by Nostromo Research for DOWN TO EARTH, February 1998

This special study on the giant Canadian mining company Inco was commissioned by Down to Earth and written by Roger Moody of Nostromo Research. The briefing provides an overview of Inco's world-wide operations and intentions; analyses the importance of Indonesia to these; attempts to assess any likely major changes in the nickel market and how Inco will respond to them; and updates the DtE/Minewatch publication DIGGING DEEP on the company's most recent involvement in Indonesia. Nostromo Research carries out consultancies on international mining issues. For more information contact R. Moody at or tel/fax +44 171 700 6189.


Inco under threat
Takeover or leave it: the Friedland factor - again?
The Indonesian factors
How vulnerable is PT Inco and to what?
Campaign opportunities
Notes to text
Additional articles


These days, when you're the world's biggest producer of anything, you can't rest on your laurels - nor the ill-gotten gains of the past.

In the aftermath of the 1994-95 restructuring of the world's market economies (Uruguay GATT and the establishment of the WTO), any big corporation becomes exposed to two major pressures: competition from other producers who threaten lower costs of production; and takeover from companies which have more money in the bank, more powerful financial backers and greater access to buyers.

INCO is the world's biggest nickel producer (see chart). Importantly it is also a major producer of nickel by-products, cobalt and copper, which have traditionally boosted its income (they're called "credits") when nickel prices drop.

However, Inco's pre-eminent position is slowly being eroded. The world market price of nickel - set by the London Metal Exchange (LME) (1) - has inexorably fallen; and latest industry predictions are that it will continue to drop (2) . A large part of the reason for this is a collapse in banking, investor confidence, and market demand for metals in the "free market" so-called "tiger" economies of south east Asia (which of course includes Indonesia, currently experiencing the worst inflation in the entire region) (3). In addition, both cobalt and copper credits are under threat - for the former, from expected renewed production in Central Africa and, for the latter – from overproduction (4).

Inco's nickel production has concentrated on its Sudbury mining complex in Canada and, to a lesser extent over the past two decades, on its Sulawesi operations in Indonesia (5). However, much of the former plant is ageing and its costs - notably of retro-fitting to conform to sulphur dioxide emission limits (Inco was and remains Canada's biggest single producer of the major acid gas) - have escalated. In 1995, a massive sulphur dioxide leak sent dozens of Sudbury residents to hospital, choking on fumes and complaining of chest pains (in late December 1997, Ontario's environment ministry got the go-ahead to sue the company for the discharges) (6). The following year an employee was killed when a furnace erupted (7). (So, it's not only in Indonesia that Inco's mismanagement of its smelting has seen the death of employees).

The survival of its Sudbury operations have therefore depended on Inco acquiring a major new, high-grade deposit before the beginning of the next century. Beyond its wildest dreams, it did this in 1996 when it shelled out $4.3 billion to acquire control of the vast Voisey's Bay multi-mineral deposit in Canada. This is generally agreed to be the biggest unexploited nickel deposit on the planet, with lots of scope for expansion. What's more, Inco's feasibility studies so far indicate it can be mined at almost rock bottom cost (78 cents per pound weight) (2).

But - and its a big "but" - Voisey's Bay is situated in Labrador, Canada, where Indigenous land claims and environmental regulations represent a far greater obstacle - hence delay – to easy exploitation, than in many other countries. This is graphically illustrated by the fact that, while the company originally expected the mine to come on-stream before the end of the century, there is virtually no prospect of its now being in commercial production until 2001 or 2002 - at the earliest (8).

Even when the environmental impact assessment is approved, and land rights issues are settled at Voisey's Bay, the questions of where the power is to come from, the smelter to be situated, and the pricing of both, will likely remain. Indeed, over the past two months these have become the most important political issues in both Newfoundland/Labrador and Quebec (9)

The Premier of Newfoundland, Brian Tobin, has said the mine won't be allowed to go ahead without a smelter (in order to bring jobs and income to the province), but is questioning the benefits of buying electricity from Quebec to power it; while the province's flirtation with a vast new hydro scheme in the Churchill Falls watershed has provoked the ire of Indigenous communities there(10).

Meanwhile, Inco's fortunes have plummeted dramatically, as the initial Voisey's Bay bubble got pricked by various interventions - first from the Inuit and Innu over land claims, then environmentalists over damage to the taiga and then the provincial government itself, annoyed that Inco was trying to cheapskate.

