Inco S.A. / Goro Nickel S.A. (Inco/GNi)

Response to the paper entitled:

"The Ecology and Economy of Indigenous Resistance:

Divergent perspectives on mining in New Caledonia",

by Saleem H. Ali, University of Vermont and Andrew S. Grewal,

Watson Institute for International Studies (Undated).

 

The purpose of this document is to respond to certain errors contained in the above-noted publication. The most obvious errors contained in this publication are addressed herein. There are additional errors and misinterpretation of information that we recommend the authors correct.

1.0 misinterpretation of inco history in new caledonia

On page 3, the Report states:

"By the early 1990s, however, liberalized restructuring allowed multinational mining conglomerates, as well as the indigenous Kanak population, to take part in the nickel ventures that dominate the New Caledonian economy."

and on page 20, the Report states:

"INCO is not new to the territory, having operated on Grande Terre since 1982 at the Thiebaghi chromite deposit, of which it owns fifty-five percent ("New Caledonia," 2001), and since 1984 at the Pomalaa East nickel deposit. However, INCO currently lacks the legitimacy of its rivals SLN, which as been operating on Grande Terre for over one hundred years, and Falconbridge, which is partnered with the local company SMSP.

Inco/Goro Nickel S.A. Response:

The Report provides a mixed impression with respect to Inco’s presence in New Caledonia, first suggesting the Company is a relative newcomer attracted by liberalized laws and then later on suggests that Inco is a former operator. The contention that Inco has not participated in the exploration of New Caledonia resources or has not been present in New Caledonia for a long period of time is not the case. When Inco was first formed in 1902, one of the seven founding members was the Société Minière Calédonienne. Since the 1920’s Inco has been exploring laterite nickel deposits in New Caledonia. We would suggest the authors revisit the history of Inco's presence in New Caledonia. A chronology of Inco’s activities in New Caledonia can be found by contacting the Goro Nickel S.A. (GNi) Noumea office. Please refer to the February 17, 2004 edition of "Les Nouvelles" for a succinct summary of Inco presence in New Caledonia.

2.0 the world largest nickel mining company

On page 9, the Report states:

"The world’s largest nickel mining company, the International Nickel Company (INCO) based in Toronto, is moving ahead with plans to …"

and on page 13, the Report states:

"INCO, the world’s largest nickel producer, is currently in the early stages of developing a mine and hydrometallurgical plant through its subsidiary Goro Nickel S.A. near Goro in southern Grande Terre."

Inco/Goro Nickel S.A. Response:

Although Inco aspires to be the world’s largest nickel mining company, Inco is not. Please refer to the 2002 Annual Report to Shareholders of Inco, - Corporate Profile which states: "Inco Limited is one of the world’s premier metals and mining companies and the world’s second largest producer of nickel".

3.0 goro nickel ownership – incorrect description

This section includes a number of incorrect statements. For example:

On page 13, the Report mistakenly states:

"Currently INCO presently owns sixty-five percent of Goro Nickel. Sumitomo currently holds twenty-five percent, which when sold to this Japanese firm effectively excluded the entry of the SLN into the venture (RECTO/VERSO, 2002). The territorial government of New Caledonia holds five percent, as does the Southern Province government. Previously, fifteen percent of Goro Nickel was owned by the French government through its Bureau des Recherches Géologiques et Minières, however, on October 11, 2002 the BRGM sold its fifteen percent to INCO, although both Eramet and the New Caledonian government were interested in acquiring the share (Belignon, "Inco," 2002)".

and on page 16, the Report re-iterates:

"Not only are the largest shareholders of the project foreign companies, from Canada and

Japan, with the local government holding only a combined ten percent of the venture, ……"

Inco/Goro Nickel S.A. Response:

While discussions have been held with a number of parties regarding their potential acquisition of an interest in Goro Nickel S.A., the Company’s ownership has not changed since 1992. Inco controls 85% of Goro Nickel S.A. and the Bureau des Recherches Géologiques et Minières (BRGM) (information available on their website: www.brgm.fr) holds the remaining 15%.

