Phelps Dodge, Inco and Falconbridge Agree to US$56 Billion Three-Way Combination, Creating One of World's Largest Mining Companies

Phelps Dodge, Inco and Falconbridge Agree to US$56 Billion Three-Way Combination, Creating One of World's Largest Mining Companies

June 26, 2006

Transaction Creates World's Largest Nickel Producer and Largest Publicly Traded Copper Producer
Combines High-Quality, Long-Lived Assets in Regions with Low Geopolitical Risk and Strong Development Pipelines; Enhances Ability to Invest in Long-Term Growth
US$900 Million of Estimated Annual Synergies Expected by 2008; Combination Expected to Be Immediately Accretive to Cash Flow and Accretive to Earnings Per Share in 2008
Phelps Dodge Offer for Combined Inco/Falconbridge Is Valued at C$80.13 Per Share; Agreement Enables Inco to Enhance Offer for Falconbridge to C$62.11 Per Share
Phelps Dodge Also Announces Up to US$5 Billion Share Repurchase Program

    PHOENIX AND TORONTO, June 26 /Xinhua-PRNewswire/ --
Phelps Dodge Corporation (NYSE: PD), Inco Limited (NYSE: N;
TSX) and Falconbridge Limited (NYSE: FAL; TSX) announced
today they have agreed to combine in a US$56(1) billion
transaction to create a North American-based mining company
that is one of the world's largest.  The new company will be
named Phelps Dodge Inco Corporation.

    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 world-class portfolio of growth projects
and exciting exploration opportunities.  For the quarter
ended March 31, 2006, the three companies had combined
revenues of US$6.3 billion and EBITDA (earnings before
interest, taxes, depreciation and amortization) of US$1.9
billion.

    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.  

    The Phelps Dodge board of directors also announced, as
part of the transaction, a share repurchase program of up
to US$5.0 billion to be commenced after closing.

    Phelps Dodge Inco will have operations in more than 40
countries and will employ approximately 40,000 people
globally.  Phelps Dodge Inco will be listed on the New York
Stock Exchange and will apply for a listing on the Toronto
Stock Exchange.  As a result of the three-way combination,
Phelps Dodge Inco will have a significantly increased
weighting in the S&P 500 Index.  A Web site with
detailed information on the transaction is available at
http://www.phelpsdodgeinco.com .

    J. Steven Whisler, chairman and chief executive officer
of Phelps Dodge Corporation, said:  "This transaction
represents a unique opportunity in a rapidly consolidating
industry to create a global leader based in North
America-home of the world's deepest and most liquid capital
markets.  The combined company has one of the industry's
most exciting portfolios of development projects, and the
scale and management expertise to pursue their development
successfully.  The creation of this new company gives us
the scale and diversification to manage cyclicality,
stabilize earnings and increase shareholder returns.  At
the same time, we are committed to maintaining an
investment-grade credit rating throughout the business
cycle."

    Scott M. Hand, chairman and chief executive officer of
Inco, said: "This combination allows Inco's
shareholders, in addition to receiving a substantial
premium for their stock, to share in the significant
synergies both from our agreed merger with Falconbridge and
from the combination with Phelps Dodge, and it creates an
opportunity for all three groups of shareholders to
participate in an exciting, new, diversified industry
leader.  We believe the Phelps Dodge transaction delivers
an excellent value proposition for our shareholders.  The
new Phelps Dodge Inco also will maintain a very strong
commitment to and presence in Canada."

    Derek Pannell, chief executive officer of Falconbridge,
said: "This is an industry-redefining transaction. 
Phelps Dodge Inco will have the scale, diversification,
market leadership, reserve position, growth profile and
balance sheet necessary to create tremendous value for
shareholders.  It represents a significant premium to
Falconbridge shareholders, with ongoing participation in
the upside of the three-way combination.  We believe this
transaction represents a most compelling opportunity for
all Falconbridge shareholders."