This turnaround was dramatically illustrated by the collapse of Inco's share price during 1997. Of the ten biggest drops in company value in the US as a whole last year, Inco's rated eighth (a fall of 45.7%). (NB Freepost’s was even greater - at 49.6% making it the fifth worst performing stock of 1997) (11). In 1997 Inco recorded a profit of "only" C$ 75 million – well under half its 1996 figure (25 cents a share as opposed to $1.17 a share) (12). Although its share price climbed in late January1998, on announcement of a corporate "restructuring" (euphemism for lay-off) (13), this may well be only a temporary respite.

Low cost nickel producers elsewhere pose a threat to the company. Russia (the world's second biggest producer) will surely continue to export as much as it can, without seriously denting its profits. Although its Norilsk Nikel operations continue to be the most polluting anywhere in the world, the partially-privatised company announced in November 1997 that it would increase production to 213,000 tonnes of nickel by the turn of the century (14). Cuba, Brazil (where Rio Tinto expects in the next year to bring on stream its Forteleza mine - although it sold its interest in the Honeymoon Well nickel deposit, with its considerable potential to deliver 80,000 tonnes a year of nickel-in-concentrate, to Outokuimpu of Finland in 1997) (15) and Western Australia, where the biggest new mines are opening also represent challenges. Gencor, one of the world's largest mining companies, which now controls Billiton, has merged with QNI, an Australian nickel group to create the world's fourth biggest nickel producer, and it soon promises to increase its share of the world market (16) both from its Australian and Colombian mines.

While the political future of New Caledonia (Kanaky) remains uncertain, the determination of both Kanak-led and overseas companies (Eramet and Falconbridge, Inco's big domestic competitor) to increase production, is not in doubt. (It is a sobering thought that, unlike almost everywhere else in the world, it is the Indigenous People of Kanaky who have shouted loudest for dangerous nickel mining and smelting to be expanded in their fragile island environment).
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These putative global challenges have prompted speculation that Inco is ripe for a takeover. In theory Inco's share drop makes it especially vulnerable to bids from another huge mining company (or more likely a consortium of miners and banks: though it should be noted that, somewhat quixotically, when the market entertains speculation of a takeover, the share price usually increases; this somewhat reduces the attraction of the prey to the predator - and indeed Inco's share price did start mounting at the end of 1997). (17)

But there are possibly only two mining companies which have either the inclination to massively increase their investment in nickel, or the ability to raise capital to buy Inco as it stands (i.e. inclusive of Voisey's Bay): Rio Tinto and Falconbridge. Rio Tinto is already a major nickel producer (thanks largely to production from its Empress operations in Zimbabwe); the world's biggest mining company promises to become a more important nickel producer as its Forteleza mine in Brazil comes into full production. Little wonder that the Canadian financial press has mooted recently the possibility that RT may bid for Inco.

It is of note that Rio Tinto was among the few companies reliably reported to be interested in buying the Voisey's Bay deposit when it was put up for sale by DFR - the Robert Friedland company which "discovered" the vast deposit in 1994. Friedland- who remains the biggest single shareholder in Inco (4% of current capital) is certainly not happy with the way Inco is currently being run - as he told Inco president Michael Sopkolate in 1997.

The notorious Robert Friedland's swashbuckling attitude to companies, deposits and local communities, is well known. Less well known are three other facts which may bear on Inco's future: that Friedland is intimately linked with Rio Tinto and has been, for more than a decade (18). The second is that Friedland has very considerable interests in Indonesia (including an option at PT Aneka Tambang's rich Pongkor gold mine at Bogor, West Java) (19) which have brought him into collusion with Indonesia's other main nickel producer, the state non-ferrous metals company PT Aneka Tambang. The third factor is that, like Friedland, Inco has gold interests in Indonesia too - notably COWs in Aceh and Northern Sumatra, where the company is in joint venture with Highlands Gold and Colony Pacific) (19a).

This is not to say that Friedland's eyes are now flashing nickel signs (as well as copper and gold ones); after all he took the money rather than the metal from the Voisey's Bay deal with Inco. However, the global mining industry has experienced unprecedented shifts in ownership and control over the past few years. It is not inconceivable that Inco will be restructured with Friedland and Rio Tinto, among others, buying further stakes and seeking to influence the Canadian giant.

