Inco Limited reports a first quarter loss of $16

million (U.S.) / Restructuring and cost-cutting programs continue Toronto (PROTEXT) - Inco Limited reported a loss of $16 million, or 13 cents a common share, for the first quarter of 1999, compared with a loss of $13 million, or 13 cents a share, in the fourth quarter of 1998 and a loss of $41 million, or 29 cents a share, in the first quarter of 1998. Fourth quarter 1998 results included an after-tax gain of $20 million, or 12 cents a share, resulting from the sale of the Company's 100 per cent interest in Inco Alloys International. First quarter 1998 results included an after-tax charge of $32 million, or 19 cents a share, associated with the Company's restructuring actions. Commenting on the first quarter 1999 results, Mike Sopko, Chairman and Chief Executive Officer, said that: ``While we are encouraged by the improvement in nickel prices in the first quarter of 1999, our program to reduce costs and expenses throughout Inco continues as part of our overriding objective to restore our profitability even in these difficult market conditions. We continue to believe that the long-term growth in nickel demand is excellent and that it will be only a matter of time before prices return to higher and more normal levels.'' Realized nickel prices, the principal determinant of the Company's profitability, for the Company's primary nickel products (including intermediates), averaged $5,181 per tonne ($2.35 per pound) in the first quarter of 1999, compared with $4,630 per tonne ($2.10 per pound) in the fourth quarter of 1998 and $6,173 per tonne ($2.80 per pound) in the first quarter of 1998. The London Metal Exchange average cash nickel price for the first quarter of 1999 of $4,630 per tonne ($2.10 per pound) increased 17 per cent, compared with the fourth quarter of 1998 but was down 15 per cent relative to the first quarter of 1998. The Company's realized price for copper averaged $1,455 per tonne ($0.66 per pound) in the first quarter of 1999, compared with $1,676 per tonne ($0.76 per pound) in the fourth quarter of 1998 and $2,006 per tonne ($0.91 per pound) in the first quarter of 1998. Realized prices in 1998 benefited from the favourable impact of the Company's copper hedging activities. Net sales from continuing operations were $438 million in the first quarter of 1999, compared with $403 million in the fourth quarter of 1998 and $500 million in the first quarter of 1998. The Company's deliveries of primary metals are shown below: First Fourth First Quarter Quarter Quarter 1999 1998 1998 ------------------------- Nickel in all forms (tonnes) 62,030 59,307 64,267 ------------------------- Copper (tonnes) 34,686 36,129 37,252 ------------------------- Cobalt (tonnes) 466 455 515 ------------------------- (in thousands) Platinum-group metals (troy ounces) 105 108 62 ------------------------- Gold (troy ounces) 14 13 15 ------------------------- Silver (troy ounces) 395 420 410 ------------------------- The Company's finished nickel inventories were 30,498 tonnes at March 31, 1999, compared with 27,347 tonnes at December 31, 1998 and 30,277 tonnes at March 31, 1998. Operating results from continuing operations were earnings of $2 million in the first quarter of 1999, compared with losses of $15 million in the fourth quarter of 1998 and $37 million in the first quarter of 1998. Operating results comprise earnings or loss before income and mining taxes, interest expense, general corporate income and expenses, and minority interest. Sales and cost of sales include deliveries of purchased nickel. The increase in operating results for the first quarter of 1999, compared with the fourth quarter of 1998, was primarily due to higher realized prices for and deliveries of nickel, partially offset by a five per cent increase in nickel unit production costs. The increase in nickel unit production costs was primarily due to higher employee and energy costs. The cash cost of nickel production, net of by-product credits, was $2,932 per tonne ($1.33 per pound) for the first quarter of 1999, up slightly from $2,888 per tonne ($1.31 per pound) for the fourth quarter of 1998 due to lower by-product prices, but down 18 per cent from $3,594 per tonne ($1.63 per pound) for the first quarter of 1998. First quarter 1998 operating results included a pre-tax charge of $64 million associated with restructuring actions, comprising $50 million for severance costs relating to employment reductions and a writedown of $14 million relating to assets affected by the Company's restructuring actions. First quarter 1999 operating results, compared with the first quarter of 1998, also reflected lower realized prices for nickel, copper and cobalt, partially offset by a 10 per cent decrease in