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INCO's Scott Hand Visits New Caledonia

Catherine Coumans Ph.D., Research Coordinator and Asia-Pacific regional program coordinator.

Remarks by Scott Hand — unoffical transcript
Yaté-Mt.Doré Community Meeting
Friday, April 4, 2003

I have been to New Caledonia many times in the last few years and have always been extremely pleased by the warm reception I received from the people in Yaté and Mt. Doré. You have always been very gracious and supportive of Inco, our project and me.

But I am especially gratified by the support I have received in the last few months since we were compelled to suspend the project that means so much to all of us. It has truly been a disappointing experience for me, but it has made me even more determined and committed to getting this project back on track.

Today, I want to talk about why we suspended the project, the status of our review and some of the steps we are taking over the next few months to improve our relationship with everyone connected to thc project. First, let me answer the question about why the project was suspended.

The only reason - and I stress "only" - is that the projected capital costs of building the project had reached alarming levels. The potential increase was as high as 45%.

Such an increase would have resulted in a construction cost of over $2 billion.
• The return on such a cost would be totally unacceptable.
• It would be nearly impossible to attract a partner.
• The project would have been extremely difficult to finance.
• Such a cost would have destroyed value for our company, not create it.

Under the circumstances we were compelled to take immediate and decisive action.

I understand some people in New Caledonia believe there are other reasons we suspended the project. Let me address them:

First, there was no connection between our decision on Goro and our plans to develop the Voisey's Bay project in Canada. We have said all along that the global nickel market needs both projects. That has not changed. We want to do both projects and we can do both projects, provided they are economic.

Second, our technology will work. We remain completely confident.

Third, our partners are still interested in participating. But, like Inco, they must have an economic project.

And fourth, Inco's commitment is just as strong, our faith in the potential of this project is just as confident.

Consider this: Inco has invested and committed about 700 million US dollars in this project already. That should be evidence to everyone that we are serious. We want to do this project. Goro Nickel is the cornerstone of Inco's growth strategy.

We have already learned a number of things during the first months oft the review process. For example, it is now evident that we started this project too quickly. We didn't do enough engineering and site assessment. We didn't get our implementation plan well organized. We didn't talk enough with local people to assure that it we would have a good working relationship during both construction and operation.

We have a number of teams working on the review process. Teams looking at costs. Teams looking at process. Teams looking at better ways to organize and implement the project.

Our teams are making good progress with the review. We already have found ways to cut some costs from the project.

But, we have not yet reduced the costs enough to provide an acceptable return on investment.

There is more to do.

Reducing costs is essential to moving ahead, but we also need a new spirit of cooperation and participation from all of the stakeholders who are involved and will benefit from the Goro Nickel project.

For example, its fair to say that Goro Nickel needs to do a better job of encouraging and assisting local suppliers to participate in the project.

But, it is also fair to say that our local suppliers and contractors must be competitive and work cooperatively. We all need to understand that Goro Nickel is a project that plays on an international stage. The economies of the project are judged against international criteria, We need that kind of global outlook and that kind or competitive approach here.

Tonight, I will be announcing two initiatives that we believe will help foster a new relationship with local businesses and our neighboring communities.

The first initiative is a pilot program that will enable us to establish a model for our working relationship when the project resumes. I will be announcing that Inco bas agreed to begin a limited amount of work at the site to test new rules under which the work is carried out. We need a relationship that will end the disruptions and confrontations we had in the last year.

I don't want there to be any misunderstanding. This is not a restart of construction. It's a test, but a test for everyone, including Goro Nickel. We want to bc successful in the future and are willing to undertake some work and employ a limited number of local people during the suspension period to show that we are serious and committed to a strong, long-lasting relationship.

We also believe that we should improve and strengthen the relationship we have with your communities of Yaté and Mt. Doré. You're our neighbors. We need to work together.

As our second initiative, I have asked Pierre and our Goro Nickel staff to begin a process of consultation with the mayors of the two municipalities.

I want them to talk about ways to encourage and promote local employment.

I want them to discuss training programs that help build skills that keep jobs and people in the local community.

I want them to explore ways to give local businesses and services a fair chance to participate in the project.

I would also hope they will consider ways to advise us and participate with us so that the impact of our operation on the communities remains beneficial.

At the end of that consultation process, I am hopeful that we will sign a Memorandum of Understanding with the mayors of Yaté and Mt. Doré.

I would like to call it a "Good Neighbors" Agreement, because that's what I hope and believe we can become — Good Neighbors.

Yesterday, I discussed this proposal with New Caledonia President Pierre Frogier and Province Sud President Jacques Lafleur, I was extremely gratified with their support and willingness to help us develop a framework for the consultation process.

In fact President Frogier has pledged his personal support for the "Good Neighbors" proposal and will work with Inco and help guide us in our consultation with the municipalities.

As I said earlier, we are in the process of an intense review to cut the costs of the project. In July we expect to be in a position to outline the conditions under which we will be able to restart.

Again, let me be clear. At this point I do not expect that we will be in a position to tell you when we will restart. But we will know more. We will understand what is required.

Today, we are announcing steps to improve our relationship with the community and work toward a mutually beneficial working arrangement with local business. We know we need to do a better job and improve our relationship with the community. We will do a better job.

At the same time we want to make it clear that Inco and Goro Nickel cannot do this alone. We want the support and cooperation of people in Yaté and Mt. Doré. We need a climate of support and negotiation rather than disruption and confrontation. We must find a better way to talk together and work together.

As part of our willingness to talk and listen, a few weeks ago I met in Canada with a delegation from Yaté. After the meeting they made public statements in Canada that were critical of Inco and the project. Such statements arc certainly not in the spirit of cooperation that is essential for this project. I hope today will mark the beginning of a new and supportive relationship.

I have said many times that Goro is the best undeveloped laterite deposit in the world. After many years of testing, Inco now has the technology to develop it. But, we must find a way to do it competitively and economically.

There is great promise here. We are on the brink of realizing it.

Together we can make the promise a reality.

Thank you.