The other contender for the Voisey's prize is Falconbridge, Canada's second biggest nickel producer - a company which two years ago also bid for control of Voisey's Bay. As Inco announced its corporate re-structuring in early 1998, so rumours circulated that the company would engage in "friendly takeover" talks with Falconbridge, which also has mines and mills in Sudbury; a combination of the two could clearly lead to savings (20)

In February 1998 Rio Tinto announced - to resounding shareholder approval - that it would buy back up to 10% of its own shares in the market, in order to boost its share value and position it to profit from the impending abolition of Advance Corporation Tax (ACT). This would somewhat reduce the attractiveness of any major takeover bid for Inco (or any other major mining company) by the British-Australian megalith, if only because it reduces available capital and increases its gearing (debt to capital ratio).

If there is a "front runner" for an Inco bid it is therefore currently Falconbridge.

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Even if a takeover were to happen in the next couple of years, what would this mean for PT Inco's operations in Indonesia? Let's now examine this company's role in some detail.

PT Inco, to a certain extent, competes against the other Indonesian producer, PT Aneka Tambang, whose fortunes were boosted by an injection of government cash in return for equity, in mid-1997. The Indonesian regime then set about privatising the company late last year. (There was early speculation that Friedland had himself purchased some of the stock offered on the Jakarta Stock Exchange). The proceeds are being used to expand the company's Pomona Ferro-nickel plant (21).

Inco's other operations also overshadow those in Indonesia - in particular the Canadian operations in the Sudbury region of Ontario. These are the largest in the world - producing more than100,000 tonnes of nickel per year (which in 1996 was nearly three times Indonesian production) (22).

Nonetheless, while Sudbury has been cutting back on jobs in the higher cost mining zones - because of escalating costs of mining, energy and environmental controls, a strike in June 1977 and, of course, the sharp fall in nickel prices - PT Inco has embarked on a huge expansion programme both in mining and smelting at Soroako, intending to increase production from its current 40,000-plus tonnes (Ni-in-matte), to around 70,000 tonnes (23).

PT Inco's unit costs of production stand within the lowest global percentile for nickel - still representing a highly profitable margin, even under present market conditions; they are also the lowest among all Inco's operations world-wide. In fact, production costs have actually gone down - they dropped 40% between 1982 and 1992 (24).

It is little wonder therefore, that Inco's chief executive, Michael Sopko, in late 1997 said the company intended to make "vigorous" advances, especially at PT Inco, as well as Voisey's Bay and its Goro project in New Caledonia (Kanaky) (25). This follows two major expansions at PT Inco in the past eight years- the second announced in 1995, to expand production from 45,000 tonnes/year to 78,000 tonnes by late 1998, with a probable further expansion to 100,000 tonnes within the next twelve years (5).

Nickel ore reserves in PT Inco's Soroako concession make this part of Indonesia the world's third largest source of nickel (after New Caledonia/Kanaky and Cuba). (22).

In 1996 the COW was extended by thirty years to 2025 (5) and new exploration has commenced in the Bahudopi area, east of Soroako, near the Gulf of Tolo, and in the Pomalaa East nickel zone, east of PT Aneka Tambang's eponymous "property" in south-east Sulawesi. By 1996, reserves at Bahudopi alone outstripped all the proven and probable reserves at Soroako (though with a slightly lower average grade: 1.77% nickel as opposed to 1.9%) (5); with the prospect of a second mine being constructed to exploit the south-east Sulawesi deposits (23).

To meet the challenge of expansion, the company is adding a fourth smelting line to the Soraoko plant and building a second hydropower plant on the Larona river (about 5km downstream of the existing plant which has a 165 MW capacity) (5). Of course, this vast new programme - currently, it would seem, the most extensive of its kind in the world - will cost precious dollars (totalling US$1.5 billion at 1996 prices) (5). But the AME (2) predicts that the production costs of nickel from the most important nickel mines world-wide will decrease even further, along with the market price, over the next year - or even three - even if Voisey's Bay is delayed. It would therefore take more than the recent dramatic events to substantially threaten Inco's operations in Sulawesi.

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First, the buyers of virtually all PT Inco's output are Japanese (just over 20% of PT Inco is owned by Sumitomo of Japan). Historically Australia has received some ore and concentrate from Indonesia, but all matte and refined metal, including alloys, go to Japan (26). Japanese corporate strategy has long been to make minority investments in equity and/or mine-to-plant outside the country and, where possible, conclude fixed long-term contracts, making for relative inelasticity in the production-demand curve (27) . However, Japan has not proved impervious to the recent Asian economic crisis - indeed its industrial output has wavered, and imports of raw materials are under threat. At least one analyst in January 1998 predicted that nickel and copper would be the metals most likely to suffer major drops in demand, as a result of the "Asian crisis" (28).

