VOISEYrsquoS BAY DEVELOPMENT AGREEMENT

AMONG

HER MAJESTY THE QUEEN IN RIGHT OF NEWFOUNDLAND AND LABRADOR

AND

VOISEYrsquoS BAY NICKEL COMPANY LIMITED

AND

INCO LIMITED

Made as of 30 September 2002

TABLE OF CONTENTS

PAGEARTICLE 1 - DEFINITIONS AND INTERPRETATION 1

11 Definitions 1 12 Schedules 9 13 Subdivisions 9 14 Headings 9 15 Number and Gender 9 16 Statutes Regulations Rules and Orders 9 17 Business Day 9 18 Contract Always Speaking 9 19 Governing Law and Choice of Forum 10 110 Construed Covenants 10 111 Inconsistency or Conflict 10 112 Severability 10 113 Currency 10 114 Knowledge 10

ARTICLE 2 - REPRESENTATIONS AND WARRANTIES 11 21 Proponentrsquos Representations and Warranties 11 22 Government Acknowledgements 12 23 Governmentrsquos Representations and Warranties 12 24 Proponent Acknowledgements 13

ARTICLE 3 - DESCRIPTION OF THE PROJECT AND RELATED FACILITIES 13 31 The Project 13 32 Capital Investment 13 33 Employment 13 34 Innovation Centre 13 35 R amp D Program 14

ARTICLE 4 - PROPONENTrsquoS UNDERTAKINGS 14 41 Infrastructure and Initial Work 14 42 R amp D Program 14 43 Mine and Concentrator Plant 15 44 Underground Exploration Program 16 45 Underground Mine Development and Concentrator Plant Expansion 16 46 Processing Plant 16 47 Selection of Applicable Processing Plant 17 48 Innovation Centre 19 49 Industrial and Employment Benefits 19 410 IBAs 19 411 VBN Undertaking Order 19 412 Corporate Income Tax 19

- ii - 413 Return of Concentrate 20 414 Copper Processing in the Province 21 415 Parties in Contract Change of Control and Assignment 21 416 Members of House of Assembly 22 417 Mining Lease 22 418 Proponentrsquos Financing 22

ARTICLE 5 - FORCE MAJEURE 22 51 Events of Force Majeure 22 52 Obligation to Perform 23 53 Force Majeure Relief 23

ARTICLE 6 - GOVERNMENT UNDERTAKINGS 23 61 Aboriginal Agreements 23 62 Electrical Rights and Provision of Power 23 63 Mining Lease 24 64 Exemption Orders 24 65 Issue of Authorizations 24 66 Legislative Framework 25 67 Special Project Orders 25 68 Corporate Income Tax 25 69 Mining Tax Act 26 610 Primary Production Order 26 611 Industrial and Employment Benefits 26

ARTICLE 7 - PROPONENTrsquoS DEFAULT 26 71 Notice of an Event of Default 26 72 Termination 26

73 Release by Proponent and Proponentrsquos Indemnity 26

ARTICLE 8 - DISPUTE RESOLUTION 26 81 Dispute Resolution 26

ARTICLE 9 - CONFIDENTIAL INFORMATION 27 91 Confidential Information 27 92 Effect of Disclosure 28 93 Approval 28 94 Permitted Disclosure of Information 28 95 Remedy 28

ARTICLE 10 - CONDITIONS CLOSING AND TERMINATION 29 101 Conditions for the Benefit of the Government 29 102 Conditions for the Benefit of the Proponent 29 103 Closing Notice 30 104 Deliveries and Closing 30

- iii -105 Termination 30 106 Effect of Agreement and Termination 30

ARTICLE 11 - GENERAL MATTERS 31 111 Enurement 31 112 Counterparts 31 113 Notices 31 114 Legal Fees 32 115 Payment of Fees and Expenses 32 116 Time of Essence 32 117 Further Assurances 32 118 Public Notices 33 119 Independent Legal Advice 33 1110 Compliance with Laws 33 1111 Entire Agreement 33 1112 Good Faith 33 1113 Waiver 33 1114 No Partnership Joint Venture or Agency 34

SCHEDULES

THIS DEVELOPMENT AGREEMENT made as of 30 September 2002

AMONG HER MAJESTY THE QUEEN IN RIGHT OFNEWFOUNDLAND AND LABRADOR as represented byThe Honourable The Premier The Honourable The Ministerof Mines and Energy and The Honourable The Minister ofLabrador and Aboriginal Affairs

AND VOISEYrsquoS BAY NICKEL COMPANY LIMITED a corporationincorporated under the laws of the Province

AND INCO LIMITED a corporation organized under the laws ofCanada

NOW THIS DEVELOPMENT AGREEMENT WITNESSETH that for and in consideration of themutual covenants and agreements herein contained and subject to the terms and conditionshereinafter set out the parties hereto mutually agree one with the other as follows

ARTICLE 1DEFINITIONS AND INTERPRETATION

11 Definitions When used in this Agreement (including the Schedules identified in Section12) unless the context otherwise requires the following terms shall have the meaningsascribed thereto

ldquoAffiliaterdquo means in respect of a Person

(a) a Person that Controls such Person(b) a Person that is Controlled by such Person or(c) a Person that is under common Control with such Person

ldquoAgreementrdquo means this Agreement and all Schedules attached to this Agreement ineach case as they may be amended or supplemented from time to time and theexpressions ldquohereofrdquo ldquohereinrdquo ldquoheretordquo ldquohereunderrdquo ldquoherebyrdquo and similar expressions referto this Agreement and unless otherwise indicated references to Articles and Sections areto Articles and Sections in this Agreement

ldquoApplicable Lawsrdquo means any statute ordinance regulation authorization order permitapproval grant license consent policy rule right franchise privilege determinationdirective decree by-law code or standard that is enacted made issued or granted by anyGovernment Entity

2

ldquoApprovalrdquo means express approval or concurrence in writing and ldquoApproverdquo andldquoApprovedrdquo shall be construed accordingly

ldquoBusiness Dayrdquo means any day other than a Saturday Sunday or statutory holiday in theProvince

ldquoCessation of Mining Operationsrdquo means the date by which due to the lack of SufficientReserves the continued operation of the Mine and Concentrator Plant would no longer beeconomically feasible

ldquoClosingrdquo means the execution and delivery of the Instruments and the coming into effectof this Agreement and the Instruments in their entirety as contemplated by Article 10

ldquoClosing Daterdquo means the date which is the fifth Business Day after the date of deliveryof the Closing Notice by the Proponent to the Government or such earlier date as theparties agree

ldquoClosing Noticerdquo has the meaning ascribed thereto in Section 103

ldquoCommercial Production Daterdquo means the date to be certified by the Proponent and atthe option of the Government confirmed by an Engineer upon which the Hydromet Planthas operated at an annualized production rate of 30000 tonnes of Finished Nickel Productfor a period of ninety consecutive days

ldquoConcentrator Plantrdquo has the meaning ascribed thereto in Section 431

ldquoConstruction Completion Daterdquo means the date to be certified by the Proponent andat the option of the Government confirmed by an Engineer upon which the constructionof the Processing Plant has been completed in accordance with the Proponentrsquos plans andspecifications therefor

ldquoControlrdquo means with respect to a Person the ability directly or indirectly through one ormore intermediaries to direct or cause the direction of the management and policies ofsuch Person through

(a) the legal or beneficial ownership of voting securities partnership interests or otherequivalent ownership interests in such Person

(b) the right or ability to appoint or elect a majority of the directors or individuals of acomparable position of such Person

(c) the right or ability to appoint the management of such Person or(d) a contract an operating agreement a management agreement a voting trust or

other similar agreement

and ldquoControlledrdquo means with respect to a Person being subject to the Control of another

3

ldquoCopper Concentraterdquo means the intermediate concentrate or similar product producedby the Concentrator Plant containing the principal quantities of copper from ore extractedor removed from the Leased Lands

ldquoCopper Concentrate Exemption Order means the Copper Concentrate ExemptionOrder in the form of Schedule 11B

ldquoDecisionrdquo means the written decision to be delivered by the Proponent to the Governmentas to whether the Proponent intends to engineer and construct the Hydromet Plant or theMatte Plant

ldquoDecision Daterdquo means the date of delivery of the Decision

ldquoDecision Materialsrdquo means the Feasibility Study and all other information and data in theProponentrsquos possession or control (including information and data generated by its advisorsand consultants) which form the basis for the Proponent making the Decision (includingsuch data and information subsequently available to or the existence of which issubsequently known by the Proponent) in form which will permit the Government and theExperts to undertake the review of the Decision and the reasons therefor as contemplatedby Section 475 Such data and information shall include without limitation reports onmetallurgical test work proposed flowsheets detailed capital and operating cost estimatesand a detailed economic analysis

ldquoDemonstration Plantrdquo means the facility at Argentia where hydrometallurgical processingtechnology will be tested including any part or sub-process of such technology themechanical or processing equipment required therefor and any pilot plant testing or similarcampaigns to determine the technical and economic feasibility of such technology

ldquoDemonstration Plant Completion Daterdquo means the date as certified by the Proponentand at the option of the Government confirmed by an Engineer upon which theconstruction of the Demonstration Plant has been completed in accordance with theProponentrsquos plans and specifications therefor and is ready to test Nickel Concentrate

ldquoEMArdquo means the Environmental Management Agreement entered into among theGovernment the Government of Canada the LIA and Innu Nation dated as of 22 July2002

ldquoEngineerrdquo means an individual independent of and acceptable to both the Proponent andthe Government who

(a) is an engineer with at least ten years of experience in base metals primaryprocessing engineering and the engineering design and construction managementof base metals primary processing plants

(b) has the requisite experience to make the relevant determination confirmation orreport to be made or given pursuant to this Agreement and

4

(c) is a member in good standing of a professional association where ldquoprofessionalassociationrdquo means a self-regulatory organization of engineers that

(i) has been given authority or recognition by statute

(ii) admits members primarily on the basis of their academic qualifications andexperience

(iii) requires compliance with the professional standards of competence andethics established by the organization and

(iv) has disciplinary powers including the power to suspend or expel a member

ldquoEvent of Bankruptcyrdquo means

(a) the entry of a decree or order by a court having jurisdiction adjudging the Proponenta bankrupt or insolvent or approving as properly filed a petition seekingreorganization or winding-up of the Proponent under the Companiesrsquo CreditorsArrangement Act (Canada) the Bankruptcy and Insolvency Act (Canada) or theWinding-Up Act (Canada) or any other bankruptcy insolvency or analogous lawsor issuing sequestration or process of execution against the Proponent or anysubstantial part of its property or ordering the winding-up or liquidation of its affairsand the continuance of any such decree or order or appointment unstayedundischarged and in effect for a period of 60 days from the date thereof

(b) the institution by the Proponent of proceedings to be adjudicated bankrupt orinsolvent or the consent by it to the institution of bankruptcy or insolvencyproceedings against it or the filing by it of a petition or answer or consent seekingreorganization or relief under the Companiesrsquo Creditors Arrangement Act (Canada)the Bankruptcy and Insolvency Act (Canada) or the Winding-Up Act (Canada) orany other bankruptcy insolvency or analogous laws or the consent by it to the filingof any such petition or to the appointment of a receiver of the Proponent or of anysubstantial part of its property or the making by it of a general assignment for thebenefit of creditors or the Proponentrsquos admission in writing of its inability to pay itsdebts generally as they become due or the Proponent taking such action infurtherance of any of such aforementioned purposes or

(c) whenever a custodian receiver receiver and manager sequestrator liquidatortrustee agent for a secured creditor or other Person with similar powers isappointed for any substantial part of the Project whether by a court or by extra-judicial means unless such custodian receiver receiver and manager sequestratorliquidator trustee or agent is removed within 60 days of such appointment

ldquoEvent of Defaultrdquo means any one or more of the following

(a) an Event of Bankruptcy has occurred with respect to the Proponent

5

(b) the Proponent is wound up its constating documents or by-laws are forfeited orsurrendered or the corporate or other existence of the Proponent is otherwiseterminated

(c) the Proponent is in breach of its obligations in Section 415 or

(d) subject to an Event of Force Majeure andor Section 652

(i) the Decision has not been delivered by 15 November 2008

(ii) the applicable Implementation Plan has not been delivered as required bySection 474 or 475

(iii) the Processing Plant has not been completed on or before 31 December2011 or

(iv) an Engineer has determined that the Proponent is not proceeding diligentlyto complete the engineering work for and the construction of the ProcessingPlant so that it will be completed on or before 31 December 2011 asrequired by Section 474 or 475

ldquoEvent of Force Majeurerdquo has the meaning ascribed thereto in Section 51

ldquoExemption Ordersrdquo means collectively the Nickel Concentrate Exemption Order theCopper Concentrate Exemption Order and the Matte Plant Exemption Order

ldquoExpertsrdquo means collectively (a) an Engineer or firm of Engineers who will make thetechnical feasibility review of the Decision and (b) a recognized third party financial expertindependent of the Government and the Proponent who will make the financial feasibilityreview of the Decision and who will jointly deliver the Expertsrsquo Report if requested by theGovernment pursuant to Section 475 The Experts shall be selected at the time and in themanner provided for in Section 473

ldquoExpertsrsquo Reportrdquo has the meaning ascribed thereto in Section 475

ldquoFeasibility Studyrdquo means the study undertaken by or on behalf of the Proponentcontaining the technical and economic evaluations which form the basis for the Decision

ldquoFinished Copper Productrdquo means finished copper product(s) having a copper contentof not less than 99

ldquoFinished Nickel Productrdquo means finished nickel product(s) having a nickel content of notless than 998

ldquoGovernmentrdquo means the Government of the Province

6

ldquoGovernment Entityrdquo means (a) any federal provincial state regional municipal localor other government governmental or public department commission board bureau oragency whether domestic or foreign (b) any subdivision agency commission board orauthority of any of the foregoing or (c) any quasi governmental or private body exercisingany regulatory expropriation or taxing authority under or for the account of any of theforegoing in each case which has jurisdiction in respect of the Project or any part thereof

ldquoHydromet Plantrdquo has the meaning ascribed thereto in Section 461

ldquoIBAsrdquo means collectively the Impacts and Benefits Agreements made as of 29 July 2002between the Proponent and each of Innu Nation and the LIA without any amendment orvariation

ldquoIEBArdquo means the Industrial and Employment Benefits Agreement in the form set out inSchedule 49

ldquoImplementation Planrdquo means a detailed description of and time schedule for thecompletion of the engineering work for and the construction of the Processing Plant by 31December 2011

ldquoIncordquo means Inco Limited a corporation organized under the laws of Canada

ldquoInformationrdquo has the meaning ascribed thereto in Section 911

ldquoInnovation Centrerdquo has the meaning ascribed thereto in Section 34

ldquoInnu Nationrdquo means Innu Nation a corporation incorporated under the laws of Canada

ldquoInstrumentsrdquo means collectively the University Agreement the Tax Agreement and theIEBA

ldquoLeased Landsrdquo means the lands described in Schedule ldquoArdquo to the Mining Lease asamended from time to time

ldquoLegislative Frameworkrdquo means the Applicable Laws of the Province in existence as ofthe date hereof applicable to the Project or any part thereof

ldquoLIArdquo means the Labrador Inuit Association a corporation incorporated under the laws ofthe Province

ldquoMatterdquo means any form of granular nickel in matte product containing not less than 50nickel which can be processed by the Matte Plant to produce Finished Nickel Product

ldquoMatte Plantrdquo has the meaning ascribed thereto in Section 462

7

ldquoMatte Plant Exemption Order means the Matte Plant Exemption Order in the form ofSchedule 11C

ldquoMinerdquo means collectively (a) the open pit mine or mines to be developed by the Proponentfor the extraction of the mineral ores located on the Leased Lands and (b) the undergroundmine or mines as contemplated by Section 45 for the extraction of the mineral ores atdepth located under the Leased Lands

ldquoMineral Actrdquo means the Mineral Act (Newfoundland and Labrador) and the regulationsthereunder

ldquoMining Leaserdquo means the Mining Lease in the form of Schedule 63

ldquoMining Tax Actrdquo means the Mining and Mineral Rights Tax Act (Newfoundland andLabrador) and the regulations thereunder

ldquoMining Tax Act Amendmentsrdquo means the proposed amendments to the Mining Tax Actset out in Schedule 69

ldquoNickel Concentraterdquo means the intermediate concentrate or similar product produced bythe Concentrator Plant containing the principal quantities of nickel and cobalt from oreextracted or removed from the Leased Lands

ldquoNickel Concentrate Exemption Order means the Nickel Concentrate Exemption Orderin the form of Schedule 11A

ldquoPersonrdquo means any individual partnership limited partnership joint venture syndicatesole proprietorship company or corporation with or without share capital unincorporatedassociation trust trustee executor administrator or other legal personal representativeor Government Entity however designated or constituted

ldquoPrimary Production Orderrdquo means the Primary Production Order in the form of Schedule610

ldquoProcessing Plantrdquo means either the Hydromet Plant or the Matte Plant which theProponent shall construct and operate in the Province as contemplated by Section 46

ldquoProcessing Related Reasonrdquo means any situation where the Proponent is unable tomeet its obligations under Section 4131 as a result of either (a) the unavailability forwhatever bona fide reason of Replacement Concentrate or (b) the unavailability ofReplacement Concentrate on reasonable commercial terms including without limitationwhere the terms relating to price or specifications would make it not economically ortechnically feasible for processing at the Processing Plant

ldquoProjectrdquo has the meaning ascribed thereto in Section 31

8

ldquoProponentrdquo means collectively VBNC Inco their respective Affiliates or any Personwhich (as permitted by this Agreement) individually or together with any of them by way ofpartnership joint venture sub-contract or otherwise holds or is entitled to a majority interestin or Control of the Project or is the operator of the Project and their respective successorsand permitted assigns

ldquoProvincerdquo means the Province of Newfoundland and Labrador Canada

ldquoR amp D Programrdquo has the meaning ascribed thereto in Section 35

ldquoReplacement Concentraterdquo means any product containing nickel or cobalt or bothderived from ores or any other source of nickel or cobalt or both mined extracted orproduced outside the Province that in each case does not represent Finished NickelProduct but which can be further processed at the Processing Plant to produce FinishedNickel Product

ldquoSufficient Reservesrdquo means the estimated quantities of ldquoProven Mineral Reservesrdquo orldquoProbable Mineral Reservesrdquo or both within the meaning of National Instrument 43-101ldquoStandards of Disclosure for Mineral Projectsrdquo (as amended from time to time) determinedby the Proponent in accordance with its standard methodologies and assumptions for suchestimates

ldquoTax Agreementrdquo means the Tax Agreement to be entered into between the Governmentand the Proponent as contemplated by Sections 412 and 68

ldquoTime of Closingrdquo means 1000 orsquoclock in the morning in the Province on the ClosingDate

ldquoUnderground Exploration Programrdquo means the underground exploration programcontemplated by Section 44

ldquoUniversityrdquo means Memorial University of Newfoundland

ldquoUniversity Agreementrdquo means the agreement to be entered into between the Proponentand the University as contemplated by Section 48

ldquoVBN Undertaking Orderrdquo means the Voiseyrsquos Bay Nickel Company Limited Mine and MillUndertaking Order under the Environmental Assessment Act (Newfoundland and Labrador)dated 5 August 1999 (OC 99-286) as amended from time to time and

ldquoVBNCrdquo means Voiseyrsquos Bay Nickel Company Limited a corporation incorporated underthe laws of the Province

9

12 Schedules

The documents attached hereto and identified below shall form an integral part of thisAgreement

Schedule 11A - Nickel Concentrate Exemption OrderSchedule 11B - Copper Concentrate Exemption OrderSchedule 11C - Matte Plant Exemption OrderSchedule 49 - IEBASchedule 4132 - Assaying ProceduresSchedule 63 - Mining LeaseSchedule 69 - Mining Tax Act AmendmentsSchedule 610 - Primary Production OrderSchedule 81 - Dispute Resolution Procedures

13 Subdivisions Unless otherwise stated a reference herein or in a Schedule by numericalor alphabetical designation to an Article Section Subsection Paragraph Subparagraphor Schedule shall refer to the Article Section Subsection Paragraph Subparagraph orSchedule bearing that designation in this Agreement or in a Schedule

14 Headings The division of this Agreement into Articles Sections SubsectionsParagraphs and Subparagraphs and the insertion of headings are for convenience ofreference only and shall not affect the construction or interpretation of this Agreement

15 Number and Gender Words importing the singular shall include the plural and vice versaand words importing a particular gender shall include all genders The use of the neutersingular pronoun to refer to a party is deemed a proper reference The necessarygrammatical changes required to make the provisions of this Agreement apply shall in allinstances be assumed as though in each case fully expressed

16 Statutes Regulations Rules and Orders Any reference in this Agreement to all or anypart of any statute regulation rule or order shall unless otherwise stated be a referenceto that statute regulation rule or order or the relevant part thereof as amendedsubstituted replaced or reenacted from time to time

17 Business Day If the day on which any act or payment is required to be done or madeunder this Agreement is a day which is not a Business Day then such act or payment shallbe performed or made on the next following Business Day

18 Contract Always Speaking With the exception of the representations and warranties ofthe parties set out in Article 2 and any estimates referred to in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic and relatedbenefits and costs of facilities referred to in this Agreement made by the Proponent wherea matter or thing is expressed in the present tense it shall be applied to the circumstancesas they arise

10

19 Governing Law and Choice of Forum This Agreement shall be interpreted inaccordance with the laws in force in the Province subject to any applicable federal laws andfor all purposes this Agreement shall be treated as a Newfoundland and Labrador contractThe Proponent irrevocably submits and attorns to the exclusive jurisdiction of the courts ofthe Province

110 Construed Covenants Each obligation or agreement of this Agreement (other than therepresentations and warranties of the parties) even though not expressed as a covenantis to be construed as a covenant

111 Inconsistency or Conflict Except where otherwise provided either expressly or bynecessary implication in this Agreement a Schedule hereto or any Instrument in the eventof any inconsistency or conflict between any such Schedule or Instrument and any provisioncontained in this Agreement the provision of this Agreement shall prevail to the extent ofthe inconsistency or conflict

112 Severability If any provision of this Agreement or the application thereof to any Personor circumstance is to any extent held or rendered invalid void illegal or unenforceablefor any reason then the particular provision

1121 shall be deemed to be independent of and severed from the remainder of thisAgreement and all the other provisions of this Agreement shall neverthelesscontinue in full force and effect and

1122 shall continue to be applicable and enforceable to the fullest extent permitted by lawagainst any Persons and in any circumstances other than those as to which it hasbeen held or rendered invalid void illegal or unenforceable

If a severance occurs under this Section 112 the parties shall use their respective bestefforts to negotiate in good faith an enforceable replacement provision that to the greatestextent possible reflects the intent or serves the purpose of the severed provision

113 Currency All references in this Agreement to currency are to Canadian dollars

114 Knowledge In this Agreement where ldquoKnowledgerdquo of a party is referred to

1141 in respect of the Proponent it shall mean the actual knowledge of the executiveofficers of the Proponent after due inquiry in respect thereof and

1142 in respect of the Government it shall mean the actual knowledge of the responsibleexecutives of the applicable department of Government after due inquiry in respectthereof

11

ARTICLE 2REPRESENTATIONS AND WARRANTIES

21 Proponentrsquos Representations and Warranties Acknowledging that the Government isrelying on such representations and warranties VBNC and Inco jointly and severallyrepresent and warrant to the Government that

211 each is a corporation which has been duly incorporated or organized as applicableunder the laws of its jurisdiction of incorporation or organization as applicable andis validly existing under such laws

212 Inco is extra-provincially registered in the Province

213 each has all necessary corporate power authority and capacity

2131 to cause the design engineering and construction of and to operateand maintain all parts of the Project and

2132 to enter into this Agreement and the Instruments and to perform itsrespective obligations herein and therein

214 the execution and delivery of this Agreement and each of the Instruments and theconsummation of the transactions contemplated herein and therein by each ofthem have been duly authorized by all necessary corporate action on the part ofeach of them

215 neither is a party to bound or affected by or subject to any indenture mortgagelease agreement instrument charter or by-law provision which with or without thegiving of notice or the lapse of time or both would be violated contravened orbreached by or under which default would occur as a result of the executiondelivery or performance of this Agreement or any of the Instruments or theconsummation of any of the transactions provided for in any of them

216 neither is bound or affected by or subject to any Applicable Law which with orwithout the giving of notice or the lapse of time or both would be violatedcontravened or breached by or under which default would occur as a result of theexecution delivery or performance of this Agreement or any of the Instruments orthe consummation of any of the transactions provided for in any of them

217 no approval authorization consent permit or other action by or filing with anyGovernment Entity is required in connection with the execution and delivery of thisAgreement or any of the Instruments and the performance of their respectiveobligations hereunder or thereunder except as otherwise stated herein

218 there is no suit action litigation arbitration proceeding or proceeding by aGovernmental Entity including appeals and applications for review in progresspending or to the Knowledge of either of them threatened against or involving

12

either of them or any judgment decree injunction or order of any court or arbitratorwhich could adversely affect their capacity or power to execute and deliver thisAgreement or any of the Instruments or to consummate the transactionscontemplated herein or therein or which could materially adversely affect theirrespective assets financial condition or future prospects

219 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of each of them enforceable against them inaccordance with their respective terms except as limited by (a) applicablebankruptcy laws or laws affecting the enforcement of creditorsrsquo rights generally and(b) the general principles of equity

2110 all references to estimates made by Inco and VBNC in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic andrelated benefits and costs of facilities are made as of the date of this Agreementhave been determined by them based upon information available at the date of thisAgreement and have been estimated by each of them bona fide and reasonablyand neither of them has any reason to believe that any such estimate isunreasonable or unfounded at the date of this Agreement and

2111 VBNC is a wholly owned subsidiary of Inco and to the Knowledge of the Proponentno Person individually or with any other Person or Persons currently Controls Inco

22 Government Acknowledgments The Government acknowledges that (a) none of VBNCInco or any Person for whom either of them may be responsible in law have made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments and (b) the Proponent shall use the most efficient and cost effective miningtechniques including state of the art automated mining technologies aimed at loweringoperating costs and extending the life of the Project

23 Governmentrsquos Representations and Warranties Acknowledging that the Proponent isrelying on such representations and warranties the Government represents and warrantsto the Proponent that

231 the execution and delivery of this Agreement and each of the Instruments and theconsummation by the Government of the transactions contemplated herein andtherein have been duly authorized by all necessary Government action

232 it is not a party to bound or affected by or subject to any indenture agreement orinstrument which with or without the giving of notice or the lapse of time or bothwould be violated contravened or breached by or under which default would occuras a result of the execution delivery or performance of this Agreement or any ofthe Instruments or the consummation of any of the transactions provided for in anyof them and

13

233 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of it enforceable against it in accordance with itsterms except as they may be limited by the general principles of equity

24 Proponent Acknowledgements Each of Inco and VBNC acknowledges that neither theGovernment nor any Person for whom it may be responsible in law has made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments

ARTICLE 3DESCRIPTION OF THE PROJECT AND RELATED FACILITIES

31 The Project The ldquoProjectrdquo will comprise collectively the Underground ExplorationProgram the Mine the Concentrator Plant the R amp D Program the Demonstration Plantthe Processing Plant and if applicable the Concentrator Plant expansion referred to inSection 45 The Processing Plant will be capable of processing concentrate andintermediate feeds containing nickel from other sources world wide which will give theProcessing Plant the capability of operating well beyond the life of the Mine

32 Capital Investment The Proponent estimates that the aggregate capital investment in theProject and related facilities will be $29 billion over the estimated 30-year life of the Projectinclusive of sustaining capital expenditures

33 Employment The Proponent estimates that

331 the construction phase of the Mine and Concentrator Plant will create approximately1700 person-years of employment in the Province the construction phase of theHydromet Plant will create approximately 3000 person-years of employment in theProvince and the construction phase of the Matte Plant will create approximately2500 person-years of employment in the Province

332 during the various operating phases the Project will create the followingemployment levels in the Province Mine and Concentrator Plant - 400 people R ampD Program - 200 people Underground Exploration Program - 85 people HydrometPlant - 400 people Matte Plant - 350 people

333 over the estimated 30-year life of the Project total employment benefits from theProject in the Province will be 76000 direct and indirect person-years and

334 gross domestic product impact to the Province with respect to the Project will be$11 billion

34 Innovation Centre The Proponent shall spend $10 million on and provide an endowmentof $1 million per year over a ten-year period to cover operational costs for an IncoInnovation Centre (the ldquoInnovation Centrerdquo) at St Johnrsquos in conjunction with theUniversity pursuant to the University Agreement The focus of the Innovation Centre willbe on education and research in mineral exploration mining and metallurgical processing

14

The Innovation Centre will provide world-class education research and training related tothe mining industry to 50-60 students per year to be engaged in Bachelors Masters andDoctorate level programs The Proponent shall commence work on the Innovation Centrein 2002 with target completion in 2004

35 R amp D Program The Proponent shall undertake a comprehensive research anddevelopment program intended to establish the commercial technical and economicfeasibility of hydrometallurgical process technology to process the Nickel Concentrate (theldquoR amp D Programrdquo) The R amp D Program will include the evaluation of chemical engineeringsub-processes for the hydrometallurgical process the mechanical equipment design for theDemonstration Plant and the construction and operation of the Demonstration Plant

ARTICLE 4PROPONENTrsquoS UNDERTAKINGS

41 Infrastructure and Initial Work Commencing in 2002 the Proponent shall

411 at the Mine site undertake site mobilization including the establishment of aconstruction camp initiation of work on temporary port facilities and construction ofaccess roads

412 at Argentia undertake leasing or other arrangements for occupancy and sitepreparation including demolition fencing security and signage

413 undertake the construction of a warehouse building and establish staging areas andlay down areas in support of Labrador activities

414 establish a project office at Argentia and information centres at St Johnrsquos andHappy Valley-Goose Bay and

415 complete site selection and commence architectural design and engineering workfor the Innovation Centre

The Proponent estimates that this infrastructure and initial work program will employ inaggregate approximately 250 persons and the Proponent shall spend not less than $55million on this program in the Province on or before 31 March 2003

42 R amp D Program421 The Proponent shall undertake the R amp D Program and as a part thereof shall

construct the Demonstration Plant at a cost which the Proponent estimates will be$130 million The Proponent shall commence the site development for theDemonstration Plant in 2002 and continue such development into 2003 Theinitiatives in support of these activities will include the operation of an informationcentre preparation of environmental baseline studies and continued upgrading orreplacement of utility services required for the Demonstration Plant maintainingstaging areas and cleanup and civil works at Argentia consisting of demolition

15

grading and earth works construction The Proponent has scheduled thecompletion of the engineering design and construction of the Demonstration Plantso that the Demonstration Plant Completion Date shall have occurred on or before31 December 2006

422 The Proponent shall provide to the Government within 15 days of the end of eachcalendar quarter commencing with the calendar quarter ending 31 December 2002a detailed progress report on the results during such calendar quarter of the R amp DProgram which report will detail costs incurred to the end of such calendar quarterand contain sufficient documentation and information to enable the Government toevaluate the Proponentrsquos progress with respect to the R amp D Program and thedevelopment of hydrometallurgical process technology for processing the NickelConcentrate If requested by the Government upon reasonable notice theProponent shall provide the Government and its representatives and advisorsaccess at reasonable times to the facilities where the R amp D Program is beingconducted and make appropriate personnel of the Proponent available to respondto any requests for additional information

423 In addition to the utilization of the Demonstration Plant for the purposes ofdeveloping hydrometallurgical process technology for processing the NickelConcentrate the Proponent shall explore business opportunities for the ongoingutilization of the Demonstration Plant for the evaluation of other concentrates andintermediate feeds after completion of the R amp D Program

43 Mine and Concentrator Plant

431 The Proponent shall cause the development of the Mine and the designengineering and construction of a millconcentrator plant which will be capable ofprocessing 6000 tonnes of ore per day (the ldquoConcentrator Plantrdquo) TheConcentrator Plant will produce the Copper Concentrate and the NickelConcentrate The Proponent has scheduled to begin the development of the Mineand the construction of the Concentrator Plant in 2003 and estimates that the Mineand Concentrator Plant will require three years to construct at a cost ofapproximately $710 million

432 The Proponent

4321 shall not ship any Nickel Concentrate out of the Province aspermitted by the Nickel Concentrate Exemption Order before theDemonstration Plant Completion Date and

4322 shall ship Nickel Concentrate from the Concentrator Plant to theDemonstration Plant in sufficient quantities for the continuedoperation of the Demonstration Plant during the R amp D Programfollowing successful start up of the Concentrator Plant

16

44 Underground Exploration Program The Proponent shall undertake an undergroundexploration program which it estimates will cost $95 million and employ approximately 85people This program is intended to identify Sufficient Reserves at depth under the LeasedLands and if there are such Sufficient Reserves the Proponent shall develop a mining planfor the economic extraction of such Reserves The initial phase of this undergroundexploration program will be an advanced surface program which the Proponent estimateswill cost $20 million to commence in 2002 with completion targeted for 2006 Subsequentunderground exploration will be scheduled to ensure that Sufficient Reserves under theLeased Lands are available to sustain full operation of the Concentrator Plant during thetransition from open-pit operations to full underground mining operations if applicable

45 Underground Mine Development and Concentrator Plant Expansion If theunderground exploration program described in Section 44 identifies Sufficient Reservesas contemplated by Section 44 the Proponent shall commence the development of anunderground mine or mines on the Leased Lands and an expansion of the ConcentratorPlant in order to supply sufficient Nickel Concentrate to maintain the operation of theProcessing Plant at full capacity The Proponent estimates that this program will costapproximately $750 million and employ an aggregate of 800 people

46 Processing Plant

461 In order to maximize long-term benefits for the Province and the people of theProvince the Proponent shall use its best efforts through the R amp D Program todevelop a technically and economically feasible hydrometallurgical processtechnology for processing the Nickel Concentrate in the Province If suchtechnology is successfully developed the Proponent shall cause the designengineering and construction of and operate and maintain a hydrometallurgicalprocessing plant with a design capacity to produce annually approximately 50000tonnes of Finished Nickel Product together with associated cobalt and copperproducts (the ldquoHydromet Plantrdquo) The Proponent estimates that the HydrometPlant will have a capital cost of approximately $800 million and during the three-yearconstruction period will generate approximately 3000 person-years of employmentThe Proponent estimates that the Hydromet Plant will employ approximately 400people during operations

462 If pursuant to Section 47 it is determined that a Hydromet Plant is not technicallyor economically feasible the Proponent shall construct a commercialhydrometallurgical nickel-matte processing facility or other similar facilityincorporating a proven state of the art technology to produce Finished NickelProduct (the ldquoMatte Plantrdquo) The Matte Plant will have a design capacity toproduce annually approximately 50000 tonnes of Finished Nickel Product togetherwith associated cobalt and copper products The Proponent estimates the MattePlant will have a capital cost of approximately $670 million and during the estimatedthree-year construction period will generate approximately 2500 person-years ofemployment The Proponent estimates that the Matte Plant will employapproximately 350 people during operations

17

463 The Proponent has represented to the Government that its objective is to operatethe Processing Plant well beyond the life of the Mine Accordingly the Proponentundertakes to explore technically and economically feasible opportunities for theexpansion of the Processing Plant and to secure opportunities to supply theProcessing Plant with feed from world wide sources to fully utilize the Proponentrsquoslarge capital investment in the Processing Plant

464 The Proponent shall establish the Processing Plant at Argentia unlessenvironmental conditions at Argentia would make it not economically feasible toestablish the Processing Plant at Argentia and in such circumstances theProponent shall locate the Processing Plant at another site in the Province

47 Selection of Applicable Processing Plant

471 The Proponent shall use commercially reasonable efforts to deliver as soon aspossible but in any event shall deliver on or before 15 November 2008 theDecision and the Decision Materials to the Government and the Experts

472 If the Proponent has not on or before 30 June 2008 delivered to the Governmentthe Decision and the Decision Materials

4721 it shall forthwith meet with the Government to review on aconfidential basis the status of its efforts towards being able todeliver the Decision

4722 thereafter it shall promptly update the Government from time to timeon its efforts to be able to deliver the Decision and the outstandingissues relevant to whether the Decision will be to build the HydrometPlant or the Matte Plant and

4723 to the extent that the Proponent is not by 30 June 2008 in aposition to deliver the Decision which confirms that the Proponentintends to proceed with the construction of the Hydromet Plant theProponent shall use commercially reasonable efforts to developImplementation Plans for both a Hydromet Plant and a Matte Plantso that it will be able to deliver the Implementation Plan for theHydromet Plant or Matte Plant as applicable on or before 31December 2008

473 The Government may at any time after the earlier of the Decision Date or 30 June2008 give the Proponent notice in writing that it wishes to proceed with theappointment of the Experts When the Government gives notice to the Proponentrequiring the appointment of the Experts the Government and the Proponent shallthen forthwith agree upon the appointment of the Experts If the Government andthe Proponent cannot so agree within 15 days after the giving by the Governmentof such notice the appointment of the Experts shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter to

18

the Joint Committee or the Mediation Procedure referred to therein If the Expertsare appointed prior to the delivery by the Proponent of the Decision and theDecision Materials the Proponent shall provide to the Government and the Expertssuch data and information as is then available that will assist the Experts in theirreview under Section 475 The Proponent and the Government shall each pay50 of the fees and expenses of the Experts Before receiving the Decision theDecision Materials or any other information or data from the Proponent under thisAgreement the Experts shall first execute a confidentiality agreement containingsubstantially the same terms as provided for in Article 9

474 If in the Decision the Proponent confirms it intends to construct the Hydromet Plantthe Proponent shall deliver the Implementation Plan for the Hydromet Plant on orbefore 31 December 2008 and thereafter shall proceed diligently to complete thedetailed engineering for and construction of the Hydromet Plant in accordance withsuch Implementation Plan so that it shall be completed on or before 31 December2011

475 If in the Decision the Proponent confirms it intends to construct the Matte Plant theGovernment shall on or before the seventh Business Days after the Decision Datedeliver to the Proponent and the Experts a notice in writing (in this Section 475 theldquoGovernment Decisionrdquo) that the Government either (a) accepts the Decision tobuild the Matte Plant or (b) intends to refer such Decision to the Experts for reviewIf in the Government Decision the Government states it intends to refer theDecision to the Experts the Proponent shall promptly deliver to the Experts theDecision and the Decision Materials if it has not previously done so The Expertswill review the Decision the Decision Materials and any other information or datawhich the Experts deem appropriate or which the Government requests them toconsider and render their report (the ldquoExpertsrsquo Reportrdquo) within 30 days of the dateon which the Government delivers the Government Decision If the Governmentrequests the Experts to consider any other information or data in addition to theDecision Materials it shall provide to the Experts and the Proponent copies of suchrequest and any such information and data at the time it delivers the GovernmentDecision and the Proponent shall have the right within five Business Days tocomment on or respond to such information and data to the Experts with a copy tothe Government The Expertsrsquo Report shall determine whether in the opinion of theExperts it would be technically and economically feasible for the Proponent to buildthe Hydromet Plant together with reasons for such determination If the ExpertsrsquoReport determines that it is technically and economically feasible for the Proponentto build the Hydromet Plant the Proponent shall on or before 31 December 2008deliver to the Government an Implementation Plan for the Hydromet Plant andthereafter shall proceed diligently to complete the detailed engineering for andconstruction of the Hydromet Plant so that it shall be completed on or before 31December 2011 If the Expertsrsquo Report confirms that it would not be technically oreconomically feasible to build the Hydromet Plant the Proponent shall on or before31 December 2008 deliver to the Government an Implementation Plan for the MattePlant and thereafter shall proceed diligently to complete the detailed engineering forand construction of the Matte Plant in accordance with such Implementation Plan

19

so that it shall be completed on or before 31 December 2011 Subject to Section477 the Expertsrsquo Report shall be final and binding on the Government and theProponent

476 The determination as to whether the Proponent is proceeding diligently with thecompletion of the engineering work for and the construction of the Processing Plantfor completion on or before 31 December 2011 as required by Section 474 or475 shall be made annually on the anniversary date of the Decision Date by anEngineer who shall certify to both the Government and the Proponent as to whetherthe actual engineering work for and construction of the Processing Plant is onschedule with the applicable Implementation Plan

477 If there is a manifest error in the Expertsrsquo Report which if corrected would result ina different determination by the Experts the Expertsrsquo Report shall be referred backto the Experts for the purpose of forthwith correcting such manifest error changingthe determination in the Expertsrsquo Report and submitting a revised Expertsrsquo Reportto the Proponent and the Government

478 Where an Engineer is required to be appointed from time to time for the purposesof Section 476 or for determining the Commercial Production Date theConstruction Completion Date or the Demonstration Plant Completion Date theGovernment and the Proponent shall forthwith agree upon the appointment of suchEngineer If the Government and the Proponent cannot so agree within 15 daysof the Government or the Proponent giving the other notice requiring appointmentof an Engineer the appointment of the Engineer shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter tothe Joint Committee or the Mediation Procedure referred to therein The Proponentand the Government shall each pay 50 of the fees and expenses of any Engineer

48 Innovation Centre The Proponent shall enter into an agreement (the ldquoUniversityAgreementrdquo) with the University in form and content satisfactory to the Government on orbefore the Closing Date The University Agreement shall contain among other things theProponentrsquos commitments and intentions set out in Section 34

49 Industrial and Employment Benefits The Proponent shall execute the IEBA to beeffective 7 October 2002

410 IBAs The Proponent represents and warrants to the Government that it has entered intothe IBAs

411 VBN Undertaking Order The Proponent agrees to abide by and implement the terms andconditions contained in the VBN Undertaking Order

412 Corporate Income Tax The Proponent shall use its best efforts to negotiate and executewith the Government an agreement covering the matters set forth in this Section 412 andSection 68 (the ldquoTax Agreementrdquo) as soon as possible but in any event on or before theClosing Date The Tax Agreement will contain provisions which to the extent permitted by

20

law will result in an allocation to the Province for the purposes of Part IV of the FederalIncome Tax Regulations of the Proponentrsquos gross revenues from the sale or disposition ofnickel copper and cobalt products whether in intermediate or final form from the Project

413 Return of Concentrate

4131 In consideration of the Government granting the Exemption Orders the Proponentguarantees that it shall prior to Cessation of Mining Operations commenceshipping into the Province Replacement Concentrate for processing into FinishedNickel Product at the Processing Plant Such Replacement Concentrate shall beshipped to and processed by the Processing Plant in sufficient quantities to permitthe Processing Plant to operate continuously at a rate that will produce not less than25000 tonnes of Finished Nickel Product annually and such shipments shallcontinue at least until such time as the contained nickel and cobalt in theReplacement Concentrate shall have equalled the total quantity of contained nickeland cobalt in the Nickel Concentrate shipped out of the Province under the termsof the Nickel Concentrate Exemption Order and otherwise than under the provisionsof an Exemption Order

4132 The Proponent shall undertake the Assaying Procedures set out in Schedule 4132with respect to the Nickel Concentrate and the Replacement Concentrate

4133 The Proponent acknowledges that if it does not perform its contractual obligationsunder Section 4131 (a) the Province and the economy of the Province will suffersubstantial loss (b) the Government would not be properly compensated for its lossby monetary damages which therefore will not be considered an adequate remedyfor such breach and (c) the Government may at any time subsequent to suchbreach commence an action against the Proponent for any one or more of thefollowing remedies whether claimed as primary or secondary alternative relief

41331 an order for specific performance

41332 appropriate injunctive relief whether mandatory or prohibitory and

41333 monetary damages including for consequential and economic lossreflecting the substantial losses suffered by the Government and theeconomy of the Province as a result of such breach

The Proponent expressly waives any right to claim or argue that the Governmentcannot claim the relief set out in Sections 41331 41332 and 41333 in any suitcommenced by the Government against the Proponent for the Proponentrsquos failureto perform its obligations under Section 4131

21

414 Copper Processing in the Province

4141 The Government acknowledges that at the date hereof the quantity of coppercurrently identified in the mineralized zones on or under the Leased Lands togetherwith identified copper deposits elsewhere in the Province are not sufficient to justifythe construction and operation of a copper processing facility in the Province on aneconomically feasible basis

4142 If at any time in the future

41421 Sufficient Reserves of copper are discovered by the Proponent inthe Province (including on or under the Leased Lands) to makeeconomic the processing on a commercial basis of the CopperConcentrate or any other product containing the principal quantitiesof copper extracted from the Leased Lands into Finished CopperProduct in the Province the Proponent shall process such CopperConcentrate into Finished Copper Product in the Province or

41422 a third party establishes a facility in the Province for the commercialprocessing of copper concentrate the Proponent shall offer for saleits then available Copper Concentrate from the Concentrator Plantto such third party for processing in such facility on then prevailingcommercial terms and conditions subject to the Proponentrsquos thenexisting contractual obligations

4143 In the circumstances set out in Section 4142 the Proponent acknowledges thatthe Government has the right pursuant to Section 311(3) of the Mineral Act torescind the Copper Concentrate Exemption Order

415 Parties in Contract Change of Control and Assignment

4151 The Proponent covenants with the Government that without the prior Approval ofthe Government it

41511 shall not take or threaten or purport to take any action whether byway of contract corporate reorganization or arrangement orotherwise that would have the effect of transferring assigningsubletting or otherwise divesting itself of a majority interest in orControl of (a) the Project or (b) all or substantially all of theProponentsrsquo rights under this Agreement the Instruments theExemption Orders the Primary Production Order and subject toApplicable Laws the Mining Lease and

41512 shall not take or threaten or purport to take any action which directlyor indirectly results in a change of Control of VBNC to a party otherthan Inco

22

4152 Wherever pursuant to Section 4151 the Government is requested to grant itsApproval such Approval may be withheld by the Government in its sole andabsolute discretion for any reason whatsoever

4153 For bona fide tax or other corporate reasons the Proponent may without theApproval of the Government transfer assign sublet or otherwise divest to anAffiliate a majority interest in or Control of (a) the Project or (b) all or substantiallyall of the Proponentrsquos rights under this Agreement the Instruments the ExemptionOrders the Primary Production Order and subject to Applicable Laws the MiningLease Notwithstanding Section 111 no such transfer assignment sublet ordivestiture shall relieve the Proponent of its obligations hereunder or thereunder

4154 The Proponent shall promptly give written notice to the Government of any actionit takes under Section 4151 or 4153

416 Members of House of Assembly The Proponent undertakes to (a) ensure that nomember of the House of Assembly of the Province shall have any interest in thisAgreement and (b) use its best efforts to ensure that no Member of the House of Assemblyof the Province receives any benefit to arise herefrom or from any report study review oranalysis required to be made or submitted pursuant to this Agreement

417 Mining Lease VBNC shall execute the Mining Lease effective 30 September 2002

418 Proponentrsquos Financing The Proponent shall use best efforts to obtain the financingcontemplated by Section 1024 including without limitation the preparation of all feasibilitystudies required in order to obtain such financing

ARTICLE 5FORCE MAJEURE

51 Events of Force Majeure For the purposes of this Article 5 and subject to the exceptionsand qualifications below each of the following shall be an ldquoEvent of Force Majeurerdquo

511 acts of God or natural disasters adverse weather conditions or other similaroccurrences

512 acts of war (declared or undeclared) or conditions arising out of or attributable toany such acts of war revolutions insurrections civil strife formal or informalhostilities mob violence riots and similar disturbances blockades or any otherunlawful acts against public order or authority

513 strikes lockouts work stoppages or labour disturbances unless directly andproximately caused by an unlawful act or omission of the Proponent

514 (a) delay or failure by suppliers of labour transportation materials machineryequipment parts supplies utilities or services (b) contractorsrsquo or sub-contractorsrsquoshortage of or inability to obtain labour transportation materials machinery

23

equipment parts supplies utilities or services or (c) breakdown of equipmentmachinery or facilities unless any of the foregoing are directly and proximatelycaused by or result from an unlawful act or omission of the Proponent

515 accidents and

516 solely in respect of the Proponentrsquos obligations in Section 4131 a ProcessingRelated Reason provided that a Processing Related Reason shall not be an Eventof Force Majeure at any time after three years following Cessation of MiningOperations

52 Obligation to Perform In order to obtain relief for an Event of Force Majeure theProponent shall (a) use commercially reasonable efforts to (i) prevent the occurrence of(ii) perform its obligations in the face of and (iii) terminate any such Event of Force Majeure(other than the events described in Section 513 relied upon) and (b) give the Governmentwritten notice of the facts which the Proponent claims constitute an Event of Force Majeureas soon as reasonably practical upon becoming aware of their existence

53 Force Majeure Relief If the Proponent establishes that it is prevented from performingany of its obligations under this Agreement the Nickel Concentrate Exemption Order or theMatte Plant Exemption Order by reason of an Event of Force Majeure such obligations willbe suspended for the period of the existence of such Event of Force Majeure and theProponent will be entitled to an extension of all dates referred to in this Agreement theNickel Concentrate Exemption Order and the Matte Plant Exemption Order for a reasonableperiod of time that reflects (a) the period during which the Proponent is prevented fromperforming its obligations by reason of the Event of Force Majeure and (b) the impact thatsuch Event of Force Majeure has on the Project including without limitation shippingschedules and construction schedules that have been delayed by reason of such Event ofForce Majeure Even though the Proponentrsquos obligations will be suspended for suchreasonable period of time when the applicable Event of Force Majeure is no longerpreventing the Proponent from performing its obligations the Proponent will again beobliged to perform such obligations

ARTICLE 6GOVERNMENT UNDERTAKINGS

61 Aboriginal Agreements The Government represents and warrants that it has entered into(a) interim measures agreements with the Innu Nation and the LIA that include the VoiseyrsquosBay chapter of the respective land claims agreements and (b) the EMA

62 Electrical Rights and Provision of Power The Government shall cause Newfoundlandand Labrador Hydro or its successors to

621 provide to the Proponent electrical power for the Processing Plant at the lower of(a) the island industrial electrical rate or (b) any lower electrical rate that may be

24

offered from time to time by Newfoundland and Labrador Hydro or its successorsto its industrial customers in comparable circumstances and

622 ensure that Newfoundland and Labrador Hydro or its successors can supply to theProponent sufficient electrical power for the operation of the Processing Plant

63 Mining Lease The Government shall issue the Mining Lease effective 30 September2002

64 Exemption Orders The Government shall issue the Exemption Orders effective 30September 2002

65 Issue of Authorizations

651 Where the Proponent has submitted all information and data in accordance withApplicable Laws and required by the Government for it to issue or grant any permitauthorization order or other approval necessary for the Proponent to implement theProject or any part thereof (in this Section 65 the ldquoAuthorization(s)rdquo) theGovernment shall issue or grant any such Authorization on a timely basis

652 If the Government does not issue or grant an Authorization on a timely basis

6521 the Government shall grant the Proponent an extension of all datesreferred to in this Agreement the Nickel Concentrate ExemptionOrder and the Matte Plant Exemption Order for a reasonable periodof time that reflects (a) the period of delay in granting suchAuthorization and (b) the impact that such delay has on the Projectincluding without limitation shipping schedules and constructionschedules that will have been delayed by Governmentrsquos failure toissue or grant such Authorization on a timely basis and

6522 if as a result of the Governmentrsquos failure to issue or grant anAuthorization on a timely basis the completion date for theProcessing Plant is delayed and provided that the Proponentestablishes that it is likely it will ship out of the Province the totalvolume of contained nickel in the Nickel Concentrate permittedunder the Nickel Concentrate Exemption Order prior to the revisedcompletion date of the Processing Plant the Government shallamend the Nickel Concentrate Exemption Order to allow anadditional quantity of contained nickel in Nickel Concentrate to beshipped out of the Province which quantity will reflect thereasonable period of time of the extension referred to in Section6521

653 The Government shall not be responsible for any delays nor shall the Proponent beentitled to any relief under this Section 65 unless such delays are directly and

25

proximately caused by or result from an act or omission of the Government or adepartment regulatory body board agent or employee of the Government

66 Legislative Framework

661 The Government represents to the Proponent (and acknowledges that theProponent is relying upon such representation) that it shall maintain substantiallythe Legislative Framework for the duration of the Project subject to legislativeamendments contemplated in this Agreement and legislation of general applicationThe Government shall maintain the Legislative Framework consistent with thisAgreement subject to Governmental responsibilities including the responsibility forensuring proper management of the Provincersquos resources the protection andmaintenance of public health and safety and the protection of the environment TheGovernment acknowledges that this Agreement is consistent with current public lawand Governmental responsibilities

662 The Proponent represents to the Government (and the Proponent acknowledgesthat the Government in consideration of agreeing to maintain the LegislativeFramework has relied upon such representation) that the Proponent shall performits obligations set out in this Agreement the Instruments the Exemption Orders thePrimary Production Order and the Mining Lease

67 Special Project Orders The Government shall issue a Special Project Order or SpecialProject Orders under Section 70 of the Labour Relations Act (Newfoundland and Labrador)to ensure a stable labour relations environment throughout the construction phases of theProject This Order or these Orders shall include without limitation provisions such as nostrikes and lock-outs and the ability to designate the union organization and employerrsquosrepresentative for the purposes of collective bargaining

68 Corporate Income Tax The Government shall use best efforts to negotiate and executewith the Proponent the Tax Agreement as soon as possible but in any event on or beforethe Closing Date The Tax Agreement will contain provisions

681 whereby the Government will provide that the rate of the Provincersquos corporateincome tax applicable to the Proponent will be the lower of the ldquoall provincesaveragerdquo or the Provincersquos income tax rate

682 which to the extent permitted by law will result in an allocation to the Province forthe purposes of Part IV of the Federal Income Tax Regulations of the Proponentrsquosgross revenues from the sale or disposition of nickel copper and cobalt productswhether in intermediate or final form from the Project and

683 whereby the Government will undertake to indemnify the Proponent for any doubletaxation resulting from the allocation referred to in Section 682

26

69 Mining Tax Act At the next session of the House of Assembly of the Province theGovernment shall introduce and support legislation to amend the Mining Tax Act inaccordance with the Mining Tax Act Amendments

610 Primary Production Order The Government shall issue the Primary Production Ordereffective 30 September 2002

611 Industrial and Employment Benefits The Government shall execute the IEBA to beeffective 7 October 2002

ARTICLE 7PROPONENTrsquoS DEFAULT

71 Notice of an Event of Default Upon the happening of an Event of Default theGovernment may deliver to the Proponent a notice of default setting forth in reasonabledetail the nature of the Event of Default and if the Government intends to exercise its rightsunder Section 72 indicating the date upon which the Government intends to exercise suchrights

72 Termination Subject to an Event of Force Majeure or the provisions of Section 652where an Event of Default has occurred and in each of such cases and so often as anEvent of Default happens after giving the notice provided for in Section 71 theGovernment may at any time in its sole discretion do any one or more of the following (a)terminate this Agreement (b) terminate the Mining Lease (c) rescind the ExemptionOrders and (d) take action for any remedy at law or in equity

73 Release by Proponent and Proponentrsquos Indemnity The Proponent hereby releases anddischarges and agrees to indemnify and save harmless the Government from every claimof every nature whether in damages (including consequential or indirect damages) or notwhich may arise or be suffered by the Proponent or any Person claiming through or underthe Proponent by reason of or as a result of anything done by the Government or anysuccessor or assign claiming through or under the Government under the provisions ofSection 72

ARTICLE 8DISPUTE RESOLUTION

81 Dispute Resolution Any dispute or difference between the parties hereto arising

811 as to whether a Processing Related Reason exists

27

812 as to the selection of an Engineer or firm of Engineers the Experts or an umpireunder Schedule 4132

813 under Section 45 as to whether the Underground Exploration Program hasidentified Sufficient Reserves under the Leased Lands

814 as to the determination of the date of Cessation of Mining Operations

815 as to whether commercial processing is economic as contemplated by Section41421

816 as to then prevailing commercial terms and conditions as contemplated by Section41422

817 under Section 51 as to whether an Event of Force Majeure exists

818 under Section 53 as to whether an Event of Force Majeure prevents the Proponentfrom performing any of its obligations under this Agreement

819 under Section 53 or Section 652 as to the reasonable period of time for theextension of the dates of performance of the Proponentrsquos obligations

8110 under Section 6522 the additional quantity of contained nickel in NickelConcentrate to be shipped out of the Province or

8111 as to whether the Proponent is complying with its obligations under Section 52

shall in each case be resolved in the manner provided for in Schedule 81

ARTICLE 9CONFIDENTIAL INFORMATION

91 Confidential Information The Government

911 acknowledges that information (the Information) supplied to it by or on behalf ofthe Proponent pursuant to or in connection with this Agreement or the Instrumentsincluding without limitation information provided pursuant to or in connection withSections 422 471 472 475 52 and 81 is of a financial commercialscientific or technical nature and is supplied in confidence and

912 subject to Sections 93 and 94 shall keep the Information confidential and shallnot use or disclose the Information to any third party without the Approval of theProponent and in doing so shall use the same care as it applies to avoid disclosureor dissemination of its own confidential information to prevent the disclosure ofInformation to any third party

28

92 Effect of Disclosure The Government acknowledges that disclosure of the Informationcontrary to the provisions of this Article 9 could reasonably be expected to921 harm significantly the competitive position or interfere significantly with the

negotiating position of the Proponent

922 result in similar information no longer being supplied by or on behalf of theProponent to the Government when it is in the public interest that similar informationcontinued to be supplied and

923 result in material financial loss to the Proponent or result in material financial gainto competitors of the Proponent and other Persons

93 Approval The Government may disclose Information if Approved by the Proponent

94 Permitted Disclosure of Information The provisions of this Article 9 shall not apply toInformation which

941 is now or which hereafter through no act or omission of the Government becomesgenerally known or available to the public without breach of this Agreement

942 after disclosure to the Government becomes generally known or available to thepublic by publication or otherwise through no act or omission of the Government

943 the Government can establish was in its possession at the time of disclosure andwas not previously acquired directly or indirectly from the Proponent

944 is disclosed to the Government by a third party on a non-confidential basis whichparty to the Knowledge of the Government is not prohibited from disclosing suchInformation to the Government by any legal contractual or fiduciary obligation towhich such party is bound or subject or

945 is required to be disclosed by law

95 Remedy Without limiting the Proponentrsquos rights and recourses for a breach by theGovernment of its obligations in this Article 9

951 the Government acknowledges that the Proponent shall suffer irreparable harm ifthe Government discloses Information contrary to the provisions of this Article 9and unless prohibited by law the Proponent shall be entitled to an injunction orinjunctions to prevent such disclosure

952 the Government shall be liable for and shall indemnify and save the Proponentharmless from and against costs losses damages and claims that it may sufferpay incur or be liable for as a result of any breach by the Government of thisArticle 9 and

29

953 in the event there are any measures which the Government can take to ensurecompliance with the provisions of Section 912 the Proponent shall be relieved ofthe obligation to provide information of the type with respect to which the breachoccurred until the Government has taken such measures

ARTICLE 10CONDITIONS CLOSING AND TERMINATION

101 Conditions for the Benefit of the Government Subject to Section 1061 the obligationsof the Government in this Agreement are subject to the satisfaction of or compliance withat or prior to the Time of Closing each of the following conditions

1011 the representations and warranties of the Proponent made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Proponent at or prior to the Time of Closing shallhave been performed the Proponent shall not be in breach of any agreement onits part contained in this Agreement at the Time of Closing and the Governmentshall have received a certificate confirming the foregoing signed for and on behalfof the Proponent in form and content satisfactory to the Government

1012 the University Agreement shall have been executed by the Proponent and a copythereof shall have been delivered to the Government

1013 the Tax Agreement shall have been executed by the Proponent and delivered to theGovernment and

1014 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

102 Conditions for the Benefit of the Proponent Subject to Section 1061 the obligationsof the Proponent in this Agreement are subject to the satisfaction of or compliance with ator prior to the Time of Closing each of the following conditions

1021 the representations and warranties of the Government made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Government at or prior to the Time of Closingshall have been performed the Government shall not be in breach of anyagreement on its part contained in this Agreement at the Time of Closing and theProponent shall have received a certificate confirming the foregoing signed for andon behalf of the Government in form and content satisfactory to the Proponent

30

1022 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

1023 the Tax Agreement shall have been executed by the Government and delivered bythe Government to the Proponent

1024 the Proponent shall have secured financing on reasonable commercial terms toenable it to develop the Mine and construct the Concentrator Plant and

1025 the Mining Tax Act Amendments shall have become law

103 Closing Notice If the Proponent (a) wishes to waive the condition set out in Section1024 or (b) has obtained the financing contemplated by Section 1024 it shall forthwithdeliver to the Government a notice (the ldquoClosing Noticerdquo) confirming that it has eitherwaived the condition set out in Section 1024 or that such condition has been satisfied

104 Deliveries and Closing1041 The Closing shall take place at the Time of Closing on the Closing Date at a

location to be agreed by the parties

1042 At the Closing

10421 the Proponent shall deliver to the Government the certificatecontemplated by Section 1011 and if not previously delivered theexecuted University Agreement and the executed Tax Agreementand

10422 the Government shall deliver to the Proponent the certificatecontemplated by Section 1021 and if not previously delivered theexecuted Tax Agreement

105 Termination This Agreement and the IBEA may be terminated at any time prior to theTime of Closing1051 by agreement of the Government and the Proponent

1052 by the Government if the conditions set out in Section 101 have not been satisfiedor waived by the Government or the Closing Notice has not been delivered to theGovernment on or before 31 March 2003 or

1053 by the Proponent if the conditions set out in Section 102 have not been satisfiedor waived by the Proponent (except the condition set out in Section 1024 in theevent the Proponent has delivered the Closing Notice)

106 Effect of Agreement and Termination

1061 Notwithstanding Section 1062 and subject to Section 1063 the Government andthe Proponent shall be bound by the provisions of Sections 41 421 422 410

31

411 412 415 416 417 418 61 63 64 65 66 67 68 69 610 and 611and Articles 5 8 9 and 11 effective as of and from the date of execution of thisAgreement

1062 Subject to Section 1061 the obligations of the Proponent and the Government inthis Agreement shall be effective as of and from the Time of Closing

1063 If this Agreement and the IEBA are terminated in accordance with the provisions ofSection 105 this Agreement and the IEBA shall thereafter become null and voidand have no effect and no party shall have any liability to the other except

10631 the obligations contained in Sections 41421 411 69 and Article9 hereof and

10632 the liability of a party in respect of its breach of this Agreement andthe IEBA prior to such termination

all of which shall survive such termination for a period of twelve months followingsuch termination

ARTICLE 11GENERAL MATTERS

111 Enurement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease shall be binding upon and shall enure to the benefitof the parties hereto the successors and assigns of the Government and the successorsand permitted assigns of the Proponent Any such assignment permitted by this Agreementshall become effective only when the assignee executes with the Government aninstrument whereby it agrees to be bound by and perform all of the Proponentrsquos obligationsunder this Agreement the Instruments the Exemption Orders the Primary ProductionOrder and the Mining Lease Subject to Section 4153 from and after the execution ofsuch instrument the assignor shall be relieved of and released from all its obligations underthis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease with effect from and after the date of execution of such instrument

112 Counterparts This Agreement and the other documents referred to herein andorotherwise required to complete the transactions contemplated hereby may be executed intwo or more counterparts including by facsimile each of which shall be deemed an originaland all of which together shall constitute one and the same instrument

113 Notices All notices requests demands and other communications hereunder shall bedeemed to have been duly given if in writing and either delivered personally sent byfacsimile transmission or by air courier service to the addresses designated below or suchother addresses as may be designated in writing by notice given hereunder and shall be

32

effective upon personal delivery or facsimile transmission thereof with proof of transmissionreceipt or upon delivery by air courier serviceIf to VBNC Voiseyrsquos Bay Nickel Company Limited

Suite 700 Baine Johnston Centre10 Fort William PlaceSt Johnrsquos NewfoundlandA1C 1K4Attention PresidentFacsimile (709) 758-8820

If to Inco Inco Limited145 King Street WestSuite 1500Toronto OntarioM5H 4B7Attention PresidentFacsimile (416) 361-7734

If to the Government Government of Newfoundland amp LabradorDepartment of Mines amp EnergyNatural Resources Building7th Floor 50 Elizabeth AvenueSt Johnrsquos NewfoundlandA1A 1W5Attention The MinisterFacsimile (709) 729-0059

114 Legal Fees In the event of any dispute or controversy between the Proponent on the onehand and the Government on the other hand relating to the interpretation of this Agreementor to the transactions contemplated herein the prevailing party shall be entitled to recoverfrom the other party reasonable legal fees and expenses incurred by the prevailing partySuch award shall include reasonable post judgment legal fees and costs

115 Payment of Fees and Expenses Each party hereto shall pay its own fees expenses anddisbursements incurred in connection with this Agreement and the transactionscontemplated hereby and all other costs and expenses incurred in its performance andcompliance with all conditions to be performed hereunder and thereunder

