Third-quarter earnings up at Inco

Nickel producer Inco (N-T) saw its earnings increase in the normally slow third quarter, largely owing to higher nickel prices.

Inco posted a US$84-million profit, or net earnings of US$91 million, for the three months ended Sept. 30. Revenues for the period were US$536 million, up from US$434 million a year before, when the company had net earnings of US$33 million, with US$26 million applicable to common shares after dividends and accrual of interest on notes.

Production in the third quarter was greater than a year earlier, the company having run through the period without its usual summer shutdown. Costs at all three major operations — Sudbury and Thompson in Canada, and Sulawesi in Indonesia — increased slightly; maintenance and stripping costs rose in Indonesia while Canadian operations had higher power costs.

For the nine months ended Sept. 30, Inco incurred a loss of US$1.5 billion, or US$8.22 per common share. Revenues to the end of September were $1.6 billion.

Neglecting asset-impairment charges, including the US$1.6-billion second-quarter writedown against the Voisey’s Bay nickel project in Labrador, and a US$660-million tax windfall, Inco would have earned around US$275 million on the first three quarters of 2002. In the comparable period of 2001, Inco made US$289 million on revenues of US$1.6 billion.

Inco is on track to produce about 54,000 tonnes nickel, 31,000 tonnes copper and 98,000 oz. of platinum group metals in 2002. It is predicting nickel production costs of US$3,130 per tonne (US$1.42 per lb.) for the year.

The company is close to finishing some early construction work at Voisey’s, including an airstrip and temporary dock. A road from the dock to the deposit is finished.

SNC-Lavalin continues work on the final feasibility study for the mine and mill at Voisey’s Bay, and Inco is expecting the report “in the next few months.”

At the Goro nickel-laterite project in New Caledonia, work stoppages affecting some of Inco’s contractors held up progress on mine construction in September. Inco previously said stoppages would not throw the project off schedule, but there is now a possibility production will be delayed to early 2005.

It also sees the project’s US$1.45-billion capital cost increasing, perhaps by as much as 15%. An updated estimate is slated for early 2003.

Inco has signed a letter of intent with the French government agency Bureau de recherches gologiques et minires (BRGM), which owns a 15% interest in Goro but plans to cash out of the project. Inco will take over BRGM’s interest, though terms of the deal are not public yet.

Sumitomo and a consortium of Japanese partners have in turn signed up for 25% of the project, again at an undisclosed price. Inco expects to have nailed down definitive agreements on both the BRGM and Sumitomo deals before year-end.

French nickel producer Eramet, whose Socit le nickel subsidiary operates five laterite mines and a nickel smelter on New Caledonia, wanted the BRGM interest but was outbid by Inco. The company said it was close to Inco’s offer but “not ready to overbid, due to the technical risks” of the proposed Goro hydrometallurgical process.