Phelps Dodge and mining consolidation
US mining company Phelps Dodge announced it had agreed to acquire two Canadian mining companies, Inco and Falconbridge. The deal is worth $35.8 billion, Inco was in the process of buying Falconbridge, so Phelps Dodge intends to snap both companies up. The new company will be named Phelps Dodge Inco.
Phelps Dodge is primarily a copper producer, the largest publicly-held copper miner in the world. (Only Chile's Codelco is bigger.) The Inco/Falconbridge deal will make it the world leader in nickel production. The company will also be the leader in molybdenum production.
In the contentious and consolidating mining world, Inco had been targeted by Canadian mining company Teck Cominco, while Inco had been bid for by Swiss miner XStrata, and both companies are serious suitors. Phelps Dodge was brought in by Inco management as a "White knight". In addition, some analysts think global mining giants BHP Billiton and Rio Tinto may make another bid.
Inco, which focuses on nickel, has operations in Canada, Indonesia, and the UK. Falconbridge, which was formerly called Noranda, is big in copper and nickel, but also mines aluminum, zinc, and lead. Its primary operations are in the US and Canada.
In addition to mining copper, Phelps Dodge also mines gold, silver, and molybdenum. It produces specialty wiring for the electronic industry. It recently sold its chemical division Columbian Chemicals to a Korean company, DC Chemical, for $540 million. The deal gave Dc over 60% of the market for carbon black (used in coloring and manufacturing) in South Korea. (Ironically, it has recently been told by the Korean antitrust commission to sell off the acquisition.)
Metals have been subject to wild price swings. While now prices are high, the few the owners the likelier it is the companies in the market can adjust quickly to demand changes and keep prices more stable. It looks more and more that only three or four companies in each mining area will survive the current rush to consolidation, and if Phelps Dodge has its way, it will be a sure survivor.
9:00:44 PM 
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