Nfld. pushes nickel smelter

The Newfoundland government is pressuring Inco (N-T) to build a smelter and refinery to process nickel concentrates from its Voisey’s Bay project in Labrador, now in the permitting phase.

“No smelter, no mine,” Premier Brian Tobin recently told reporters.

Newfoundland has regulations on its books that require companies with mines in the province to process their ores at home, if economically feasible.

“A year ago, Inco committed to building a smelter and refinery,” says William Rowat, the government’s advisor for Voisey’s Bay. “Last fall, they started saying ‘money’s tight,’ and they don’t think it’s economically feasible.”

Rowatt says the major nickel producer has been excused from building a copper smelter to process the copper concentrates that also will be produced at Voisey’s Bay. “A study was done that showed it was not economical, and Newfoundland said, ‘OK.'”

He says a new study by Inco makes the case that the nickel smelter and refinery would not provide a sufficient return for shareholders and would be difficult to finance in a period of low nickel prices. He says Inco would rather postpone the $1-billion smelter-refinery project, start mining as soon as possible, and ship concentrates to its existing facilities at its operations in Sudbury, Ont., or to other smelters. Building only the mine and mill portion of the Voisey’s Bay project would reduce Inco’s capital requirements to about $500 million, down from $1.5 billion for both projects.

“We’ve reviewed the numbers and see flaws in the analysis,” Rowat says. “We think it’s financable.”

Inco, meanwhile, continues to regard its discussions with the government on the matter as “confidential.”

Last month, however, Inco President Michael Sopko told reporters that the company had yet to resolve a number of key items, including taxes, electrical power and “the scope” of the project. “The review we are undertaking clearly indicates that what was feasible at nickel prices at US$3.50 to US$4 a pound, is not attractive at current prices of US$2.40 a pound,” he said.

Sopko also said development of Voisey’s Bay “must be based on sound economic principles and provide a satisfactory return on investment to Inco’s shareholders.”

Inco posted a loss in the fourth quarter of 1997 and is continuing a major restructuring program to reduce costs and improve its bottom line.