Takeovers of Inco & Falco

The following is an article written by Stan Sudol who is a Toronto based
communications consultant and policy analyst. 

     You would have to be living on some unconnected deserted island in the South Pacific not including New Caledonia – not to know that the “story of the year” was the foreign takeovers of Inco and Falconbridge.
     That is not the way anyone in this city envisioned the final outcome in January when the spot price of nickel was trading at about ($US) 13,500 a tonne versus last week’s price of just a little over 35,500.
     By the end of January, there were concerns the “metallic marriage made in heaven” was starting to go wrong when Inco had to extend its offer for Falconbridge to June 30 due to delayed government approvals from the United States and the European Union.The regulatory holdups were destined to become one of the major causes of the merger’s failure.

     On May 8, Vancouver-based Teck-Cominco made a hostile bid for Inco on condition that the Falconbridge merger was dropped. On May 16, Xstrata made a hostile cash bid for the 80 percent of Falconbridge that it did not already own.
     On June 26, Arizona-based Phelps Dodge, in a friendly deal, agreed to buy both Inco and Falconbridge, allowing the original merger to go ahead in a (US) $40 billion deal, the largest in Canadian corporate history. Intense opposition to this deal surfaced from Phelps Dodge shareholders.
     In the interim, Xstrata, Phelps Dodge, Teck-Cominco, and Inco all increased their various bids, but the final knockout punch came from Xstrata on July 19 with a cash (Cdn) $16.3 billion offer. Inco admitted defeat and abandoned merger efforts with Falconbridge.

     On Aug. 11, CVRD, the world’s biggest producer of iron ore,  unveiled a (Cdn) $17 billion cash offer for Inco trumping competing cash/share offers from Phelps Dodge and Teck-Cominco.
     By Sept. 24, Inco told its shareholders to tender to CVRD’s offer and the end of an era in Canadian mining comes to a close as the two iconic nickel miners fell under foreign control. Obviously, in hindsight, mistakes were made by Inco and Falconbridge.

     However, the biggest culprit has to be the federal Martin Liberals and Harper Tories. No other major industrial power in the world would have allowed a trillion-dollar natural resource like the Sudbury Basin to fall under foreign control.
     The most capitalistic country in the world, the United States, blocked a proposed Chinese takeover of a small oil producer, Unocal Corporation, due to national security reasons.
     Both the Liberal and Tory disinterest in this issue and their abysmal lack of support for Inco – by pressuring the European Union to speed up regulatory approvals – were nothing short of scandalous. But this is all water under the bridge. The deal is done.

     Sudbury will benefit from the financial clout of the larger CVRD Inco and Xstrata Nickel with the rapid development of new mines in the Basin.
      To date, both CVRD and Xstrata have shown great respect for their skilled workers, and both appear committed to honouring past agreements and intend to use local suppliers. On December 18, Xstrata Nickel announced a $5 million investment in the Centre for Excellence in Mining Innovation (CEMI) at Laurentian University. There is no doubt both these companies will be good corporate citizen.

     But for the generations of workers, whose roots run deep in the Sudbury Basin, the heart and soul of the global nickel industry, it is the end of an era. For them, it will take a little time to adjust.

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Prime Minister Harper turns his back as two foreign mining
companies swoop in to snatch a trillion dollar Canadian asset.

     What went wrong? The friendly takeover of Falconbridge Nickel Mines by its long time Sudbury Basin competitor Inco, came to a crashing end. The red flags were blowing in the fierce wind but our beloved federal government did nothing. The prime minister let a trillion dollar Canadian asset slip into the hands of foreign ownership. No other industrial country in the world would have let this tragedy happen.
     By the summer of 2006, news that a meteor impacted the Sudbury Basin 2 billion years ago would have taken a back seat to the money hungry shareholders of these two companies. The price of nickel was going through the roof, Canadian and foreign mining companies were now lining up with their gloves off as takeover fever was running rampant. All the two friendly mining competitors from Sudbury wanted to do was walk down the isle to a marriage made in mining heaven.
     If you thought shareholders have the best interest of companies at hand, think again. The shareholders of Falconbridge and Inco were called take and run speculators. Probably most of them didn't even know where Sudbury was or did they care. They circled like turkey vultures waiting for the right moment, then swooped in for the feast and left with their wallets full.
     By the end of 2006 Sudbury was no longer in control of its destiny. What will happen now? Only the future knows and as the years go by the question will be, did we learn or will history repeat itself.
     However, the battle for the Sudbury Basin, is it over? I ask that question because all the cards were not played. Unlike humans,  Falconbridge and Inco at some point in the future could rise from the grave. If they are to come back action needs to be taken sooner than later and I mean sooner.

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Sudbury Basin may be a crater of gold at the end of the rainbow

     The Sudbury Basin, which is the largest integrated mining complex in the world, may be worth much more than anyone imagined. The financial world currently pegs the Sudbury Basin as a trillion dollar asset.
     A recent computer simulation of how the Sudbury Basin came into existence, sheds light on just how much nickel, copper and other minerals may be underground in this ancient crater. The simulation suggests that current mining operations have barely scratched the surface. It calculates mining could go on non stop for the next 400 years and puts a value of one
quadrillion dollars on the structure.

     The simulation calculates its data from a 8 by 12 mile meteor hitting the Basin 2 billion years ago. The meteor would have broken through the 25 mile thick crust and turned that part of the planet inside out. The resulting mayhem put our planet into a nuclear winter. The molten liquid that was able to flow upward through million of cracks contained vast amounts of nickel, copper and other minerals. However, the simulation points to the fact the richest veins are deep underground. These veins become larger and more pure but the question is will we be able to mine that deep, for these veins are 10 to 20 miles deep.