Glencore Xstrata and Vale in talks to combine Sudbury nickel operations: reports

SUDBURY, Ont. – Glencore Xstrata PLC and Vale SA are in preliminary talks about combining their nickel mine operations in Sudbury, Ont., reports said Friday.

Citing sources, the Globe and Mail newspaper and Reuters news agency said the two companies have begun “exploratory” discussions as part of an effort to cut costs.

Vale declined to comment when asked about the report, while Glencore was not immediately available for comment.

Nickel prices which started the year close to $8 per pound, have fallen to trade around $6 to $6.50 per pound in recent weeks.

Vale, which is based in Brazil, owns the former Inco Ltd. nickel operations in Sudbury that it bought in 2006, while Xstrata holds the former Falconbridge Ltd. operations that it acquired the same year.

The takeover deals followed a failed attempt by Inco and Falconbridge to merge with copper producer Phelps Dodge Corp.

The idea of the two companies working together to cut costs is not a new one.

In 2006, shortly after Xstrata took control of the former Falconbridge operations, the company said it had a team ready to discuss cost saving opportunities.

Xstrata said at the time that the companies could cost cuts by maximizing throughput at the Sudbury mills and looking at using existing infrastructure to access new ores that were under the rival company’s boundaries.

Vale and Xstrata also held talks regarding a possible merger deal that were called off in March 2008 without an agreement.