116 Time of Essence Time is of the essence of this Agreement

117 Further Assurances Each of the parties shall promptly do make execute deliver orcause to be done made executed or delivered all such further acts documents and thingsas the other parties hereto may reasonably require from time to time for the purpose ofgiving effect to this Agreement and the transactions contemplated hereby and shall usereasonable efforts and take all such steps as may be reasonably within its power toimplement to their full extent the provisions hereof and thereof

33

118 Public Notices No press release or other announcement concerning the transactionscontemplated by this Agreement shall be made either by the Proponent or the Governmentwithout the prior Approval of the other (such Approval not to be unreasonably withheld)provided however that the Proponent may without such Approval make such disclosureif the same is required by law or any stock exchange on which any of the securities of theProponent or any of its Affiliates are listed or by any securities commission or other similarregulatory authority having jurisdiction over the Proponent or any of its Affiliates and if suchdisclosure is required the Person making the disclosure shall use best efforts to give priororal or written notice to the Government and if such prior notice is not possible to givesuch notice immediately following the making of such disclosure Notwithstanding theforegoing the Proponent acknowledges that the Government will make this Agreement andthe Schedules hereto public

119 Independent Legal Advice Each of the parties acknowledges having obtained its ownindependent legal advice with respect to this Agreement and the transactions contemplatedhereby to the fullest extent deemed necessary by each party prior to its execution anddelivery Furthermore the parties acknowledge that neither acted under any duress innegotiating drafting and executing this Agreement the Instruments and any documentscontemplated hereby There shall be no presumption that any ambiguity in this Agreementthe Instruments and any documents contemplated hereby be resolved in favour of any ofthe parties

1110 Compliance with Laws Without limiting the generality of any other covenant herein theProponent shall at its own cost and expense comply with and shall use best efforts toensure that all Persons for whom the Proponent is at law responsible comply with allApplicable Laws in connection with the Project

1111 Entire Agreement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease set forth the entire agreement and all thecovenants promises assurances agreements representations conditions warrantiesstatements and understandings (collectively ldquoRepresentationsrdquo) between the partiesconcerning the subject matter hereof No Representations are made by the Governmentto the Proponent or by the Proponent to the Government except as expressly set out in thisAgreement the Instruments the Exemption Orders the Primary Production Order and theMining Lease For greater certainty the Statement of Principles between the Governmentand the Proponent dated as of 11 June 2002 shall have no application to the parties or thematters contemplated by this Agreement after the date hereof and is replaced entirely bythis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease

1112 Good Faith Each of the Government and the Proponent shall at all times exercise all itsrights hereunder in a manner consistent with good business practices and shall act in goodfaith

1113 Waiver The failure of any party hereto to insist in any one instance upon the strictperformance by another party hereto of its obligations hereunder the Instruments theExemption Orders the Primary Production Order and the Mining Lease or the failure of any

34

party hereto to exercise any right option or remedy shall not constitute a waiver orrelinquishment for the future of any such obligation right option or remedy nor shall itconstitute a waiver of a subsequent breach No covenant or condition of this Agreementmay be waived by any party hereto except by the written consent of that party andforbearance or indulgence by that party in any regard whatsoever for no matter how longshall not constitute a waiver of such covenant or condition and until such covenant orcondition has been performed or waived in writing that party shall be entitled to invoke anyremedy available to that party under this Agreement the Instruments the ExemptionOrders the Primary Production Order and the Mining Lease despite its forbearance orindulgence

1114 No Partnership Joint Venture or Agency The Government and the Proponent expresslydisclaim any intention to create a partnership joint venture or joint enterprise It isunderstood acknowledged and agreed that nothing contained in this Agreement nor anyacts of the parties shall constitute or be deemed to constitute the Government and theProponent as partners joint venturers or principal and agent in any way or for any purpose

THE HONOURABLE THE PREMIER

THE HONOURABLE THE MINISTER OFMINES AND ENERGY

THE HONOURABLE THE MINISTER OFLABRADOR AND ABORIGINAL AFFAIRS

INCO LIMITED

ByChairman and Chief Executive Officer

VOISEYrsquoS BAY NICKEL COMPANY LIMITED

ByPresident

SCHEDULE 11ANICKEL CONCENTRATE EXEMPTION ORDER

This document can be found at the following web address httpwwwgovnfcahoaregulationsrc020066htm

TABLE OF CONTENTS

PAGEARTICLE 1 - DEFINITIONS AND INTERPRETATION 1

11 Definitions 1 12 Schedules 9 13 Subdivisions 9 14 Headings 9 15 Number and Gender 9 16 Statutes Regulations Rules and Orders 9 17 Business Day 9 18 Contract Always Speaking 9 19 Governing Law and Choice of Forum 10 110 Construed Covenants 10 111 Inconsistency or Conflict 10 112 Severability 10 113 Currency 10 114 Knowledge 10

ARTICLE 2 - REPRESENTATIONS AND WARRANTIES 11 21 Proponentrsquos Representations and Warranties 11 22 Government Acknowledgements 12 23 Governmentrsquos Representations and Warranties 12 24 Proponent Acknowledgements 13

ARTICLE 3 - DESCRIPTION OF THE PROJECT AND RELATED FACILITIES 13 31 The Project 13 32 Capital Investment 13 33 Employment 13 34 Innovation Centre 13 35 R amp D Program 14

ARTICLE 4 - PROPONENTrsquoS UNDERTAKINGS 14 41 Infrastructure and Initial Work 14 42 R amp D Program 14 43 Mine and Concentrator Plant 15 44 Underground Exploration Program 16 45 Underground Mine Development and Concentrator Plant Expansion 16 46 Processing Plant 16 47 Selection of Applicable Processing Plant 17 48 Innovation Centre 19 49 Industrial and Employment Benefits 19 410 IBAs 19 411 VBN Undertaking Order 19 412 Corporate Income Tax 19

- ii - 413 Return of Concentrate 20 414 Copper Processing in the Province 21 415 Parties in Contract Change of Control and Assignment 21 416 Members of House of Assembly 22 417 Mining Lease 22 418 Proponentrsquos Financing 22

ARTICLE 5 - FORCE MAJEURE 22 51 Events of Force Majeure 22 52 Obligation to Perform 23 53 Force Majeure Relief 23

ARTICLE 6 - GOVERNMENT UNDERTAKINGS 23 61 Aboriginal Agreements 23 62 Electrical Rights and Provision of Power 23 63 Mining Lease 24 64 Exemption Orders 24 65 Issue of Authorizations 24 66 Legislative Framework 25 67 Special Project Orders 25 68 Corporate Income Tax 25 69 Mining Tax Act 26 610 Primary Production Order 26 611 Industrial and Employment Benefits 26

ARTICLE 7 - PROPONENTrsquoS DEFAULT 26 71 Notice of an Event of Default 26 72 Termination 26

73 Release by Proponent and Proponentrsquos Indemnity 26

ARTICLE 8 - DISPUTE RESOLUTION 26 81 Dispute Resolution 26

ARTICLE 9 - CONFIDENTIAL INFORMATION 27 91 Confidential Information 27 92 Effect of Disclosure 28 93 Approval 28 94 Permitted Disclosure of Information 28 95 Remedy 28

ARTICLE 10 - CONDITIONS CLOSING AND TERMINATION 29 101 Conditions for the Benefit of the Government 29 102 Conditions for the Benefit of the Proponent 29 103 Closing Notice 30 104 Deliveries and Closing 30

- iii -105 Termination 30 106 Effect of Agreement and Termination 30

ARTICLE 11 - GENERAL MATTERS 31 111 Enurement 31 112 Counterparts 31 113 Notices 31 114 Legal Fees 32 115 Payment of Fees and Expenses 32 116 Time of Essence 32 117 Further Assurances 32 118 Public Notices 33 119 Independent Legal Advice 33 1110 Compliance with Laws 33 1111 Entire Agreement 33 1112 Good Faith 33 1113 Waiver 33 1114 No Partnership Joint Venture or Agency 34

SCHEDULES

THIS DEVELOPMENT AGREEMENT made as of 30 September 2002

AMONG HER MAJESTY THE QUEEN IN RIGHT OFNEWFOUNDLAND AND LABRADOR as represented byThe Honourable The Premier The Honourable The Ministerof Mines and Energy and The Honourable The Minister ofLabrador and Aboriginal Affairs

AND VOISEYrsquoS BAY NICKEL COMPANY LIMITED a corporationincorporated under the laws of the Province

AND INCO LIMITED a corporation organized under the laws ofCanada

NOW THIS DEVELOPMENT AGREEMENT WITNESSETH that for and in consideration of themutual covenants and agreements herein contained and subject to the terms and conditionshereinafter set out the parties hereto mutually agree one with the other as follows

ARTICLE 1DEFINITIONS AND INTERPRETATION

11 Definitions When used in this Agreement (including the Schedules identified in Section12) unless the context otherwise requires the following terms shall have the meaningsascribed thereto

ldquoAffiliaterdquo means in respect of a Person

(a) a Person that Controls such Person(b) a Person that is Controlled by such Person or(c) a Person that is under common Control with such Person

ldquoAgreementrdquo means this Agreement and all Schedules attached to this Agreement ineach case as they may be amended or supplemented from time to time and theexpressions ldquohereofrdquo ldquohereinrdquo ldquoheretordquo ldquohereunderrdquo ldquoherebyrdquo and similar expressions referto this Agreement and unless otherwise indicated references to Articles and Sections areto Articles and Sections in this Agreement

ldquoApplicable Lawsrdquo means any statute ordinance regulation authorization order permitapproval grant license consent policy rule right franchise privilege determinationdirective decree by-law code or standard that is enacted made issued or granted by anyGovernment Entity

2

ldquoApprovalrdquo means express approval or concurrence in writing and ldquoApproverdquo andldquoApprovedrdquo shall be construed accordingly

ldquoBusiness Dayrdquo means any day other than a Saturday Sunday or statutory holiday in theProvince

ldquoCessation of Mining Operationsrdquo means the date by which due to the lack of SufficientReserves the continued operation of the Mine and Concentrator Plant would no longer beeconomically feasible

ldquoClosingrdquo means the execution and delivery of the Instruments and the coming into effectof this Agreement and the Instruments in their entirety as contemplated by Article 10

ldquoClosing Daterdquo means the date which is the fifth Business Day after the date of deliveryof the Closing Notice by the Proponent to the Government or such earlier date as theparties agree

ldquoClosing Noticerdquo has the meaning ascribed thereto in Section 103

ldquoCommercial Production Daterdquo means the date to be certified by the Proponent and atthe option of the Government confirmed by an Engineer upon which the Hydromet Planthas operated at an annualized production rate of 30000 tonnes of Finished Nickel Productfor a period of ninety consecutive days

ldquoConcentrator Plantrdquo has the meaning ascribed thereto in Section 431

ldquoConstruction Completion Daterdquo means the date to be certified by the Proponent andat the option of the Government confirmed by an Engineer upon which the constructionof the Processing Plant has been completed in accordance with the Proponentrsquos plans andspecifications therefor

ldquoControlrdquo means with respect to a Person the ability directly or indirectly through one ormore intermediaries to direct or cause the direction of the management and policies ofsuch Person through

(a) the legal or beneficial ownership of voting securities partnership interests or otherequivalent ownership interests in such Person

(b) the right or ability to appoint or elect a majority of the directors or individuals of acomparable position of such Person

(c) the right or ability to appoint the management of such Person or(d) a contract an operating agreement a management agreement a voting trust or

other similar agreement

and ldquoControlledrdquo means with respect to a Person being subject to the Control of another

3

ldquoCopper Concentraterdquo means the intermediate concentrate or similar product producedby the Concentrator Plant containing the principal quantities of copper from ore extractedor removed from the Leased Lands

ldquoCopper Concentrate Exemption Order means the Copper Concentrate ExemptionOrder in the form of Schedule 11B

ldquoDecisionrdquo means the written decision to be delivered by the Proponent to the Governmentas to whether the Proponent intends to engineer and construct the Hydromet Plant or theMatte Plant

ldquoDecision Daterdquo means the date of delivery of the Decision

ldquoDecision Materialsrdquo means the Feasibility Study and all other information and data in theProponentrsquos possession or control (including information and data generated by its advisorsand consultants) which form the basis for the Proponent making the Decision (includingsuch data and information subsequently available to or the existence of which issubsequently known by the Proponent) in form which will permit the Government and theExperts to undertake the review of the Decision and the reasons therefor as contemplatedby Section 475 Such data and information shall include without limitation reports onmetallurgical test work proposed flowsheets detailed capital and operating cost estimatesand a detailed economic analysis

ldquoDemonstration Plantrdquo means the facility at Argentia where hydrometallurgical processingtechnology will be tested including any part or sub-process of such technology themechanical or processing equipment required therefor and any pilot plant testing or similarcampaigns to determine the technical and economic feasibility of such technology

ldquoDemonstration Plant Completion Daterdquo means the date as certified by the Proponentand at the option of the Government confirmed by an Engineer upon which theconstruction of the Demonstration Plant has been completed in accordance with theProponentrsquos plans and specifications therefor and is ready to test Nickel Concentrate

ldquoEMArdquo means the Environmental Management Agreement entered into among theGovernment the Government of Canada the LIA and Innu Nation dated as of 22 July2002

ldquoEngineerrdquo means an individual independent of and acceptable to both the Proponent andthe Government who

(a) is an engineer with at least ten years of experience in base metals primaryprocessing engineering and the engineering design and construction managementof base metals primary processing plants

(b) has the requisite experience to make the relevant determination confirmation orreport to be made or given pursuant to this Agreement and

4

(c) is a member in good standing of a professional association where ldquoprofessionalassociationrdquo means a self-regulatory organization of engineers that

(i) has been given authority or recognition by statute

(ii) admits members primarily on the basis of their academic qualifications andexperience

(iii) requires compliance with the professional standards of competence andethics established by the organization and

(iv) has disciplinary powers including the power to suspend or expel a member

ldquoEvent of Bankruptcyrdquo means

(a) the entry of a decree or order by a court having jurisdiction adjudging the Proponenta bankrupt or insolvent or approving as properly filed a petition seekingreorganization or winding-up of the Proponent under the Companiesrsquo CreditorsArrangement Act (Canada) the Bankruptcy and Insolvency Act (Canada) or theWinding-Up Act (Canada) or any other bankruptcy insolvency or analogous lawsor issuing sequestration or process of execution against the Proponent or anysubstantial part of its property or ordering the winding-up or liquidation of its affairsand the continuance of any such decree or order or appointment unstayedundischarged and in effect for a period of 60 days from the date thereof

(b) the institution by the Proponent of proceedings to be adjudicated bankrupt orinsolvent or the consent by it to the institution of bankruptcy or insolvencyproceedings against it or the filing by it of a petition or answer or consent seekingreorganization or relief under the Companiesrsquo Creditors Arrangement Act (Canada)the Bankruptcy and Insolvency Act (Canada) or the Winding-Up Act (Canada) orany other bankruptcy insolvency or analogous laws or the consent by it to the filingof any such petition or to the appointment of a receiver of the Proponent or of anysubstantial part of its property or the making by it of a general assignment for thebenefit of creditors or the Proponentrsquos admission in writing of its inability to pay itsdebts generally as they become due or the Proponent taking such action infurtherance of any of such aforementioned purposes or

(c) whenever a custodian receiver receiver and manager sequestrator liquidatortrustee agent for a secured creditor or other Person with similar powers isappointed for any substantial part of the Project whether by a court or by extra-judicial means unless such custodian receiver receiver and manager sequestratorliquidator trustee or agent is removed within 60 days of such appointment

ldquoEvent of Defaultrdquo means any one or more of the following

(a) an Event of Bankruptcy has occurred with respect to the Proponent

5

(b) the Proponent is wound up its constating documents or by-laws are forfeited orsurrendered or the corporate or other existence of the Proponent is otherwiseterminated

(c) the Proponent is in breach of its obligations in Section 415 or

(d) subject to an Event of Force Majeure andor Section 652

(i) the Decision has not been delivered by 15 November 2008

(ii) the applicable Implementation Plan has not been delivered as required bySection 474 or 475

(iii) the Processing Plant has not been completed on or before 31 December2011 or

(iv) an Engineer has determined that the Proponent is not proceeding diligentlyto complete the engineering work for and the construction of the ProcessingPlant so that it will be completed on or before 31 December 2011 asrequired by Section 474 or 475

ldquoEvent of Force Majeurerdquo has the meaning ascribed thereto in Section 51

ldquoExemption Ordersrdquo means collectively the Nickel Concentrate Exemption Order theCopper Concentrate Exemption Order and the Matte Plant Exemption Order

ldquoExpertsrdquo means collectively (a) an Engineer or firm of Engineers who will make thetechnical feasibility review of the Decision and (b) a recognized third party financial expertindependent of the Government and the Proponent who will make the financial feasibilityreview of the Decision and who will jointly deliver the Expertsrsquo Report if requested by theGovernment pursuant to Section 475 The Experts shall be selected at the time and in themanner provided for in Section 473

ldquoExpertsrsquo Reportrdquo has the meaning ascribed thereto in Section 475

ldquoFeasibility Studyrdquo means the study undertaken by or on behalf of the Proponentcontaining the technical and economic evaluations which form the basis for the Decision

ldquoFinished Copper Productrdquo means finished copper product(s) having a copper contentof not less than 99

ldquoFinished Nickel Productrdquo means finished nickel product(s) having a nickel content of notless than 998

ldquoGovernmentrdquo means the Government of the Province

6

ldquoGovernment Entityrdquo means (a) any federal provincial state regional municipal localor other government governmental or public department commission board bureau oragency whether domestic or foreign (b) any subdivision agency commission board orauthority of any of the foregoing or (c) any quasi governmental or private body exercisingany regulatory expropriation or taxing authority under or for the account of any of theforegoing in each case which has jurisdiction in respect of the Project or any part thereof

ldquoHydromet Plantrdquo has the meaning ascribed thereto in Section 461

ldquoIBAsrdquo means collectively the Impacts and Benefits Agreements made as of 29 July 2002between the Proponent and each of Innu Nation and the LIA without any amendment orvariation

ldquoIEBArdquo means the Industrial and Employment Benefits Agreement in the form set out inSchedule 49

ldquoImplementation Planrdquo means a detailed description of and time schedule for thecompletion of the engineering work for and the construction of the Processing Plant by 31December 2011

ldquoIncordquo means Inco Limited a corporation organized under the laws of Canada

ldquoInformationrdquo has the meaning ascribed thereto in Section 911

ldquoInnovation Centrerdquo has the meaning ascribed thereto in Section 34

ldquoInnu Nationrdquo means Innu Nation a corporation incorporated under the laws of Canada

ldquoInstrumentsrdquo means collectively the University Agreement the Tax Agreement and theIEBA

ldquoLeased Landsrdquo means the lands described in Schedule ldquoArdquo to the Mining Lease asamended from time to time

ldquoLegislative Frameworkrdquo means the Applicable Laws of the Province in existence as ofthe date hereof applicable to the Project or any part thereof

ldquoLIArdquo means the Labrador Inuit Association a corporation incorporated under the laws ofthe Province

ldquoMatterdquo means any form of granular nickel in matte product containing not less than 50nickel which can be processed by the Matte Plant to produce Finished Nickel Product

ldquoMatte Plantrdquo has the meaning ascribed thereto in Section 462

7

ldquoMatte Plant Exemption Order means the Matte Plant Exemption Order in the form ofSchedule 11C

ldquoMinerdquo means collectively (a) the open pit mine or mines to be developed by the Proponentfor the extraction of the mineral ores located on the Leased Lands and (b) the undergroundmine or mines as contemplated by Section 45 for the extraction of the mineral ores atdepth located under the Leased Lands

ldquoMineral Actrdquo means the Mineral Act (Newfoundland and Labrador) and the regulationsthereunder

ldquoMining Leaserdquo means the Mining Lease in the form of Schedule 63

ldquoMining Tax Actrdquo means the Mining and Mineral Rights Tax Act (Newfoundland andLabrador) and the regulations thereunder

ldquoMining Tax Act Amendmentsrdquo means the proposed amendments to the Mining Tax Actset out in Schedule 69

ldquoNickel Concentraterdquo means the intermediate concentrate or similar product produced bythe Concentrator Plant containing the principal quantities of nickel and cobalt from oreextracted or removed from the Leased Lands

ldquoNickel Concentrate Exemption Order means the Nickel Concentrate Exemption Orderin the form of Schedule 11A

ldquoPersonrdquo means any individual partnership limited partnership joint venture syndicatesole proprietorship company or corporation with or without share capital unincorporatedassociation trust trustee executor administrator or other legal personal representativeor Government Entity however designated or constituted

ldquoPrimary Production Orderrdquo means the Primary Production Order in the form of Schedule610

ldquoProcessing Plantrdquo means either the Hydromet Plant or the Matte Plant which theProponent shall construct and operate in the Province as contemplated by Section 46

ldquoProcessing Related Reasonrdquo means any situation where the Proponent is unable tomeet its obligations under Section 4131 as a result of either (a) the unavailability forwhatever bona fide reason of Replacement Concentrate or (b) the unavailability ofReplacement Concentrate on reasonable commercial terms including without limitationwhere the terms relating to price or specifications would make it not economically ortechnically feasible for processing at the Processing Plant

ldquoProjectrdquo has the meaning ascribed thereto in Section 31

8

ldquoProponentrdquo means collectively VBNC Inco their respective Affiliates or any Personwhich (as permitted by this Agreement) individually or together with any of them by way ofpartnership joint venture sub-contract or otherwise holds or is entitled to a majority interestin or Control of the Project or is the operator of the Project and their respective successorsand permitted assigns

ldquoProvincerdquo means the Province of Newfoundland and Labrador Canada

ldquoR amp D Programrdquo has the meaning ascribed thereto in Section 35

ldquoReplacement Concentraterdquo means any product containing nickel or cobalt or bothderived from ores or any other source of nickel or cobalt or both mined extracted orproduced outside the Province that in each case does not represent Finished NickelProduct but which can be further processed at the Processing Plant to produce FinishedNickel Product

ldquoSufficient Reservesrdquo means the estimated quantities of ldquoProven Mineral Reservesrdquo orldquoProbable Mineral Reservesrdquo or both within the meaning of National Instrument 43-101ldquoStandards of Disclosure for Mineral Projectsrdquo (as amended from time to time) determinedby the Proponent in accordance with its standard methodologies and assumptions for suchestimates

ldquoTax Agreementrdquo means the Tax Agreement to be entered into between the Governmentand the Proponent as contemplated by Sections 412 and 68

ldquoTime of Closingrdquo means 1000 orsquoclock in the morning in the Province on the ClosingDate

ldquoUnderground Exploration Programrdquo means the underground exploration programcontemplated by Section 44

ldquoUniversityrdquo means Memorial University of Newfoundland

ldquoUniversity Agreementrdquo means the agreement to be entered into between the Proponentand the University as contemplated by Section 48

ldquoVBN Undertaking Orderrdquo means the Voiseyrsquos Bay Nickel Company Limited Mine and MillUndertaking Order under the Environmental Assessment Act (Newfoundland and Labrador)dated 5 August 1999 (OC 99-286) as amended from time to time and

ldquoVBNCrdquo means Voiseyrsquos Bay Nickel Company Limited a corporation incorporated underthe laws of the Province

9

12 Schedules

The documents attached hereto and identified below shall form an integral part of thisAgreement

Schedule 11A - Nickel Concentrate Exemption OrderSchedule 11B - Copper Concentrate Exemption OrderSchedule 11C - Matte Plant Exemption OrderSchedule 49 - IEBASchedule 4132 - Assaying ProceduresSchedule 63 - Mining LeaseSchedule 69 - Mining Tax Act AmendmentsSchedule 610 - Primary Production OrderSchedule 81 - Dispute Resolution Procedures

13 Subdivisions Unless otherwise stated a reference herein or in a Schedule by numericalor alphabetical designation to an Article Section Subsection Paragraph Subparagraphor Schedule shall refer to the Article Section Subsection Paragraph Subparagraph orSchedule bearing that designation in this Agreement or in a Schedule

14 Headings The division of this Agreement into Articles Sections SubsectionsParagraphs and Subparagraphs and the insertion of headings are for convenience ofreference only and shall not affect the construction or interpretation of this Agreement

15 Number and Gender Words importing the singular shall include the plural and vice versaand words importing a particular gender shall include all genders The use of the neutersingular pronoun to refer to a party is deemed a proper reference The necessarygrammatical changes required to make the provisions of this Agreement apply shall in allinstances be assumed as though in each case fully expressed

16 Statutes Regulations Rules and Orders Any reference in this Agreement to all or anypart of any statute regulation rule or order shall unless otherwise stated be a referenceto that statute regulation rule or order or the relevant part thereof as amendedsubstituted replaced or reenacted from time to time

17 Business Day If the day on which any act or payment is required to be done or madeunder this Agreement is a day which is not a Business Day then such act or payment shallbe performed or made on the next following Business Day

18 Contract Always Speaking With the exception of the representations and warranties ofthe parties set out in Article 2 and any estimates referred to in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic and relatedbenefits and costs of facilities referred to in this Agreement made by the Proponent wherea matter or thing is expressed in the present tense it shall be applied to the circumstancesas they arise

10

19 Governing Law and Choice of Forum This Agreement shall be interpreted inaccordance with the laws in force in the Province subject to any applicable federal laws andfor all purposes this Agreement shall be treated as a Newfoundland and Labrador contractThe Proponent irrevocably submits and attorns to the exclusive jurisdiction of the courts ofthe Province

110 Construed Covenants Each obligation or agreement of this Agreement (other than therepresentations and warranties of the parties) even though not expressed as a covenantis to be construed as a covenant

111 Inconsistency or Conflict Except where otherwise provided either expressly or bynecessary implication in this Agreement a Schedule hereto or any Instrument in the eventof any inconsistency or conflict between any such Schedule or Instrument and any provisioncontained in this Agreement the provision of this Agreement shall prevail to the extent ofthe inconsistency or conflict

112 Severability If any provision of this Agreement or the application thereof to any Personor circumstance is to any extent held or rendered invalid void illegal or unenforceablefor any reason then the particular provision

1121 shall be deemed to be independent of and severed from the remainder of thisAgreement and all the other provisions of this Agreement shall neverthelesscontinue in full force and effect and

1122 shall continue to be applicable and enforceable to the fullest extent permitted by lawagainst any Persons and in any circumstances other than those as to which it hasbeen held or rendered invalid void illegal or unenforceable

If a severance occurs under this Section 112 the parties shall use their respective bestefforts to negotiate in good faith an enforceable replacement provision that to the greatestextent possible reflects the intent or serves the purpose of the severed provision

113 Currency All references in this Agreement to currency are to Canadian dollars

114 Knowledge In this Agreement where ldquoKnowledgerdquo of a party is referred to

1141 in respect of the Proponent it shall mean the actual knowledge of the executiveofficers of the Proponent after due inquiry in respect thereof and

1142 in respect of the Government it shall mean the actual knowledge of the responsibleexecutives of the applicable department of Government after due inquiry in respectthereof

11

ARTICLE 2REPRESENTATIONS AND WARRANTIES

21 Proponentrsquos Representations and Warranties Acknowledging that the Government isrelying on such representations and warranties VBNC and Inco jointly and severallyrepresent and warrant to the Government that

211 each is a corporation which has been duly incorporated or organized as applicableunder the laws of its jurisdiction of incorporation or organization as applicable andis validly existing under such laws

212 Inco is extra-provincially registered in the Province

213 each has all necessary corporate power authority and capacity

2131 to cause the design engineering and construction of and to operateand maintain all parts of the Project and

2132 to enter into this Agreement and the Instruments and to perform itsrespective obligations herein and therein

214 the execution and delivery of this Agreement and each of the Instruments and theconsummation of the transactions contemplated herein and therein by each ofthem have been duly authorized by all necessary corporate action on the part ofeach of them

215 neither is a party to bound or affected by or subject to any indenture mortgagelease agreement instrument charter or by-law provision which with or without thegiving of notice or the lapse of time or both would be violated contravened orbreached by or under which default would occur as a result of the executiondelivery or performance of this Agreement or any of the Instruments or theconsummation of any of the transactions provided for in any of them

216 neither is bound or affected by or subject to any Applicable Law which with orwithout the giving of notice or the lapse of time or both would be violatedcontravened or breached by or under which default would occur as a result of theexecution delivery or performance of this Agreement or any of the Instruments orthe consummation of any of the transactions provided for in any of them

217 no approval authorization consent permit or other action by or filing with anyGovernment Entity is required in connection with the execution and delivery of thisAgreement or any of the Instruments and the performance of their respectiveobligations hereunder or thereunder except as otherwise stated herein

218 there is no suit action litigation arbitration proceeding or proceeding by aGovernmental Entity including appeals and applications for review in progresspending or to the Knowledge of either of them threatened against or involving

12

either of them or any judgment decree injunction or order of any court or arbitratorwhich could adversely affect their capacity or power to execute and deliver thisAgreement or any of the Instruments or to consummate the transactionscontemplated herein or therein or which could materially adversely affect theirrespective assets financial condition or future prospects

219 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of each of them enforceable against them inaccordance with their respective terms except as limited by (a) applicablebankruptcy laws or laws affecting the enforcement of creditorsrsquo rights generally and(b) the general principles of equity

2110 all references to estimates made by Inco and VBNC in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic andrelated benefits and costs of facilities are made as of the date of this Agreementhave been determined by them based upon information available at the date of thisAgreement and have been estimated by each of them bona fide and reasonablyand neither of them has any reason to believe that any such estimate isunreasonable or unfounded at the date of this Agreement and

2111 VBNC is a wholly owned subsidiary of Inco and to the Knowledge of the Proponentno Person individually or with any other Person or Persons currently Controls Inco

22 Government Acknowledgments The Government acknowledges that (a) none of VBNCInco or any Person for whom either of them may be responsible in law have made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments and (b) the Proponent shall use the most efficient and cost effective miningtechniques including state of the art automated mining technologies aimed at loweringoperating costs and extending the life of the Project

23 Governmentrsquos Representations and Warranties Acknowledging that the Proponent isrelying on such representations and warranties the Government represents and warrantsto the Proponent that

231 the execution and delivery of this Agreement and each of the Instruments and theconsummation by the Government of the transactions contemplated herein andtherein have been duly authorized by all necessary Government action

232 it is not a party to bound or affected by or subject to any indenture agreement orinstrument which with or without the giving of notice or the lapse of time or bothwould be violated contravened or breached by or under which default would occuras a result of the execution delivery or performance of this Agreement or any ofthe Instruments or the consummation of any of the transactions provided for in anyof them and

13

233 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of it enforceable against it in accordance with itsterms except as they may be limited by the general principles of equity

24 Proponent Acknowledgements Each of Inco and VBNC acknowledges that neither theGovernment nor any Person for whom it may be responsible in law has made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments

ARTICLE 3DESCRIPTION OF THE PROJECT AND RELATED FACILITIES

31 The Project The ldquoProjectrdquo will comprise collectively the Underground ExplorationProgram the Mine the Concentrator Plant the R amp D Program the Demonstration Plantthe Processing Plant and if applicable the Concentrator Plant expansion referred to inSection 45 The Processing Plant will be capable of processing concentrate andintermediate feeds containing nickel from other sources world wide which will give theProcessing Plant the capability of operating well beyond the life of the Mine

32 Capital Investment The Proponent estimates that the aggregate capital investment in theProject and related facilities will be $29 billion over the estimated 30-year life of the Projectinclusive of sustaining capital expenditures

33 Employment The Proponent estimates that

331 the construction phase of the Mine and Concentrator Plant will create approximately1700 person-years of employment in the Province the construction phase of theHydromet Plant will create approximately 3000 person-years of employment in theProvince and the construction phase of the Matte Plant will create approximately2500 person-years of employment in the Province

332 during the various operating phases the Project will create the followingemployment levels in the Province Mine and Concentrator Plant - 400 people R ampD Program - 200 people Underground Exploration Program - 85 people HydrometPlant - 400 people Matte Plant - 350 people

333 over the estimated 30-year life of the Project total employment benefits from theProject in the Province will be 76000 direct and indirect person-years and

334 gross domestic product impact to the Province with respect to the Project will be$11 billion

34 Innovation Centre The Proponent shall spend $10 million on and provide an endowmentof $1 million per year over a ten-year period to cover operational costs for an IncoInnovation Centre (the ldquoInnovation Centrerdquo) at St Johnrsquos in conjunction with theUniversity pursuant to the University Agreement The focus of the Innovation Centre willbe on education and research in mineral exploration mining and metallurgical processing

14

The Innovation Centre will provide world-class education research and training related tothe mining industry to 50-60 students per year to be engaged in Bachelors Masters andDoctorate level programs The Proponent shall commence work on the Innovation Centrein 2002 with target completion in 2004

35 R amp D Program The Proponent shall undertake a comprehensive research anddevelopment program intended to establish the commercial technical and economicfeasibility of hydrometallurgical process technology to process the Nickel Concentrate (theldquoR amp D Programrdquo) The R amp D Program will include the evaluation of chemical engineeringsub-processes for the hydrometallurgical process the mechanical equipment design for theDemonstration Plant and the construction and operation of the Demonstration Plant

ARTICLE 4PROPONENTrsquoS UNDERTAKINGS

41 Infrastructure and Initial Work Commencing in 2002 the Proponent shall

411 at the Mine site undertake site mobilization including the establishment of aconstruction camp initiation of work on temporary port facilities and construction ofaccess roads

412 at Argentia undertake leasing or other arrangements for occupancy and sitepreparation including demolition fencing security and signage

413 undertake the construction of a warehouse building and establish staging areas andlay down areas in support of Labrador activities

414 establish a project office at Argentia and information centres at St Johnrsquos andHappy Valley-Goose Bay and

415 complete site selection and commence architectural design and engineering workfor the Innovation Centre

The Proponent estimates that this infrastructure and initial work program will employ inaggregate approximately 250 persons and the Proponent shall spend not less than $55million on this program in the Province on or before 31 March 2003

42 R amp D Program421 The Proponent shall undertake the R amp D Program and as a part thereof shall

construct the Demonstration Plant at a cost which the Proponent estimates will be$130 million The Proponent shall commence the site development for theDemonstration Plant in 2002 and continue such development into 2003 Theinitiatives in support of these activities will include the operation of an informationcentre preparation of environmental baseline studies and continued upgrading orreplacement of utility services required for the Demonstration Plant maintainingstaging areas and cleanup and civil works at Argentia consisting of demolition

15

grading and earth works construction The Proponent has scheduled thecompletion of the engineering design and construction of the Demonstration Plantso that the Demonstration Plant Completion Date shall have occurred on or before31 December 2006

422 The Proponent shall provide to the Government within 15 days of the end of eachcalendar quarter commencing with the calendar quarter ending 31 December 2002a detailed progress report on the results during such calendar quarter of the R amp DProgram which report will detail costs incurred to the end of such calendar quarterand contain sufficient documentation and information to enable the Government toevaluate the Proponentrsquos progress with respect to the R amp D Program and thedevelopment of hydrometallurgical process technology for processing the NickelConcentrate If requested by the Government upon reasonable notice theProponent shall provide the Government and its representatives and advisorsaccess at reasonable times to the facilities where the R amp D Program is beingconducted and make appropriate personnel of the Proponent available to respondto any requests for additional information

423 In addition to the utilization of the Demonstration Plant for the purposes ofdeveloping hydrometallurgical process technology for processing the NickelConcentrate the Proponent shall explore business opportunities for the ongoingutilization of the Demonstration Plant for the evaluation of other concentrates andintermediate feeds after completion of the R amp D Program

43 Mine and Concentrator Plant

431 The Proponent shall cause the development of the Mine and the designengineering and construction of a millconcentrator plant which will be capable ofprocessing 6000 tonnes of ore per day (the ldquoConcentrator Plantrdquo) TheConcentrator Plant will produce the Copper Concentrate and the NickelConcentrate The Proponent has scheduled to begin the development of the Mineand the construction of the Concentrator Plant in 2003 and estimates that the Mineand Concentrator Plant will require three years to construct at a cost ofapproximately $710 million

432 The Proponent

4321 shall not ship any Nickel Concentrate out of the Province aspermitted by the Nickel Concentrate Exemption Order before theDemonstration Plant Completion Date and

4322 shall ship Nickel Concentrate from the Concentrator Plant to theDemonstration Plant in sufficient quantities for the continuedoperation of the Demonstration Plant during the R amp D Programfollowing successful start up of the Concentrator Plant

16

44 Underground Exploration Program The Proponent shall undertake an undergroundexploration program which it estimates will cost $95 million and employ approximately 85people This program is intended to identify Sufficient Reserves at depth under the LeasedLands and if there are such Sufficient Reserves the Proponent shall develop a mining planfor the economic extraction of such Reserves The initial phase of this undergroundexploration program will be an advanced surface program which the Proponent estimateswill cost $20 million to commence in 2002 with completion targeted for 2006 Subsequentunderground exploration will be scheduled to ensure that Sufficient Reserves under theLeased Lands are available to sustain full operation of the Concentrator Plant during thetransition from open-pit operations to full underground mining operations if applicable

45 Underground Mine Development and Concentrator Plant Expansion If theunderground exploration program described in Section 44 identifies Sufficient Reservesas contemplated by Section 44 the Proponent shall commence the development of anunderground mine or mines on the Leased Lands and an expansion of the ConcentratorPlant in order to supply sufficient Nickel Concentrate to maintain the operation of theProcessing Plant at full capacity The Proponent estimates that this program will costapproximately $750 million and employ an aggregate of 800 people

46 Processing Plant

461 In order to maximize long-term benefits for the Province and the people of theProvince the Proponent shall use its best efforts through the R amp D Program todevelop a technically and economically feasible hydrometallurgical processtechnology for processing the Nickel Concentrate in the Province If suchtechnology is successfully developed the Proponent shall cause the designengineering and construction of and operate and maintain a hydrometallurgicalprocessing plant with a design capacity to produce annually approximately 50000tonnes of Finished Nickel Product together with associated cobalt and copperproducts (the ldquoHydromet Plantrdquo) The Proponent estimates that the HydrometPlant will have a capital cost of approximately $800 million and during the three-yearconstruction period will generate approximately 3000 person-years of employmentThe Proponent estimates that the Hydromet Plant will employ approximately 400people during operations

462 If pursuant to Section 47 it is determined that a Hydromet Plant is not technicallyor economically feasible the Proponent shall construct a commercialhydrometallurgical nickel-matte processing facility or other similar facilityincorporating a proven state of the art technology to produce Finished NickelProduct (the ldquoMatte Plantrdquo) The Matte Plant will have a design capacity toproduce annually approximately 50000 tonnes of Finished Nickel Product togetherwith associated cobalt and copper products The Proponent estimates the MattePlant will have a capital cost of approximately $670 million and during the estimatedthree-year construction period will generate approximately 2500 person-years ofemployment The Proponent estimates that the Matte Plant will employapproximately 350 people during operations

17

463 The Proponent has represented to the Government that its objective is to operatethe Processing Plant well beyond the life of the Mine Accordingly the Proponentundertakes to explore technically and economically feasible opportunities for theexpansion of the Processing Plant and to secure opportunities to supply theProcessing Plant with feed from world wide sources to fully utilize the Proponentrsquoslarge capital investment in the Processing Plant

464 The Proponent shall establish the Processing Plant at Argentia unlessenvironmental conditions at Argentia would make it not economically feasible toestablish the Processing Plant at Argentia and in such circumstances theProponent shall locate the Processing Plant at another site in the Province

47 Selection of Applicable Processing Plant

471 The Proponent shall use commercially reasonable efforts to deliver as soon aspossible but in any event shall deliver on or before 15 November 2008 theDecision and the Decision Materials to the Government and the Experts

472 If the Proponent has not on or before 30 June 2008 delivered to the Governmentthe Decision and the Decision Materials

4721 it shall forthwith meet with the Government to review on aconfidential basis the status of its efforts towards being able todeliver the Decision

4722 thereafter it shall promptly update the Government from time to timeon its efforts to be able to deliver the Decision and the outstandingissues relevant to whether the Decision will be to build the HydrometPlant or the Matte Plant and

4723 to the extent that the Proponent is not by 30 June 2008 in aposition to deliver the Decision which confirms that the Proponentintends to proceed with the construction of the Hydromet Plant theProponent shall use commercially reasonable efforts to developImplementation Plans for both a Hydromet Plant and a Matte Plantso that it will be able to deliver the Implementation Plan for theHydromet Plant or Matte Plant as applicable on or before 31December 2008

473 The Government may at any time after the earlier of the Decision Date or 30 June2008 give the Proponent notice in writing that it wishes to proceed with theappointment of the Experts When the Government gives notice to the Proponentrequiring the appointment of the Experts the Government and the Proponent shallthen forthwith agree upon the appointment of the Experts If the Government andthe Proponent cannot so agree within 15 days after the giving by the Governmentof such notice the appointment of the Experts shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter to

18

the Joint Committee or the Mediation Procedure referred to therein If the Expertsare appointed prior to the delivery by the Proponent of the Decision and theDecision Materials the Proponent shall provide to the Government and the Expertssuch data and information as is then available that will assist the Experts in theirreview under Section 475 The Proponent and the Government shall each pay50 of the fees and expenses of the Experts Before receiving the Decision theDecision Materials or any other information or data from the Proponent under thisAgreement the Experts shall first execute a confidentiality agreement containingsubstantially the same terms as provided for in Article 9

474 If in the Decision the Proponent confirms it intends to construct the Hydromet Plantthe Proponent shall deliver the Implementation Plan for the Hydromet Plant on orbefore 31 December 2008 and thereafter shall proceed diligently to complete thedetailed engineering for and construction of the Hydromet Plant in accordance withsuch Implementation Plan so that it shall be completed on or before 31 December2011

475 If in the Decision the Proponent confirms it intends to construct the Matte Plant theGovernment shall on or before the seventh Business Days after the Decision Datedeliver to the Proponent and the Experts a notice in writing (in this Section 475 theldquoGovernment Decisionrdquo) that the Government either (a) accepts the Decision tobuild the Matte Plant or (b) intends to refer such Decision to the Experts for reviewIf in the Government Decision the Government states it intends to refer theDecision to the Experts the Proponent shall promptly deliver to the Experts theDecision and the Decision Materials if it has not previously done so The Expertswill review the Decision the Decision Materials and any other information or datawhich the Experts deem appropriate or which the Government requests them toconsider and render their report (the ldquoExpertsrsquo Reportrdquo) within 30 days of the dateon which the Government delivers the Government Decision If the Governmentrequests the Experts to consider any other information or data in addition to theDecision Materials it shall provide to the Experts and the Proponent copies of suchrequest and any such information and data at the time it delivers the GovernmentDecision and the Proponent shall have the right within five Business Days tocomment on or respond to such information and data to the Experts with a copy tothe Government The Expertsrsquo Report shall determine whether in the opinion of theExperts it would be technically and economically feasible for the Proponent to buildthe Hydromet Plant together with reasons for such determination If the ExpertsrsquoReport determines that it is technically and economically feasible for the Proponentto build the Hydromet Plant the Proponent shall on or before 31 December 2008deliver to the Government an Implementation Plan for the Hydromet Plant andthereafter shall proceed diligently to complete the detailed engineering for andconstruction of the Hydromet Plant so that it shall be completed on or before 31December 2011 If the Expertsrsquo Report confirms that it would not be technically oreconomically feasible to build the Hydromet Plant the Proponent shall on or before31 December 2008 deliver to the Government an Implementation Plan for the MattePlant and thereafter shall proceed diligently to complete the detailed engineering forand construction of the Matte Plant in accordance with such Implementation Plan

19

so that it shall be completed on or before 31 December 2011 Subject to Section477 the Expertsrsquo Report shall be final and binding on the Government and theProponent

476 The determination as to whether the Proponent is proceeding diligently with thecompletion of the engineering work for and the construction of the Processing Plantfor completion on or before 31 December 2011 as required by Section 474 or475 shall be made annually on the anniversary date of the Decision Date by anEngineer who shall certify to both the Government and the Proponent as to whetherthe actual engineering work for and construction of the Processing Plant is onschedule with the applicable Implementation Plan

477 If there is a manifest error in the Expertsrsquo Report which if corrected would result ina different determination by the Experts the Expertsrsquo Report shall be referred backto the Experts for the purpose of forthwith correcting such manifest error changingthe determination in the Expertsrsquo Report and submitting a revised Expertsrsquo Reportto the Proponent and the Government

478 Where an Engineer is required to be appointed from time to time for the purposesof Section 476 or for determining the Commercial Production Date theConstruction Completion Date or the Demonstration Plant Completion Date theGovernment and the Proponent shall forthwith agree upon the appointment of suchEngineer If the Government and the Proponent cannot so agree within 15 daysof the Government or the Proponent giving the other notice requiring appointmentof an Engineer the appointment of the Engineer shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter tothe Joint Committee or the Mediation Procedure referred to therein The Proponentand the Government shall each pay 50 of the fees and expenses of any Engineer

48 Innovation Centre The Proponent shall enter into an agreement (the ldquoUniversityAgreementrdquo) with the University in form and content satisfactory to the Government on orbefore the Closing Date The University Agreement shall contain among other things theProponentrsquos commitments and intentions set out in Section 34

49 Industrial and Employment Benefits The Proponent shall execute the IEBA to beeffective 7 October 2002

410 IBAs The Proponent represents and warrants to the Government that it has entered intothe IBAs

411 VBN Undertaking Order The Proponent agrees to abide by and implement the terms andconditions contained in the VBN Undertaking Order

412 Corporate Income Tax The Proponent shall use its best efforts to negotiate and executewith the Government an agreement covering the matters set forth in this Section 412 andSection 68 (the ldquoTax Agreementrdquo) as soon as possible but in any event on or before theClosing Date The Tax Agreement will contain provisions which to the extent permitted by

20

law will result in an allocation to the Province for the purposes of Part IV of the FederalIncome Tax Regulations of the Proponentrsquos gross revenues from the sale or disposition ofnickel copper and cobalt products whether in intermediate or final form from the Project

413 Return of Concentrate

4131 In consideration of the Government granting the Exemption Orders the Proponentguarantees that it shall prior to Cessation of Mining Operations commenceshipping into the Province Replacement Concentrate for processing into FinishedNickel Product at the Processing Plant Such Replacement Concentrate shall beshipped to and processed by the Processing Plant in sufficient quantities to permitthe Processing Plant to operate continuously at a rate that will produce not less than25000 tonnes of Finished Nickel Product annually and such shipments shallcontinue at least until such time as the contained nickel and cobalt in theReplacement Concentrate shall have equalled the total quantity of contained nickeland cobalt in the Nickel Concentrate shipped out of the Province under the termsof the Nickel Concentrate Exemption Order and otherwise than under the provisionsof an Exemption Order

4132 The Proponent shall undertake the Assaying Procedures set out in Schedule 4132with respect to the Nickel Concentrate and the Replacement Concentrate

4133 The Proponent acknowledges that if it does not perform its contractual obligationsunder Section 4131 (a) the Province and the economy of the Province will suffersubstantial loss (b) the Government would not be properly compensated for its lossby monetary damages which therefore will not be considered an adequate remedyfor such breach and (c) the Government may at any time subsequent to suchbreach commence an action against the Proponent for any one or more of thefollowing remedies whether claimed as primary or secondary alternative relief

41331 an order for specific performance

41332 appropriate injunctive relief whether mandatory or prohibitory and

41333 monetary damages including for consequential and economic lossreflecting the substantial losses suffered by the Government and theeconomy of the Province as a result of such breach

The Proponent expressly waives any right to claim or argue that the Governmentcannot claim the relief set out in Sections 41331 41332 and 41333 in any suitcommenced by the Government against the Proponent for the Proponentrsquos failureto perform its obligations under Section 4131

21

414 Copper Processing in the Province

4141 The Government acknowledges that at the date hereof the quantity of coppercurrently identified in the mineralized zones on or under the Leased Lands togetherwith identified copper deposits elsewhere in the Province are not sufficient to justifythe construction and operation of a copper processing facility in the Province on aneconomically feasible basis

4142 If at any time in the future

41421 Sufficient Reserves of copper are discovered by the Proponent inthe Province (including on or under the Leased Lands) to makeeconomic the processing on a commercial basis of the CopperConcentrate or any other product containing the principal quantitiesof copper extracted from the Leased Lands into Finished CopperProduct in the Province the Proponent shall process such CopperConcentrate into Finished Copper Product in the Province or

41422 a third party establishes a facility in the Province for the commercialprocessing of copper concentrate the Proponent shall offer for saleits then available Copper Concentrate from the Concentrator Plantto such third party for processing in such facility on then prevailingcommercial terms and conditions subject to the Proponentrsquos thenexisting contractual obligations

4143 In the circumstances set out in Section 4142 the Proponent acknowledges thatthe Government has the right pursuant to Section 311(3) of the Mineral Act torescind the Copper Concentrate Exemption Order

415 Parties in Contract Change of Control and Assignment

4151 The Proponent covenants with the Government that without the prior Approval ofthe Government it

41511 shall not take or threaten or purport to take any action whether byway of contract corporate reorganization or arrangement orotherwise that would have the effect of transferring assigningsubletting or otherwise divesting itself of a majority interest in orControl of (a) the Project or (b) all or substantially all of theProponentsrsquo rights under this Agreement the Instruments theExemption Orders the Primary Production Order and subject toApplicable Laws the Mining Lease and

41512 shall not take or threaten or purport to take any action which directlyor indirectly results in a change of Control of VBNC to a party otherthan Inco

22

4152 Wherever pursuant to Section 4151 the Government is requested to grant itsApproval such Approval may be withheld by the Government in its sole andabsolute discretion for any reason whatsoever

4153 For bona fide tax or other corporate reasons the Proponent may without theApproval of the Government transfer assign sublet or otherwise divest to anAffiliate a majority interest in or Control of (a) the Project or (b) all or substantiallyall of the Proponentrsquos rights under this Agreement the Instruments the ExemptionOrders the Primary Production Order and subject to Applicable Laws the MiningLease Notwithstanding Section 111 no such transfer assignment sublet ordivestiture shall relieve the Proponent of its obligations hereunder or thereunder

4154 The Proponent shall promptly give written notice to the Government of any actionit takes under Section 4151 or 4153

416 Members of House of Assembly The Proponent undertakes to (a) ensure that nomember of the House of Assembly of the Province shall have any interest in thisAgreement and (b) use its best efforts to ensure that no Member of the House of Assemblyof the Province receives any benefit to arise herefrom or from any report study review oranalysis required to be made or submitted pursuant to this Agreement

417 Mining Lease VBNC shall execute the Mining Lease effective 30 September 2002

418 Proponentrsquos Financing The Proponent shall use best efforts to obtain the financingcontemplated by Section 1024 including without limitation the preparation of all feasibilitystudies required in order to obtain such financing

ARTICLE 5FORCE MAJEURE

51 Events of Force Majeure For the purposes of this Article 5 and subject to the exceptionsand qualifications below each of the following shall be an ldquoEvent of Force Majeurerdquo

511 acts of God or natural disasters adverse weather conditions or other similaroccurrences

512 acts of war (declared or undeclared) or conditions arising out of or attributable toany such acts of war revolutions insurrections civil strife formal or informalhostilities mob violence riots and similar disturbances blockades or any otherunlawful acts against public order or authority

513 strikes lockouts work stoppages or labour disturbances unless directly andproximately caused by an unlawful act or omission of the Proponent

514 (a) delay or failure by suppliers of labour transportation materials machineryequipment parts supplies utilities or services (b) contractorsrsquo or sub-contractorsrsquoshortage of or inability to obtain labour transportation materials machinery

23

equipment parts supplies utilities or services or (c) breakdown of equipmentmachinery or facilities unless any of the foregoing are directly and proximatelycaused by or result from an unlawful act or omission of the Proponent

515 accidents and

516 solely in respect of the Proponentrsquos obligations in Section 4131 a ProcessingRelated Reason provided that a Processing Related Reason shall not be an Eventof Force Majeure at any time after three years following Cessation of MiningOperations

52 Obligation to Perform In order to obtain relief for an Event of Force Majeure theProponent shall (a) use commercially reasonable efforts to (i) prevent the occurrence of(ii) perform its obligations in the face of and (iii) terminate any such Event of Force Majeure(other than the events described in Section 513 relied upon) and (b) give the Governmentwritten notice of the facts which the Proponent claims constitute an Event of Force Majeureas soon as reasonably practical upon becoming aware of their existence

53 Force Majeure Relief If the Proponent establishes that it is prevented from performingany of its obligations under this Agreement the Nickel Concentrate Exemption Order or theMatte Plant Exemption Order by reason of an Event of Force Majeure such obligations willbe suspended for the period of the existence of such Event of Force Majeure and theProponent will be entitled to an extension of all dates referred to in this Agreement theNickel Concentrate Exemption Order and the Matte Plant Exemption Order for a reasonableperiod of time that reflects (a) the period during which the Proponent is prevented fromperforming its obligations by reason of the Event of Force Majeure and (b) the impact thatsuch Event of Force Majeure has on the Project including without limitation shippingschedules and construction schedules that have been delayed by reason of such Event ofForce Majeure Even though the Proponentrsquos obligations will be suspended for suchreasonable period of time when the applicable Event of Force Majeure is no longerpreventing the Proponent from performing its obligations the Proponent will again beobliged to perform such obligations

ARTICLE 6GOVERNMENT UNDERTAKINGS

61 Aboriginal Agreements The Government represents and warrants that it has entered into(a) interim measures agreements with the Innu Nation and the LIA that include the VoiseyrsquosBay chapter of the respective land claims agreements and (b) the EMA

62 Electrical Rights and Provision of Power The Government shall cause Newfoundlandand Labrador Hydro or its successors to

621 provide to the Proponent electrical power for the Processing Plant at the lower of(a) the island industrial electrical rate or (b) any lower electrical rate that may be

24

offered from time to time by Newfoundland and Labrador Hydro or its successorsto its industrial customers in comparable circumstances and

622 ensure that Newfoundland and Labrador Hydro or its successors can supply to theProponent sufficient electrical power for the operation of the Processing Plant

63 Mining Lease The Government shall issue the Mining Lease effective 30 September2002

64 Exemption Orders The Government shall issue the Exemption Orders effective 30September 2002

65 Issue of Authorizations

651 Where the Proponent has submitted all information and data in accordance withApplicable Laws and required by the Government for it to issue or grant any permitauthorization order or other approval necessary for the Proponent to implement theProject or any part thereof (in this Section 65 the ldquoAuthorization(s)rdquo) theGovernment shall issue or grant any such Authorization on a timely basis

652 If the Government does not issue or grant an Authorization on a timely basis

6521 the Government shall grant the Proponent an extension of all datesreferred to in this Agreement the Nickel Concentrate ExemptionOrder and the Matte Plant Exemption Order for a reasonable periodof time that reflects (a) the period of delay in granting suchAuthorization and (b) the impact that such delay has on the Projectincluding without limitation shipping schedules and constructionschedules that will have been delayed by Governmentrsquos failure toissue or grant such Authorization on a timely basis and

6522 if as a result of the Governmentrsquos failure to issue or grant anAuthorization on a timely basis the completion date for theProcessing Plant is delayed and provided that the Proponentestablishes that it is likely it will ship out of the Province the totalvolume of contained nickel in the Nickel Concentrate permittedunder the Nickel Concentrate Exemption Order prior to the revisedcompletion date of the Processing Plant the Government shallamend the Nickel Concentrate Exemption Order to allow anadditional quantity of contained nickel in Nickel Concentrate to beshipped out of the Province which quantity will reflect thereasonable period of time of the extension referred to in Section6521

653 The Government shall not be responsible for any delays nor shall the Proponent beentitled to any relief under this Section 65 unless such delays are directly and

25

proximately caused by or result from an act or omission of the Government or adepartment regulatory body board agent or employee of the Government

66 Legislative Framework

661 The Government represents to the Proponent (and acknowledges that theProponent is relying upon such representation) that it shall maintain substantiallythe Legislative Framework for the duration of the Project subject to legislativeamendments contemplated in this Agreement and legislation of general applicationThe Government shall maintain the Legislative Framework consistent with thisAgreement subject to Governmental responsibilities including the responsibility forensuring proper management of the Provincersquos resources the protection andmaintenance of public health and safety and the protection of the environment TheGovernment acknowledges that this Agreement is consistent with current public lawand Governmental responsibilities

662 The Proponent represents to the Government (and the Proponent acknowledgesthat the Government in consideration of agreeing to maintain the LegislativeFramework has relied upon such representation) that the Proponent shall performits obligations set out in this Agreement the Instruments the Exemption Orders thePrimary Production Order and the Mining Lease

67 Special Project Orders The Government shall issue a Special Project Order or SpecialProject Orders under Section 70 of the Labour Relations Act (Newfoundland and Labrador)to ensure a stable labour relations environment throughout the construction phases of theProject This Order or these Orders shall include without limitation provisions such as nostrikes and lock-outs and the ability to designate the union organization and employerrsquosrepresentative for the purposes of collective bargaining

68 Corporate Income Tax The Government shall use best efforts to negotiate and executewith the Proponent the Tax Agreement as soon as possible but in any event on or beforethe Closing Date The Tax Agreement will contain provisions

681 whereby the Government will provide that the rate of the Provincersquos corporateincome tax applicable to the Proponent will be the lower of the ldquoall provincesaveragerdquo or the Provincersquos income tax rate

682 which to the extent permitted by law will result in an allocation to the Province forthe purposes of Part IV of the Federal Income Tax Regulations of the Proponentrsquosgross revenues from the sale or disposition of nickel copper and cobalt productswhether in intermediate or final form from the Project and

683 whereby the Government will undertake to indemnify the Proponent for any doubletaxation resulting from the allocation referred to in Section 682

26

69 Mining Tax Act At the next session of the House of Assembly of the Province theGovernment shall introduce and support legislation to amend the Mining Tax Act inaccordance with the Mining Tax Act Amendments

610 Primary Production Order The Government shall issue the Primary Production Ordereffective 30 September 2002

611 Industrial and Employment Benefits The Government shall execute the IEBA to beeffective 7 October 2002

ARTICLE 7PROPONENTrsquoS DEFAULT

71 Notice of an Event of Default Upon the happening of an Event of Default theGovernment may deliver to the Proponent a notice of default setting forth in reasonabledetail the nature of the Event of Default and if the Government intends to exercise its rightsunder Section 72 indicating the date upon which the Government intends to exercise suchrights

72 Termination Subject to an Event of Force Majeure or the provisions of Section 652where an Event of Default has occurred and in each of such cases and so often as anEvent of Default happens after giving the notice provided for in Section 71 theGovernment may at any time in its sole discretion do any one or more of the following (a)terminate this Agreement (b) terminate the Mining Lease (c) rescind the ExemptionOrders and (d) take action for any remedy at law or in equity

73 Release by Proponent and Proponentrsquos Indemnity The Proponent hereby releases anddischarges and agrees to indemnify and save harmless the Government from every claimof every nature whether in damages (including consequential or indirect damages) or notwhich may arise or be suffered by the Proponent or any Person claiming through or underthe Proponent by reason of or as a result of anything done by the Government or anysuccessor or assign claiming through or under the Government under the provisions ofSection 72

ARTICLE 8DISPUTE RESOLUTION

81 Dispute Resolution Any dispute or difference between the parties hereto arising

811 as to whether a Processing Related Reason exists

27

812 as to the selection of an Engineer or firm of Engineers the Experts or an umpireunder Schedule 4132

813 under Section 45 as to whether the Underground Exploration Program hasidentified Sufficient Reserves under the Leased Lands

814 as to the determination of the date of Cessation of Mining Operations

815 as to whether commercial processing is economic as contemplated by Section41421

816 as to then prevailing commercial terms and conditions as contemplated by Section41422

817 under Section 51 as to whether an Event of Force Majeure exists

818 under Section 53 as to whether an Event of Force Majeure prevents the Proponentfrom performing any of its obligations under this Agreement

819 under Section 53 or Section 652 as to the reasonable period of time for theextension of the dates of performance of the Proponentrsquos obligations

8110 under Section 6522 the additional quantity of contained nickel in NickelConcentrate to be shipped out of the Province or

8111 as to whether the Proponent is complying with its obligations under Section 52

shall in each case be resolved in the manner provided for in Schedule 81

ARTICLE 9CONFIDENTIAL INFORMATION

91 Confidential Information The Government

911 acknowledges that information (the Information) supplied to it by or on behalf ofthe Proponent pursuant to or in connection with this Agreement or the Instrumentsincluding without limitation information provided pursuant to or in connection withSections 422 471 472 475 52 and 81 is of a financial commercialscientific or technical nature and is supplied in confidence and

912 subject to Sections 93 and 94 shall keep the Information confidential and shallnot use or disclose the Information to any third party without the Approval of theProponent and in doing so shall use the same care as it applies to avoid disclosureor dissemination of its own confidential information to prevent the disclosure ofInformation to any third party

28

92 Effect of Disclosure The Government acknowledges that disclosure of the Informationcontrary to the provisions of this Article 9 could reasonably be expected to921 harm significantly the competitive position or interfere significantly with the

negotiating position of the Proponent

922 result in similar information no longer being supplied by or on behalf of theProponent to the Government when it is in the public interest that similar informationcontinued to be supplied and

923 result in material financial loss to the Proponent or result in material financial gainto competitors of the Proponent and other Persons

93 Approval The Government may disclose Information if Approved by the Proponent

94 Permitted Disclosure of Information The provisions of this Article 9 shall not apply toInformation which

941 is now or which hereafter through no act or omission of the Government becomesgenerally known or available to the public without breach of this Agreement

942 after disclosure to the Government becomes generally known or available to thepublic by publication or otherwise through no act or omission of the Government

943 the Government can establish was in its possession at the time of disclosure andwas not previously acquired directly or indirectly from the Proponent

944 is disclosed to the Government by a third party on a non-confidential basis whichparty to the Knowledge of the Government is not prohibited from disclosing suchInformation to the Government by any legal contractual or fiduciary obligation towhich such party is bound or subject or

945 is required to be disclosed by law

95 Remedy Without limiting the Proponentrsquos rights and recourses for a breach by theGovernment of its obligations in this Article 9

951 the Government acknowledges that the Proponent shall suffer irreparable harm ifthe Government discloses Information contrary to the provisions of this Article 9and unless prohibited by law the Proponent shall be entitled to an injunction orinjunctions to prevent such disclosure

952 the Government shall be liable for and shall indemnify and save the Proponentharmless from and against costs losses damages and claims that it may sufferpay incur or be liable for as a result of any breach by the Government of thisArticle 9 and

29

953 in the event there are any measures which the Government can take to ensurecompliance with the provisions of Section 912 the Proponent shall be relieved ofthe obligation to provide information of the type with respect to which the breachoccurred until the Government has taken such measures

ARTICLE 10CONDITIONS CLOSING AND TERMINATION

101 Conditions for the Benefit of the Government Subject to Section 1061 the obligationsof the Government in this Agreement are subject to the satisfaction of or compliance withat or prior to the Time of Closing each of the following conditions

1011 the representations and warranties of the Proponent made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Proponent at or prior to the Time of Closing shallhave been performed the Proponent shall not be in breach of any agreement onits part contained in this Agreement at the Time of Closing and the Governmentshall have received a certificate confirming the foregoing signed for and on behalfof the Proponent in form and content satisfactory to the Government

1012 the University Agreement shall have been executed by the Proponent and a copythereof shall have been delivered to the Government

1013 the Tax Agreement shall have been executed by the Proponent and delivered to theGovernment and

1014 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

102 Conditions for the Benefit of the Proponent Subject to Section 1061 the obligationsof the Proponent in this Agreement are subject to the satisfaction of or compliance with ator prior to the Time of Closing each of the following conditions

1021 the representations and warranties of the Government made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Government at or prior to the Time of Closingshall have been performed the Government shall not be in breach of anyagreement on its part contained in this Agreement at the Time of Closing and theProponent shall have received a certificate confirming the foregoing signed for andon behalf of the Government in form and content satisfactory to the Proponent

30

1022 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

1023 the Tax Agreement shall have been executed by the Government and delivered bythe Government to the Proponent

1024 the Proponent shall have secured financing on reasonable commercial terms toenable it to develop the Mine and construct the Concentrator Plant and

1025 the Mining Tax Act Amendments shall have become law

103 Closing Notice If the Proponent (a) wishes to waive the condition set out in Section1024 or (b) has obtained the financing contemplated by Section 1024 it shall forthwithdeliver to the Government a notice (the ldquoClosing Noticerdquo) confirming that it has eitherwaived the condition set out in Section 1024 or that such condition has been satisfied

104 Deliveries and Closing1041 The Closing shall take place at the Time of Closing on the Closing Date at a

location to be agreed by the parties

1042 At the Closing

10421 the Proponent shall deliver to the Government the certificatecontemplated by Section 1011 and if not previously delivered theexecuted University Agreement and the executed Tax Agreementand

