Inco continues restructuring

Bad times in the nickel business have forced Inco (N-T) to think the unthinkable: sharing facilities with rival producer Falconbridge (FL-T).

Weak metals prices have prompted the nickel miners to engage in preliminary discussions aimed at finding mutually beneficial ways to cut costs and improve the economics of their mines in the Sudbury Basin.

While those discussions continue, Inco is forging ahead with a restructuring program at its Ontario and Manitoba divisions aimed at finding annual savings of $165 million (starting in 1999).

Inco expects to realize annual savings of $75 million by reducing its Sudbury workforce by 1,000 (16% of total staff) and cutting its Thompson, Man., workforce by 175 (10%). About half of the Ontario job losses were previously announced and will be covered by retirements.

Corporate and administrative staff also will be reduced, for annual savings of $19 million. Marketing, purchasing, engineering and other functions will be consolidated, for annual savings of about $52 million.

Others savings will come from a $15-million cut in exploration expenditures and the refocusing of research and development expenditures.

Inco also plans to sell non-core assets, additional to previously announced sales that await regulatory clearance.

At a recent board meeting, Inco directors slashed the quarterly dividend rate for common shares to US2.5cents from US10cents, effective March 13, 1998. The board also suspended a share repurchase program announced last summer. The company reports that one million shares were bought before weak nickel prices forced the suspension of the program.

Meanwhile, Inco is carrying out a detailed analysis of each of its each operating mines, with the goal of devising new mining plans that will boost efficiency and reduce costs. This work is expected to be completed by mid-1998. The company previously announced plans to suspend or cease operations at four of its mines in the Sudbury camp.

Development plans for the mine and mill at Voisey’s Bay in Labrador are reported to be on track, however a number of issues related to the smelter and refinery portion must still be hammered out with the federal and provincial governments.

Inco officials say development of the Voisey’s Bay project is “dependent on sound economic considerations and realizing an appropriate return for shareholders relative to other projects, while at the same time meeting the legitimate requirements of both governments and the aboriginal groups concerned.”