Letter to the Editor from Eramet’s President

Dear Sir:

I refer to your editorial of June 21, 2006 (“Eramet still hankering after Koniambo”).

During the current maelstrom of takeover bids in the nickel world here in Canada, the main rule of the game should be total transparency vis-a-vis the shareholders of all competing acquirers (Xstrata, Teck Cominco, Phelps Dodge) as well as of Falconbridge, the target.

Let me bring to these shareholders an additional point of view, different from the current media coverage largely influenced by Inco and Falconbridge.

Eramet has no preference for any of the acquirers, Canadian, European, or American, we are only concerned that some of the attitudes today might have a long-term negative effect on the nickel business worldwide.

Firstly, the price of nickel today is artificially high, in light of a supply/demand balance and an absence of real shortages. This over-evaluation is a result of intense speculation on the London Metal Exchange, fuelled by announcements and rumours that push the nickel price upwards, e.g. rumours in May about a possible strike in Sudbury (which never happened), followed now by similar rumours at Voisey’s Bay, unfounded statements about a supposed shortage of 30,000 tonnes of nickel, etc.

There is no doubt that high nickel prices at this very moment help boost Inco’s share value, giving a false advantage to the Inco bid to acquire Falconbridge, which is largely paid in Inco shares. Quite apart from this bidding war, we are concerned that such exaggerated nickel prices could bring customers to find substitutes for nickel and stainless steel, which would have negative long-term effects on these markets.

Secondly, during the 2005 battle to obtain the New Caledonian Koniambo nickel ore body mining rights, Falconbridge was forced in a French Court of Justice into committing to build a greenfield pyrometallurgical plant in New Caledonia. The amount to be spent for this project has been announced by Falconbridge itself in February 2005 to amount to US$2.7 billion (and is probably today above US$3 billion, if we factor in cost escalations usually experienced at other major nickel projects in the world).

Why has such a huge financial commitment not been disclosed by Falconbridge to its shareholders? Consider especially that it is generally considered that the profitability of this project is less than obvious: Inco claimed that its own project of “only” US$2 billion in Goro (also in New Caledonia), utilizing a hydro metallurgical process much less costly in energy, would have a profitability less than reasonable. What then of the profitability of Koniambo?

Last but not least, what is the level of information provided by Inco about the very serious environmental problems that it is encountering in Goro? This project, in its construction phase, has been stopped for 2 months now, as it faces significant opposition in the local population, as well as regulatory challenges, in connection with the water emissions: it is very likely that Inco will have to spend much more in capital expenditures and in operating costs in order to solve this dispute.

Again, Eramet has no preference between the various bidders, but we consider that shareholders of all involved parties are entitled to transparency and must receive complete information: the recent battle between Mittal and Arcelor’s management has shown that shareholders have the last word. Falconbridge shareholders need to be empowered so they too can make up their own minds.

Yours truly,

Jacques Bacardats

President of Eramet

Paris, France