Second, as the international leader in nickel production, Inco has for many years been subject to mounting pressure for the pollutive and dangerous nature of its mining and smelting to be better recognised and curbed. For Voisey's Bay the company has had to prepare possibly the most extensive defence of a future project ever seen in the mining industry - a six thousand page EIS (2,000 pages of proposals with 4,000 comprising technical data), which will be subject to numerous public reviews.

Third - also partly as a result of environmental pressures - scrap nickel is becoming much more of a player than it was some years ago: the market share of secondary to primary metal increased by between 10% and 15% in 1996 (23). If this trend continues, then investment in primary production could be squeezed even further.

Fourth, Inco's other nickel mines and investments include substantial holdings in Kanaky (New Caledonia), Guatemala and Brazil. Given the parlous near-term market future for nickel, it is unthinkable that all these will be maintained, let alone expanded. (Or, in the case of the notorious Exmibal/Inco operations in Guatemala, taken out of mothballs - although in 1996 there was speculation that this was on the cards. This mine continues to be haunted by one of the worst massacres even in Guatemlala's bloody recent history, when 100 Kekchi Indians were slaughtered by the army in 1978 for protesting at the robbery of their lands to make way for the Exmibal plant) (29).

Stainless steel manufacturers now benefit from a buyer's market, (most nickel production goes towards stainless steel) which will not just depend on long-term availability of mined supplies, but also partly dictate location of mines and smelters. Such security of supply from Indonesia could be threatened by a major political change within the country, thus enhancing the attractiveness to Inco of other sources - though it should be stressed that the odds on this happening are fairly long.

PI Inco is therefore vulnerable on several fronts - changes in direction imposed by new management at Inco itself; reductions in demand from Japan cut backs in investment on new nickel projects around the world - especially if construction of Voisey's Bay is accelerated (or further big low-cost deposits are discovered in the Pacific region); increased competition from older exporters, who could reduce their production costs even further - or flood the market (Russia and Cuba); output from newer producers (notably in Western Australia); demands for more stringent environmental and social impact studies in Indonesia; competition from recycled scrap.

What this should tell those affected by the company at the mine face, and those opposed to increased foreign control of local and national resources, is that Inco is not the monolithic market colossus it might paint itself to be, but actually cracking at several seams.

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Since the majority of nickel exploitation takes place on the land of Indigenous Peoples - or (in the case of Norilsk's Siberian operations) profoundly affects them - the opportunity has never been better for an international coalition, to monitor and confront the nickel industry world-wide.

Initially, such a coalition could spotlight the huge gaps between what Inco is being forced to comply with on its home base and the cavalier disregard for similar standards in Indonesia.

Already, as part of the Voisey's Bay permitting process, the provincial government, along with Innu and Inuit organisations, have formed a single panel review committee. Currently (and up to mid March) the company's proposals are being subject to a 75- day review. Only then will public hearings take place on all aspects of the project (30). To calm fears among the local population, the company has, inter alia: sponsored an Indigenous newspaper (which has featured articles critical of it); announced it was willing to limit winter shipments of nickel concentrate to "ease disruption to hunting and travel by Natives" (30); and said it wants to incorporate "traditional ecological knowledge" into the Voisey's Bay project (31).

Could Inco therefore be compelled to do anything comparable as it expands in Indonesia?

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Consumption of Indonesian mined nickel relative to the rest of the world
(1996 figures in thousand tonnes for selected countries)

   Botswana 25
   S. Africa 32
  Brazil 20
  Colombia 31
  Dominican Republic 31
  Indonesia 90
  Philippines 13
  Greece 22
  Australia 116
  New Caledonia (Kanaky) 120
  CSS 251
  Cuba 53
  Global total 1,056

(source: Int. Nickel Study Group)

Comment: Virtually all of PT Inco's Indonesian nickel production (45,000 tonnes in 1995, 40,000 tonnes in 1996) goes to Japan, which is the world's second most important consumer of nickel, after the European Community.

Indonesian refined nickel relative to the rest of the world
(thousand tonnes)

  S.Africa 32
  Zimbabwe 16
  Brazil 16
  Canada 130
  CIS 189
  Dominican Rep 31
  Colombia 23
   US 15
  Indonesia 10
  Finland 30
  Greece 18
   France 10
  UK 40
  Australia 78
  China 37
  Cuba 30
  World total 946

(main source: INSG)

Comment: Inco meets around 17% of the total world demand for nickel (187,000 tonnes in 1996 out of a world total of 1,015, 000) from its own production. Of this, just under one fifth is derived from PT Inco and approximately three-fifths from the company's Sudbury operations.

