Reuters
Thursday, May 18, 2006

TORONTO (Reuters) - Falconbridge Ltd., which is the takeover target of Inco Ltd. and Xstrata Plc, took the unusual step of reporting results for one month on Thursday, as it tried to show shareholders just how well it has performed.

Adrian Mastracci, investment counsel at Vancouver’s ‘fee-only’ KCM Wealth Management, says, “I think underlying it all they want to tell the world that hey this is a great company and we want the best price for it.”

In an unexpected announcement, Falconbridge reported a 194 percent increase in profits for the month of April, earning $238 million, or 63 cents a share, compared with a profit of $81 million, or 27 cents a share, in April 2005.

"Falconbridge's performance for the month of April further demonstrates our leverage to strong metals prices," Falconbridge Chief Executive Derek Pannell said in a statement.

"Our earnings leverage to current metals prices is creating the backdrop for impressive earnings and free cash flow generation."

However, he acknowledged that the announcement was unusual.

"While we realize that the release of monthly results is unusual, and we will not make a habit of it, we felt it was important that shareholders understand the magnitude of the earnings that we are generating at this crucial time," he said.

Revenues almost doubled to $1.3 billion as realized prices for copper and zinc jumped significantly. Prices of nickel rose 6 percent. Operating expenses rose to $866 million from $498 million due to the higher value of raw material feeds and energy costs.

Falconbridge said Inco does not have access to its books and that the move was only to give shareholders access to material information.

"We cannot let the shareholders make a decision on the valuation of our company without giving them the information," Falconbridge spokesman Denis Couture said.

Analysts said Falconbridge's move was curious.

"If Inco doesn't have access to all this kind of current financial information, this would sort of be an unusual way for them to provide it... which would perhaps help Inco justify a higher bid," said Kerry Smith, an analyst with Haywood Securities.

"To me, I would just assume that Inco has enough accountants and enough information that they would know what the number was anyhow... not sure what they are trying to accomplish here."

John Ing, president of Maison Placements also called it unusual, but said: "They are obviously trying to put all the information that's out there in a timely manner. All's fair in love and war as they say."

Falconbridge has agreed to be taken over by Inco in a deal that would create the largest nickel producer in the world.

On Wednesday, Xstrata, Falconbridge's biggest shareholder, trumped Inco's bid with an unsolicited offer for the rest of Falconbridge's shares. Inco itself is a target of Teck Cominco Ltd.

"I think underlying it all they want to tell the world that 'hey this is a great company and we want the best price for it'," said Adrian Mastracci, president at KCM Wealth Management.

(Additional reporting by Eric Martyn)

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