The authors are referred to the Inco website which states:

"Inco Limited currently owns 85% of Goro Nickel, while a French government agency - the Bureau de Recherches Géologiques et Minières (BRGM) - owns 15%. In July 2002, Inco reached an agreement in principle covering the acquisition of a 25% interest in Goro by a consortium of Japanese companies led by Sumitomo Metal Mining Co., Ltd. As part of this expected ownership position, in October 2002 Inco entered into a letter of intent with BRGM to acquire its 15 per cent interest. These agreements in principle are subject to further discussion and review in light of Inco's December 2002 announcement to undertake a comprehensive project review".

Therefore, the statement on page 16 referencing "Japanese ownership" of Goro Nickel is incorrect. We request the authors correct the Goro Nickel ownership in their Report.

4.0 acts of violence

Under the title "Opposition of Goro", the authors describe a number of acts of violence.

On page 19, the Report states:

"Many members of these groups that have voiced their opposition to the Goro Project have become targets of violent acts and intimidation within the last few years", and then goes on to describe a number of incidents that occurred in New Caledonia.

Inco/Goro Nickel S.A. Response:

The authors appear to imply that these acts of violence are linked with Inco/Goro Nickel. We take strong exception to these allegations. Inco/Goro Nickel have never supported, condoned, encouraged or participated in any acts of violence, including the acts cited in pages 19 and 20 of your Report. We would suggest the Report disassociates Inco/Goro Nickel from the incidents that have been referenced. The implication that Inco/Goro Nickel allegedly were involved with these acts should be corrected by removing these allegations from the section entitled "Opposition of Goro".

5.0 project status

On page 25, the Report states:

Starting in the middle of summer, 2002, the Goro project has experienced a series of disruptions that have recently resulted in a work stoppage that is expected to last at least six-months (Belignon, "Goro," 2002), and possibly up to two years, seriously delaying the overall project timeline. Rising costs, which are estimated to be as high as forty-five percent more than previously anticipated (Hiscock, 2002), along with recent labour and subsequent contract disputes have culminated in this major setback for the development.

Inco/Goro Nickel S.A. Response:

Since the Report is undated, we are unsure of how much of this information was available to the authors at the time of its preparation. We have provided a synopsis of the status of the Project.

(http://www.inco.com/MediaCentre/News/default.asp?year=2002&posting_id=1597).

(http://www.inco.com/MediaCentre/News/default.asp?year=2003&posting_id=2188).

(http://www.inco.com/MediaCentre/News/default.asp?year=2003&posting_id=1819)

This information is publicly available on the Inco website. We are surprised that researchers interested in the Goro Project have neglected to include these updates in the Report.

6.0 training and job opportunities

On page 16, the Report states:

"… However, it is unclear who will get the jobs created by the project…."

Inco/Goro Nickel S.A. Response:

The Report misrepresents Goro Nickel’s efforts in job training and education activities since the Goro Nickel pilot plant began operation in 1998. Please find below a summary of Goro Nickel’s training initiatives.

General

Based on the principle that the construction period will provide a sufficient pool of local employees to be available for the eventual commercial operations, the Goro Nickel staffing strategy anticipates resources from three sources:

It is anticipated that selected persons from the above sources will be involved at different stages of the construction activities. During 2000, Goro Nickel and local partners, including the New Caledonian government and Province Sud, set up a training program to feed operation requirements.

Since the project review started in December 2002, a complementary plan for construction jobs was also developed to manage the expectations of personnel previously employed by BTH for re-employment when the project recommences.

Training Strategy

The training strategy is designed to provide the following:

This staged process is intended to provide the required training program as shown in the following schematic:

Training Program for Commercial Activities

The training programs will be designed taking into account the following principles:

The participants who will succeed in this training program for the eventual commercial activities are expected to be integrated into the construction team, through the various construction contractors, and to put into practice their learning during the construction phase. These training programs are open to Goro Nickel current employees in order to upgrade their skills. Goro Nickel funds this aspect of the program.

Based on an appropriate skill and behaviour assessment program, the construction employees will be transferred progressively from contractors to the Goro Nickel operations team. They will follow a pre-commissioning and pre-startup training program prior to assignment to their startup role.

The Plan

i) Heavy Equipment Operators

Goro Nickel provided an experimental training program for potential candidates with Poro Mining School (CFTMC). The purpose of the program was to maximize the involvement of youth from the local community.

