June 28, 2006

Buy-out of Inco, Falconbridge bodes well for more investment in Canada

TORONTO

The buy-out of Inco Limited and Falconbridge Limited by Phelps Dodge Corporation is expected to have a positive impact on continuing development in Canada.

The combined company will have an impressive list of greenfield and brownfield projects and expansions. One of those is Voisey’s Bay in Labrador.

“The upshot of this is that it creates a larger company with much deeper pockets,” said John Clinkard, economist with Reed Construction Data and Canadata. “This strengthens the company’s ability to maintain and possibly increase its investments in both Voisey’s Bay and in Sudbury.”

Phelps Dodge Inco will be the world’s leading nickel producer, the world’s largest publicly traded copper producer and a leading producer of molybdenum and cobalt, and it will have a portfolio of growth projects and exploration opportunities.

“We can look for even further investments in Canadian projects.”

John Clinkard, Economist

The corporate office and the new company’s copper division will be headquartered in Phoenix. Inco Nickel, the new company’s nickel division, will be headquartered in Toronto.

Phelps Dodge Inco will have operations in more than 40 countries and will employ approximately 40,000 people globally.

The combination of Phelps Dodge, Inco and Falconbridge is expected to result in total annual synergies of approximately US$900 million by 2008. This includes US$550 million in total expected annual synergies from the combination of Inco and Falconbridge.

The combination brings together three companies with complementary skill sets. The synergies previously identified by Inco and Falconbridge will be generated in part by joint operation of facilities in the Sudbury Basin, where there are interwoven mines and processing facilities.

Phelps Dodge Inco said it will not lay off any employees at any of its Canadian operating companies for at least three years after the completion of the transaction, unless those employees are part of an already announced shutdown or reduction in workforce. The company will maintain a major nickel research and development facility in Canada, and continue all existing Canadian exploration activities for a period of at least three years.

In local communities, Phelps Dodge Inco will maintain all community and educational programs currently in place. In Ontario, Manitoba, Newfoundland and Labrador, Quebec, and New Brunswick, the company has committed to direct resources toward training, education and other initiatives with the specific goal of training potential new employees, as well as enhancing the resources and quality of training available to existing employees.

The new company will also maintain and carry forward the practice of environmental protection established over many years by each company, as well as keeping an unwavering focus on worker health and safety.

“This agreement boosts confidence in the investments both Inco and Falconbridge have made in Canada, and we’ll see some synergy over the longer term,” Clinard added.

“Certainly, it bodes well for both Sudbury and Voisey’s Bay, and we can look for even further investments in Canadian projects.”

DCN NEWS SERVICES

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