10422 the Government shall deliver to the Proponent the certificatecontemplated by Section 1021 and if not previously delivered theexecuted Tax Agreement

105 Termination This Agreement and the IBEA may be terminated at any time prior to theTime of Closing1051 by agreement of the Government and the Proponent

1052 by the Government if the conditions set out in Section 101 have not been satisfiedor waived by the Government or the Closing Notice has not been delivered to theGovernment on or before 31 March 2003 or

1053 by the Proponent if the conditions set out in Section 102 have not been satisfiedor waived by the Proponent (except the condition set out in Section 1024 in theevent the Proponent has delivered the Closing Notice)

106 Effect of Agreement and Termination

1061 Notwithstanding Section 1062 and subject to Section 1063 the Government andthe Proponent shall be bound by the provisions of Sections 41 421 422 410

31

411 412 415 416 417 418 61 63 64 65 66 67 68 69 610 and 611and Articles 5 8 9 and 11 effective as of and from the date of execution of thisAgreement

1062 Subject to Section 1061 the obligations of the Proponent and the Government inthis Agreement shall be effective as of and from the Time of Closing

1063 If this Agreement and the IEBA are terminated in accordance with the provisions ofSection 105 this Agreement and the IEBA shall thereafter become null and voidand have no effect and no party shall have any liability to the other except

10631 the obligations contained in Sections 41421 411 69 and Article9 hereof and

10632 the liability of a party in respect of its breach of this Agreement andthe IEBA prior to such termination

all of which shall survive such termination for a period of twelve months followingsuch termination

ARTICLE 11GENERAL MATTERS

111 Enurement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease shall be binding upon and shall enure to the benefitof the parties hereto the successors and assigns of the Government and the successorsand permitted assigns of the Proponent Any such assignment permitted by this Agreementshall become effective only when the assignee executes with the Government aninstrument whereby it agrees to be bound by and perform all of the Proponentrsquos obligationsunder this Agreement the Instruments the Exemption Orders the Primary ProductionOrder and the Mining Lease Subject to Section 4153 from and after the execution ofsuch instrument the assignor shall be relieved of and released from all its obligations underthis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease with effect from and after the date of execution of such instrument

112 Counterparts This Agreement and the other documents referred to herein andorotherwise required to complete the transactions contemplated hereby may be executed intwo or more counterparts including by facsimile each of which shall be deemed an originaland all of which together shall constitute one and the same instrument

113 Notices All notices requests demands and other communications hereunder shall bedeemed to have been duly given if in writing and either delivered personally sent byfacsimile transmission or by air courier service to the addresses designated below or suchother addresses as may be designated in writing by notice given hereunder and shall be

32

effective upon personal delivery or facsimile transmission thereof with proof of transmissionreceipt or upon delivery by air courier serviceIf to VBNC Voiseyrsquos Bay Nickel Company Limited

Suite 700 Baine Johnston Centre10 Fort William PlaceSt Johnrsquos NewfoundlandA1C 1K4Attention PresidentFacsimile (709) 758-8820

If to Inco Inco Limited145 King Street WestSuite 1500Toronto OntarioM5H 4B7Attention PresidentFacsimile (416) 361-7734

If to the Government Government of Newfoundland amp LabradorDepartment of Mines amp EnergyNatural Resources Building7th Floor 50 Elizabeth AvenueSt Johnrsquos NewfoundlandA1A 1W5Attention The MinisterFacsimile (709) 729-0059

114 Legal Fees In the event of any dispute or controversy between the Proponent on the onehand and the Government on the other hand relating to the interpretation of this Agreementor to the transactions contemplated herein the prevailing party shall be entitled to recoverfrom the other party reasonable legal fees and expenses incurred by the prevailing partySuch award shall include reasonable post judgment legal fees and costs

115 Payment of Fees and Expenses Each party hereto shall pay its own fees expenses anddisbursements incurred in connection with this Agreement and the transactionscontemplated hereby and all other costs and expenses incurred in its performance andcompliance with all conditions to be performed hereunder and thereunder

116 Time of Essence Time is of the essence of this Agreement

117 Further Assurances Each of the parties shall promptly do make execute deliver orcause to be done made executed or delivered all such further acts documents and thingsas the other parties hereto may reasonably require from time to time for the purpose ofgiving effect to this Agreement and the transactions contemplated hereby and shall usereasonable efforts and take all such steps as may be reasonably within its power toimplement to their full extent the provisions hereof and thereof

33

118 Public Notices No press release or other announcement concerning the transactionscontemplated by this Agreement shall be made either by the Proponent or the Governmentwithout the prior Approval of the other (such Approval not to be unreasonably withheld)provided however that the Proponent may without such Approval make such disclosureif the same is required by law or any stock exchange on which any of the securities of theProponent or any of its Affiliates are listed or by any securities commission or other similarregulatory authority having jurisdiction over the Proponent or any of its Affiliates and if suchdisclosure is required the Person making the disclosure shall use best efforts to give priororal or written notice to the Government and if such prior notice is not possible to givesuch notice immediately following the making of such disclosure Notwithstanding theforegoing the Proponent acknowledges that the Government will make this Agreement andthe Schedules hereto public

119 Independent Legal Advice Each of the parties acknowledges having obtained its ownindependent legal advice with respect to this Agreement and the transactions contemplatedhereby to the fullest extent deemed necessary by each party prior to its execution anddelivery Furthermore the parties acknowledge that neither acted under any duress innegotiating drafting and executing this Agreement the Instruments and any documentscontemplated hereby There shall be no presumption that any ambiguity in this Agreementthe Instruments and any documents contemplated hereby be resolved in favour of any ofthe parties

1110 Compliance with Laws Without limiting the generality of any other covenant herein theProponent shall at its own cost and expense comply with and shall use best efforts toensure that all Persons for whom the Proponent is at law responsible comply with allApplicable Laws in connection with the Project

1111 Entire Agreement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease set forth the entire agreement and all thecovenants promises assurances agreements representations conditions warrantiesstatements and understandings (collectively ldquoRepresentationsrdquo) between the partiesconcerning the subject matter hereof No Representations are made by the Governmentto the Proponent or by the Proponent to the Government except as expressly set out in thisAgreement the Instruments the Exemption Orders the Primary Production Order and theMining Lease For greater certainty the Statement of Principles between the Governmentand the Proponent dated as of 11 June 2002 shall have no application to the parties or thematters contemplated by this Agreement after the date hereof and is replaced entirely bythis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease

1112 Good Faith Each of the Government and the Proponent shall at all times exercise all itsrights hereunder in a manner consistent with good business practices and shall act in goodfaith

1113 Waiver The failure of any party hereto to insist in any one instance upon the strictperformance by another party hereto of its obligations hereunder the Instruments theExemption Orders the Primary Production Order and the Mining Lease or the failure of any

34

party hereto to exercise any right option or remedy shall not constitute a waiver orrelinquishment for the future of any such obligation right option or remedy nor shall itconstitute a waiver of a subsequent breach No covenant or condition of this Agreementmay be waived by any party hereto except by the written consent of that party andforbearance or indulgence by that party in any regard whatsoever for no matter how longshall not constitute a waiver of such covenant or condition and until such covenant orcondition has been performed or waived in writing that party shall be entitled to invoke anyremedy available to that party under this Agreement the Instruments the ExemptionOrders the Primary Production Order and the Mining Lease despite its forbearance orindulgence

1114 No Partnership Joint Venture or Agency The Government and the Proponent expresslydisclaim any intention to create a partnership joint venture or joint enterprise It isunderstood acknowledged and agreed that nothing contained in this Agreement nor anyacts of the parties shall constitute or be deemed to constitute the Government and theProponent as partners joint venturers or principal and agent in any way or for any purpose

THE HONOURABLE THE PREMIER

THE HONOURABLE THE MINISTER OFMINES AND ENERGY

THE HONOURABLE THE MINISTER OFLABRADOR AND ABORIGINAL AFFAIRS

INCO LIMITED

ByChairman and Chief Executive Officer

VOISEYrsquoS BAY NICKEL COMPANY LIMITED

ByPresident

SCHEDULE 11ANICKEL CONCENTRATE EXEMPTION ORDER

This document can be found at the following web address httpwwwgovnfcahoaregulationsrc020066htm

- ii - 413 Return of Concentrate 20 414 Copper Processing in the Province 21 415 Parties in Contract Change of Control and Assignment 21 416 Members of House of Assembly 22 417 Mining Lease 22 418 Proponentrsquos Financing 22

ARTICLE 5 - FORCE MAJEURE 22 51 Events of Force Majeure 22 52 Obligation to Perform 23 53 Force Majeure Relief 23

ARTICLE 6 - GOVERNMENT UNDERTAKINGS 23 61 Aboriginal Agreements 23 62 Electrical Rights and Provision of Power 23 63 Mining Lease 24 64 Exemption Orders 24 65 Issue of Authorizations 24 66 Legislative Framework 25 67 Special Project Orders 25 68 Corporate Income Tax 25 69 Mining Tax Act 26 610 Primary Production Order 26 611 Industrial and Employment Benefits 26

ARTICLE 7 - PROPONENTrsquoS DEFAULT 26 71 Notice of an Event of Default 26 72 Termination 26

73 Release by Proponent and Proponentrsquos Indemnity 26

ARTICLE 8 - DISPUTE RESOLUTION 26 81 Dispute Resolution 26

ARTICLE 9 - CONFIDENTIAL INFORMATION 27 91 Confidential Information 27 92 Effect of Disclosure 28 93 Approval 28 94 Permitted Disclosure of Information 28 95 Remedy 28

ARTICLE 10 - CONDITIONS CLOSING AND TERMINATION 29 101 Conditions for the Benefit of the Government 29 102 Conditions for the Benefit of the Proponent 29 103 Closing Notice 30 104 Deliveries and Closing 30

- iii -105 Termination 30 106 Effect of Agreement and Termination 30

ARTICLE 11 - GENERAL MATTERS 31 111 Enurement 31 112 Counterparts 31 113 Notices 31 114 Legal Fees 32 115 Payment of Fees and Expenses 32 116 Time of Essence 32 117 Further Assurances 32 118 Public Notices 33 119 Independent Legal Advice 33 1110 Compliance with Laws 33 1111 Entire Agreement 33 1112 Good Faith 33 1113 Waiver 33 1114 No Partnership Joint Venture or Agency 34

SCHEDULES

THIS DEVELOPMENT AGREEMENT made as of 30 September 2002

AMONG HER MAJESTY THE QUEEN IN RIGHT OFNEWFOUNDLAND AND LABRADOR as represented byThe Honourable The Premier The Honourable The Ministerof Mines and Energy and The Honourable The Minister ofLabrador and Aboriginal Affairs

AND VOISEYrsquoS BAY NICKEL COMPANY LIMITED a corporationincorporated under the laws of the Province

AND INCO LIMITED a corporation organized under the laws ofCanada

NOW THIS DEVELOPMENT AGREEMENT WITNESSETH that for and in consideration of themutual covenants and agreements herein contained and subject to the terms and conditionshereinafter set out the parties hereto mutually agree one with the other as follows

ARTICLE 1DEFINITIONS AND INTERPRETATION

11 Definitions When used in this Agreement (including the Schedules identified in Section12) unless the context otherwise requires the following terms shall have the meaningsascribed thereto

ldquoAffiliaterdquo means in respect of a Person

(a) a Person that Controls such Person(b) a Person that is Controlled by such Person or(c) a Person that is under common Control with such Person

ldquoAgreementrdquo means this Agreement and all Schedules attached to this Agreement ineach case as they may be amended or supplemented from time to time and theexpressions ldquohereofrdquo ldquohereinrdquo ldquoheretordquo ldquohereunderrdquo ldquoherebyrdquo and similar expressions referto this Agreement and unless otherwise indicated references to Articles and Sections areto Articles and Sections in this Agreement

ldquoApplicable Lawsrdquo means any statute ordinance regulation authorization order permitapproval grant license consent policy rule right franchise privilege determinationdirective decree by-law code or standard that is enacted made issued or granted by anyGovernment Entity

2

ldquoApprovalrdquo means express approval or concurrence in writing and ldquoApproverdquo andldquoApprovedrdquo shall be construed accordingly

ldquoBusiness Dayrdquo means any day other than a Saturday Sunday or statutory holiday in theProvince

ldquoCessation of Mining Operationsrdquo means the date by which due to the lack of SufficientReserves the continued operation of the Mine and Concentrator Plant would no longer beeconomically feasible

ldquoClosingrdquo means the execution and delivery of the Instruments and the coming into effectof this Agreement and the Instruments in their entirety as contemplated by Article 10

ldquoClosing Daterdquo means the date which is the fifth Business Day after the date of deliveryof the Closing Notice by the Proponent to the Government or such earlier date as theparties agree

ldquoClosing Noticerdquo has the meaning ascribed thereto in Section 103

ldquoCommercial Production Daterdquo means the date to be certified by the Proponent and atthe option of the Government confirmed by an Engineer upon which the Hydromet Planthas operated at an annualized production rate of 30000 tonnes of Finished Nickel Productfor a period of ninety consecutive days

ldquoConcentrator Plantrdquo has the meaning ascribed thereto in Section 431

ldquoConstruction Completion Daterdquo means the date to be certified by the Proponent andat the option of the Government confirmed by an Engineer upon which the constructionof the Processing Plant has been completed in accordance with the Proponentrsquos plans andspecifications therefor

ldquoControlrdquo means with respect to a Person the ability directly or indirectly through one ormore intermediaries to direct or cause the direction of the management and policies ofsuch Person through

(a) the legal or beneficial ownership of voting securities partnership interests or otherequivalent ownership interests in such Person

(b) the right or ability to appoint or elect a majority of the directors or individuals of acomparable position of such Person

(c) the right or ability to appoint the management of such Person or(d) a contract an operating agreement a management agreement a voting trust or

other similar agreement

and ldquoControlledrdquo means with respect to a Person being subject to the Control of another

3

ldquoCopper Concentraterdquo means the intermediate concentrate or similar product producedby the Concentrator Plant containing the principal quantities of copper from ore extractedor removed from the Leased Lands

ldquoCopper Concentrate Exemption Order means the Copper Concentrate ExemptionOrder in the form of Schedule 11B

ldquoDecisionrdquo means the written decision to be delivered by the Proponent to the Governmentas to whether the Proponent intends to engineer and construct the Hydromet Plant or theMatte Plant

ldquoDecision Daterdquo means the date of delivery of the Decision

ldquoDecision Materialsrdquo means the Feasibility Study and all other information and data in theProponentrsquos possession or control (including information and data generated by its advisorsand consultants) which form the basis for the Proponent making the Decision (includingsuch data and information subsequently available to or the existence of which issubsequently known by the Proponent) in form which will permit the Government and theExperts to undertake the review of the Decision and the reasons therefor as contemplatedby Section 475 Such data and information shall include without limitation reports onmetallurgical test work proposed flowsheets detailed capital and operating cost estimatesand a detailed economic analysis

ldquoDemonstration Plantrdquo means the facility at Argentia where hydrometallurgical processingtechnology will be tested including any part or sub-process of such technology themechanical or processing equipment required therefor and any pilot plant testing or similarcampaigns to determine the technical and economic feasibility of such technology

ldquoDemonstration Plant Completion Daterdquo means the date as certified by the Proponentand at the option of the Government confirmed by an Engineer upon which theconstruction of the Demonstration Plant has been completed in accordance with theProponentrsquos plans and specifications therefor and is ready to test Nickel Concentrate

ldquoEMArdquo means the Environmental Management Agreement entered into among theGovernment the Government of Canada the LIA and Innu Nation dated as of 22 July2002

ldquoEngineerrdquo means an individual independent of and acceptable to both the Proponent andthe Government who

(a) is an engineer with at least ten years of experience in base metals primaryprocessing engineering and the engineering design and construction managementof base metals primary processing plants

(b) has the requisite experience to make the relevant determination confirmation orreport to be made or given pursuant to this Agreement and

4

(c) is a member in good standing of a professional association where ldquoprofessionalassociationrdquo means a self-regulatory organization of engineers that

(i) has been given authority or recognition by statute

(ii) admits members primarily on the basis of their academic qualifications andexperience

(iii) requires compliance with the professional standards of competence andethics established by the organization and

(iv) has disciplinary powers including the power to suspend or expel a member

ldquoEvent of Bankruptcyrdquo means

(a) the entry of a decree or order by a court having jurisdiction adjudging the Proponenta bankrupt or insolvent or approving as properly filed a petition seekingreorganization or winding-up of the Proponent under the Companiesrsquo CreditorsArrangement Act (Canada) the Bankruptcy and Insolvency Act (Canada) or theWinding-Up Act (Canada) or any other bankruptcy insolvency or analogous lawsor issuing sequestration or process of execution against the Proponent or anysubstantial part of its property or ordering the winding-up or liquidation of its affairsand the continuance of any such decree or order or appointment unstayedundischarged and in effect for a period of 60 days from the date thereof

(b) the institution by the Proponent of proceedings to be adjudicated bankrupt orinsolvent or the consent by it to the institution of bankruptcy or insolvencyproceedings against it or the filing by it of a petition or answer or consent seekingreorganization or relief under the Companiesrsquo Creditors Arrangement Act (Canada)the Bankruptcy and Insolvency Act (Canada) or the Winding-Up Act (Canada) orany other bankruptcy insolvency or analogous laws or the consent by it to the filingof any such petition or to the appointment of a receiver of the Proponent or of anysubstantial part of its property or the making by it of a general assignment for thebenefit of creditors or the Proponentrsquos admission in writing of its inability to pay itsdebts generally as they become due or the Proponent taking such action infurtherance of any of such aforementioned purposes or

(c) whenever a custodian receiver receiver and manager sequestrator liquidatortrustee agent for a secured creditor or other Person with similar powers isappointed for any substantial part of the Project whether by a court or by extra-judicial means unless such custodian receiver receiver and manager sequestratorliquidator trustee or agent is removed within 60 days of such appointment

ldquoEvent of Defaultrdquo means any one or more of the following

(a) an Event of Bankruptcy has occurred with respect to the Proponent

5

(b) the Proponent is wound up its constating documents or by-laws are forfeited orsurrendered or the corporate or other existence of the Proponent is otherwiseterminated

(c) the Proponent is in breach of its obligations in Section 415 or

(d) subject to an Event of Force Majeure andor Section 652

(i) the Decision has not been delivered by 15 November 2008

(ii) the applicable Implementation Plan has not been delivered as required bySection 474 or 475

(iii) the Processing Plant has not been completed on or before 31 December2011 or

(iv) an Engineer has determined that the Proponent is not proceeding diligentlyto complete the engineering work for and the construction of the ProcessingPlant so that it will be completed on or before 31 December 2011 asrequired by Section 474 or 475

ldquoEvent of Force Majeurerdquo has the meaning ascribed thereto in Section 51

ldquoExemption Ordersrdquo means collectively the Nickel Concentrate Exemption Order theCopper Concentrate Exemption Order and the Matte Plant Exemption Order

ldquoExpertsrdquo means collectively (a) an Engineer or firm of Engineers who will make thetechnical feasibility review of the Decision and (b) a recognized third party financial expertindependent of the Government and the Proponent who will make the financial feasibilityreview of the Decision and who will jointly deliver the Expertsrsquo Report if requested by theGovernment pursuant to Section 475 The Experts shall be selected at the time and in themanner provided for in Section 473

ldquoExpertsrsquo Reportrdquo has the meaning ascribed thereto in Section 475

ldquoFeasibility Studyrdquo means the study undertaken by or on behalf of the Proponentcontaining the technical and economic evaluations which form the basis for the Decision

ldquoFinished Copper Productrdquo means finished copper product(s) having a copper contentof not less than 99

ldquoFinished Nickel Productrdquo means finished nickel product(s) having a nickel content of notless than 998

ldquoGovernmentrdquo means the Government of the Province

6

ldquoGovernment Entityrdquo means (a) any federal provincial state regional municipal localor other government governmental or public department commission board bureau oragency whether domestic or foreign (b) any subdivision agency commission board orauthority of any of the foregoing or (c) any quasi governmental or private body exercisingany regulatory expropriation or taxing authority under or for the account of any of theforegoing in each case which has jurisdiction in respect of the Project or any part thereof

ldquoHydromet Plantrdquo has the meaning ascribed thereto in Section 461

ldquoIBAsrdquo means collectively the Impacts and Benefits Agreements made as of 29 July 2002between the Proponent and each of Innu Nation and the LIA without any amendment orvariation

ldquoIEBArdquo means the Industrial and Employment Benefits Agreement in the form set out inSchedule 49

ldquoImplementation Planrdquo means a detailed description of and time schedule for thecompletion of the engineering work for and the construction of the Processing Plant by 31December 2011

ldquoIncordquo means Inco Limited a corporation organized under the laws of Canada

ldquoInformationrdquo has the meaning ascribed thereto in Section 911

ldquoInnovation Centrerdquo has the meaning ascribed thereto in Section 34

ldquoInnu Nationrdquo means Innu Nation a corporation incorporated under the laws of Canada

ldquoInstrumentsrdquo means collectively the University Agreement the Tax Agreement and theIEBA

ldquoLeased Landsrdquo means the lands described in Schedule ldquoArdquo to the Mining Lease asamended from time to time

ldquoLegislative Frameworkrdquo means the Applicable Laws of the Province in existence as ofthe date hereof applicable to the Project or any part thereof

ldquoLIArdquo means the Labrador Inuit Association a corporation incorporated under the laws ofthe Province

ldquoMatterdquo means any form of granular nickel in matte product containing not less than 50nickel which can be processed by the Matte Plant to produce Finished Nickel Product

ldquoMatte Plantrdquo has the meaning ascribed thereto in Section 462

7

ldquoMatte Plant Exemption Order means the Matte Plant Exemption Order in the form ofSchedule 11C

ldquoMinerdquo means collectively (a) the open pit mine or mines to be developed by the Proponentfor the extraction of the mineral ores located on the Leased Lands and (b) the undergroundmine or mines as contemplated by Section 45 for the extraction of the mineral ores atdepth located under the Leased Lands

ldquoMineral Actrdquo means the Mineral Act (Newfoundland and Labrador) and the regulationsthereunder

ldquoMining Leaserdquo means the Mining Lease in the form of Schedule 63

ldquoMining Tax Actrdquo means the Mining and Mineral Rights Tax Act (Newfoundland andLabrador) and the regulations thereunder

ldquoMining Tax Act Amendmentsrdquo means the proposed amendments to the Mining Tax Actset out in Schedule 69

ldquoNickel Concentraterdquo means the intermediate concentrate or similar product produced bythe Concentrator Plant containing the principal quantities of nickel and cobalt from oreextracted or removed from the Leased Lands

ldquoNickel Concentrate Exemption Order means the Nickel Concentrate Exemption Orderin the form of Schedule 11A

ldquoPersonrdquo means any individual partnership limited partnership joint venture syndicatesole proprietorship company or corporation with or without share capital unincorporatedassociation trust trustee executor administrator or other legal personal representativeor Government Entity however designated or constituted

ldquoPrimary Production Orderrdquo means the Primary Production Order in the form of Schedule610

ldquoProcessing Plantrdquo means either the Hydromet Plant or the Matte Plant which theProponent shall construct and operate in the Province as contemplated by Section 46

ldquoProcessing Related Reasonrdquo means any situation where the Proponent is unable tomeet its obligations under Section 4131 as a result of either (a) the unavailability forwhatever bona fide reason of Replacement Concentrate or (b) the unavailability ofReplacement Concentrate on reasonable commercial terms including without limitationwhere the terms relating to price or specifications would make it not economically ortechnically feasible for processing at the Processing Plant

ldquoProjectrdquo has the meaning ascribed thereto in Section 31

8

ldquoProponentrdquo means collectively VBNC Inco their respective Affiliates or any Personwhich (as permitted by this Agreement) individually or together with any of them by way ofpartnership joint venture sub-contract or otherwise holds or is entitled to a majority interestin or Control of the Project or is the operator of the Project and their respective successorsand permitted assigns

ldquoProvincerdquo means the Province of Newfoundland and Labrador Canada

ldquoR amp D Programrdquo has the meaning ascribed thereto in Section 35

ldquoReplacement Concentraterdquo means any product containing nickel or cobalt or bothderived from ores or any other source of nickel or cobalt or both mined extracted orproduced outside the Province that in each case does not represent Finished NickelProduct but which can be further processed at the Processing Plant to produce FinishedNickel Product

ldquoSufficient Reservesrdquo means the estimated quantities of ldquoProven Mineral Reservesrdquo orldquoProbable Mineral Reservesrdquo or both within the meaning of National Instrument 43-101ldquoStandards of Disclosure for Mineral Projectsrdquo (as amended from time to time) determinedby the Proponent in accordance with its standard methodologies and assumptions for suchestimates

ldquoTax Agreementrdquo means the Tax Agreement to be entered into between the Governmentand the Proponent as contemplated by Sections 412 and 68

ldquoTime of Closingrdquo means 1000 orsquoclock in the morning in the Province on the ClosingDate

ldquoUnderground Exploration Programrdquo means the underground exploration programcontemplated by Section 44

ldquoUniversityrdquo means Memorial University of Newfoundland

ldquoUniversity Agreementrdquo means the agreement to be entered into between the Proponentand the University as contemplated by Section 48

ldquoVBN Undertaking Orderrdquo means the Voiseyrsquos Bay Nickel Company Limited Mine and MillUndertaking Order under the Environmental Assessment Act (Newfoundland and Labrador)dated 5 August 1999 (OC 99-286) as amended from time to time and

ldquoVBNCrdquo means Voiseyrsquos Bay Nickel Company Limited a corporation incorporated underthe laws of the Province

9

12 Schedules

The documents attached hereto and identified below shall form an integral part of thisAgreement

Schedule 11A - Nickel Concentrate Exemption OrderSchedule 11B - Copper Concentrate Exemption OrderSchedule 11C - Matte Plant Exemption OrderSchedule 49 - IEBASchedule 4132 - Assaying ProceduresSchedule 63 - Mining LeaseSchedule 69 - Mining Tax Act AmendmentsSchedule 610 - Primary Production OrderSchedule 81 - Dispute Resolution Procedures

13 Subdivisions Unless otherwise stated a reference herein or in a Schedule by numericalor alphabetical designation to an Article Section Subsection Paragraph Subparagraphor Schedule shall refer to the Article Section Subsection Paragraph Subparagraph orSchedule bearing that designation in this Agreement or in a Schedule

14 Headings The division of this Agreement into Articles Sections SubsectionsParagraphs and Subparagraphs and the insertion of headings are for convenience ofreference only and shall not affect the construction or interpretation of this Agreement

15 Number and Gender Words importing the singular shall include the plural and vice versaand words importing a particular gender shall include all genders The use of the neutersingular pronoun to refer to a party is deemed a proper reference The necessarygrammatical changes required to make the provisions of this Agreement apply shall in allinstances be assumed as though in each case fully expressed

16 Statutes Regulations Rules and Orders Any reference in this Agreement to all or anypart of any statute regulation rule or order shall unless otherwise stated be a referenceto that statute regulation rule or order or the relevant part thereof as amendedsubstituted replaced or reenacted from time to time

17 Business Day If the day on which any act or payment is required to be done or madeunder this Agreement is a day which is not a Business Day then such act or payment shallbe performed or made on the next following Business Day

18 Contract Always Speaking With the exception of the representations and warranties ofthe parties set out in Article 2 and any estimates referred to in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic and relatedbenefits and costs of facilities referred to in this Agreement made by the Proponent wherea matter or thing is expressed in the present tense it shall be applied to the circumstancesas they arise

10

19 Governing Law and Choice of Forum This Agreement shall be interpreted inaccordance with the laws in force in the Province subject to any applicable federal laws andfor all purposes this Agreement shall be treated as a Newfoundland and Labrador contractThe Proponent irrevocably submits and attorns to the exclusive jurisdiction of the courts ofthe Province

110 Construed Covenants Each obligation or agreement of this Agreement (other than therepresentations and warranties of the parties) even though not expressed as a covenantis to be construed as a covenant

111 Inconsistency or Conflict Except where otherwise provided either expressly or bynecessary implication in this Agreement a Schedule hereto or any Instrument in the eventof any inconsistency or conflict between any such Schedule or Instrument and any provisioncontained in this Agreement the provision of this Agreement shall prevail to the extent ofthe inconsistency or conflict

112 Severability If any provision of this Agreement or the application thereof to any Personor circumstance is to any extent held or rendered invalid void illegal or unenforceablefor any reason then the particular provision

1121 shall be deemed to be independent of and severed from the remainder of thisAgreement and all the other provisions of this Agreement shall neverthelesscontinue in full force and effect and

1122 shall continue to be applicable and enforceable to the fullest extent permitted by lawagainst any Persons and in any circumstances other than those as to which it hasbeen held or rendered invalid void illegal or unenforceable

If a severance occurs under this Section 112 the parties shall use their respective bestefforts to negotiate in good faith an enforceable replacement provision that to the greatestextent possible reflects the intent or serves the purpose of the severed provision

113 Currency All references in this Agreement to currency are to Canadian dollars

114 Knowledge In this Agreement where ldquoKnowledgerdquo of a party is referred to

1141 in respect of the Proponent it shall mean the actual knowledge of the executiveofficers of the Proponent after due inquiry in respect thereof and

1142 in respect of the Government it shall mean the actual knowledge of the responsibleexecutives of the applicable department of Government after due inquiry in respectthereof

11

ARTICLE 2REPRESENTATIONS AND WARRANTIES

21 Proponentrsquos Representations and Warranties Acknowledging that the Government isrelying on such representations and warranties VBNC and Inco jointly and severallyrepresent and warrant to the Government that

211 each is a corporation which has been duly incorporated or organized as applicableunder the laws of its jurisdiction of incorporation or organization as applicable andis validly existing under such laws

212 Inco is extra-provincially registered in the Province

213 each has all necessary corporate power authority and capacity

2131 to cause the design engineering and construction of and to operateand maintain all parts of the Project and

2132 to enter into this Agreement and the Instruments and to perform itsrespective obligations herein and therein

214 the execution and delivery of this Agreement and each of the Instruments and theconsummation of the transactions contemplated herein and therein by each ofthem have been duly authorized by all necessary corporate action on the part ofeach of them

215 neither is a party to bound or affected by or subject to any indenture mortgagelease agreement instrument charter or by-law provision which with or without thegiving of notice or the lapse of time or both would be violated contravened orbreached by or under which default would occur as a result of the executiondelivery or performance of this Agreement or any of the Instruments or theconsummation of any of the transactions provided for in any of them

216 neither is bound or affected by or subject to any Applicable Law which with orwithout the giving of notice or the lapse of time or both would be violatedcontravened or breached by or under which default would occur as a result of theexecution delivery or performance of this Agreement or any of the Instruments orthe consummation of any of the transactions provided for in any of them

217 no approval authorization consent permit or other action by or filing with anyGovernment Entity is required in connection with the execution and delivery of thisAgreement or any of the Instruments and the performance of their respectiveobligations hereunder or thereunder except as otherwise stated herein

218 there is no suit action litigation arbitration proceeding or proceeding by aGovernmental Entity including appeals and applications for review in progresspending or to the Knowledge of either of them threatened against or involving

12

either of them or any judgment decree injunction or order of any court or arbitratorwhich could adversely affect their capacity or power to execute and deliver thisAgreement or any of the Instruments or to consummate the transactionscontemplated herein or therein or which could materially adversely affect theirrespective assets financial condition or future prospects

219 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of each of them enforceable against them inaccordance with their respective terms except as limited by (a) applicablebankruptcy laws or laws affecting the enforcement of creditorsrsquo rights generally and(b) the general principles of equity

2110 all references to estimates made by Inco and VBNC in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic andrelated benefits and costs of facilities are made as of the date of this Agreementhave been determined by them based upon information available at the date of thisAgreement and have been estimated by each of them bona fide and reasonablyand neither of them has any reason to believe that any such estimate isunreasonable or unfounded at the date of this Agreement and

2111 VBNC is a wholly owned subsidiary of Inco and to the Knowledge of the Proponentno Person individually or with any other Person or Persons currently Controls Inco

22 Government Acknowledgments The Government acknowledges that (a) none of VBNCInco or any Person for whom either of them may be responsible in law have made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments and (b) the Proponent shall use the most efficient and cost effective miningtechniques including state of the art automated mining technologies aimed at loweringoperating costs and extending the life of the Project

23 Governmentrsquos Representations and Warranties Acknowledging that the Proponent isrelying on such representations and warranties the Government represents and warrantsto the Proponent that

231 the execution and delivery of this Agreement and each of the Instruments and theconsummation by the Government of the transactions contemplated herein andtherein have been duly authorized by all necessary Government action

232 it is not a party to bound or affected by or subject to any indenture agreement orinstrument which with or without the giving of notice or the lapse of time or bothwould be violated contravened or breached by or under which default would occuras a result of the execution delivery or performance of this Agreement or any ofthe Instruments or the consummation of any of the transactions provided for in anyof them and

13

233 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of it enforceable against it in accordance with itsterms except as they may be limited by the general principles of equity

24 Proponent Acknowledgements Each of Inco and VBNC acknowledges that neither theGovernment nor any Person for whom it may be responsible in law has made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments

ARTICLE 3DESCRIPTION OF THE PROJECT AND RELATED FACILITIES

31 The Project The ldquoProjectrdquo will comprise collectively the Underground ExplorationProgram the Mine the Concentrator Plant the R amp D Program the Demonstration Plantthe Processing Plant and if applicable the Concentrator Plant expansion referred to inSection 45 The Processing Plant will be capable of processing concentrate andintermediate feeds containing nickel from other sources world wide which will give theProcessing Plant the capability of operating well beyond the life of the Mine

32 Capital Investment The Proponent estimates that the aggregate capital investment in theProject and related facilities will be $29 billion over the estimated 30-year life of the Projectinclusive of sustaining capital expenditures

33 Employment The Proponent estimates that

331 the construction phase of the Mine and Concentrator Plant will create approximately1700 person-years of employment in the Province the construction phase of theHydromet Plant will create approximately 3000 person-years of employment in theProvince and the construction phase of the Matte Plant will create approximately2500 person-years of employment in the Province

332 during the various operating phases the Project will create the followingemployment levels in the Province Mine and Concentrator Plant - 400 people R ampD Program - 200 people Underground Exploration Program - 85 people HydrometPlant - 400 people Matte Plant - 350 people

333 over the estimated 30-year life of the Project total employment benefits from theProject in the Province will be 76000 direct and indirect person-years and

334 gross domestic product impact to the Province with respect to the Project will be$11 billion

34 Innovation Centre The Proponent shall spend $10 million on and provide an endowmentof $1 million per year over a ten-year period to cover operational costs for an IncoInnovation Centre (the ldquoInnovation Centrerdquo) at St Johnrsquos in conjunction with theUniversity pursuant to the University Agreement The focus of the Innovation Centre willbe on education and research in mineral exploration mining and metallurgical processing

14

The Innovation Centre will provide world-class education research and training related tothe mining industry to 50-60 students per year to be engaged in Bachelors Masters andDoctorate level programs The Proponent shall commence work on the Innovation Centrein 2002 with target completion in 2004

35 R amp D Program The Proponent shall undertake a comprehensive research anddevelopment program intended to establish the commercial technical and economicfeasibility of hydrometallurgical process technology to process the Nickel Concentrate (theldquoR amp D Programrdquo) The R amp D Program will include the evaluation of chemical engineeringsub-processes for the hydrometallurgical process the mechanical equipment design for theDemonstration Plant and the construction and operation of the Demonstration Plant

ARTICLE 4PROPONENTrsquoS UNDERTAKINGS

41 Infrastructure and Initial Work Commencing in 2002 the Proponent shall

411 at the Mine site undertake site mobilization including the establishment of aconstruction camp initiation of work on temporary port facilities and construction ofaccess roads

412 at Argentia undertake leasing or other arrangements for occupancy and sitepreparation including demolition fencing security and signage

413 undertake the construction of a warehouse building and establish staging areas andlay down areas in support of Labrador activities

414 establish a project office at Argentia and information centres at St Johnrsquos andHappy Valley-Goose Bay and

415 complete site selection and commence architectural design and engineering workfor the Innovation Centre

The Proponent estimates that this infrastructure and initial work program will employ inaggregate approximately 250 persons and the Proponent shall spend not less than $55million on this program in the Province on or before 31 March 2003

42 R amp D Program421 The Proponent shall undertake the R amp D Program and as a part thereof shall

construct the Demonstration Plant at a cost which the Proponent estimates will be$130 million The Proponent shall commence the site development for theDemonstration Plant in 2002 and continue such development into 2003 Theinitiatives in support of these activities will include the operation of an informationcentre preparation of environmental baseline studies and continued upgrading orreplacement of utility services required for the Demonstration Plant maintainingstaging areas and cleanup and civil works at Argentia consisting of demolition

15

grading and earth works construction The Proponent has scheduled thecompletion of the engineering design and construction of the Demonstration Plantso that the Demonstration Plant Completion Date shall have occurred on or before31 December 2006

422 The Proponent shall provide to the Government within 15 days of the end of eachcalendar quarter commencing with the calendar quarter ending 31 December 2002a detailed progress report on the results during such calendar quarter of the R amp DProgram which report will detail costs incurred to the end of such calendar quarterand contain sufficient documentation and information to enable the Government toevaluate the Proponentrsquos progress with respect to the R amp D Program and thedevelopment of hydrometallurgical process technology for processing the NickelConcentrate If requested by the Government upon reasonable notice theProponent shall provide the Government and its representatives and advisorsaccess at reasonable times to the facilities where the R amp D Program is beingconducted and make appropriate personnel of the Proponent available to respondto any requests for additional information

423 In addition to the utilization of the Demonstration Plant for the purposes ofdeveloping hydrometallurgical process technology for processing the NickelConcentrate the Proponent shall explore business opportunities for the ongoingutilization of the Demonstration Plant for the evaluation of other concentrates andintermediate feeds after completion of the R amp D Program

43 Mine and Concentrator Plant

431 The Proponent shall cause the development of the Mine and the designengineering and construction of a millconcentrator plant which will be capable ofprocessing 6000 tonnes of ore per day (the ldquoConcentrator Plantrdquo) TheConcentrator Plant will produce the Copper Concentrate and the NickelConcentrate The Proponent has scheduled to begin the development of the Mineand the construction of the Concentrator Plant in 2003 and estimates that the Mineand Concentrator Plant will require three years to construct at a cost ofapproximately $710 million

432 The Proponent

4321 shall not ship any Nickel Concentrate out of the Province aspermitted by the Nickel Concentrate Exemption Order before theDemonstration Plant Completion Date and

4322 shall ship Nickel Concentrate from the Concentrator Plant to theDemonstration Plant in sufficient quantities for the continuedoperation of the Demonstration Plant during the R amp D Programfollowing successful start up of the Concentrator Plant

16

44 Underground Exploration Program The Proponent shall undertake an undergroundexploration program which it estimates will cost $95 million and employ approximately 85people This program is intended to identify Sufficient Reserves at depth under the LeasedLands and if there are such Sufficient Reserves the Proponent shall develop a mining planfor the economic extraction of such Reserves The initial phase of this undergroundexploration program will be an advanced surface program which the Proponent estimateswill cost $20 million to commence in 2002 with completion targeted for 2006 Subsequentunderground exploration will be scheduled to ensure that Sufficient Reserves under theLeased Lands are available to sustain full operation of the Concentrator Plant during thetransition from open-pit operations to full underground mining operations if applicable

45 Underground Mine Development and Concentrator Plant Expansion If theunderground exploration program described in Section 44 identifies Sufficient Reservesas contemplated by Section 44 the Proponent shall commence the development of anunderground mine or mines on the Leased Lands and an expansion of the ConcentratorPlant in order to supply sufficient Nickel Concentrate to maintain the operation of theProcessing Plant at full capacity The Proponent estimates that this program will costapproximately $750 million and employ an aggregate of 800 people

46 Processing Plant

461 In order to maximize long-term benefits for the Province and the people of theProvince the Proponent shall use its best efforts through the R amp D Program todevelop a technically and economically feasible hydrometallurgical processtechnology for processing the Nickel Concentrate in the Province If suchtechnology is successfully developed the Proponent shall cause the designengineering and construction of and operate and maintain a hydrometallurgicalprocessing plant with a design capacity to produce annually approximately 50000tonnes of Finished Nickel Product together with associated cobalt and copperproducts (the ldquoHydromet Plantrdquo) The Proponent estimates that the HydrometPlant will have a capital cost of approximately $800 million and during the three-yearconstruction period will generate approximately 3000 person-years of employmentThe Proponent estimates that the Hydromet Plant will employ approximately 400people during operations

462 If pursuant to Section 47 it is determined that a Hydromet Plant is not technicallyor economically feasible the Proponent shall construct a commercialhydrometallurgical nickel-matte processing facility or other similar facilityincorporating a proven state of the art technology to produce Finished NickelProduct (the ldquoMatte Plantrdquo) The Matte Plant will have a design capacity toproduce annually approximately 50000 tonnes of Finished Nickel Product togetherwith associated cobalt and copper products The Proponent estimates the MattePlant will have a capital cost of approximately $670 million and during the estimatedthree-year construction period will generate approximately 2500 person-years ofemployment The Proponent estimates that the Matte Plant will employapproximately 350 people during operations

17

463 The Proponent has represented to the Government that its objective is to operatethe Processing Plant well beyond the life of the Mine Accordingly the Proponentundertakes to explore technically and economically feasible opportunities for theexpansion of the Processing Plant and to secure opportunities to supply theProcessing Plant with feed from world wide sources to fully utilize the Proponentrsquoslarge capital investment in the Processing Plant

464 The Proponent shall establish the Processing Plant at Argentia unlessenvironmental conditions at Argentia would make it not economically feasible toestablish the Processing Plant at Argentia and in such circumstances theProponent shall locate the Processing Plant at another site in the Province

47 Selection of Applicable Processing Plant

471 The Proponent shall use commercially reasonable efforts to deliver as soon aspossible but in any event shall deliver on or before 15 November 2008 theDecision and the Decision Materials to the Government and the Experts

472 If the Proponent has not on or before 30 June 2008 delivered to the Governmentthe Decision and the Decision Materials

4721 it shall forthwith meet with the Government to review on aconfidential basis the status of its efforts towards being able todeliver the Decision

4722 thereafter it shall promptly update the Government from time to timeon its efforts to be able to deliver the Decision and the outstandingissues relevant to whether the Decision will be to build the HydrometPlant or the Matte Plant and

4723 to the extent that the Proponent is not by 30 June 2008 in aposition to deliver the Decision which confirms that the Proponentintends to proceed with the construction of the Hydromet Plant theProponent shall use commercially reasonable efforts to developImplementation Plans for both a Hydromet Plant and a Matte Plantso that it will be able to deliver the Implementation Plan for theHydromet Plant or Matte Plant as applicable on or before 31December 2008

473 The Government may at any time after the earlier of the Decision Date or 30 June2008 give the Proponent notice in writing that it wishes to proceed with theappointment of the Experts When the Government gives notice to the Proponentrequiring the appointment of the Experts the Government and the Proponent shallthen forthwith agree upon the appointment of the Experts If the Government andthe Proponent cannot so agree within 15 days after the giving by the Governmentof such notice the appointment of the Experts shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter to

18

the Joint Committee or the Mediation Procedure referred to therein If the Expertsare appointed prior to the delivery by the Proponent of the Decision and theDecision Materials the Proponent shall provide to the Government and the Expertssuch data and information as is then available that will assist the Experts in theirreview under Section 475 The Proponent and the Government shall each pay50 of the fees and expenses of the Experts Before receiving the Decision theDecision Materials or any other information or data from the Proponent under thisAgreement the Experts shall first execute a confidentiality agreement containingsubstantially the same terms as provided for in Article 9

474 If in the Decision the Proponent confirms it intends to construct the Hydromet Plantthe Proponent shall deliver the Implementation Plan for the Hydromet Plant on orbefore 31 December 2008 and thereafter shall proceed diligently to complete thedetailed engineering for and construction of the Hydromet Plant in accordance withsuch Implementation Plan so that it shall be completed on or before 31 December2011

475 If in the Decision the Proponent confirms it intends to construct the Matte Plant theGovernment shall on or before the seventh Business Days after the Decision Datedeliver to the Proponent and the Experts a notice in writing (in this Section 475 theldquoGovernment Decisionrdquo) that the Government either (a) accepts the Decision tobuild the Matte Plant or (b) intends to refer such Decision to the Experts for reviewIf in the Government Decision the Government states it intends to refer theDecision to the Experts the Proponent shall promptly deliver to the Experts theDecision and the Decision Materials if it has not previously done so The Expertswill review the Decision the Decision Materials and any other information or datawhich the Experts deem appropriate or which the Government requests them toconsider and render their report (the ldquoExpertsrsquo Reportrdquo) within 30 days of the dateon which the Government delivers the Government Decision If the Governmentrequests the Experts to consider any other information or data in addition to theDecision Materials it shall provide to the Experts and the Proponent copies of suchrequest and any such information and data at the time it delivers the GovernmentDecision and the Proponent shall have the right within five Business Days tocomment on or respond to such information and data to the Experts with a copy tothe Government The Expertsrsquo Report shall determine whether in the opinion of theExperts it would be technically and economically feasible for the Proponent to buildthe Hydromet Plant together with reasons for such determination If the ExpertsrsquoReport determines that it is technically and economically feasible for the Proponentto build the Hydromet Plant the Proponent shall on or before 31 December 2008deliver to the Government an Implementation Plan for the Hydromet Plant andthereafter shall proceed diligently to complete the detailed engineering for andconstruction of the Hydromet Plant so that it shall be completed on or before 31December 2011 If the Expertsrsquo Report confirms that it would not be technically oreconomically feasible to build the Hydromet Plant the Proponent shall on or before31 December 2008 deliver to the Government an Implementation Plan for the MattePlant and thereafter shall proceed diligently to complete the detailed engineering forand construction of the Matte Plant in accordance with such Implementation Plan

19

so that it shall be completed on or before 31 December 2011 Subject to Section477 the Expertsrsquo Report shall be final and binding on the Government and theProponent

476 The determination as to whether the Proponent is proceeding diligently with thecompletion of the engineering work for and the construction of the Processing Plantfor completion on or before 31 December 2011 as required by Section 474 or475 shall be made annually on the anniversary date of the Decision Date by anEngineer who shall certify to both the Government and the Proponent as to whetherthe actual engineering work for and construction of the Processing Plant is onschedule with the applicable Implementation Plan

477 If there is a manifest error in the Expertsrsquo Report which if corrected would result ina different determination by the Experts the Expertsrsquo Report shall be referred backto the Experts for the purpose of forthwith correcting such manifest error changingthe determination in the Expertsrsquo Report and submitting a revised Expertsrsquo Reportto the Proponent and the Government

478 Where an Engineer is required to be appointed from time to time for the purposesof Section 476 or for determining the Commercial Production Date theConstruction Completion Date or the Demonstration Plant Completion Date theGovernment and the Proponent shall forthwith agree upon the appointment of suchEngineer If the Government and the Proponent cannot so agree within 15 daysof the Government or the Proponent giving the other notice requiring appointmentof an Engineer the appointment of the Engineer shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter tothe Joint Committee or the Mediation Procedure referred to therein The Proponentand the Government shall each pay 50 of the fees and expenses of any Engineer

48 Innovation Centre The Proponent shall enter into an agreement (the ldquoUniversityAgreementrdquo) with the University in form and content satisfactory to the Government on orbefore the Closing Date The University Agreement shall contain among other things theProponentrsquos commitments and intentions set out in Section 34

49 Industrial and Employment Benefits The Proponent shall execute the IEBA to beeffective 7 October 2002

410 IBAs The Proponent represents and warrants to the Government that it has entered intothe IBAs

411 VBN Undertaking Order The Proponent agrees to abide by and implement the terms andconditions contained in the VBN Undertaking Order

412 Corporate Income Tax The Proponent shall use its best efforts to negotiate and executewith the Government an agreement covering the matters set forth in this Section 412 andSection 68 (the ldquoTax Agreementrdquo) as soon as possible but in any event on or before theClosing Date The Tax Agreement will contain provisions which to the extent permitted by

20

law will result in an allocation to the Province for the purposes of Part IV of the FederalIncome Tax Regulations of the Proponentrsquos gross revenues from the sale or disposition ofnickel copper and cobalt products whether in intermediate or final form from the Project

413 Return of Concentrate

4131 In consideration of the Government granting the Exemption Orders the Proponentguarantees that it shall prior to Cessation of Mining Operations commenceshipping into the Province Replacement Concentrate for processing into FinishedNickel Product at the Processing Plant Such Replacement Concentrate shall beshipped to and processed by the Processing Plant in sufficient quantities to permitthe Processing Plant to operate continuously at a rate that will produce not less than25000 tonnes of Finished Nickel Product annually and such shipments shallcontinue at least until such time as the contained nickel and cobalt in theReplacement Concentrate shall have equalled the total quantity of contained nickeland cobalt in the Nickel Concentrate shipped out of the Province under the termsof the Nickel Concentrate Exemption Order and otherwise than under the provisionsof an Exemption Order

4132 The Proponent shall undertake the Assaying Procedures set out in Schedule 4132with respect to the Nickel Concentrate and the Replacement Concentrate

4133 The Proponent acknowledges that if it does not perform its contractual obligationsunder Section 4131 (a) the Province and the economy of the Province will suffersubstantial loss (b) the Government would not be properly compensated for its lossby monetary damages which therefore will not be considered an adequate remedyfor such breach and (c) the Government may at any time subsequent to suchbreach commence an action against the Proponent for any one or more of thefollowing remedies whether claimed as primary or secondary alternative relief

41331 an order for specific performance

41332 appropriate injunctive relief whether mandatory or prohibitory and

41333 monetary damages including for consequential and economic lossreflecting the substantial losses suffered by the Government and theeconomy of the Province as a result of such breach

The Proponent expressly waives any right to claim or argue that the Governmentcannot claim the relief set out in Sections 41331 41332 and 41333 in any suitcommenced by the Government against the Proponent for the Proponentrsquos failureto perform its obligations under Section 4131

21

414 Copper Processing in the Province

4141 The Government acknowledges that at the date hereof the quantity of coppercurrently identified in the mineralized zones on or under the Leased Lands togetherwith identified copper deposits elsewhere in the Province are not sufficient to justifythe construction and operation of a copper processing facility in the Province on aneconomically feasible basis

4142 If at any time in the future

41421 Sufficient Reserves of copper are discovered by the Proponent inthe Province (including on or under the Leased Lands) to makeeconomic the processing on a commercial basis of the CopperConcentrate or any other product containing the principal quantitiesof copper extracted from the Leased Lands into Finished CopperProduct in the Province the Proponent shall process such CopperConcentrate into Finished Copper Product in the Province or

41422 a third party establishes a facility in the Province for the commercialprocessing of copper concentrate the Proponent shall offer for saleits then available Copper Concentrate from the Concentrator Plantto such third party for processing in such facility on then prevailingcommercial terms and conditions subject to the Proponentrsquos thenexisting contractual obligations

4143 In the circumstances set out in Section 4142 the Proponent acknowledges thatthe Government has the right pursuant to Section 311(3) of the Mineral Act torescind the Copper Concentrate Exemption Order

415 Parties in Contract Change of Control and Assignment

4151 The Proponent covenants with the Government that without the prior Approval ofthe Government it

41511 shall not take or threaten or purport to take any action whether byway of contract corporate reorganization or arrangement orotherwise that would have the effect of transferring assigningsubletting or otherwise divesting itself of a majority interest in orControl of (a) the Project or (b) all or substantially all of theProponentsrsquo rights under this Agreement the Instruments theExemption Orders the Primary Production Order and subject toApplicable Laws the Mining Lease and

41512 shall not take or threaten or purport to take any action which directlyor indirectly results in a change of Control of VBNC to a party otherthan Inco

22

4152 Wherever pursuant to Section 4151 the Government is requested to grant itsApproval such Approval may be withheld by the Government in its sole andabsolute discretion for any reason whatsoever

4153 For bona fide tax or other corporate reasons the Proponent may without theApproval of the Government transfer assign sublet or otherwise divest to anAffiliate a majority interest in or Control of (a) the Project or (b) all or substantiallyall of the Proponentrsquos rights under this Agreement the Instruments the ExemptionOrders the Primary Production Order and subject to Applicable Laws the MiningLease Notwithstanding Section 111 no such transfer assignment sublet ordivestiture shall relieve the Proponent of its obligations hereunder or thereunder

4154 The Proponent shall promptly give written notice to the Government of any actionit takes under Section 4151 or 4153

416 Members of House of Assembly The Proponent undertakes to (a) ensure that nomember of the House of Assembly of the Province shall have any interest in thisAgreement and (b) use its best efforts to ensure that no Member of the House of Assemblyof the Province receives any benefit to arise herefrom or from any report study review oranalysis required to be made or submitted pursuant to this Agreement

417 Mining Lease VBNC shall execute the Mining Lease effective 30 September 2002

418 Proponentrsquos Financing The Proponent shall use best efforts to obtain the financingcontemplated by Section 1024 including without limitation the preparation of all feasibilitystudies required in order to obtain such financing

ARTICLE 5FORCE MAJEURE

51 Events of Force Majeure For the purposes of this Article 5 and subject to the exceptionsand qualifications below each of the following shall be an ldquoEvent of Force Majeurerdquo

511 acts of God or natural disasters adverse weather conditions or other similaroccurrences

512 acts of war (declared or undeclared) or conditions arising out of or attributable toany such acts of war revolutions insurrections civil strife formal or informalhostilities mob violence riots and similar disturbances blockades or any otherunlawful acts against public order or authority

513 strikes lockouts work stoppages or labour disturbances unless directly andproximately caused by an unlawful act or omission of the Proponent

514 (a) delay or failure by suppliers of labour transportation materials machineryequipment parts supplies utilities or services (b) contractorsrsquo or sub-contractorsrsquoshortage of or inability to obtain labour transportation materials machinery

23

equipment parts supplies utilities or services or (c) breakdown of equipmentmachinery or facilities unless any of the foregoing are directly and proximatelycaused by or result from an unlawful act or omission of the Proponent

515 accidents and

516 solely in respect of the Proponentrsquos obligations in Section 4131 a ProcessingRelated Reason provided that a Processing Related Reason shall not be an Eventof Force Majeure at any time after three years following Cessation of MiningOperations

52 Obligation to Perform In order to obtain relief for an Event of Force Majeure theProponent shall (a) use commercially reasonable efforts to (i) prevent the occurrence of(ii) perform its obligations in the face of and (iii) terminate any such Event of Force Majeure(other than the events described in Section 513 relied upon) and (b) give the Governmentwritten notice of the facts which the Proponent claims constitute an Event of Force Majeureas soon as reasonably practical upon becoming aware of their existence

53 Force Majeure Relief If the Proponent establishes that it is prevented from performingany of its obligations under this Agreement the Nickel Concentrate Exemption Order or theMatte Plant Exemption Order by reason of an Event of Force Majeure such obligations willbe suspended for the period of the existence of such Event of Force Majeure and theProponent will be entitled to an extension of all dates referred to in this Agreement theNickel Concentrate Exemption Order and the Matte Plant Exemption Order for a reasonableperiod of time that reflects (a) the period during which the Proponent is prevented fromperforming its obligations by reason of the Event of Force Majeure and (b) the impact thatsuch Event of Force Majeure has on the Project including without limitation shippingschedules and construction schedules that have been delayed by reason of such Event ofForce Majeure Even though the Proponentrsquos obligations will be suspended for suchreasonable period of time when the applicable Event of Force Majeure is no longerpreventing the Proponent from performing its obligations the Proponent will again beobliged to perform such obligations

ARTICLE 6GOVERNMENT UNDERTAKINGS

61 Aboriginal Agreements The Government represents and warrants that it has entered into(a) interim measures agreements with the Innu Nation and the LIA that include the VoiseyrsquosBay chapter of the respective land claims agreements and (b) the EMA

62 Electrical Rights and Provision of Power The Government shall cause Newfoundlandand Labrador Hydro or its successors to

621 provide to the Proponent electrical power for the Processing Plant at the lower of(a) the island industrial electrical rate or (b) any lower electrical rate that may be

24

offered from time to time by Newfoundland and Labrador Hydro or its successorsto its industrial customers in comparable circumstances and

622 ensure that Newfoundland and Labrador Hydro or its successors can supply to theProponent sufficient electrical power for the operation of the Processing Plant

63 Mining Lease The Government shall issue the Mining Lease effective 30 September2002

64 Exemption Orders The Government shall issue the Exemption Orders effective 30September 2002

65 Issue of Authorizations

651 Where the Proponent has submitted all information and data in accordance withApplicable Laws and required by the Government for it to issue or grant any permitauthorization order or other approval necessary for the Proponent to implement theProject or any part thereof (in this Section 65 the ldquoAuthorization(s)rdquo) theGovernment shall issue or grant any such Authorization on a timely basis

652 If the Government does not issue or grant an Authorization on a timely basis

6521 the Government shall grant the Proponent an extension of all datesreferred to in this Agreement the Nickel Concentrate ExemptionOrder and the Matte Plant Exemption Order for a reasonable periodof time that reflects (a) the period of delay in granting suchAuthorization and (b) the impact that such delay has on the Projectincluding without limitation shipping schedules and constructionschedules that will have been delayed by Governmentrsquos failure toissue or grant such Authorization on a timely basis and

6522 if as a result of the Governmentrsquos failure to issue or grant anAuthorization on a timely basis the completion date for theProcessing Plant is delayed and provided that the Proponentestablishes that it is likely it will ship out of the Province the totalvolume of contained nickel in the Nickel Concentrate permittedunder the Nickel Concentrate Exemption Order prior to the revisedcompletion date of the Processing Plant the Government shallamend the Nickel Concentrate Exemption Order to allow anadditional quantity of contained nickel in Nickel Concentrate to beshipped out of the Province which quantity will reflect thereasonable period of time of the extension referred to in Section6521

653 The Government shall not be responsible for any delays nor shall the Proponent beentitled to any relief under this Section 65 unless such delays are directly and

25

proximately caused by or result from an act or omission of the Government or adepartment regulatory body board agent or employee of the Government

66 Legislative Framework

661 The Government represents to the Proponent (and acknowledges that theProponent is relying upon such representation) that it shall maintain substantiallythe Legislative Framework for the duration of the Project subject to legislativeamendments contemplated in this Agreement and legislation of general applicationThe Government shall maintain the Legislative Framework consistent with thisAgreement subject to Governmental responsibilities including the responsibility forensuring proper management of the Provincersquos resources the protection andmaintenance of public health and safety and the protection of the environment TheGovernment acknowledges that this Agreement is consistent with current public lawand Governmental responsibilities

662 The Proponent represents to the Government (and the Proponent acknowledgesthat the Government in consideration of agreeing to maintain the LegislativeFramework has relied upon such representation) that the Proponent shall performits obligations set out in this Agreement the Instruments the Exemption Orders thePrimary Production Order and the Mining Lease

67 Special Project Orders The Government shall issue a Special Project Order or SpecialProject Orders under Section 70 of the Labour Relations Act (Newfoundland and Labrador)to ensure a stable labour relations environment throughout the construction phases of theProject This Order or these Orders shall include without limitation provisions such as nostrikes and lock-outs and the ability to designate the union organization and employerrsquosrepresentative for the purposes of collective bargaining

68 Corporate Income Tax The Government shall use best efforts to negotiate and executewith the Proponent the Tax Agreement as soon as possible but in any event on or beforethe Closing Date The Tax Agreement will contain provisions

681 whereby the Government will provide that the rate of the Provincersquos corporateincome tax applicable to the Proponent will be the lower of the ldquoall provincesaveragerdquo or the Provincersquos income tax rate

682 which to the extent permitted by law will result in an allocation to the Province forthe purposes of Part IV of the Federal Income Tax Regulations of the Proponentrsquosgross revenues from the sale or disposition of nickel copper and cobalt productswhether in intermediate or final form from the Project and

683 whereby the Government will undertake to indemnify the Proponent for any doubletaxation resulting from the allocation referred to in Section 682

26

69 Mining Tax Act At the next session of the House of Assembly of the Province theGovernment shall introduce and support legislation to amend the Mining Tax Act inaccordance with the Mining Tax Act Amendments

610 Primary Production Order The Government shall issue the Primary Production Ordereffective 30 September 2002

611 Industrial and Employment Benefits The Government shall execute the IEBA to beeffective 7 October 2002

ARTICLE 7PROPONENTrsquoS DEFAULT

71 Notice of an Event of Default Upon the happening of an Event of Default theGovernment may deliver to the Proponent a notice of default setting forth in reasonabledetail the nature of the Event of Default and if the Government intends to exercise its rightsunder Section 72 indicating the date upon which the Government intends to exercise suchrights

72 Termination Subject to an Event of Force Majeure or the provisions of Section 652where an Event of Default has occurred and in each of such cases and so often as anEvent of Default happens after giving the notice provided for in Section 71 theGovernment may at any time in its sole discretion do any one or more of the following (a)terminate this Agreement (b) terminate the Mining Lease (c) rescind the ExemptionOrders and (d) take action for any remedy at law or in equity

73 Release by Proponent and Proponentrsquos Indemnity The Proponent hereby releases anddischarges and agrees to indemnify and save harmless the Government from every claimof every nature whether in damages (including consequential or indirect damages) or notwhich may arise or be suffered by the Proponent or any Person claiming through or underthe Proponent by reason of or as a result of anything done by the Government or anysuccessor or assign claiming through or under the Government under the provisions ofSection 72

ARTICLE 8DISPUTE RESOLUTION

81 Dispute Resolution Any dispute or difference between the parties hereto arising

811 as to whether a Processing Related Reason exists

27

812 as to the selection of an Engineer or firm of Engineers the Experts or an umpireunder Schedule 4132

813 under Section 45 as to whether the Underground Exploration Program hasidentified Sufficient Reserves under the Leased Lands

814 as to the determination of the date of Cessation of Mining Operations

815 as to whether commercial processing is economic as contemplated by Section41421

816 as to then prevailing commercial terms and conditions as contemplated by Section41422

817 under Section 51 as to whether an Event of Force Majeure exists

818 under Section 53 as to whether an Event of Force Majeure prevents the Proponentfrom performing any of its obligations under this Agreement

819 under Section 53 or Section 652 as to the reasonable period of time for theextension of the dates of performance of the Proponentrsquos obligations

8110 under Section 6522 the additional quantity of contained nickel in NickelConcentrate to be shipped out of the Province or

8111 as to whether the Proponent is complying with its obligations under Section 52

shall in each case be resolved in the manner provided for in Schedule 81

ARTICLE 9CONFIDENTIAL INFORMATION

91 Confidential Information The Government

911 acknowledges that information (the Information) supplied to it by or on behalf ofthe Proponent pursuant to or in connection with this Agreement or the Instrumentsincluding without limitation information provided pursuant to or in connection withSections 422 471 472 475 52 and 81 is of a financial commercialscientific or technical nature and is supplied in confidence and

912 subject to Sections 93 and 94 shall keep the Information confidential and shallnot use or disclose the Information to any third party without the Approval of theProponent and in doing so shall use the same care as it applies to avoid disclosureor dissemination of its own confidential information to prevent the disclosure ofInformation to any third party

28

92 Effect of Disclosure The Government acknowledges that disclosure of the Informationcontrary to the provisions of this Article 9 could reasonably be expected to921 harm significantly the competitive position or interfere significantly with the

negotiating position of the Proponent

922 result in similar information no longer being supplied by or on behalf of theProponent to the Government when it is in the public interest that similar informationcontinued to be supplied and

923 result in material financial loss to the Proponent or result in material financial gainto competitors of the Proponent and other Persons

93 Approval The Government may disclose Information if Approved by the Proponent

94 Permitted Disclosure of Information The provisions of this Article 9 shall not apply toInformation which

941 is now or which hereafter through no act or omission of the Government becomesgenerally known or available to the public without breach of this Agreement

942 after disclosure to the Government becomes generally known or available to thepublic by publication or otherwise through no act or omission of the Government

943 the Government can establish was in its possession at the time of disclosure andwas not previously acquired directly or indirectly from the Proponent

944 is disclosed to the Government by a third party on a non-confidential basis whichparty to the Knowledge of the Government is not prohibited from disclosing suchInformation to the Government by any legal contractual or fiduciary obligation towhich such party is bound or subject or

945 is required to be disclosed by law

95 Remedy Without limiting the Proponentrsquos rights and recourses for a breach by theGovernment of its obligations in this Article 9

951 the Government acknowledges that the Proponent shall suffer irreparable harm ifthe Government discloses Information contrary to the provisions of this Article 9and unless prohibited by law the Proponent shall be entitled to an injunction orinjunctions to prevent such disclosure

