Inco earnings down in second quarter (July 24, 2001)

Nickel producer Inco (N-T) posted second-quarter earnings of US$45 million as revenues from nickel sales continued to shrink. At the same time, the company unveiled a deal with the government of New Caledonia that will give its Goro operation a 15-year tax holiday.

The US$45-million (20 per share) in earnings did not include a US$173-million non-cash benefit, taken out of deferred taxes, which arose from decreases to tax rates in Ontario and Manitoba.

Revenues for the three months ended June 30 were US$583 million. During the second quarter of 2000, the company made US$106 million on revenues of US$837 million. Lower metal prices cut deeply into revenue in the recent quarter, though production from mines and smelters was fractionally higher.

The company realized an average US$7,065 per tonne on nickel in the recent quarter, down from US$9,979 a year before. Realized prices for copper fell to US$1,707 per tonne from US$1,830. During the quarter, average London Metal Exchange prices were US$6,681 for nickel and US$1,652 for copper.

Inco did get some good news on another front with the announcement of a tax holiday granted to the Goro project in the French Pacific territory of New Caledonia. The government approved a 15-year tax-free period for new nickel development projects and a 5-year extension where the tax rate is halved. Under a separate provision, the full tax rate kicks in after the project is making a prescribed return.

The US$1.4-billion Goro project is currently being financed and is scheduled to be in production in late 2004. Inco has a 70% interest. The Bureau de Recherches Gologiques et Minires (BRGM), a French government agency, holds the rest. The BRGM is looking to dispose of its holding and the New Caledonian government has expressed a preference for seeing the share go to Socit Le Nickel, a subsidiary of nickel producer Eramet in which the territory’s regional governments own a 30% interest.