However, Inco purchases other producer's nickel output through the London Metal Exchange (LME) and traders, in order to meet existing contracts and to maintain its pre-eminent position in the market. In 1996, its sales reached 253,000 tonnes (23). Its Indonesian and Sudbury expansion should enable it to maintain its 30% global market share from its own production alone within a few years, notwithstanding developments around Voisey's Bay.

If Voisey's Bay comes on stream around the year 2000, Inco's total refined production is projected at around 340,000 tonnes; without Voisey's Bay, at around 217,000 (23)

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(1) FT 17/9/97

2) AME Mineral Economics Nickel 1998: Industry Operating Costs to 2002, Australia

(3) The FT headline of December 3 1997 told it all (or almost): "Nickel at three and a half year low on fears over Asia". In October, as fund managers offloaded their stakes in nickel (or sold them short - i.e. sold metal they didn't actually own, in expectation of falling prices). One analyst for Australia's Macquarie Bank spoke of "the blood bath in Asian equity markets". (FT 24/10/98).

(4) Northern Miner, Toronto, 16/2/98

(5) Mining Annual Review 1996

(6) Toronto Globe and Mail 6/12/97

(7) South East Asia Mining Letter (SAML) 29/11/96

(8) Inco press release 19/9/96

(9) CBC News 30.12.97; Evening Telegram 5/1/98, Innu Nation Press Release, 16/1/98.

(10) Toronto Globe and Mail 4/2/98; Evening Telegram 25/1/98; Le Devoir 6/1/98, Evening Telegram 9/2/98; Innu Press Release January 1998

(11) USA Today "Worst stocks of 1997" 22.12.97

(12) Toronto Globe and Mail 5/2/98

(13) Globe and Mail 29/1/98

(14) Mining Journal (MJ) 21/11/97

15) FT 4/9/97

(16) FT 19/6/97

(17) MJ 5/12/98

(18) see Parting Company, Partizans, winter 1997, Multinational Monitor, November 1994 and Mining Magazine June-July 1997

(19) SAML 15/11/96

(20) Maclean's magazine 9/2/98

(21) FT 23/1097

(22) MM Nov 1996

(23) Mining Annual Review (MAR) 1997

(24) MAR 1992

(25) MJ 21/11/97

(26) US Dept of Interior, Bureau of Mines, International Review Mineral Industries of Asia and the Pacific, vol 111 1990).

(27) Minewatch, Higher Values, number 11 1997

(28) Alan Williamson, Deutsche Morgan Grenfell, quoted in FT 13/1/98

(29) Roger Moody, The Gulliver File, Minewatch and WISE Glen Aplin, International Books, Utrecht 1993

(30) Financial Post (Canada) 18/12/97

(31) CBC News 18/2/98

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Additional Articles


Future hinges on metals price, shareholders told; Inco loses $41 million
The Toronto Star, Thurs 23 Apr 1998, By Lisa Wright

[Comment: The following article from Canada confirms not only that Inco is in deep trouble, but that it is having second - and third - thoughts about the vast Voisey's Bay project. Not surprisingly, it is increasingly looking for survival through expansion in Indonesia, New Caledonia and at its Sudbury operations. It is a pity the company just had its AGM, without (apparently) any questions being asked about Soroako. We have no information on what Indonesian support groups in Canada are doing. But clearly Inco is now more vulnerable to attack than for many, many years. ]

Inco Ltd.'s plans to build the biggest nickel mine in the world at its prized Voisey's Bay site in Labrador are in jeopardy unless metals prices bounce back, the company chairman warned investors yesterday. In the wake of a staggering $41 million (U.S.) loss in the first quarter, Inco's chairman and chief executive officer Michael Sopko left the door open yesterday to further delays past its projected 2000 start-up - and discussed possible alternatives if it never gets off the ground.

“We wish to proceed with full development of Voisey's Bay - but only if it makes economic sense to our shareholders,” Sopko told shareholders at Inco's packed annual meeting at the Metro Convention Centre. “This commitment was always subject to technical and economic realities to the project. It was never unconditional.” he said to the crowd of about 500 people.

