Aug. 12, 2006: #2

Phelps Dodge Profit Drops, Miners Stand by Inco Deal
www.resourceinvestor.com/pebble.asp?relid=21971

Xstrata's bid was cleared by Canadian foreign-ownership regulators Tuesday, in a move that made Xstrata's offer is lower-risk and, analysts said, could precipitate withdrawal of shares tendered to Inco's bid. [Someone wrote that they always clear these deals, so what good are the regulators, if that is the case?]

[....] Barry Allan, an analyst with Research Capital Corp., has maintained Inco will do whatever it takes to get the Falconbridge deal done, and said Wednesday that Inco may still have a trick or two up its sleeve.

But, he added ''it's not clear that Inco is in the driver's seat here at all in securing its three-way merger.''

The United Steelworkers union, which represents workers at both Falconbridge and Inco, blasted Ottawa's decision to give Xstrata the green light Wednesday, pointing to a potential loss of Canadian resources and jobs.

Stock markets lower despite strong retail data; new bid surfaces for Inco , Malcolm Morrison, Canadian Press, August 11, 2006
www.canada.com/vancouversun/story.ht
ml?id=6a47517a-b6b8-4bbd-985d-33d3e438f98e&k=8419

[....] Brazil's CVRD (NYSE:RIO) is bidding $17 billion or $86 a share for nickel giant Inco. Vancouver-based Teck Cominco Ltd. (TSX:TCK.B) previously made a cash-stock bid for Inco worth about $86 a share, while Inco has backed a similar takeover bid by U.S.-based Phelps Dodge (NYSE:PD).

Inco shares were up $2.19 to $88.44 while Teck shares jumped $2.38 to $78.57.

"The beat goes on," said John Kinsey, portfolio manager at Caldwell Securities.

"Their market seems to be anticipating that either one or both of Phelps and Teck will extend and raise their offers." [....]

COMPANHIA VALE DO RIO DOCE (CVRD)

Madrid bolsa: CVRD info
www.bolsamadrid.es/comun/fichaemp
/fichavalor.asp?isin=BRVALEACNPA3&id=ing

Incorporated on June 1, 1942 as a state owned company and privatized on May7, 1997, Companhia Vale do Rio Doce - CVRD is one of the most important and productive business groups in Brazil, with international operations and customers in more than 30 countries. CVRD today maintains commercial offices in North America (New York), Europe (Brussels) and Asia (Tokyo and Shanghai), the locations of its principal customers.

www.cvrd.com.br/files/factsheeti.pdf

CVRD Overview

Incorporated in 1942, Companhia Vale do Rio Doce (CVRD) isthe largest diversified mining company in the Americas and the fifth largest company in the global metals & mining industry, with a market capitalization of approximately US$ 20billion. CVRD shares are traded on the New York StockExchange - NYSE (RIO and RIOPR), on the BOVESPA (Vale3and Vale5) and on Latibex (XVALP and XVALO). Average dailytrading is close to US$ 80 million. The ADR depositary agent isJP Morgan Chase.

CVRD is the largest global producer and exporter of iron ore and pellets with a participation of 33% of the seaborne market. It is the world’s second largest producer of manganese and ferro alloys and have a participation of 11% of the manganese seaborne market. Bothironore andmanganese are very important raw materials for steelmaking.

CVRD is one of the world’s lowest cost integrated producers of aluminum (bauxite, alumina and primary aluminum), and is a large producer of kaolin, used for paper coating, and potash, a raw material for the fertilizer industry. In July 2004, CVRD inaugurated the Sossego copper mine, its first copper project from a series to be implemented until 2010. It is also starting to develop nickel projects aiming to become one of the three largest global mining companies by the end of this decade.

It is a natural resources powerhouse, with vast reserves of iron ore, bauxite, copper/gold, kaolin, manganese, nickel andpotash. Its iron ore resources support current production of 200 million tons per year for the next 200 years. CVRD holds 11% of the total estimated global bauxite reserves and mineral rights to an area equivalent to 2.5 times the size of Belgium.

CVRD is the largest logistics player in Brazil, owning and operating several railroads and ports.

Up to 89% of its revenues are US dollar denominated while less than 30% of costs are US dollar denominated. Therefore, this characteristic of the Company cashflow provides a natural currency hedge.

CVRD headquarters and main assets and operations are located in Brazil, with offices in New York, Brussels, Tokyo and Shanghai. It owns companies in the USA (California Steel Industry, San Bernardino, Ca.), France (RDME, Dunkerque), Norway (RDMN, Mo I Rana) and Bahrain (GIIC).