952 the Government shall be liable for and shall indemnify and save the Proponentharmless from and against costs losses damages and claims that it may sufferpay incur or be liable for as a result of any breach by the Government of thisArticle 9 and

29

953 in the event there are any measures which the Government can take to ensurecompliance with the provisions of Section 912 the Proponent shall be relieved ofthe obligation to provide information of the type with respect to which the breachoccurred until the Government has taken such measures

ARTICLE 10CONDITIONS CLOSING AND TERMINATION

101 Conditions for the Benefit of the Government Subject to Section 1061 the obligationsof the Government in this Agreement are subject to the satisfaction of or compliance withat or prior to the Time of Closing each of the following conditions

1011 the representations and warranties of the Proponent made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Proponent at or prior to the Time of Closing shallhave been performed the Proponent shall not be in breach of any agreement onits part contained in this Agreement at the Time of Closing and the Governmentshall have received a certificate confirming the foregoing signed for and on behalfof the Proponent in form and content satisfactory to the Government

1012 the University Agreement shall have been executed by the Proponent and a copythereof shall have been delivered to the Government

1013 the Tax Agreement shall have been executed by the Proponent and delivered to theGovernment and

1014 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

102 Conditions for the Benefit of the Proponent Subject to Section 1061 the obligationsof the Proponent in this Agreement are subject to the satisfaction of or compliance with ator prior to the Time of Closing each of the following conditions

1021 the representations and warranties of the Government made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Government at or prior to the Time of Closingshall have been performed the Government shall not be in breach of anyagreement on its part contained in this Agreement at the Time of Closing and theProponent shall have received a certificate confirming the foregoing signed for andon behalf of the Government in form and content satisfactory to the Proponent

30

1022 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

1023 the Tax Agreement shall have been executed by the Government and delivered bythe Government to the Proponent

1024 the Proponent shall have secured financing on reasonable commercial terms toenable it to develop the Mine and construct the Concentrator Plant and

1025 the Mining Tax Act Amendments shall have become law

103 Closing Notice If the Proponent (a) wishes to waive the condition set out in Section1024 or (b) has obtained the financing contemplated by Section 1024 it shall forthwithdeliver to the Government a notice (the ldquoClosing Noticerdquo) confirming that it has eitherwaived the condition set out in Section 1024 or that such condition has been satisfied

104 Deliveries and Closing1041 The Closing shall take place at the Time of Closing on the Closing Date at a

location to be agreed by the parties

1042 At the Closing

10421 the Proponent shall deliver to the Government the certificatecontemplated by Section 1011 and if not previously delivered theexecuted University Agreement and the executed Tax Agreementand

10422 the Government shall deliver to the Proponent the certificatecontemplated by Section 1021 and if not previously delivered theexecuted Tax Agreement

105 Termination This Agreement and the IBEA may be terminated at any time prior to theTime of Closing1051 by agreement of the Government and the Proponent

1052 by the Government if the conditions set out in Section 101 have not been satisfiedor waived by the Government or the Closing Notice has not been delivered to theGovernment on or before 31 March 2003 or

1053 by the Proponent if the conditions set out in Section 102 have not been satisfiedor waived by the Proponent (except the condition set out in Section 1024 in theevent the Proponent has delivered the Closing Notice)

106 Effect of Agreement and Termination

1061 Notwithstanding Section 1062 and subject to Section 1063 the Government andthe Proponent shall be bound by the provisions of Sections 41 421 422 410

31

411 412 415 416 417 418 61 63 64 65 66 67 68 69 610 and 611and Articles 5 8 9 and 11 effective as of and from the date of execution of thisAgreement

1062 Subject to Section 1061 the obligations of the Proponent and the Government inthis Agreement shall be effective as of and from the Time of Closing

1063 If this Agreement and the IEBA are terminated in accordance with the provisions ofSection 105 this Agreement and the IEBA shall thereafter become null and voidand have no effect and no party shall have any liability to the other except

10631 the obligations contained in Sections 41421 411 69 and Article9 hereof and

10632 the liability of a party in respect of its breach of this Agreement andthe IEBA prior to such termination

all of which shall survive such termination for a period of twelve months followingsuch termination

ARTICLE 11GENERAL MATTERS

111 Enurement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease shall be binding upon and shall enure to the benefitof the parties hereto the successors and assigns of the Government and the successorsand permitted assigns of the Proponent Any such assignment permitted by this Agreementshall become effective only when the assignee executes with the Government aninstrument whereby it agrees to be bound by and perform all of the Proponentrsquos obligationsunder this Agreement the Instruments the Exemption Orders the Primary ProductionOrder and the Mining Lease Subject to Section 4153 from and after the execution ofsuch instrument the assignor shall be relieved of and released from all its obligations underthis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease with effect from and after the date of execution of such instrument

112 Counterparts This Agreement and the other documents referred to herein andorotherwise required to complete the transactions contemplated hereby may be executed intwo or more counterparts including by facsimile each of which shall be deemed an originaland all of which together shall constitute one and the same instrument

113 Notices All notices requests demands and other communications hereunder shall bedeemed to have been duly given if in writing and either delivered personally sent byfacsimile transmission or by air courier service to the addresses designated below or suchother addresses as may be designated in writing by notice given hereunder and shall be

32

effective upon personal delivery or facsimile transmission thereof with proof of transmissionreceipt or upon delivery by air courier serviceIf to VBNC Voiseyrsquos Bay Nickel Company Limited

Suite 700 Baine Johnston Centre10 Fort William PlaceSt Johnrsquos NewfoundlandA1C 1K4Attention PresidentFacsimile (709) 758-8820

If to Inco Inco Limited145 King Street WestSuite 1500Toronto OntarioM5H 4B7Attention PresidentFacsimile (416) 361-7734

If to the Government Government of Newfoundland amp LabradorDepartment of Mines amp EnergyNatural Resources Building7th Floor 50 Elizabeth AvenueSt Johnrsquos NewfoundlandA1A 1W5Attention The MinisterFacsimile (709) 729-0059

114 Legal Fees In the event of any dispute or controversy between the Proponent on the onehand and the Government on the other hand relating to the interpretation of this Agreementor to the transactions contemplated herein the prevailing party shall be entitled to recoverfrom the other party reasonable legal fees and expenses incurred by the prevailing partySuch award shall include reasonable post judgment legal fees and costs

115 Payment of Fees and Expenses Each party hereto shall pay its own fees expenses anddisbursements incurred in connection with this Agreement and the transactionscontemplated hereby and all other costs and expenses incurred in its performance andcompliance with all conditions to be performed hereunder and thereunder

116 Time of Essence Time is of the essence of this Agreement

117 Further Assurances Each of the parties shall promptly do make execute deliver orcause to be done made executed or delivered all such further acts documents and thingsas the other parties hereto may reasonably require from time to time for the purpose ofgiving effect to this Agreement and the transactions contemplated hereby and shall usereasonable efforts and take all such steps as may be reasonably within its power toimplement to their full extent the provisions hereof and thereof

33

118 Public Notices No press release or other announcement concerning the transactionscontemplated by this Agreement shall be made either by the Proponent or the Governmentwithout the prior Approval of the other (such Approval not to be unreasonably withheld)provided however that the Proponent may without such Approval make such disclosureif the same is required by law or any stock exchange on which any of the securities of theProponent or any of its Affiliates are listed or by any securities commission or other similarregulatory authority having jurisdiction over the Proponent or any of its Affiliates and if suchdisclosure is required the Person making the disclosure shall use best efforts to give priororal or written notice to the Government and if such prior notice is not possible to givesuch notice immediately following the making of such disclosure Notwithstanding theforegoing the Proponent acknowledges that the Government will make this Agreement andthe Schedules hereto public

119 Independent Legal Advice Each of the parties acknowledges having obtained its ownindependent legal advice with respect to this Agreement and the transactions contemplatedhereby to the fullest extent deemed necessary by each party prior to its execution anddelivery Furthermore the parties acknowledge that neither acted under any duress innegotiating drafting and executing this Agreement the Instruments and any documentscontemplated hereby There shall be no presumption that any ambiguity in this Agreementthe Instruments and any documents contemplated hereby be resolved in favour of any ofthe parties

1110 Compliance with Laws Without limiting the generality of any other covenant herein theProponent shall at its own cost and expense comply with and shall use best efforts toensure that all Persons for whom the Proponent is at law responsible comply with allApplicable Laws in connection with the Project

1111 Entire Agreement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease set forth the entire agreement and all thecovenants promises assurances agreements representations conditions warrantiesstatements and understandings (collectively ldquoRepresentationsrdquo) between the partiesconcerning the subject matter hereof No Representations are made by the Governmentto the Proponent or by the Proponent to the Government except as expressly set out in thisAgreement the Instruments the Exemption Orders the Primary Production Order and theMining Lease For greater certainty the Statement of Principles between the Governmentand the Proponent dated as of 11 June 2002 shall have no application to the parties or thematters contemplated by this Agreement after the date hereof and is replaced entirely bythis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease

1112 Good Faith Each of the Government and the Proponent shall at all times exercise all itsrights hereunder in a manner consistent with good business practices and shall act in goodfaith

1113 Waiver The failure of any party hereto to insist in any one instance upon the strictperformance by another party hereto of its obligations hereunder the Instruments theExemption Orders the Primary Production Order and the Mining Lease or the failure of any

34

party hereto to exercise any right option or remedy shall not constitute a waiver orrelinquishment for the future of any such obligation right option or remedy nor shall itconstitute a waiver of a subsequent breach No covenant or condition of this Agreementmay be waived by any party hereto except by the written consent of that party andforbearance or indulgence by that party in any regard whatsoever for no matter how longshall not constitute a waiver of such covenant or condition and until such covenant orcondition has been performed or waived in writing that party shall be entitled to invoke anyremedy available to that party under this Agreement the Instruments the ExemptionOrders the Primary Production Order and the Mining Lease despite its forbearance orindulgence

1114 No Partnership Joint Venture or Agency The Government and the Proponent expresslydisclaim any intention to create a partnership joint venture or joint enterprise It isunderstood acknowledged and agreed that nothing contained in this Agreement nor anyacts of the parties shall constitute or be deemed to constitute the Government and theProponent as partners joint venturers or principal and agent in any way or for any purpose

THE HONOURABLE THE PREMIER

THE HONOURABLE THE MINISTER OFMINES AND ENERGY

THE HONOURABLE THE MINISTER OFLABRADOR AND ABORIGINAL AFFAIRS

INCO LIMITED

ByChairman and Chief Executive Officer

VOISEYrsquoS BAY NICKEL COMPANY LIMITED

ByPresident

SCHEDULE 11ANICKEL CONCENTRATE EXEMPTION ORDER

This document can be found at the following web address httpwwwgovnfcahoaregulationsrc020066htm

- iii -105 Termination 30 106 Effect of Agreement and Termination 30

ARTICLE 11 - GENERAL MATTERS 31 111 Enurement 31 112 Counterparts 31 113 Notices 31 114 Legal Fees 32 115 Payment of Fees and Expenses 32 116 Time of Essence 32 117 Further Assurances 32 118 Public Notices 33 119 Independent Legal Advice 33 1110 Compliance with Laws 33 1111 Entire Agreement 33 1112 Good Faith 33 1113 Waiver 33 1114 No Partnership Joint Venture or Agency 34

SCHEDULES

THIS DEVELOPMENT AGREEMENT made as of 30 September 2002

AMONG HER MAJESTY THE QUEEN IN RIGHT OFNEWFOUNDLAND AND LABRADOR as represented byThe Honourable The Premier The Honourable The Ministerof Mines and Energy and The Honourable The Minister ofLabrador and Aboriginal Affairs

AND VOISEYrsquoS BAY NICKEL COMPANY LIMITED a corporationincorporated under the laws of the Province

AND INCO LIMITED a corporation organized under the laws ofCanada

NOW THIS DEVELOPMENT AGREEMENT WITNESSETH that for and in consideration of themutual covenants and agreements herein contained and subject to the terms and conditionshereinafter set out the parties hereto mutually agree one with the other as follows

ARTICLE 1DEFINITIONS AND INTERPRETATION

11 Definitions When used in this Agreement (including the Schedules identified in Section12) unless the context otherwise requires the following terms shall have the meaningsascribed thereto

ldquoAffiliaterdquo means in respect of a Person

(a) a Person that Controls such Person(b) a Person that is Controlled by such Person or(c) a Person that is under common Control with such Person

ldquoAgreementrdquo means this Agreement and all Schedules attached to this Agreement ineach case as they may be amended or supplemented from time to time and theexpressions ldquohereofrdquo ldquohereinrdquo ldquoheretordquo ldquohereunderrdquo ldquoherebyrdquo and similar expressions referto this Agreement and unless otherwise indicated references to Articles and Sections areto Articles and Sections in this Agreement

ldquoApplicable Lawsrdquo means any statute ordinance regulation authorization order permitapproval grant license consent policy rule right franchise privilege determinationdirective decree by-law code or standard that is enacted made issued or granted by anyGovernment Entity

2

ldquoApprovalrdquo means express approval or concurrence in writing and ldquoApproverdquo andldquoApprovedrdquo shall be construed accordingly

ldquoBusiness Dayrdquo means any day other than a Saturday Sunday or statutory holiday in theProvince

ldquoCessation of Mining Operationsrdquo means the date by which due to the lack of SufficientReserves the continued operation of the Mine and Concentrator Plant would no longer beeconomically feasible

ldquoClosingrdquo means the execution and delivery of the Instruments and the coming into effectof this Agreement and the Instruments in their entirety as contemplated by Article 10

ldquoClosing Daterdquo means the date which is the fifth Business Day after the date of deliveryof the Closing Notice by the Proponent to the Government or such earlier date as theparties agree

ldquoClosing Noticerdquo has the meaning ascribed thereto in Section 103

ldquoCommercial Production Daterdquo means the date to be certified by the Proponent and atthe option of the Government confirmed by an Engineer upon which the Hydromet Planthas operated at an annualized production rate of 30000 tonnes of Finished Nickel Productfor a period of ninety consecutive days

ldquoConcentrator Plantrdquo has the meaning ascribed thereto in Section 431

ldquoConstruction Completion Daterdquo means the date to be certified by the Proponent andat the option of the Government confirmed by an Engineer upon which the constructionof the Processing Plant has been completed in accordance with the Proponentrsquos plans andspecifications therefor

ldquoControlrdquo means with respect to a Person the ability directly or indirectly through one ormore intermediaries to direct or cause the direction of the management and policies ofsuch Person through

(a) the legal or beneficial ownership of voting securities partnership interests or otherequivalent ownership interests in such Person

(b) the right or ability to appoint or elect a majority of the directors or individuals of acomparable position of such Person

(c) the right or ability to appoint the management of such Person or(d) a contract an operating agreement a management agreement a voting trust or

other similar agreement

and ldquoControlledrdquo means with respect to a Person being subject to the Control of another

3

ldquoCopper Concentraterdquo means the intermediate concentrate or similar product producedby the Concentrator Plant containing the principal quantities of copper from ore extractedor removed from the Leased Lands

ldquoCopper Concentrate Exemption Order means the Copper Concentrate ExemptionOrder in the form of Schedule 11B

ldquoDecisionrdquo means the written decision to be delivered by the Proponent to the Governmentas to whether the Proponent intends to engineer and construct the Hydromet Plant or theMatte Plant

ldquoDecision Daterdquo means the date of delivery of the Decision

ldquoDecision Materialsrdquo means the Feasibility Study and all other information and data in theProponentrsquos possession or control (including information and data generated by its advisorsand consultants) which form the basis for the Proponent making the Decision (includingsuch data and information subsequently available to or the existence of which issubsequently known by the Proponent) in form which will permit the Government and theExperts to undertake the review of the Decision and the reasons therefor as contemplatedby Section 475 Such data and information shall include without limitation reports onmetallurgical test work proposed flowsheets detailed capital and operating cost estimatesand a detailed economic analysis

ldquoDemonstration Plantrdquo means the facility at Argentia where hydrometallurgical processingtechnology will be tested including any part or sub-process of such technology themechanical or processing equipment required therefor and any pilot plant testing or similarcampaigns to determine the technical and economic feasibility of such technology

ldquoDemonstration Plant Completion Daterdquo means the date as certified by the Proponentand at the option of the Government confirmed by an Engineer upon which theconstruction of the Demonstration Plant has been completed in accordance with theProponentrsquos plans and specifications therefor and is ready to test Nickel Concentrate

ldquoEMArdquo means the Environmental Management Agreement entered into among theGovernment the Government of Canada the LIA and Innu Nation dated as of 22 July2002

ldquoEngineerrdquo means an individual independent of and acceptable to both the Proponent andthe Government who

(a) is an engineer with at least ten years of experience in base metals primaryprocessing engineering and the engineering design and construction managementof base metals primary processing plants

(b) has the requisite experience to make the relevant determination confirmation orreport to be made or given pursuant to this Agreement and

4

(c) is a member in good standing of a professional association where ldquoprofessionalassociationrdquo means a self-regulatory organization of engineers that

(i) has been given authority or recognition by statute

(ii) admits members primarily on the basis of their academic qualifications andexperience

(iii) requires compliance with the professional standards of competence andethics established by the organization and

(iv) has disciplinary powers including the power to suspend or expel a member

ldquoEvent of Bankruptcyrdquo means

(a) the entry of a decree or order by a court having jurisdiction adjudging the Proponenta bankrupt or insolvent or approving as properly filed a petition seekingreorganization or winding-up of the Proponent under the Companiesrsquo CreditorsArrangement Act (Canada) the Bankruptcy and Insolvency Act (Canada) or theWinding-Up Act (Canada) or any other bankruptcy insolvency or analogous lawsor issuing sequestration or process of execution against the Proponent or anysubstantial part of its property or ordering the winding-up or liquidation of its affairsand the continuance of any such decree or order or appointment unstayedundischarged and in effect for a period of 60 days from the date thereof

(b) the institution by the Proponent of proceedings to be adjudicated bankrupt orinsolvent or the consent by it to the institution of bankruptcy or insolvencyproceedings against it or the filing by it of a petition or answer or consent seekingreorganization or relief under the Companiesrsquo Creditors Arrangement Act (Canada)the Bankruptcy and Insolvency Act (Canada) or the Winding-Up Act (Canada) orany other bankruptcy insolvency or analogous laws or the consent by it to the filingof any such petition or to the appointment of a receiver of the Proponent or of anysubstantial part of its property or the making by it of a general assignment for thebenefit of creditors or the Proponentrsquos admission in writing of its inability to pay itsdebts generally as they become due or the Proponent taking such action infurtherance of any of such aforementioned purposes or

(c) whenever a custodian receiver receiver and manager sequestrator liquidatortrustee agent for a secured creditor or other Person with similar powers isappointed for any substantial part of the Project whether by a court or by extra-judicial means unless such custodian receiver receiver and manager sequestratorliquidator trustee or agent is removed within 60 days of such appointment

ldquoEvent of Defaultrdquo means any one or more of the following

(a) an Event of Bankruptcy has occurred with respect to the Proponent

5

(b) the Proponent is wound up its constating documents or by-laws are forfeited orsurrendered or the corporate or other existence of the Proponent is otherwiseterminated

(c) the Proponent is in breach of its obligations in Section 415 or

(d) subject to an Event of Force Majeure andor Section 652

(i) the Decision has not been delivered by 15 November 2008

(ii) the applicable Implementation Plan has not been delivered as required bySection 474 or 475

(iii) the Processing Plant has not been completed on or before 31 December2011 or

(iv) an Engineer has determined that the Proponent is not proceeding diligentlyto complete the engineering work for and the construction of the ProcessingPlant so that it will be completed on or before 31 December 2011 asrequired by Section 474 or 475

ldquoEvent of Force Majeurerdquo has the meaning ascribed thereto in Section 51

ldquoExemption Ordersrdquo means collectively the Nickel Concentrate Exemption Order theCopper Concentrate Exemption Order and the Matte Plant Exemption Order

ldquoExpertsrdquo means collectively (a) an Engineer or firm of Engineers who will make thetechnical feasibility review of the Decision and (b) a recognized third party financial expertindependent of the Government and the Proponent who will make the financial feasibilityreview of the Decision and who will jointly deliver the Expertsrsquo Report if requested by theGovernment pursuant to Section 475 The Experts shall be selected at the time and in themanner provided for in Section 473

ldquoExpertsrsquo Reportrdquo has the meaning ascribed thereto in Section 475

ldquoFeasibility Studyrdquo means the study undertaken by or on behalf of the Proponentcontaining the technical and economic evaluations which form the basis for the Decision

ldquoFinished Copper Productrdquo means finished copper product(s) having a copper contentof not less than 99

ldquoFinished Nickel Productrdquo means finished nickel product(s) having a nickel content of notless than 998

ldquoGovernmentrdquo means the Government of the Province

6

ldquoGovernment Entityrdquo means (a) any federal provincial state regional municipal localor other government governmental or public department commission board bureau oragency whether domestic or foreign (b) any subdivision agency commission board orauthority of any of the foregoing or (c) any quasi governmental or private body exercisingany regulatory expropriation or taxing authority under or for the account of any of theforegoing in each case which has jurisdiction in respect of the Project or any part thereof

ldquoHydromet Plantrdquo has the meaning ascribed thereto in Section 461

ldquoIBAsrdquo means collectively the Impacts and Benefits Agreements made as of 29 July 2002between the Proponent and each of Innu Nation and the LIA without any amendment orvariation

ldquoIEBArdquo means the Industrial and Employment Benefits Agreement in the form set out inSchedule 49

ldquoImplementation Planrdquo means a detailed description of and time schedule for thecompletion of the engineering work for and the construction of the Processing Plant by 31December 2011

ldquoIncordquo means Inco Limited a corporation organized under the laws of Canada

ldquoInformationrdquo has the meaning ascribed thereto in Section 911

ldquoInnovation Centrerdquo has the meaning ascribed thereto in Section 34

ldquoInnu Nationrdquo means Innu Nation a corporation incorporated under the laws of Canada

ldquoInstrumentsrdquo means collectively the University Agreement the Tax Agreement and theIEBA

ldquoLeased Landsrdquo means the lands described in Schedule ldquoArdquo to the Mining Lease asamended from time to time

ldquoLegislative Frameworkrdquo means the Applicable Laws of the Province in existence as ofthe date hereof applicable to the Project or any part thereof

ldquoLIArdquo means the Labrador Inuit Association a corporation incorporated under the laws ofthe Province

ldquoMatterdquo means any form of granular nickel in matte product containing not less than 50nickel which can be processed by the Matte Plant to produce Finished Nickel Product

ldquoMatte Plantrdquo has the meaning ascribed thereto in Section 462

7

ldquoMatte Plant Exemption Order means the Matte Plant Exemption Order in the form ofSchedule 11C

ldquoMinerdquo means collectively (a) the open pit mine or mines to be developed by the Proponentfor the extraction of the mineral ores located on the Leased Lands and (b) the undergroundmine or mines as contemplated by Section 45 for the extraction of the mineral ores atdepth located under the Leased Lands

ldquoMineral Actrdquo means the Mineral Act (Newfoundland and Labrador) and the regulationsthereunder

ldquoMining Leaserdquo means the Mining Lease in the form of Schedule 63

ldquoMining Tax Actrdquo means the Mining and Mineral Rights Tax Act (Newfoundland andLabrador) and the regulations thereunder

ldquoMining Tax Act Amendmentsrdquo means the proposed amendments to the Mining Tax Actset out in Schedule 69

ldquoNickel Concentraterdquo means the intermediate concentrate or similar product produced bythe Concentrator Plant containing the principal quantities of nickel and cobalt from oreextracted or removed from the Leased Lands

ldquoNickel Concentrate Exemption Order means the Nickel Concentrate Exemption Orderin the form of Schedule 11A

ldquoPersonrdquo means any individual partnership limited partnership joint venture syndicatesole proprietorship company or corporation with or without share capital unincorporatedassociation trust trustee executor administrator or other legal personal representativeor Government Entity however designated or constituted

ldquoPrimary Production Orderrdquo means the Primary Production Order in the form of Schedule610

ldquoProcessing Plantrdquo means either the Hydromet Plant or the Matte Plant which theProponent shall construct and operate in the Province as contemplated by Section 46

ldquoProcessing Related Reasonrdquo means any situation where the Proponent is unable tomeet its obligations under Section 4131 as a result of either (a) the unavailability forwhatever bona fide reason of Replacement Concentrate or (b) the unavailability ofReplacement Concentrate on reasonable commercial terms including without limitationwhere the terms relating to price or specifications would make it not economically ortechnically feasible for processing at the Processing Plant

ldquoProjectrdquo has the meaning ascribed thereto in Section 31

8

ldquoProponentrdquo means collectively VBNC Inco their respective Affiliates or any Personwhich (as permitted by this Agreement) individually or together with any of them by way ofpartnership joint venture sub-contract or otherwise holds or is entitled to a majority interestin or Control of the Project or is the operator of the Project and their respective successorsand permitted assigns

ldquoProvincerdquo means the Province of Newfoundland and Labrador Canada

ldquoR amp D Programrdquo has the meaning ascribed thereto in Section 35

ldquoReplacement Concentraterdquo means any product containing nickel or cobalt or bothderived from ores or any other source of nickel or cobalt or both mined extracted orproduced outside the Province that in each case does not represent Finished NickelProduct but which can be further processed at the Processing Plant to produce FinishedNickel Product

ldquoSufficient Reservesrdquo means the estimated quantities of ldquoProven Mineral Reservesrdquo orldquoProbable Mineral Reservesrdquo or both within the meaning of National Instrument 43-101ldquoStandards of Disclosure for Mineral Projectsrdquo (as amended from time to time) determinedby the Proponent in accordance with its standard methodologies and assumptions for suchestimates

ldquoTax Agreementrdquo means the Tax Agreement to be entered into between the Governmentand the Proponent as contemplated by Sections 412 and 68

ldquoTime of Closingrdquo means 1000 orsquoclock in the morning in the Province on the ClosingDate

ldquoUnderground Exploration Programrdquo means the underground exploration programcontemplated by Section 44

ldquoUniversityrdquo means Memorial University of Newfoundland

ldquoUniversity Agreementrdquo means the agreement to be entered into between the Proponentand the University as contemplated by Section 48

ldquoVBN Undertaking Orderrdquo means the Voiseyrsquos Bay Nickel Company Limited Mine and MillUndertaking Order under the Environmental Assessment Act (Newfoundland and Labrador)dated 5 August 1999 (OC 99-286) as amended from time to time and

ldquoVBNCrdquo means Voiseyrsquos Bay Nickel Company Limited a corporation incorporated underthe laws of the Province

9

12 Schedules

The documents attached hereto and identified below shall form an integral part of thisAgreement

Schedule 11A - Nickel Concentrate Exemption OrderSchedule 11B - Copper Concentrate Exemption OrderSchedule 11C - Matte Plant Exemption OrderSchedule 49 - IEBASchedule 4132 - Assaying ProceduresSchedule 63 - Mining LeaseSchedule 69 - Mining Tax Act AmendmentsSchedule 610 - Primary Production OrderSchedule 81 - Dispute Resolution Procedures

13 Subdivisions Unless otherwise stated a reference herein or in a Schedule by numericalor alphabetical designation to an Article Section Subsection Paragraph Subparagraphor Schedule shall refer to the Article Section Subsection Paragraph Subparagraph orSchedule bearing that designation in this Agreement or in a Schedule

14 Headings The division of this Agreement into Articles Sections SubsectionsParagraphs and Subparagraphs and the insertion of headings are for convenience ofreference only and shall not affect the construction or interpretation of this Agreement

15 Number and Gender Words importing the singular shall include the plural and vice versaand words importing a particular gender shall include all genders The use of the neutersingular pronoun to refer to a party is deemed a proper reference The necessarygrammatical changes required to make the provisions of this Agreement apply shall in allinstances be assumed as though in each case fully expressed

16 Statutes Regulations Rules and Orders Any reference in this Agreement to all or anypart of any statute regulation rule or order shall unless otherwise stated be a referenceto that statute regulation rule or order or the relevant part thereof as amendedsubstituted replaced or reenacted from time to time

17 Business Day If the day on which any act or payment is required to be done or madeunder this Agreement is a day which is not a Business Day then such act or payment shallbe performed or made on the next following Business Day

18 Contract Always Speaking With the exception of the representations and warranties ofthe parties set out in Article 2 and any estimates referred to in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic and relatedbenefits and costs of facilities referred to in this Agreement made by the Proponent wherea matter or thing is expressed in the present tense it shall be applied to the circumstancesas they arise

10

19 Governing Law and Choice of Forum This Agreement shall be interpreted inaccordance with the laws in force in the Province subject to any applicable federal laws andfor all purposes this Agreement shall be treated as a Newfoundland and Labrador contractThe Proponent irrevocably submits and attorns to the exclusive jurisdiction of the courts ofthe Province

110 Construed Covenants Each obligation or agreement of this Agreement (other than therepresentations and warranties of the parties) even though not expressed as a covenantis to be construed as a covenant

111 Inconsistency or Conflict Except where otherwise provided either expressly or bynecessary implication in this Agreement a Schedule hereto or any Instrument in the eventof any inconsistency or conflict between any such Schedule or Instrument and any provisioncontained in this Agreement the provision of this Agreement shall prevail to the extent ofthe inconsistency or conflict

112 Severability If any provision of this Agreement or the application thereof to any Personor circumstance is to any extent held or rendered invalid void illegal or unenforceablefor any reason then the particular provision

1121 shall be deemed to be independent of and severed from the remainder of thisAgreement and all the other provisions of this Agreement shall neverthelesscontinue in full force and effect and

1122 shall continue to be applicable and enforceable to the fullest extent permitted by lawagainst any Persons and in any circumstances other than those as to which it hasbeen held or rendered invalid void illegal or unenforceable

If a severance occurs under this Section 112 the parties shall use their respective bestefforts to negotiate in good faith an enforceable replacement provision that to the greatestextent possible reflects the intent or serves the purpose of the severed provision

113 Currency All references in this Agreement to currency are to Canadian dollars

114 Knowledge In this Agreement where ldquoKnowledgerdquo of a party is referred to

1141 in respect of the Proponent it shall mean the actual knowledge of the executiveofficers of the Proponent after due inquiry in respect thereof and

1142 in respect of the Government it shall mean the actual knowledge of the responsibleexecutives of the applicable department of Government after due inquiry in respectthereof

11

ARTICLE 2REPRESENTATIONS AND WARRANTIES

21 Proponentrsquos Representations and Warranties Acknowledging that the Government isrelying on such representations and warranties VBNC and Inco jointly and severallyrepresent and warrant to the Government that

211 each is a corporation which has been duly incorporated or organized as applicableunder the laws of its jurisdiction of incorporation or organization as applicable andis validly existing under such laws

212 Inco is extra-provincially registered in the Province

213 each has all necessary corporate power authority and capacity

2131 to cause the design engineering and construction of and to operateand maintain all parts of the Project and

2132 to enter into this Agreement and the Instruments and to perform itsrespective obligations herein and therein

214 the execution and delivery of this Agreement and each of the Instruments and theconsummation of the transactions contemplated herein and therein by each ofthem have been duly authorized by all necessary corporate action on the part ofeach of them

215 neither is a party to bound or affected by or subject to any indenture mortgagelease agreement instrument charter or by-law provision which with or without thegiving of notice or the lapse of time or both would be violated contravened orbreached by or under which default would occur as a result of the executiondelivery or performance of this Agreement or any of the Instruments or theconsummation of any of the transactions provided for in any of them

216 neither is bound or affected by or subject to any Applicable Law which with orwithout the giving of notice or the lapse of time or both would be violatedcontravened or breached by or under which default would occur as a result of theexecution delivery or performance of this Agreement or any of the Instruments orthe consummation of any of the transactions provided for in any of them

217 no approval authorization consent permit or other action by or filing with anyGovernment Entity is required in connection with the execution and delivery of thisAgreement or any of the Instruments and the performance of their respectiveobligations hereunder or thereunder except as otherwise stated herein

218 there is no suit action litigation arbitration proceeding or proceeding by aGovernmental Entity including appeals and applications for review in progresspending or to the Knowledge of either of them threatened against or involving

12

either of them or any judgment decree injunction or order of any court or arbitratorwhich could adversely affect their capacity or power to execute and deliver thisAgreement or any of the Instruments or to consummate the transactionscontemplated herein or therein or which could materially adversely affect theirrespective assets financial condition or future prospects

219 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of each of them enforceable against them inaccordance with their respective terms except as limited by (a) applicablebankruptcy laws or laws affecting the enforcement of creditorsrsquo rights generally and(b) the general principles of equity

2110 all references to estimates made by Inco and VBNC in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic andrelated benefits and costs of facilities are made as of the date of this Agreementhave been determined by them based upon information available at the date of thisAgreement and have been estimated by each of them bona fide and reasonablyand neither of them has any reason to believe that any such estimate isunreasonable or unfounded at the date of this Agreement and

2111 VBNC is a wholly owned subsidiary of Inco and to the Knowledge of the Proponentno Person individually or with any other Person or Persons currently Controls Inco

22 Government Acknowledgments The Government acknowledges that (a) none of VBNCInco or any Person for whom either of them may be responsible in law have made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments and (b) the Proponent shall use the most efficient and cost effective miningtechniques including state of the art automated mining technologies aimed at loweringoperating costs and extending the life of the Project

23 Governmentrsquos Representations and Warranties Acknowledging that the Proponent isrelying on such representations and warranties the Government represents and warrantsto the Proponent that

231 the execution and delivery of this Agreement and each of the Instruments and theconsummation by the Government of the transactions contemplated herein andtherein have been duly authorized by all necessary Government action

232 it is not a party to bound or affected by or subject to any indenture agreement orinstrument which with or without the giving of notice or the lapse of time or bothwould be violated contravened or breached by or under which default would occuras a result of the execution delivery or performance of this Agreement or any ofthe Instruments or the consummation of any of the transactions provided for in anyof them and

13

233 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of it enforceable against it in accordance with itsterms except as they may be limited by the general principles of equity

24 Proponent Acknowledgements Each of Inco and VBNC acknowledges that neither theGovernment nor any Person for whom it may be responsible in law has made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments

ARTICLE 3DESCRIPTION OF THE PROJECT AND RELATED FACILITIES

31 The Project The ldquoProjectrdquo will comprise collectively the Underground ExplorationProgram the Mine the Concentrator Plant the R amp D Program the Demonstration Plantthe Processing Plant and if applicable the Concentrator Plant expansion referred to inSection 45 The Processing Plant will be capable of processing concentrate andintermediate feeds containing nickel from other sources world wide which will give theProcessing Plant the capability of operating well beyond the life of the Mine

32 Capital Investment The Proponent estimates that the aggregate capital investment in theProject and related facilities will be $29 billion over the estimated 30-year life of the Projectinclusive of sustaining capital expenditures

33 Employment The Proponent estimates that

331 the construction phase of the Mine and Concentrator Plant will create approximately1700 person-years of employment in the Province the construction phase of theHydromet Plant will create approximately 3000 person-years of employment in theProvince and the construction phase of the Matte Plant will create approximately2500 person-years of employment in the Province

332 during the various operating phases the Project will create the followingemployment levels in the Province Mine and Concentrator Plant - 400 people R ampD Program - 200 people Underground Exploration Program - 85 people HydrometPlant - 400 people Matte Plant - 350 people

333 over the estimated 30-year life of the Project total employment benefits from theProject in the Province will be 76000 direct and indirect person-years and

334 gross domestic product impact to the Province with respect to the Project will be$11 billion

34 Innovation Centre The Proponent shall spend $10 million on and provide an endowmentof $1 million per year over a ten-year period to cover operational costs for an IncoInnovation Centre (the ldquoInnovation Centrerdquo) at St Johnrsquos in conjunction with theUniversity pursuant to the University Agreement The focus of the Innovation Centre willbe on education and research in mineral exploration mining and metallurgical processing

14

The Innovation Centre will provide world-class education research and training related tothe mining industry to 50-60 students per year to be engaged in Bachelors Masters andDoctorate level programs The Proponent shall commence work on the Innovation Centrein 2002 with target completion in 2004

35 R amp D Program The Proponent shall undertake a comprehensive research anddevelopment program intended to establish the commercial technical and economicfeasibility of hydrometallurgical process technology to process the Nickel Concentrate (theldquoR amp D Programrdquo) The R amp D Program will include the evaluation of chemical engineeringsub-processes for the hydrometallurgical process the mechanical equipment design for theDemonstration Plant and the construction and operation of the Demonstration Plant

ARTICLE 4PROPONENTrsquoS UNDERTAKINGS

41 Infrastructure and Initial Work Commencing in 2002 the Proponent shall

411 at the Mine site undertake site mobilization including the establishment of aconstruction camp initiation of work on temporary port facilities and construction ofaccess roads

412 at Argentia undertake leasing or other arrangements for occupancy and sitepreparation including demolition fencing security and signage

413 undertake the construction of a warehouse building and establish staging areas andlay down areas in support of Labrador activities

414 establish a project office at Argentia and information centres at St Johnrsquos andHappy Valley-Goose Bay and

415 complete site selection and commence architectural design and engineering workfor the Innovation Centre

The Proponent estimates that this infrastructure and initial work program will employ inaggregate approximately 250 persons and the Proponent shall spend not less than $55million on this program in the Province on or before 31 March 2003

42 R amp D Program421 The Proponent shall undertake the R amp D Program and as a part thereof shall

construct the Demonstration Plant at a cost which the Proponent estimates will be$130 million The Proponent shall commence the site development for theDemonstration Plant in 2002 and continue such development into 2003 Theinitiatives in support of these activities will include the operation of an informationcentre preparation of environmental baseline studies and continued upgrading orreplacement of utility services required for the Demonstration Plant maintainingstaging areas and cleanup and civil works at Argentia consisting of demolition

15

grading and earth works construction The Proponent has scheduled thecompletion of the engineering design and construction of the Demonstration Plantso that the Demonstration Plant Completion Date shall have occurred on or before31 December 2006

422 The Proponent shall provide to the Government within 15 days of the end of eachcalendar quarter commencing with the calendar quarter ending 31 December 2002a detailed progress report on the results during such calendar quarter of the R amp DProgram which report will detail costs incurred to the end of such calendar quarterand contain sufficient documentation and information to enable the Government toevaluate the Proponentrsquos progress with respect to the R amp D Program and thedevelopment of hydrometallurgical process technology for processing the NickelConcentrate If requested by the Government upon reasonable notice theProponent shall provide the Government and its representatives and advisorsaccess at reasonable times to the facilities where the R amp D Program is beingconducted and make appropriate personnel of the Proponent available to respondto any requests for additional information

423 In addition to the utilization of the Demonstration Plant for the purposes ofdeveloping hydrometallurgical process technology for processing the NickelConcentrate the Proponent shall explore business opportunities for the ongoingutilization of the Demonstration Plant for the evaluation of other concentrates andintermediate feeds after completion of the R amp D Program

43 Mine and Concentrator Plant

431 The Proponent shall cause the development of the Mine and the designengineering and construction of a millconcentrator plant which will be capable ofprocessing 6000 tonnes of ore per day (the ldquoConcentrator Plantrdquo) TheConcentrator Plant will produce the Copper Concentrate and the NickelConcentrate The Proponent has scheduled to begin the development of the Mineand the construction of the Concentrator Plant in 2003 and estimates that the Mineand Concentrator Plant will require three years to construct at a cost ofapproximately $710 million

432 The Proponent

4321 shall not ship any Nickel Concentrate out of the Province aspermitted by the Nickel Concentrate Exemption Order before theDemonstration Plant Completion Date and

4322 shall ship Nickel Concentrate from the Concentrator Plant to theDemonstration Plant in sufficient quantities for the continuedoperation of the Demonstration Plant during the R amp D Programfollowing successful start up of the Concentrator Plant

16

44 Underground Exploration Program The Proponent shall undertake an undergroundexploration program which it estimates will cost $95 million and employ approximately 85people This program is intended to identify Sufficient Reserves at depth under the LeasedLands and if there are such Sufficient Reserves the Proponent shall develop a mining planfor the economic extraction of such Reserves The initial phase of this undergroundexploration program will be an advanced surface program which the Proponent estimateswill cost $20 million to commence in 2002 with completion targeted for 2006 Subsequentunderground exploration will be scheduled to ensure that Sufficient Reserves under theLeased Lands are available to sustain full operation of the Concentrator Plant during thetransition from open-pit operations to full underground mining operations if applicable

45 Underground Mine Development and Concentrator Plant Expansion If theunderground exploration program described in Section 44 identifies Sufficient Reservesas contemplated by Section 44 the Proponent shall commence the development of anunderground mine or mines on the Leased Lands and an expansion of the ConcentratorPlant in order to supply sufficient Nickel Concentrate to maintain the operation of theProcessing Plant at full capacity The Proponent estimates that this program will costapproximately $750 million and employ an aggregate of 800 people

46 Processing Plant

461 In order to maximize long-term benefits for the Province and the people of theProvince the Proponent shall use its best efforts through the R amp D Program todevelop a technically and economically feasible hydrometallurgical processtechnology for processing the Nickel Concentrate in the Province If suchtechnology is successfully developed the Proponent shall cause the designengineering and construction of and operate and maintain a hydrometallurgicalprocessing plant with a design capacity to produce annually approximately 50000tonnes of Finished Nickel Product together with associated cobalt and copperproducts (the ldquoHydromet Plantrdquo) The Proponent estimates that the HydrometPlant will have a capital cost of approximately $800 million and during the three-yearconstruction period will generate approximately 3000 person-years of employmentThe Proponent estimates that the Hydromet Plant will employ approximately 400people during operations

462 If pursuant to Section 47 it is determined that a Hydromet Plant is not technicallyor economically feasible the Proponent shall construct a commercialhydrometallurgical nickel-matte processing facility or other similar facilityincorporating a proven state of the art technology to produce Finished NickelProduct (the ldquoMatte Plantrdquo) The Matte Plant will have a design capacity toproduce annually approximately 50000 tonnes of Finished Nickel Product togetherwith associated cobalt and copper products The Proponent estimates the MattePlant will have a capital cost of approximately $670 million and during the estimatedthree-year construction period will generate approximately 2500 person-years ofemployment The Proponent estimates that the Matte Plant will employapproximately 350 people during operations

17

463 The Proponent has represented to the Government that its objective is to operatethe Processing Plant well beyond the life of the Mine Accordingly the Proponentundertakes to explore technically and economically feasible opportunities for theexpansion of the Processing Plant and to secure opportunities to supply theProcessing Plant with feed from world wide sources to fully utilize the Proponentrsquoslarge capital investment in the Processing Plant

464 The Proponent shall establish the Processing Plant at Argentia unlessenvironmental conditions at Argentia would make it not economically feasible toestablish the Processing Plant at Argentia and in such circumstances theProponent shall locate the Processing Plant at another site in the Province

47 Selection of Applicable Processing Plant

471 The Proponent shall use commercially reasonable efforts to deliver as soon aspossible but in any event shall deliver on or before 15 November 2008 theDecision and the Decision Materials to the Government and the Experts

472 If the Proponent has not on or before 30 June 2008 delivered to the Governmentthe Decision and the Decision Materials

4721 it shall forthwith meet with the Government to review on aconfidential basis the status of its efforts towards being able todeliver the Decision

4722 thereafter it shall promptly update the Government from time to timeon its efforts to be able to deliver the Decision and the outstandingissues relevant to whether the Decision will be to build the HydrometPlant or the Matte Plant and

4723 to the extent that the Proponent is not by 30 June 2008 in aposition to deliver the Decision which confirms that the Proponentintends to proceed with the construction of the Hydromet Plant theProponent shall use commercially reasonable efforts to developImplementation Plans for both a Hydromet Plant and a Matte Plantso that it will be able to deliver the Implementation Plan for theHydromet Plant or Matte Plant as applicable on or before 31December 2008

473 The Government may at any time after the earlier of the Decision Date or 30 June2008 give the Proponent notice in writing that it wishes to proceed with theappointment of the Experts When the Government gives notice to the Proponentrequiring the appointment of the Experts the Government and the Proponent shallthen forthwith agree upon the appointment of the Experts If the Government andthe Proponent cannot so agree within 15 days after the giving by the Governmentof such notice the appointment of the Experts shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter to

18

the Joint Committee or the Mediation Procedure referred to therein If the Expertsare appointed prior to the delivery by the Proponent of the Decision and theDecision Materials the Proponent shall provide to the Government and the Expertssuch data and information as is then available that will assist the Experts in theirreview under Section 475 The Proponent and the Government shall each pay50 of the fees and expenses of the Experts Before receiving the Decision theDecision Materials or any other information or data from the Proponent under thisAgreement the Experts shall first execute a confidentiality agreement containingsubstantially the same terms as provided for in Article 9

474 If in the Decision the Proponent confirms it intends to construct the Hydromet Plantthe Proponent shall deliver the Implementation Plan for the Hydromet Plant on orbefore 31 December 2008 and thereafter shall proceed diligently to complete thedetailed engineering for and construction of the Hydromet Plant in accordance withsuch Implementation Plan so that it shall be completed on or before 31 December2011

475 If in the Decision the Proponent confirms it intends to construct the Matte Plant theGovernment shall on or before the seventh Business Days after the Decision Datedeliver to the Proponent and the Experts a notice in writing (in this Section 475 theldquoGovernment Decisionrdquo) that the Government either (a) accepts the Decision tobuild the Matte Plant or (b) intends to refer such Decision to the Experts for reviewIf in the Government Decision the Government states it intends to refer theDecision to the Experts the Proponent shall promptly deliver to the Experts theDecision and the Decision Materials if it has not previously done so The Expertswill review the Decision the Decision Materials and any other information or datawhich the Experts deem appropriate or which the Government requests them toconsider and render their report (the ldquoExpertsrsquo Reportrdquo) within 30 days of the dateon which the Government delivers the Government Decision If the Governmentrequests the Experts to consider any other information or data in addition to theDecision Materials it shall provide to the Experts and the Proponent copies of suchrequest and any such information and data at the time it delivers the GovernmentDecision and the Proponent shall have the right within five Business Days tocomment on or respond to such information and data to the Experts with a copy tothe Government The Expertsrsquo Report shall determine whether in the opinion of theExperts it would be technically and economically feasible for the Proponent to buildthe Hydromet Plant together with reasons for such determination If the ExpertsrsquoReport determines that it is technically and economically feasible for the Proponentto build the Hydromet Plant the Proponent shall on or before 31 December 2008deliver to the Government an Implementation Plan for the Hydromet Plant andthereafter shall proceed diligently to complete the detailed engineering for andconstruction of the Hydromet Plant so that it shall be completed on or before 31December 2011 If the Expertsrsquo Report confirms that it would not be technically oreconomically feasible to build the Hydromet Plant the Proponent shall on or before31 December 2008 deliver to the Government an Implementation Plan for the MattePlant and thereafter shall proceed diligently to complete the detailed engineering forand construction of the Matte Plant in accordance with such Implementation Plan

19

so that it shall be completed on or before 31 December 2011 Subject to Section477 the Expertsrsquo Report shall be final and binding on the Government and theProponent

476 The determination as to whether the Proponent is proceeding diligently with thecompletion of the engineering work for and the construction of the Processing Plantfor completion on or before 31 December 2011 as required by Section 474 or475 shall be made annually on the anniversary date of the Decision Date by anEngineer who shall certify to both the Government and the Proponent as to whetherthe actual engineering work for and construction of the Processing Plant is onschedule with the applicable Implementation Plan

477 If there is a manifest error in the Expertsrsquo Report which if corrected would result ina different determination by the Experts the Expertsrsquo Report shall be referred backto the Experts for the purpose of forthwith correcting such manifest error changingthe determination in the Expertsrsquo Report and submitting a revised Expertsrsquo Reportto the Proponent and the Government

478 Where an Engineer is required to be appointed from time to time for the purposesof Section 476 or for determining the Commercial Production Date theConstruction Completion Date or the Demonstration Plant Completion Date theGovernment and the Proponent shall forthwith agree upon the appointment of suchEngineer If the Government and the Proponent cannot so agree within 15 daysof the Government or the Proponent giving the other notice requiring appointmentof an Engineer the appointment of the Engineer shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter tothe Joint Committee or the Mediation Procedure referred to therein The Proponentand the Government shall each pay 50 of the fees and expenses of any Engineer

48 Innovation Centre The Proponent shall enter into an agreement (the ldquoUniversityAgreementrdquo) with the University in form and content satisfactory to the Government on orbefore the Closing Date The University Agreement shall contain among other things theProponentrsquos commitments and intentions set out in Section 34

49 Industrial and Employment Benefits The Proponent shall execute the IEBA to beeffective 7 October 2002

410 IBAs The Proponent represents and warrants to the Government that it has entered intothe IBAs

411 VBN Undertaking Order The Proponent agrees to abide by and implement the terms andconditions contained in the VBN Undertaking Order

412 Corporate Income Tax The Proponent shall use its best efforts to negotiate and executewith the Government an agreement covering the matters set forth in this Section 412 andSection 68 (the ldquoTax Agreementrdquo) as soon as possible but in any event on or before theClosing Date The Tax Agreement will contain provisions which to the extent permitted by

20

law will result in an allocation to the Province for the purposes of Part IV of the FederalIncome Tax Regulations of the Proponentrsquos gross revenues from the sale or disposition ofnickel copper and cobalt products whether in intermediate or final form from the Project

413 Return of Concentrate

4131 In consideration of the Government granting the Exemption Orders the Proponentguarantees that it shall prior to Cessation of Mining Operations commenceshipping into the Province Replacement Concentrate for processing into FinishedNickel Product at the Processing Plant Such Replacement Concentrate shall beshipped to and processed by the Processing Plant in sufficient quantities to permitthe Processing Plant to operate continuously at a rate that will produce not less than25000 tonnes of Finished Nickel Product annually and such shipments shallcontinue at least until such time as the contained nickel and cobalt in theReplacement Concentrate shall have equalled the total quantity of contained nickeland cobalt in the Nickel Concentrate shipped out of the Province under the termsof the Nickel Concentrate Exemption Order and otherwise than under the provisionsof an Exemption Order

4132 The Proponent shall undertake the Assaying Procedures set out in Schedule 4132with respect to the Nickel Concentrate and the Replacement Concentrate

4133 The Proponent acknowledges that if it does not perform its contractual obligationsunder Section 4131 (a) the Province and the economy of the Province will suffersubstantial loss (b) the Government would not be properly compensated for its lossby monetary damages which therefore will not be considered an adequate remedyfor such breach and (c) the Government may at any time subsequent to suchbreach commence an action against the Proponent for any one or more of thefollowing remedies whether claimed as primary or secondary alternative relief

41331 an order for specific performance

41332 appropriate injunctive relief whether mandatory or prohibitory and

41333 monetary damages including for consequential and economic lossreflecting the substantial losses suffered by the Government and theeconomy of the Province as a result of such breach

The Proponent expressly waives any right to claim or argue that the Governmentcannot claim the relief set out in Sections 41331 41332 and 41333 in any suitcommenced by the Government against the Proponent for the Proponentrsquos failureto perform its obligations under Section 4131

21

414 Copper Processing in the Province

4141 The Government acknowledges that at the date hereof the quantity of coppercurrently identified in the mineralized zones on or under the Leased Lands togetherwith identified copper deposits elsewhere in the Province are not sufficient to justifythe construction and operation of a copper processing facility in the Province on aneconomically feasible basis

4142 If at any time in the future

41421 Sufficient Reserves of copper are discovered by the Proponent inthe Province (including on or under the Leased Lands) to makeeconomic the processing on a commercial basis of the CopperConcentrate or any other product containing the principal quantitiesof copper extracted from the Leased Lands into Finished CopperProduct in the Province the Proponent shall process such CopperConcentrate into Finished Copper Product in the Province or

41422 a third party establishes a facility in the Province for the commercialprocessing of copper concentrate the Proponent shall offer for saleits then available Copper Concentrate from the Concentrator Plantto such third party for processing in such facility on then prevailingcommercial terms and conditions subject to the Proponentrsquos thenexisting contractual obligations

4143 In the circumstances set out in Section 4142 the Proponent acknowledges thatthe Government has the right pursuant to Section 311(3) of the Mineral Act torescind the Copper Concentrate Exemption Order

415 Parties in Contract Change of Control and Assignment

4151 The Proponent covenants with the Government that without the prior Approval ofthe Government it

41511 shall not take or threaten or purport to take any action whether byway of contract corporate reorganization or arrangement orotherwise that would have the effect of transferring assigningsubletting or otherwise divesting itself of a majority interest in orControl of (a) the Project or (b) all or substantially all of theProponentsrsquo rights under this Agreement the Instruments theExemption Orders the Primary Production Order and subject toApplicable Laws the Mining Lease and

41512 shall not take or threaten or purport to take any action which directlyor indirectly results in a change of Control of VBNC to a party otherthan Inco

22

4152 Wherever pursuant to Section 4151 the Government is requested to grant itsApproval such Approval may be withheld by the Government in its sole andabsolute discretion for any reason whatsoever

4153 For bona fide tax or other corporate reasons the Proponent may without theApproval of the Government transfer assign sublet or otherwise divest to anAffiliate a majority interest in or Control of (a) the Project or (b) all or substantiallyall of the Proponentrsquos rights under this Agreement the Instruments the ExemptionOrders the Primary Production Order and subject to Applicable Laws the MiningLease Notwithstanding Section 111 no such transfer assignment sublet ordivestiture shall relieve the Proponent of its obligations hereunder or thereunder

4154 The Proponent shall promptly give written notice to the Government of any actionit takes under Section 4151 or 4153

416 Members of House of Assembly The Proponent undertakes to (a) ensure that nomember of the House of Assembly of the Province shall have any interest in thisAgreement and (b) use its best efforts to ensure that no Member of the House of Assemblyof the Province receives any benefit to arise herefrom or from any report study review oranalysis required to be made or submitted pursuant to this Agreement

417 Mining Lease VBNC shall execute the Mining Lease effective 30 September 2002

418 Proponentrsquos Financing The Proponent shall use best efforts to obtain the financingcontemplated by Section 1024 including without limitation the preparation of all feasibilitystudies required in order to obtain such financing

ARTICLE 5FORCE MAJEURE

51 Events of Force Majeure For the purposes of this Article 5 and subject to the exceptionsand qualifications below each of the following shall be an ldquoEvent of Force Majeurerdquo

511 acts of God or natural disasters adverse weather conditions or other similaroccurrences

512 acts of war (declared or undeclared) or conditions arising out of or attributable toany such acts of war revolutions insurrections civil strife formal or informalhostilities mob violence riots and similar disturbances blockades or any otherunlawful acts against public order or authority

513 strikes lockouts work stoppages or labour disturbances unless directly andproximately caused by an unlawful act or omission of the Proponent

514 (a) delay or failure by suppliers of labour transportation materials machineryequipment parts supplies utilities or services (b) contractorsrsquo or sub-contractorsrsquoshortage of or inability to obtain labour transportation materials machinery

23

equipment parts supplies utilities or services or (c) breakdown of equipmentmachinery or facilities unless any of the foregoing are directly and proximatelycaused by or result from an unlawful act or omission of the Proponent

515 accidents and

516 solely in respect of the Proponentrsquos obligations in Section 4131 a ProcessingRelated Reason provided that a Processing Related Reason shall not be an Eventof Force Majeure at any time after three years following Cessation of MiningOperations

52 Obligation to Perform In order to obtain relief for an Event of Force Majeure theProponent shall (a) use commercially reasonable efforts to (i) prevent the occurrence of(ii) perform its obligations in the face of and (iii) terminate any such Event of Force Majeure(other than the events described in Section 513 relied upon) and (b) give the Governmentwritten notice of the facts which the Proponent claims constitute an Event of Force Majeureas soon as reasonably practical upon becoming aware of their existence

53 Force Majeure Relief If the Proponent establishes that it is prevented from performingany of its obligations under this Agreement the Nickel Concentrate Exemption Order or theMatte Plant Exemption Order by reason of an Event of Force Majeure such obligations willbe suspended for the period of the existence of such Event of Force Majeure and theProponent will be entitled to an extension of all dates referred to in this Agreement theNickel Concentrate Exemption Order and the Matte Plant Exemption Order for a reasonableperiod of time that reflects (a) the period during which the Proponent is prevented fromperforming its obligations by reason of the Event of Force Majeure and (b) the impact thatsuch Event of Force Majeure has on the Project including without limitation shippingschedules and construction schedules that have been delayed by reason of such Event ofForce Majeure Even though the Proponentrsquos obligations will be suspended for suchreasonable period of time when the applicable Event of Force Majeure is no longerpreventing the Proponent from performing its obligations the Proponent will again beobliged to perform such obligations

ARTICLE 6GOVERNMENT UNDERTAKINGS

61 Aboriginal Agreements The Government represents and warrants that it has entered into(a) interim measures agreements with the Innu Nation and the LIA that include the VoiseyrsquosBay chapter of the respective land claims agreements and (b) the EMA

62 Electrical Rights and Provision of Power The Government shall cause Newfoundlandand Labrador Hydro or its successors to

621 provide to the Proponent electrical power for the Processing Plant at the lower of(a) the island industrial electrical rate or (b) any lower electrical rate that may be

24

offered from time to time by Newfoundland and Labrador Hydro or its successorsto its industrial customers in comparable circumstances and

622 ensure that Newfoundland and Labrador Hydro or its successors can supply to theProponent sufficient electrical power for the operation of the Processing Plant

63 Mining Lease The Government shall issue the Mining Lease effective 30 September2002

64 Exemption Orders The Government shall issue the Exemption Orders effective 30September 2002

65 Issue of Authorizations

651 Where the Proponent has submitted all information and data in accordance withApplicable Laws and required by the Government for it to issue or grant any permitauthorization order or other approval necessary for the Proponent to implement theProject or any part thereof (in this Section 65 the ldquoAuthorization(s)rdquo) theGovernment shall issue or grant any such Authorization on a timely basis

652 If the Government does not issue or grant an Authorization on a timely basis

6521 the Government shall grant the Proponent an extension of all datesreferred to in this Agreement the Nickel Concentrate ExemptionOrder and the Matte Plant Exemption Order for a reasonable periodof time that reflects (a) the period of delay in granting suchAuthorization and (b) the impact that such delay has on the Projectincluding without limitation shipping schedules and constructionschedules that will have been delayed by Governmentrsquos failure toissue or grant such Authorization on a timely basis and

6522 if as a result of the Governmentrsquos failure to issue or grant anAuthorization on a timely basis the completion date for theProcessing Plant is delayed and provided that the Proponentestablishes that it is likely it will ship out of the Province the totalvolume of contained nickel in the Nickel Concentrate permittedunder the Nickel Concentrate Exemption Order prior to the revisedcompletion date of the Processing Plant the Government shallamend the Nickel Concentrate Exemption Order to allow anadditional quantity of contained nickel in Nickel Concentrate to beshipped out of the Province which quantity will reflect thereasonable period of time of the extension referred to in Section6521

653 The Government shall not be responsible for any delays nor shall the Proponent beentitled to any relief under this Section 65 unless such delays are directly and

25

proximately caused by or result from an act or omission of the Government or adepartment regulatory body board agent or employee of the Government

66 Legislative Framework

661 The Government represents to the Proponent (and acknowledges that theProponent is relying upon such representation) that it shall maintain substantiallythe Legislative Framework for the duration of the Project subject to legislativeamendments contemplated in this Agreement and legislation of general applicationThe Government shall maintain the Legislative Framework consistent with thisAgreement subject to Governmental responsibilities including the responsibility forensuring proper management of the Provincersquos resources the protection andmaintenance of public health and safety and the protection of the environment TheGovernment acknowledges that this Agreement is consistent with current public lawand Governmental responsibilities

662 The Proponent represents to the Government (and the Proponent acknowledgesthat the Government in consideration of agreeing to maintain the LegislativeFramework has relied upon such representation) that the Proponent shall performits obligations set out in this Agreement the Instruments the Exemption Orders thePrimary Production Order and the Mining Lease

67 Special Project Orders The Government shall issue a Special Project Order or SpecialProject Orders under Section 70 of the Labour Relations Act (Newfoundland and Labrador)to ensure a stable labour relations environment throughout the construction phases of theProject This Order or these Orders shall include without limitation provisions such as nostrikes and lock-outs and the ability to designate the union organization and employerrsquosrepresentative for the purposes of collective bargaining

68 Corporate Income Tax The Government shall use best efforts to negotiate and executewith the Proponent the Tax Agreement as soon as possible but in any event on or beforethe Closing Date The Tax Agreement will contain provisions

681 whereby the Government will provide that the rate of the Provincersquos corporateincome tax applicable to the Proponent will be the lower of the ldquoall provincesaveragerdquo or the Provincersquos income tax rate

682 which to the extent permitted by law will result in an allocation to the Province forthe purposes of Part IV of the Federal Income Tax Regulations of the Proponentrsquosgross revenues from the sale or disposition of nickel copper and cobalt productswhether in intermediate or final form from the Project and

683 whereby the Government will undertake to indemnify the Proponent for any doubletaxation resulting from the allocation referred to in Section 682

26

69 Mining Tax Act At the next session of the House of Assembly of the Province theGovernment shall introduce and support legislation to amend the Mining Tax Act inaccordance with the Mining Tax Act Amendments

610 Primary Production Order The Government shall issue the Primary Production Ordereffective 30 September 2002

611 Industrial and Employment Benefits The Government shall execute the IEBA to beeffective 7 October 2002

ARTICLE 7PROPONENTrsquoS DEFAULT

71 Notice of an Event of Default Upon the happening of an Event of Default theGovernment may deliver to the Proponent a notice of default setting forth in reasonabledetail the nature of the Event of Default and if the Government intends to exercise its rightsunder Section 72 indicating the date upon which the Government intends to exercise suchrights

72 Termination Subject to an Event of Force Majeure or the provisions of Section 652where an Event of Default has occurred and in each of such cases and so often as anEvent of Default happens after giving the notice provided for in Section 71 theGovernment may at any time in its sole discretion do any one or more of the following (a)terminate this Agreement (b) terminate the Mining Lease (c) rescind the ExemptionOrders and (d) take action for any remedy at law or in equity

73 Release by Proponent and Proponentrsquos Indemnity The Proponent hereby releases anddischarges and agrees to indemnify and save harmless the Government from every claimof every nature whether in damages (including consequential or indirect damages) or notwhich may arise or be suffered by the Proponent or any Person claiming through or underthe Proponent by reason of or as a result of anything done by the Government or anysuccessor or assign claiming through or under the Government under the provisions ofSection 72

ARTICLE 8DISPUTE RESOLUTION

81 Dispute Resolution Any dispute or difference between the parties hereto arising

811 as to whether a Processing Related Reason exists

27

812 as to the selection of an Engineer or firm of Engineers the Experts or an umpireunder Schedule 4132

813 under Section 45 as to whether the Underground Exploration Program hasidentified Sufficient Reserves under the Leased Lands

814 as to the determination of the date of Cessation of Mining Operations

815 as to whether commercial processing is economic as contemplated by Section41421

816 as to then prevailing commercial terms and conditions as contemplated by Section41422

817 under Section 51 as to whether an Event of Force Majeure exists

818 under Section 53 as to whether an Event of Force Majeure prevents the Proponentfrom performing any of its obligations under this Agreement

819 under Section 53 or Section 652 as to the reasonable period of time for theextension of the dates of performance of the Proponentrsquos obligations

8110 under Section 6522 the additional quantity of contained nickel in NickelConcentrate to be shipped out of the Province or

8111 as to whether the Proponent is complying with its obligations under Section 52

shall in each case be resolved in the manner provided for in Schedule 81

ARTICLE 9CONFIDENTIAL INFORMATION

91 Confidential Information The Government

911 acknowledges that information (the Information) supplied to it by or on behalf ofthe Proponent pursuant to or in connection with this Agreement or the Instrumentsincluding without limitation information provided pursuant to or in connection withSections 422 471 472 475 52 and 81 is of a financial commercialscientific or technical nature and is supplied in confidence and

912 subject to Sections 93 and 94 shall keep the Information confidential and shallnot use or disclose the Information to any third party without the Approval of theProponent and in doing so shall use the same care as it applies to avoid disclosureor dissemination of its own confidential information to prevent the disclosure ofInformation to any third party

28

92 Effect of Disclosure The Government acknowledges that disclosure of the Informationcontrary to the provisions of this Article 9 could reasonably be expected to921 harm significantly the competitive position or interfere significantly with the

negotiating position of the Proponent

922 result in similar information no longer being supplied by or on behalf of theProponent to the Government when it is in the public interest that similar informationcontinued to be supplied and

923 result in material financial loss to the Proponent or result in material financial gainto competitors of the Proponent and other Persons

93 Approval The Government may disclose Information if Approved by the Proponent

94 Permitted Disclosure of Information The provisions of this Article 9 shall not apply toInformation which

941 is now or which hereafter through no act or omission of the Government becomesgenerally known or available to the public without breach of this Agreement