nickel unit production costs and higher deliveries of platinum-group metals and nickel. The decrease in nickel unit production costs was primarily due to reduced employment and other costs, and improved ore grades and recoveries. Cash provided by the Company's operating activities for the first quarter of 1999 was $19 million, compared with cash used for operating activities of $34 million in the first quarter of 1998. Capital expenditures were $74 million in the first quarter of 1999, down from $106 million in the first quarter of 1998, principally reflecting lower spending in Indonesia associated with the expansion project of PT International Nickel Indonesia Tbk (``PT Inco'') as it nears completion. PT Inco currently expects to complete its expansion project in the second half of 1999. Dividends of $10 million were paid in the first quarter of 1999 to minority shareholders of Inco TNC Ltd. (formerly Tokyo Nickel Company, Ltd.) (``Inco TNC'') as part of a series of related transactions increasing the Company's equity interest in Inco TNC from 51 per cent to 67 per cent. During the quarter, work on the pilot plant at the Company's 85 per cent-owned Goro nickel project in the French Overseas Territory of New Caledonia proceeded on schedule. In late April, key modules for the plant arrived at site. Construction is currently expected to be completed in August 1999. At March 31, 1999, the Company's total debt increased $87 million to $1,610 million, compared with $1,523 million at December 31, 1998, reflecting principally the financing of the expansion of PT Inco and other capital expenditures. The Company's total debt:equity ratio was 27:73 at March 31, 1999, compared with 26:74 at December 31, 1998. At March 31, 1999, the number of the Company's Common Shares issued and outstanding was 166,059,082. The Board of Directors today declared a dividend of $0.6875 per share in respect of the Company's 5.5% Convertible Redeemable Preferred Shares Series E, payable June 1, for the quarter ending May 31, 1999, to shareholders of record on May 7. Voisey's Bay Update ------------------- Status of Negotiations with Provincial Government The Company and its wholly-owned subsidiary, Voisey's Bay Nickel Company Limited (``VBNCL''), recently have held confidential discussions on an informal basis with officials of the Province of Newfoundland and Labrador to review how negotiations would be restarted on the key issues which the parties have identified with respect to the objectives for Voisey's Bay. The Company's position has been, and will continue to be, that the development of the Voisey's Bay deposit by the Company should be based upon sound economic considerations and the realization of an appropriate rate of return for the Company's shareholders, while at the same time meeting the legitimate requirements of both governments and the aboriginal groups concerned. The Company has continued to evaluate possible concepts for development of the Voisey's Bay deposit, which would provide for an economically viable project and address the principal issues of concern to the Province. The Company currently expects to be in a position to discuss these concepts with the Province once the federal and provincial governments have indicated how they intend to deal with the key recommendations set forth in the April 1, 1999 report of the panel overseeing the environmental assessment process referred to below. The project has experienced delays, which have enabled other projects to be developed to meet at least part of the expected long-term growth in nickel demand. The governments and other interested parties must recognize that the economic viability of the Voisey's Bay project should be assessed in relation to the numerous other nickel projects, both greenfield ones and expansions of existing operations, around the world which are currently being evaluated with respect to their timing and feasibility of development. Status of Exploration Program During the first quarter of 1999, exploration drilling and geophysical work continued, consistent with the exploration program developed for 1999. With four diamond drill rigs in operation, drilling both in the main block area held by VBNCL where the Voisey's Bay deposit is located and in four regional areas in Labrador has been designed to delineate extensions to known deposits as well as test more regional geological and geophysical targets away from the main block area. Fifteen boreholes were completed during the quarter with three still in progress at the end of the quarter. All boreholes completed were surveyed with the three component borehole EM system. A total of 13,434 metres of drilling was completed during the first quarter of 1999, compared with 13,356 metres having been drilled