Brazilian miner purchased Inco for $19.4 billion on Oct. 6, 2006
Ten years ago today, Canadians became much more familiar with a Brazilian mining company called Vale. On Oct. 6, 2006, Vale purchased homegrown miner Inco in a $19.4-billion bid.
The New York Times said at the time the sale “further undermines Canada’s status as a force in the mining industry.” But with the benefit of hindsight, others have said Vale’s purchase of Inco had to happen.
Jean-Charles Cachon, chair of Laurentian University’s department of management, has argued both Inco and Falconbridge did not have the financial clout needed to expand their operations and meet growing global demand for nickel and copper.
In 2006, said Cachon, both companies forecasted demand for nickel and copper would increase by about 50 per cent over the next seven years, due to growing demand in emerging markets like China and India.
“In order to achieve that increase in production, the two companies combined needed to invest several billion dollars,” Cachon said. At the time, Vale was around eight or nine times the size of Inco, Cachon said.
Even a merger between Inco and Falconbridge would not have created a company large enough to make those investments, he argued. To complicate matters, Vale had a number of potential suitors at the time, including Canadian mining giant Teck Cominco, and, of course, Vale.
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