Xstrata Nickel extends olive branch to Inco Ltd.

• Author: Ross, Ian
• Position: SPECIAL REPORT: MINING

Xstrata officials are holding out an olive branch to Inco and the future owners of the Canadian nickel mining giant to consider teaming up on a Sudbury joint venture.

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Newly-appointed Xstrata Nickel CEO Ian Pearce and Xstrata CFO Trevor Reid toured the company's recently-acquired Falcon-bridge assets, in late August, while meeting with employees and community leaders to outline their "value-creating" growth strategy, and allay any fears associated with a hostile takeover.

The Anglo-Swiss miner has promised no job cuts in operations personnel for three years while giving complete authority and autonomy for the nickel business unit to run their own operations.

"We are responsible for providing the capital, they are responsible for running their businesses," Reid told a Sudbury and District Chamber of Commerce breakfast crowd of business people, local politicians, labour leaders, mining suppliers and Inco officials on Aug. 31.

As a well-connected company on the London financial market, Reid pledged to be a good corporate citizen and promised to provide the necessary capital to maximize the Sudbury operation while seeking partnership opportunities wherever possible. Xstrata has fostered global partnerships with Anglo American, BHP Billiton and Teck Cominco.

"We're not going to spend $20 billion on a company to see it whither and die through lack of support," said Reid.

Xstrata's Aug. 17 acquisition of Falcon-bridge fulfilled a long-held desire to grab a foothold in the nickel industry and add to their diversified copper, zinc, coal and chrome portfolio.

Renowned for its lean management structure, with some 30 employees at their London and Zug, Switzerland corporate offices, Reid stressed Xstrata's approach to creating shareholder value is not to lower costs by "slashing and burning", but increasing efficiencies through growing operations.

Part of Xstrata's plan for Sudbury is to improve efficiencies by pursuing a partnership with the prospective new owner of Inco, most likely Brazilian miner Companhia Vale do Rio Doce (CVRD).

Soon after Xstrata chief executive Mick Davis appointed Pearce (formerly Falcon-bridge's chief operating officer) to the head of his nickel business, he extended an invitation for Inco's suitor to join them in creating a consolidated mining camp.

Last fall, Inco and Falconbridge began early legwork to consolidate operations during their merger talks.

With Inco's North American president Mark Cutifani...