942 after disclosure to the Government becomes generally known or available to thepublic by publication or otherwise through no act or omission of the Government

943 the Government can establish was in its possession at the time of disclosure andwas not previously acquired directly or indirectly from the Proponent

944 is disclosed to the Government by a third party on a non-confidential basis whichparty to the Knowledge of the Government is not prohibited from disclosing suchInformation to the Government by any legal contractual or fiduciary obligation towhich such party is bound or subject or

945 is required to be disclosed by law

95 Remedy Without limiting the Proponentrsquos rights and recourses for a breach by theGovernment of its obligations in this Article 9

951 the Government acknowledges that the Proponent shall suffer irreparable harm ifthe Government discloses Information contrary to the provisions of this Article 9and unless prohibited by law the Proponent shall be entitled to an injunction orinjunctions to prevent such disclosure

952 the Government shall be liable for and shall indemnify and save the Proponentharmless from and against costs losses damages and claims that it may sufferpay incur or be liable for as a result of any breach by the Government of thisArticle 9 and

29

953 in the event there are any measures which the Government can take to ensurecompliance with the provisions of Section 912 the Proponent shall be relieved ofthe obligation to provide information of the type with respect to which the breachoccurred until the Government has taken such measures

ARTICLE 10CONDITIONS CLOSING AND TERMINATION

101 Conditions for the Benefit of the Government Subject to Section 1061 the obligationsof the Government in this Agreement are subject to the satisfaction of or compliance withat or prior to the Time of Closing each of the following conditions

1011 the representations and warranties of the Proponent made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Proponent at or prior to the Time of Closing shallhave been performed the Proponent shall not be in breach of any agreement onits part contained in this Agreement at the Time of Closing and the Governmentshall have received a certificate confirming the foregoing signed for and on behalfof the Proponent in form and content satisfactory to the Government

1012 the University Agreement shall have been executed by the Proponent and a copythereof shall have been delivered to the Government

1013 the Tax Agreement shall have been executed by the Proponent and delivered to theGovernment and

1014 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

102 Conditions for the Benefit of the Proponent Subject to Section 1061 the obligationsof the Proponent in this Agreement are subject to the satisfaction of or compliance with ator prior to the Time of Closing each of the following conditions

1021 the representations and warranties of the Government made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Government at or prior to the Time of Closingshall have been performed the Government shall not be in breach of anyagreement on its part contained in this Agreement at the Time of Closing and theProponent shall have received a certificate confirming the foregoing signed for andon behalf of the Government in form and content satisfactory to the Proponent

30

1022 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

1023 the Tax Agreement shall have been executed by the Government and delivered bythe Government to the Proponent

1024 the Proponent shall have secured financing on reasonable commercial terms toenable it to develop the Mine and construct the Concentrator Plant and

1025 the Mining Tax Act Amendments shall have become law

103 Closing Notice If the Proponent (a) wishes to waive the condition set out in Section1024 or (b) has obtained the financing contemplated by Section 1024 it shall forthwithdeliver to the Government a notice (the ldquoClosing Noticerdquo) confirming that it has eitherwaived the condition set out in Section 1024 or that such condition has been satisfied

104 Deliveries and Closing1041 The Closing shall take place at the Time of Closing on the Closing Date at a

location to be agreed by the parties

1042 At the Closing

10421 the Proponent shall deliver to the Government the certificatecontemplated by Section 1011 and if not previously delivered theexecuted University Agreement and the executed Tax Agreementand

10422 the Government shall deliver to the Proponent the certificatecontemplated by Section 1021 and if not previously delivered theexecuted Tax Agreement

105 Termination This Agreement and the IBEA may be terminated at any time prior to theTime of Closing1051 by agreement of the Government and the Proponent

1052 by the Government if the conditions set out in Section 101 have not been satisfiedor waived by the Government or the Closing Notice has not been delivered to theGovernment on or before 31 March 2003 or

1053 by the Proponent if the conditions set out in Section 102 have not been satisfiedor waived by the Proponent (except the condition set out in Section 1024 in theevent the Proponent has delivered the Closing Notice)

106 Effect of Agreement and Termination

1061 Notwithstanding Section 1062 and subject to Section 1063 the Government andthe Proponent shall be bound by the provisions of Sections 41 421 422 410

31

411 412 415 416 417 418 61 63 64 65 66 67 68 69 610 and 611and Articles 5 8 9 and 11 effective as of and from the date of execution of thisAgreement

1062 Subject to Section 1061 the obligations of the Proponent and the Government inthis Agreement shall be effective as of and from the Time of Closing

1063 If this Agreement and the IEBA are terminated in accordance with the provisions ofSection 105 this Agreement and the IEBA shall thereafter become null and voidand have no effect and no party shall have any liability to the other except

10631 the obligations contained in Sections 41421 411 69 and Article9 hereof and

10632 the liability of a party in respect of its breach of this Agreement andthe IEBA prior to such termination

all of which shall survive such termination for a period of twelve months followingsuch termination

ARTICLE 11GENERAL MATTERS

111 Enurement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease shall be binding upon and shall enure to the benefitof the parties hereto the successors and assigns of the Government and the successorsand permitted assigns of the Proponent Any such assignment permitted by this Agreementshall become effective only when the assignee executes with the Government aninstrument whereby it agrees to be bound by and perform all of the Proponentrsquos obligationsunder this Agreement the Instruments the Exemption Orders the Primary ProductionOrder and the Mining Lease Subject to Section 4153 from and after the execution ofsuch instrument the assignor shall be relieved of and released from all its obligations underthis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease with effect from and after the date of execution of such instrument

112 Counterparts This Agreement and the other documents referred to herein andorotherwise required to complete the transactions contemplated hereby may be executed intwo or more counterparts including by facsimile each of which shall be deemed an originaland all of which together shall constitute one and the same instrument

113 Notices All notices requests demands and other communications hereunder shall bedeemed to have been duly given if in writing and either delivered personally sent byfacsimile transmission or by air courier service to the addresses designated below or suchother addresses as may be designated in writing by notice given hereunder and shall be

32

effective upon personal delivery or facsimile transmission thereof with proof of transmissionreceipt or upon delivery by air courier serviceIf to VBNC Voiseyrsquos Bay Nickel Company Limited

Suite 700 Baine Johnston Centre10 Fort William PlaceSt Johnrsquos NewfoundlandA1C 1K4Attention PresidentFacsimile (709) 758-8820

If to Inco Inco Limited145 King Street WestSuite 1500Toronto OntarioM5H 4B7Attention PresidentFacsimile (416) 361-7734

If to the Government Government of Newfoundland amp LabradorDepartment of Mines amp EnergyNatural Resources Building7th Floor 50 Elizabeth AvenueSt Johnrsquos NewfoundlandA1A 1W5Attention The MinisterFacsimile (709) 729-0059

114 Legal Fees In the event of any dispute or controversy between the Proponent on the onehand and the Government on the other hand relating to the interpretation of this Agreementor to the transactions contemplated herein the prevailing party shall be entitled to recoverfrom the other party reasonable legal fees and expenses incurred by the prevailing partySuch award shall include reasonable post judgment legal fees and costs

115 Payment of Fees and Expenses Each party hereto shall pay its own fees expenses anddisbursements incurred in connection with this Agreement and the transactionscontemplated hereby and all other costs and expenses incurred in its performance andcompliance with all conditions to be performed hereunder and thereunder

116 Time of Essence Time is of the essence of this Agreement

117 Further Assurances Each of the parties shall promptly do make execute deliver orcause to be done made executed or delivered all such further acts documents and thingsas the other parties hereto may reasonably require from time to time for the purpose ofgiving effect to this Agreement and the transactions contemplated hereby and shall usereasonable efforts and take all such steps as may be reasonably within its power toimplement to their full extent the provisions hereof and thereof

33

118 Public Notices No press release or other announcement concerning the transactionscontemplated by this Agreement shall be made either by the Proponent or the Governmentwithout the prior Approval of the other (such Approval not to be unreasonably withheld)provided however that the Proponent may without such Approval make such disclosureif the same is required by law or any stock exchange on which any of the securities of theProponent or any of its Affiliates are listed or by any securities commission or other similarregulatory authority having jurisdiction over the Proponent or any of its Affiliates and if suchdisclosure is required the Person making the disclosure shall use best efforts to give priororal or written notice to the Government and if such prior notice is not possible to givesuch notice immediately following the making of such disclosure Notwithstanding theforegoing the Proponent acknowledges that the Government will make this Agreement andthe Schedules hereto public

119 Independent Legal Advice Each of the parties acknowledges having obtained its ownindependent legal advice with respect to this Agreement and the transactions contemplatedhereby to the fullest extent deemed necessary by each party prior to its execution anddelivery Furthermore the parties acknowledge that neither acted under any duress innegotiating drafting and executing this Agreement the Instruments and any documentscontemplated hereby There shall be no presumption that any ambiguity in this Agreementthe Instruments and any documents contemplated hereby be resolved in favour of any ofthe parties

1110 Compliance with Laws Without limiting the generality of any other covenant herein theProponent shall at its own cost and expense comply with and shall use best efforts toensure that all Persons for whom the Proponent is at law responsible comply with allApplicable Laws in connection with the Project

1111 Entire Agreement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease set forth the entire agreement and all thecovenants promises assurances agreements representations conditions warrantiesstatements and understandings (collectively ldquoRepresentationsrdquo) between the partiesconcerning the subject matter hereof No Representations are made by the Governmentto the Proponent or by the Proponent to the Government except as expressly set out in thisAgreement the Instruments the Exemption Orders the Primary Production Order and theMining Lease For greater certainty the Statement of Principles between the Governmentand the Proponent dated as of 11 June 2002 shall have no application to the parties or thematters contemplated by this Agreement after the date hereof and is replaced entirely bythis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease

1112 Good Faith Each of the Government and the Proponent shall at all times exercise all itsrights hereunder in a manner consistent with good business practices and shall act in goodfaith

1113 Waiver The failure of any party hereto to insist in any one instance upon the strictperformance by another party hereto of its obligations hereunder the Instruments theExemption Orders the Primary Production Order and the Mining Lease or the failure of any

34

party hereto to exercise any right option or remedy shall not constitute a waiver orrelinquishment for the future of any such obligation right option or remedy nor shall itconstitute a waiver of a subsequent breach No covenant or condition of this Agreementmay be waived by any party hereto except by the written consent of that party andforbearance or indulgence by that party in any regard whatsoever for no matter how longshall not constitute a waiver of such covenant or condition and until such covenant orcondition has been performed or waived in writing that party shall be entitled to invoke anyremedy available to that party under this Agreement the Instruments the ExemptionOrders the Primary Production Order and the Mining Lease despite its forbearance orindulgence

1114 No Partnership Joint Venture or Agency The Government and the Proponent expresslydisclaim any intention to create a partnership joint venture or joint enterprise It isunderstood acknowledged and agreed that nothing contained in this Agreement nor anyacts of the parties shall constitute or be deemed to constitute the Government and theProponent as partners joint venturers or principal and agent in any way or for any purpose

THE HONOURABLE THE PREMIER

THE HONOURABLE THE MINISTER OFMINES AND ENERGY

THE HONOURABLE THE MINISTER OFLABRADOR AND ABORIGINAL AFFAIRS

INCO LIMITED

ByChairman and Chief Executive Officer

VOISEYrsquoS BAY NICKEL COMPANY LIMITED

ByPresident

SCHEDULE 11ANICKEL CONCENTRATE EXEMPTION ORDER

This document can be found at the following web address httpwwwgovnfcahoaregulationsrc020066htm

THIS DEVELOPMENT AGREEMENT made as of 30 September 2002

AMONG HER MAJESTY THE QUEEN IN RIGHT OFNEWFOUNDLAND AND LABRADOR as represented byThe Honourable The Premier The Honourable The Ministerof Mines and Energy and The Honourable The Minister ofLabrador and Aboriginal Affairs

AND VOISEYrsquoS BAY NICKEL COMPANY LIMITED a corporationincorporated under the laws of the Province

AND INCO LIMITED a corporation organized under the laws ofCanada

NOW THIS DEVELOPMENT AGREEMENT WITNESSETH that for and in consideration of themutual covenants and agreements herein contained and subject to the terms and conditionshereinafter set out the parties hereto mutually agree one with the other as follows

ARTICLE 1DEFINITIONS AND INTERPRETATION

11 Definitions When used in this Agreement (including the Schedules identified in Section12) unless the context otherwise requires the following terms shall have the meaningsascribed thereto

ldquoAffiliaterdquo means in respect of a Person

(a) a Person that Controls such Person(b) a Person that is Controlled by such Person or(c) a Person that is under common Control with such Person

ldquoAgreementrdquo means this Agreement and all Schedules attached to this Agreement ineach case as they may be amended or supplemented from time to time and theexpressions ldquohereofrdquo ldquohereinrdquo ldquoheretordquo ldquohereunderrdquo ldquoherebyrdquo and similar expressions referto this Agreement and unless otherwise indicated references to Articles and Sections areto Articles and Sections in this Agreement

ldquoApplicable Lawsrdquo means any statute ordinance regulation authorization order permitapproval grant license consent policy rule right franchise privilege determinationdirective decree by-law code or standard that is enacted made issued or granted by anyGovernment Entity

2

ldquoApprovalrdquo means express approval or concurrence in writing and ldquoApproverdquo andldquoApprovedrdquo shall be construed accordingly

ldquoBusiness Dayrdquo means any day other than a Saturday Sunday or statutory holiday in theProvince

ldquoCessation of Mining Operationsrdquo means the date by which due to the lack of SufficientReserves the continued operation of the Mine and Concentrator Plant would no longer beeconomically feasible

ldquoClosingrdquo means the execution and delivery of the Instruments and the coming into effectof this Agreement and the Instruments in their entirety as contemplated by Article 10

ldquoClosing Daterdquo means the date which is the fifth Business Day after the date of deliveryof the Closing Notice by the Proponent to the Government or such earlier date as theparties agree

ldquoClosing Noticerdquo has the meaning ascribed thereto in Section 103

ldquoCommercial Production Daterdquo means the date to be certified by the Proponent and atthe option of the Government confirmed by an Engineer upon which the Hydromet Planthas operated at an annualized production rate of 30000 tonnes of Finished Nickel Productfor a period of ninety consecutive days

ldquoConcentrator Plantrdquo has the meaning ascribed thereto in Section 431

ldquoConstruction Completion Daterdquo means the date to be certified by the Proponent andat the option of the Government confirmed by an Engineer upon which the constructionof the Processing Plant has been completed in accordance with the Proponentrsquos plans andspecifications therefor

ldquoControlrdquo means with respect to a Person the ability directly or indirectly through one ormore intermediaries to direct or cause the direction of the management and policies ofsuch Person through

(a) the legal or beneficial ownership of voting securities partnership interests or otherequivalent ownership interests in such Person

(b) the right or ability to appoint or elect a majority of the directors or individuals of acomparable position of such Person

(c) the right or ability to appoint the management of such Person or(d) a contract an operating agreement a management agreement a voting trust or

other similar agreement

and ldquoControlledrdquo means with respect to a Person being subject to the Control of another

3

ldquoCopper Concentraterdquo means the intermediate concentrate or similar product producedby the Concentrator Plant containing the principal quantities of copper from ore extractedor removed from the Leased Lands

ldquoCopper Concentrate Exemption Order means the Copper Concentrate ExemptionOrder in the form of Schedule 11B

ldquoDecisionrdquo means the written decision to be delivered by the Proponent to the Governmentas to whether the Proponent intends to engineer and construct the Hydromet Plant or theMatte Plant

ldquoDecision Daterdquo means the date of delivery of the Decision

ldquoDecision Materialsrdquo means the Feasibility Study and all other information and data in theProponentrsquos possession or control (including information and data generated by its advisorsand consultants) which form the basis for the Proponent making the Decision (includingsuch data and information subsequently available to or the existence of which issubsequently known by the Proponent) in form which will permit the Government and theExperts to undertake the review of the Decision and the reasons therefor as contemplatedby Section 475 Such data and information shall include without limitation reports onmetallurgical test work proposed flowsheets detailed capital and operating cost estimatesand a detailed economic analysis

ldquoDemonstration Plantrdquo means the facility at Argentia where hydrometallurgical processingtechnology will be tested including any part or sub-process of such technology themechanical or processing equipment required therefor and any pilot plant testing or similarcampaigns to determine the technical and economic feasibility of such technology

ldquoDemonstration Plant Completion Daterdquo means the date as certified by the Proponentand at the option of the Government confirmed by an Engineer upon which theconstruction of the Demonstration Plant has been completed in accordance with theProponentrsquos plans and specifications therefor and is ready to test Nickel Concentrate

ldquoEMArdquo means the Environmental Management Agreement entered into among theGovernment the Government of Canada the LIA and Innu Nation dated as of 22 July2002

ldquoEngineerrdquo means an individual independent of and acceptable to both the Proponent andthe Government who

(a) is an engineer with at least ten years of experience in base metals primaryprocessing engineering and the engineering design and construction managementof base metals primary processing plants

(b) has the requisite experience to make the relevant determination confirmation orreport to be made or given pursuant to this Agreement and

4

(c) is a member in good standing of a professional association where ldquoprofessionalassociationrdquo means a self-regulatory organization of engineers that

(i) has been given authority or recognition by statute

(ii) admits members primarily on the basis of their academic qualifications andexperience

(iii) requires compliance with the professional standards of competence andethics established by the organization and

(iv) has disciplinary powers including the power to suspend or expel a member

ldquoEvent of Bankruptcyrdquo means

(a) the entry of a decree or order by a court having jurisdiction adjudging the Proponenta bankrupt or insolvent or approving as properly filed a petition seekingreorganization or winding-up of the Proponent under the Companiesrsquo CreditorsArrangement Act (Canada) the Bankruptcy and Insolvency Act (Canada) or theWinding-Up Act (Canada) or any other bankruptcy insolvency or analogous lawsor issuing sequestration or process of execution against the Proponent or anysubstantial part of its property or ordering the winding-up or liquidation of its affairsand the continuance of any such decree or order or appointment unstayedundischarged and in effect for a period of 60 days from the date thereof

(b) the institution by the Proponent of proceedings to be adjudicated bankrupt orinsolvent or the consent by it to the institution of bankruptcy or insolvencyproceedings against it or the filing by it of a petition or answer or consent seekingreorganization or relief under the Companiesrsquo Creditors Arrangement Act (Canada)the Bankruptcy and Insolvency Act (Canada) or the Winding-Up Act (Canada) orany other bankruptcy insolvency or analogous laws or the consent by it to the filingof any such petition or to the appointment of a receiver of the Proponent or of anysubstantial part of its property or the making by it of a general assignment for thebenefit of creditors or the Proponentrsquos admission in writing of its inability to pay itsdebts generally as they become due or the Proponent taking such action infurtherance of any of such aforementioned purposes or

(c) whenever a custodian receiver receiver and manager sequestrator liquidatortrustee agent for a secured creditor or other Person with similar powers isappointed for any substantial part of the Project whether by a court or by extra-judicial means unless such custodian receiver receiver and manager sequestratorliquidator trustee or agent is removed within 60 days of such appointment

ldquoEvent of Defaultrdquo means any one or more of the following

(a) an Event of Bankruptcy has occurred with respect to the Proponent

5

(b) the Proponent is wound up its constating documents or by-laws are forfeited orsurrendered or the corporate or other existence of the Proponent is otherwiseterminated

(c) the Proponent is in breach of its obligations in Section 415 or

(d) subject to an Event of Force Majeure andor Section 652

(i) the Decision has not been delivered by 15 November 2008

(ii) the applicable Implementation Plan has not been delivered as required bySection 474 or 475

(iii) the Processing Plant has not been completed on or before 31 December2011 or

(iv) an Engineer has determined that the Proponent is not proceeding diligentlyto complete the engineering work for and the construction of the ProcessingPlant so that it will be completed on or before 31 December 2011 asrequired by Section 474 or 475

ldquoEvent of Force Majeurerdquo has the meaning ascribed thereto in Section 51

ldquoExemption Ordersrdquo means collectively the Nickel Concentrate Exemption Order theCopper Concentrate Exemption Order and the Matte Plant Exemption Order

ldquoExpertsrdquo means collectively (a) an Engineer or firm of Engineers who will make thetechnical feasibility review of the Decision and (b) a recognized third party financial expertindependent of the Government and the Proponent who will make the financial feasibilityreview of the Decision and who will jointly deliver the Expertsrsquo Report if requested by theGovernment pursuant to Section 475 The Experts shall be selected at the time and in themanner provided for in Section 473

ldquoExpertsrsquo Reportrdquo has the meaning ascribed thereto in Section 475

ldquoFeasibility Studyrdquo means the study undertaken by or on behalf of the Proponentcontaining the technical and economic evaluations which form the basis for the Decision

ldquoFinished Copper Productrdquo means finished copper product(s) having a copper contentof not less than 99

ldquoFinished Nickel Productrdquo means finished nickel product(s) having a nickel content of notless than 998

ldquoGovernmentrdquo means the Government of the Province

6

ldquoGovernment Entityrdquo means (a) any federal provincial state regional municipal localor other government governmental or public department commission board bureau oragency whether domestic or foreign (b) any subdivision agency commission board orauthority of any of the foregoing or (c) any quasi governmental or private body exercisingany regulatory expropriation or taxing authority under or for the account of any of theforegoing in each case which has jurisdiction in respect of the Project or any part thereof

ldquoHydromet Plantrdquo has the meaning ascribed thereto in Section 461

ldquoIBAsrdquo means collectively the Impacts and Benefits Agreements made as of 29 July 2002between the Proponent and each of Innu Nation and the LIA without any amendment orvariation

ldquoIEBArdquo means the Industrial and Employment Benefits Agreement in the form set out inSchedule 49

ldquoImplementation Planrdquo means a detailed description of and time schedule for thecompletion of the engineering work for and the construction of the Processing Plant by 31December 2011

ldquoIncordquo means Inco Limited a corporation organized under the laws of Canada

ldquoInformationrdquo has the meaning ascribed thereto in Section 911

ldquoInnovation Centrerdquo has the meaning ascribed thereto in Section 34

ldquoInnu Nationrdquo means Innu Nation a corporation incorporated under the laws of Canada

ldquoInstrumentsrdquo means collectively the University Agreement the Tax Agreement and theIEBA

ldquoLeased Landsrdquo means the lands described in Schedule ldquoArdquo to the Mining Lease asamended from time to time

ldquoLegislative Frameworkrdquo means the Applicable Laws of the Province in existence as ofthe date hereof applicable to the Project or any part thereof

ldquoLIArdquo means the Labrador Inuit Association a corporation incorporated under the laws ofthe Province

ldquoMatterdquo means any form of granular nickel in matte product containing not less than 50nickel which can be processed by the Matte Plant to produce Finished Nickel Product

ldquoMatte Plantrdquo has the meaning ascribed thereto in Section 462

7

ldquoMatte Plant Exemption Order means the Matte Plant Exemption Order in the form ofSchedule 11C

ldquoMinerdquo means collectively (a) the open pit mine or mines to be developed by the Proponentfor the extraction of the mineral ores located on the Leased Lands and (b) the undergroundmine or mines as contemplated by Section 45 for the extraction of the mineral ores atdepth located under the Leased Lands

ldquoMineral Actrdquo means the Mineral Act (Newfoundland and Labrador) and the regulationsthereunder

ldquoMining Leaserdquo means the Mining Lease in the form of Schedule 63

ldquoMining Tax Actrdquo means the Mining and Mineral Rights Tax Act (Newfoundland andLabrador) and the regulations thereunder

ldquoMining Tax Act Amendmentsrdquo means the proposed amendments to the Mining Tax Actset out in Schedule 69

ldquoNickel Concentraterdquo means the intermediate concentrate or similar product produced bythe Concentrator Plant containing the principal quantities of nickel and cobalt from oreextracted or removed from the Leased Lands

ldquoNickel Concentrate Exemption Order means the Nickel Concentrate Exemption Orderin the form of Schedule 11A

ldquoPersonrdquo means any individual partnership limited partnership joint venture syndicatesole proprietorship company or corporation with or without share capital unincorporatedassociation trust trustee executor administrator or other legal personal representativeor Government Entity however designated or constituted

ldquoPrimary Production Orderrdquo means the Primary Production Order in the form of Schedule610

ldquoProcessing Plantrdquo means either the Hydromet Plant or the Matte Plant which theProponent shall construct and operate in the Province as contemplated by Section 46

ldquoProcessing Related Reasonrdquo means any situation where the Proponent is unable tomeet its obligations under Section 4131 as a result of either (a) the unavailability forwhatever bona fide reason of Replacement Concentrate or (b) the unavailability ofReplacement Concentrate on reasonable commercial terms including without limitationwhere the terms relating to price or specifications would make it not economically ortechnically feasible for processing at the Processing Plant

ldquoProjectrdquo has the meaning ascribed thereto in Section 31

8

ldquoProponentrdquo means collectively VBNC Inco their respective Affiliates or any Personwhich (as permitted by this Agreement) individually or together with any of them by way ofpartnership joint venture sub-contract or otherwise holds or is entitled to a majority interestin or Control of the Project or is the operator of the Project and their respective successorsand permitted assigns

ldquoProvincerdquo means the Province of Newfoundland and Labrador Canada

ldquoR amp D Programrdquo has the meaning ascribed thereto in Section 35

ldquoReplacement Concentraterdquo means any product containing nickel or cobalt or bothderived from ores or any other source of nickel or cobalt or both mined extracted orproduced outside the Province that in each case does not represent Finished NickelProduct but which can be further processed at the Processing Plant to produce FinishedNickel Product

ldquoSufficient Reservesrdquo means the estimated quantities of ldquoProven Mineral Reservesrdquo orldquoProbable Mineral Reservesrdquo or both within the meaning of National Instrument 43-101ldquoStandards of Disclosure for Mineral Projectsrdquo (as amended from time to time) determinedby the Proponent in accordance with its standard methodologies and assumptions for suchestimates

ldquoTax Agreementrdquo means the Tax Agreement to be entered into between the Governmentand the Proponent as contemplated by Sections 412 and 68

ldquoTime of Closingrdquo means 1000 orsquoclock in the morning in the Province on the ClosingDate

ldquoUnderground Exploration Programrdquo means the underground exploration programcontemplated by Section 44

ldquoUniversityrdquo means Memorial University of Newfoundland

ldquoUniversity Agreementrdquo means the agreement to be entered into between the Proponentand the University as contemplated by Section 48

ldquoVBN Undertaking Orderrdquo means the Voiseyrsquos Bay Nickel Company Limited Mine and MillUndertaking Order under the Environmental Assessment Act (Newfoundland and Labrador)dated 5 August 1999 (OC 99-286) as amended from time to time and

ldquoVBNCrdquo means Voiseyrsquos Bay Nickel Company Limited a corporation incorporated underthe laws of the Province

9

12 Schedules

The documents attached hereto and identified below shall form an integral part of thisAgreement

Schedule 11A - Nickel Concentrate Exemption OrderSchedule 11B - Copper Concentrate Exemption OrderSchedule 11C - Matte Plant Exemption OrderSchedule 49 - IEBASchedule 4132 - Assaying ProceduresSchedule 63 - Mining LeaseSchedule 69 - Mining Tax Act AmendmentsSchedule 610 - Primary Production OrderSchedule 81 - Dispute Resolution Procedures

13 Subdivisions Unless otherwise stated a reference herein or in a Schedule by numericalor alphabetical designation to an Article Section Subsection Paragraph Subparagraphor Schedule shall refer to the Article Section Subsection Paragraph Subparagraph orSchedule bearing that designation in this Agreement or in a Schedule

14 Headings The division of this Agreement into Articles Sections SubsectionsParagraphs and Subparagraphs and the insertion of headings are for convenience ofreference only and shall not affect the construction or interpretation of this Agreement

15 Number and Gender Words importing the singular shall include the plural and vice versaand words importing a particular gender shall include all genders The use of the neutersingular pronoun to refer to a party is deemed a proper reference The necessarygrammatical changes required to make the provisions of this Agreement apply shall in allinstances be assumed as though in each case fully expressed

16 Statutes Regulations Rules and Orders Any reference in this Agreement to all or anypart of any statute regulation rule or order shall unless otherwise stated be a referenceto that statute regulation rule or order or the relevant part thereof as amendedsubstituted replaced or reenacted from time to time

17 Business Day If the day on which any act or payment is required to be done or madeunder this Agreement is a day which is not a Business Day then such act or payment shallbe performed or made on the next following Business Day

18 Contract Always Speaking With the exception of the representations and warranties ofthe parties set out in Article 2 and any estimates referred to in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic and relatedbenefits and costs of facilities referred to in this Agreement made by the Proponent wherea matter or thing is expressed in the present tense it shall be applied to the circumstancesas they arise

10

19 Governing Law and Choice of Forum This Agreement shall be interpreted inaccordance with the laws in force in the Province subject to any applicable federal laws andfor all purposes this Agreement shall be treated as a Newfoundland and Labrador contractThe Proponent irrevocably submits and attorns to the exclusive jurisdiction of the courts ofthe Province

110 Construed Covenants Each obligation or agreement of this Agreement (other than therepresentations and warranties of the parties) even though not expressed as a covenantis to be construed as a covenant

111 Inconsistency or Conflict Except where otherwise provided either expressly or bynecessary implication in this Agreement a Schedule hereto or any Instrument in the eventof any inconsistency or conflict between any such Schedule or Instrument and any provisioncontained in this Agreement the provision of this Agreement shall prevail to the extent ofthe inconsistency or conflict

112 Severability If any provision of this Agreement or the application thereof to any Personor circumstance is to any extent held or rendered invalid void illegal or unenforceablefor any reason then the particular provision

1121 shall be deemed to be independent of and severed from the remainder of thisAgreement and all the other provisions of this Agreement shall neverthelesscontinue in full force and effect and

1122 shall continue to be applicable and enforceable to the fullest extent permitted by lawagainst any Persons and in any circumstances other than those as to which it hasbeen held or rendered invalid void illegal or unenforceable

If a severance occurs under this Section 112 the parties shall use their respective bestefforts to negotiate in good faith an enforceable replacement provision that to the greatestextent possible reflects the intent or serves the purpose of the severed provision

113 Currency All references in this Agreement to currency are to Canadian dollars

114 Knowledge In this Agreement where ldquoKnowledgerdquo of a party is referred to

1141 in respect of the Proponent it shall mean the actual knowledge of the executiveofficers of the Proponent after due inquiry in respect thereof and

1142 in respect of the Government it shall mean the actual knowledge of the responsibleexecutives of the applicable department of Government after due inquiry in respectthereof

11

ARTICLE 2REPRESENTATIONS AND WARRANTIES

21 Proponentrsquos Representations and Warranties Acknowledging that the Government isrelying on such representations and warranties VBNC and Inco jointly and severallyrepresent and warrant to the Government that

211 each is a corporation which has been duly incorporated or organized as applicableunder the laws of its jurisdiction of incorporation or organization as applicable andis validly existing under such laws

212 Inco is extra-provincially registered in the Province

213 each has all necessary corporate power authority and capacity

2131 to cause the design engineering and construction of and to operateand maintain all parts of the Project and

2132 to enter into this Agreement and the Instruments and to perform itsrespective obligations herein and therein

214 the execution and delivery of this Agreement and each of the Instruments and theconsummation of the transactions contemplated herein and therein by each ofthem have been duly authorized by all necessary corporate action on the part ofeach of them

215 neither is a party to bound or affected by or subject to any indenture mortgagelease agreement instrument charter or by-law provision which with or without thegiving of notice or the lapse of time or both would be violated contravened orbreached by or under which default would occur as a result of the executiondelivery or performance of this Agreement or any of the Instruments or theconsummation of any of the transactions provided for in any of them

216 neither is bound or affected by or subject to any Applicable Law which with orwithout the giving of notice or the lapse of time or both would be violatedcontravened or breached by or under which default would occur as a result of theexecution delivery or performance of this Agreement or any of the Instruments orthe consummation of any of the transactions provided for in any of them

217 no approval authorization consent permit or other action by or filing with anyGovernment Entity is required in connection with the execution and delivery of thisAgreement or any of the Instruments and the performance of their respectiveobligations hereunder or thereunder except as otherwise stated herein

218 there is no suit action litigation arbitration proceeding or proceeding by aGovernmental Entity including appeals and applications for review in progresspending or to the Knowledge of either of them threatened against or involving

12

either of them or any judgment decree injunction or order of any court or arbitratorwhich could adversely affect their capacity or power to execute and deliver thisAgreement or any of the Instruments or to consummate the transactionscontemplated herein or therein or which could materially adversely affect theirrespective assets financial condition or future prospects

219 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of each of them enforceable against them inaccordance with their respective terms except as limited by (a) applicablebankruptcy laws or laws affecting the enforcement of creditorsrsquo rights generally and(b) the general principles of equity

2110 all references to estimates made by Inco and VBNC in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic andrelated benefits and costs of facilities are made as of the date of this Agreementhave been determined by them based upon information available at the date of thisAgreement and have been estimated by each of them bona fide and reasonablyand neither of them has any reason to believe that any such estimate isunreasonable or unfounded at the date of this Agreement and

2111 VBNC is a wholly owned subsidiary of Inco and to the Knowledge of the Proponentno Person individually or with any other Person or Persons currently Controls Inco

22 Government Acknowledgments The Government acknowledges that (a) none of VBNCInco or any Person for whom either of them may be responsible in law have made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments and (b) the Proponent shall use the most efficient and cost effective miningtechniques including state of the art automated mining technologies aimed at loweringoperating costs and extending the life of the Project

23 Governmentrsquos Representations and Warranties Acknowledging that the Proponent isrelying on such representations and warranties the Government represents and warrantsto the Proponent that

231 the execution and delivery of this Agreement and each of the Instruments and theconsummation by the Government of the transactions contemplated herein andtherein have been duly authorized by all necessary Government action

232 it is not a party to bound or affected by or subject to any indenture agreement orinstrument which with or without the giving of notice or the lapse of time or bothwould be violated contravened or breached by or under which default would occuras a result of the execution delivery or performance of this Agreement or any ofthe Instruments or the consummation of any of the transactions provided for in anyof them and

13

233 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of it enforceable against it in accordance with itsterms except as they may be limited by the general principles of equity

24 Proponent Acknowledgements Each of Inco and VBNC acknowledges that neither theGovernment nor any Person for whom it may be responsible in law has made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments

ARTICLE 3DESCRIPTION OF THE PROJECT AND RELATED FACILITIES

31 The Project The ldquoProjectrdquo will comprise collectively the Underground ExplorationProgram the Mine the Concentrator Plant the R amp D Program the Demonstration Plantthe Processing Plant and if applicable the Concentrator Plant expansion referred to inSection 45 The Processing Plant will be capable of processing concentrate andintermediate feeds containing nickel from other sources world wide which will give theProcessing Plant the capability of operating well beyond the life of the Mine

32 Capital Investment The Proponent estimates that the aggregate capital investment in theProject and related facilities will be $29 billion over the estimated 30-year life of the Projectinclusive of sustaining capital expenditures

33 Employment The Proponent estimates that

331 the construction phase of the Mine and Concentrator Plant will create approximately1700 person-years of employment in the Province the construction phase of theHydromet Plant will create approximately 3000 person-years of employment in theProvince and the construction phase of the Matte Plant will create approximately2500 person-years of employment in the Province

332 during the various operating phases the Project will create the followingemployment levels in the Province Mine and Concentrator Plant - 400 people R ampD Program - 200 people Underground Exploration Program - 85 people HydrometPlant - 400 people Matte Plant - 350 people

333 over the estimated 30-year life of the Project total employment benefits from theProject in the Province will be 76000 direct and indirect person-years and

334 gross domestic product impact to the Province with respect to the Project will be$11 billion

34 Innovation Centre The Proponent shall spend $10 million on and provide an endowmentof $1 million per year over a ten-year period to cover operational costs for an IncoInnovation Centre (the ldquoInnovation Centrerdquo) at St Johnrsquos in conjunction with theUniversity pursuant to the University Agreement The focus of the Innovation Centre willbe on education and research in mineral exploration mining and metallurgical processing

14

The Innovation Centre will provide world-class education research and training related tothe mining industry to 50-60 students per year to be engaged in Bachelors Masters andDoctorate level programs The Proponent shall commence work on the Innovation Centrein 2002 with target completion in 2004

35 R amp D Program The Proponent shall undertake a comprehensive research anddevelopment program intended to establish the commercial technical and economicfeasibility of hydrometallurgical process technology to process the Nickel Concentrate (theldquoR amp D Programrdquo) The R amp D Program will include the evaluation of chemical engineeringsub-processes for the hydrometallurgical process the mechanical equipment design for theDemonstration Plant and the construction and operation of the Demonstration Plant

ARTICLE 4PROPONENTrsquoS UNDERTAKINGS

41 Infrastructure and Initial Work Commencing in 2002 the Proponent shall

411 at the Mine site undertake site mobilization including the establishment of aconstruction camp initiation of work on temporary port facilities and construction ofaccess roads

412 at Argentia undertake leasing or other arrangements for occupancy and sitepreparation including demolition fencing security and signage

413 undertake the construction of a warehouse building and establish staging areas andlay down areas in support of Labrador activities

414 establish a project office at Argentia and information centres at St Johnrsquos andHappy Valley-Goose Bay and

415 complete site selection and commence architectural design and engineering workfor the Innovation Centre

The Proponent estimates that this infrastructure and initial work program will employ inaggregate approximately 250 persons and the Proponent shall spend not less than $55million on this program in the Province on or before 31 March 2003

42 R amp D Program421 The Proponent shall undertake the R amp D Program and as a part thereof shall

construct the Demonstration Plant at a cost which the Proponent estimates will be$130 million The Proponent shall commence the site development for theDemonstration Plant in 2002 and continue such development into 2003 Theinitiatives in support of these activities will include the operation of an informationcentre preparation of environmental baseline studies and continued upgrading orreplacement of utility services required for the Demonstration Plant maintainingstaging areas and cleanup and civil works at Argentia consisting of demolition

15

grading and earth works construction The Proponent has scheduled thecompletion of the engineering design and construction of the Demonstration Plantso that the Demonstration Plant Completion Date shall have occurred on or before31 December 2006

422 The Proponent shall provide to the Government within 15 days of the end of eachcalendar quarter commencing with the calendar quarter ending 31 December 2002a detailed progress report on the results during such calendar quarter of the R amp DProgram which report will detail costs incurred to the end of such calendar quarterand contain sufficient documentation and information to enable the Government toevaluate the Proponentrsquos progress with respect to the R amp D Program and thedevelopment of hydrometallurgical process technology for processing the NickelConcentrate If requested by the Government upon reasonable notice theProponent shall provide the Government and its representatives and advisorsaccess at reasonable times to the facilities where the R amp D Program is beingconducted and make appropriate personnel of the Proponent available to respondto any requests for additional information

423 In addition to the utilization of the Demonstration Plant for the purposes ofdeveloping hydrometallurgical process technology for processing the NickelConcentrate the Proponent shall explore business opportunities for the ongoingutilization of the Demonstration Plant for the evaluation of other concentrates andintermediate feeds after completion of the R amp D Program

43 Mine and Concentrator Plant

431 The Proponent shall cause the development of the Mine and the designengineering and construction of a millconcentrator plant which will be capable ofprocessing 6000 tonnes of ore per day (the ldquoConcentrator Plantrdquo) TheConcentrator Plant will produce the Copper Concentrate and the NickelConcentrate The Proponent has scheduled to begin the development of the Mineand the construction of the Concentrator Plant in 2003 and estimates that the Mineand Concentrator Plant will require three years to construct at a cost ofapproximately $710 million

432 The Proponent

4321 shall not ship any Nickel Concentrate out of the Province aspermitted by the Nickel Concentrate Exemption Order before theDemonstration Plant Completion Date and

4322 shall ship Nickel Concentrate from the Concentrator Plant to theDemonstration Plant in sufficient quantities for the continuedoperation of the Demonstration Plant during the R amp D Programfollowing successful start up of the Concentrator Plant

16

44 Underground Exploration Program The Proponent shall undertake an undergroundexploration program which it estimates will cost $95 million and employ approximately 85people This program is intended to identify Sufficient Reserves at depth under the LeasedLands and if there are such Sufficient Reserves the Proponent shall develop a mining planfor the economic extraction of such Reserves The initial phase of this undergroundexploration program will be an advanced surface program which the Proponent estimateswill cost $20 million to commence in 2002 with completion targeted for 2006 Subsequentunderground exploration will be scheduled to ensure that Sufficient Reserves under theLeased Lands are available to sustain full operation of the Concentrator Plant during thetransition from open-pit operations to full underground mining operations if applicable

45 Underground Mine Development and Concentrator Plant Expansion If theunderground exploration program described in Section 44 identifies Sufficient Reservesas contemplated by Section 44 the Proponent shall commence the development of anunderground mine or mines on the Leased Lands and an expansion of the ConcentratorPlant in order to supply sufficient Nickel Concentrate to maintain the operation of theProcessing Plant at full capacity The Proponent estimates that this program will costapproximately $750 million and employ an aggregate of 800 people

46 Processing Plant

461 In order to maximize long-term benefits for the Province and the people of theProvince the Proponent shall use its best efforts through the R amp D Program todevelop a technically and economically feasible hydrometallurgical processtechnology for processing the Nickel Concentrate in the Province If suchtechnology is successfully developed the Proponent shall cause the designengineering and construction of and operate and maintain a hydrometallurgicalprocessing plant with a design capacity to produce annually approximately 50000tonnes of Finished Nickel Product together with associated cobalt and copperproducts (the ldquoHydromet Plantrdquo) The Proponent estimates that the HydrometPlant will have a capital cost of approximately $800 million and during the three-yearconstruction period will generate approximately 3000 person-years of employmentThe Proponent estimates that the Hydromet Plant will employ approximately 400people during operations

462 If pursuant to Section 47 it is determined that a Hydromet Plant is not technicallyor economically feasible the Proponent shall construct a commercialhydrometallurgical nickel-matte processing facility or other similar facilityincorporating a proven state of the art technology to produce Finished NickelProduct (the ldquoMatte Plantrdquo) The Matte Plant will have a design capacity toproduce annually approximately 50000 tonnes of Finished Nickel Product togetherwith associated cobalt and copper products The Proponent estimates the MattePlant will have a capital cost of approximately $670 million and during the estimatedthree-year construction period will generate approximately 2500 person-years ofemployment The Proponent estimates that the Matte Plant will employapproximately 350 people during operations

17

463 The Proponent has represented to the Government that its objective is to operatethe Processing Plant well beyond the life of the Mine Accordingly the Proponentundertakes to explore technically and economically feasible opportunities for theexpansion of the Processing Plant and to secure opportunities to supply theProcessing Plant with feed from world wide sources to fully utilize the Proponentrsquoslarge capital investment in the Processing Plant

464 The Proponent shall establish the Processing Plant at Argentia unlessenvironmental conditions at Argentia would make it not economically feasible toestablish the Processing Plant at Argentia and in such circumstances theProponent shall locate the Processing Plant at another site in the Province

47 Selection of Applicable Processing Plant

471 The Proponent shall use commercially reasonable efforts to deliver as soon aspossible but in any event shall deliver on or before 15 November 2008 theDecision and the Decision Materials to the Government and the Experts

472 If the Proponent has not on or before 30 June 2008 delivered to the Governmentthe Decision and the Decision Materials

4721 it shall forthwith meet with the Government to review on aconfidential basis the status of its efforts towards being able todeliver the Decision

4722 thereafter it shall promptly update the Government from time to timeon its efforts to be able to deliver the Decision and the outstandingissues relevant to whether the Decision will be to build the HydrometPlant or the Matte Plant and

4723 to the extent that the Proponent is not by 30 June 2008 in aposition to deliver the Decision which confirms that the Proponentintends to proceed with the construction of the Hydromet Plant theProponent shall use commercially reasonable efforts to developImplementation Plans for both a Hydromet Plant and a Matte Plantso that it will be able to deliver the Implementation Plan for theHydromet Plant or Matte Plant as applicable on or before 31December 2008

473 The Government may at any time after the earlier of the Decision Date or 30 June2008 give the Proponent notice in writing that it wishes to proceed with theappointment of the Experts When the Government gives notice to the Proponentrequiring the appointment of the Experts the Government and the Proponent shallthen forthwith agree upon the appointment of the Experts If the Government andthe Proponent cannot so agree within 15 days after the giving by the Governmentof such notice the appointment of the Experts shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter to

18

the Joint Committee or the Mediation Procedure referred to therein If the Expertsare appointed prior to the delivery by the Proponent of the Decision and theDecision Materials the Proponent shall provide to the Government and the Expertssuch data and information as is then available that will assist the Experts in theirreview under Section 475 The Proponent and the Government shall each pay50 of the fees and expenses of the Experts Before receiving the Decision theDecision Materials or any other information or data from the Proponent under thisAgreement the Experts shall first execute a confidentiality agreement containingsubstantially the same terms as provided for in Article 9

474 If in the Decision the Proponent confirms it intends to construct the Hydromet Plantthe Proponent shall deliver the Implementation Plan for the Hydromet Plant on orbefore 31 December 2008 and thereafter shall proceed diligently to complete thedetailed engineering for and construction of the Hydromet Plant in accordance withsuch Implementation Plan so that it shall be completed on or before 31 December2011

475 If in the Decision the Proponent confirms it intends to construct the Matte Plant theGovernment shall on or before the seventh Business Days after the Decision Datedeliver to the Proponent and the Experts a notice in writing (in this Section 475 theldquoGovernment Decisionrdquo) that the Government either (a) accepts the Decision tobuild the Matte Plant or (b) intends to refer such Decision to the Experts for reviewIf in the Government Decision the Government states it intends to refer theDecision to the Experts the Proponent shall promptly deliver to the Experts theDecision and the Decision Materials if it has not previously done so The Expertswill review the Decision the Decision Materials and any other information or datawhich the Experts deem appropriate or which the Government requests them toconsider and render their report (the ldquoExpertsrsquo Reportrdquo) within 30 days of the dateon which the Government delivers the Government Decision If the Governmentrequests the Experts to consider any other information or data in addition to theDecision Materials it shall provide to the Experts and the Proponent copies of suchrequest and any such information and data at the time it delivers the GovernmentDecision and the Proponent shall have the right within five Business Days tocomment on or respond to such information and data to the Experts with a copy tothe Government The Expertsrsquo Report shall determine whether in the opinion of theExperts it would be technically and economically feasible for the Proponent to buildthe Hydromet Plant together with reasons for such determination If the ExpertsrsquoReport determines that it is technically and economically feasible for the Proponentto build the Hydromet Plant the Proponent shall on or before 31 December 2008deliver to the Government an Implementation Plan for the Hydromet Plant andthereafter shall proceed diligently to complete the detailed engineering for andconstruction of the Hydromet Plant so that it shall be completed on or before 31December 2011 If the Expertsrsquo Report confirms that it would not be technically oreconomically feasible to build the Hydromet Plant the Proponent shall on or before31 December 2008 deliver to the Government an Implementation Plan for the MattePlant and thereafter shall proceed diligently to complete the detailed engineering forand construction of the Matte Plant in accordance with such Implementation Plan

19

so that it shall be completed on or before 31 December 2011 Subject to Section477 the Expertsrsquo Report shall be final and binding on the Government and theProponent

476 The determination as to whether the Proponent is proceeding diligently with thecompletion of the engineering work for and the construction of the Processing Plantfor completion on or before 31 December 2011 as required by Section 474 or475 shall be made annually on the anniversary date of the Decision Date by anEngineer who shall certify to both the Government and the Proponent as to whetherthe actual engineering work for and construction of the Processing Plant is onschedule with the applicable Implementation Plan

477 If there is a manifest error in the Expertsrsquo Report which if corrected would result ina different determination by the Experts the Expertsrsquo Report shall be referred backto the Experts for the purpose of forthwith correcting such manifest error changingthe determination in the Expertsrsquo Report and submitting a revised Expertsrsquo Reportto the Proponent and the Government

478 Where an Engineer is required to be appointed from time to time for the purposesof Section 476 or for determining the Commercial Production Date theConstruction Completion Date or the Demonstration Plant Completion Date theGovernment and the Proponent shall forthwith agree upon the appointment of suchEngineer If the Government and the Proponent cannot so agree within 15 daysof the Government or the Proponent giving the other notice requiring appointmentof an Engineer the appointment of the Engineer shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter tothe Joint Committee or the Mediation Procedure referred to therein The Proponentand the Government shall each pay 50 of the fees and expenses of any Engineer

48 Innovation Centre The Proponent shall enter into an agreement (the ldquoUniversityAgreementrdquo) with the University in form and content satisfactory to the Government on orbefore the Closing Date The University Agreement shall contain among other things theProponentrsquos commitments and intentions set out in Section 34

49 Industrial and Employment Benefits The Proponent shall execute the IEBA to beeffective 7 October 2002

410 IBAs The Proponent represents and warrants to the Government that it has entered intothe IBAs

411 VBN Undertaking Order The Proponent agrees to abide by and implement the terms andconditions contained in the VBN Undertaking Order

412 Corporate Income Tax The Proponent shall use its best efforts to negotiate and executewith the Government an agreement covering the matters set forth in this Section 412 andSection 68 (the ldquoTax Agreementrdquo) as soon as possible but in any event on or before theClosing Date The Tax Agreement will contain provisions which to the extent permitted by

20

law will result in an allocation to the Province for the purposes of Part IV of the FederalIncome Tax Regulations of the Proponentrsquos gross revenues from the sale or disposition ofnickel copper and cobalt products whether in intermediate or final form from the Project

413 Return of Concentrate

4131 In consideration of the Government granting the Exemption Orders the Proponentguarantees that it shall prior to Cessation of Mining Operations commenceshipping into the Province Replacement Concentrate for processing into FinishedNickel Product at the Processing Plant Such Replacement Concentrate shall beshipped to and processed by the Processing Plant in sufficient quantities to permitthe Processing Plant to operate continuously at a rate that will produce not less than25000 tonnes of Finished Nickel Product annually and such shipments shallcontinue at least until such time as the contained nickel and cobalt in theReplacement Concentrate shall have equalled the total quantity of contained nickeland cobalt in the Nickel Concentrate shipped out of the Province under the termsof the Nickel Concentrate Exemption Order and otherwise than under the provisionsof an Exemption Order

4132 The Proponent shall undertake the Assaying Procedures set out in Schedule 4132with respect to the Nickel Concentrate and the Replacement Concentrate

4133 The Proponent acknowledges that if it does not perform its contractual obligationsunder Section 4131 (a) the Province and the economy of the Province will suffersubstantial loss (b) the Government would not be properly compensated for its lossby monetary damages which therefore will not be considered an adequate remedyfor such breach and (c) the Government may at any time subsequent to suchbreach commence an action against the Proponent for any one or more of thefollowing remedies whether claimed as primary or secondary alternative relief

41331 an order for specific performance

41332 appropriate injunctive relief whether mandatory or prohibitory and

41333 monetary damages including for consequential and economic lossreflecting the substantial losses suffered by the Government and theeconomy of the Province as a result of such breach

The Proponent expressly waives any right to claim or argue that the Governmentcannot claim the relief set out in Sections 41331 41332 and 41333 in any suitcommenced by the Government against the Proponent for the Proponentrsquos failureto perform its obligations under Section 4131

21

414 Copper Processing in the Province

4141 The Government acknowledges that at the date hereof the quantity of coppercurrently identified in the mineralized zones on or under the Leased Lands togetherwith identified copper deposits elsewhere in the Province are not sufficient to justifythe construction and operation of a copper processing facility in the Province on aneconomically feasible basis

4142 If at any time in the future

41421 Sufficient Reserves of copper are discovered by the Proponent inthe Province (including on or under the Leased Lands) to makeeconomic the processing on a commercial basis of the CopperConcentrate or any other product containing the principal quantitiesof copper extracted from the Leased Lands into Finished CopperProduct in the Province the Proponent shall process such CopperConcentrate into Finished Copper Product in the Province or

41422 a third party establishes a facility in the Province for the commercialprocessing of copper concentrate the Proponent shall offer for saleits then available Copper Concentrate from the Concentrator Plantto such third party for processing in such facility on then prevailingcommercial terms and conditions subject to the Proponentrsquos thenexisting contractual obligations

4143 In the circumstances set out in Section 4142 the Proponent acknowledges thatthe Government has the right pursuant to Section 311(3) of the Mineral Act torescind the Copper Concentrate Exemption Order

415 Parties in Contract Change of Control and Assignment

4151 The Proponent covenants with the Government that without the prior Approval ofthe Government it

41511 shall not take or threaten or purport to take any action whether byway of contract corporate reorganization or arrangement orotherwise that would have the effect of transferring assigningsubletting or otherwise divesting itself of a majority interest in orControl of (a) the Project or (b) all or substantially all of theProponentsrsquo rights under this Agreement the Instruments theExemption Orders the Primary Production Order and subject toApplicable Laws the Mining Lease and

41512 shall not take or threaten or purport to take any action which directlyor indirectly results in a change of Control of VBNC to a party otherthan Inco

22

4152 Wherever pursuant to Section 4151 the Government is requested to grant itsApproval such Approval may be withheld by the Government in its sole andabsolute discretion for any reason whatsoever

4153 For bona fide tax or other corporate reasons the Proponent may without theApproval of the Government transfer assign sublet or otherwise divest to anAffiliate a majority interest in or Control of (a) the Project or (b) all or substantiallyall of the Proponentrsquos rights under this Agreement the Instruments the ExemptionOrders the Primary Production Order and subject to Applicable Laws the MiningLease Notwithstanding Section 111 no such transfer assignment sublet ordivestiture shall relieve the Proponent of its obligations hereunder or thereunder

4154 The Proponent shall promptly give written notice to the Government of any actionit takes under Section 4151 or 4153

416 Members of House of Assembly The Proponent undertakes to (a) ensure that nomember of the House of Assembly of the Province shall have any interest in thisAgreement and (b) use its best efforts to ensure that no Member of the House of Assemblyof the Province receives any benefit to arise herefrom or from any report study review oranalysis required to be made or submitted pursuant to this Agreement

417 Mining Lease VBNC shall execute the Mining Lease effective 30 September 2002

418 Proponentrsquos Financing The Proponent shall use best efforts to obtain the financingcontemplated by Section 1024 including without limitation the preparation of all feasibilitystudies required in order to obtain such financing

ARTICLE 5FORCE MAJEURE

51 Events of Force Majeure For the purposes of this Article 5 and subject to the exceptionsand qualifications below each of the following shall be an ldquoEvent of Force Majeurerdquo

511 acts of God or natural disasters adverse weather conditions or other similaroccurrences

512 acts of war (declared or undeclared) or conditions arising out of or attributable toany such acts of war revolutions insurrections civil strife formal or informalhostilities mob violence riots and similar disturbances blockades or any otherunlawful acts against public order or authority

513 strikes lockouts work stoppages or labour disturbances unless directly andproximately caused by an unlawful act or omission of the Proponent

514 (a) delay or failure by suppliers of labour transportation materials machineryequipment parts supplies utilities or services (b) contractorsrsquo or sub-contractorsrsquoshortage of or inability to obtain labour transportation materials machinery

23

equipment parts supplies utilities or services or (c) breakdown of equipmentmachinery or facilities unless any of the foregoing are directly and proximatelycaused by or result from an unlawful act or omission of the Proponent

515 accidents and

516 solely in respect of the Proponentrsquos obligations in Section 4131 a ProcessingRelated Reason provided that a Processing Related Reason shall not be an Eventof Force Majeure at any time after three years following Cessation of MiningOperations

52 Obligation to Perform In order to obtain relief for an Event of Force Majeure theProponent shall (a) use commercially reasonable efforts to (i) prevent the occurrence of(ii) perform its obligations in the face of and (iii) terminate any such Event of Force Majeure(other than the events described in Section 513 relied upon) and (b) give the Governmentwritten notice of the facts which the Proponent claims constitute an Event of Force Majeureas soon as reasonably practical upon becoming aware of their existence

53 Force Majeure Relief If the Proponent establishes that it is prevented from performingany of its obligations under this Agreement the Nickel Concentrate Exemption Order or theMatte Plant Exemption Order by reason of an Event of Force Majeure such obligations willbe suspended for the period of the existence of such Event of Force Majeure and theProponent will be entitled to an extension of all dates referred to in this Agreement theNickel Concentrate Exemption Order and the Matte Plant Exemption Order for a reasonableperiod of time that reflects (a) the period during which the Proponent is prevented fromperforming its obligations by reason of the Event of Force Majeure and (b) the impact thatsuch Event of Force Majeure has on the Project including without limitation shippingschedules and construction schedules that have been delayed by reason of such Event ofForce Majeure Even though the Proponentrsquos obligations will be suspended for suchreasonable period of time when the applicable Event of Force Majeure is no longerpreventing the Proponent from performing its obligations the Proponent will again beobliged to perform such obligations

ARTICLE 6GOVERNMENT UNDERTAKINGS

61 Aboriginal Agreements The Government represents and warrants that it has entered into(a) interim measures agreements with the Innu Nation and the LIA that include the VoiseyrsquosBay chapter of the respective land claims agreements and (b) the EMA

62 Electrical Rights and Provision of Power The Government shall cause Newfoundlandand Labrador Hydro or its successors to

621 provide to the Proponent electrical power for the Processing Plant at the lower of(a) the island industrial electrical rate or (b) any lower electrical rate that may be

24

offered from time to time by Newfoundland and Labrador Hydro or its successorsto its industrial customers in comparable circumstances and

622 ensure that Newfoundland and Labrador Hydro or its successors can supply to theProponent sufficient electrical power for the operation of the Processing Plant

63 Mining Lease The Government shall issue the Mining Lease effective 30 September2002

64 Exemption Orders The Government shall issue the Exemption Orders effective 30September 2002

65 Issue of Authorizations

651 Where the Proponent has submitted all information and data in accordance withApplicable Laws and required by the Government for it to issue or grant any permitauthorization order or other approval necessary for the Proponent to implement theProject or any part thereof (in this Section 65 the ldquoAuthorization(s)rdquo) theGovernment shall issue or grant any such Authorization on a timely basis

652 If the Government does not issue or grant an Authorization on a timely basis

6521 the Government shall grant the Proponent an extension of all datesreferred to in this Agreement the Nickel Concentrate ExemptionOrder and the Matte Plant Exemption Order for a reasonable periodof time that reflects (a) the period of delay in granting suchAuthorization and (b) the impact that such delay has on the Projectincluding without limitation shipping schedules and constructionschedules that will have been delayed by Governmentrsquos failure toissue or grant such Authorization on a timely basis and

6522 if as a result of the Governmentrsquos failure to issue or grant anAuthorization on a timely basis the completion date for theProcessing Plant is delayed and provided that the Proponentestablishes that it is likely it will ship out of the Province the totalvolume of contained nickel in the Nickel Concentrate permittedunder the Nickel Concentrate Exemption Order prior to the revisedcompletion date of the Processing Plant the Government shallamend the Nickel Concentrate Exemption Order to allow anadditional quantity of contained nickel in Nickel Concentrate to beshipped out of the Province which quantity will reflect thereasonable period of time of the extension referred to in Section6521

653 The Government shall not be responsible for any delays nor shall the Proponent beentitled to any relief under this Section 65 unless such delays are directly and

25

proximately caused by or result from an act or omission of the Government or adepartment regulatory body board agent or employee of the Government

66 Legislative Framework

661 The Government represents to the Proponent (and acknowledges that theProponent is relying upon such representation) that it shall maintain substantiallythe Legislative Framework for the duration of the Project subject to legislativeamendments contemplated in this Agreement and legislation of general applicationThe Government shall maintain the Legislative Framework consistent with thisAgreement subject to Governmental responsibilities including the responsibility forensuring proper management of the Provincersquos resources the protection andmaintenance of public health and safety and the protection of the environment TheGovernment acknowledges that this Agreement is consistent with current public lawand Governmental responsibilities

662 The Proponent represents to the Government (and the Proponent acknowledgesthat the Government in consideration of agreeing to maintain the LegislativeFramework has relied upon such representation) that the Proponent shall performits obligations set out in this Agreement the Instruments the Exemption Orders thePrimary Production Order and the Mining Lease

67 Special Project Orders The Government shall issue a Special Project Order or SpecialProject Orders under Section 70 of the Labour Relations Act (Newfoundland and Labrador)to ensure a stable labour relations environment throughout the construction phases of theProject This Order or these Orders shall include without limitation provisions such as nostrikes and lock-outs and the ability to designate the union organization and employerrsquosrepresentative for the purposes of collective bargaining

68 Corporate Income Tax The Government shall use best efforts to negotiate and executewith the Proponent the Tax Agreement as soon as possible but in any event on or beforethe Closing Date The Tax Agreement will contain provisions

681 whereby the Government will provide that the rate of the Provincersquos corporateincome tax applicable to the Proponent will be the lower of the ldquoall provincesaveragerdquo or the Provincersquos income tax rate

682 which to the extent permitted by law will result in an allocation to the Province forthe purposes of Part IV of the Federal Income Tax Regulations of the Proponentrsquosgross revenues from the sale or disposition of nickel copper and cobalt productswhether in intermediate or final form from the Project and

683 whereby the Government will undertake to indemnify the Proponent for any doubletaxation resulting from the allocation referred to in Section 682

26

69 Mining Tax Act At the next session of the House of Assembly of the Province theGovernment shall introduce and support legislation to amend the Mining Tax Act inaccordance with the Mining Tax Act Amendments

610 Primary Production Order The Government shall issue the Primary Production Ordereffective 30 September 2002

611 Industrial and Employment Benefits The Government shall execute the IEBA to beeffective 7 October 2002

ARTICLE 7PROPONENTrsquoS DEFAULT

71 Notice of an Event of Default Upon the happening of an Event of Default theGovernment may deliver to the Proponent a notice of default setting forth in reasonabledetail the nature of the Event of Default and if the Government intends to exercise its rightsunder Section 72 indicating the date upon which the Government intends to exercise suchrights

72 Termination Subject to an Event of Force Majeure or the provisions of Section 652where an Event of Default has occurred and in each of such cases and so often as anEvent of Default happens after giving the notice provided for in Section 71 theGovernment may at any time in its sole discretion do any one or more of the following (a)terminate this Agreement (b) terminate the Mining Lease (c) rescind the ExemptionOrders and (d) take action for any remedy at law or in equity

73 Release by Proponent and Proponentrsquos Indemnity The Proponent hereby releases anddischarges and agrees to indemnify and save harmless the Government from every claimof every nature whether in damages (including consequential or indirect damages) or notwhich may arise or be suffered by the Proponent or any Person claiming through or underthe Proponent by reason of or as a result of anything done by the Government or anysuccessor or assign claiming through or under the Government under the provisions ofSection 72

ARTICLE 8DISPUTE RESOLUTION

81 Dispute Resolution Any dispute or difference between the parties hereto arising

811 as to whether a Processing Related Reason exists

27

812 as to the selection of an Engineer or firm of Engineers the Experts or an umpireunder Schedule 4132

813 under Section 45 as to whether the Underground Exploration Program hasidentified Sufficient Reserves under the Leased Lands

814 as to the determination of the date of Cessation of Mining Operations

815 as to whether commercial processing is economic as contemplated by Section41421

816 as to then prevailing commercial terms and conditions as contemplated by Section41422

817 under Section 51 as to whether an Event of Force Majeure exists

818 under Section 53 as to whether an Event of Force Majeure prevents the Proponentfrom performing any of its obligations under this Agreement

819 under Section 53 or Section 652 as to the reasonable period of time for theextension of the dates of performance of the Proponentrsquos obligations

8110 under Section 6522 the additional quantity of contained nickel in NickelConcentrate to be shipped out of the Province or

8111 as to whether the Proponent is complying with its obligations under Section 52

shall in each case be resolved in the manner provided for in Schedule 81

ARTICLE 9CONFIDENTIAL INFORMATION

91 Confidential Information The Government

911 acknowledges that information (the Information) supplied to it by or on behalf ofthe Proponent pursuant to or in connection with this Agreement or the Instrumentsincluding without limitation information provided pursuant to or in connection withSections 422 471 472 475 52 and 81 is of a financial commercialscientific or technical nature and is supplied in confidence and

912 subject to Sections 93 and 94 shall keep the Information confidential and shallnot use or disclose the Information to any third party without the Approval of theProponent and in doing so shall use the same care as it applies to avoid disclosureor dissemination of its own confidential information to prevent the disclosure ofInformation to any third party

28

92 Effect of Disclosure The Government acknowledges that disclosure of the Informationcontrary to the provisions of this Article 9 could reasonably be expected to921 harm significantly the competitive position or interfere significantly with the

negotiating position of the Proponent

922 result in similar information no longer being supplied by or on behalf of theProponent to the Government when it is in the public interest that similar informationcontinued to be supplied and

923 result in material financial loss to the Proponent or result in material financial gainto competitors of the Proponent and other Persons