in the first quarter of 1998. Drilling of the previously indicated new zone, the NED zone, located 400 metres north of the Eastern Deeps section was completed. Two holes drilled during the quarter on the west and east sides of this new zone returned mineralized intercepts of 25.2 metres grading 0.96% nickel, 0.82% copper and 0.056% cobalt and 15 metres grading 1.11% nickel, 0.93% copper and 0.074% cobalt, respectively. This zone is expected to add modest additional tonnage and will be included in the updated estimate of the total resources at Voisey's Bay to be completed by mid- 1999. Regional stratigraphic drilling was carried out during the first quarter of 1999 in areas located 1,000 metres east of the Far Eastern Deeps and seven kilometres southwest of the Ovoid. The troctolitic rocks in the boreholes drilled were not mineralized. Stratigraphic drilling will continue focusing on other targets near known mineralization. Preparations began late in the first quarter to mobilize a geophysical crew for the Franco target on the Kiglapait property located about 60 kilometres north of the main block area. Drilling last fall in this area encountered narrow intersections of nickel mineralization. Follow-up drilling will focus on a six kilometre long geophysical anomaly related to the base of an intrusion located on the southwestern edge of the Kiglapait property. During the quarter, the mineral licenses held by VBNCL covering the main block area, including the two licences covering the Voisey's Bay deposit, were extended for a second five-year term. The terms of the extension require VBNCL to continue to meet certain minimum exploration expenditures on the properties covered by the licenses. Status of Environmental Permitting and Discussions with Aboriginal Groups On April 1, 1999, the panel created to oversee the harmonized environmental review process for the mine, mill and related facilities and infrastructure in the Voisey's Bay, Labrador area (the ``Mine/Mill Project'') issued its report and recommendations. The panel recommended that the Mine/Mill Project proceed subject to a number of other separate recommendations. While the panel made over 100 recommendations as part of its report, the Company believes that all of the environmental recommendations can be addressed so long as they do not create unrealistic burdens on the project. The panel was complimentary with respect to how the Company and VBNCL had collected data, implemented studies and considered the many environmental, socio- economic and aboriginal community issues that the panel had required be evaluated. The panel's report included a limited number of recommendations outside the environmental area that could affect the economics, scope and timing of development. One of these recommendations focused on project life, proposing that production levels should assure a 20 to 25 year project life. Two other non-environmental recommendations concerned having (1) the governments reach agreements in principle on land claims or alternatives to adequately address certain issues of importance to the Labrador Inuit Association (``LIA'') and the Innu Nation and (2) the Company/VBNCL reach separate impact and benefits agreements (or IBAs) with the LIA and the Innu Nation. The Company has previously stated that, in addition to environmental clearance, in order for the project to proceed the following three areas had to be adequately addressed on a timely basis: (1) having the governments and the LIA and Innu Nation reach appropriate arrangements on land claims; (2) having mutually acceptable IBAs in place; and (3) reaching agreement with the Province on key issues relating to the project's scope. The Company continues to believe that, if the interested parties work together, recognizing the economic, technical and other realities that must be taken into account, then these key issues can be addressed to meet the needs and objectives of the governments and the LIA and the Innu Nation. The Company does not believe that there are any insurmountable issues in reaching mutually satisfactory IBAs on a timely basis so long as there is a clear recognition of the realities of what the project can afford. In March 1999, a decision was rendered by a Canadian federal court in the September 1997 action filed by a Newfoundland-based organization, whose members include environmental and other groups. This ruling, which has not been appealed, confirmed the decision made by a federal minister that the environmental review and approval process for any proposed smelter and refinery facilities be separate from the process governing the Mine/Mill Project. This news release contains forward-looking statements regarding the Voisey's Bay project, the Goro nickel project and