 

This program was registered by the French Ministry of Labour.

ii) Plant Operators

In this field, two different programs are in place:

Two sessions with 30 trainees were planned to commence 15 months prior to startup. The information, subscription and testing process had commenced. As a result of project review, this program is on hold.

These programs are financed by Goro Nickel (50%) and by local institutions (50%). Those who will complete these programs will also participate in a pre-commissioning training program prior to job assignment.

iii) Maintenance Personnel

Like the Plant Operators, a customized program of seven months "DU Genie industriel" has been developed with l’Université de la Nouvelle-Calédonie and Technology Institute. The target population is also high school graduates (Lycée) with a industrial maintenance background.

One Session of 39 candidates – mechanical, electrical, and instrument fitters are planned to commence by the end of this year. The information, subscription and testing process are currently being progressed. This program is financed jointly by Goro Nickel (50%) and by local institutions (50%).

Those who complete the program are expected to be employed as part of the construction team and may have the opportunity to transfer to Goro Nickel operations through the pre-commissioning training program.

Training Program for Construction Activities

Following the project suspension the New Caledonia government and Goro Nickel established a special training plan to upgrade the skills of workers participating in the project prior to the suspension. A Training Management Committee, led by the New Caledonia government and including local institutions such as SEF-PS, MIJ, Goro Nickel and others, are supervising this process. The role of this Committee is to:

pre-requisite;

This training plan is focusing on specific construction jobs such as:

Currently, the Pipe Fitters Program is in progress. Sixteen pipe fitters will be trained on a nine-month training program, registered by the French Ministry of Labour.

Plan for Engineers and Supervisors

According to the number of employees required at this level, Goro Nickel has decided to:

For some current employees, Goro Nickel developed an internal process for personal development through customized training, hands-on and industrial experience. In 2002, seven supervisors were trained in leadership and management in Canada.

Regarding our future needs, we are working closely with career counsellors involved in engineering or university studies. When appropriate, the new staffing plan for commercial activities will be provided to the institutions so students are aware of our future needs in terms of skills, discipline and schedule. We are sponsoring some students following their training programs in chemistry, geology and industrial maintenance. This sponsorship is expected to expand in the future.

The following table summarizes the number of students participating in the current programs.

 

For Operation

Customize

Numbers of Trainees

Mine Heavy Equipment Operators

YES

38

Mine Heavy Equipment Operators

NO

20

DEUST Metallurgy 2001 Session

NO

6

Customise Program

   

Plant Operators

YES

60

Mechanical Fitters

YES

15

Electrical Fitters

YES

12

Instrument Fitters

YES

12

For Construction

   

Pipe Fitters

NO

16

Crane Drivers

NO

TBD

Scaffolders

NO

TBD

Steel Workers

NO

TBD

total

 

179

TBD: To Be Defined

   

We request the Report be modified to reflect the very significant training program and effort sponsored by Goro Nickel and others.

7.0 tax incentives

On page 13, the Report states:

"… and INCO secured a $200 million bond in March of 2001 ("New Caledonia," 2001) and garnering further funding."

and on page 20, the Report states:

"… these stakeholders [GNi and our yet to be declared Japanese partners] have been granted unprecedented tax holidays. The tax breaks assumes revenues for local government for at least fifteen years, limiting the potential benefits of the project to merely employment opportunities."

Inco/Goro Nickel S.A. Response:

The Report does not accurately describe the Government of New Caledonia and France’s economic incentives and implies that Goro Nickel is the exclusive beneficiary of these financial incentives. The reference to the tax incentives and Paul Act (or Loi Girardin) financing is described in the Report under the respective titles of "Background to the Goro Project" and "Opposition to the Goro Project". The tax incentive provided by France to French nationals or corporations who invest in France’s overseas territories are available to all projects that meet certain requirements set forth in the legislation and are not exclusive to Goro Nickel.

Goro Nickel is treated on an equal footing with all other French nationals investing in New Caledonia. The authors should review the amount of funds available to Goro Nickel compared with the amount of funds available to other projects including Koniambo. In addition we suggest the title describing financial incentives should not focus only on the Goro Project.