    Terms of the Transaction

    Under the terms of the transaction, Phelps Dodge will
acquire all of the outstanding common shares of Inco for a
combination of cash and common shares of Phelps Dodge
having a value of C$80.13 per Inco share, based upon the
closing price of Phelps Dodge stock and the closing
US/Canadian dollar exchange rate on Friday, June 23, 2006. 
Each shareholder of Inco would receive 0.672 shares of
Phelps Dodge stock plus C$17.50 per share in cash for each
share of Inco stock.  This represents a premium of 23
percent to Inco's market price as of close of trading on
June 23 and a 19 percent premium to the value of the
existing Teck Cominco Limited unsolicited offer for Inco.

    Simultaneous with its entry into the combination
agreement with Phelps Dodge, Inco has entered into an
agreement with Falconbridge to increase its previously
recommended offer for Falconbridge.  Under the terms of
this enhanced offer, Inco has increased the cash component
of the offer from C$12.50 to C$17.50 and the exchange ratio
from 0.524 shares of Inco for each share of Falconbridge to
0.55676 shares of Inco for each share of Falconbridge.  The
board of Falconbridge has unanimously agreed to recommend
this revised offer and also approved an amendment of the
Support Agreement with Inco to reflect the revised price.

    Based upon the value of the consideration offered by
Phelps Dodge for Inco of C$80.13 per share, the implied
value of the revised agreed offer for Falconbridge
including the increased cash component is C$62.11 per
share, representing a 12 percent premium to Falconbridge's
closing price on June 23, and an 18 percent premium to the
existing Xstrata plc unsolicited offer for Falconbridge.  


    At Phelps Dodge's June 23 closing price of US$82.95,
the total enterprise value of the acquisition by Phelps
Dodge of the combined Inco and Falconbridge is
approximately US$40 billion.

    The acquisition of Falconbridge by Inco is subject to
regulatory approvals and other customary closing
conditions, and Inco's tender offer is expected to close in
July.  Inco anticipates conducting a second-stage
transaction to acquire the remaining Falconbridge shares,
which is expected to close in August.  Upon the closing of
the Phelps Dodge-Inco combination, shareholders of
Falconbridge who have been issued Inco common shares in the
Inco-Falconbridge transaction will be entitled to receive
for those shares the same package of cash and Phelps Dodge
shares as will other Inco shareholders.

    Phelps Dodge strongly supports Inco's agreed offer for
Falconbridge and has entered into a definitive agreement
under which it will purchase up to US$3.0 billion of
convertible subordinated notes issued by Inco to provide
Inco with substantial additional liquidity at the time of
its purchase of Falconbridge common shares and to satisfy
related dissent rights, as needed.  The convertible
subordinated notes will only be funded in the event the
Inco/Falconbridge combination is consummated.  The
instrument will be redeemable for cash at any time by Inco
after the merger with Falconbridge and may be converted at
any time beginning six months after issuance by Phelps
Dodge at a conversion rate equal to 95 percent of the
market value of Inco's common shares plus accrued interest
of the security at the time of conversion.  The instrument
will bear an 8 percent PIK coupon.  The issuance of the
convertible subordinated notes will be subject to
regulatory approval.

    Phelps Dodge intends to complete its share repurchase
program within the 12 months after closing of the Inco
transaction in an amount equal to US$5 billion, less the
amount of any convertible subordinated notes purchased by
Phelps Dodge.

    The transaction between Phelps Dodge and Inco is not
conditioned upon the completion of the Inco and
Falconbridge combination.  Thus, in the event the
Inco-Falconbridge merger is not completed, Inco
shareholders will receive the same 0.672 shares of Phelps
Dodge and C$17.50 per share in cash that they would have
received in the proposed three-way combination.  Should
Inco not complete the Falconbridge transaction, the Phelps
Dodge board of directors intends to execute the full US$5.0
billion share repurchase program within 12 months of closing
a transaction with Inco.