The project, touted as the crown jewel of Inco's considerable assets, has already been plagued by numerous delays due to environmental concerns and aboriginal land disputes. Nickel prices are languishing at their lowest level in four years, which observers say has put a new spin on the company's negotiations with the provincial government over taxes, the cost of power and the size of the project. However, Sopko insisted Inco remains “fully committed” to the project and vowed there will be no writedown of the $4.3 billion (Canadian) investment Newfoundland is banking on to stimulate its economy and boost job creation.

“We will proceed with commercial development once the necessary approvals are in place and only when it is clear that our shareholders will benefit,'' Sopko said. If Voisey's Bay doesn't work out, Sopko mused that Inco could instead rely on production from its PT Inco division in Indonesia, the Goro site in New Caledonia and its recent $125 million infusion to expand its existing Creighton mine in Sudbury.

Environmental approvals and agreements with the province and Innu population are needed before Inco can proceed to build a nickel mine and smelter in Newfoundland.

“But let me state that we cannot agree to any deal; it has to be the right deal,'' Inco President Scott Hand said. Sopko and Hand were on the hot seat as they fielded questions, insults - and even threats - from audience members, the most vocal of whom were representatives from labour, environmental and aboriginal groups.

“You know the track record of the Innu in terms of protesting,” said Penote Michel, a representative of the Innu Nation in Labrador. “If progress isn't made (in environmental talks), rest assured you are going to lose money,'' he said shaking his fist at Sopko, adding: “Be careful. This is a clear warning.”

Union representatives - some of whom travelled from Thompson, Man., to criticise Sopko - said the recent job cuts of 1,300 (many of which will be through retirements) from Inco's work force were cruel and would only backfire in the long run since employee morale is at an all-time low. “They (workers) feel betrayed and productivity will suffer for it,” said Wayne Fraser, Sudbury's area co-ordinator for the United Steelworkers of America.

Sopko, who briefly donned a miner's hard hat before questions got under way, said he sympathized with workers but reminded them that cutbacks are a reality of the changing economy. “I can understand why you're lashing out at everyone around you,” he said. “It (the restructuring) is difficult for you and it's difficult for me. The world has changed, Inco must change and so must Sudbury,” he said, adding changes will result in the company mining in the area for another 100 years. But Sopko was on the spot as accusations flew about everything from the lack of women and minorities on Inco's board of directors and environmental concerns pinned to Earth Day to queries about takeovers and also Sopko's 22 per cent raise in base salary last year. But he explained his over-all pay packet was actually cut by 50 per cent because of the company's poor performance.

Inco's first quarter results show the company lost $41 million, or 29 cents a common share, in the three months ended March 31. (Financial reports are in U.S. dollars). That compares with a loss of $4 million, or 7 cents a share, in the fourth quarter of 1997 and net earnings of $58 million, or 29 cents a share, in the first quarter of 1997. The latest losses were due to an after-tax charge of $32 million associated with the company's restructuring and lower prices for nickel and copper. Inco had an annual profit of $75 million for 1997, down from $179 million in 1996.

Starting next year, Inco expects to save $165 million annually through a broad range of cuts to its work force and some of its overseas exploration projects along with the closing of several mines and its New York office. The market reacted favourably to the get-tough message that came from the meeting. Inco shares rose 65 cents (Canadian) to close at $27.35 in Toronto trading.

Despite an atmosphere of doom and gloom at the nickel giant, it's still too early to throw in the towel on both Voisey's Bay and Inco, said Fred Ketchen, senior vice-president and managing director of equity trading at ScotiaMcLeod Inc.. “While things are on the difficult side right now, I think Inco's long, long history isn't going to fade into the sunset any time soon,'' he said, adding he expects some activity in Voisey's Bay by 2000 as nickel prices start to rebound. “They're in a commodity that's cyclical in nature when it comes to price,'' he said. “It takes patience. Along the way, nickel will go up in price and Inco will benefit accordingly,'' Ketchen added.

Just as Sopko adamantly dismissed takeover rumours - saying no one to date has approached Inco with an offer - so too did Ketchen, saying: “You have to have pretty deep pockets to take over Inco.''


Editorial, St. John's Evening Telegram, Wed 22 Apr 1998

Last Saturday's Telegram told the story of a report by the investment banking and securities firm, Goldman Sachs, which questioned the viability of the Voisey's Bay nickel project.

The Voisey's ore body itself is of high enough quality to be exploited, and the location of the ore on tidewater makes it viable to mine (even at the presently depressed price for nickel).

