More questions than answers as Inco, Falconbridge look to meld

Oct 14, 2005 | 06:28 AM | Rory Carroll

Canadian miners Inco Ltd. and Falconbridge Ltd. grabbed headlines when they announced their intention to combine forces to create the world's largest nickel producer.

The marriage, blessed by both companies' boards, would involve Inco purchasing Falconbridge for $10.2 billion.

Assuming regulators give the green light, the "new Inco" would be a metals and mining powerhouse responsible for around 28 percent (about 334,000 tonnes) of the world's 1.2-million-tonne-a-year nickel production. And it's not going to stop there.

The new Inco expects to increase its nickel output by 35 percent to more than 450,000 tonnes annually by 2009 on the back of new production from its Voisey's Bay project in Newfoundland and Labrador and the Goro project in New Caledonia. Nearly half of the company's business will be in nickel and a third will be dedicated to copper, while aluminum, cobalt, precious metals and zinc will round out the rest of its portfolio.

Described by Inco as a "friendly takeover," the deal is effectively a merger, with Inco owning 54 percent of the company and Falconbridge the remaining 46 percent. The company will retain the Inco moniker and headquarters will remain in Toronto, where both companies are already based. Scott Hand, chairman and chief executive officer of Inco, will continue in that role, while Derek Pannell, chief executive officer of Falconbridge, will assume the role of president.

While the move might have answered some questions, it has certainly raised others

Why now?

Talk of an Inco-Falconbridge merger is nothing new. Some said the writing has been on the wall since they began working together on projects and set up operations on either side of the Sudbury Basin in Ontario. So why opt to unite now?....