8.0 prony exploration

On page 14, the Report states:

In July of 2002 in an unexpected step, the Southern Province government granted INCO a six-year exploration permit at the minimal cost of about $22 million, to an approximately 8,300 hectares area near Prony, adjacent to their Goro site. This move, called the ‘Prony Concession’ has the potential to vastly increase the output from the Goro project from an estimated 50,000 tonnes per year to over 200,000 tonnes per year. It has been seen as detrimental to the environment since it greatly expands the area of land open to mining activities on Grande Terre and also as a threat to the viability of the Koniambo project, for a mine of this magnitude could undercut the costs of production and out compete the Northern mine.”

Inco/Goro Nickel S.A. Response:

We believe the description provided in the Report does not properly reflect the status of the Prony exploration activity in the context of Goro Nickel being granted a "Permis de Recherches de type A (PRA)" in December 2003. A PRA allows for the exploration of certain minerals. The PRA is not a mining concession or does not allow mining to proceed. The following factors should be included in your description of Prony.

We question the statement made that the Prony project poses a threat to the Koniambo project. The sponsors of the Koniambo project have indicated a production decision could be made towards the end of 2004. By this time, the Prony project will not have started exploration drilling or initiated their required baseline environmental studies. It is anticipated that it will take at least six years to collect sufficient exploration information to make a decision on the resource potential of the area. Only then would a production decision be made and one would then proceed with gaining approval for mine development. The Koniambo project is nearing a production decision while the Prony project is at an early stage of exploration, therefore we question the authors’ view that Prony is a threat to the Koniambo project.

9.0 misrepresentation of new caledonian regulatory and permitting process

On page 2, the Report states:

"However, nickel mining tends to have environmental and social repercussions and so it is not surprising that, on this island where virtually no formal French or European Union environmental regulations apply…"

and on page 8, the Report states:

"Thus far, New Caledonia has largely neglected to act towards enacting any French environmental regulations within the territory."

Inco/Goro Nickel S.A. Response:

It is unfortunate the authors did not conduct a review of the regulatory regime in New Caledonia. Inco/Goro Nickel believe that the New Caledonian Authorities (Territorial and Provincial governments) as well as the French Administration are best suited to describe their regulatory requirements for the resource sector. This information is readily available from the French government website (http//www.legifrance.fr). However, in the absence of an appropriate review in the Report, we would like to offer the following comments.

New Caledonia is an overseas territory of France, and as such, has a number of distinct laws and regulations. Protection of the environment is under the jurisdiction of the provinces of New Caledonia, and, for the Province Sud, a number of regulations are in place to ensure protection of the environment. A complete listing of these regulations are available in the document entitled "La réglementation de l’environnement en Province Sud" published by the Province Sud (http://www.province-sud.nc/services/publication/index.php?txt_publication=Environnement).

Of particular importance for the Goro Project are the following regulations:

These regulations provide the framework (the procedures and processes) that must be followed in order to obtain necessary mining permits and operating permits for classified facilities (installations classées), water licenses, land and foreshore occupation permits.

For the "installations classées" (operating permit), the procedure requires that the installations classées permit application (IC application) be submitted to a public enquiry, overseen by an independent public enquiry commissioner. The public feed back obtained from these public enquiries are taken into account by the Provincial Administration (Direction des resources naturelles – DRN) in the draft of the terms and conditions for granting of the installations classées operating permits. The President of the Province signs the IC permit. In addition to detailed terms and conditions under which the IC facility is authorized to operate, the Arrêté d’autorisation (IC permit) also imposes environmental monitoring and reporting requirements on the permit holder.

Goro Nickel S.A. hold a number of IC permits and invites the authors to consult the Journal Officiel of New Caledonia, and in particular the following Arrêté d’autorisation, to acquaint themselves with the terms and conditions as well as the environmental monitoring and reporting requirements for the permits obtained by Goro Nickel S.A. for the Goro Project:

A copy of Goro Nickel’s operating permit for the pilot plant is attached (Arrêté no 1542-99/APS du 28 septembre 1999). This operating permit (IC permit) clearly describes the Goro Nickel’s obligations in terms of environmental monitoring and reporting. The Authorities (Province Sud) has the right to suspend, amend or cancel the permit at any time should either the operating conditions not be met or they believe there is a threat to environment or public health.

