Nickel at $6.61 and rising.

Vale Inco had a partial shutdown for the month of May and started a 2 month total shutdown on June 1.

Initial reports on contract negotiations are not good. According to both sides they are miles apart. They have extended the contract by 6 weeks to July 12 in an attempt to hammer out an agreement.

This shutdown will result in a loss of production of 14,000 metric tonnes of finished nickel. Stockpiles were increasing at 10,000 tonnes per month prior to the Inco shutdowns but have already been reduced by 4,000 tonnes in the last few weeks.

Estimates are that nickel prices will continue to rise during the shutdown. Recently nickel prices have risen from $4.20 at the end of March.

Sources say the company is requesting reductions to Pensions, Benefits and Nickel Bonus among other things.

This is no longer the Canadian version of Inco. CVRD (Vale) is based in Brazil and has operations world wide. Vale is one of the worlds largest mining companies and has operations world wide. Their Nickel division is only one small portion of their business.

Several months ago Vale announced that their Sudbury Nickel Division was a high cost operation and they will be attempting to reduce production costs. Two weeks ago they announced that many staff functions are being moved from Sudbury to Toronto and Rio.

The prospects for a contract settlement without a stike are slim. Leo Gerard, International President of USWA is from Sudbury and worked at Inco. Many of his friends including Wayne Fraser, a Canadian Director, have been promoted to executive positions in the Union.Wayne is chief negotiator in these negotiations.

This is a key and highly visible local for USWA and Gerard's home turf. This is the last place that the Union will want to have major concessions. However, that is precisely what it will take for Vale to agree to a new contract with local 6500 in Sudbury.

The problems of the Auto industry are the most visible expression of the condition of the entire North American economy. The concessions that we have seen from auto unions will set a precident for all future contract negotiations including Vale Inco.

IMHO Vale will close down the Sudbury operation before it will agree to a continuation of the current contract. There have been recent indications that the operation in Thompson Manitoba is considered a key ingredient in their arsenal. Vale considers the Manitoba Government to be friendly to business. They settled the labour contract in Thompson in late 2008 without a strike. They have also been expanding their operations in Thompson and providing much needed Capital.

Inco in Sudbury once endured a 9 month stike (1970's). Unfortunately it is beginning to look like this record may not stand.

To the extent that Nickel prices benefit the RoF, the future looks good. IMHO Nickel prices will rise by a minimum of $1.00 every month that Inco is out of business. 1.00 times 9 = $9.00 + $6.00 = $15.00 per pound.

NOT @ $.74 now = $1.50 in 9 months without new news.

Also we expect infrastructure money from Feds & Province for roads etc

GO NOT GO.

SN