sudbury, Ont.

While the company does not reveal production costs, it says its estimated pretax breakeven nickel price (which has been declining the past few years) for 1994 is US$2.70 per lb., and for 1995 is less than US$2.50. President Scott Hand said Inco hopes to expand its annual worldwide nickel production by some 20%, to at least 480 million lb., by the end of the decade. The company wants to operate its Canadian operations (in Ontario and Manitoba) on a 12-month basis (shutdowns and equipment failures, among other troubles this year, have had a severe impact on output), and it is planning to add a fourth line at its 58%-owned P.T. Inco operation in Indonesia (which will boost capacity by 40 million lb. annually).

The new fourth line is part of an expansion project at P.T. Inco, which will boost annual output there to about 150 million lb. from 100 million lb.; improvements to the three existing lines should add another 10 million lb. annually. The estimated cost of the expansion work is US$500 million. Inco is also bullish on the potential for its Goro nickel-cobalt property in New Caledonia and the development of a hydrometallurgical process for the project.

The company’s total debt has fallen to slightly more than $US1 billion from almost US$1.3 billion at the end of 1991, and its net debt-to-equity ratio currently stands at 36-to-64.

Inco also produces copper, cobalt, platinum and palladium.