With respect to the Matignon Accord and the Nouméa Accord, these agreements culminated with the promulgation of the LOI ORGANIQUE N°99-209 du 19 mars 1999 relative à la Nouvelle Calédonie. The Loi organique lays out the political structures and the decision-making framework by which New Caledonians will organize and decide on the future direction of the Territory over the coming years.

 

10.0 Environmental monitoring

On page 8, Report states:

"According to Bruno Van Peteghem, 2001 GoldmanPrize winner and the territory’s most recognized environmentalist, "’there is no environmental monitoring of any kind in New Caledonia so mining companies can do what they like" (Roberts, 2001)."

Inco/Goro Nickel S.A. Response:

The Arrêté no 1542-99/APS du 28 septembre 1999 provides an example of the environmental monitoring and reporting requirements required under the Province Sud regulatory regime. All of the monitoring reports transmitted to the New Caledonian authorities can be consulted by the public at the SME.

Goro Nickel has other monitoring obligations required under the Arrêté described in section 9. The Noumea office of Service des Mines et de l’Energie has posted in its foyer the air quality trend analysis for another mining company. Therefore, we suggest the authors revisit this section of the Report and accurately reflect the monitoring obligations imposed on mining companies.

11.0 Environmental Review process

On page 15, the Report states:

"They (The Kanaks sic) had also been continuing their call for an independent environmental review of the project as well as an extension to the one-month public comment period on INCO’s lengthy project assessment in order to more fully examine the over 2100-page document (INCO, "Dossier," 2002)".

Inco/Goro Nickel S.A. Response:

In 2002, an independent review of the Installation classées application was conducted by INERIS and IFREMER. INERIS is a leading European technical institution located in France (http//www.ineris.fr) specializing in industrial risk prevention and environmental protection.

The INERIS review was completed in August 2002. INERIS representatives summarized their findings in a series of public meetings in Noumea on August 9 and 10, 2002. Subsequent public presentations were made by INERIS representatives at the Sénat Coutumier on November 12, 2002 and at the Goro Village on November 13, 2002.

 

On page 22, the Report states:

"On August 10, 2002, the French Institut National de l’Environnement Industriel et des Risques (INERIS) released conclusions about its review of the Goro Report and uncovered inaccurate information on both the company’s estimated chemical pollution and the effects of waste metals on the environment and also highlighted thirty-seven other problems regarding the development".

Inco/Goro Nickel S.A. Response:

The INERIS Report listed 38 recommendations. These recommendations consist of suggestions on design improvements, undertaking additional baseline studies in order to enhance Goro Nickel’s proposed environmental monitoring program, and issues to be incorporated into Goro Nickel’s management plans once the plant is in operation. Goro Nickel has stated that it will implement all the recommendations proposed by INERIS.

We are puzzled why the authors called for an independent review for the Goro Project (page 16 of the Report) when such a review has already been completed. On page 22 of the Report the authors reference the INERIS Report, an independent review of the Goro IC document.

12.0 lack of transparency

On page 20, the Report provides the unreferenced statement:

"Inco’s perceived evasiveness and its initial refusal to release the environmental impact assessment only heightened concerns over the project’s ecological effects".

Inco/Goro Nickel S.A. Response:

We are puzzled by this comment. Inco did not refuse to release the environmental impact statement contained in the IC application. Indeed, the IC application was placed on the Inco website shortly after the document was released to the government authorities.

also on page 20, the Report states:

"The company has raised also concerns over its practices by maintaining a relative lack of transparency regarding its plans for the development. The company delayed the release of its project Report, including an environmental assessment, and allowed only one month for the public response period to the paper, despite the fact that it is over 2100 pages long."

and on page 21, the Report states:

"However, the actual environmental assessment in the case of the Goro project reveals many ecological risks which have been differentially noted by the indigenous population and activists in contrast with the Koniambo project."