Looking Forward

CVRD growth strategy is focused on shareholder value creation through emphasis in profitable organic growth. TheCompany believes that organic growth is the most important driver of cash generation. It has a US$ 8.5 billion project pipeline of low-cost profitable projects to be developed from 2004 to 2010. Acquisitions also may generate value to the shareholders and the Company is always analyzing good opportunities.

Company Fact Sheet Companhia Vale do Rio Doce

High Quality Portfolio
Iron Ore and Pellets
Aluminum - Bauxite, Alumina and Aluminum
Manganese and Ferro Alloys
Industrial Minerals - Kaolin and Potash
Copper/Gold and Nickel
Railroads and Ports
Stakes in world class steel companies [....]

Brazil's CVRD makes $16.67B play for inco -- Two-year search for partner , Drew Hasselback, Financial Post / National Post, August 12, 2006
http://www.canada.com/nationalpost/financialpost
/story.html?id=8f27343e-414d-4b04-8865-0fde9b49e6ae&k=73594

[....] CVRD's bid for Inco is the Brazilian company's third significant foray into the Canadian mining world. In February, CVRD bought Vancouver-based Canico Resource Corp. for $765-million. The transaction gave CVRD control over the Onca-Puma nickel project in Brazil. Inco was a 14% shareholder in Canico, and retains royalty rights on future production.

Less successful was CVRD's attempt in 2004 to buy what was then Canada's largest mining company, Noranda Inc. After those talks failed, Noranda ultimately merged with Toronto-based Falconbridge Ltd. Switzerland-based Xstrata PLC is poised to acquire Falconbridge next week with a friendly all-cash offer of $18.6-billion.

[....] "Would I like to get into iron ore? I'd love it," [Scott Hand, Inco's CEO] said. "One of the things that I've always said -- and I'll say it until they put me in the wooden box -- is that you want to be in the metals and materials that China needs and doesn't have."

Miners like the iron business because it uses contracts that fix prices for one-year terms. By contrast, base metals such as nickel and copper are sold at spot prices, which can fluctuate wildly. [....]

CVRD already has an office in Shanghai ... all set. Does it partner with a Chinese or Canadian Chinese company? I notice students have been doing internships in Brazil at CVRD -- part of the UBC mining engineering course. UBC 4th Year Mining Engineering Trip to Brazil: Sponsor report Package -- pdf

Check further; there might be other liberally interesting ties ... perhaps not. Was there any taxpayer funding for a "center of excellence"? I have noted that descriptor used for "initiatives" closely connected to a previous government's own aims and/or businesses and friends, using taxpayer cash.



One family's shares hold Teck's future -- Last chance for Inco?: If Keevils switch to common shares, 'that would sway a lot of investors' , Boyd Erman, Financial Post, August 12, 2006
www.canada.com/nationalpost/financialpost/story.ht
ml?id=3fc015bf-16aa-4965-8417-67d0d8ad0770

The next few days will reveal how badly Teck Cominco Ltd.'s controlling Keevil family wants to be a global force in the mining industry.

Teck's bid for nickel miner Inco Ltd. is on life support after Brazil's Companhia Vale do Rio Doce yesterday unveiled an $86 a share bid that's comparable in face value, but is all cash rather than the mix of $40 cash and the balance in shares that Teck is offering.

[....] The Keevils took control of the company in 1959, and today share a majority voting stake with Sumitomo of Japan, using super voting stock.

That setup is distasteful to many shareholders who would otherwise consider supporting Teck. Should the Keevils and Sumitomo pledge to give up their super voting shares in return for common shares, they will give their company a shot at winning Inco and vaulting into the top tier of miners. [....]

David Kilgour and David Matas: Investigators into Organ Harvesting Reply to Chinese Regime , Aug 10, 2006
www.theepochtimes.com/news/6-8-10/44796.html

Editor's Note: On July 6 former Canadian Secretary of State (Asia Pacific) David Kilgour and international human rights lawyer David Matas released the report of their independent investigation into the allegations that large scale organ harvesting from living Falun Gong practitioners was taking place in China. They reported these allegations to be credible. In a response issued by the Chinese Embassy in Ottawa on the day the same day their report was released, and again in another response issued by the Embassy on July 26, Kilgour and Matas were subjected to criticism. This statement is their response to the Chinese regime's statements.

[....] Our sole concerns are respect for the truth and human rights.

