Inco aims to revive dividends - Company wants to launch Goro, Voisey first

Inco aims to revive dividends - Company wants to launch Goro, Voisey first

Toronto Star

April 22, 2004

Hand assures investors about Ontario operations

Inco Ltd.'s plan to resume development of its giant Goro nickel mine by August may lead the nickel producer to look at another project — reintroducing a dividend plan next year.

Speaking at the company's annual meeting in Toronto yesterday, chief executive Scott Hand said he is confident the company will announce in August that development at Goro, in the French South Pacific territory of New Caledonia, will resume following the site's second review.

"We wouldn't be doing all of the things that we are doing and we wouldn't be having the optimism that we do if we didn't think that there is a very good prospect that this project is going to go ahead," said Hand.

"We moved too quickly last time and this time we are doing it step by step and we're optimistic that we are going to succeed, but we have to await the final results."

Goro, one of the few big nickel projects earmarked for development this decade, was put on hold by Inco in December, 2002, after estimates showed a 30 per cent to 45 per cent cost overrun.

Inco plans to give a progress report on Goro in May.

The company also said it could re-establish its shareholder dividend once Goro and its Voisey's Bay nickel project in Labrador are under way. Inco halted its dividend in 1998 because of difficult market conditions and a commitment to expand the company.

While Inco did not rule out a dividend as soon as 2005 if the nickel market and its cash flow are strong, Hand leaned toward waiting until the two big projects start operating.

"We believe the most important thing is to be sure that we have both projects well under way, well understood, well controlled and well financed.

"And if, at that time, we are satisfied that that has occurred, and we are generating good cash flows, then we should be looking at the possibility of a dividend."

Operations at Voisey's Bay are expected to be commissioned late next year.

Inco's production was hit last year by a three-month strike at its main Ontario operations, but the company has set aside several initiatives for 2005 to help it beat its own target of 500 million to 510 million pounds of nickel this year.

In a tight market, where nickel demand will be limited by available supply, Inco said its Sudbury operations extended the intervals between furnace and maintenance stoppages and will operate this year without any major shutdowns.

Inco's annual meeting also drew protests from environmental activists, criticizing what they called human rights and environmental violations. They cited local indigenous opposition to the Goro project and a sluggish cleanup at a Port Colborne, Ont., nickel refinery that closed in 1984.