Inco/Goro Nickel S.A. Response:

On January 2002, Goro Nickel released the environmental impact assessment in the IC application for the Goro project. To date, neither the IC application nor the environmental impact assessment for the Koniambo Project have been released for public review. Therefore, we believe it is improper for the authors to "contrast" the environmental effects of two projects when the basis of comparison is on unequal footing. We would suggest the authors withdraw this conclusion and withhold their evaluation of the Goro Nickel Project and Koniambo Project until the Koniambo EIS is released for public review.

Contrary to the remarks cited in the Report, we believe that Goro Nickel has been very open regarding its environmental assessment study for the project.

The Goro Nickel initial Bankable Feasibility Study (BFS) was completed in March 2001, and includes an environmental review of the project. However, the design of the Goro Nickel project was not finalized until October 2001, after Inco retained the Bechtel, Technip, Hatch (BTH) joint venture as the EPCM contractor. Therefore the environmental impact assessment study for the proposed project was included in the IC permit application (refer to Tome 3 of the IC permit application, which can be consulted on the Inco website). Since the project and the BFS is slightly different to the proposed project described in the IC application, we are unsure why the authors believe this information is relevant.

The inference that Inco allowed a one-month review period for its IC permit application is incorrect. The comment period is specified by New Caledonian regulation [which is a transposition of the French installations classées regulation]. It is therefore presumptuous to assume that Goro Nickel set the time period for the statutory public reviews of its submission. Therefore, we suggest the authors modify the Report to reflect the regulatory process.

We would like to point out that the IC application was placed on the Inco website in February 2002, well before the commencement of the government review period and where the complete application still can be publicly reviewed. In addition, supplementary information is available at the Goro Nickel’s Noumea office.

On-going Public Consultations

We believe that the Goro Project enjoys wide support throughout New Caledonia. The Comité de suivi de Yaté was established during the construction phase to provide a communication forum. During 2002 and 2003, meetings were held every two weeks, either at the Mairie de Yaté or on the construction site. Representatives of Goro Nickel and site construction personnel explained the construction activities. These meetings allowed for the local residents to express their views and concerns related to the construction activities.

The meetings of the "Commission Minière Inter-Municipale" are New Caledonian regulatory requirements for all major construction activities (refer to section 10 above). These meetings are chaired by the mayors of the Communes affected by the project activities and attended by representatives of the following groups:

The Service des Mines et de l’Energie (SME) acts as the secretary and provides a written record of the issues and concerns raised by the community. The meeting of the Commission Minière opens with a presentation of the proposed work and is followed by a site visit to show to the participants the exact location of the construction activity. During the presentation, the project proponent is invited to present his project (description of specific construction activities, sequence, environmental impact, mitigation measures, outcome of studies, discussion of alternatives) and respond to any questions raised by the audience. At the conclusion of the site visit, the chairman of the commission (mayor of the commune), in consultation with the Grand Chiefs of the local tribes, summarizes the opinion of the community regarding the proposed development. The minutes of the meeting of the Commission Minière as recorded by the SME thus provide a good record of all concerns raised by the community concerning the proposed development.

Since August 2001, seven meetings of the Commission Minière have been held. More will be required as the project progresses. At each meeting, the Grand Chiefs have granted the consent of their tribes to proceed with specific construction activities.

Minutes of meetings of the Commission Minière Intercommunale can be obtained from the Mairie of Yaté or the SME. Goro Nickel is surprised that the authors have not checked this readily available source of public information regarding community concerns and issues as it relates to the Goro Project.

13.0 Project Report content

On page 20, the Report states:

"The Report is also criticized for being created in an office thousands of kilometers from New Caledonia and hurriedly translated into French 17, rendering it replete with errors".

Inco/Goro Nickel S.A. Response:

The authors characterize the Project Report as incomplete.

