Inco Sees 2nd-Half Profit of $1.42 Billion on Nickel

Inco Sees 2nd-Half Profit of $1.42 Billion on Nickel

Inco Ltd., a nickel miner seeking to convince shareholders of Falconbridge Ltd. to accept its takeover offer, said second-half earnings will more than double from the first half because metal prices will remain high.

Profit excluding some items will be about $1.42 billion, or $6.17 a share, in the second half, assuming nickel prices of $12.01 a pound and copper at $3.53 a pound, Toronto-based Inco said today in a statement. Inco, itself a target of competing takeover bids, earned $600 million, or $3.09, in the first half.

Inco, backed by Phoenix-based copper producer Phelps Dodge Corp., offered cash and stock for Falconbridge to compete with a an all-cash bid by Switzerland’s Xstrata Plc. Phelps Dodge wants to acquire Inco and Falconbridge as part of the world’s biggest mining merger ever. Vancouver-based zinc producer Teck Cominco Ltd. has made a separate hostile offer for Inco.

“We have every reason to believe that the strength we’re seeing in the nickel market today will continue unabated through the second half of 2006,” Inco Executive Vice President of Marketing Peter Goudie said in the statement.

Extended Price Rally

Inco said its second-half forecast is based on the assumption that second-half prices for nickel and copper will remain at the levels seen so far in July. Inco said its forecast of adjusted net earnings excludes items such as gains or losses on the sale of non-core assets and writedowns in the value of assets, among other things.

Nickel and copper prices have soared this year as demand, fueled by growing economies such as China’s, outpaced mine output. Nickel, which is used to rust-proof steel, has gained 75 percent on the London Metal Exchange this year, while copper, used to make wires and pipes, has climbed 58 percent on the Comex division of the New York Mercantile Exchange.

Inco Chief Executive Officer Scott Hand on July 19 predicted “a very strong finish for the year” amid high nickel and copper prices, without providing specific earnings figures.

Deadline Approaching

Copper stockpiles monitored by the London Metals Exchange amount to less than three days of global consumption, the exchange said two days ago. Production will lag demand by 46,000 metric tons this year, Macquarie Bank Ltd. said July 17.

Hand today urged shareholders of Falconbridge, Canada’s second-largest nickel producer, to tender their shares to the Inco offer, which expires at midnight July 27.

“There is no better way for investors to profit from the expected strength in the nickel markets for the next five years or more than by participating in the nickel assets, resources and production of the combined Inco and Falconbridge,” Hand said in the statement.

Two days ago, Inco said it would scrap a shareholder-rights plan Aug. 16 as part of an agreement with hostile bidder Teck Cominco, paving the way for other companies to make offers.

Inco expects to receive more offers if Xstrata wins the battle for Falconbridge, Inco lawyers Larry Lowenstein and Mark Gelowitz said in a filing with the Ontario Securities Commission last week.


Share this post