Nickel miners set to change? Or the same old story?

Nickel miners set to change? Or the same old story?

12th October 2005

This week, the world's second biggest nickel producer, Canada's Inco, announced that it would merge with the country's second major producer, Falconbridge. "New Inco" (there's nothing like changing your title to imply you're also changing your modus operandi) would at a stroke become the sixth largest mining company on the planet.

As with many M&A's (mergers and acquisitions) in the minerals industry, the main aims of the two companies are: to cut costs (an estimated $350 million a year), consolidate operations (the two companies have huge mines and plants in the Sudbury region of Ontario), and boost market access.

However, mining analysts aren't unanimous in backing the deal - mainly on economic grounds: with metal prices riding high, it will be a costly exercise, perhaps too costly for some speculators.

There's also "the Xstrata factor". The UK-Swiss mining conglomerate, controlled by the shadowy private trading company, Glencore, holds just under 20% of Falconbridge. Will Xstrata walk away with money under its belt? Will it make a counter-bid, albeit an expensive one? Or will it bide its time (perhaps increasing its stake), and strike for ownership at a later date?

As numerous postings on this site reveal, Inco is one of the least responsible, and less responsive, of big mining companies. Falconbridge has a somewhat better reputation - both among communities and workers - though the differences shouldn't be over-stressed. If Xstrata - itself no slouch when it comes to environmental destruction - does take over New Inco, standards that are already unacceptably low within nickel mining and smeltingy, could fall even lower.

Meanwhile, Norilsk Nikel - an even greater corporate polluter than Inco - looks likely to be toppled from its perch as number one in the nickel industry. Possibly in response to the threatened Inco-Falconbridg merger, Zhak Rozenberg, the company's deputy director has just "unveiled" a major programme to reduce its noxious emissions and water use.

But, read between the lines: this won't happen yet and it seems little more than hype. "Ecological problems are not ecological problems as such," declares Mr Rozenberg. "they are a result of unsatisfactory technology." Yet reducing Norilsk's SO2 emissions to virtually nil is a "dream".

As for his views on what a nickel-free world would look like:"We might as well return to the stone age, sit by a crystal clear river all day, eat absolutely ecologically clean fish, and that would be it."

Indeed, Mr Rozenberg!