The content of the IC permit application is established by regulation (refer to article 8 of the Délibération N°14 du 21 juin 1985 relative aux installations classées pour la protection de l’environnement). The table below presents a brief outline of the content of the IC permit application:

 

Regulatory requirement – article 8 of Délibération N° 14 du 21 juin 1985 relative aux installations classées pour la protection de l’environnement

Goro Nickel S.A.’s IC permit application (January 15, 2002 submission – can be consulted on Inco’s website)

Identification of applicant

Tome 1

Location of the facilities

Tome 1

Listing of installations classées subjected to specific application

Tome 1

Detailed description of the project

Tome 2

Regulatory drawings (size and scale specified by the regulation)

Tome 1 and Tome 5

Environmental Impact Study which include:

  • Baseline studies
  • Potential environmental impacts of the facilities
  • Mitigation measures to protect the environment

Tome 3 – Etude d’impact

Volume 1 – Etat initial

Volume 2 – Origine, nature et gravité de la pollution

Volume 3 – Effets environnementaux du projet

Safety Report (Etude de dangers)

Tome 4 – Etude de dangers

Notification of compliance with Health and Safety requirements

Tome 4 – Notice d’hygiène et de sécurité

 

The IC application is one of the most comprehensive environmental data sets for a project in New Caledonia.

Goro Nickel contracted Technip, a French consulting firm to assist in the preparation of the IC application. Some sections of the IC application were prepared exclusively in French by the consultants, however, some technical section of the IC application was written in English and then translated into French by Technip staff. We recognize that errors may have occurred and we invite the authors to provide us with their review and comments on the application. A vague characterization of the IC application is not helpful.

14.0 environmental concerns - misinformation about the goro project

On page 21, the Report states:

"Inco plans to implement a submarine tailings disposal (STD) system for its wastes and the high concentration of hazardous materials produced at Goro, regardless of how they leave the site, are already problematic in the eyes of many New Caledonians. While the literature on the environmental impact of STD is highly contested, the perception of this method remains far more negative than terrestrial disposal."

Inco/Goro S.A. Response:

Goro Nickel does not plan to implement a submarine tailings disposal system. Inco plans to place the tailings in the Kwé Basin and refill the open mining area (using terrestrial disposal). We refer the authors to the IC application found on the Inco website (ww.inco.com). We are disappointed that the authors failed to describe our tailings deposition accurately. We request the authors explain how they reached the conclusion that Inco was intending to use a submarine tailings disposal.

On page 21 & 22, the Report states:

"An analysis of Inco’s project assessment by Corail Vivant, reveals the concentrations of these metals carried in the run-off from Goro to be significantly higher than those allowed by French law. Corail Vivant asserts that the Report lists manganese concentration to be no less than 100 milligrams per liter and no more than 200 mg/l, while French regulations allow only a 1 mg/l concentration of the metal."

Inco/Goro S.A. Response:

It is correct that Inco/Goro Nickel is seeking an Mn level of <100 mg/l in the effluent discharge. The development of the Mn level was based on the following factors: (i) location of the effluent discharge location (ii) an assessment of acute and chronic toxicity testing (iii) a comprehensive environmental effects monitoring program developed with the Institut de recherche pour le développement (IRD) with appropriate bio-indicators to confirm the results of the assessment (iv) the precipitation of Mn cause the pre-precipitation of Mg, escalating costs and other environmental consequences such as increases in the release of greenhouse gases, etc. (v) the monitoring and follow-up program will be designed with action level trigger points.

Therefore, we believe, taking into account all factors, a 100 mg/l Mn permit level is acceptable.

On page 22, the Report states:

"Chromium and other heavy metals such as lead, mercury and arsenic are typically the most dangerous waste products for mines".

Inco/Goro S.A. Response:

First, we question the identified "heavy metals" are the most dangerous products from mines. We believe the authors should re-evaluate potential environmental effects of mines.

For the authors benefit, in France the "Arrêté du 2 février 1998 relatif aux prélèvement et à la consommation d’eau ainsi qu’aux emissions de toute nature des installations classées pour la protection de l’environnement soumises à autorisation" establishes the acceptable discharge concentrations in effluent of chromium total (Cr), Cr(VI) and other metals (refer to http//www.legifrance.fr to consult the Arrêté).

The concentrations of Cr total and Cr(VI) in Goro Nickel’s commercial plant effluent will be below these levels as demonstrated by analysis of the pilot plant effluent and other modeling efforts.

and on page 22, the Report states:

"Inco’s Report contains no information about lead. This lack of specifics in Inco’s Report has provided ample reason for environmentalists and other groups to keep a close eye on Goro plan".

