Offer Enhanced For Falconbridge

Phelps Dodge Corp., Inco Ltd., & Falconbridge Ltd. announced today that all 3 companies have taken action to improve the terms of their 3-way combination. Phelps Dodge has increased the cash portion of the consideration to be paid to the shareholders of Inco in the combination of Phelps Dodge & Inco by C$2.75 per Inco share. Inco has increased the cash portion of its offer to purchase all outstanding common shares of Falconbridge by C$1.00 per Falconbridge share, & the Falconbridge board of directors has declared aspecial cash dividend of C$0.75 per Falconbridge common share.

Improved Terms
Under the improved terms, Phelps Dodge will acquire all outstanding common shares of Inco for a combination of cash & common shares of Phelps Dodge having a value of C$80.70 per Inco share, based upon the closing price of Phelps Dodge stock & the closing U.S./Canadian dollar exchange rate on Friday, July 14th. Shareholders of Inco will receive 0.672 shares of Phelps Dodge stock plus C$20.25 per share in cash for each share of Inco stock. This represents a premium of 7.8% to Inco's marketprice as of close of trading on July 14th & a premium of 23.7% to Inco's market price as of the close of trading on June 23rd, the last trading day before the announcement of the combination of Phelps Dodge, Inco & Falconbridge.

Under its enhanced bid for Falconbridge, Inco is now offering C$18.50 plus 0.55676 shares of Inco for each share of Falconbridge, assuming full proration of the consideration. With the completion of both transactions, Falconbridge shareholders would receive an implied total consideration on a "look-through" basis of C$63.43 per Falconbridge common share, consisting of: (a) C$29.77 in cash; & (b) 0.3741 of a Phelps Dodge Inco Corp. common share (based on the closing price of the Phelps Dodge common shares on the New York Stock Exchange & applicable U.S. Federal Reserve U.S.-Canadian dollar exchange rates on July 14th).

Falconbridge Special Dividend
In order to further increase the value received by Falconbridge shareholders, the board of Falconbridge declared a special cash dividend of C$0.75 per Falconbridge share payable on Aug. 10th, to common shareholders of record at the close of business on July 26th. The Falconbridge board also has unanimously determined that Inco's amended offer for the shares of Falconbridge is superior to the unsolicited offerby Xstrata & unanimously recommends that Falconbridge shareholders accept the Inco offer.

Reduction in Minimum Tender Condition
In addition, Inco has reduced the minimum condition in its offer for Falconbridge from two thirds of the outstanding shares of Falconbridge to 50.01% of such outstanding shares on a fully diluted basis. Phelps Dodge & Inco also amended their Combination Agreement so that the combination of Phelps Dodge & Inco may be consummated before the acquisition by Inco of 100% of Falconbridge. Inco's amended offer for Falconbridge will expire on July 27th, 2006.

The 3-way combination of Phelps Dodge, Inco & Falconbridge will create one of the world's leading mining companies & the largest based in North America. Phelps Dodge Inco will be the world's leading nickel producer, the largest publicly traded copper producer & a leading producer of molybdenum & cobalt.

As part of the transaction, Phelps Dodge expects to repurchase up to US$5.0 billion of its shares in the 12 months after closing.

J. Steven Whisler, chairman & C.E.O. of Phelps Dodge, said: "We strongly believe the combination of Phelps Dodge, Inco & Falconbridge represents a unique value-creation opportunity for the shareholders of all 3 companies. There's no question that the value of the enhanced Inco offer for Falconbridge is superior to the unsolicited offer by Xstrata. In addition to the value inherent in the offer, the Falconbridge shareholders will have the ability to participate in the upside resulting from the 3-way combination through their ownership of almost 30% of the combined company, which includes a 30% share in the $900 million of expected annual synergies, which in total have a net present value of approx., $5.8 billion."

Scott Hand, chairman & chief executive officer of Inco, said: "Today's actions demonstrate our shared commitment to create the leading North American-based mining company & a global powerhouse in copper & nickel. That's great news for our shareholders, for our employees, for our communities & for Canada."

Derek Pannell, chief executive officer of Falconbridge, said: "We are pleased with the actions taken today by Phelps Dodge & Inco & by their affirmation of the value of Falconbridge. The special dividend declared b your board today further enhances the expected return to our shareholders. We are confident our shareholders will see the value in the combination of these 3 companies to create Phelps Dodge Inco."

All required regulatory approvals for Inco's acquisition of Falconbridge have been received. Phelps Dodge's offer to acquire Inco is expected to close in September, subject to Phelps Dodge & Inco shareholder approval, regulatory approvals & customary closing conditions.