What the report questions is whether the current price of ore can sustain the size of a nickel project as previously envisioned, the smelter at Argentia, and the substantial demands being placed on the entire operation by the province, the environmental assessment and the various native groups. The Goldman Sachs study says the huge project that was planned two years ago is not viable given the current depressed price of nickel.

Of course, the price of nickel today is less critical than the price of nickel when it eventually goes to market. If nickel prices increase by 50 per cent between now and the time the ore is mined, the mine will be not only viable, but extremely valuable. The problem lies in getting that ore shipped to market in a few years.

Between now and market day, Inco is going to have to invest $1 billion into the mine, mill and smelter development, and unfortunately they will have to do that while their nickel is selling at bargain basement prices and the company revenues are being squeezed. Any company with a cash flow problem like that is not particularly well situated to invest in a massive new development like Voisey's Bay.

Compounding the company's problems is a number of questions that must be answered before Inco can get a firm estimate on its costs. What will the company have to pay to meet the requirements of the environmental assessment process? What will it have to pay to the Innu and the Inuit, and what royalty will the company have to pay to the province? These payments will affect the viability of the operation.

Since most people in the province want the mine and smelter to go ahead, what can be done to move the project ahead? The environmental process is already under way, and on May 1 the environmental panel will rule on the company's environmental assessment. If the company's 6,000-page environmental report is satisfactory to the panel, the assessment will go into the hearing stage, and the process will move forward. If the panel requires further work on the assessment report, however, the process will be further delayed.

The discussions with the native groups are another matter. The Inuit have a framework for their land claim; the Innu do not. But that process, while important, still leaves Inco in a position where they have to come to terms with the native groups and pay them for the loss of their land. That may take months to negotiate and may cost many millions of dollars in the face of today's low nickel prices.

And finally the province must now establish a royalty regime for Inco that gives the company some certainty about what proportion of its profits will be shared with the people of the province. Clearly, the current mining royalty regime with the 10-year tax holiday will not do, but some sort of graduated royalty scheme similar to the province's generic oil royalty regime and the royalty scheme being put in place for the lower Churchill developments might be appropriate.

And what about the smelter at Argentia? We'll have a look at that tomorrow.


[Comment: Found by a friend at]

Indo Metals announces that on February 19th, the Indonesian government signed the 7th Generation Contract of Work (CoW) pertaining to the west Ambon and Haruku portion of its Maluku Joint Venture property.

The lands included within the new CoW include 9,207 hectares on Haruku Island, and 34,550 hectares on west Ambon Island. Jim Clucas, President, said today: ''I am delighted that the government of Indonesia has signed into law this Contract of Work as it now enables us and our partners to proceed with an aggressive exploration program, including drilling. We are confident that drill-testing of the numerous silver-rich, polymetallic and porphyry style targets identified to date will bring additional positive results.''

The Maluku Joint Venture properties consist of over 100,000 hectares held in part by the signed 7th Generation CoW covering Haruku Island and west Ambon Island and in part by applications for 8th Generation CoWs covering Nusa Laut and Saparua Islands and portions of Ambon Island. The properties are held under an agreement with Ingold Holdings Indonesia Inc., a wholly owned subsidiary of Inco Limited (Inco) of Toronto, Canada.

The agreement grants Indo Metals the right to earn a 49 percent interest in Inco's 85 percent interest in the Maluku properties. P.T. Aneka Tambang, a state-owned Indonesian mining company and minority owner in the Maluku properties, has a 15 percent interest in the Maluku Joint Venture.

On Behalf of the Board of Directors James D. Clucas, President The Vancouver Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.



Indo Metals announces that the results of the exploration conducted during the second half of 1997 on its Maluku Joint Venture Ambon Island property in Indonesia resulted in the discovery of 42 new base metal-silver(plus or minus) gold showings. These results have significantly increased the potential for the discovery of high-grade, silver-rich, polymetallic base metal deposits and porphyry copper deposits.

The aggressive prospecting and mapping programs on Ambon Island discovered 42 new mineral showings, of which 23 are in outcrop and 19 as boulders and float trains. All of the new showings occur relatively close to the coast, within six kilometres of tide water.