93 Approval The Government may disclose Information if Approved by the Proponent

94 Permitted Disclosure of Information The provisions of this Article 9 shall not apply toInformation which

941 is now or which hereafter through no act or omission of the Government becomesgenerally known or available to the public without breach of this Agreement

942 after disclosure to the Government becomes generally known or available to thepublic by publication or otherwise through no act or omission of the Government

943 the Government can establish was in its possession at the time of disclosure andwas not previously acquired directly or indirectly from the Proponent

944 is disclosed to the Government by a third party on a non-confidential basis whichparty to the Knowledge of the Government is not prohibited from disclosing suchInformation to the Government by any legal contractual or fiduciary obligation towhich such party is bound or subject or

945 is required to be disclosed by law

95 Remedy Without limiting the Proponentrsquos rights and recourses for a breach by theGovernment of its obligations in this Article 9

951 the Government acknowledges that the Proponent shall suffer irreparable harm ifthe Government discloses Information contrary to the provisions of this Article 9and unless prohibited by law the Proponent shall be entitled to an injunction orinjunctions to prevent such disclosure

952 the Government shall be liable for and shall indemnify and save the Proponentharmless from and against costs losses damages and claims that it may sufferpay incur or be liable for as a result of any breach by the Government of thisArticle 9 and

29

953 in the event there are any measures which the Government can take to ensurecompliance with the provisions of Section 912 the Proponent shall be relieved ofthe obligation to provide information of the type with respect to which the breachoccurred until the Government has taken such measures

ARTICLE 10CONDITIONS CLOSING AND TERMINATION

101 Conditions for the Benefit of the Government Subject to Section 1061 the obligationsof the Government in this Agreement are subject to the satisfaction of or compliance withat or prior to the Time of Closing each of the following conditions

1011 the representations and warranties of the Proponent made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Proponent at or prior to the Time of Closing shallhave been performed the Proponent shall not be in breach of any agreement onits part contained in this Agreement at the Time of Closing and the Governmentshall have received a certificate confirming the foregoing signed for and on behalfof the Proponent in form and content satisfactory to the Government

1012 the University Agreement shall have been executed by the Proponent and a copythereof shall have been delivered to the Government

1013 the Tax Agreement shall have been executed by the Proponent and delivered to theGovernment and

1014 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

102 Conditions for the Benefit of the Proponent Subject to Section 1061 the obligationsof the Proponent in this Agreement are subject to the satisfaction of or compliance with ator prior to the Time of Closing each of the following conditions

1021 the representations and warranties of the Government made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Government at or prior to the Time of Closingshall have been performed the Government shall not be in breach of anyagreement on its part contained in this Agreement at the Time of Closing and theProponent shall have received a certificate confirming the foregoing signed for andon behalf of the Government in form and content satisfactory to the Proponent

30

1022 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

1023 the Tax Agreement shall have been executed by the Government and delivered bythe Government to the Proponent

1024 the Proponent shall have secured financing on reasonable commercial terms toenable it to develop the Mine and construct the Concentrator Plant and

1025 the Mining Tax Act Amendments shall have become law

103 Closing Notice If the Proponent (a) wishes to waive the condition set out in Section1024 or (b) has obtained the financing contemplated by Section 1024 it shall forthwithdeliver to the Government a notice (the ldquoClosing Noticerdquo) confirming that it has eitherwaived the condition set out in Section 1024 or that such condition has been satisfied

104 Deliveries and Closing1041 The Closing shall take place at the Time of Closing on the Closing Date at a

location to be agreed by the parties

1042 At the Closing

10421 the Proponent shall deliver to the Government the certificatecontemplated by Section 1011 and if not previously delivered theexecuted University Agreement and the executed Tax Agreementand

10422 the Government shall deliver to the Proponent the certificatecontemplated by Section 1021 and if not previously delivered theexecuted Tax Agreement

105 Termination This Agreement and the IBEA may be terminated at any time prior to theTime of Closing1051 by agreement of the Government and the Proponent

1052 by the Government if the conditions set out in Section 101 have not been satisfiedor waived by the Government or the Closing Notice has not been delivered to theGovernment on or before 31 March 2003 or

1053 by the Proponent if the conditions set out in Section 102 have not been satisfiedor waived by the Proponent (except the condition set out in Section 1024 in theevent the Proponent has delivered the Closing Notice)

106 Effect of Agreement and Termination

1061 Notwithstanding Section 1062 and subject to Section 1063 the Government andthe Proponent shall be bound by the provisions of Sections 41 421 422 410

31

411 412 415 416 417 418 61 63 64 65 66 67 68 69 610 and 611and Articles 5 8 9 and 11 effective as of and from the date of execution of thisAgreement

1062 Subject to Section 1061 the obligations of the Proponent and the Government inthis Agreement shall be effective as of and from the Time of Closing

1063 If this Agreement and the IEBA are terminated in accordance with the provisions ofSection 105 this Agreement and the IEBA shall thereafter become null and voidand have no effect and no party shall have any liability to the other except

10631 the obligations contained in Sections 41421 411 69 and Article9 hereof and

10632 the liability of a party in respect of its breach of this Agreement andthe IEBA prior to such termination

all of which shall survive such termination for a period of twelve months followingsuch termination

ARTICLE 11GENERAL MATTERS

111 Enurement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease shall be binding upon and shall enure to the benefitof the parties hereto the successors and assigns of the Government and the successorsand permitted assigns of the Proponent Any such assignment permitted by this Agreementshall become effective only when the assignee executes with the Government aninstrument whereby it agrees to be bound by and perform all of the Proponentrsquos obligationsunder this Agreement the Instruments the Exemption Orders the Primary ProductionOrder and the Mining Lease Subject to Section 4153 from and after the execution ofsuch instrument the assignor shall be relieved of and released from all its obligations underthis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease with effect from and after the date of execution of such instrument

112 Counterparts This Agreement and the other documents referred to herein andorotherwise required to complete the transactions contemplated hereby may be executed intwo or more counterparts including by facsimile each of which shall be deemed an originaland all of which together shall constitute one and the same instrument

113 Notices All notices requests demands and other communications hereunder shall bedeemed to have been duly given if in writing and either delivered personally sent byfacsimile transmission or by air courier service to the addresses designated below or suchother addresses as may be designated in writing by notice given hereunder and shall be

32

effective upon personal delivery or facsimile transmission thereof with proof of transmissionreceipt or upon delivery by air courier serviceIf to VBNC Voiseyrsquos Bay Nickel Company Limited

Suite 700 Baine Johnston Centre10 Fort William PlaceSt Johnrsquos NewfoundlandA1C 1K4Attention PresidentFacsimile (709) 758-8820

If to Inco Inco Limited145 King Street WestSuite 1500Toronto OntarioM5H 4B7Attention PresidentFacsimile (416) 361-7734

If to the Government Government of Newfoundland amp LabradorDepartment of Mines amp EnergyNatural Resources Building7th Floor 50 Elizabeth AvenueSt Johnrsquos NewfoundlandA1A 1W5Attention The MinisterFacsimile (709) 729-0059

114 Legal Fees In the event of any dispute or controversy between the Proponent on the onehand and the Government on the other hand relating to the interpretation of this Agreementor to the transactions contemplated herein the prevailing party shall be entitled to recoverfrom the other party reasonable legal fees and expenses incurred by the prevailing partySuch award shall include reasonable post judgment legal fees and costs

115 Payment of Fees and Expenses Each party hereto shall pay its own fees expenses anddisbursements incurred in connection with this Agreement and the transactionscontemplated hereby and all other costs and expenses incurred in its performance andcompliance with all conditions to be performed hereunder and thereunder

116 Time of Essence Time is of the essence of this Agreement

117 Further Assurances Each of the parties shall promptly do make execute deliver orcause to be done made executed or delivered all such further acts documents and thingsas the other parties hereto may reasonably require from time to time for the purpose ofgiving effect to this Agreement and the transactions contemplated hereby and shall usereasonable efforts and take all such steps as may be reasonably within its power toimplement to their full extent the provisions hereof and thereof

33

118 Public Notices No press release or other announcement concerning the transactionscontemplated by this Agreement shall be made either by the Proponent or the Governmentwithout the prior Approval of the other (such Approval not to be unreasonably withheld)provided however that the Proponent may without such Approval make such disclosureif the same is required by law or any stock exchange on which any of the securities of theProponent or any of its Affiliates are listed or by any securities commission or other similarregulatory authority having jurisdiction over the Proponent or any of its Affiliates and if suchdisclosure is required the Person making the disclosure shall use best efforts to give priororal or written notice to the Government and if such prior notice is not possible to givesuch notice immediately following the making of such disclosure Notwithstanding theforegoing the Proponent acknowledges that the Government will make this Agreement andthe Schedules hereto public

119 Independent Legal Advice Each of the parties acknowledges having obtained its ownindependent legal advice with respect to this Agreement and the transactions contemplatedhereby to the fullest extent deemed necessary by each party prior to its execution anddelivery Furthermore the parties acknowledge that neither acted under any duress innegotiating drafting and executing this Agreement the Instruments and any documentscontemplated hereby There shall be no presumption that any ambiguity in this Agreementthe Instruments and any documents contemplated hereby be resolved in favour of any ofthe parties

1110 Compliance with Laws Without limiting the generality of any other covenant herein theProponent shall at its own cost and expense comply with and shall use best efforts toensure that all Persons for whom the Proponent is at law responsible comply with allApplicable Laws in connection with the Project

1111 Entire Agreement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease set forth the entire agreement and all thecovenants promises assurances agreements representations conditions warrantiesstatements and understandings (collectively ldquoRepresentationsrdquo) between the partiesconcerning the subject matter hereof No Representations are made by the Governmentto the Proponent or by the Proponent to the Government except as expressly set out in thisAgreement the Instruments the Exemption Orders the Primary Production Order and theMining Lease For greater certainty the Statement of Principles between the Governmentand the Proponent dated as of 11 June 2002 shall have no application to the parties or thematters contemplated by this Agreement after the date hereof and is replaced entirely bythis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease

1112 Good Faith Each of the Government and the Proponent shall at all times exercise all itsrights hereunder in a manner consistent with good business practices and shall act in goodfaith

1113 Waiver The failure of any party hereto to insist in any one instance upon the strictperformance by another party hereto of its obligations hereunder the Instruments theExemption Orders the Primary Production Order and the Mining Lease or the failure of any

34

party hereto to exercise any right option or remedy shall not constitute a waiver orrelinquishment for the future of any such obligation right option or remedy nor shall itconstitute a waiver of a subsequent breach No covenant or condition of this Agreementmay be waived by any party hereto except by the written consent of that party andforbearance or indulgence by that party in any regard whatsoever for no matter how longshall not constitute a waiver of such covenant or condition and until such covenant orcondition has been performed or waived in writing that party shall be entitled to invoke anyremedy available to that party under this Agreement the Instruments the ExemptionOrders the Primary Production Order and the Mining Lease despite its forbearance orindulgence

1114 No Partnership Joint Venture or Agency The Government and the Proponent expresslydisclaim any intention to create a partnership joint venture or joint enterprise It isunderstood acknowledged and agreed that nothing contained in this Agreement nor anyacts of the parties shall constitute or be deemed to constitute the Government and theProponent as partners joint venturers or principal and agent in any way or for any purpose

THE HONOURABLE THE PREMIER

THE HONOURABLE THE MINISTER OFMINES AND ENERGY

THE HONOURABLE THE MINISTER OFLABRADOR AND ABORIGINAL AFFAIRS

INCO LIMITED

ByChairman and Chief Executive Officer

VOISEYrsquoS BAY NICKEL COMPANY LIMITED

ByPresident

SCHEDULE 11ANICKEL CONCENTRATE EXEMPTION ORDER

This document can be found at the following web address httpwwwgovnfcahoaregulationsrc020066htm

2

ldquoApprovalrdquo means express approval or concurrence in writing and ldquoApproverdquo andldquoApprovedrdquo shall be construed accordingly

ldquoBusiness Dayrdquo means any day other than a Saturday Sunday or statutory holiday in theProvince

ldquoCessation of Mining Operationsrdquo means the date by which due to the lack of SufficientReserves the continued operation of the Mine and Concentrator Plant would no longer beeconomically feasible

ldquoClosingrdquo means the execution and delivery of the Instruments and the coming into effectof this Agreement and the Instruments in their entirety as contemplated by Article 10

ldquoClosing Daterdquo means the date which is the fifth Business Day after the date of deliveryof the Closing Notice by the Proponent to the Government or such earlier date as theparties agree

ldquoClosing Noticerdquo has the meaning ascribed thereto in Section 103

ldquoCommercial Production Daterdquo means the date to be certified by the Proponent and atthe option of the Government confirmed by an Engineer upon which the Hydromet Planthas operated at an annualized production rate of 30000 tonnes of Finished Nickel Productfor a period of ninety consecutive days

ldquoConcentrator Plantrdquo has the meaning ascribed thereto in Section 431

ldquoConstruction Completion Daterdquo means the date to be certified by the Proponent andat the option of the Government confirmed by an Engineer upon which the constructionof the Processing Plant has been completed in accordance with the Proponentrsquos plans andspecifications therefor

ldquoControlrdquo means with respect to a Person the ability directly or indirectly through one ormore intermediaries to direct or cause the direction of the management and policies ofsuch Person through

(a) the legal or beneficial ownership of voting securities partnership interests or otherequivalent ownership interests in such Person

(b) the right or ability to appoint or elect a majority of the directors or individuals of acomparable position of such Person

(c) the right or ability to appoint the management of such Person or(d) a contract an operating agreement a management agreement a voting trust or

other similar agreement

and ldquoControlledrdquo means with respect to a Person being subject to the Control of another

3

ldquoCopper Concentraterdquo means the intermediate concentrate or similar product producedby the Concentrator Plant containing the principal quantities of copper from ore extractedor removed from the Leased Lands

ldquoCopper Concentrate Exemption Order means the Copper Concentrate ExemptionOrder in the form of Schedule 11B

ldquoDecisionrdquo means the written decision to be delivered by the Proponent to the Governmentas to whether the Proponent intends to engineer and construct the Hydromet Plant or theMatte Plant

ldquoDecision Daterdquo means the date of delivery of the Decision

ldquoDecision Materialsrdquo means the Feasibility Study and all other information and data in theProponentrsquos possession or control (including information and data generated by its advisorsand consultants) which form the basis for the Proponent making the Decision (includingsuch data and information subsequently available to or the existence of which issubsequently known by the Proponent) in form which will permit the Government and theExperts to undertake the review of the Decision and the reasons therefor as contemplatedby Section 475 Such data and information shall include without limitation reports onmetallurgical test work proposed flowsheets detailed capital and operating cost estimatesand a detailed economic analysis

ldquoDemonstration Plantrdquo means the facility at Argentia where hydrometallurgical processingtechnology will be tested including any part or sub-process of such technology themechanical or processing equipment required therefor and any pilot plant testing or similarcampaigns to determine the technical and economic feasibility of such technology

ldquoDemonstration Plant Completion Daterdquo means the date as certified by the Proponentand at the option of the Government confirmed by an Engineer upon which theconstruction of the Demonstration Plant has been completed in accordance with theProponentrsquos plans and specifications therefor and is ready to test Nickel Concentrate

ldquoEMArdquo means the Environmental Management Agreement entered into among theGovernment the Government of Canada the LIA and Innu Nation dated as of 22 July2002

ldquoEngineerrdquo means an individual independent of and acceptable to both the Proponent andthe Government who

(a) is an engineer with at least ten years of experience in base metals primaryprocessing engineering and the engineering design and construction managementof base metals primary processing plants

(b) has the requisite experience to make the relevant determination confirmation orreport to be made or given pursuant to this Agreement and

4

(c) is a member in good standing of a professional association where ldquoprofessionalassociationrdquo means a self-regulatory organization of engineers that

(i) has been given authority or recognition by statute

(ii) admits members primarily on the basis of their academic qualifications andexperience

(iii) requires compliance with the professional standards of competence andethics established by the organization and

(iv) has disciplinary powers including the power to suspend or expel a member

ldquoEvent of Bankruptcyrdquo means

(a) the entry of a decree or order by a court having jurisdiction adjudging the Proponenta bankrupt or insolvent or approving as properly filed a petition seekingreorganization or winding-up of the Proponent under the Companiesrsquo CreditorsArrangement Act (Canada) the Bankruptcy and Insolvency Act (Canada) or theWinding-Up Act (Canada) or any other bankruptcy insolvency or analogous lawsor issuing sequestration or process of execution against the Proponent or anysubstantial part of its property or ordering the winding-up or liquidation of its affairsand the continuance of any such decree or order or appointment unstayedundischarged and in effect for a period of 60 days from the date thereof

(b) the institution by the Proponent of proceedings to be adjudicated bankrupt orinsolvent or the consent by it to the institution of bankruptcy or insolvencyproceedings against it or the filing by it of a petition or answer or consent seekingreorganization or relief under the Companiesrsquo Creditors Arrangement Act (Canada)the Bankruptcy and Insolvency Act (Canada) or the Winding-Up Act (Canada) orany other bankruptcy insolvency or analogous laws or the consent by it to the filingof any such petition or to the appointment of a receiver of the Proponent or of anysubstantial part of its property or the making by it of a general assignment for thebenefit of creditors or the Proponentrsquos admission in writing of its inability to pay itsdebts generally as they become due or the Proponent taking such action infurtherance of any of such aforementioned purposes or

(c) whenever a custodian receiver receiver and manager sequestrator liquidatortrustee agent for a secured creditor or other Person with similar powers isappointed for any substantial part of the Project whether by a court or by extra-judicial means unless such custodian receiver receiver and manager sequestratorliquidator trustee or agent is removed within 60 days of such appointment

ldquoEvent of Defaultrdquo means any one or more of the following

(a) an Event of Bankruptcy has occurred with respect to the Proponent

5

(b) the Proponent is wound up its constating documents or by-laws are forfeited orsurrendered or the corporate or other existence of the Proponent is otherwiseterminated

(c) the Proponent is in breach of its obligations in Section 415 or

(d) subject to an Event of Force Majeure andor Section 652

(i) the Decision has not been delivered by 15 November 2008

(ii) the applicable Implementation Plan has not been delivered as required bySection 474 or 475

(iii) the Processing Plant has not been completed on or before 31 December2011 or

(iv) an Engineer has determined that the Proponent is not proceeding diligentlyto complete the engineering work for and the construction of the ProcessingPlant so that it will be completed on or before 31 December 2011 asrequired by Section 474 or 475

ldquoEvent of Force Majeurerdquo has the meaning ascribed thereto in Section 51

ldquoExemption Ordersrdquo means collectively the Nickel Concentrate Exemption Order theCopper Concentrate Exemption Order and the Matte Plant Exemption Order

ldquoExpertsrdquo means collectively (a) an Engineer or firm of Engineers who will make thetechnical feasibility review of the Decision and (b) a recognized third party financial expertindependent of the Government and the Proponent who will make the financial feasibilityreview of the Decision and who will jointly deliver the Expertsrsquo Report if requested by theGovernment pursuant to Section 475 The Experts shall be selected at the time and in themanner provided for in Section 473

ldquoExpertsrsquo Reportrdquo has the meaning ascribed thereto in Section 475

ldquoFeasibility Studyrdquo means the study undertaken by or on behalf of the Proponentcontaining the technical and economic evaluations which form the basis for the Decision

ldquoFinished Copper Productrdquo means finished copper product(s) having a copper contentof not less than 99

ldquoFinished Nickel Productrdquo means finished nickel product(s) having a nickel content of notless than 998

ldquoGovernmentrdquo means the Government of the Province

6

ldquoGovernment Entityrdquo means (a) any federal provincial state regional municipal localor other government governmental or public department commission board bureau oragency whether domestic or foreign (b) any subdivision agency commission board orauthority of any of the foregoing or (c) any quasi governmental or private body exercisingany regulatory expropriation or taxing authority under or for the account of any of theforegoing in each case which has jurisdiction in respect of the Project or any part thereof

ldquoHydromet Plantrdquo has the meaning ascribed thereto in Section 461

ldquoIBAsrdquo means collectively the Impacts and Benefits Agreements made as of 29 July 2002between the Proponent and each of Innu Nation and the LIA without any amendment orvariation

ldquoIEBArdquo means the Industrial and Employment Benefits Agreement in the form set out inSchedule 49

ldquoImplementation Planrdquo means a detailed description of and time schedule for thecompletion of the engineering work for and the construction of the Processing Plant by 31December 2011

ldquoIncordquo means Inco Limited a corporation organized under the laws of Canada

ldquoInformationrdquo has the meaning ascribed thereto in Section 911

ldquoInnovation Centrerdquo has the meaning ascribed thereto in Section 34

ldquoInnu Nationrdquo means Innu Nation a corporation incorporated under the laws of Canada

ldquoInstrumentsrdquo means collectively the University Agreement the Tax Agreement and theIEBA

ldquoLeased Landsrdquo means the lands described in Schedule ldquoArdquo to the Mining Lease asamended from time to time

ldquoLegislative Frameworkrdquo means the Applicable Laws of the Province in existence as ofthe date hereof applicable to the Project or any part thereof

ldquoLIArdquo means the Labrador Inuit Association a corporation incorporated under the laws ofthe Province

ldquoMatterdquo means any form of granular nickel in matte product containing not less than 50nickel which can be processed by the Matte Plant to produce Finished Nickel Product

ldquoMatte Plantrdquo has the meaning ascribed thereto in Section 462

7

ldquoMatte Plant Exemption Order means the Matte Plant Exemption Order in the form ofSchedule 11C

ldquoMinerdquo means collectively (a) the open pit mine or mines to be developed by the Proponentfor the extraction of the mineral ores located on the Leased Lands and (b) the undergroundmine or mines as contemplated by Section 45 for the extraction of the mineral ores atdepth located under the Leased Lands

ldquoMineral Actrdquo means the Mineral Act (Newfoundland and Labrador) and the regulationsthereunder

ldquoMining Leaserdquo means the Mining Lease in the form of Schedule 63

ldquoMining Tax Actrdquo means the Mining and Mineral Rights Tax Act (Newfoundland andLabrador) and the regulations thereunder

ldquoMining Tax Act Amendmentsrdquo means the proposed amendments to the Mining Tax Actset out in Schedule 69

ldquoNickel Concentraterdquo means the intermediate concentrate or similar product produced bythe Concentrator Plant containing the principal quantities of nickel and cobalt from oreextracted or removed from the Leased Lands

ldquoNickel Concentrate Exemption Order means the Nickel Concentrate Exemption Orderin the form of Schedule 11A

ldquoPersonrdquo means any individual partnership limited partnership joint venture syndicatesole proprietorship company or corporation with or without share capital unincorporatedassociation trust trustee executor administrator or other legal personal representativeor Government Entity however designated or constituted

ldquoPrimary Production Orderrdquo means the Primary Production Order in the form of Schedule610

ldquoProcessing Plantrdquo means either the Hydromet Plant or the Matte Plant which theProponent shall construct and operate in the Province as contemplated by Section 46

ldquoProcessing Related Reasonrdquo means any situation where the Proponent is unable tomeet its obligations under Section 4131 as a result of either (a) the unavailability forwhatever bona fide reason of Replacement Concentrate or (b) the unavailability ofReplacement Concentrate on reasonable commercial terms including without limitationwhere the terms relating to price or specifications would make it not economically ortechnically feasible for processing at the Processing Plant

ldquoProjectrdquo has the meaning ascribed thereto in Section 31

8

ldquoProponentrdquo means collectively VBNC Inco their respective Affiliates or any Personwhich (as permitted by this Agreement) individually or together with any of them by way ofpartnership joint venture sub-contract or otherwise holds or is entitled to a majority interestin or Control of the Project or is the operator of the Project and their respective successorsand permitted assigns

ldquoProvincerdquo means the Province of Newfoundland and Labrador Canada

ldquoR amp D Programrdquo has the meaning ascribed thereto in Section 35

ldquoReplacement Concentraterdquo means any product containing nickel or cobalt or bothderived from ores or any other source of nickel or cobalt or both mined extracted orproduced outside the Province that in each case does not represent Finished NickelProduct but which can be further processed at the Processing Plant to produce FinishedNickel Product

ldquoSufficient Reservesrdquo means the estimated quantities of ldquoProven Mineral Reservesrdquo orldquoProbable Mineral Reservesrdquo or both within the meaning of National Instrument 43-101ldquoStandards of Disclosure for Mineral Projectsrdquo (as amended from time to time) determinedby the Proponent in accordance with its standard methodologies and assumptions for suchestimates

ldquoTax Agreementrdquo means the Tax Agreement to be entered into between the Governmentand the Proponent as contemplated by Sections 412 and 68

ldquoTime of Closingrdquo means 1000 orsquoclock in the morning in the Province on the ClosingDate

ldquoUnderground Exploration Programrdquo means the underground exploration programcontemplated by Section 44

ldquoUniversityrdquo means Memorial University of Newfoundland

ldquoUniversity Agreementrdquo means the agreement to be entered into between the Proponentand the University as contemplated by Section 48

ldquoVBN Undertaking Orderrdquo means the Voiseyrsquos Bay Nickel Company Limited Mine and MillUndertaking Order under the Environmental Assessment Act (Newfoundland and Labrador)dated 5 August 1999 (OC 99-286) as amended from time to time and

ldquoVBNCrdquo means Voiseyrsquos Bay Nickel Company Limited a corporation incorporated underthe laws of the Province

9

12 Schedules

The documents attached hereto and identified below shall form an integral part of thisAgreement

Schedule 11A - Nickel Concentrate Exemption OrderSchedule 11B - Copper Concentrate Exemption OrderSchedule 11C - Matte Plant Exemption OrderSchedule 49 - IEBASchedule 4132 - Assaying ProceduresSchedule 63 - Mining LeaseSchedule 69 - Mining Tax Act AmendmentsSchedule 610 - Primary Production OrderSchedule 81 - Dispute Resolution Procedures

13 Subdivisions Unless otherwise stated a reference herein or in a Schedule by numericalor alphabetical designation to an Article Section Subsection Paragraph Subparagraphor Schedule shall refer to the Article Section Subsection Paragraph Subparagraph orSchedule bearing that designation in this Agreement or in a Schedule

14 Headings The division of this Agreement into Articles Sections SubsectionsParagraphs and Subparagraphs and the insertion of headings are for convenience ofreference only and shall not affect the construction or interpretation of this Agreement

15 Number and Gender Words importing the singular shall include the plural and vice versaand words importing a particular gender shall include all genders The use of the neutersingular pronoun to refer to a party is deemed a proper reference The necessarygrammatical changes required to make the provisions of this Agreement apply shall in allinstances be assumed as though in each case fully expressed

16 Statutes Regulations Rules and Orders Any reference in this Agreement to all or anypart of any statute regulation rule or order shall unless otherwise stated be a referenceto that statute regulation rule or order or the relevant part thereof as amendedsubstituted replaced or reenacted from time to time

17 Business Day If the day on which any act or payment is required to be done or madeunder this Agreement is a day which is not a Business Day then such act or payment shallbe performed or made on the next following Business Day

18 Contract Always Speaking With the exception of the representations and warranties ofthe parties set out in Article 2 and any estimates referred to in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic and relatedbenefits and costs of facilities referred to in this Agreement made by the Proponent wherea matter or thing is expressed in the present tense it shall be applied to the circumstancesas they arise

10

19 Governing Law and Choice of Forum This Agreement shall be interpreted inaccordance with the laws in force in the Province subject to any applicable federal laws andfor all purposes this Agreement shall be treated as a Newfoundland and Labrador contractThe Proponent irrevocably submits and attorns to the exclusive jurisdiction of the courts ofthe Province

110 Construed Covenants Each obligation or agreement of this Agreement (other than therepresentations and warranties of the parties) even though not expressed as a covenantis to be construed as a covenant

111 Inconsistency or Conflict Except where otherwise provided either expressly or bynecessary implication in this Agreement a Schedule hereto or any Instrument in the eventof any inconsistency or conflict between any such Schedule or Instrument and any provisioncontained in this Agreement the provision of this Agreement shall prevail to the extent ofthe inconsistency or conflict

112 Severability If any provision of this Agreement or the application thereof to any Personor circumstance is to any extent held or rendered invalid void illegal or unenforceablefor any reason then the particular provision

1121 shall be deemed to be independent of and severed from the remainder of thisAgreement and all the other provisions of this Agreement shall neverthelesscontinue in full force and effect and

1122 shall continue to be applicable and enforceable to the fullest extent permitted by lawagainst any Persons and in any circumstances other than those as to which it hasbeen held or rendered invalid void illegal or unenforceable

If a severance occurs under this Section 112 the parties shall use their respective bestefforts to negotiate in good faith an enforceable replacement provision that to the greatestextent possible reflects the intent or serves the purpose of the severed provision

113 Currency All references in this Agreement to currency are to Canadian dollars

114 Knowledge In this Agreement where ldquoKnowledgerdquo of a party is referred to

1141 in respect of the Proponent it shall mean the actual knowledge of the executiveofficers of the Proponent after due inquiry in respect thereof and

1142 in respect of the Government it shall mean the actual knowledge of the responsibleexecutives of the applicable department of Government after due inquiry in respectthereof

11

ARTICLE 2REPRESENTATIONS AND WARRANTIES

21 Proponentrsquos Representations and Warranties Acknowledging that the Government isrelying on such representations and warranties VBNC and Inco jointly and severallyrepresent and warrant to the Government that

211 each is a corporation which has been duly incorporated or organized as applicableunder the laws of its jurisdiction of incorporation or organization as applicable andis validly existing under such laws

212 Inco is extra-provincially registered in the Province

213 each has all necessary corporate power authority and capacity

2131 to cause the design engineering and construction of and to operateand maintain all parts of the Project and

2132 to enter into this Agreement and the Instruments and to perform itsrespective obligations herein and therein

214 the execution and delivery of this Agreement and each of the Instruments and theconsummation of the transactions contemplated herein and therein by each ofthem have been duly authorized by all necessary corporate action on the part ofeach of them

215 neither is a party to bound or affected by or subject to any indenture mortgagelease agreement instrument charter or by-law provision which with or without thegiving of notice or the lapse of time or both would be violated contravened orbreached by or under which default would occur as a result of the executiondelivery or performance of this Agreement or any of the Instruments or theconsummation of any of the transactions provided for in any of them

216 neither is bound or affected by or subject to any Applicable Law which with orwithout the giving of notice or the lapse of time or both would be violatedcontravened or breached by or under which default would occur as a result of theexecution delivery or performance of this Agreement or any of the Instruments orthe consummation of any of the transactions provided for in any of them

217 no approval authorization consent permit or other action by or filing with anyGovernment Entity is required in connection with the execution and delivery of thisAgreement or any of the Instruments and the performance of their respectiveobligations hereunder or thereunder except as otherwise stated herein

218 there is no suit action litigation arbitration proceeding or proceeding by aGovernmental Entity including appeals and applications for review in progresspending or to the Knowledge of either of them threatened against or involving

12

either of them or any judgment decree injunction or order of any court or arbitratorwhich could adversely affect their capacity or power to execute and deliver thisAgreement or any of the Instruments or to consummate the transactionscontemplated herein or therein or which could materially adversely affect theirrespective assets financial condition or future prospects

219 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of each of them enforceable against them inaccordance with their respective terms except as limited by (a) applicablebankruptcy laws or laws affecting the enforcement of creditorsrsquo rights generally and(b) the general principles of equity

2110 all references to estimates made by Inco and VBNC in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic andrelated benefits and costs of facilities are made as of the date of this Agreementhave been determined by them based upon information available at the date of thisAgreement and have been estimated by each of them bona fide and reasonablyand neither of them has any reason to believe that any such estimate isunreasonable or unfounded at the date of this Agreement and

2111 VBNC is a wholly owned subsidiary of Inco and to the Knowledge of the Proponentno Person individually or with any other Person or Persons currently Controls Inco

22 Government Acknowledgments The Government acknowledges that (a) none of VBNCInco or any Person for whom either of them may be responsible in law have made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments and (b) the Proponent shall use the most efficient and cost effective miningtechniques including state of the art automated mining technologies aimed at loweringoperating costs and extending the life of the Project

23 Governmentrsquos Representations and Warranties Acknowledging that the Proponent isrelying on such representations and warranties the Government represents and warrantsto the Proponent that

231 the execution and delivery of this Agreement and each of the Instruments and theconsummation by the Government of the transactions contemplated herein andtherein have been duly authorized by all necessary Government action

232 it is not a party to bound or affected by or subject to any indenture agreement orinstrument which with or without the giving of notice or the lapse of time or bothwould be violated contravened or breached by or under which default would occuras a result of the execution delivery or performance of this Agreement or any ofthe Instruments or the consummation of any of the transactions provided for in anyof them and

13

233 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of it enforceable against it in accordance with itsterms except as they may be limited by the general principles of equity

24 Proponent Acknowledgements Each of Inco and VBNC acknowledges that neither theGovernment nor any Person for whom it may be responsible in law has made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments

ARTICLE 3DESCRIPTION OF THE PROJECT AND RELATED FACILITIES

31 The Project The ldquoProjectrdquo will comprise collectively the Underground ExplorationProgram the Mine the Concentrator Plant the R amp D Program the Demonstration Plantthe Processing Plant and if applicable the Concentrator Plant expansion referred to inSection 45 The Processing Plant will be capable of processing concentrate andintermediate feeds containing nickel from other sources world wide which will give theProcessing Plant the capability of operating well beyond the life of the Mine

32 Capital Investment The Proponent estimates that the aggregate capital investment in theProject and related facilities will be $29 billion over the estimated 30-year life of the Projectinclusive of sustaining capital expenditures

33 Employment The Proponent estimates that

331 the construction phase of the Mine and Concentrator Plant will create approximately1700 person-years of employment in the Province the construction phase of theHydromet Plant will create approximately 3000 person-years of employment in theProvince and the construction phase of the Matte Plant will create approximately2500 person-years of employment in the Province

332 during the various operating phases the Project will create the followingemployment levels in the Province Mine and Concentrator Plant - 400 people R ampD Program - 200 people Underground Exploration Program - 85 people HydrometPlant - 400 people Matte Plant - 350 people

333 over the estimated 30-year life of the Project total employment benefits from theProject in the Province will be 76000 direct and indirect person-years and

334 gross domestic product impact to the Province with respect to the Project will be$11 billion

34 Innovation Centre The Proponent shall spend $10 million on and provide an endowmentof $1 million per year over a ten-year period to cover operational costs for an IncoInnovation Centre (the ldquoInnovation Centrerdquo) at St Johnrsquos in conjunction with theUniversity pursuant to the University Agreement The focus of the Innovation Centre willbe on education and research in mineral exploration mining and metallurgical processing

14

The Innovation Centre will provide world-class education research and training related tothe mining industry to 50-60 students per year to be engaged in Bachelors Masters andDoctorate level programs The Proponent shall commence work on the Innovation Centrein 2002 with target completion in 2004

35 R amp D Program The Proponent shall undertake a comprehensive research anddevelopment program intended to establish the commercial technical and economicfeasibility of hydrometallurgical process technology to process the Nickel Concentrate (theldquoR amp D Programrdquo) The R amp D Program will include the evaluation of chemical engineeringsub-processes for the hydrometallurgical process the mechanical equipment design for theDemonstration Plant and the construction and operation of the Demonstration Plant

ARTICLE 4PROPONENTrsquoS UNDERTAKINGS

41 Infrastructure and Initial Work Commencing in 2002 the Proponent shall

411 at the Mine site undertake site mobilization including the establishment of aconstruction camp initiation of work on temporary port facilities and construction ofaccess roads

412 at Argentia undertake leasing or other arrangements for occupancy and sitepreparation including demolition fencing security and signage

413 undertake the construction of a warehouse building and establish staging areas andlay down areas in support of Labrador activities

414 establish a project office at Argentia and information centres at St Johnrsquos andHappy Valley-Goose Bay and

415 complete site selection and commence architectural design and engineering workfor the Innovation Centre

The Proponent estimates that this infrastructure and initial work program will employ inaggregate approximately 250 persons and the Proponent shall spend not less than $55million on this program in the Province on or before 31 March 2003

42 R amp D Program421 The Proponent shall undertake the R amp D Program and as a part thereof shall

construct the Demonstration Plant at a cost which the Proponent estimates will be$130 million The Proponent shall commence the site development for theDemonstration Plant in 2002 and continue such development into 2003 Theinitiatives in support of these activities will include the operation of an informationcentre preparation of environmental baseline studies and continued upgrading orreplacement of utility services required for the Demonstration Plant maintainingstaging areas and cleanup and civil works at Argentia consisting of demolition

15

grading and earth works construction The Proponent has scheduled thecompletion of the engineering design and construction of the Demonstration Plantso that the Demonstration Plant Completion Date shall have occurred on or before31 December 2006

422 The Proponent shall provide to the Government within 15 days of the end of eachcalendar quarter commencing with the calendar quarter ending 31 December 2002a detailed progress report on the results during such calendar quarter of the R amp DProgram which report will detail costs incurred to the end of such calendar quarterand contain sufficient documentation and information to enable the Government toevaluate the Proponentrsquos progress with respect to the R amp D Program and thedevelopment of hydrometallurgical process technology for processing the NickelConcentrate If requested by the Government upon reasonable notice theProponent shall provide the Government and its representatives and advisorsaccess at reasonable times to the facilities where the R amp D Program is beingconducted and make appropriate personnel of the Proponent available to respondto any requests for additional information

423 In addition to the utilization of the Demonstration Plant for the purposes ofdeveloping hydrometallurgical process technology for processing the NickelConcentrate the Proponent shall explore business opportunities for the ongoingutilization of the Demonstration Plant for the evaluation of other concentrates andintermediate feeds after completion of the R amp D Program

43 Mine and Concentrator Plant

431 The Proponent shall cause the development of the Mine and the designengineering and construction of a millconcentrator plant which will be capable ofprocessing 6000 tonnes of ore per day (the ldquoConcentrator Plantrdquo) TheConcentrator Plant will produce the Copper Concentrate and the NickelConcentrate The Proponent has scheduled to begin the development of the Mineand the construction of the Concentrator Plant in 2003 and estimates that the Mineand Concentrator Plant will require three years to construct at a cost ofapproximately $710 million

432 The Proponent

4321 shall not ship any Nickel Concentrate out of the Province aspermitted by the Nickel Concentrate Exemption Order before theDemonstration Plant Completion Date and

4322 shall ship Nickel Concentrate from the Concentrator Plant to theDemonstration Plant in sufficient quantities for the continuedoperation of the Demonstration Plant during the R amp D Programfollowing successful start up of the Concentrator Plant

16

44 Underground Exploration Program The Proponent shall undertake an undergroundexploration program which it estimates will cost $95 million and employ approximately 85people This program is intended to identify Sufficient Reserves at depth under the LeasedLands and if there are such Sufficient Reserves the Proponent shall develop a mining planfor the economic extraction of such Reserves The initial phase of this undergroundexploration program will be an advanced surface program which the Proponent estimateswill cost $20 million to commence in 2002 with completion targeted for 2006 Subsequentunderground exploration will be scheduled to ensure that Sufficient Reserves under theLeased Lands are available to sustain full operation of the Concentrator Plant during thetransition from open-pit operations to full underground mining operations if applicable

45 Underground Mine Development and Concentrator Plant Expansion If theunderground exploration program described in Section 44 identifies Sufficient Reservesas contemplated by Section 44 the Proponent shall commence the development of anunderground mine or mines on the Leased Lands and an expansion of the ConcentratorPlant in order to supply sufficient Nickel Concentrate to maintain the operation of theProcessing Plant at full capacity The Proponent estimates that this program will costapproximately $750 million and employ an aggregate of 800 people

46 Processing Plant

461 In order to maximize long-term benefits for the Province and the people of theProvince the Proponent shall use its best efforts through the R amp D Program todevelop a technically and economically feasible hydrometallurgical processtechnology for processing the Nickel Concentrate in the Province If suchtechnology is successfully developed the Proponent shall cause the designengineering and construction of and operate and maintain a hydrometallurgicalprocessing plant with a design capacity to produce annually approximately 50000tonnes of Finished Nickel Product together with associated cobalt and copperproducts (the ldquoHydromet Plantrdquo) The Proponent estimates that the HydrometPlant will have a capital cost of approximately $800 million and during the three-yearconstruction period will generate approximately 3000 person-years of employmentThe Proponent estimates that the Hydromet Plant will employ approximately 400people during operations

462 If pursuant to Section 47 it is determined that a Hydromet Plant is not technicallyor economically feasible the Proponent shall construct a commercialhydrometallurgical nickel-matte processing facility or other similar facilityincorporating a proven state of the art technology to produce Finished NickelProduct (the ldquoMatte Plantrdquo) The Matte Plant will have a design capacity toproduce annually approximately 50000 tonnes of Finished Nickel Product togetherwith associated cobalt and copper products The Proponent estimates the MattePlant will have a capital cost of approximately $670 million and during the estimatedthree-year construction period will generate approximately 2500 person-years ofemployment The Proponent estimates that the Matte Plant will employapproximately 350 people during operations

17

463 The Proponent has represented to the Government that its objective is to operatethe Processing Plant well beyond the life of the Mine Accordingly the Proponentundertakes to explore technically and economically feasible opportunities for theexpansion of the Processing Plant and to secure opportunities to supply theProcessing Plant with feed from world wide sources to fully utilize the Proponentrsquoslarge capital investment in the Processing Plant

464 The Proponent shall establish the Processing Plant at Argentia unlessenvironmental conditions at Argentia would make it not economically feasible toestablish the Processing Plant at Argentia and in such circumstances theProponent shall locate the Processing Plant at another site in the Province

47 Selection of Applicable Processing Plant

471 The Proponent shall use commercially reasonable efforts to deliver as soon aspossible but in any event shall deliver on or before 15 November 2008 theDecision and the Decision Materials to the Government and the Experts

472 If the Proponent has not on or before 30 June 2008 delivered to the Governmentthe Decision and the Decision Materials

4721 it shall forthwith meet with the Government to review on aconfidential basis the status of its efforts towards being able todeliver the Decision

4722 thereafter it shall promptly update the Government from time to timeon its efforts to be able to deliver the Decision and the outstandingissues relevant to whether the Decision will be to build the HydrometPlant or the Matte Plant and

4723 to the extent that the Proponent is not by 30 June 2008 in aposition to deliver the Decision which confirms that the Proponentintends to proceed with the construction of the Hydromet Plant theProponent shall use commercially reasonable efforts to developImplementation Plans for both a Hydromet Plant and a Matte Plantso that it will be able to deliver the Implementation Plan for theHydromet Plant or Matte Plant as applicable on or before 31December 2008

473 The Government may at any time after the earlier of the Decision Date or 30 June2008 give the Proponent notice in writing that it wishes to proceed with theappointment of the Experts When the Government gives notice to the Proponentrequiring the appointment of the Experts the Government and the Proponent shallthen forthwith agree upon the appointment of the Experts If the Government andthe Proponent cannot so agree within 15 days after the giving by the Governmentof such notice the appointment of the Experts shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter to

18

the Joint Committee or the Mediation Procedure referred to therein If the Expertsare appointed prior to the delivery by the Proponent of the Decision and theDecision Materials the Proponent shall provide to the Government and the Expertssuch data and information as is then available that will assist the Experts in theirreview under Section 475 The Proponent and the Government shall each pay50 of the fees and expenses of the Experts Before receiving the Decision theDecision Materials or any other information or data from the Proponent under thisAgreement the Experts shall first execute a confidentiality agreement containingsubstantially the same terms as provided for in Article 9

474 If in the Decision the Proponent confirms it intends to construct the Hydromet Plantthe Proponent shall deliver the Implementation Plan for the Hydromet Plant on orbefore 31 December 2008 and thereafter shall proceed diligently to complete thedetailed engineering for and construction of the Hydromet Plant in accordance withsuch Implementation Plan so that it shall be completed on or before 31 December2011

475 If in the Decision the Proponent confirms it intends to construct the Matte Plant theGovernment shall on or before the seventh Business Days after the Decision Datedeliver to the Proponent and the Experts a notice in writing (in this Section 475 theldquoGovernment Decisionrdquo) that the Government either (a) accepts the Decision tobuild the Matte Plant or (b) intends to refer such Decision to the Experts for reviewIf in the Government Decision the Government states it intends to refer theDecision to the Experts the Proponent shall promptly deliver to the Experts theDecision and the Decision Materials if it has not previously done so The Expertswill review the Decision the Decision Materials and any other information or datawhich the Experts deem appropriate or which the Government requests them toconsider and render their report (the ldquoExpertsrsquo Reportrdquo) within 30 days of the dateon which the Government delivers the Government Decision If the Governmentrequests the Experts to consider any other information or data in addition to theDecision Materials it shall provide to the Experts and the Proponent copies of suchrequest and any such information and data at the time it delivers the GovernmentDecision and the Proponent shall have the right within five Business Days tocomment on or respond to such information and data to the Experts with a copy tothe Government The Expertsrsquo Report shall determine whether in the opinion of theExperts it would be technically and economically feasible for the Proponent to buildthe Hydromet Plant together with reasons for such determination If the ExpertsrsquoReport determines that it is technically and economically feasible for the Proponentto build the Hydromet Plant the Proponent shall on or before 31 December 2008deliver to the Government an Implementation Plan for the Hydromet Plant andthereafter shall proceed diligently to complete the detailed engineering for andconstruction of the Hydromet Plant so that it shall be completed on or before 31December 2011 If the Expertsrsquo Report confirms that it would not be technically oreconomically feasible to build the Hydromet Plant the Proponent shall on or before31 December 2008 deliver to the Government an Implementation Plan for the MattePlant and thereafter shall proceed diligently to complete the detailed engineering forand construction of the Matte Plant in accordance with such Implementation Plan

19

so that it shall be completed on or before 31 December 2011 Subject to Section477 the Expertsrsquo Report shall be final and binding on the Government and theProponent

476 The determination as to whether the Proponent is proceeding diligently with thecompletion of the engineering work for and the construction of the Processing Plantfor completion on or before 31 December 2011 as required by Section 474 or475 shall be made annually on the anniversary date of the Decision Date by anEngineer who shall certify to both the Government and the Proponent as to whetherthe actual engineering work for and construction of the Processing Plant is onschedule with the applicable Implementation Plan

477 If there is a manifest error in the Expertsrsquo Report which if corrected would result ina different determination by the Experts the Expertsrsquo Report shall be referred backto the Experts for the purpose of forthwith correcting such manifest error changingthe determination in the Expertsrsquo Report and submitting a revised Expertsrsquo Reportto the Proponent and the Government

478 Where an Engineer is required to be appointed from time to time for the purposesof Section 476 or for determining the Commercial Production Date theConstruction Completion Date or the Demonstration Plant Completion Date theGovernment and the Proponent shall forthwith agree upon the appointment of suchEngineer If the Government and the Proponent cannot so agree within 15 daysof the Government or the Proponent giving the other notice requiring appointmentof an Engineer the appointment of the Engineer shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter tothe Joint Committee or the Mediation Procedure referred to therein The Proponentand the Government shall each pay 50 of the fees and expenses of any Engineer

48 Innovation Centre The Proponent shall enter into an agreement (the ldquoUniversityAgreementrdquo) with the University in form and content satisfactory to the Government on orbefore the Closing Date The University Agreement shall contain among other things theProponentrsquos commitments and intentions set out in Section 34

49 Industrial and Employment Benefits The Proponent shall execute the IEBA to beeffective 7 October 2002

410 IBAs The Proponent represents and warrants to the Government that it has entered intothe IBAs

411 VBN Undertaking Order The Proponent agrees to abide by and implement the terms andconditions contained in the VBN Undertaking Order

412 Corporate Income Tax The Proponent shall use its best efforts to negotiate and executewith the Government an agreement covering the matters set forth in this Section 412 andSection 68 (the ldquoTax Agreementrdquo) as soon as possible but in any event on or before theClosing Date The Tax Agreement will contain provisions which to the extent permitted by

20

law will result in an allocation to the Province for the purposes of Part IV of the FederalIncome Tax Regulations of the Proponentrsquos gross revenues from the sale or disposition ofnickel copper and cobalt products whether in intermediate or final form from the Project

413 Return of Concentrate

4131 In consideration of the Government granting the Exemption Orders the Proponentguarantees that it shall prior to Cessation of Mining Operations commenceshipping into the Province Replacement Concentrate for processing into FinishedNickel Product at the Processing Plant Such Replacement Concentrate shall beshipped to and processed by the Processing Plant in sufficient quantities to permitthe Processing Plant to operate continuously at a rate that will produce not less than25000 tonnes of Finished Nickel Product annually and such shipments shallcontinue at least until such time as the contained nickel and cobalt in theReplacement Concentrate shall have equalled the total quantity of contained nickeland cobalt in the Nickel Concentrate shipped out of the Province under the termsof the Nickel Concentrate Exemption Order and otherwise than under the provisionsof an Exemption Order

4132 The Proponent shall undertake the Assaying Procedures set out in Schedule 4132with respect to the Nickel Concentrate and the Replacement Concentrate

4133 The Proponent acknowledges that if it does not perform its contractual obligationsunder Section 4131 (a) the Province and the economy of the Province will suffersubstantial loss (b) the Government would not be properly compensated for its lossby monetary damages which therefore will not be considered an adequate remedyfor such breach and (c) the Government may at any time subsequent to suchbreach commence an action against the Proponent for any one or more of thefollowing remedies whether claimed as primary or secondary alternative relief

41331 an order for specific performance

41332 appropriate injunctive relief whether mandatory or prohibitory and

41333 monetary damages including for consequential and economic lossreflecting the substantial losses suffered by the Government and theeconomy of the Province as a result of such breach

The Proponent expressly waives any right to claim or argue that the Governmentcannot claim the relief set out in Sections 41331 41332 and 41333 in any suitcommenced by the Government against the Proponent for the Proponentrsquos failureto perform its obligations under Section 4131

21

414 Copper Processing in the Province

4141 The Government acknowledges that at the date hereof the quantity of coppercurrently identified in the mineralized zones on or under the Leased Lands togetherwith identified copper deposits elsewhere in the Province are not sufficient to justifythe construction and operation of a copper processing facility in the Province on aneconomically feasible basis

4142 If at any time in the future

41421 Sufficient Reserves of copper are discovered by the Proponent inthe Province (including on or under the Leased Lands) to makeeconomic the processing on a commercial basis of the CopperConcentrate or any other product containing the principal quantitiesof copper extracted from the Leased Lands into Finished CopperProduct in the Province the Proponent shall process such CopperConcentrate into Finished Copper Product in the Province or

41422 a third party establishes a facility in the Province for the commercialprocessing of copper concentrate the Proponent shall offer for saleits then available Copper Concentrate from the Concentrator Plantto such third party for processing in such facility on then prevailingcommercial terms and conditions subject to the Proponentrsquos thenexisting contractual obligations

4143 In the circumstances set out in Section 4142 the Proponent acknowledges thatthe Government has the right pursuant to Section 311(3) of the Mineral Act torescind the Copper Concentrate Exemption Order

415 Parties in Contract Change of Control and Assignment

4151 The Proponent covenants with the Government that without the prior Approval ofthe Government it

41511 shall not take or threaten or purport to take any action whether byway of contract corporate reorganization or arrangement orotherwise that would have the effect of transferring assigningsubletting or otherwise divesting itself of a majority interest in orControl of (a) the Project or (b) all or substantially all of theProponentsrsquo rights under this Agreement the Instruments theExemption Orders the Primary Production Order and subject toApplicable Laws the Mining Lease and

41512 shall not take or threaten or purport to take any action which directlyor indirectly results in a change of Control of VBNC to a party otherthan Inco

22

4152 Wherever pursuant to Section 4151 the Government is requested to grant itsApproval such Approval may be withheld by the Government in its sole andabsolute discretion for any reason whatsoever

4153 For bona fide tax or other corporate reasons the Proponent may without theApproval of the Government transfer assign sublet or otherwise divest to anAffiliate a majority interest in or Control of (a) the Project or (b) all or substantiallyall of the Proponentrsquos rights under this Agreement the Instruments the ExemptionOrders the Primary Production Order and subject to Applicable Laws the MiningLease Notwithstanding Section 111 no such transfer assignment sublet ordivestiture shall relieve the Proponent of its obligations hereunder or thereunder

4154 The Proponent shall promptly give written notice to the Government of any actionit takes under Section 4151 or 4153

416 Members of House of Assembly The Proponent undertakes to (a) ensure that nomember of the House of Assembly of the Province shall have any interest in thisAgreement and (b) use its best efforts to ensure that no Member of the House of Assemblyof the Province receives any benefit to arise herefrom or from any report study review oranalysis required to be made or submitted pursuant to this Agreement

417 Mining Lease VBNC shall execute the Mining Lease effective 30 September 2002

418 Proponentrsquos Financing The Proponent shall use best efforts to obtain the financingcontemplated by Section 1024 including without limitation the preparation of all feasibilitystudies required in order to obtain such financing

ARTICLE 5FORCE MAJEURE

51 Events of Force Majeure For the purposes of this Article 5 and subject to the exceptionsand qualifications below each of the following shall be an ldquoEvent of Force Majeurerdquo

511 acts of God or natural disasters adverse weather conditions or other similaroccurrences

512 acts of war (declared or undeclared) or conditions arising out of or attributable toany such acts of war revolutions insurrections civil strife formal or informalhostilities mob violence riots and similar disturbances blockades or any otherunlawful acts against public order or authority

513 strikes lockouts work stoppages or labour disturbances unless directly andproximately caused by an unlawful act or omission of the Proponent

514 (a) delay or failure by suppliers of labour transportation materials machineryequipment parts supplies utilities or services (b) contractorsrsquo or sub-contractorsrsquoshortage of or inability to obtain labour transportation materials machinery

23

equipment parts supplies utilities or services or (c) breakdown of equipmentmachinery or facilities unless any of the foregoing are directly and proximatelycaused by or result from an unlawful act or omission of the Proponent

515 accidents and

516 solely in respect of the Proponentrsquos obligations in Section 4131 a ProcessingRelated Reason provided that a Processing Related Reason shall not be an Eventof Force Majeure at any time after three years following Cessation of MiningOperations

52 Obligation to Perform In order to obtain relief for an Event of Force Majeure theProponent shall (a) use commercially reasonable efforts to (i) prevent the occurrence of(ii) perform its obligations in the face of and (iii) terminate any such Event of Force Majeure(other than the events described in Section 513 relied upon) and (b) give the Governmentwritten notice of the facts which the Proponent claims constitute an Event of Force Majeureas soon as reasonably practical upon becoming aware of their existence

53 Force Majeure Relief If the Proponent establishes that it is prevented from performingany of its obligations under this Agreement the Nickel Concentrate Exemption Order or theMatte Plant Exemption Order by reason of an Event of Force Majeure such obligations willbe suspended for the period of the existence of such Event of Force Majeure and theProponent will be entitled to an extension of all dates referred to in this Agreement theNickel Concentrate Exemption Order and the Matte Plant Exemption Order for a reasonableperiod of time that reflects (a) the period during which the Proponent is prevented fromperforming its obligations by reason of the Event of Force Majeure and (b) the impact thatsuch Event of Force Majeure has on the Project including without limitation shippingschedules and construction schedules that have been delayed by reason of such Event ofForce Majeure Even though the Proponentrsquos obligations will be suspended for suchreasonable period of time when the applicable Event of Force Majeure is no longerpreventing the Proponent from performing its obligations the Proponent will again beobliged to perform such obligations

ARTICLE 6GOVERNMENT UNDERTAKINGS

61 Aboriginal Agreements The Government represents and warrants that it has entered into(a) interim measures agreements with the Innu Nation and the LIA that include the VoiseyrsquosBay chapter of the respective land claims agreements and (b) the EMA

62 Electrical Rights and Provision of Power The Government shall cause Newfoundlandand Labrador Hydro or its successors to

621 provide to the Proponent electrical power for the Processing Plant at the lower of(a) the island industrial electrical rate or (b) any lower electrical rate that may be

24

offered from time to time by Newfoundland and Labrador Hydro or its successorsto its industrial customers in comparable circumstances and

622 ensure that Newfoundland and Labrador Hydro or its successors can supply to theProponent sufficient electrical power for the operation of the Processing Plant

63 Mining Lease The Government shall issue the Mining Lease effective 30 September2002

64 Exemption Orders The Government shall issue the Exemption Orders effective 30September 2002

65 Issue of Authorizations

651 Where the Proponent has submitted all information and data in accordance withApplicable Laws and required by the Government for it to issue or grant any permitauthorization order or other approval necessary for the Proponent to implement theProject or any part thereof (in this Section 65 the ldquoAuthorization(s)rdquo) theGovernment shall issue or grant any such Authorization on a timely basis

652 If the Government does not issue or grant an Authorization on a timely basis

6521 the Government shall grant the Proponent an extension of all datesreferred to in this Agreement the Nickel Concentrate ExemptionOrder and the Matte Plant Exemption Order for a reasonable periodof time that reflects (a) the period of delay in granting suchAuthorization and (b) the impact that such delay has on the Projectincluding without limitation shipping schedules and constructionschedules that will have been delayed by Governmentrsquos failure toissue or grant such Authorization on a timely basis and

6522 if as a result of the Governmentrsquos failure to issue or grant anAuthorization on a timely basis the completion date for theProcessing Plant is delayed and provided that the Proponentestablishes that it is likely it will ship out of the Province the totalvolume of contained nickel in the Nickel Concentrate permittedunder the Nickel Concentrate Exemption Order prior to the revisedcompletion date of the Processing Plant the Government shallamend the Nickel Concentrate Exemption Order to allow anadditional quantity of contained nickel in Nickel Concentrate to beshipped out of the Province which quantity will reflect thereasonable period of time of the extension referred to in Section6521

653 The Government shall not be responsible for any delays nor shall the Proponent beentitled to any relief under this Section 65 unless such delays are directly and

25

proximately caused by or result from an act or omission of the Government or adepartment regulatory body board agent or employee of the Government

66 Legislative Framework

661 The Government represents to the Proponent (and acknowledges that theProponent is relying upon such representation) that it shall maintain substantiallythe Legislative Framework for the duration of the Project subject to legislativeamendments contemplated in this Agreement and legislation of general applicationThe Government shall maintain the Legislative Framework consistent with thisAgreement subject to Governmental responsibilities including the responsibility forensuring proper management of the Provincersquos resources the protection andmaintenance of public health and safety and the protection of the environment TheGovernment acknowledges that this Agreement is consistent with current public lawand Governmental responsibilities

662 The Proponent represents to the Government (and the Proponent acknowledgesthat the Government in consideration of agreeing to maintain the LegislativeFramework has relied upon such representation) that the Proponent shall performits obligations set out in this Agreement the Instruments the Exemption Orders thePrimary Production Order and the Mining Lease

67 Special Project Orders The Government shall issue a Special Project Order or SpecialProject Orders under Section 70 of the Labour Relations Act (Newfoundland and Labrador)to ensure a stable labour relations environment throughout the construction phases of theProject This Order or these Orders shall include without limitation provisions such as nostrikes and lock-outs and the ability to designate the union organization and employerrsquosrepresentative for the purposes of collective bargaining

68 Corporate Income Tax The Government shall use best efforts to negotiate and executewith the Proponent the Tax Agreement as soon as possible but in any event on or beforethe Closing Date The Tax Agreement will contain provisions

681 whereby the Government will provide that the rate of the Provincersquos corporateincome tax applicable to the Proponent will be the lower of the ldquoall provincesaveragerdquo or the Provincersquos income tax rate

682 which to the extent permitted by law will result in an allocation to the Province forthe purposes of Part IV of the Federal Income Tax Regulations of the Proponentrsquosgross revenues from the sale or disposition of nickel copper and cobalt productswhether in intermediate or final form from the Project and

683 whereby the Government will undertake to indemnify the Proponent for any doubletaxation resulting from the allocation referred to in Section 682

26

69 Mining Tax Act At the next session of the House of Assembly of the Province theGovernment shall introduce and support legislation to amend the Mining Tax Act inaccordance with the Mining Tax Act Amendments

610 Primary Production Order The Government shall issue the Primary Production Ordereffective 30 September 2002

611 Industrial and Employment Benefits The Government shall execute the IEBA to beeffective 7 October 2002

ARTICLE 7PROPONENTrsquoS DEFAULT

71 Notice of an Event of Default Upon the happening of an Event of Default theGovernment may deliver to the Proponent a notice of default setting forth in reasonabledetail the nature of the Event of Default and if the Government intends to exercise its rightsunder Section 72 indicating the date upon which the Government intends to exercise suchrights

72 Termination Subject to an Event of Force Majeure or the provisions of Section 652where an Event of Default has occurred and in each of such cases and so often as anEvent of Default happens after giving the notice provided for in Section 71 theGovernment may at any time in its sole discretion do any one or more of the following (a)terminate this Agreement (b) terminate the Mining Lease (c) rescind the ExemptionOrders and (d) take action for any remedy at law or in equity

73 Release by Proponent and Proponentrsquos Indemnity The Proponent hereby releases anddischarges and agrees to indemnify and save harmless the Government from every claimof every nature whether in damages (including consequential or indirect damages) or notwhich may arise or be suffered by the Proponent or any Person claiming through or underthe Proponent by reason of or as a result of anything done by the Government or anysuccessor or assign claiming through or under the Government under the provisions ofSection 72

ARTICLE 8DISPUTE RESOLUTION

81 Dispute Resolution Any dispute or difference between the parties hereto arising

811 as to whether a Processing Related Reason exists

27

812 as to the selection of an Engineer or firm of Engineers the Experts or an umpireunder Schedule 4132

813 under Section 45 as to whether the Underground Exploration Program hasidentified Sufficient Reserves under the Leased Lands

814 as to the determination of the date of Cessation of Mining Operations

815 as to whether commercial processing is economic as contemplated by Section41421

816 as to then prevailing commercial terms and conditions as contemplated by Section41422

817 under Section 51 as to whether an Event of Force Majeure exists

818 under Section 53 as to whether an Event of Force Majeure prevents the Proponentfrom performing any of its obligations under this Agreement

819 under Section 53 or Section 652 as to the reasonable period of time for theextension of the dates of performance of the Proponentrsquos obligations

8110 under Section 6522 the additional quantity of contained nickel in NickelConcentrate to be shipped out of the Province or

8111 as to whether the Proponent is complying with its obligations under Section 52

shall in each case be resolved in the manner provided for in Schedule 81

ARTICLE 9CONFIDENTIAL INFORMATION

91 Confidential Information The Government

911 acknowledges that information (the Information) supplied to it by or on behalf ofthe Proponent pursuant to or in connection with this Agreement or the Instrumentsincluding without limitation information provided pursuant to or in connection withSections 422 471 472 475 52 and 81 is of a financial commercialscientific or technical nature and is supplied in confidence and

912 subject to Sections 93 and 94 shall keep the Information confidential and shallnot use or disclose the Information to any third party without the Approval of theProponent and in doing so shall use the same care as it applies to avoid disclosureor dissemination of its own confidential information to prevent the disclosure ofInformation to any third party

28

92 Effect of Disclosure The Government acknowledges that disclosure of the Informationcontrary to the provisions of this Article 9 could reasonably be expected to921 harm significantly the competitive position or interfere significantly with the

negotiating position of the Proponent

922 result in similar information no longer being supplied by or on behalf of theProponent to the Government when it is in the public interest that similar informationcontinued to be supplied and

923 result in material financial loss to the Proponent or result in material financial gainto competitors of the Proponent and other Persons

93 Approval The Government may disclose Information if Approved by the Proponent

94 Permitted Disclosure of Information The provisions of this Article 9 shall not apply toInformation which

941 is now or which hereafter through no act or omission of the Government becomesgenerally known or available to the public without breach of this Agreement

942 after disclosure to the Government becomes generally known or available to thepublic by publication or otherwise through no act or omission of the Government

943 the Government can establish was in its possession at the time of disclosure andwas not previously acquired directly or indirectly from the Proponent

944 is disclosed to the Government by a third party on a non-confidential basis whichparty to the Knowledge of the Government is not prohibited from disclosing suchInformation to the Government by any legal contractual or fiduciary obligation towhich such party is bound or subject or

945 is required to be disclosed by law

95 Remedy Without limiting the Proponentrsquos rights and recourses for a breach by theGovernment of its obligations in this Article 9

951 the Government acknowledges that the Proponent shall suffer irreparable harm ifthe Government discloses Information contrary to the provisions of this Article 9and unless prohibited by law the Proponent shall be entitled to an injunction orinjunctions to prevent such disclosure

952 the Government shall be liable for and shall indemnify and save the Proponentharmless from and against costs losses damages and claims that it may sufferpay incur or be liable for as a result of any breach by the Government of thisArticle 9 and

29

953 in the event there are any measures which the Government can take to ensurecompliance with the provisions of Section 912 the Proponent shall be relieved ofthe obligation to provide information of the type with respect to which the breachoccurred until the Government has taken such measures

