Updated from 11:35 a.m. EDTThe bidding battle for Inco ( N) was turning into a frenzy Monday after Canada's Teck Cominco ( TCK) upped its offer for the Canadian nickel miner to $14.6 billion, 11% higher than previously. The improved Teck offer comes after Thursday's shareholder rejection of Inco's plans to buy Falconbridge ( FAL), another Canadian nickel miner. Instead, it seems likely that Swiss rival miner Xstrata will acquire the 80% of Falconbridge shares that it doesn't already own. The Teck bid, which expires Aug. 16, also calls into question the planned merger of U.S. copper miner Phelps Dodge ( PD) with Inco. Prior to the failure of the Inco-Falconbridge merger, the two were planning to join up with Phelps in a three-way transaction. Inco shares were trading up 1.2% while those of Falconbridge were up marginally. Both firms also benefited from continued buoyant nickel prices. The price for delivery in three months was trading at $11.71 a pound Friday. Teck Cominco was recently up 2.2%. Phelps was rallying over 7% higher in the afternoon, buoyed by an upgrade by Prudential before the opening, as well as a Toronto Globe & Mail report that the company itself may become a target for takeover by the Grupo Mexico unit of Southern Copper ( PCU), which was recently up 1.85%. Hope that the planned three-way Phelps-Inco-Falconbridge merger may now be dead is further helping the stock, as the deal was generally viewed poorly. " In general in mergers there is a tendency to overbid," says Nicholas Economides, professor of economics at NYU's Stern School of Business. "Post-merger savings are not usually what were expected." Economides notes that it can take until many months after a transaction is complete to accurately gauge whether an acquisition price was bloated or not. Another supporting factor for Phelps stock was surging copper prices on the Comex division of the New York Mercantile Exchange, with September copper contracts trading as high as $3.655 a pound at one point during the session, but pulled back later to close at $3.57, up 2.1 cents. News late Friday that workers at Chile's Escondida copper mine voted in favor of a strike helped lift prices. Copper prices have risen approximately 20 cents over the past week as industry inventories remain low and the prospect of a strike will keep supply anxieties at the forefront of traders' minds. In precious metals, gold was relatively quiet, with Mideast tensions failing to ignite a rally. December Comex gold closed at $646.50 an ounce, down $1.00, having recovered from a low of $640.50.
"I think we are seeing a fairly decent dose of profit-taking," says Jim Steel, gold analyst at HSBC in New York. "The interesting thing about today is that the dollar is somewhat weakish, and that isn't providing support to gold as you would expect." The gold market will likely remain subdued until the Federal Reserve meets on Aug. 8 or until other significant events occur, Steel adds. "Further external stimulus
will be necessary," to push prices higher, agrees Rhona O'Connell, an analyst at GFMS Analytics, a London-based consulting firm. Nonetheless, O'Connell says there's a general level of support in the market. "There is plenty of grass-roots physical demand waiting in the wings," she says. "And it is starting to appear on dips in price" after volatility and chased away many buyers. Shares of the bullion-exchange-traded funds iShares Comex Gold Trust ( IAU) and streetTRACKS Gold Shares ( GLD) dipped in line with the metal. Gold-miner stocks slid, with shares of Newmont Mining ( NEM) down slightly. Those of Freeport-McMoRan Copper & Gold ( FCX) were trading up in line with the copper price.