Prospecting and mapping on the equally prospective interior of the island in 1998 will require helicopter support. Grab sample values from some of the various occurrences recently discovered on Ambon Island include:

Occurrence Status Copper(%) Lead(%) Zinc(%) Silver (oz/t)
Tomu Outcrop 1.2 4.5 5.0 1.9
West Tomu Float 21.8 0.1 0.1 0.5
Rose Outcrop 1.0 0.6 5.5 0.1
Hulung Outcrop 1.4 - 4.4 0.1
Nahaii Outcrop 3.9 - - 0.1
Buyang Outcrop 1.1 - - 0.1
East Kahuli Outcrop 1.0 2.2 7.8 3.6
Larike Float 0.2 6.0 2.8 8.7
Luang Outcrop 0.9 7.0 6.2 3.9
Luang North Outcrop 1.1 9.1 7.6 17.7

The 42 showings discovered to date on Ambon Island can be divided into three main types of mineralization:
(1) high grade polymetallic Cu-Pb-Zn-Ag sulphides occurring as replacement mineralization in breccias and volcanics;
(2) base metal quartz vein pithermal-style mineralization;
(3) disseminated chalcopyrite mineralization in altered dioritic intrusions.
These various styles are associated variably with propylitic, argillic, and sericitic alteration.

These types of mineralization are probably related to portions of a porphyry-centred system with alteration and base metal mineralization peripheral to a central porphyry. The overall setting may be somewhat similar to other major base metal-silver belts such as the eastern Cordillera of central Peru and Guanajuato district in Mexico which host a variety of epithermal and manto-type polymetallic deposits. In Peru, a similar geological environment hosts Cu (plus or minus) Zn porphyry related deposits (eg. Antamina) and more distal, large (greater than 60 mt), high grade, base metal replacement deposits related to late breccias and intrusions (e.g Cerro de Pasco).

The Hulung, Nahaii, and Buyang Cu-rich prospects located on the north-west coast of Ambon Island occur in a cluster within a 13 km by 7 km area characterised by stream sediments containing anomalous copper values. The Hulung and Nahaii prospects are hosted by volcanic rocks and represent volcanic and/or breccia hosted base metal replacement deposits; these may be considered typical of Ambon polymetallic mineralization. The Buyang copper showings are hosted by both altered leucodiorites and volcanics. The Buyang mineralization is considered to be part of a porphyry system. The results from the limited work completed to date indicate the area has significant potential to host a porphyry copper deposit.

The Larike, Luang, and Luang North showings at the south-west tip of Ambon Island occur within a 6 km by 4.5 km area containing nine outcrop or float mineral occurrences. The mineralization and alteration is typical Ambon type mineralization found peripheral to porphyry systems. It is important to note that the sample from Luang tabled above also contained 1.2 g/t gold. In the Kahuli area on the north side of Ambon Island, about nine km east of the Hulung, Nahaii and Buyang showings, a total of seven bedrock and two float occurrences were discovered over an area roughly 3 km by 1.5 kilometres. The heavily disseminated sulphide mineralization here is similar to that at the Wai Ira deposit on neighbouring Haruku Island and occurs as the matrix within coarse felsic agglomerates.

The grab sample of the sulphide rich matrix at East Kahuli listed on the table above also contained 1.16 g/t Au. Channel sample values include 0.4% Cu, 1.5% Pb, 5.6% Zn, 0.8 oz/t Ag, and 0.36 g/t Au over 2 m, and 0.2% Cu, 1.1% Pb, 1.8% Zn, 0.4 oz/t Ag, and 0.18 g/t Au over 4 metres. The Rose and Tomu occurrences, listed in the table above, also occur in the Kahuli area.

The 1998 exploration program, budgeted at US$2 million, will start in March and continue throughout the year. The program will focus on prioritising the showings warranting immediate follow-up, and continuing the prospecting program by helicopter in the interior of the island. High priority areas will be gridded and subjected to detailed surveys, leading up to a drill program.

The Maluku Joint Venture properties consist of over 100,000 hectares held in part by a signed 7th Generation Contract of Work (CoW) covering Haruku Island and west Ambon Island and in part by applications for 8th Generation CoWs covering Nusa Laut and Saparua Islands and portions of Ambon Island. The properties are held under an agreement with Ingold Holdings Indonesia Inc., a wholly owned subsidiary of Inco Limited (Inco) of Toronto. The agreement grants Indo Metals the right to earn a 49 percent interest in Inco's 85 percent interest in the Maluku properties. P.T. Aneka Tambang, a state-owned Indonesian mining company and minority owner in the Maluku properties, has a 15 percent interest in the Maluku Joint Venture.

On Behalf of the Board of Directors James D. Clucas, President The Vancouver Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this new release.

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