Exploring the Inco merger.

Northern mine suppliers and service providers were not far behind Inco Ltd. CEO Scott Hand and Falconbridge Ltd. CEO Derek Pannell in their optimism after news of their companies' intended merger was announced Oct. 11.

Technically, the deal is a $12-billion friendly takeover of Falconbridge by Inco that has been discussed on both sides since last summer. It is not set in stone just yet. The deal is subject to a series of regulatory approvals and must receive the support of two-thirds of each of the company's shareholders. Also, Swiss-based Xstrata, which holds 20 per cent of Falconbridge, could still "come over the top," according to Pannell. But Inco's offer is a "more than reasonable package," which promises savings no other combined offer can, he said, adding any debt created by the deal could be paid off within two years.

The new company, which would retain the name Inco and have Hand as its CEO and Pannell as its president, would be the world's largest producer of nickel (1 billion pounds per annum by 2009) and fifth-largest producer of copper.

Inco is offering $34 cash or 0.6713 of one of its shares plus five Canadian cents in cash for each Falconbridge common share.

Worth $25 billion, the new Inco would employ 25,000 people worldwide. Hand and Pannell said there are no plans to close any individual operation in the new Inco family. All current collective agreements will be honoured.

In Greater Sudbury, where according to Inco North America/Europe president Mark Cutifani the greatest impact of the merger will be felt, there are more people employed by mine service providers and suppliers than in the mines themselves.

Pannell said the merger of two Canadian companies into one powerhouse would be better for Sudbury and Timmins than Falconbridge being taken over by a foreign interest.

"Bringing these two companies together ... gives us a more robust financial position," said Pannell. "It is a company that will source its services. For the long-term, it bodes well for longevity and employment in those centres, whereas in another alternative, if control were to go outside (the country), we would tend to lose those services as well as financial investment services in Toronto."

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On first blush, the company representatives Northern Ontario Business spoke to were optimistic.

Toromont Inc. has had a long-term relationship with Inco and has been endevouring to do the same with Falconbridge.

"This is an opportunity to strengthen our relationship with both companies under one umbrella," says Kent Knowlton, Toromont's vice president of sales.

"As they grow, we will grow with them."

He says he knows many business owners who are adopting a "wait and see attitude," but on the surface the merger appears to be a move in a positive direction.

Similarly, Century Systems Technologies Inc. president Ray Auger does work with Inco and Falconbridge globally and sees this as a positive step in Inco's international position.

In the announcement, Cutifani spoke of Inco wanting to contract local companies for local work, but if they cannot get quality product or service, they will contract externally.

That sort of comment makes companies conscious of delivering a quality product, which should be done anyway, according to Auger.

Brad Hurley is vice-president of the multi-national Hurley Group. He sees opportunity in the new mines the merger's projected cost-savings will make economical to open.

"For us I think it's positive, because obviously Falconbridge has new mines opening up and Inco has the potential to open up a lot of new properties in Sudbury," he says. "The profitability will just expedite the process of getting underground quicker.

"So more mines means more profitability, which means more jobs, more sub-suppliers and more vendors required. I think it can only be good."

Hurley "hopes" the new Inco will reinvest in Sudbury.

"We're an international company, so even if they invested outside of the Sudbury Basin, hopefully we would still do work with them."

Mayor to ask employment question

Sudbury Mayor David Courtemanche said he sees a lot of positives coming from the merger in a statement to the media.

"I understand the concerns that some people have regarding jobs and the long-term impact (of the deal)," he added. "In the coming weeks and months, I will be seeking more details regarding this merger and its impact on the local workforce."

Dick DeStefano, executive director of the Sudbury Area Mining Supply and Service Association (SAMSSA) said in a release he sees the merger as just another part of Sudbury's evolution into Canada's mining centre of excellence.

"The Greater Sudbury Development Corporation, with endorsements from City Council, has identified the supply and service industry as a key factor in creating real measurable wealth in the cluster," he said. "This will only accelerate during the next five years.

"Greater Sudbury will become the Mining Centre of Excellence within the next year."

Timmins-James Bay MPP Gilles Bisson, Nickel Belt MPP Shelly Martel and Timmins-James Bay MP Charlie Angus (all New Democrats) released a joint statement that expressed their reservations over the deal.

In the near future, Sudbury operations will shed 100-150 jobs, according to Hand and Pannell. According to Inco spokesman Cory McPhee, the vast majority, if not all, of those losses will be managed through natural attrition.

But in the long term, there could be 500 or 600 new jobs added to mine operations in the area as new mines made economical by the $350 million the company hopes to save annually through synergies created by the merger are opened. Aspects of the Thompson, Manitoba smelter's process can be applied in Sudbury, for example. That and other processing sequence synergies will help the company refine metals in the ideal place. It will save on freight costs, since there are Inco mines near Falconbridge smelters and vice versa in the Sudbury area.

The new mines will save the jobs of many miners working in Falconbridge mines scheduled for closure in the next few years, according to Hand and Pannell.

Bisson is hopeful all that will pan out. He wants the company to make sure the merger is not built on a foundation of concessions from unionized workers and retirees.

"There needs to be a commitment to strengthening each operation."

Martel warned talk of synergies can often lead to job losses. "We want the new company to commit to maintaining current employment levels, and to re-invest in the various operations," she said.

If Inco is to control all copper operations, then we need to ensure synergies are for the best of the community, said Angus.

"This could be a good thing but we must make sure communities are not played against each other," he said. "I would like to see a commitment to Kidd Creek operations in Timmins."

The United Steelworkers of America, the largest union in Inco and Falconbridge operations across Canada, echoed their sentiment. "If this buyout is done with respect and consideration of workers and their contribution to the future of the new Inco, then there should be no loss of jobs anywhere," said Steelworkers' Ontario/Atlantic Director Wayne Fraser.

His membership includes Inco employees in Sudbury and Falconbridge office workers at Port Colborne, technical employees in Sudbury, the current workforce at Inco Voisey's Bay, Nifd. and Falconbridge workers in Bathurst, NB.

Workers at the Kidd Creek Mine in Timmins have been on strike since the beginning of the month.

The CAW says it essentially approves of any deal that will enhance the long-term viability of ore bodies in the Sudbury Basin, provided there are:

* Good-paying long term jobs for the workforce now in place and those employed by the new Inco;

* The possibility of secure jobs for the youth of our community;

* Continued concern for the environment of this region by the corporation that will exploit the natural resources and;

* The continuation of benefits and pensions into retirement for the workers who produce the wealth for the shareholders of the new corporate entity.

The Ontario Mining Association (OMA) declined to comment, given the still hypothetical nature of the merger.

www.inco.com/newinco

By CRAIG GILBERT, KELLY LOUISEIZE and ADELLE LARMOUR

Northern Ontario Business