It’s official: Diamond Fields now a division of Inco

With all shares of Diamond Fields Resources (DFR) now in the hands of Inco (N-T), the former’s Voisey Bay Nickel Company subsidiary has become a division of Inco.

On Aug. 21, Inco’s acquisition of DFR became final, after having been delayed for three months by a lawsuit filed by a group of shareholders of Exdiam, a dormant Texas firm in which DFR’s co-chairman Jean-Raymond Boulle had been director. The plaintiffs had demanded all of DFR’s assets as compensation for what they claimed was a breach of fiduciary duty on the part of Boulle, but, instead, they recently settled out of court for US$25 million.

Also, an Arkansas court recently dismissed another lawsuit involving Boulle, launched by former DFR executive Lydia Talmers. She had sought 600,000 DFR shares but reached an out-of-court settlement with Boulle.

Inco’s takeover deal gives DFR shareholders 0.557 of an Inco common share per DFR share (or the equivalent in cash, up to an aggregate maximum of $350 million), along with 0.091 of an Inco Series E Convertible Redeemable Preferred Share, 0.25 of an Inco Class VBN share and one note which will be paid in one share of Diamond Fields International, will comprise all of DFR’s diamond assets. The total package is worth about $4.5 billion, or $43.50 per DFR share.

Inco Class VBN shares began trading the morning after the transaction closed.

DFR’s chief asset (through the Voisey’s Bay Nickel Company) was its 75% share of the Voisey’s Bay nickel-copper-cobalt deposit (Inco acquired the other 25% in June 1995). In its proxy circular regarding the acquisition of DFR, Inco refers to a “potential reserve and resource estimate” at Voisey’s Bay of 150 million tonnes, though only the measured and indicated total of 31.5 million tonnes grading 2.84% nickel, 1.69% copper and 0.12% cobalt from the original Ovoid zone deposit is considered official. Much more mineralization has been found, primarily in the Eastern Deeps zone, since the above totals were calculated by Teck (TEK-T).

DFR’s contract with Archean Resources, the private company doing most of the exploration work at Voisey’s Bay, expires at the end of 1996. Purcell says it “remains to be seen” whether the contract is to be renewed.

He adds that DFR’s head office in Vancouver will “cease to exist” (Inco has a Vancouver office already), while the Voisey’s Bay Nickel Company office in St. John’s “will continue as such, just with some new players.” As for the transfer of DFR personnel to Inco, he says some appointment notices will be announced in the future.

Voisey’s Bay Nickel is now a wholly owned subsidiary of Inco, the same designation given to the company’s Ontario and Manitoba divisions.

In order to offset the earnings dilution that will result from the acquisition of DFR, Inco has begun the process of repurchasing up to 11.5 million of its common shares (10% of the current public float).

Inco plans to buy the shares over the next 12 months, using a combination of internal cash surpluses and the proceeds of possible future asset sales. The company does not intend to borrow in order to finance the share repurchase program.