    Inco has agreed to pay a break-up fee to Phelps Dodge
under certain circumstances of US$475 million on a
stand-alone basis and US$925 million in conjunction with
its combination with Falconbridge.  Inco has also given
Phelps Dodge certain other customary rights, including a
right to match competing offers.  Phelps Dodge has agreed
to pay Inco a US$500 million break-up fee under certain
circumstances.

    Phelps Dodge has received financing commitments from
Citigroup and HSBC that may be drawn upon to fund the
contemplated transactions and the up to US$5.0 billion
share repurchase program.

    Inco has received additional financing commitments from
Morgan Stanley, Goldman, Sachs & Co., Royal Bank of
Canada, and Bank of Nova Scotia in support of the increased
cash component of its revised agreed offer for
Falconbridge.

    After completion of the transaction, current Phelps
Dodge shareholders would own approximately 40 percent of
Phelps Dodge Inco, current Inco shareholders would own
approximately 31 percent, and current Falconbridge holders
would own approximately 29 percent.  The transaction, which
is subject to Phelps Dodge and Inco shareholder approval,
regulatory approvals and customary closing conditions, is
expected to close in September 2006.

    Delivering Significant Value to Shareholders Through
Synergies and Growth

    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 net present value of total synergies, at a 7.0
percent discount rate, is approximately US$5.8 billion
after-tax.

    The combination brings together three companies with
unique, 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 contiguous, interwoven mines and processing
facilities.  Consolidation of the district allows feed flow
changes that result in production increases and cost
reductions.  Also, consolidation of management allows for
the sharing of best practices.

    The inclusion of Phelps Dodge enhances these synergies.
 Its three-year-old North American One Mine processes are an
excellent blueprint for the consolidation of the Sudbury
district.  In addition, Phelps Dodge brings a focus on
technology that can be applied to improve process
recoveries and throughput in Sudbury and elsewhere.  Also,
the larger company will realize savings in procurement and
supply-chain management because of its much larger size.

    Based on these synergies, the combination is expected
to be immediately accretive to cash flow and accretive to
earnings per share in 2008, excluding integration and
transaction costs. 

    The new, larger company will benefit from a
strengthened financial position to take advantage of future
growth opportunities.  This increased financial strength,
coupled with its combined assets and expertise, will enable
it to pursue current and future development projects more
effectively.  

    The combined company will have an impressive list of
greenfield and brownfield projects and expansions.  Those
now in commissioning or in the late stages of construction
include Voisey's Bay (nickel), Cerro Verde
(copper/molybdenum) and Henderson (molybdenum).  Other
projects include Safford (copper), Tenke Fungurume
(copper/cobalt), Climax (molybdenum), Lomas Bayas (copper),
Collahuasi (copper/molybdenum), El Morro (copper), El Pachon
(copper), El Abra (copper), Goro (nickel), Koniambo
(nickel), and Nickel Rim (nickel).

    Management Team and Board of Directors

    J. Steven Whisler, 51, chairman and chief executive
officer of Phelps Dodge, will be chairman and chief
executive officer of the new company.  Scott M. Hand, 64,
chairman and chief executive officer of Inco, will become
vice chairman of Phelps Dodge Inco.  Derek Pannell, 60,
chief executive officer of Falconbridge, will become
president: Inco Nickel and will head the new company's
nickel, zinc and aluminum operations.  Timothy R. Snider,
56, president and chief operating officer of Phelps Dodge,
will hold the same position in the new company.  Ramiro G.
Peru, 50, executive vice president and chief financial
officer of Phelps Dodge, will be the chief financial
officer of the new company.  Whisler, Snider and Peru will
be based in Phoenix.  Hand and Pannell will be based in
Toronto.

    The board of directors of the new company will be
composed of 15 members, 11 from the board of Phelps Dodge
and four from the boards of Inco and Falconbridge.  

