3 Xstrata grabs Canadian foothold in Sudbury.

The arrival of European mining giant Xstrata in northeastern Ontario should herald "the dawn of tremendous expansion" for the service industry and the economy, says a Northern Ontario mining industry watcher.

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The 2006 global bidding war for Falcon-bridge and Inco will be regarded as a milestone moment for Sudbury and Timmins in the years to come, says Jean-Charles Cachon, a professor of organizational strategy at Laurentian University's faculty of management.

"It's going to be important because it's basically a leap into another league."

Falconbridge and its cross-town Sudbury rival Inco, were second tier miners valued in the $10 billion range. "Now they're in the $20-billion league," says Cachon, among the Rio Tintos and BHP Billitons. "That puts Sudbury among the major players."

As a well-connected company in the London financial markets, the new Canadian entities--Xstrata Nickel and Xstrata Copper--should deliver a huge influx of investment capital into the region, Cachon says.

The British-Swiss company completed its $24.8 billion takeover of Falconbridge after taking up 99.9 per cent of the Toronto-based miner's outstanding stock in October.

Xstrata won control of Falconbridge in August after a heated battle against Inco and Phelps Dodge. The company expects to complete the integration of Falconbridge by year's end.

It fulfilled the company's stated desire to grab a foothold in the nickel industry and add to its diversified copper, zinc, coal and chrome portfolio.

Before this year's takeovers, Cachon says, Falconbridge and Inco represented $12 billion in annual sales. Today, Xstrata Nickel and CVRD-Inco will total more than $40 billion.

For companies supplying them, it's a "huge step up" in providing services to the third and fourth largest mining companies in the world, pushing them into the upper strata of global competition.

Earlier this year, Inco and Falconbridge tried to convince investors and analysts of the value of their proposed merger by giving them a look during a Sudbury tour of how the two companies planned to generate about $550 million in average annual value by combining their operations.

They also highlighted an expected increase in nickel and copper production by approximately 100 million pounds by 2009, and production of platinum group metals by 111,000 ounces in a combined camp.

Xstrata Nickel Chief Executive Officer Ian Pearce was unavailable for comment.

Renowned for its lean management structure, CFO Trevor Reid stressed to a Sudbury business audience late last summer that Xstrata's approach to creating shareholder value is not "slashing and burning" but increasing efficiencies by growing operations and allowing nickel business managers to run their operations.

Xstrata promised to preserve for three years Falconbridge's Canadian nickel, copper, zinc mining, exploration, research and processing operations, and not to lay off workers during that time.

Cachon doubts Xstrata will be handing out any pink slips after that freeze expires. Not with base metal prices, especially nickel, growing four to five per cent every year.

That means building new mines and hiring more highly specialized labour to replace an aging workforce while shifting others into new positions.

"The problem is not shedding workforce, it's finding replacements," says Cachon.

Until discovering their high-grade Nickel Rim South deposit, now under mine construction, Falconbridge geologists were sweating where the next elephant deposit would come from.

Cachon says thanks to steadily improving technology developed by Sudbury's R & D technology community, Xstrata Nickel shouldn't have any problems finding more rich ore bodies in the highly-prospective 135-kilometre rim of the Sudbury Basin.

He says it's also in Xstrata's best interests to finance hard rock mining research in Sudbury's technology cluster.

"Sudbury is the place to be to test that kind of research. It's an ideal lab for anyone doing mining and robotic research."

He says as a world mining capital, Sudbury's service industry offers leading edge expertise in mining-related construction, robotics and automation engineering, exploration, software development, explosives, machinery and even underground vehicles.

By IAN ROSS 

Northern Ontario Business 

QUICK FACTS

Xstrata Nickel

City: Greater Sudbury 

Founded: 1992

CEO: Ian Pearce

No. of Employees: 1500

www.xstratanickel.com