the Company's other businesses and operations. Actual results may differ materially from those contemplated by these statements depending on, among others, such key factors as the timing of receipt of necessary federal and provincial environmental and other approvals, settlement of aboriginal land claims, exploration activities and results, engineering and construction timetables, financing arrangements, supply and demand for metals to be produced, production levels and costs, and metals prices. Unaudited Condensed Consolidated Financial Statements Are Attached. INCO LIMITED ------------------------------ (U.S. dollars in millions) CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) ---------------------------------------------- First Quarter Fourth Quarter 1999 1998 1998 --------- --------- ---------- - Net sales $ 438 $ 500 $ 403 --------- --------- ---------- - Costs and expenses Cost of sales and operating 417 525 406 Selling, general and administrative 21 28 26 Research and development 3 5 4 Exploration 6 8 6 Interest 20 22 20 --------- --------- ---------- - Total costs and expenses 467 588 462 --------- --------- ---------- - Loss before taxes and minority interest (29) (88) (59) Income and mining taxes (11) (42) (29) --------- --------- ---------- - Loss before minority interest (18) (46) (30) Minority interest (2) 1 3 --------- --------- ---------- - Loss from continuing operations (16) (47) (33) Earnings from discontinued operations - 6 20 --------- --------- ---------- - Loss (16) (41) (13) Dividends on preferred shares (6) (6) (7) Dividends on class VBN shares - (1) - --------- --------- ---------- - Loss applicable to common shares $ (22) $ (48) $ (20) --------- --------- ---------- - --------- --------- ---------- - Net earnings (loss) per common share Basic and fully diluted Continuing operations $ (0.13) $ (0.32) $ (0.25) Discontinued operations - 0.03 0.12 --------- --------- ---------- - $ (0.13) $ (0.29) $ (0.13) --------- --------- ---------- - --------- --------- ---------- - Common shares outstanding (weighted average, in thousands) 166,059 166,038 166,059 --------- --------- ---------- - --------- --------- ---------- - INCO LIMITED ------------------------------ (U.S. dollars in millions) CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) ------------------------------------ March 31, December 31, 1999 1998 ----------- ------------- Assets Cash and marketable securities $ 96 $ 82 Accounts receivable 238 256 Inventories 487 473 Other current assets 63 63 ------ ---------- Total current assets 884 874 Capital assets 6,248 6,241 Other assets 239 227 ------ ---------- $7,371 $7,342 ------ ---------- ------ ---------- Liabilities and shareholders' equity Long-term debt due within one year $ 64 $ 66 Accounts payable and accrued liabilities 452 471 Taxes payable 28 23 ------ ---------- Total current liabilities 544 560 Long-term debt 1,546 1,457 Deferred taxes 170 186 Post-retirement benefits 462 455 Future removal and site restoration costs 40 38 Minority interest 273 288 Shareholders' equity 4,336 4,358 ------ ---------- $7,371 $7,342 ------ ---------- ------ ---------- INCO LIMITED ------------------------------ (U.S. dollars in millions) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) ---------------------------------------------- First Quarter 1999 1998 --------- --------- Operating activities Loss before minority interest $ (18) $ (46) Charges (credits) not affecting cash Depreciation and depletion 66 64 Deferred income and mining taxes (17) (68) Other 2 7 Decrease (increase) in non-cash working capital related to operations (11) 12 Accruals less than payments for post-retirement benefits (3) (3) --------- --------- 19 (34) --------- --------- Investing activities Capital expenditures (74) (106) Other (2) (3) --------- --------- (76) (109) --------- --------- Financing activities Net increase in borrowings 87 143 Common shares issued - 1 Preferred, class VBN and common dividends paid (6) (11) Dividends paid to minority interest (10) (1) --------- --------- 71 132 --------- --------- Discontinued operations - (6) --------- --------- Increase (decrease) in cash and marketable securities 14 (17) Cash and marketable securities at beginning of period 82 56 --------- --------- Cash and marketable securities at end of period $ 96 $ 39 --------- --------- --------- --------- ots Original Text Service: Inco Limited Internet: http://www.newsaktuell.de Contact: Investor Relations: Sandra Scott, Tel: (Toronto) 001 416 361-7758 Media Relations: Jerry Rogers, Tel: 001 416 361-7754 Subscribers please note that material bearing the slug "PROTEXT" is not part of CTK's news service and is not to be published under the "CTK" slug. 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