    Benefits to Canada

    Canada will derive benefits not only from the new
Phelps Dodge Inco's scale and global reach, but its
continuing strong commitment to Canada overall and the
local communities in which it operates.  As the largest
mining company based in North America, Phelps Dodge Inco
will have ready access to global capital markets and be
well positioned to draw upon its leading market position,
combined management teams, technical depth and the
expertise of its collective workforce.  In Canada, Phelps
Dodge Inco will continue to pursue all major capital
expenditure projects that Inco and Falconbridge have
initiated.

    Regarding Canadian employment, Phelps Dodge Inco 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. 
Canadians will occupy a majority of management positions of
the Canadian businesses at Phelps Dodge Inco.  While there
will be some head-office workforce reduction, as is natural
in any such combination, Phelps Dodge Inco will provide
severance and make available appropriate outplacement
and/or counseling services. Phelps Dodge Inco has committed
to establish the head office of the global nickel business
in Toronto.  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.  Additionally, Phelps Dodge Inco
will abide by any practices or agreements engaged in by
Inco or Falconbridge with provincial Canadian governments
concerning the export or processing of intermediate ore
products.

    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, Phelps Dodge Inco 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.  

    A World Leader in Metals and Mining 

    The combined entity will have large-scale production
capabilities, significant proven and probable reserves in
all of its core commodities and a diversified asset base.

    Copper

    Pro-forma 2005 copper production for the combined
entity was 3.4 billion pounds.  Pro-forma 2005 copper
revenues were US$11.13 billion.  Phelps Dodge Inco will be
the world's largest publicly traded copper corporation
after the closing.

    Nickel

    Pro-forma 2005 nickel production for the combined
entity was 738 million pounds.  Pro-forma 2005 nickel
revenues were US$5.8 billion.  Upon closing of the
transaction, Phelps Dodge Inco will be the world's largest
nickel producer.

    Molybdenum

    Pro-forma 2005 molybdenum production for the combined
entity was 68 million pounds.  Pro-forma 2005 molybdenum
revenues were US$1.89 billion.  Phelps Dodge Inco will be
the world's second largest producer of molybdenum.

    Cobalt

    Pro-forma 2005 cobalt production for the combined
entity was 14 million pounds.  Pro-forma 2005 cobalt
revenues were US$210 million.  Phelps Dodge Inco will be
the world's third-largest producer of cobalt.

    Webcast

    Management of Phelps Dodge, Inco and Falconbridge will
host a webcast for investors today at 9:00 a.m. eastern
time, to discuss the details of the transaction.  The
webcast can be accessed at http://www.phelpsdodgeinco.com
.

    Phelps Dodge is one of the world's leading producers of
copper and molybdenum and is the largest producer of
molybdenum-based chemicals and continuous-cast copper rod.
The company employs 13,500 people worldwide.

    Inco is a primary metals company.  In business for 100
years, it is one of Canada's best-known companies and
largest exporters. It employs 12,000 people around the
world at mining operations, production facilities, a
research center and through its marketing and sales
network. 

    Falconbridge is a leading copper and nickel company
with investments in fully integrated zinc and aluminum
assets.  Its primary focus is the identification and
development of world-class copper and nickel ore bodies. 
It employs 14,500 people at its operations and offices in
18 countries.

    Advisors and Counsel

    Phelps Dodge is being advised by Citigroup Corporate
and Investment Banking and by HSBC Securities.  Phelps
Dodge's counsel are Debevoise & Plimpton LLP and Heenan
Blaikie LLP.  Inco is being advised by Morgan Stanley, RBC
Capital Markets and Goldman Sachs.  Inco's counsel are
Sullivan & Cromwell and Osler, Hoskin & Harcourt
LLP.  Falconbridge is being advised by CIBC World Markets. 
Falconbridge's counsel are McCarthy Tetrault LLP and Fried
Frank Harris Shriver & Jacobson LLP.

