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The U.S. Department of Justice has stepped up its investigation of a bid to create the world’s largest nickel producer. On Friday, Inco Ltd. and Falconbridge Ltd., both of Canada, announced that the agency had issued a second request for information on their $10.2 billion merger, which would put more than 735 million pounds of annual nickel production in the hands of one company. Nickel is a critical ingredient in stainless steel. The companies also are key producers worldwide of cobalt, copper and a range of precious metals. Company officials said in a joint press release that “given the nature and size of the pending acquisition,” they anticipated that the U.S. government would extend the merger review beyond the initial 30 days required by law. The two companies added that they had been “working with the DOJ staff” since the deal was announced Oct. 11. Although the companies aren’t based in the United States, they are big suppliers to U.S. steelmakers. Recognizing they may have to assuage the Justice Department and antitrust regulators in other countries, Inco officials acknowledged in initial merger documents that they may be forced to divest Falconbridge’s Norwegian refinery, located in Kristiansand. Inco proposes to divest the Nikkelverk refinery and related marketing businesses after the merger is complete, either through a sale, an IPO or a spinoff to shareholders. Inco also said it is willing to continue supplying the refinery with raw materials. The Nikkelverk refinery, which Falconbridge bills as one of the lowest-cost nickel refineries in the Western Hemisphere, produced 71,410 tonnes (metric) of nickel in 2004 as well as 35,643 tonnes of copper cathodes and 4,670 tonnes of cobalt. The refinery has the capacity to process 86,000 tonnes of nickel, 39,000 tonnes of copper cathodes and 5,200 tonnes of cobalt annually. The refinery also treats silver, gold and precious metals. The plant employs about 500 people and is one of the major industrial employers of southern Norway. Nikkelverk opened in 1910 and was acquired by the original Falconbridge in 1929. David Balto, an antitrust partner at Washington law firm Robins, Kaplan, Miller & Ciresi, said Justice officials are unlikely to block or obtain divestitures beyond the Nikkelverk facility. He said a court decision last year tossing out the Federal Trade Commission’s injunction against Arch Coal Inc.’s acquisition of Triton Coal Co. “raised the bar” in terms of evidence the government must provide to show a commodity merger will give remaining players power to coordinate pricing or production. Copyright �2005 TDD, LLC. All rights reserved.

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