Inco/Goro Nickel S.A. Response:

The reference to lead is particularly disconcerting.

A cursory review of the IC application (dated January 2002) identifies a number of references to lead.

For example:

Tome 3 – Etude d’impact, Volume 1, please review

Further, a review of lead concentrations can be found in Tome 3 - Etude d’impact, Volume 2 – Effluents

Suffice it to say that there is ample information about lead in the Installations Classées.

Inco/Goro Nickel recognizes that lead will be a parameter that will require monitoring and will be included in the operating permit. We suggest the authors revisit the IC application and review their conclusion that the Inco Report contains no information about lead.

On page 23, the Report states:

" … concerns about coal, … since as regulation do not exist, coal with particularly high sulfur content may be used" and CO2 emission rates of 600,000 tonnes per year.

Inco/Goro S.A. Response:

These figures are inconsistent.

It is worth mentioning that the Goro Project will use 55 MW of the power generated by the proposed power plant (the rest of the power being dedicated to the growing needs of New Caledonia, and the Noumea region in particular). The construction of an oversized power plant to serve the needs of the island is a perfect example of how the Goro Nickel Project has integrated the needs of New Caledonia.

We would suggest the authors review the calculations of release parameters included in their Report.

15.0 inco – working with aboriginal groups

On page 18, the authors make the comment:

"The kanaks are also supported by Innu…"

 

Clarification

Inco has demonstrated its ability to reach agreements with the aboriginal community. In 2002 Inco signed with the Labrador Inuit Association and Innu Nation separate impact agreements. These agreements were negotiated over a period of time and were based on an element of trust and sharing the same goals. As a result of these negotiations, the Innu Nation and the Labrador Inuit Association have formed monitoring partnerships and are currently participating the construction of the Voisey’s Bay Project.

16.0 other minor comments

On page 4, the Report states:

"We relied on detailed ethnographic studies and personal interviews of key stakeholders in the mineral development negotiations as well as key players in the resistance movements for this study."

Inco/Goro Nickel S.A. Response:

The Report does not reference the ethnographic studies. Which studies were used for the Report?

The authors should confirm the statement made on page 5: "Most of New Caledonia’s nickel is currently shipped overseas as unrefined ore…."

On page 1, the Report states:

"Grande Terre, where the capital city Noumea is located, is only 400 km long, yet is still one of the largest South Pacific islands. Literally "Big Land," Grande Terre is also the location of nearly one quarter of the world’s entire known nickel reserves".

Inco/Goro Nickel S.A. Response:

In the above sentence the word "reserves", should be replaced by mineral resources for the statement to be factual.

On page 13, the Report states:

"The deposit at Goro is estimated to contain "370 Mt [million tonnes] averaging 1.6 percent nickel and 0.17percent cobalt, including proven and probable reserves of 47 Mt" ("New Caledonia,"2000). Assessments analyzing Goro’s annual production capacity have pegged it at 54,000 tons of nickel and 5,400 tons of cobalt ("Inco to," n.d.), with final products of seventy-eight percent nickel nickel-oxide and cobalt carbonate destined for stainless steel"

Inco/Goro Nickel S.A. Response:

Please refer to Inco’s 2003 Annual Report page 80 for appropriate numbers for mineral resources and mineral reserves as the reporting of such numbers are strictly regulated under the SEC and OSC.

As of year-end 2003, the estimated mineral resources reported for the Goro Project excluding mineral reserves are 95M metric tonnes of measured and indicated mineral resources at an average grade of 1.58% nickel and 0.13% cobalt, and 144M metric tonnes of inferred mineral resources at an average grade of 1.7% nickel and 0.12% cobalt. In addition to these mineral resources, there are proven and probable mineral reserves of 57M metric tonnes at an average grade of 1.52% nickel and 0.12% cobalt.

Also Inco’s 2002 Annual Report page 41 states that the planned plant capacity is projected to be 55,000 metric tonnes of nickel and 4,500 metric tonnes of cobalt.

As for the nickel content in the nickel oxide it is 78% while the cobalt content in the cobalt carbonate product is 47%. The way the sentence is written leads the reader to believe that the cobalt content in the cobalt carbonate is the same as the nickel content in the nickel oxide.