10. Both Chinese statements say:

"China has consistently abided by the relevant guiding principles of the World Health Organization endorsed in 1991, prohibiting the sale of human organs and stipulating that donors' written consent must be obtained beforehand and donors are entitled to refuse the donation at last minute."

This statement was belied by the facts. The China International Transplantation Network Assistance Centre Website until April of this year set out a price list for transplants. The price list was removed from the website in April, but is still archived. To see the web site now, go to
http://en.zoukiishoku.com .
To see the archived site, go to
http://archive.edoors.com/render.php?uri=http%3A%2F%2Fen.zoukiishoku.com%2Flist%2Fcost.htm+&x=16&y=11 .
As well, many individuals can attest to paying for organ transplants in China.

11. The statement in both responses that China has consistently abided by the principle stipulating that donors' written consent must be obtained beforehand is also belied by the facts. Human Rights Watch has reported that consent is obtained from executed prisoners in only a minority of cases. The organization writes that even in this minority of cases

"the abusive circumstances of detention and incarceration in China, from the time a person is first accused of a capital offense until the moment of his or her execution, are such as to render absurd any notion of "free and voluntary consent."

Organ Procurement and Judicial Execution in China, August 1994.

12. Both Chinese statements say:

"China has issued a regulation on human organ transplants, explicitly banning the sale of organs and introducing a set of medical standards for organ transplants in an effort to guarantee medical safety and the health of patients. The regulation requires medical institution which is qualified for practising human organ transplant to register at provincial level health department. Unregistered medical institutions are forbidden to practice human organ transplant. If the government finds any registered institution violating the regulation, it will cancel the registration and punish the people responsible."

We acknowledge that this is so, and wrote about it in our report. We also note that this legislation came into force only a few days before our report was released on July 1st. It is not an answer to our findings about what happened before that date. Moreover, in China, there is a huge gap between enacting legislation and enforcing it.

Our first reply, issued long before the second Chinese response, made this point. Yet, the second Chinese response just repeats word for word what was in their first response on this point.

It is an error to refer to a law which came into effect after the relevant period to deny that something happened earlier. When this error is pointed out to the Government of China and the Government persists in the error nonetheless, we can only conclude that this error is deliberate. [....]

Airport security measures may be here to stay, CTV.ca News Staff, Aug. 11 2006 11:35 PM ET
www.ctv.ca/servlet/ArticleNews/story/CTVNews
/20060810/airport_delays_060811/20060811?hub=Canada

[....] The federal government announced proposed regulations Friday under the Explosives Act that would require companies selling the restricted materials to register with the government, keep meticulous inventory records, and notify police if they believe a customer will use the materials to make bombs.

The chemicals include:

Ammonium nitrate in solid form, at a concentration of 28 per cent to 34 per cent nitrogen;
Nitric acid at a concentration of at least 68 per cent;
Nitromethane;
Hydrogen peroxide at a concentration of at least 30 per cent;
Potassium nitrate;
Sodium nitrate;
Potassium chlorate;
Sodium chlorate; and
Potassium perchlorate.
Hydrogen peroxide is the only chemical on the list readily available to consumers in drug stores as a disinfectant -- but at far weaker concentrations that would not be covered by the proposed regulations.

Electronics

Duchesneau advised travellers to arrive early, pack light, and requested that passengers put laptop computers and other electronic devices in checked bags -- though they are not required to do so.

But he also said his agency is considering a number of new measures, including the possibility of banning such gear from cabins. [....]

Music to annoy the savage beast , George Jonas, National Post, August 12, 2006
www.canada.com/nationalpost/news/editorialsletters
/story.html?id=f01edcc4-129a-44c0-b790-d065367603d0

[....] I'm listening to steel drums as I'm writing this. A nearby schoolyard has been infested by a Caribbean-style steel band, whose members use the summer months to try achieving a level of adequacy on their bizarre instruments. If they succeed, the sound they produce may be a tad less annoying than acid rock, though more annoying than Scottish or Greek bagpipes, designed to grate on the enemy's nerves under battlefield conditions. Before reaching that level of competence, steel bands sound like an industrial accident in progress.

[....] One person's nuisance is another person's musical experience for a variety of reasons, the most important of which may defy analysis. I think Albert Camus was right when he wrote that: "Truly fertile music, the only kind that will move us, that we shall truly appreciate, will be a music conducive to dream, which banishes all reason and analysis. One must not wish first to understand and then to feel. Art does not tolerate Reason." [....]