ARTICLE 10CONDITIONS CLOSING AND TERMINATION

101 Conditions for the Benefit of the Government Subject to Section 1061 the obligationsof the Government in this Agreement are subject to the satisfaction of or compliance withat or prior to the Time of Closing each of the following conditions

1011 the representations and warranties of the Proponent made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Proponent at or prior to the Time of Closing shallhave been performed the Proponent shall not be in breach of any agreement onits part contained in this Agreement at the Time of Closing and the Governmentshall have received a certificate confirming the foregoing signed for and on behalfof the Proponent in form and content satisfactory to the Government

1012 the University Agreement shall have been executed by the Proponent and a copythereof shall have been delivered to the Government

1013 the Tax Agreement shall have been executed by the Proponent and delivered to theGovernment and

1014 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

102 Conditions for the Benefit of the Proponent Subject to Section 1061 the obligationsof the Proponent in this Agreement are subject to the satisfaction of or compliance with ator prior to the Time of Closing each of the following conditions

1021 the representations and warranties of the Government made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Government at or prior to the Time of Closingshall have been performed the Government shall not be in breach of anyagreement on its part contained in this Agreement at the Time of Closing and theProponent shall have received a certificate confirming the foregoing signed for andon behalf of the Government in form and content satisfactory to the Proponent

30

1022 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

1023 the Tax Agreement shall have been executed by the Government and delivered bythe Government to the Proponent

1024 the Proponent shall have secured financing on reasonable commercial terms toenable it to develop the Mine and construct the Concentrator Plant and

1025 the Mining Tax Act Amendments shall have become law

103 Closing Notice If the Proponent (a) wishes to waive the condition set out in Section1024 or (b) has obtained the financing contemplated by Section 1024 it shall forthwithdeliver to the Government a notice (the ldquoClosing Noticerdquo) confirming that it has eitherwaived the condition set out in Section 1024 or that such condition has been satisfied

104 Deliveries and Closing1041 The Closing shall take place at the Time of Closing on the Closing Date at a

location to be agreed by the parties

1042 At the Closing

10421 the Proponent shall deliver to the Government the certificatecontemplated by Section 1011 and if not previously delivered theexecuted University Agreement and the executed Tax Agreementand

10422 the Government shall deliver to the Proponent the certificatecontemplated by Section 1021 and if not previously delivered theexecuted Tax Agreement

105 Termination This Agreement and the IBEA may be terminated at any time prior to theTime of Closing1051 by agreement of the Government and the Proponent

1052 by the Government if the conditions set out in Section 101 have not been satisfiedor waived by the Government or the Closing Notice has not been delivered to theGovernment on or before 31 March 2003 or

1053 by the Proponent if the conditions set out in Section 102 have not been satisfiedor waived by the Proponent (except the condition set out in Section 1024 in theevent the Proponent has delivered the Closing Notice)

106 Effect of Agreement and Termination

1061 Notwithstanding Section 1062 and subject to Section 1063 the Government andthe Proponent shall be bound by the provisions of Sections 41 421 422 410

31

411 412 415 416 417 418 61 63 64 65 66 67 68 69 610 and 611and Articles 5 8 9 and 11 effective as of and from the date of execution of thisAgreement

1062 Subject to Section 1061 the obligations of the Proponent and the Government inthis Agreement shall be effective as of and from the Time of Closing

1063 If this Agreement and the IEBA are terminated in accordance with the provisions ofSection 105 this Agreement and the IEBA shall thereafter become null and voidand have no effect and no party shall have any liability to the other except

10631 the obligations contained in Sections 41421 411 69 and Article9 hereof and

10632 the liability of a party in respect of its breach of this Agreement andthe IEBA prior to such termination

all of which shall survive such termination for a period of twelve months followingsuch termination

ARTICLE 11GENERAL MATTERS

111 Enurement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease shall be binding upon and shall enure to the benefitof the parties hereto the successors and assigns of the Government and the successorsand permitted assigns of the Proponent Any such assignment permitted by this Agreementshall become effective only when the assignee executes with the Government aninstrument whereby it agrees to be bound by and perform all of the Proponentrsquos obligationsunder this Agreement the Instruments the Exemption Orders the Primary ProductionOrder and the Mining Lease Subject to Section 4153 from and after the execution ofsuch instrument the assignor shall be relieved of and released from all its obligations underthis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease with effect from and after the date of execution of such instrument

112 Counterparts This Agreement and the other documents referred to herein andorotherwise required to complete the transactions contemplated hereby may be executed intwo or more counterparts including by facsimile each of which shall be deemed an originaland all of which together shall constitute one and the same instrument

113 Notices All notices requests demands and other communications hereunder shall bedeemed to have been duly given if in writing and either delivered personally sent byfacsimile transmission or by air courier service to the addresses designated below or suchother addresses as may be designated in writing by notice given hereunder and shall be

32

effective upon personal delivery or facsimile transmission thereof with proof of transmissionreceipt or upon delivery by air courier serviceIf to VBNC Voiseyrsquos Bay Nickel Company Limited

Suite 700 Baine Johnston Centre10 Fort William PlaceSt Johnrsquos NewfoundlandA1C 1K4Attention PresidentFacsimile (709) 758-8820

If to Inco Inco Limited145 King Street WestSuite 1500Toronto OntarioM5H 4B7Attention PresidentFacsimile (416) 361-7734

If to the Government Government of Newfoundland amp LabradorDepartment of Mines amp EnergyNatural Resources Building7th Floor 50 Elizabeth AvenueSt Johnrsquos NewfoundlandA1A 1W5Attention The MinisterFacsimile (709) 729-0059

114 Legal Fees In the event of any dispute or controversy between the Proponent on the onehand and the Government on the other hand relating to the interpretation of this Agreementor to the transactions contemplated herein the prevailing party shall be entitled to recoverfrom the other party reasonable legal fees and expenses incurred by the prevailing partySuch award shall include reasonable post judgment legal fees and costs

115 Payment of Fees and Expenses Each party hereto shall pay its own fees expenses anddisbursements incurred in connection with this Agreement and the transactionscontemplated hereby and all other costs and expenses incurred in its performance andcompliance with all conditions to be performed hereunder and thereunder

116 Time of Essence Time is of the essence of this Agreement

117 Further Assurances Each of the parties shall promptly do make execute deliver orcause to be done made executed or delivered all such further acts documents and thingsas the other parties hereto may reasonably require from time to time for the purpose ofgiving effect to this Agreement and the transactions contemplated hereby and shall usereasonable efforts and take all such steps as may be reasonably within its power toimplement to their full extent the provisions hereof and thereof

33

118 Public Notices No press release or other announcement concerning the transactionscontemplated by this Agreement shall be made either by the Proponent or the Governmentwithout the prior Approval of the other (such Approval not to be unreasonably withheld)provided however that the Proponent may without such Approval make such disclosureif the same is required by law or any stock exchange on which any of the securities of theProponent or any of its Affiliates are listed or by any securities commission or other similarregulatory authority having jurisdiction over the Proponent or any of its Affiliates and if suchdisclosure is required the Person making the disclosure shall use best efforts to give priororal or written notice to the Government and if such prior notice is not possible to givesuch notice immediately following the making of such disclosure Notwithstanding theforegoing the Proponent acknowledges that the Government will make this Agreement andthe Schedules hereto public

119 Independent Legal Advice Each of the parties acknowledges having obtained its ownindependent legal advice with respect to this Agreement and the transactions contemplatedhereby to the fullest extent deemed necessary by each party prior to its execution anddelivery Furthermore the parties acknowledge that neither acted under any duress innegotiating drafting and executing this Agreement the Instruments and any documentscontemplated hereby There shall be no presumption that any ambiguity in this Agreementthe Instruments and any documents contemplated hereby be resolved in favour of any ofthe parties

1110 Compliance with Laws Without limiting the generality of any other covenant herein theProponent shall at its own cost and expense comply with and shall use best efforts toensure that all Persons for whom the Proponent is at law responsible comply with allApplicable Laws in connection with the Project

1111 Entire Agreement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease set forth the entire agreement and all thecovenants promises assurances agreements representations conditions warrantiesstatements and understandings (collectively ldquoRepresentationsrdquo) between the partiesconcerning the subject matter hereof No Representations are made by the Governmentto the Proponent or by the Proponent to the Government except as expressly set out in thisAgreement the Instruments the Exemption Orders the Primary Production Order and theMining Lease For greater certainty the Statement of Principles between the Governmentand the Proponent dated as of 11 June 2002 shall have no application to the parties or thematters contemplated by this Agreement after the date hereof and is replaced entirely bythis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease

1112 Good Faith Each of the Government and the Proponent shall at all times exercise all itsrights hereunder in a manner consistent with good business practices and shall act in goodfaith

1113 Waiver The failure of any party hereto to insist in any one instance upon the strictperformance by another party hereto of its obligations hereunder the Instruments theExemption Orders the Primary Production Order and the Mining Lease or the failure of any

34

party hereto to exercise any right option or remedy shall not constitute a waiver orrelinquishment for the future of any such obligation right option or remedy nor shall itconstitute a waiver of a subsequent breach No covenant or condition of this Agreementmay be waived by any party hereto except by the written consent of that party andforbearance or indulgence by that party in any regard whatsoever for no matter how longshall not constitute a waiver of such covenant or condition and until such covenant orcondition has been performed or waived in writing that party shall be entitled to invoke anyremedy available to that party under this Agreement the Instruments the ExemptionOrders the Primary Production Order and the Mining Lease despite its forbearance orindulgence

1114 No Partnership Joint Venture or Agency The Government and the Proponent expresslydisclaim any intention to create a partnership joint venture or joint enterprise It isunderstood acknowledged and agreed that nothing contained in this Agreement nor anyacts of the parties shall constitute or be deemed to constitute the Government and theProponent as partners joint venturers or principal and agent in any way or for any purpose

THE HONOURABLE THE PREMIER

THE HONOURABLE THE MINISTER OFMINES AND ENERGY

THE HONOURABLE THE MINISTER OFLABRADOR AND ABORIGINAL AFFAIRS

INCO LIMITED

ByChairman and Chief Executive Officer

VOISEYrsquoS BAY NICKEL COMPANY LIMITED

ByPresident

SCHEDULE 11ANICKEL CONCENTRATE EXEMPTION ORDER

This document can be found at the following web address httpwwwgovnfcahoaregulationsrc020066htm

3

ldquoCopper Concentraterdquo means the intermediate concentrate or similar product producedby the Concentrator Plant containing the principal quantities of copper from ore extractedor removed from the Leased Lands

ldquoCopper Concentrate Exemption Order means the Copper Concentrate ExemptionOrder in the form of Schedule 11B

ldquoDecisionrdquo means the written decision to be delivered by the Proponent to the Governmentas to whether the Proponent intends to engineer and construct the Hydromet Plant or theMatte Plant

ldquoDecision Daterdquo means the date of delivery of the Decision

ldquoDecision Materialsrdquo means the Feasibility Study and all other information and data in theProponentrsquos possession or control (including information and data generated by its advisorsand consultants) which form the basis for the Proponent making the Decision (includingsuch data and information subsequently available to or the existence of which issubsequently known by the Proponent) in form which will permit the Government and theExperts to undertake the review of the Decision and the reasons therefor as contemplatedby Section 475 Such data and information shall include without limitation reports onmetallurgical test work proposed flowsheets detailed capital and operating cost estimatesand a detailed economic analysis

ldquoDemonstration Plantrdquo means the facility at Argentia where hydrometallurgical processingtechnology will be tested including any part or sub-process of such technology themechanical or processing equipment required therefor and any pilot plant testing or similarcampaigns to determine the technical and economic feasibility of such technology

ldquoDemonstration Plant Completion Daterdquo means the date as certified by the Proponentand at the option of the Government confirmed by an Engineer upon which theconstruction of the Demonstration Plant has been completed in accordance with theProponentrsquos plans and specifications therefor and is ready to test Nickel Concentrate

ldquoEMArdquo means the Environmental Management Agreement entered into among theGovernment the Government of Canada the LIA and Innu Nation dated as of 22 July2002

ldquoEngineerrdquo means an individual independent of and acceptable to both the Proponent andthe Government who

(a) is an engineer with at least ten years of experience in base metals primaryprocessing engineering and the engineering design and construction managementof base metals primary processing plants

(b) has the requisite experience to make the relevant determination confirmation orreport to be made or given pursuant to this Agreement and

4

(c) is a member in good standing of a professional association where ldquoprofessionalassociationrdquo means a self-regulatory organization of engineers that

(i) has been given authority or recognition by statute

(ii) admits members primarily on the basis of their academic qualifications andexperience

(iii) requires compliance with the professional standards of competence andethics established by the organization and

(iv) has disciplinary powers including the power to suspend or expel a member

ldquoEvent of Bankruptcyrdquo means

(a) the entry of a decree or order by a court having jurisdiction adjudging the Proponenta bankrupt or insolvent or approving as properly filed a petition seekingreorganization or winding-up of the Proponent under the Companiesrsquo CreditorsArrangement Act (Canada) the Bankruptcy and Insolvency Act (Canada) or theWinding-Up Act (Canada) or any other bankruptcy insolvency or analogous lawsor issuing sequestration or process of execution against the Proponent or anysubstantial part of its property or ordering the winding-up or liquidation of its affairsand the continuance of any such decree or order or appointment unstayedundischarged and in effect for a period of 60 days from the date thereof

(b) the institution by the Proponent of proceedings to be adjudicated bankrupt orinsolvent or the consent by it to the institution of bankruptcy or insolvencyproceedings against it or the filing by it of a petition or answer or consent seekingreorganization or relief under the Companiesrsquo Creditors Arrangement Act (Canada)the Bankruptcy and Insolvency Act (Canada) or the Winding-Up Act (Canada) orany other bankruptcy insolvency or analogous laws or the consent by it to the filingof any such petition or to the appointment of a receiver of the Proponent or of anysubstantial part of its property or the making by it of a general assignment for thebenefit of creditors or the Proponentrsquos admission in writing of its inability to pay itsdebts generally as they become due or the Proponent taking such action infurtherance of any of such aforementioned purposes or

(c) whenever a custodian receiver receiver and manager sequestrator liquidatortrustee agent for a secured creditor or other Person with similar powers isappointed for any substantial part of the Project whether by a court or by extra-judicial means unless such custodian receiver receiver and manager sequestratorliquidator trustee or agent is removed within 60 days of such appointment

ldquoEvent of Defaultrdquo means any one or more of the following

(a) an Event of Bankruptcy has occurred with respect to the Proponent

5

(b) the Proponent is wound up its constating documents or by-laws are forfeited orsurrendered or the corporate or other existence of the Proponent is otherwiseterminated

(c) the Proponent is in breach of its obligations in Section 415 or

(d) subject to an Event of Force Majeure andor Section 652

(i) the Decision has not been delivered by 15 November 2008

(ii) the applicable Implementation Plan has not been delivered as required bySection 474 or 475

(iii) the Processing Plant has not been completed on or before 31 December2011 or

(iv) an Engineer has determined that the Proponent is not proceeding diligentlyto complete the engineering work for and the construction of the ProcessingPlant so that it will be completed on or before 31 December 2011 asrequired by Section 474 or 475

ldquoEvent of Force Majeurerdquo has the meaning ascribed thereto in Section 51

ldquoExemption Ordersrdquo means collectively the Nickel Concentrate Exemption Order theCopper Concentrate Exemption Order and the Matte Plant Exemption Order

ldquoExpertsrdquo means collectively (a) an Engineer or firm of Engineers who will make thetechnical feasibility review of the Decision and (b) a recognized third party financial expertindependent of the Government and the Proponent who will make the financial feasibilityreview of the Decision and who will jointly deliver the Expertsrsquo Report if requested by theGovernment pursuant to Section 475 The Experts shall be selected at the time and in themanner provided for in Section 473

ldquoExpertsrsquo Reportrdquo has the meaning ascribed thereto in Section 475

ldquoFeasibility Studyrdquo means the study undertaken by or on behalf of the Proponentcontaining the technical and economic evaluations which form the basis for the Decision

ldquoFinished Copper Productrdquo means finished copper product(s) having a copper contentof not less than 99

ldquoFinished Nickel Productrdquo means finished nickel product(s) having a nickel content of notless than 998

ldquoGovernmentrdquo means the Government of the Province

6

ldquoGovernment Entityrdquo means (a) any federal provincial state regional municipal localor other government governmental or public department commission board bureau oragency whether domestic or foreign (b) any subdivision agency commission board orauthority of any of the foregoing or (c) any quasi governmental or private body exercisingany regulatory expropriation or taxing authority under or for the account of any of theforegoing in each case which has jurisdiction in respect of the Project or any part thereof

ldquoHydromet Plantrdquo has the meaning ascribed thereto in Section 461

ldquoIBAsrdquo means collectively the Impacts and Benefits Agreements made as of 29 July 2002between the Proponent and each of Innu Nation and the LIA without any amendment orvariation

ldquoIEBArdquo means the Industrial and Employment Benefits Agreement in the form set out inSchedule 49

ldquoImplementation Planrdquo means a detailed description of and time schedule for thecompletion of the engineering work for and the construction of the Processing Plant by 31December 2011

ldquoIncordquo means Inco Limited a corporation organized under the laws of Canada

ldquoInformationrdquo has the meaning ascribed thereto in Section 911

ldquoInnovation Centrerdquo has the meaning ascribed thereto in Section 34

ldquoInnu Nationrdquo means Innu Nation a corporation incorporated under the laws of Canada

ldquoInstrumentsrdquo means collectively the University Agreement the Tax Agreement and theIEBA

ldquoLeased Landsrdquo means the lands described in Schedule ldquoArdquo to the Mining Lease asamended from time to time

ldquoLegislative Frameworkrdquo means the Applicable Laws of the Province in existence as ofthe date hereof applicable to the Project or any part thereof

ldquoLIArdquo means the Labrador Inuit Association a corporation incorporated under the laws ofthe Province

ldquoMatterdquo means any form of granular nickel in matte product containing not less than 50nickel which can be processed by the Matte Plant to produce Finished Nickel Product

ldquoMatte Plantrdquo has the meaning ascribed thereto in Section 462

7

ldquoMatte Plant Exemption Order means the Matte Plant Exemption Order in the form ofSchedule 11C

ldquoMinerdquo means collectively (a) the open pit mine or mines to be developed by the Proponentfor the extraction of the mineral ores located on the Leased Lands and (b) the undergroundmine or mines as contemplated by Section 45 for the extraction of the mineral ores atdepth located under the Leased Lands

ldquoMineral Actrdquo means the Mineral Act (Newfoundland and Labrador) and the regulationsthereunder

ldquoMining Leaserdquo means the Mining Lease in the form of Schedule 63

ldquoMining Tax Actrdquo means the Mining and Mineral Rights Tax Act (Newfoundland andLabrador) and the regulations thereunder

ldquoMining Tax Act Amendmentsrdquo means the proposed amendments to the Mining Tax Actset out in Schedule 69

ldquoNickel Concentraterdquo means the intermediate concentrate or similar product produced bythe Concentrator Plant containing the principal quantities of nickel and cobalt from oreextracted or removed from the Leased Lands

ldquoNickel Concentrate Exemption Order means the Nickel Concentrate Exemption Orderin the form of Schedule 11A

ldquoPersonrdquo means any individual partnership limited partnership joint venture syndicatesole proprietorship company or corporation with or without share capital unincorporatedassociation trust trustee executor administrator or other legal personal representativeor Government Entity however designated or constituted

ldquoPrimary Production Orderrdquo means the Primary Production Order in the form of Schedule610

ldquoProcessing Plantrdquo means either the Hydromet Plant or the Matte Plant which theProponent shall construct and operate in the Province as contemplated by Section 46

ldquoProcessing Related Reasonrdquo means any situation where the Proponent is unable tomeet its obligations under Section 4131 as a result of either (a) the unavailability forwhatever bona fide reason of Replacement Concentrate or (b) the unavailability ofReplacement Concentrate on reasonable commercial terms including without limitationwhere the terms relating to price or specifications would make it not economically ortechnically feasible for processing at the Processing Plant

ldquoProjectrdquo has the meaning ascribed thereto in Section 31

8

ldquoProponentrdquo means collectively VBNC Inco their respective Affiliates or any Personwhich (as permitted by this Agreement) individually or together with any of them by way ofpartnership joint venture sub-contract or otherwise holds or is entitled to a majority interestin or Control of the Project or is the operator of the Project and their respective successorsand permitted assigns

ldquoProvincerdquo means the Province of Newfoundland and Labrador Canada

ldquoR amp D Programrdquo has the meaning ascribed thereto in Section 35

ldquoReplacement Concentraterdquo means any product containing nickel or cobalt or bothderived from ores or any other source of nickel or cobalt or both mined extracted orproduced outside the Province that in each case does not represent Finished NickelProduct but which can be further processed at the Processing Plant to produce FinishedNickel Product

ldquoSufficient Reservesrdquo means the estimated quantities of ldquoProven Mineral Reservesrdquo orldquoProbable Mineral Reservesrdquo or both within the meaning of National Instrument 43-101ldquoStandards of Disclosure for Mineral Projectsrdquo (as amended from time to time) determinedby the Proponent in accordance with its standard methodologies and assumptions for suchestimates

ldquoTax Agreementrdquo means the Tax Agreement to be entered into between the Governmentand the Proponent as contemplated by Sections 412 and 68

ldquoTime of Closingrdquo means 1000 orsquoclock in the morning in the Province on the ClosingDate

ldquoUnderground Exploration Programrdquo means the underground exploration programcontemplated by Section 44

ldquoUniversityrdquo means Memorial University of Newfoundland

ldquoUniversity Agreementrdquo means the agreement to be entered into between the Proponentand the University as contemplated by Section 48

ldquoVBN Undertaking Orderrdquo means the Voiseyrsquos Bay Nickel Company Limited Mine and MillUndertaking Order under the Environmental Assessment Act (Newfoundland and Labrador)dated 5 August 1999 (OC 99-286) as amended from time to time and

ldquoVBNCrdquo means Voiseyrsquos Bay Nickel Company Limited a corporation incorporated underthe laws of the Province

9

12 Schedules

The documents attached hereto and identified below shall form an integral part of thisAgreement

Schedule 11A - Nickel Concentrate Exemption OrderSchedule 11B - Copper Concentrate Exemption OrderSchedule 11C - Matte Plant Exemption OrderSchedule 49 - IEBASchedule 4132 - Assaying ProceduresSchedule 63 - Mining LeaseSchedule 69 - Mining Tax Act AmendmentsSchedule 610 - Primary Production OrderSchedule 81 - Dispute Resolution Procedures

13 Subdivisions Unless otherwise stated a reference herein or in a Schedule by numericalor alphabetical designation to an Article Section Subsection Paragraph Subparagraphor Schedule shall refer to the Article Section Subsection Paragraph Subparagraph orSchedule bearing that designation in this Agreement or in a Schedule

14 Headings The division of this Agreement into Articles Sections SubsectionsParagraphs and Subparagraphs and the insertion of headings are for convenience ofreference only and shall not affect the construction or interpretation of this Agreement

15 Number and Gender Words importing the singular shall include the plural and vice versaand words importing a particular gender shall include all genders The use of the neutersingular pronoun to refer to a party is deemed a proper reference The necessarygrammatical changes required to make the provisions of this Agreement apply shall in allinstances be assumed as though in each case fully expressed

16 Statutes Regulations Rules and Orders Any reference in this Agreement to all or anypart of any statute regulation rule or order shall unless otherwise stated be a referenceto that statute regulation rule or order or the relevant part thereof as amendedsubstituted replaced or reenacted from time to time

17 Business Day If the day on which any act or payment is required to be done or madeunder this Agreement is a day which is not a Business Day then such act or payment shallbe performed or made on the next following Business Day

18 Contract Always Speaking With the exception of the representations and warranties ofthe parties set out in Article 2 and any estimates referred to in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic and relatedbenefits and costs of facilities referred to in this Agreement made by the Proponent wherea matter or thing is expressed in the present tense it shall be applied to the circumstancesas they arise

10

19 Governing Law and Choice of Forum This Agreement shall be interpreted inaccordance with the laws in force in the Province subject to any applicable federal laws andfor all purposes this Agreement shall be treated as a Newfoundland and Labrador contractThe Proponent irrevocably submits and attorns to the exclusive jurisdiction of the courts ofthe Province

110 Construed Covenants Each obligation or agreement of this Agreement (other than therepresentations and warranties of the parties) even though not expressed as a covenantis to be construed as a covenant

111 Inconsistency or Conflict Except where otherwise provided either expressly or bynecessary implication in this Agreement a Schedule hereto or any Instrument in the eventof any inconsistency or conflict between any such Schedule or Instrument and any provisioncontained in this Agreement the provision of this Agreement shall prevail to the extent ofthe inconsistency or conflict

112 Severability If any provision of this Agreement or the application thereof to any Personor circumstance is to any extent held or rendered invalid void illegal or unenforceablefor any reason then the particular provision

1121 shall be deemed to be independent of and severed from the remainder of thisAgreement and all the other provisions of this Agreement shall neverthelesscontinue in full force and effect and

1122 shall continue to be applicable and enforceable to the fullest extent permitted by lawagainst any Persons and in any circumstances other than those as to which it hasbeen held or rendered invalid void illegal or unenforceable

If a severance occurs under this Section 112 the parties shall use their respective bestefforts to negotiate in good faith an enforceable replacement provision that to the greatestextent possible reflects the intent or serves the purpose of the severed provision

113 Currency All references in this Agreement to currency are to Canadian dollars

114 Knowledge In this Agreement where ldquoKnowledgerdquo of a party is referred to

1141 in respect of the Proponent it shall mean the actual knowledge of the executiveofficers of the Proponent after due inquiry in respect thereof and

1142 in respect of the Government it shall mean the actual knowledge of the responsibleexecutives of the applicable department of Government after due inquiry in respectthereof

11

ARTICLE 2REPRESENTATIONS AND WARRANTIES

21 Proponentrsquos Representations and Warranties Acknowledging that the Government isrelying on such representations and warranties VBNC and Inco jointly and severallyrepresent and warrant to the Government that

211 each is a corporation which has been duly incorporated or organized as applicableunder the laws of its jurisdiction of incorporation or organization as applicable andis validly existing under such laws

212 Inco is extra-provincially registered in the Province

213 each has all necessary corporate power authority and capacity

2131 to cause the design engineering and construction of and to operateand maintain all parts of the Project and

2132 to enter into this Agreement and the Instruments and to perform itsrespective obligations herein and therein

214 the execution and delivery of this Agreement and each of the Instruments and theconsummation of the transactions contemplated herein and therein by each ofthem have been duly authorized by all necessary corporate action on the part ofeach of them

215 neither is a party to bound or affected by or subject to any indenture mortgagelease agreement instrument charter or by-law provision which with or without thegiving of notice or the lapse of time or both would be violated contravened orbreached by or under which default would occur as a result of the executiondelivery or performance of this Agreement or any of the Instruments or theconsummation of any of the transactions provided for in any of them

216 neither is bound or affected by or subject to any Applicable Law which with orwithout the giving of notice or the lapse of time or both would be violatedcontravened or breached by or under which default would occur as a result of theexecution delivery or performance of this Agreement or any of the Instruments orthe consummation of any of the transactions provided for in any of them

217 no approval authorization consent permit or other action by or filing with anyGovernment Entity is required in connection with the execution and delivery of thisAgreement or any of the Instruments and the performance of their respectiveobligations hereunder or thereunder except as otherwise stated herein

218 there is no suit action litigation arbitration proceeding or proceeding by aGovernmental Entity including appeals and applications for review in progresspending or to the Knowledge of either of them threatened against or involving

12

either of them or any judgment decree injunction or order of any court or arbitratorwhich could adversely affect their capacity or power to execute and deliver thisAgreement or any of the Instruments or to consummate the transactionscontemplated herein or therein or which could materially adversely affect theirrespective assets financial condition or future prospects

219 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of each of them enforceable against them inaccordance with their respective terms except as limited by (a) applicablebankruptcy laws or laws affecting the enforcement of creditorsrsquo rights generally and(b) the general principles of equity

2110 all references to estimates made by Inco and VBNC in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic andrelated benefits and costs of facilities are made as of the date of this Agreementhave been determined by them based upon information available at the date of thisAgreement and have been estimated by each of them bona fide and reasonablyand neither of them has any reason to believe that any such estimate isunreasonable or unfounded at the date of this Agreement and

2111 VBNC is a wholly owned subsidiary of Inco and to the Knowledge of the Proponentno Person individually or with any other Person or Persons currently Controls Inco

22 Government Acknowledgments The Government acknowledges that (a) none of VBNCInco or any Person for whom either of them may be responsible in law have made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments and (b) the Proponent shall use the most efficient and cost effective miningtechniques including state of the art automated mining technologies aimed at loweringoperating costs and extending the life of the Project

23 Governmentrsquos Representations and Warranties Acknowledging that the Proponent isrelying on such representations and warranties the Government represents and warrantsto the Proponent that

231 the execution and delivery of this Agreement and each of the Instruments and theconsummation by the Government of the transactions contemplated herein andtherein have been duly authorized by all necessary Government action

232 it is not a party to bound or affected by or subject to any indenture agreement orinstrument which with or without the giving of notice or the lapse of time or bothwould be violated contravened or breached by or under which default would occuras a result of the execution delivery or performance of this Agreement or any ofthe Instruments or the consummation of any of the transactions provided for in anyof them and

13

233 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of it enforceable against it in accordance with itsterms except as they may be limited by the general principles of equity

24 Proponent Acknowledgements Each of Inco and VBNC acknowledges that neither theGovernment nor any Person for whom it may be responsible in law has made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments

ARTICLE 3DESCRIPTION OF THE PROJECT AND RELATED FACILITIES

31 The Project The ldquoProjectrdquo will comprise collectively the Underground ExplorationProgram the Mine the Concentrator Plant the R amp D Program the Demonstration Plantthe Processing Plant and if applicable the Concentrator Plant expansion referred to inSection 45 The Processing Plant will be capable of processing concentrate andintermediate feeds containing nickel from other sources world wide which will give theProcessing Plant the capability of operating well beyond the life of the Mine

32 Capital Investment The Proponent estimates that the aggregate capital investment in theProject and related facilities will be $29 billion over the estimated 30-year life of the Projectinclusive of sustaining capital expenditures

33 Employment The Proponent estimates that

331 the construction phase of the Mine and Concentrator Plant will create approximately1700 person-years of employment in the Province the construction phase of theHydromet Plant will create approximately 3000 person-years of employment in theProvince and the construction phase of the Matte Plant will create approximately2500 person-years of employment in the Province

332 during the various operating phases the Project will create the followingemployment levels in the Province Mine and Concentrator Plant - 400 people R ampD Program - 200 people Underground Exploration Program - 85 people HydrometPlant - 400 people Matte Plant - 350 people

333 over the estimated 30-year life of the Project total employment benefits from theProject in the Province will be 76000 direct and indirect person-years and

334 gross domestic product impact to the Province with respect to the Project will be$11 billion

34 Innovation Centre The Proponent shall spend $10 million on and provide an endowmentof $1 million per year over a ten-year period to cover operational costs for an IncoInnovation Centre (the ldquoInnovation Centrerdquo) at St Johnrsquos in conjunction with theUniversity pursuant to the University Agreement The focus of the Innovation Centre willbe on education and research in mineral exploration mining and metallurgical processing

14

The Innovation Centre will provide world-class education research and training related tothe mining industry to 50-60 students per year to be engaged in Bachelors Masters andDoctorate level programs The Proponent shall commence work on the Innovation Centrein 2002 with target completion in 2004

35 R amp D Program The Proponent shall undertake a comprehensive research anddevelopment program intended to establish the commercial technical and economicfeasibility of hydrometallurgical process technology to process the Nickel Concentrate (theldquoR amp D Programrdquo) The R amp D Program will include the evaluation of chemical engineeringsub-processes for the hydrometallurgical process the mechanical equipment design for theDemonstration Plant and the construction and operation of the Demonstration Plant

ARTICLE 4PROPONENTrsquoS UNDERTAKINGS

41 Infrastructure and Initial Work Commencing in 2002 the Proponent shall

411 at the Mine site undertake site mobilization including the establishment of aconstruction camp initiation of work on temporary port facilities and construction ofaccess roads

412 at Argentia undertake leasing or other arrangements for occupancy and sitepreparation including demolition fencing security and signage

413 undertake the construction of a warehouse building and establish staging areas andlay down areas in support of Labrador activities

414 establish a project office at Argentia and information centres at St Johnrsquos andHappy Valley-Goose Bay and

415 complete site selection and commence architectural design and engineering workfor the Innovation Centre

The Proponent estimates that this infrastructure and initial work program will employ inaggregate approximately 250 persons and the Proponent shall spend not less than $55million on this program in the Province on or before 31 March 2003

42 R amp D Program421 The Proponent shall undertake the R amp D Program and as a part thereof shall

construct the Demonstration Plant at a cost which the Proponent estimates will be$130 million The Proponent shall commence the site development for theDemonstration Plant in 2002 and continue such development into 2003 Theinitiatives in support of these activities will include the operation of an informationcentre preparation of environmental baseline studies and continued upgrading orreplacement of utility services required for the Demonstration Plant maintainingstaging areas and cleanup and civil works at Argentia consisting of demolition

15

grading and earth works construction The Proponent has scheduled thecompletion of the engineering design and construction of the Demonstration Plantso that the Demonstration Plant Completion Date shall have occurred on or before31 December 2006

422 The Proponent shall provide to the Government within 15 days of the end of eachcalendar quarter commencing with the calendar quarter ending 31 December 2002a detailed progress report on the results during such calendar quarter of the R amp DProgram which report will detail costs incurred to the end of such calendar quarterand contain sufficient documentation and information to enable the Government toevaluate the Proponentrsquos progress with respect to the R amp D Program and thedevelopment of hydrometallurgical process technology for processing the NickelConcentrate If requested by the Government upon reasonable notice theProponent shall provide the Government and its representatives and advisorsaccess at reasonable times to the facilities where the R amp D Program is beingconducted and make appropriate personnel of the Proponent available to respondto any requests for additional information

423 In addition to the utilization of the Demonstration Plant for the purposes ofdeveloping hydrometallurgical process technology for processing the NickelConcentrate the Proponent shall explore business opportunities for the ongoingutilization of the Demonstration Plant for the evaluation of other concentrates andintermediate feeds after completion of the R amp D Program

43 Mine and Concentrator Plant

431 The Proponent shall cause the development of the Mine and the designengineering and construction of a millconcentrator plant which will be capable ofprocessing 6000 tonnes of ore per day (the ldquoConcentrator Plantrdquo) TheConcentrator Plant will produce the Copper Concentrate and the NickelConcentrate The Proponent has scheduled to begin the development of the Mineand the construction of the Concentrator Plant in 2003 and estimates that the Mineand Concentrator Plant will require three years to construct at a cost ofapproximately $710 million

432 The Proponent

4321 shall not ship any Nickel Concentrate out of the Province aspermitted by the Nickel Concentrate Exemption Order before theDemonstration Plant Completion Date and

4322 shall ship Nickel Concentrate from the Concentrator Plant to theDemonstration Plant in sufficient quantities for the continuedoperation of the Demonstration Plant during the R amp D Programfollowing successful start up of the Concentrator Plant

16

44 Underground Exploration Program The Proponent shall undertake an undergroundexploration program which it estimates will cost $95 million and employ approximately 85people This program is intended to identify Sufficient Reserves at depth under the LeasedLands and if there are such Sufficient Reserves the Proponent shall develop a mining planfor the economic extraction of such Reserves The initial phase of this undergroundexploration program will be an advanced surface program which the Proponent estimateswill cost $20 million to commence in 2002 with completion targeted for 2006 Subsequentunderground exploration will be scheduled to ensure that Sufficient Reserves under theLeased Lands are available to sustain full operation of the Concentrator Plant during thetransition from open-pit operations to full underground mining operations if applicable

45 Underground Mine Development and Concentrator Plant Expansion If theunderground exploration program described in Section 44 identifies Sufficient Reservesas contemplated by Section 44 the Proponent shall commence the development of anunderground mine or mines on the Leased Lands and an expansion of the ConcentratorPlant in order to supply sufficient Nickel Concentrate to maintain the operation of theProcessing Plant at full capacity The Proponent estimates that this program will costapproximately $750 million and employ an aggregate of 800 people

46 Processing Plant

461 In order to maximize long-term benefits for the Province and the people of theProvince the Proponent shall use its best efforts through the R amp D Program todevelop a technically and economically feasible hydrometallurgical processtechnology for processing the Nickel Concentrate in the Province If suchtechnology is successfully developed the Proponent shall cause the designengineering and construction of and operate and maintain a hydrometallurgicalprocessing plant with a design capacity to produce annually approximately 50000tonnes of Finished Nickel Product together with associated cobalt and copperproducts (the ldquoHydromet Plantrdquo) The Proponent estimates that the HydrometPlant will have a capital cost of approximately $800 million and during the three-yearconstruction period will generate approximately 3000 person-years of employmentThe Proponent estimates that the Hydromet Plant will employ approximately 400people during operations

462 If pursuant to Section 47 it is determined that a Hydromet Plant is not technicallyor economically feasible the Proponent shall construct a commercialhydrometallurgical nickel-matte processing facility or other similar facilityincorporating a proven state of the art technology to produce Finished NickelProduct (the ldquoMatte Plantrdquo) The Matte Plant will have a design capacity toproduce annually approximately 50000 tonnes of Finished Nickel Product togetherwith associated cobalt and copper products The Proponent estimates the MattePlant will have a capital cost of approximately $670 million and during the estimatedthree-year construction period will generate approximately 2500 person-years ofemployment The Proponent estimates that the Matte Plant will employapproximately 350 people during operations

17

463 The Proponent has represented to the Government that its objective is to operatethe Processing Plant well beyond the life of the Mine Accordingly the Proponentundertakes to explore technically and economically feasible opportunities for theexpansion of the Processing Plant and to secure opportunities to supply theProcessing Plant with feed from world wide sources to fully utilize the Proponentrsquoslarge capital investment in the Processing Plant

464 The Proponent shall establish the Processing Plant at Argentia unlessenvironmental conditions at Argentia would make it not economically feasible toestablish the Processing Plant at Argentia and in such circumstances theProponent shall locate the Processing Plant at another site in the Province

47 Selection of Applicable Processing Plant

471 The Proponent shall use commercially reasonable efforts to deliver as soon aspossible but in any event shall deliver on or before 15 November 2008 theDecision and the Decision Materials to the Government and the Experts

472 If the Proponent has not on or before 30 June 2008 delivered to the Governmentthe Decision and the Decision Materials

4721 it shall forthwith meet with the Government to review on aconfidential basis the status of its efforts towards being able todeliver the Decision

4722 thereafter it shall promptly update the Government from time to timeon its efforts to be able to deliver the Decision and the outstandingissues relevant to whether the Decision will be to build the HydrometPlant or the Matte Plant and

4723 to the extent that the Proponent is not by 30 June 2008 in aposition to deliver the Decision which confirms that the Proponentintends to proceed with the construction of the Hydromet Plant theProponent shall use commercially reasonable efforts to developImplementation Plans for both a Hydromet Plant and a Matte Plantso that it will be able to deliver the Implementation Plan for theHydromet Plant or Matte Plant as applicable on or before 31December 2008

473 The Government may at any time after the earlier of the Decision Date or 30 June2008 give the Proponent notice in writing that it wishes to proceed with theappointment of the Experts When the Government gives notice to the Proponentrequiring the appointment of the Experts the Government and the Proponent shallthen forthwith agree upon the appointment of the Experts If the Government andthe Proponent cannot so agree within 15 days after the giving by the Governmentof such notice the appointment of the Experts shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter to

18

the Joint Committee or the Mediation Procedure referred to therein If the Expertsare appointed prior to the delivery by the Proponent of the Decision and theDecision Materials the Proponent shall provide to the Government and the Expertssuch data and information as is then available that will assist the Experts in theirreview under Section 475 The Proponent and the Government shall each pay50 of the fees and expenses of the Experts Before receiving the Decision theDecision Materials or any other information or data from the Proponent under thisAgreement the Experts shall first execute a confidentiality agreement containingsubstantially the same terms as provided for in Article 9

474 If in the Decision the Proponent confirms it intends to construct the Hydromet Plantthe Proponent shall deliver the Implementation Plan for the Hydromet Plant on orbefore 31 December 2008 and thereafter shall proceed diligently to complete thedetailed engineering for and construction of the Hydromet Plant in accordance withsuch Implementation Plan so that it shall be completed on or before 31 December2011

475 If in the Decision the Proponent confirms it intends to construct the Matte Plant theGovernment shall on or before the seventh Business Days after the Decision Datedeliver to the Proponent and the Experts a notice in writing (in this Section 475 theldquoGovernment Decisionrdquo) that the Government either (a) accepts the Decision tobuild the Matte Plant or (b) intends to refer such Decision to the Experts for reviewIf in the Government Decision the Government states it intends to refer theDecision to the Experts the Proponent shall promptly deliver to the Experts theDecision and the Decision Materials if it has not previously done so The Expertswill review the Decision the Decision Materials and any other information or datawhich the Experts deem appropriate or which the Government requests them toconsider and render their report (the ldquoExpertsrsquo Reportrdquo) within 30 days of the dateon which the Government delivers the Government Decision If the Governmentrequests the Experts to consider any other information or data in addition to theDecision Materials it shall provide to the Experts and the Proponent copies of suchrequest and any such information and data at the time it delivers the GovernmentDecision and the Proponent shall have the right within five Business Days tocomment on or respond to such information and data to the Experts with a copy tothe Government The Expertsrsquo Report shall determine whether in the opinion of theExperts it would be technically and economically feasible for the Proponent to buildthe Hydromet Plant together with reasons for such determination If the ExpertsrsquoReport determines that it is technically and economically feasible for the Proponentto build the Hydromet Plant the Proponent shall on or before 31 December 2008deliver to the Government an Implementation Plan for the Hydromet Plant andthereafter shall proceed diligently to complete the detailed engineering for andconstruction of the Hydromet Plant so that it shall be completed on or before 31December 2011 If the Expertsrsquo Report confirms that it would not be technically oreconomically feasible to build the Hydromet Plant the Proponent shall on or before31 December 2008 deliver to the Government an Implementation Plan for the MattePlant and thereafter shall proceed diligently to complete the detailed engineering forand construction of the Matte Plant in accordance with such Implementation Plan

19

so that it shall be completed on or before 31 December 2011 Subject to Section477 the Expertsrsquo Report shall be final and binding on the Government and theProponent

476 The determination as to whether the Proponent is proceeding diligently with thecompletion of the engineering work for and the construction of the Processing Plantfor completion on or before 31 December 2011 as required by Section 474 or475 shall be made annually on the anniversary date of the Decision Date by anEngineer who shall certify to both the Government and the Proponent as to whetherthe actual engineering work for and construction of the Processing Plant is onschedule with the applicable Implementation Plan

477 If there is a manifest error in the Expertsrsquo Report which if corrected would result ina different determination by the Experts the Expertsrsquo Report shall be referred backto the Experts for the purpose of forthwith correcting such manifest error changingthe determination in the Expertsrsquo Report and submitting a revised Expertsrsquo Reportto the Proponent and the Government

478 Where an Engineer is required to be appointed from time to time for the purposesof Section 476 or for determining the Commercial Production Date theConstruction Completion Date or the Demonstration Plant Completion Date theGovernment and the Proponent shall forthwith agree upon the appointment of suchEngineer If the Government and the Proponent cannot so agree within 15 daysof the Government or the Proponent giving the other notice requiring appointmentof an Engineer the appointment of the Engineer shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter tothe Joint Committee or the Mediation Procedure referred to therein The Proponentand the Government shall each pay 50 of the fees and expenses of any Engineer

48 Innovation Centre The Proponent shall enter into an agreement (the ldquoUniversityAgreementrdquo) with the University in form and content satisfactory to the Government on orbefore the Closing Date The University Agreement shall contain among other things theProponentrsquos commitments and intentions set out in Section 34

49 Industrial and Employment Benefits The Proponent shall execute the IEBA to beeffective 7 October 2002

410 IBAs The Proponent represents and warrants to the Government that it has entered intothe IBAs

411 VBN Undertaking Order The Proponent agrees to abide by and implement the terms andconditions contained in the VBN Undertaking Order

412 Corporate Income Tax The Proponent shall use its best efforts to negotiate and executewith the Government an agreement covering the matters set forth in this Section 412 andSection 68 (the ldquoTax Agreementrdquo) as soon as possible but in any event on or before theClosing Date The Tax Agreement will contain provisions which to the extent permitted by

20

law will result in an allocation to the Province for the purposes of Part IV of the FederalIncome Tax Regulations of the Proponentrsquos gross revenues from the sale or disposition ofnickel copper and cobalt products whether in intermediate or final form from the Project

413 Return of Concentrate

4131 In consideration of the Government granting the Exemption Orders the Proponentguarantees that it shall prior to Cessation of Mining Operations commenceshipping into the Province Replacement Concentrate for processing into FinishedNickel Product at the Processing Plant Such Replacement Concentrate shall beshipped to and processed by the Processing Plant in sufficient quantities to permitthe Processing Plant to operate continuously at a rate that will produce not less than25000 tonnes of Finished Nickel Product annually and such shipments shallcontinue at least until such time as the contained nickel and cobalt in theReplacement Concentrate shall have equalled the total quantity of contained nickeland cobalt in the Nickel Concentrate shipped out of the Province under the termsof the Nickel Concentrate Exemption Order and otherwise than under the provisionsof an Exemption Order

4132 The Proponent shall undertake the Assaying Procedures set out in Schedule 4132with respect to the Nickel Concentrate and the Replacement Concentrate

4133 The Proponent acknowledges that if it does not perform its contractual obligationsunder Section 4131 (a) the Province and the economy of the Province will suffersubstantial loss (b) the Government would not be properly compensated for its lossby monetary damages which therefore will not be considered an adequate remedyfor such breach and (c) the Government may at any time subsequent to suchbreach commence an action against the Proponent for any one or more of thefollowing remedies whether claimed as primary or secondary alternative relief

41331 an order for specific performance

41332 appropriate injunctive relief whether mandatory or prohibitory and

41333 monetary damages including for consequential and economic lossreflecting the substantial losses suffered by the Government and theeconomy of the Province as a result of such breach

The Proponent expressly waives any right to claim or argue that the Governmentcannot claim the relief set out in Sections 41331 41332 and 41333 in any suitcommenced by the Government against the Proponent for the Proponentrsquos failureto perform its obligations under Section 4131

21

414 Copper Processing in the Province

4141 The Government acknowledges that at the date hereof the quantity of coppercurrently identified in the mineralized zones on or under the Leased Lands togetherwith identified copper deposits elsewhere in the Province are not sufficient to justifythe construction and operation of a copper processing facility in the Province on aneconomically feasible basis

4142 If at any time in the future

41421 Sufficient Reserves of copper are discovered by the Proponent inthe Province (including on or under the Leased Lands) to makeeconomic the processing on a commercial basis of the CopperConcentrate or any other product containing the principal quantitiesof copper extracted from the Leased Lands into Finished CopperProduct in the Province the Proponent shall process such CopperConcentrate into Finished Copper Product in the Province or

41422 a third party establishes a facility in the Province for the commercialprocessing of copper concentrate the Proponent shall offer for saleits then available Copper Concentrate from the Concentrator Plantto such third party for processing in such facility on then prevailingcommercial terms and conditions subject to the Proponentrsquos thenexisting contractual obligations

4143 In the circumstances set out in Section 4142 the Proponent acknowledges thatthe Government has the right pursuant to Section 311(3) of the Mineral Act torescind the Copper Concentrate Exemption Order

415 Parties in Contract Change of Control and Assignment

4151 The Proponent covenants with the Government that without the prior Approval ofthe Government it

41511 shall not take or threaten or purport to take any action whether byway of contract corporate reorganization or arrangement orotherwise that would have the effect of transferring assigningsubletting or otherwise divesting itself of a majority interest in orControl of (a) the Project or (b) all or substantially all of theProponentsrsquo rights under this Agreement the Instruments theExemption Orders the Primary Production Order and subject toApplicable Laws the Mining Lease and

41512 shall not take or threaten or purport to take any action which directlyor indirectly results in a change of Control of VBNC to a party otherthan Inco

22

4152 Wherever pursuant to Section 4151 the Government is requested to grant itsApproval such Approval may be withheld by the Government in its sole andabsolute discretion for any reason whatsoever

4153 For bona fide tax or other corporate reasons the Proponent may without theApproval of the Government transfer assign sublet or otherwise divest to anAffiliate a majority interest in or Control of (a) the Project or (b) all or substantiallyall of the Proponentrsquos rights under this Agreement the Instruments the ExemptionOrders the Primary Production Order and subject to Applicable Laws the MiningLease Notwithstanding Section 111 no such transfer assignment sublet ordivestiture shall relieve the Proponent of its obligations hereunder or thereunder

4154 The Proponent shall promptly give written notice to the Government of any actionit takes under Section 4151 or 4153

416 Members of House of Assembly The Proponent undertakes to (a) ensure that nomember of the House of Assembly of the Province shall have any interest in thisAgreement and (b) use its best efforts to ensure that no Member of the House of Assemblyof the Province receives any benefit to arise herefrom or from any report study review oranalysis required to be made or submitted pursuant to this Agreement

417 Mining Lease VBNC shall execute the Mining Lease effective 30 September 2002

418 Proponentrsquos Financing The Proponent shall use best efforts to obtain the financingcontemplated by Section 1024 including without limitation the preparation of all feasibilitystudies required in order to obtain such financing

ARTICLE 5FORCE MAJEURE

51 Events of Force Majeure For the purposes of this Article 5 and subject to the exceptionsand qualifications below each of the following shall be an ldquoEvent of Force Majeurerdquo

511 acts of God or natural disasters adverse weather conditions or other similaroccurrences

512 acts of war (declared or undeclared) or conditions arising out of or attributable toany such acts of war revolutions insurrections civil strife formal or informalhostilities mob violence riots and similar disturbances blockades or any otherunlawful acts against public order or authority

513 strikes lockouts work stoppages or labour disturbances unless directly andproximately caused by an unlawful act or omission of the Proponent

514 (a) delay or failure by suppliers of labour transportation materials machineryequipment parts supplies utilities or services (b) contractorsrsquo or sub-contractorsrsquoshortage of or inability to obtain labour transportation materials machinery

23

equipment parts supplies utilities or services or (c) breakdown of equipmentmachinery or facilities unless any of the foregoing are directly and proximatelycaused by or result from an unlawful act or omission of the Proponent

515 accidents and

516 solely in respect of the Proponentrsquos obligations in Section 4131 a ProcessingRelated Reason provided that a Processing Related Reason shall not be an Eventof Force Majeure at any time after three years following Cessation of MiningOperations

52 Obligation to Perform In order to obtain relief for an Event of Force Majeure theProponent shall (a) use commercially reasonable efforts to (i) prevent the occurrence of(ii) perform its obligations in the face of and (iii) terminate any such Event of Force Majeure(other than the events described in Section 513 relied upon) and (b) give the Governmentwritten notice of the facts which the Proponent claims constitute an Event of Force Majeureas soon as reasonably practical upon becoming aware of their existence

53 Force Majeure Relief If the Proponent establishes that it is prevented from performingany of its obligations under this Agreement the Nickel Concentrate Exemption Order or theMatte Plant Exemption Order by reason of an Event of Force Majeure such obligations willbe suspended for the period of the existence of such Event of Force Majeure and theProponent will be entitled to an extension of all dates referred to in this Agreement theNickel Concentrate Exemption Order and the Matte Plant Exemption Order for a reasonableperiod of time that reflects (a) the period during which the Proponent is prevented fromperforming its obligations by reason of the Event of Force Majeure and (b) the impact thatsuch Event of Force Majeure has on the Project including without limitation shippingschedules and construction schedules that have been delayed by reason of such Event ofForce Majeure Even though the Proponentrsquos obligations will be suspended for suchreasonable period of time when the applicable Event of Force Majeure is no longerpreventing the Proponent from performing its obligations the Proponent will again beobliged to perform such obligations

ARTICLE 6GOVERNMENT UNDERTAKINGS

61 Aboriginal Agreements The Government represents and warrants that it has entered into(a) interim measures agreements with the Innu Nation and the LIA that include the VoiseyrsquosBay chapter of the respective land claims agreements and (b) the EMA

62 Electrical Rights and Provision of Power The Government shall cause Newfoundlandand Labrador Hydro or its successors to

621 provide to the Proponent electrical power for the Processing Plant at the lower of(a) the island industrial electrical rate or (b) any lower electrical rate that may be

24

offered from time to time by Newfoundland and Labrador Hydro or its successorsto its industrial customers in comparable circumstances and

622 ensure that Newfoundland and Labrador Hydro or its successors can supply to theProponent sufficient electrical power for the operation of the Processing Plant

63 Mining Lease The Government shall issue the Mining Lease effective 30 September2002

64 Exemption Orders The Government shall issue the Exemption Orders effective 30September 2002

65 Issue of Authorizations

651 Where the Proponent has submitted all information and data in accordance withApplicable Laws and required by the Government for it to issue or grant any permitauthorization order or other approval necessary for the Proponent to implement theProject or any part thereof (in this Section 65 the ldquoAuthorization(s)rdquo) theGovernment shall issue or grant any such Authorization on a timely basis

652 If the Government does not issue or grant an Authorization on a timely basis

6521 the Government shall grant the Proponent an extension of all datesreferred to in this Agreement the Nickel Concentrate ExemptionOrder and the Matte Plant Exemption Order for a reasonable periodof time that reflects (a) the period of delay in granting suchAuthorization and (b) the impact that such delay has on the Projectincluding without limitation shipping schedules and constructionschedules that will have been delayed by Governmentrsquos failure toissue or grant such Authorization on a timely basis and

6522 if as a result of the Governmentrsquos failure to issue or grant anAuthorization on a timely basis the completion date for theProcessing Plant is delayed and provided that the Proponentestablishes that it is likely it will ship out of the Province the totalvolume of contained nickel in the Nickel Concentrate permittedunder the Nickel Concentrate Exemption Order prior to the revisedcompletion date of the Processing Plant the Government shallamend the Nickel Concentrate Exemption Order to allow anadditional quantity of contained nickel in Nickel Concentrate to beshipped out of the Province which quantity will reflect thereasonable period of time of the extension referred to in Section6521

653 The Government shall not be responsible for any delays nor shall the Proponent beentitled to any relief under this Section 65 unless such delays are directly and

25

proximately caused by or result from an act or omission of the Government or adepartment regulatory body board agent or employee of the Government

66 Legislative Framework

661 The Government represents to the Proponent (and acknowledges that theProponent is relying upon such representation) that it shall maintain substantiallythe Legislative Framework for the duration of the Project subject to legislativeamendments contemplated in this Agreement and legislation of general applicationThe Government shall maintain the Legislative Framework consistent with thisAgreement subject to Governmental responsibilities including the responsibility forensuring proper management of the Provincersquos resources the protection andmaintenance of public health and safety and the protection of the environment TheGovernment acknowledges that this Agreement is consistent with current public lawand Governmental responsibilities

662 The Proponent represents to the Government (and the Proponent acknowledgesthat the Government in consideration of agreeing to maintain the LegislativeFramework has relied upon such representation) that the Proponent shall performits obligations set out in this Agreement the Instruments the Exemption Orders thePrimary Production Order and the Mining Lease

67 Special Project Orders The Government shall issue a Special Project Order or SpecialProject Orders under Section 70 of the Labour Relations Act (Newfoundland and Labrador)to ensure a stable labour relations environment throughout the construction phases of theProject This Order or these Orders shall include without limitation provisions such as nostrikes and lock-outs and the ability to designate the union organization and employerrsquosrepresentative for the purposes of collective bargaining

68 Corporate Income Tax The Government shall use best efforts to negotiate and executewith the Proponent the Tax Agreement as soon as possible but in any event on or beforethe Closing Date The Tax Agreement will contain provisions

681 whereby the Government will provide that the rate of the Provincersquos corporateincome tax applicable to the Proponent will be the lower of the ldquoall provincesaveragerdquo or the Provincersquos income tax rate

682 which to the extent permitted by law will result in an allocation to the Province forthe purposes of Part IV of the Federal Income Tax Regulations of the Proponentrsquosgross revenues from the sale or disposition of nickel copper and cobalt productswhether in intermediate or final form from the Project and

683 whereby the Government will undertake to indemnify the Proponent for any doubletaxation resulting from the allocation referred to in Section 682

26

69 Mining Tax Act At the next session of the House of Assembly of the Province theGovernment shall introduce and support legislation to amend the Mining Tax Act inaccordance with the Mining Tax Act Amendments

610 Primary Production Order The Government shall issue the Primary Production Ordereffective 30 September 2002

611 Industrial and Employment Benefits The Government shall execute the IEBA to beeffective 7 October 2002

ARTICLE 7PROPONENTrsquoS DEFAULT

71 Notice of an Event of Default Upon the happening of an Event of Default theGovernment may deliver to the Proponent a notice of default setting forth in reasonabledetail the nature of the Event of Default and if the Government intends to exercise its rightsunder Section 72 indicating the date upon which the Government intends to exercise suchrights

72 Termination Subject to an Event of Force Majeure or the provisions of Section 652where an Event of Default has occurred and in each of such cases and so often as anEvent of Default happens after giving the notice provided for in Section 71 theGovernment may at any time in its sole discretion do any one or more of the following (a)terminate this Agreement (b) terminate the Mining Lease (c) rescind the ExemptionOrders and (d) take action for any remedy at law or in equity

73 Release by Proponent and Proponentrsquos Indemnity The Proponent hereby releases anddischarges and agrees to indemnify and save harmless the Government from every claimof every nature whether in damages (including consequential or indirect damages) or notwhich may arise or be suffered by the Proponent or any Person claiming through or underthe Proponent by reason of or as a result of anything done by the Government or anysuccessor or assign claiming through or under the Government under the provisions ofSection 72

ARTICLE 8DISPUTE RESOLUTION

81 Dispute Resolution Any dispute or difference between the parties hereto arising

811 as to whether a Processing Related Reason exists

27

812 as to the selection of an Engineer or firm of Engineers the Experts or an umpireunder Schedule 4132

813 under Section 45 as to whether the Underground Exploration Program hasidentified Sufficient Reserves under the Leased Lands

814 as to the determination of the date of Cessation of Mining Operations

815 as to whether commercial processing is economic as contemplated by Section41421

816 as to then prevailing commercial terms and conditions as contemplated by Section41422

817 under Section 51 as to whether an Event of Force Majeure exists

818 under Section 53 as to whether an Event of Force Majeure prevents the Proponentfrom performing any of its obligations under this Agreement

819 under Section 53 or Section 652 as to the reasonable period of time for theextension of the dates of performance of the Proponentrsquos obligations

8110 under Section 6522 the additional quantity of contained nickel in NickelConcentrate to be shipped out of the Province or

8111 as to whether the Proponent is complying with its obligations under Section 52

shall in each case be resolved in the manner provided for in Schedule 81

ARTICLE 9CONFIDENTIAL INFORMATION

91 Confidential Information The Government

911 acknowledges that information (the Information) supplied to it by or on behalf ofthe Proponent pursuant to or in connection with this Agreement or the Instrumentsincluding without limitation information provided pursuant to or in connection withSections 422 471 472 475 52 and 81 is of a financial commercialscientific or technical nature and is supplied in confidence and

912 subject to Sections 93 and 94 shall keep the Information confidential and shallnot use or disclose the Information to any third party without the Approval of theProponent and in doing so shall use the same care as it applies to avoid disclosureor dissemination of its own confidential information to prevent the disclosure ofInformation to any third party

28

92 Effect of Disclosure The Government acknowledges that disclosure of the Informationcontrary to the provisions of this Article 9 could reasonably be expected to921 harm significantly the competitive position or interfere significantly with the

negotiating position of the Proponent

922 result in similar information no longer being supplied by or on behalf of theProponent to the Government when it is in the public interest that similar informationcontinued to be supplied and

923 result in material financial loss to the Proponent or result in material financial gainto competitors of the Proponent and other Persons

93 Approval The Government may disclose Information if Approved by the Proponent

94 Permitted Disclosure of Information The provisions of this Article 9 shall not apply toInformation which

941 is now or which hereafter through no act or omission of the Government becomesgenerally known or available to the public without breach of this Agreement

942 after disclosure to the Government becomes generally known or available to thepublic by publication or otherwise through no act or omission of the Government

943 the Government can establish was in its possession at the time of disclosure andwas not previously acquired directly or indirectly from the Proponent

944 is disclosed to the Government by a third party on a non-confidential basis whichparty to the Knowledge of the Government is not prohibited from disclosing suchInformation to the Government by any legal contractual or fiduciary obligation towhich such party is bound or subject or

945 is required to be disclosed by law

95 Remedy Without limiting the Proponentrsquos rights and recourses for a breach by theGovernment of its obligations in this Article 9

951 the Government acknowledges that the Proponent shall suffer irreparable harm ifthe Government discloses Information contrary to the provisions of this Article 9and unless prohibited by law the Proponent shall be entitled to an injunction orinjunctions to prevent such disclosure

952 the Government shall be liable for and shall indemnify and save the Proponentharmless from and against costs losses damages and claims that it may sufferpay incur or be liable for as a result of any breach by the Government of thisArticle 9 and

29

953 in the event there are any measures which the Government can take to ensurecompliance with the provisions of Section 912 the Proponent shall be relieved ofthe obligation to provide information of the type with respect to which the breachoccurred until the Government has taken such measures

ARTICLE 10CONDITIONS CLOSING AND TERMINATION

101 Conditions for the Benefit of the Government Subject to Section 1061 the obligationsof the Government in this Agreement are subject to the satisfaction of or compliance withat or prior to the Time of Closing each of the following conditions

1011 the representations and warranties of the Proponent made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Proponent at or prior to the Time of Closing shallhave been performed the Proponent shall not be in breach of any agreement onits part contained in this Agreement at the Time of Closing and the Governmentshall have received a certificate confirming the foregoing signed for and on behalfof the Proponent in form and content satisfactory to the Government

1012 the University Agreement shall have been executed by the Proponent and a copythereof shall have been delivered to the Government

1013 the Tax Agreement shall have been executed by the Proponent and delivered to theGovernment and

1014 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

102 Conditions for the Benefit of the Proponent Subject to Section 1061 the obligationsof the Proponent in this Agreement are subject to the satisfaction of or compliance with ator prior to the Time of Closing each of the following conditions

1021 the representations and warranties of the Government made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Government at or prior to the Time of Closingshall have been performed the Government shall not be in breach of anyagreement on its part contained in this Agreement at the Time of Closing and theProponent shall have received a certificate confirming the foregoing signed for andon behalf of the Government in form and content satisfactory to the Proponent

30

1022 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

1023 the Tax Agreement shall have been executed by the Government and delivered bythe Government to the Proponent

1024 the Proponent shall have secured financing on reasonable commercial terms toenable it to develop the Mine and construct the Concentrator Plant and

1025 the Mining Tax Act Amendments shall have become law

103 Closing Notice If the Proponent (a) wishes to waive the condition set out in Section1024 or (b) has obtained the financing contemplated by Section 1024 it shall forthwithdeliver to the Government a notice (the ldquoClosing Noticerdquo) confirming that it has eitherwaived the condition set out in Section 1024 or that such condition has been satisfied

104 Deliveries and Closing1041 The Closing shall take place at the Time of Closing on the Closing Date at a

location to be agreed by the parties

1042 At the Closing

10421 the Proponent shall deliver to the Government the certificatecontemplated by Section 1011 and if not previously delivered theexecuted University Agreement and the executed Tax Agreementand

10422 the Government shall deliver to the Proponent the certificatecontemplated by Section 1021 and if not previously delivered theexecuted Tax Agreement

105 Termination This Agreement and the IBEA may be terminated at any time prior to theTime of Closing1051 by agreement of the Government and the Proponent

1052 by the Government if the conditions set out in Section 101 have not been satisfiedor waived by the Government or the Closing Notice has not been delivered to theGovernment on or before 31 March 2003 or

1053 by the Proponent if the conditions set out in Section 102 have not been satisfiedor waived by the Proponent (except the condition set out in Section 1024 in theevent the Proponent has delivered the Closing Notice)

106 Effect of Agreement and Termination

1061 Notwithstanding Section 1062 and subject to Section 1063 the Government andthe Proponent shall be bound by the provisions of Sections 41 421 422 410

31

411 412 415 416 417 418 61 63 64 65 66 67 68 69 610 and 611and Articles 5 8 9 and 11 effective as of and from the date of execution of thisAgreement

1062 Subject to Section 1061 the obligations of the Proponent and the Government inthis Agreement shall be effective as of and from the Time of Closing

