Battle for mines begins as cos hunt for fresh supplies

OTTAWA: From Ontario, Canada, to Rio de Janeiro in Brazil to the US city of Phoenix, Arizona, the global battle over precious metals has blasted open as big mining companies hunt down fresh supplies.

And the rewards for those companies that emerge victorious are likely to be lucrative as commodity prices continue to strike record highs.

However, the rich seams and swelling corporate coffers have also sparked discontent, particularly in Chile where miners at the world’s largest copper mine recently started strike demanding better benefits.

Brazilian mining giant CVRD muscled on to the scene as it unveiled a whopping $15.1-bn takeover bid for Canadian nickel miner Inco, which is already being pursued by two other mining groups in a fierce contest.

As Companhia Vale do Rio Doce (CVRD) announced its bid, the price of nickel struck an all-time high of $27,300 per tonne in London.

Global nickel supplies are already stretched and analysts said prices shot higher on reports that Inco had been hit by a strike at its Voisey’s Bay mine. Industrial tensions have also soured in Chile of late as metals prices streak ever higher.

Northern Chile’s Escondida mine, the world’s largest copper mine, was operating at less than 10% of capacity on Friday as over 2,000 workers demanding better pay continued a strike which was launched on Monday.

Workers at the vast mine, which is run by Anglo-Australian resources group BHP Billiton, are demanding a 13% wage increase as they say global copper prices have tripled since their last contract was signed three years ago.

Copper prices breached $8,000 per tonne in the wake of the strike announcement. As commodity prices have soared, partly on mounting demand from China’s growing economy and its hunger for metals such as nickel which it does not possess in great volumes, companies have started eyeing their rivals.

CVRD was the latest group to enter the bidding war for Inco with its 17bn Canadian dollar pitch, or 86 Canadian dollars ($76.79) per Inco share. The Brazilian company’s chief executive Roger Agnelli made it clear that CVRD has global ambitions.

“The operations of the two companies are complementary and the combination will enhance our capabilities to benefit from the fast changing global landscape in metals and the mining industry,” he said.The deal would enable CVRD to become an even larger player in the world market for such metals as iron ore, pellets, nickel, bauxite, alumina, manganese and ferroalloys.

Canada’s Teck Cominco and US mining behemoth Phelps Dodge are already bidding to swallow up Inco, even as its shareholders mull competing offers.Officials at Inco could not be reached for comment, but the takeover battle has boosted its share price. On the New York Stock Exchange, its stock closed up $2.63, or 3.4%, at $79.21 on Friday.

The nickel miner’s board of directors said on Tuesday that they were recommending Inco’s shareholders reject the offer from Teck Cominco in favour of the offer from Phoenix-headquartered Phelps Dodge.

However, the board also said it would continue its talks with Teck Cominco in case a “superior proposal“ emerges.Inco shareholders stand to receive 79.81 Canadian dollars in cash and shares from Phelps Dodge if that deal goes through, compared with Teck Cominco’s bid of 82.50 Canadian dollars. Teck Cominco has said its offer will expire on August 16.

Phelps Dodge and Inco had originally sought a three-way merger with Canadian copper and nickel mine group Falconbridge, but withdrew their offer recently after Anglo-Swiss firm Xstrata swooped and upped its bid for Falconbridge.