    Forward-Looking Statements 

    These materials include "forward-looking
statements" (as defined in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934) including statements regarding, among
other things, the benefits of the combination with Inco and
the combined company's plans, objectives, expectations and
intentions.  All statements other than historical
information are forward-looking statements.  These
forward-looking statements are based on management's
current beliefs and expectations, speak only as of the date
made, and are subject to a number of significant risks and
uncertainties that cannot be predicted or quantified and
are beyond our control.  Future developments and actual
results could differ materially from those set forth in,
contemplated by, or underlying the forward-looking
statements.  The following factors, among others, could
cause actual results to differ from those described in the
forward-looking statements in this documents: (i) the
ability to obtain governmental approvals of the combination
on the proposed terms and schedule; (ii) the failure of
Inco's shareholders to approve the plan of arrangement;
(iii) the failure of Phelps Dodge's shareholders to
authorize the issuance of Phelps Dodge common shares, the
change of Phelps Dodge's name to Phelps Dodge Inco and an
increase in the size of Phelps Dodge's board of directors
as required under the combination agreement; (iv) the risks
that the businesses of Phelps Dodge and Inco and/or
Falconbridge will not be integrated successfully; (v) the
risks that the cost savings, growth prospects and any other
synergies from the combination may not be fully realized or
may take longer to realize than expected; (vi) the combined
company's inability to refinance indebtedness incurred in
connection with the combination on favorable terms or at
all; (vii) the possibility that Phelps Dodge will combine
with Inco only; (viii) the possible impairment of goodwill
and other long-lived assets resulting from the combination
and the resulting impact on the combined company's assets
and earnings; and (ix) additional factors that may affect
future results of the combined company set forth in Phelps
Dodge's, Inco's and Falconbridge's filings with the
Securities and Exchange Commission, which filings are
available at the SEC's Web Site at (http://www.sec.gov). 
Except as required by law, we are under no obligation, and
expressly disclaim any obligation, to update, alter or
otherwise revise any forward-looking statement, whether
written or oral, that may be made from time to time,
whether as a result of new information, future events or
otherwise.

    Supplemental Data

    These materials also include terms used to describe
supplemental data.  Any such data or terms are not a
substitute for any U.S. generally accepted accounting
principle measure and should be evaluated within the
context of our U.S. GAAP results. Any such references may
not be comparable to similarly titled measures reported by
other companies.  As required by Regulation G, we have
posted on our Web Site -- http://www.phelpsdodgeinco.com --
a full reconciliation of non-GAAP financial measures to U.S.
GAAP financial measures.  Unless otherwise indicated, all
information in this news release relating to Phelps Dodge
is on a post-FIN-46 basis (i.e., Candelaria and El Abra are
fully consolidated with minority interests shown separately
rather than a pro rata consolidation).

    NOTE:  In connection with the proposed combination,
Phelps Dodge Corporation ("Phelps Dodge") intends
to file a preliminary proxy statement on Schedule 14A with
the SEC.  Investors are urged to read the proxy statement
(including all amendments and supplements to it) when it is
filed because it contains important information.  Investors
may obtain free copies of the proxy statement, as well as
other filings containing information about Phelps Dodge,
Inco and Falconbridge, without charge, at the SEC's Web
site (http://www.sec.gov). Copies of Phelps Dodge's filings
may also be obtained without charge from Phelps Dodge at
Phelps Dodge's Web site (http://www.phelpsdodge.com) or by
directing a request to Phelps Dodge, One North Central
Avenue, Phoenix, Arizona 85004-4415, Attention: Assistant
General Counsel and Corporate Secretary [phone].

    For more information, please contact:

     Peter J. Faur
     Tel:   [phone] 

    Investors: 
     Stanton K. Rideout
     Tel:   [phone]

     Steve Mitchell 
     Tel:   [phone]

    Investors: 
     Sandra Scott
     Tel:   [phone]

    Media & Investors: 
     Denis Couture 
     Falconbridge Limited, 
     Tel:   [phone]

SOURCE   Phelps Dodge Corporation, Inco Limited;
Falconbridge Limited