Dump Inco, buy Falconbridge, Toronto analyst tells his clients

Dump Inco, buy Falconbridge, Toronto analyst tells his clients

Rival mining company in good position to benefit from Inco strike: mining specialist

By Carol Mulligan, The Sudbury Star

June 03, 2003

Falconbridge Ltd. could end up being the only "real winner" in the strike by members of Local 6500 of the United Steelworkers of America against Inco Ltd., says a Toronto mining analyst.

The analyst, who did not wish to be identified, said he has been talking to investors in the last week and telling them to "take money out of Inco and put it into Falconbridge."

Inco's chief rival is well-positioned to benefit from the strike because its contract with Mine Mill Local 598/CAW does not expire until the end of January, said the analyst.

Because of a six-month strike in 2000-2001, the local's contract, which normally would end in September, expires at a later date.

That will mean more security for investors, who may wish to park some of their money there for now, he said.

Last week, the analyst said he downgraded Inco stock from buy to hold. The strike could last six to eight weeks, another analyst said Monday, noting that Inco employees are among the country's best-paid hourly workforces and might not mind being on the picket lines for June and July.

"The hourly guys are in a good spot because the nickel price is up," said Kerry Smith of Haywood Securities in Toronto.

"So, that makes it more difficult for the company in terms of their negotiations."

About 3,300 members of United Steelworkers of America Local 6500 in Sudbury and Local 170 in Port Colborne went on strike Sunday morning after almost 95 per cent rejected a company offer.

The Sudbury complex produces nine per cent of the world's nickel; the strike affects about one-third of the mining giant's global workforce and half of its nickel capacity.

No talks were scheduled to resolve the first strike at Inco since 1997. That shutdown lasted a month, as did a 1982 strike. A strike that started in September 1978 lasted until June 1979.

"Right now, the problem is trying to deal with the large gap that exists between the company's and the union's respective positions," Inco spokesman Cory McPhee said.

Pensions were the main issue, McPhee said. With 45 per cent of Inco's Sudbury employees eligible to retire within three years, the company is facing a huge pension shortfall.

The union wants pension payments for employees with more than 30 years of service increased to $3,300 a month from $3,000.

On Monday, Inco's share price gained 68 cents at $28.80. Shares in Falconbridge gained 40 cents Cdn to $18.30.