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Inco has discovered how fine the line can be between predator and prey. Nine months after launching its agreed offer for rival Canadian nickel producer Falconbridge it has conceded defeat in the face of a more compelling cash offer from Anglo-Swiss group Xstrata. Now Inco is trying to keep a vestige of control over its own destiny by attempting to complete the sale of itself to Phelps Dodge.

It is still possible. But, with the Falconbridge deal out of the way and commodity prices still high, Inco could draw broader interest. Teck Cominco, another Canadian miner, has already tabled a rival offer for Inco. Other big global miners might also be tempted into the race. Inco offers buyers diversification through its strong nickel position and the chance of significant cost savings through working with Falconbridge’s new owners to operate a key Canadian site. Whoever emerges as the victor, the price is likely to be above Phelps’s current cash and shares offer of about C$82 a share.

That leaves Phelps in a delicate position. Its master plan of bagging both Inco and Falconbridge in a three-way combination has been scuppered. It must now be wary of being too aggressive on Plan B – acquiring just Inco. If it raises the price too high, Phelps could yet turn into an acquisition target itself.

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