Phelps Dodge Withdraws Bid for Inco, Opening Door for RIO

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Phelps Dodge, Giving Up on Inco, Could Become a Takeover Prospect

• Summary: Arizona-based U.S. copper miner Phelps Dodge (PD) has ended its takeover bid for Canadian mining company Inco (N). The move sent shares of Phelps Dodge up more than 3% as many shareholders had opposed the takeover because they felt it would saddle the company with too much debt and increase shareholder dilution. The move clears the way for Brazilian mining company Companhia Vale do Rio Doce (RIO) to takeover Inco as soon as an agreement can be reached. With rising industrial metal prices resulting from increased Chinese demand and consolidation taking place across the mining industry, speculation has begun that Phelps Dodge may become a takeover target themselves in the near future. "The deal process is going to continue, because it's extremely hard to develop mines," said Frank Holmes, chief executive and chief investment officer of U.S. Global Investors, a San Antonio money manager that specializes in natural resources. With its increasing copper production, Mr. Holmes said, Phelps Dodge "could become a target." In the meantime, Phelps Dodge is content to continue expanding its own copper mining operations in the U.S. as well as in such places as Africa and South America.
• Comment on related stocks/ETFs: William Trent believes that all the M&A activity in the mining sector is bullish for a continued commodity boom. Yaser Anwar believes copper to be a particularly strong prospect to continue the commodity bull run.