1063 If this Agreement and the IEBA are terminated in accordance with the provisions ofSection 105 this Agreement and the IEBA shall thereafter become null and voidand have no effect and no party shall have any liability to the other except

10631 the obligations contained in Sections 41421 411 69 and Article9 hereof and

10632 the liability of a party in respect of its breach of this Agreement andthe IEBA prior to such termination

all of which shall survive such termination for a period of twelve months followingsuch termination

ARTICLE 11GENERAL MATTERS

111 Enurement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease shall be binding upon and shall enure to the benefitof the parties hereto the successors and assigns of the Government and the successorsand permitted assigns of the Proponent Any such assignment permitted by this Agreementshall become effective only when the assignee executes with the Government aninstrument whereby it agrees to be bound by and perform all of the Proponentrsquos obligationsunder this Agreement the Instruments the Exemption Orders the Primary ProductionOrder and the Mining Lease Subject to Section 4153 from and after the execution ofsuch instrument the assignor shall be relieved of and released from all its obligations underthis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease with effect from and after the date of execution of such instrument

112 Counterparts This Agreement and the other documents referred to herein andorotherwise required to complete the transactions contemplated hereby may be executed intwo or more counterparts including by facsimile each of which shall be deemed an originaland all of which together shall constitute one and the same instrument

113 Notices All notices requests demands and other communications hereunder shall bedeemed to have been duly given if in writing and either delivered personally sent byfacsimile transmission or by air courier service to the addresses designated below or suchother addresses as may be designated in writing by notice given hereunder and shall be

32

effective upon personal delivery or facsimile transmission thereof with proof of transmissionreceipt or upon delivery by air courier serviceIf to VBNC Voiseyrsquos Bay Nickel Company Limited

Suite 700 Baine Johnston Centre10 Fort William PlaceSt Johnrsquos NewfoundlandA1C 1K4Attention PresidentFacsimile (709) 758-8820

If to Inco Inco Limited145 King Street WestSuite 1500Toronto OntarioM5H 4B7Attention PresidentFacsimile (416) 361-7734

If to the Government Government of Newfoundland amp LabradorDepartment of Mines amp EnergyNatural Resources Building7th Floor 50 Elizabeth AvenueSt Johnrsquos NewfoundlandA1A 1W5Attention The MinisterFacsimile (709) 729-0059

114 Legal Fees In the event of any dispute or controversy between the Proponent on the onehand and the Government on the other hand relating to the interpretation of this Agreementor to the transactions contemplated herein the prevailing party shall be entitled to recoverfrom the other party reasonable legal fees and expenses incurred by the prevailing partySuch award shall include reasonable post judgment legal fees and costs

115 Payment of Fees and Expenses Each party hereto shall pay its own fees expenses anddisbursements incurred in connection with this Agreement and the transactionscontemplated hereby and all other costs and expenses incurred in its performance andcompliance with all conditions to be performed hereunder and thereunder

116 Time of Essence Time is of the essence of this Agreement

117 Further Assurances Each of the parties shall promptly do make execute deliver orcause to be done made executed or delivered all such further acts documents and thingsas the other parties hereto may reasonably require from time to time for the purpose ofgiving effect to this Agreement and the transactions contemplated hereby and shall usereasonable efforts and take all such steps as may be reasonably within its power toimplement to their full extent the provisions hereof and thereof

33

118 Public Notices No press release or other announcement concerning the transactionscontemplated by this Agreement shall be made either by the Proponent or the Governmentwithout the prior Approval of the other (such Approval not to be unreasonably withheld)provided however that the Proponent may without such Approval make such disclosureif the same is required by law or any stock exchange on which any of the securities of theProponent or any of its Affiliates are listed or by any securities commission or other similarregulatory authority having jurisdiction over the Proponent or any of its Affiliates and if suchdisclosure is required the Person making the disclosure shall use best efforts to give priororal or written notice to the Government and if such prior notice is not possible to givesuch notice immediately following the making of such disclosure Notwithstanding theforegoing the Proponent acknowledges that the Government will make this Agreement andthe Schedules hereto public

119 Independent Legal Advice Each of the parties acknowledges having obtained its ownindependent legal advice with respect to this Agreement and the transactions contemplatedhereby to the fullest extent deemed necessary by each party prior to its execution anddelivery Furthermore the parties acknowledge that neither acted under any duress innegotiating drafting and executing this Agreement the Instruments and any documentscontemplated hereby There shall be no presumption that any ambiguity in this Agreementthe Instruments and any documents contemplated hereby be resolved in favour of any ofthe parties

1110 Compliance with Laws Without limiting the generality of any other covenant herein theProponent shall at its own cost and expense comply with and shall use best efforts toensure that all Persons for whom the Proponent is at law responsible comply with allApplicable Laws in connection with the Project

1111 Entire Agreement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease set forth the entire agreement and all thecovenants promises assurances agreements representations conditions warrantiesstatements and understandings (collectively ldquoRepresentationsrdquo) between the partiesconcerning the subject matter hereof No Representations are made by the Governmentto the Proponent or by the Proponent to the Government except as expressly set out in thisAgreement the Instruments the Exemption Orders the Primary Production Order and theMining Lease For greater certainty the Statement of Principles between the Governmentand the Proponent dated as of 11 June 2002 shall have no application to the parties or thematters contemplated by this Agreement after the date hereof and is replaced entirely bythis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease

1112 Good Faith Each of the Government and the Proponent shall at all times exercise all itsrights hereunder in a manner consistent with good business practices and shall act in goodfaith

1113 Waiver The failure of any party hereto to insist in any one instance upon the strictperformance by another party hereto of its obligations hereunder the Instruments theExemption Orders the Primary Production Order and the Mining Lease or the failure of any

34

party hereto to exercise any right option or remedy shall not constitute a waiver orrelinquishment for the future of any such obligation right option or remedy nor shall itconstitute a waiver of a subsequent breach No covenant or condition of this Agreementmay be waived by any party hereto except by the written consent of that party andforbearance or indulgence by that party in any regard whatsoever for no matter how longshall not constitute a waiver of such covenant or condition and until such covenant orcondition has been performed or waived in writing that party shall be entitled to invoke anyremedy available to that party under this Agreement the Instruments the ExemptionOrders the Primary Production Order and the Mining Lease despite its forbearance orindulgence

1114 No Partnership Joint Venture or Agency The Government and the Proponent expresslydisclaim any intention to create a partnership joint venture or joint enterprise It isunderstood acknowledged and agreed that nothing contained in this Agreement nor anyacts of the parties shall constitute or be deemed to constitute the Government and theProponent as partners joint venturers or principal and agent in any way or for any purpose

THE HONOURABLE THE PREMIER

THE HONOURABLE THE MINISTER OFMINES AND ENERGY

THE HONOURABLE THE MINISTER OFLABRADOR AND ABORIGINAL AFFAIRS

INCO LIMITED

ByChairman and Chief Executive Officer

VOISEYrsquoS BAY NICKEL COMPANY LIMITED

ByPresident

SCHEDULE 11ANICKEL CONCENTRATE EXEMPTION ORDER

This document can be found at the following web address httpwwwgovnfcahoaregulationsrc020066htm

4

(c) is a member in good standing of a professional association where ldquoprofessionalassociationrdquo means a self-regulatory organization of engineers that

(i) has been given authority or recognition by statute

(ii) admits members primarily on the basis of their academic qualifications andexperience

(iii) requires compliance with the professional standards of competence andethics established by the organization and

(iv) has disciplinary powers including the power to suspend or expel a member

ldquoEvent of Bankruptcyrdquo means

(a) the entry of a decree or order by a court having jurisdiction adjudging the Proponenta bankrupt or insolvent or approving as properly filed a petition seekingreorganization or winding-up of the Proponent under the Companiesrsquo CreditorsArrangement Act (Canada) the Bankruptcy and Insolvency Act (Canada) or theWinding-Up Act (Canada) or any other bankruptcy insolvency or analogous lawsor issuing sequestration or process of execution against the Proponent or anysubstantial part of its property or ordering the winding-up or liquidation of its affairsand the continuance of any such decree or order or appointment unstayedundischarged and in effect for a period of 60 days from the date thereof

(b) the institution by the Proponent of proceedings to be adjudicated bankrupt orinsolvent or the consent by it to the institution of bankruptcy or insolvencyproceedings against it or the filing by it of a petition or answer or consent seekingreorganization or relief under the Companiesrsquo Creditors Arrangement Act (Canada)the Bankruptcy and Insolvency Act (Canada) or the Winding-Up Act (Canada) orany other bankruptcy insolvency or analogous laws or the consent by it to the filingof any such petition or to the appointment of a receiver of the Proponent or of anysubstantial part of its property or the making by it of a general assignment for thebenefit of creditors or the Proponentrsquos admission in writing of its inability to pay itsdebts generally as they become due or the Proponent taking such action infurtherance of any of such aforementioned purposes or

(c) whenever a custodian receiver receiver and manager sequestrator liquidatortrustee agent for a secured creditor or other Person with similar powers isappointed for any substantial part of the Project whether by a court or by extra-judicial means unless such custodian receiver receiver and manager sequestratorliquidator trustee or agent is removed within 60 days of such appointment

ldquoEvent of Defaultrdquo means any one or more of the following

(a) an Event of Bankruptcy has occurred with respect to the Proponent

5

(b) the Proponent is wound up its constating documents or by-laws are forfeited orsurrendered or the corporate or other existence of the Proponent is otherwiseterminated

(c) the Proponent is in breach of its obligations in Section 415 or

(d) subject to an Event of Force Majeure andor Section 652

(i) the Decision has not been delivered by 15 November 2008

(ii) the applicable Implementation Plan has not been delivered as required bySection 474 or 475

(iii) the Processing Plant has not been completed on or before 31 December2011 or

(iv) an Engineer has determined that the Proponent is not proceeding diligentlyto complete the engineering work for and the construction of the ProcessingPlant so that it will be completed on or before 31 December 2011 asrequired by Section 474 or 475

ldquoEvent of Force Majeurerdquo has the meaning ascribed thereto in Section 51

ldquoExemption Ordersrdquo means collectively the Nickel Concentrate Exemption Order theCopper Concentrate Exemption Order and the Matte Plant Exemption Order

ldquoExpertsrdquo means collectively (a) an Engineer or firm of Engineers who will make thetechnical feasibility review of the Decision and (b) a recognized third party financial expertindependent of the Government and the Proponent who will make the financial feasibilityreview of the Decision and who will jointly deliver the Expertsrsquo Report if requested by theGovernment pursuant to Section 475 The Experts shall be selected at the time and in themanner provided for in Section 473

ldquoExpertsrsquo Reportrdquo has the meaning ascribed thereto in Section 475

ldquoFeasibility Studyrdquo means the study undertaken by or on behalf of the Proponentcontaining the technical and economic evaluations which form the basis for the Decision

ldquoFinished Copper Productrdquo means finished copper product(s) having a copper contentof not less than 99

ldquoFinished Nickel Productrdquo means finished nickel product(s) having a nickel content of notless than 998

ldquoGovernmentrdquo means the Government of the Province

6

ldquoGovernment Entityrdquo means (a) any federal provincial state regional municipal localor other government governmental or public department commission board bureau oragency whether domestic or foreign (b) any subdivision agency commission board orauthority of any of the foregoing or (c) any quasi governmental or private body exercisingany regulatory expropriation or taxing authority under or for the account of any of theforegoing in each case which has jurisdiction in respect of the Project or any part thereof

ldquoHydromet Plantrdquo has the meaning ascribed thereto in Section 461

ldquoIBAsrdquo means collectively the Impacts and Benefits Agreements made as of 29 July 2002between the Proponent and each of Innu Nation and the LIA without any amendment orvariation

ldquoIEBArdquo means the Industrial and Employment Benefits Agreement in the form set out inSchedule 49

ldquoImplementation Planrdquo means a detailed description of and time schedule for thecompletion of the engineering work for and the construction of the Processing Plant by 31December 2011

ldquoIncordquo means Inco Limited a corporation organized under the laws of Canada

ldquoInformationrdquo has the meaning ascribed thereto in Section 911

ldquoInnovation Centrerdquo has the meaning ascribed thereto in Section 34

ldquoInnu Nationrdquo means Innu Nation a corporation incorporated under the laws of Canada

ldquoInstrumentsrdquo means collectively the University Agreement the Tax Agreement and theIEBA

ldquoLeased Landsrdquo means the lands described in Schedule ldquoArdquo to the Mining Lease asamended from time to time

ldquoLegislative Frameworkrdquo means the Applicable Laws of the Province in existence as ofthe date hereof applicable to the Project or any part thereof

ldquoLIArdquo means the Labrador Inuit Association a corporation incorporated under the laws ofthe Province

ldquoMatterdquo means any form of granular nickel in matte product containing not less than 50nickel which can be processed by the Matte Plant to produce Finished Nickel Product

ldquoMatte Plantrdquo has the meaning ascribed thereto in Section 462

7

ldquoMatte Plant Exemption Order means the Matte Plant Exemption Order in the form ofSchedule 11C

ldquoMinerdquo means collectively (a) the open pit mine or mines to be developed by the Proponentfor the extraction of the mineral ores located on the Leased Lands and (b) the undergroundmine or mines as contemplated by Section 45 for the extraction of the mineral ores atdepth located under the Leased Lands

ldquoMineral Actrdquo means the Mineral Act (Newfoundland and Labrador) and the regulationsthereunder

ldquoMining Leaserdquo means the Mining Lease in the form of Schedule 63

ldquoMining Tax Actrdquo means the Mining and Mineral Rights Tax Act (Newfoundland andLabrador) and the regulations thereunder

ldquoMining Tax Act Amendmentsrdquo means the proposed amendments to the Mining Tax Actset out in Schedule 69

ldquoNickel Concentraterdquo means the intermediate concentrate or similar product produced bythe Concentrator Plant containing the principal quantities of nickel and cobalt from oreextracted or removed from the Leased Lands

ldquoNickel Concentrate Exemption Order means the Nickel Concentrate Exemption Orderin the form of Schedule 11A

ldquoPersonrdquo means any individual partnership limited partnership joint venture syndicatesole proprietorship company or corporation with or without share capital unincorporatedassociation trust trustee executor administrator or other legal personal representativeor Government Entity however designated or constituted

ldquoPrimary Production Orderrdquo means the Primary Production Order in the form of Schedule610

ldquoProcessing Plantrdquo means either the Hydromet Plant or the Matte Plant which theProponent shall construct and operate in the Province as contemplated by Section 46

ldquoProcessing Related Reasonrdquo means any situation where the Proponent is unable tomeet its obligations under Section 4131 as a result of either (a) the unavailability forwhatever bona fide reason of Replacement Concentrate or (b) the unavailability ofReplacement Concentrate on reasonable commercial terms including without limitationwhere the terms relating to price or specifications would make it not economically ortechnically feasible for processing at the Processing Plant

ldquoProjectrdquo has the meaning ascribed thereto in Section 31

8

ldquoProponentrdquo means collectively VBNC Inco their respective Affiliates or any Personwhich (as permitted by this Agreement) individually or together with any of them by way ofpartnership joint venture sub-contract or otherwise holds or is entitled to a majority interestin or Control of the Project or is the operator of the Project and their respective successorsand permitted assigns

ldquoProvincerdquo means the Province of Newfoundland and Labrador Canada

ldquoR amp D Programrdquo has the meaning ascribed thereto in Section 35

ldquoReplacement Concentraterdquo means any product containing nickel or cobalt or bothderived from ores or any other source of nickel or cobalt or both mined extracted orproduced outside the Province that in each case does not represent Finished NickelProduct but which can be further processed at the Processing Plant to produce FinishedNickel Product

ldquoSufficient Reservesrdquo means the estimated quantities of ldquoProven Mineral Reservesrdquo orldquoProbable Mineral Reservesrdquo or both within the meaning of National Instrument 43-101ldquoStandards of Disclosure for Mineral Projectsrdquo (as amended from time to time) determinedby the Proponent in accordance with its standard methodologies and assumptions for suchestimates

ldquoTax Agreementrdquo means the Tax Agreement to be entered into between the Governmentand the Proponent as contemplated by Sections 412 and 68

ldquoTime of Closingrdquo means 1000 orsquoclock in the morning in the Province on the ClosingDate

ldquoUnderground Exploration Programrdquo means the underground exploration programcontemplated by Section 44

ldquoUniversityrdquo means Memorial University of Newfoundland

ldquoUniversity Agreementrdquo means the agreement to be entered into between the Proponentand the University as contemplated by Section 48

ldquoVBN Undertaking Orderrdquo means the Voiseyrsquos Bay Nickel Company Limited Mine and MillUndertaking Order under the Environmental Assessment Act (Newfoundland and Labrador)dated 5 August 1999 (OC 99-286) as amended from time to time and

ldquoVBNCrdquo means Voiseyrsquos Bay Nickel Company Limited a corporation incorporated underthe laws of the Province

9

12 Schedules

The documents attached hereto and identified below shall form an integral part of thisAgreement

Schedule 11A - Nickel Concentrate Exemption OrderSchedule 11B - Copper Concentrate Exemption OrderSchedule 11C - Matte Plant Exemption OrderSchedule 49 - IEBASchedule 4132 - Assaying ProceduresSchedule 63 - Mining LeaseSchedule 69 - Mining Tax Act AmendmentsSchedule 610 - Primary Production OrderSchedule 81 - Dispute Resolution Procedures

13 Subdivisions Unless otherwise stated a reference herein or in a Schedule by numericalor alphabetical designation to an Article Section Subsection Paragraph Subparagraphor Schedule shall refer to the Article Section Subsection Paragraph Subparagraph orSchedule bearing that designation in this Agreement or in a Schedule

14 Headings The division of this Agreement into Articles Sections SubsectionsParagraphs and Subparagraphs and the insertion of headings are for convenience ofreference only and shall not affect the construction or interpretation of this Agreement

15 Number and Gender Words importing the singular shall include the plural and vice versaand words importing a particular gender shall include all genders The use of the neutersingular pronoun to refer to a party is deemed a proper reference The necessarygrammatical changes required to make the provisions of this Agreement apply shall in allinstances be assumed as though in each case fully expressed

16 Statutes Regulations Rules and Orders Any reference in this Agreement to all or anypart of any statute regulation rule or order shall unless otherwise stated be a referenceto that statute regulation rule or order or the relevant part thereof as amendedsubstituted replaced or reenacted from time to time

17 Business Day If the day on which any act or payment is required to be done or madeunder this Agreement is a day which is not a Business Day then such act or payment shallbe performed or made on the next following Business Day

18 Contract Always Speaking With the exception of the representations and warranties ofthe parties set out in Article 2 and any estimates referred to in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic and relatedbenefits and costs of facilities referred to in this Agreement made by the Proponent wherea matter or thing is expressed in the present tense it shall be applied to the circumstancesas they arise

10

19 Governing Law and Choice of Forum This Agreement shall be interpreted inaccordance with the laws in force in the Province subject to any applicable federal laws andfor all purposes this Agreement shall be treated as a Newfoundland and Labrador contractThe Proponent irrevocably submits and attorns to the exclusive jurisdiction of the courts ofthe Province

110 Construed Covenants Each obligation or agreement of this Agreement (other than therepresentations and warranties of the parties) even though not expressed as a covenantis to be construed as a covenant

111 Inconsistency or Conflict Except where otherwise provided either expressly or bynecessary implication in this Agreement a Schedule hereto or any Instrument in the eventof any inconsistency or conflict between any such Schedule or Instrument and any provisioncontained in this Agreement the provision of this Agreement shall prevail to the extent ofthe inconsistency or conflict

112 Severability If any provision of this Agreement or the application thereof to any Personor circumstance is to any extent held or rendered invalid void illegal or unenforceablefor any reason then the particular provision

1121 shall be deemed to be independent of and severed from the remainder of thisAgreement and all the other provisions of this Agreement shall neverthelesscontinue in full force and effect and

1122 shall continue to be applicable and enforceable to the fullest extent permitted by lawagainst any Persons and in any circumstances other than those as to which it hasbeen held or rendered invalid void illegal or unenforceable

If a severance occurs under this Section 112 the parties shall use their respective bestefforts to negotiate in good faith an enforceable replacement provision that to the greatestextent possible reflects the intent or serves the purpose of the severed provision

113 Currency All references in this Agreement to currency are to Canadian dollars

114 Knowledge In this Agreement where ldquoKnowledgerdquo of a party is referred to

1141 in respect of the Proponent it shall mean the actual knowledge of the executiveofficers of the Proponent after due inquiry in respect thereof and

1142 in respect of the Government it shall mean the actual knowledge of the responsibleexecutives of the applicable department of Government after due inquiry in respectthereof

11

ARTICLE 2REPRESENTATIONS AND WARRANTIES

21 Proponentrsquos Representations and Warranties Acknowledging that the Government isrelying on such representations and warranties VBNC and Inco jointly and severallyrepresent and warrant to the Government that

211 each is a corporation which has been duly incorporated or organized as applicableunder the laws of its jurisdiction of incorporation or organization as applicable andis validly existing under such laws

212 Inco is extra-provincially registered in the Province

213 each has all necessary corporate power authority and capacity

2131 to cause the design engineering and construction of and to operateand maintain all parts of the Project and

2132 to enter into this Agreement and the Instruments and to perform itsrespective obligations herein and therein

214 the execution and delivery of this Agreement and each of the Instruments and theconsummation of the transactions contemplated herein and therein by each ofthem have been duly authorized by all necessary corporate action on the part ofeach of them

215 neither is a party to bound or affected by or subject to any indenture mortgagelease agreement instrument charter or by-law provision which with or without thegiving of notice or the lapse of time or both would be violated contravened orbreached by or under which default would occur as a result of the executiondelivery or performance of this Agreement or any of the Instruments or theconsummation of any of the transactions provided for in any of them

216 neither is bound or affected by or subject to any Applicable Law which with orwithout the giving of notice or the lapse of time or both would be violatedcontravened or breached by or under which default would occur as a result of theexecution delivery or performance of this Agreement or any of the Instruments orthe consummation of any of the transactions provided for in any of them

217 no approval authorization consent permit or other action by or filing with anyGovernment Entity is required in connection with the execution and delivery of thisAgreement or any of the Instruments and the performance of their respectiveobligations hereunder or thereunder except as otherwise stated herein

218 there is no suit action litigation arbitration proceeding or proceeding by aGovernmental Entity including appeals and applications for review in progresspending or to the Knowledge of either of them threatened against or involving

12

either of them or any judgment decree injunction or order of any court or arbitratorwhich could adversely affect their capacity or power to execute and deliver thisAgreement or any of the Instruments or to consummate the transactionscontemplated herein or therein or which could materially adversely affect theirrespective assets financial condition or future prospects

219 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of each of them enforceable against them inaccordance with their respective terms except as limited by (a) applicablebankruptcy laws or laws affecting the enforcement of creditorsrsquo rights generally and(b) the general principles of equity

2110 all references to estimates made by Inco and VBNC in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic andrelated benefits and costs of facilities are made as of the date of this Agreementhave been determined by them based upon information available at the date of thisAgreement and have been estimated by each of them bona fide and reasonablyand neither of them has any reason to believe that any such estimate isunreasonable or unfounded at the date of this Agreement and

2111 VBNC is a wholly owned subsidiary of Inco and to the Knowledge of the Proponentno Person individually or with any other Person or Persons currently Controls Inco

22 Government Acknowledgments The Government acknowledges that (a) none of VBNCInco or any Person for whom either of them may be responsible in law have made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments and (b) the Proponent shall use the most efficient and cost effective miningtechniques including state of the art automated mining technologies aimed at loweringoperating costs and extending the life of the Project

23 Governmentrsquos Representations and Warranties Acknowledging that the Proponent isrelying on such representations and warranties the Government represents and warrantsto the Proponent that

231 the execution and delivery of this Agreement and each of the Instruments and theconsummation by the Government of the transactions contemplated herein andtherein have been duly authorized by all necessary Government action

232 it is not a party to bound or affected by or subject to any indenture agreement orinstrument which with or without the giving of notice or the lapse of time or bothwould be violated contravened or breached by or under which default would occuras a result of the execution delivery or performance of this Agreement or any ofthe Instruments or the consummation of any of the transactions provided for in anyof them and

13

233 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of it enforceable against it in accordance with itsterms except as they may be limited by the general principles of equity

24 Proponent Acknowledgements Each of Inco and VBNC acknowledges that neither theGovernment nor any Person for whom it may be responsible in law has made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments

ARTICLE 3DESCRIPTION OF THE PROJECT AND RELATED FACILITIES

31 The Project The ldquoProjectrdquo will comprise collectively the Underground ExplorationProgram the Mine the Concentrator Plant the R amp D Program the Demonstration Plantthe Processing Plant and if applicable the Concentrator Plant expansion referred to inSection 45 The Processing Plant will be capable of processing concentrate andintermediate feeds containing nickel from other sources world wide which will give theProcessing Plant the capability of operating well beyond the life of the Mine

32 Capital Investment The Proponent estimates that the aggregate capital investment in theProject and related facilities will be $29 billion over the estimated 30-year life of the Projectinclusive of sustaining capital expenditures

33 Employment The Proponent estimates that

331 the construction phase of the Mine and Concentrator Plant will create approximately1700 person-years of employment in the Province the construction phase of theHydromet Plant will create approximately 3000 person-years of employment in theProvince and the construction phase of the Matte Plant will create approximately2500 person-years of employment in the Province

332 during the various operating phases the Project will create the followingemployment levels in the Province Mine and Concentrator Plant - 400 people R ampD Program - 200 people Underground Exploration Program - 85 people HydrometPlant - 400 people Matte Plant - 350 people

333 over the estimated 30-year life of the Project total employment benefits from theProject in the Province will be 76000 direct and indirect person-years and

334 gross domestic product impact to the Province with respect to the Project will be$11 billion

34 Innovation Centre The Proponent shall spend $10 million on and provide an endowmentof $1 million per year over a ten-year period to cover operational costs for an IncoInnovation Centre (the ldquoInnovation Centrerdquo) at St Johnrsquos in conjunction with theUniversity pursuant to the University Agreement The focus of the Innovation Centre willbe on education and research in mineral exploration mining and metallurgical processing

14

The Innovation Centre will provide world-class education research and training related tothe mining industry to 50-60 students per year to be engaged in Bachelors Masters andDoctorate level programs The Proponent shall commence work on the Innovation Centrein 2002 with target completion in 2004

35 R amp D Program The Proponent shall undertake a comprehensive research anddevelopment program intended to establish the commercial technical and economicfeasibility of hydrometallurgical process technology to process the Nickel Concentrate (theldquoR amp D Programrdquo) The R amp D Program will include the evaluation of chemical engineeringsub-processes for the hydrometallurgical process the mechanical equipment design for theDemonstration Plant and the construction and operation of the Demonstration Plant

ARTICLE 4PROPONENTrsquoS UNDERTAKINGS

41 Infrastructure and Initial Work Commencing in 2002 the Proponent shall

411 at the Mine site undertake site mobilization including the establishment of aconstruction camp initiation of work on temporary port facilities and construction ofaccess roads

412 at Argentia undertake leasing or other arrangements for occupancy and sitepreparation including demolition fencing security and signage

413 undertake the construction of a warehouse building and establish staging areas andlay down areas in support of Labrador activities

414 establish a project office at Argentia and information centres at St Johnrsquos andHappy Valley-Goose Bay and

415 complete site selection and commence architectural design and engineering workfor the Innovation Centre

The Proponent estimates that this infrastructure and initial work program will employ inaggregate approximately 250 persons and the Proponent shall spend not less than $55million on this program in the Province on or before 31 March 2003

42 R amp D Program421 The Proponent shall undertake the R amp D Program and as a part thereof shall

construct the Demonstration Plant at a cost which the Proponent estimates will be$130 million The Proponent shall commence the site development for theDemonstration Plant in 2002 and continue such development into 2003 Theinitiatives in support of these activities will include the operation of an informationcentre preparation of environmental baseline studies and continued upgrading orreplacement of utility services required for the Demonstration Plant maintainingstaging areas and cleanup and civil works at Argentia consisting of demolition

15

grading and earth works construction The Proponent has scheduled thecompletion of the engineering design and construction of the Demonstration Plantso that the Demonstration Plant Completion Date shall have occurred on or before31 December 2006

422 The Proponent shall provide to the Government within 15 days of the end of eachcalendar quarter commencing with the calendar quarter ending 31 December 2002a detailed progress report on the results during such calendar quarter of the R amp DProgram which report will detail costs incurred to the end of such calendar quarterand contain sufficient documentation and information to enable the Government toevaluate the Proponentrsquos progress with respect to the R amp D Program and thedevelopment of hydrometallurgical process technology for processing the NickelConcentrate If requested by the Government upon reasonable notice theProponent shall provide the Government and its representatives and advisorsaccess at reasonable times to the facilities where the R amp D Program is beingconducted and make appropriate personnel of the Proponent available to respondto any requests for additional information

423 In addition to the utilization of the Demonstration Plant for the purposes ofdeveloping hydrometallurgical process technology for processing the NickelConcentrate the Proponent shall explore business opportunities for the ongoingutilization of the Demonstration Plant for the evaluation of other concentrates andintermediate feeds after completion of the R amp D Program

43 Mine and Concentrator Plant

431 The Proponent shall cause the development of the Mine and the designengineering and construction of a millconcentrator plant which will be capable ofprocessing 6000 tonnes of ore per day (the ldquoConcentrator Plantrdquo) TheConcentrator Plant will produce the Copper Concentrate and the NickelConcentrate The Proponent has scheduled to begin the development of the Mineand the construction of the Concentrator Plant in 2003 and estimates that the Mineand Concentrator Plant will require three years to construct at a cost ofapproximately $710 million

432 The Proponent

4321 shall not ship any Nickel Concentrate out of the Province aspermitted by the Nickel Concentrate Exemption Order before theDemonstration Plant Completion Date and

4322 shall ship Nickel Concentrate from the Concentrator Plant to theDemonstration Plant in sufficient quantities for the continuedoperation of the Demonstration Plant during the R amp D Programfollowing successful start up of the Concentrator Plant

16

44 Underground Exploration Program The Proponent shall undertake an undergroundexploration program which it estimates will cost $95 million and employ approximately 85people This program is intended to identify Sufficient Reserves at depth under the LeasedLands and if there are such Sufficient Reserves the Proponent shall develop a mining planfor the economic extraction of such Reserves The initial phase of this undergroundexploration program will be an advanced surface program which the Proponent estimateswill cost $20 million to commence in 2002 with completion targeted for 2006 Subsequentunderground exploration will be scheduled to ensure that Sufficient Reserves under theLeased Lands are available to sustain full operation of the Concentrator Plant during thetransition from open-pit operations to full underground mining operations if applicable

45 Underground Mine Development and Concentrator Plant Expansion If theunderground exploration program described in Section 44 identifies Sufficient Reservesas contemplated by Section 44 the Proponent shall commence the development of anunderground mine or mines on the Leased Lands and an expansion of the ConcentratorPlant in order to supply sufficient Nickel Concentrate to maintain the operation of theProcessing Plant at full capacity The Proponent estimates that this program will costapproximately $750 million and employ an aggregate of 800 people

46 Processing Plant

461 In order to maximize long-term benefits for the Province and the people of theProvince the Proponent shall use its best efforts through the R amp D Program todevelop a technically and economically feasible hydrometallurgical processtechnology for processing the Nickel Concentrate in the Province If suchtechnology is successfully developed the Proponent shall cause the designengineering and construction of and operate and maintain a hydrometallurgicalprocessing plant with a design capacity to produce annually approximately 50000tonnes of Finished Nickel Product together with associated cobalt and copperproducts (the ldquoHydromet Plantrdquo) The Proponent estimates that the HydrometPlant will have a capital cost of approximately $800 million and during the three-yearconstruction period will generate approximately 3000 person-years of employmentThe Proponent estimates that the Hydromet Plant will employ approximately 400people during operations

462 If pursuant to Section 47 it is determined that a Hydromet Plant is not technicallyor economically feasible the Proponent shall construct a commercialhydrometallurgical nickel-matte processing facility or other similar facilityincorporating a proven state of the art technology to produce Finished NickelProduct (the ldquoMatte Plantrdquo) The Matte Plant will have a design capacity toproduce annually approximately 50000 tonnes of Finished Nickel Product togetherwith associated cobalt and copper products The Proponent estimates the MattePlant will have a capital cost of approximately $670 million and during the estimatedthree-year construction period will generate approximately 2500 person-years ofemployment The Proponent estimates that the Matte Plant will employapproximately 350 people during operations

17

463 The Proponent has represented to the Government that its objective is to operatethe Processing Plant well beyond the life of the Mine Accordingly the Proponentundertakes to explore technically and economically feasible opportunities for theexpansion of the Processing Plant and to secure opportunities to supply theProcessing Plant with feed from world wide sources to fully utilize the Proponentrsquoslarge capital investment in the Processing Plant

464 The Proponent shall establish the Processing Plant at Argentia unlessenvironmental conditions at Argentia would make it not economically feasible toestablish the Processing Plant at Argentia and in such circumstances theProponent shall locate the Processing Plant at another site in the Province

47 Selection of Applicable Processing Plant

471 The Proponent shall use commercially reasonable efforts to deliver as soon aspossible but in any event shall deliver on or before 15 November 2008 theDecision and the Decision Materials to the Government and the Experts

472 If the Proponent has not on or before 30 June 2008 delivered to the Governmentthe Decision and the Decision Materials

4721 it shall forthwith meet with the Government to review on aconfidential basis the status of its efforts towards being able todeliver the Decision

4722 thereafter it shall promptly update the Government from time to timeon its efforts to be able to deliver the Decision and the outstandingissues relevant to whether the Decision will be to build the HydrometPlant or the Matte Plant and

4723 to the extent that the Proponent is not by 30 June 2008 in aposition to deliver the Decision which confirms that the Proponentintends to proceed with the construction of the Hydromet Plant theProponent shall use commercially reasonable efforts to developImplementation Plans for both a Hydromet Plant and a Matte Plantso that it will be able to deliver the Implementation Plan for theHydromet Plant or Matte Plant as applicable on or before 31December 2008

473 The Government may at any time after the earlier of the Decision Date or 30 June2008 give the Proponent notice in writing that it wishes to proceed with theappointment of the Experts When the Government gives notice to the Proponentrequiring the appointment of the Experts the Government and the Proponent shallthen forthwith agree upon the appointment of the Experts If the Government andthe Proponent cannot so agree within 15 days after the giving by the Governmentof such notice the appointment of the Experts shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter to

18

the Joint Committee or the Mediation Procedure referred to therein If the Expertsare appointed prior to the delivery by the Proponent of the Decision and theDecision Materials the Proponent shall provide to the Government and the Expertssuch data and information as is then available that will assist the Experts in theirreview under Section 475 The Proponent and the Government shall each pay50 of the fees and expenses of the Experts Before receiving the Decision theDecision Materials or any other information or data from the Proponent under thisAgreement the Experts shall first execute a confidentiality agreement containingsubstantially the same terms as provided for in Article 9

474 If in the Decision the Proponent confirms it intends to construct the Hydromet Plantthe Proponent shall deliver the Implementation Plan for the Hydromet Plant on orbefore 31 December 2008 and thereafter shall proceed diligently to complete thedetailed engineering for and construction of the Hydromet Plant in accordance withsuch Implementation Plan so that it shall be completed on or before 31 December2011

475 If in the Decision the Proponent confirms it intends to construct the Matte Plant theGovernment shall on or before the seventh Business Days after the Decision Datedeliver to the Proponent and the Experts a notice in writing (in this Section 475 theldquoGovernment Decisionrdquo) that the Government either (a) accepts the Decision tobuild the Matte Plant or (b) intends to refer such Decision to the Experts for reviewIf in the Government Decision the Government states it intends to refer theDecision to the Experts the Proponent shall promptly deliver to the Experts theDecision and the Decision Materials if it has not previously done so The Expertswill review the Decision the Decision Materials and any other information or datawhich the Experts deem appropriate or which the Government requests them toconsider and render their report (the ldquoExpertsrsquo Reportrdquo) within 30 days of the dateon which the Government delivers the Government Decision If the Governmentrequests the Experts to consider any other information or data in addition to theDecision Materials it shall provide to the Experts and the Proponent copies of suchrequest and any such information and data at the time it delivers the GovernmentDecision and the Proponent shall have the right within five Business Days tocomment on or respond to such information and data to the Experts with a copy tothe Government The Expertsrsquo Report shall determine whether in the opinion of theExperts it would be technically and economically feasible for the Proponent to buildthe Hydromet Plant together with reasons for such determination If the ExpertsrsquoReport determines that it is technically and economically feasible for the Proponentto build the Hydromet Plant the Proponent shall on or before 31 December 2008deliver to the Government an Implementation Plan for the Hydromet Plant andthereafter shall proceed diligently to complete the detailed engineering for andconstruction of the Hydromet Plant so that it shall be completed on or before 31December 2011 If the Expertsrsquo Report confirms that it would not be technically oreconomically feasible to build the Hydromet Plant the Proponent shall on or before31 December 2008 deliver to the Government an Implementation Plan for the MattePlant and thereafter shall proceed diligently to complete the detailed engineering forand construction of the Matte Plant in accordance with such Implementation Plan

19

so that it shall be completed on or before 31 December 2011 Subject to Section477 the Expertsrsquo Report shall be final and binding on the Government and theProponent

476 The determination as to whether the Proponent is proceeding diligently with thecompletion of the engineering work for and the construction of the Processing Plantfor completion on or before 31 December 2011 as required by Section 474 or475 shall be made annually on the anniversary date of the Decision Date by anEngineer who shall certify to both the Government and the Proponent as to whetherthe actual engineering work for and construction of the Processing Plant is onschedule with the applicable Implementation Plan

477 If there is a manifest error in the Expertsrsquo Report which if corrected would result ina different determination by the Experts the Expertsrsquo Report shall be referred backto the Experts for the purpose of forthwith correcting such manifest error changingthe determination in the Expertsrsquo Report and submitting a revised Expertsrsquo Reportto the Proponent and the Government

478 Where an Engineer is required to be appointed from time to time for the purposesof Section 476 or for determining the Commercial Production Date theConstruction Completion Date or the Demonstration Plant Completion Date theGovernment and the Proponent shall forthwith agree upon the appointment of suchEngineer If the Government and the Proponent cannot so agree within 15 daysof the Government or the Proponent giving the other notice requiring appointmentof an Engineer the appointment of the Engineer shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter tothe Joint Committee or the Mediation Procedure referred to therein The Proponentand the Government shall each pay 50 of the fees and expenses of any Engineer

48 Innovation Centre The Proponent shall enter into an agreement (the ldquoUniversityAgreementrdquo) with the University in form and content satisfactory to the Government on orbefore the Closing Date The University Agreement shall contain among other things theProponentrsquos commitments and intentions set out in Section 34

49 Industrial and Employment Benefits The Proponent shall execute the IEBA to beeffective 7 October 2002

410 IBAs The Proponent represents and warrants to the Government that it has entered intothe IBAs

411 VBN Undertaking Order The Proponent agrees to abide by and implement the terms andconditions contained in the VBN Undertaking Order

412 Corporate Income Tax The Proponent shall use its best efforts to negotiate and executewith the Government an agreement covering the matters set forth in this Section 412 andSection 68 (the ldquoTax Agreementrdquo) as soon as possible but in any event on or before theClosing Date The Tax Agreement will contain provisions which to the extent permitted by

20

law will result in an allocation to the Province for the purposes of Part IV of the FederalIncome Tax Regulations of the Proponentrsquos gross revenues from the sale or disposition ofnickel copper and cobalt products whether in intermediate or final form from the Project

413 Return of Concentrate

4131 In consideration of the Government granting the Exemption Orders the Proponentguarantees that it shall prior to Cessation of Mining Operations commenceshipping into the Province Replacement Concentrate for processing into FinishedNickel Product at the Processing Plant Such Replacement Concentrate shall beshipped to and processed by the Processing Plant in sufficient quantities to permitthe Processing Plant to operate continuously at a rate that will produce not less than25000 tonnes of Finished Nickel Product annually and such shipments shallcontinue at least until such time as the contained nickel and cobalt in theReplacement Concentrate shall have equalled the total quantity of contained nickeland cobalt in the Nickel Concentrate shipped out of the Province under the termsof the Nickel Concentrate Exemption Order and otherwise than under the provisionsof an Exemption Order

4132 The Proponent shall undertake the Assaying Procedures set out in Schedule 4132with respect to the Nickel Concentrate and the Replacement Concentrate

4133 The Proponent acknowledges that if it does not perform its contractual obligationsunder Section 4131 (a) the Province and the economy of the Province will suffersubstantial loss (b) the Government would not be properly compensated for its lossby monetary damages which therefore will not be considered an adequate remedyfor such breach and (c) the Government may at any time subsequent to suchbreach commence an action against the Proponent for any one or more of thefollowing remedies whether claimed as primary or secondary alternative relief

41331 an order for specific performance

41332 appropriate injunctive relief whether mandatory or prohibitory and

41333 monetary damages including for consequential and economic lossreflecting the substantial losses suffered by the Government and theeconomy of the Province as a result of such breach

The Proponent expressly waives any right to claim or argue that the Governmentcannot claim the relief set out in Sections 41331 41332 and 41333 in any suitcommenced by the Government against the Proponent for the Proponentrsquos failureto perform its obligations under Section 4131

21

414 Copper Processing in the Province

4141 The Government acknowledges that at the date hereof the quantity of coppercurrently identified in the mineralized zones on or under the Leased Lands togetherwith identified copper deposits elsewhere in the Province are not sufficient to justifythe construction and operation of a copper processing facility in the Province on aneconomically feasible basis

4142 If at any time in the future

41421 Sufficient Reserves of copper are discovered by the Proponent inthe Province (including on or under the Leased Lands) to makeeconomic the processing on a commercial basis of the CopperConcentrate or any other product containing the principal quantitiesof copper extracted from the Leased Lands into Finished CopperProduct in the Province the Proponent shall process such CopperConcentrate into Finished Copper Product in the Province or

41422 a third party establishes a facility in the Province for the commercialprocessing of copper concentrate the Proponent shall offer for saleits then available Copper Concentrate from the Concentrator Plantto such third party for processing in such facility on then prevailingcommercial terms and conditions subject to the Proponentrsquos thenexisting contractual obligations

4143 In the circumstances set out in Section 4142 the Proponent acknowledges thatthe Government has the right pursuant to Section 311(3) of the Mineral Act torescind the Copper Concentrate Exemption Order

415 Parties in Contract Change of Control and Assignment

4151 The Proponent covenants with the Government that without the prior Approval ofthe Government it

41511 shall not take or threaten or purport to take any action whether byway of contract corporate reorganization or arrangement orotherwise that would have the effect of transferring assigningsubletting or otherwise divesting itself of a majority interest in orControl of (a) the Project or (b) all or substantially all of theProponentsrsquo rights under this Agreement the Instruments theExemption Orders the Primary Production Order and subject toApplicable Laws the Mining Lease and

41512 shall not take or threaten or purport to take any action which directlyor indirectly results in a change of Control of VBNC to a party otherthan Inco

22

4152 Wherever pursuant to Section 4151 the Government is requested to grant itsApproval such Approval may be withheld by the Government in its sole andabsolute discretion for any reason whatsoever

4153 For bona fide tax or other corporate reasons the Proponent may without theApproval of the Government transfer assign sublet or otherwise divest to anAffiliate a majority interest in or Control of (a) the Project or (b) all or substantiallyall of the Proponentrsquos rights under this Agreement the Instruments the ExemptionOrders the Primary Production Order and subject to Applicable Laws the MiningLease Notwithstanding Section 111 no such transfer assignment sublet ordivestiture shall relieve the Proponent of its obligations hereunder or thereunder

4154 The Proponent shall promptly give written notice to the Government of any actionit takes under Section 4151 or 4153

416 Members of House of Assembly The Proponent undertakes to (a) ensure that nomember of the House of Assembly of the Province shall have any interest in thisAgreement and (b) use its best efforts to ensure that no Member of the House of Assemblyof the Province receives any benefit to arise herefrom or from any report study review oranalysis required to be made or submitted pursuant to this Agreement

417 Mining Lease VBNC shall execute the Mining Lease effective 30 September 2002

418 Proponentrsquos Financing The Proponent shall use best efforts to obtain the financingcontemplated by Section 1024 including without limitation the preparation of all feasibilitystudies required in order to obtain such financing

ARTICLE 5FORCE MAJEURE

51 Events of Force Majeure For the purposes of this Article 5 and subject to the exceptionsand qualifications below each of the following shall be an ldquoEvent of Force Majeurerdquo

511 acts of God or natural disasters adverse weather conditions or other similaroccurrences

512 acts of war (declared or undeclared) or conditions arising out of or attributable toany such acts of war revolutions insurrections civil strife formal or informalhostilities mob violence riots and similar disturbances blockades or any otherunlawful acts against public order or authority

513 strikes lockouts work stoppages or labour disturbances unless directly andproximately caused by an unlawful act or omission of the Proponent

514 (a) delay or failure by suppliers of labour transportation materials machineryequipment parts supplies utilities or services (b) contractorsrsquo or sub-contractorsrsquoshortage of or inability to obtain labour transportation materials machinery

23

equipment parts supplies utilities or services or (c) breakdown of equipmentmachinery or facilities unless any of the foregoing are directly and proximatelycaused by or result from an unlawful act or omission of the Proponent

515 accidents and

516 solely in respect of the Proponentrsquos obligations in Section 4131 a ProcessingRelated Reason provided that a Processing Related Reason shall not be an Eventof Force Majeure at any time after three years following Cessation of MiningOperations

52 Obligation to Perform In order to obtain relief for an Event of Force Majeure theProponent shall (a) use commercially reasonable efforts to (i) prevent the occurrence of(ii) perform its obligations in the face of and (iii) terminate any such Event of Force Majeure(other than the events described in Section 513 relied upon) and (b) give the Governmentwritten notice of the facts which the Proponent claims constitute an Event of Force Majeureas soon as reasonably practical upon becoming aware of their existence

53 Force Majeure Relief If the Proponent establishes that it is prevented from performingany of its obligations under this Agreement the Nickel Concentrate Exemption Order or theMatte Plant Exemption Order by reason of an Event of Force Majeure such obligations willbe suspended for the period of the existence of such Event of Force Majeure and theProponent will be entitled to an extension of all dates referred to in this Agreement theNickel Concentrate Exemption Order and the Matte Plant Exemption Order for a reasonableperiod of time that reflects (a) the period during which the Proponent is prevented fromperforming its obligations by reason of the Event of Force Majeure and (b) the impact thatsuch Event of Force Majeure has on the Project including without limitation shippingschedules and construction schedules that have been delayed by reason of such Event ofForce Majeure Even though the Proponentrsquos obligations will be suspended for suchreasonable period of time when the applicable Event of Force Majeure is no longerpreventing the Proponent from performing its obligations the Proponent will again beobliged to perform such obligations

ARTICLE 6GOVERNMENT UNDERTAKINGS

61 Aboriginal Agreements The Government represents and warrants that it has entered into(a) interim measures agreements with the Innu Nation and the LIA that include the VoiseyrsquosBay chapter of the respective land claims agreements and (b) the EMA

62 Electrical Rights and Provision of Power The Government shall cause Newfoundlandand Labrador Hydro or its successors to

621 provide to the Proponent electrical power for the Processing Plant at the lower of(a) the island industrial electrical rate or (b) any lower electrical rate that may be

24

offered from time to time by Newfoundland and Labrador Hydro or its successorsto its industrial customers in comparable circumstances and

622 ensure that Newfoundland and Labrador Hydro or its successors can supply to theProponent sufficient electrical power for the operation of the Processing Plant

63 Mining Lease The Government shall issue the Mining Lease effective 30 September2002

64 Exemption Orders The Government shall issue the Exemption Orders effective 30September 2002

65 Issue of Authorizations

651 Where the Proponent has submitted all information and data in accordance withApplicable Laws and required by the Government for it to issue or grant any permitauthorization order or other approval necessary for the Proponent to implement theProject or any part thereof (in this Section 65 the ldquoAuthorization(s)rdquo) theGovernment shall issue or grant any such Authorization on a timely basis

652 If the Government does not issue or grant an Authorization on a timely basis

6521 the Government shall grant the Proponent an extension of all datesreferred to in this Agreement the Nickel Concentrate ExemptionOrder and the Matte Plant Exemption Order for a reasonable periodof time that reflects (a) the period of delay in granting suchAuthorization and (b) the impact that such delay has on the Projectincluding without limitation shipping schedules and constructionschedules that will have been delayed by Governmentrsquos failure toissue or grant such Authorization on a timely basis and

6522 if as a result of the Governmentrsquos failure to issue or grant anAuthorization on a timely basis the completion date for theProcessing Plant is delayed and provided that the Proponentestablishes that it is likely it will ship out of the Province the totalvolume of contained nickel in the Nickel Concentrate permittedunder the Nickel Concentrate Exemption Order prior to the revisedcompletion date of the Processing Plant the Government shallamend the Nickel Concentrate Exemption Order to allow anadditional quantity of contained nickel in Nickel Concentrate to beshipped out of the Province which quantity will reflect thereasonable period of time of the extension referred to in Section6521

653 The Government shall not be responsible for any delays nor shall the Proponent beentitled to any relief under this Section 65 unless such delays are directly and

25

proximately caused by or result from an act or omission of the Government or adepartment regulatory body board agent or employee of the Government

66 Legislative Framework

661 The Government represents to the Proponent (and acknowledges that theProponent is relying upon such representation) that it shall maintain substantiallythe Legislative Framework for the duration of the Project subject to legislativeamendments contemplated in this Agreement and legislation of general applicationThe Government shall maintain the Legislative Framework consistent with thisAgreement subject to Governmental responsibilities including the responsibility forensuring proper management of the Provincersquos resources the protection andmaintenance of public health and safety and the protection of the environment TheGovernment acknowledges that this Agreement is consistent with current public lawand Governmental responsibilities

662 The Proponent represents to the Government (and the Proponent acknowledgesthat the Government in consideration of agreeing to maintain the LegislativeFramework has relied upon such representation) that the Proponent shall performits obligations set out in this Agreement the Instruments the Exemption Orders thePrimary Production Order and the Mining Lease

67 Special Project Orders The Government shall issue a Special Project Order or SpecialProject Orders under Section 70 of the Labour Relations Act (Newfoundland and Labrador)to ensure a stable labour relations environment throughout the construction phases of theProject This Order or these Orders shall include without limitation provisions such as nostrikes and lock-outs and the ability to designate the union organization and employerrsquosrepresentative for the purposes of collective bargaining

68 Corporate Income Tax The Government shall use best efforts to negotiate and executewith the Proponent the Tax Agreement as soon as possible but in any event on or beforethe Closing Date The Tax Agreement will contain provisions

681 whereby the Government will provide that the rate of the Provincersquos corporateincome tax applicable to the Proponent will be the lower of the ldquoall provincesaveragerdquo or the Provincersquos income tax rate

682 which to the extent permitted by law will result in an allocation to the Province forthe purposes of Part IV of the Federal Income Tax Regulations of the Proponentrsquosgross revenues from the sale or disposition of nickel copper and cobalt productswhether in intermediate or final form from the Project and

683 whereby the Government will undertake to indemnify the Proponent for any doubletaxation resulting from the allocation referred to in Section 682

26

69 Mining Tax Act At the next session of the House of Assembly of the Province theGovernment shall introduce and support legislation to amend the Mining Tax Act inaccordance with the Mining Tax Act Amendments

610 Primary Production Order The Government shall issue the Primary Production Ordereffective 30 September 2002

611 Industrial and Employment Benefits The Government shall execute the IEBA to beeffective 7 October 2002

ARTICLE 7PROPONENTrsquoS DEFAULT

71 Notice of an Event of Default Upon the happening of an Event of Default theGovernment may deliver to the Proponent a notice of default setting forth in reasonabledetail the nature of the Event of Default and if the Government intends to exercise its rightsunder Section 72 indicating the date upon which the Government intends to exercise suchrights

72 Termination Subject to an Event of Force Majeure or the provisions of Section 652where an Event of Default has occurred and in each of such cases and so often as anEvent of Default happens after giving the notice provided for in Section 71 theGovernment may at any time in its sole discretion do any one or more of the following (a)terminate this Agreement (b) terminate the Mining Lease (c) rescind the ExemptionOrders and (d) take action for any remedy at law or in equity

73 Release by Proponent and Proponentrsquos Indemnity The Proponent hereby releases anddischarges and agrees to indemnify and save harmless the Government from every claimof every nature whether in damages (including consequential or indirect damages) or notwhich may arise or be suffered by the Proponent or any Person claiming through or underthe Proponent by reason of or as a result of anything done by the Government or anysuccessor or assign claiming through or under the Government under the provisions ofSection 72

ARTICLE 8DISPUTE RESOLUTION

81 Dispute Resolution Any dispute or difference between the parties hereto arising

811 as to whether a Processing Related Reason exists

27

812 as to the selection of an Engineer or firm of Engineers the Experts or an umpireunder Schedule 4132

813 under Section 45 as to whether the Underground Exploration Program hasidentified Sufficient Reserves under the Leased Lands

814 as to the determination of the date of Cessation of Mining Operations

815 as to whether commercial processing is economic as contemplated by Section41421

816 as to then prevailing commercial terms and conditions as contemplated by Section41422

817 under Section 51 as to whether an Event of Force Majeure exists

818 under Section 53 as to whether an Event of Force Majeure prevents the Proponentfrom performing any of its obligations under this Agreement

819 under Section 53 or Section 652 as to the reasonable period of time for theextension of the dates of performance of the Proponentrsquos obligations

8110 under Section 6522 the additional quantity of contained nickel in NickelConcentrate to be shipped out of the Province or

8111 as to whether the Proponent is complying with its obligations under Section 52

shall in each case be resolved in the manner provided for in Schedule 81

ARTICLE 9CONFIDENTIAL INFORMATION

91 Confidential Information The Government

911 acknowledges that information (the Information) supplied to it by or on behalf ofthe Proponent pursuant to or in connection with this Agreement or the Instrumentsincluding without limitation information provided pursuant to or in connection withSections 422 471 472 475 52 and 81 is of a financial commercialscientific or technical nature and is supplied in confidence and

912 subject to Sections 93 and 94 shall keep the Information confidential and shallnot use or disclose the Information to any third party without the Approval of theProponent and in doing so shall use the same care as it applies to avoid disclosureor dissemination of its own confidential information to prevent the disclosure ofInformation to any third party

28

92 Effect of Disclosure The Government acknowledges that disclosure of the Informationcontrary to the provisions of this Article 9 could reasonably be expected to921 harm significantly the competitive position or interfere significantly with the

negotiating position of the Proponent

922 result in similar information no longer being supplied by or on behalf of theProponent to the Government when it is in the public interest that similar informationcontinued to be supplied and

923 result in material financial loss to the Proponent or result in material financial gainto competitors of the Proponent and other Persons

93 Approval The Government may disclose Information if Approved by the Proponent

94 Permitted Disclosure of Information The provisions of this Article 9 shall not apply toInformation which

941 is now or which hereafter through no act or omission of the Government becomesgenerally known or available to the public without breach of this Agreement

942 after disclosure to the Government becomes generally known or available to thepublic by publication or otherwise through no act or omission of the Government

943 the Government can establish was in its possession at the time of disclosure andwas not previously acquired directly or indirectly from the Proponent

944 is disclosed to the Government by a third party on a non-confidential basis whichparty to the Knowledge of the Government is not prohibited from disclosing suchInformation to the Government by any legal contractual or fiduciary obligation towhich such party is bound or subject or

945 is required to be disclosed by law

95 Remedy Without limiting the Proponentrsquos rights and recourses for a breach by theGovernment of its obligations in this Article 9

951 the Government acknowledges that the Proponent shall suffer irreparable harm ifthe Government discloses Information contrary to the provisions of this Article 9and unless prohibited by law the Proponent shall be entitled to an injunction orinjunctions to prevent such disclosure

952 the Government shall be liable for and shall indemnify and save the Proponentharmless from and against costs losses damages and claims that it may sufferpay incur or be liable for as a result of any breach by the Government of thisArticle 9 and

29

953 in the event there are any measures which the Government can take to ensurecompliance with the provisions of Section 912 the Proponent shall be relieved ofthe obligation to provide information of the type with respect to which the breachoccurred until the Government has taken such measures

ARTICLE 10CONDITIONS CLOSING AND TERMINATION

101 Conditions for the Benefit of the Government Subject to Section 1061 the obligationsof the Government in this Agreement are subject to the satisfaction of or compliance withat or prior to the Time of Closing each of the following conditions

1011 the representations and warranties of the Proponent made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Proponent at or prior to the Time of Closing shallhave been performed the Proponent shall not be in breach of any agreement onits part contained in this Agreement at the Time of Closing and the Governmentshall have received a certificate confirming the foregoing signed for and on behalfof the Proponent in form and content satisfactory to the Government

1012 the University Agreement shall have been executed by the Proponent and a copythereof shall have been delivered to the Government

1013 the Tax Agreement shall have been executed by the Proponent and delivered to theGovernment and

1014 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

102 Conditions for the Benefit of the Proponent Subject to Section 1061 the obligationsof the Proponent in this Agreement are subject to the satisfaction of or compliance with ator prior to the Time of Closing each of the following conditions

1021 the representations and warranties of the Government made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Government at or prior to the Time of Closingshall have been performed the Government shall not be in breach of anyagreement on its part contained in this Agreement at the Time of Closing and theProponent shall have received a certificate confirming the foregoing signed for andon behalf of the Government in form and content satisfactory to the Proponent

30

1022 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

1023 the Tax Agreement shall have been executed by the Government and delivered bythe Government to the Proponent

1024 the Proponent shall have secured financing on reasonable commercial terms toenable it to develop the Mine and construct the Concentrator Plant and

1025 the Mining Tax Act Amendments shall have become law

103 Closing Notice If the Proponent (a) wishes to waive the condition set out in Section1024 or (b) has obtained the financing contemplated by Section 1024 it shall forthwithdeliver to the Government a notice (the ldquoClosing Noticerdquo) confirming that it has eitherwaived the condition set out in Section 1024 or that such condition has been satisfied

104 Deliveries and Closing1041 The Closing shall take place at the Time of Closing on the Closing Date at a

location to be agreed by the parties

1042 At the Closing

10421 the Proponent shall deliver to the Government the certificatecontemplated by Section 1011 and if not previously delivered theexecuted University Agreement and the executed Tax Agreementand

10422 the Government shall deliver to the Proponent the certificatecontemplated by Section 1021 and if not previously delivered theexecuted Tax Agreement

105 Termination This Agreement and the IBEA may be terminated at any time prior to theTime of Closing1051 by agreement of the Government and the Proponent

1052 by the Government if the conditions set out in Section 101 have not been satisfiedor waived by the Government or the Closing Notice has not been delivered to theGovernment on or before 31 March 2003 or

1053 by the Proponent if the conditions set out in Section 102 have not been satisfiedor waived by the Proponent (except the condition set out in Section 1024 in theevent the Proponent has delivered the Closing Notice)

106 Effect of Agreement and Termination

1061 Notwithstanding Section 1062 and subject to Section 1063 the Government andthe Proponent shall be bound by the provisions of Sections 41 421 422 410

31

411 412 415 416 417 418 61 63 64 65 66 67 68 69 610 and 611and Articles 5 8 9 and 11 effective as of and from the date of execution of thisAgreement

1062 Subject to Section 1061 the obligations of the Proponent and the Government inthis Agreement shall be effective as of and from the Time of Closing

1063 If this Agreement and the IEBA are terminated in accordance with the provisions ofSection 105 this Agreement and the IEBA shall thereafter become null and voidand have no effect and no party shall have any liability to the other except

10631 the obligations contained in Sections 41421 411 69 and Article9 hereof and

10632 the liability of a party in respect of its breach of this Agreement andthe IEBA prior to such termination

all of which shall survive such termination for a period of twelve months followingsuch termination

ARTICLE 11GENERAL MATTERS

111 Enurement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease shall be binding upon and shall enure to the benefitof the parties hereto the successors and assigns of the Government and the successorsand permitted assigns of the Proponent Any such assignment permitted by this Agreementshall become effective only when the assignee executes with the Government aninstrument whereby it agrees to be bound by and perform all of the Proponentrsquos obligationsunder this Agreement the Instruments the Exemption Orders the Primary ProductionOrder and the Mining Lease Subject to Section 4153 from and after the execution ofsuch instrument the assignor shall be relieved of and released from all its obligations underthis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease with effect from and after the date of execution of such instrument

112 Counterparts This Agreement and the other documents referred to herein andorotherwise required to complete the transactions contemplated hereby may be executed intwo or more counterparts including by facsimile each of which shall be deemed an originaland all of which together shall constitute one and the same instrument

113 Notices All notices requests demands and other communications hereunder shall bedeemed to have been duly given if in writing and either delivered personally sent byfacsimile transmission or by air courier service to the addresses designated below or suchother addresses as may be designated in writing by notice given hereunder and shall be

32

effective upon personal delivery or facsimile transmission thereof with proof of transmissionreceipt or upon delivery by air courier serviceIf to VBNC Voiseyrsquos Bay Nickel Company Limited

Suite 700 Baine Johnston Centre10 Fort William PlaceSt Johnrsquos NewfoundlandA1C 1K4Attention PresidentFacsimile (709) 758-8820

If to Inco Inco Limited145 King Street WestSuite 1500Toronto OntarioM5H 4B7Attention PresidentFacsimile (416) 361-7734

If to the Government Government of Newfoundland amp LabradorDepartment of Mines amp EnergyNatural Resources Building7th Floor 50 Elizabeth AvenueSt Johnrsquos NewfoundlandA1A 1W5Attention The MinisterFacsimile (709) 729-0059

114 Legal Fees In the event of any dispute or controversy between the Proponent on the onehand and the Government on the other hand relating to the interpretation of this Agreementor to the transactions contemplated herein the prevailing party shall be entitled to recoverfrom the other party reasonable legal fees and expenses incurred by the prevailing partySuch award shall include reasonable post judgment legal fees and costs

115 Payment of Fees and Expenses Each party hereto shall pay its own fees expenses anddisbursements incurred in connection with this Agreement and the transactionscontemplated hereby and all other costs and expenses incurred in its performance andcompliance with all conditions to be performed hereunder and thereunder

116 Time of Essence Time is of the essence of this Agreement

117 Further Assurances Each of the parties shall promptly do make execute deliver orcause to be done made executed or delivered all such further acts documents and thingsas the other parties hereto may reasonably require from time to time for the purpose ofgiving effect to this Agreement and the transactions contemplated hereby and shall usereasonable efforts and take all such steps as may be reasonably within its power toimplement to their full extent the provisions hereof and thereof

33

118 Public Notices No press release or other announcement concerning the transactionscontemplated by this Agreement shall be made either by the Proponent or the Governmentwithout the prior Approval of the other (such Approval not to be unreasonably withheld)provided however that the Proponent may without such Approval make such disclosureif the same is required by law or any stock exchange on which any of the securities of theProponent or any of its Affiliates are listed or by any securities commission or other similarregulatory authority having jurisdiction over the Proponent or any of its Affiliates and if suchdisclosure is required the Person making the disclosure shall use best efforts to give priororal or written notice to the Government and if such prior notice is not possible to givesuch notice immediately following the making of such disclosure Notwithstanding theforegoing the Proponent acknowledges that the Government will make this Agreement andthe Schedules hereto public

119 Independent Legal Advice Each of the parties acknowledges having obtained its ownindependent legal advice with respect to this Agreement and the transactions contemplatedhereby to the fullest extent deemed necessary by each party prior to its execution anddelivery Furthermore the parties acknowledge that neither acted under any duress innegotiating drafting and executing this Agreement the Instruments and any documentscontemplated hereby There shall be no presumption that any ambiguity in this Agreementthe Instruments and any documents contemplated hereby be resolved in favour of any ofthe parties

1110 Compliance with Laws Without limiting the generality of any other covenant herein theProponent shall at its own cost and expense comply with and shall use best efforts toensure that all Persons for whom the Proponent is at law responsible comply with allApplicable Laws in connection with the Project

1111 Entire Agreement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease set forth the entire agreement and all thecovenants promises assurances agreements representations conditions warrantiesstatements and understandings (collectively ldquoRepresentationsrdquo) between the partiesconcerning the subject matter hereof No Representations are made by the Governmentto the Proponent or by the Proponent to the Government except as expressly set out in thisAgreement the Instruments the Exemption Orders the Primary Production Order and theMining Lease For greater certainty the Statement of Principles between the Governmentand the Proponent dated as of 11 June 2002 shall have no application to the parties or thematters contemplated by this Agreement after the date hereof and is replaced entirely bythis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease

1112 Good Faith Each of the Government and the Proponent shall at all times exercise all itsrights hereunder in a manner consistent with good business practices and shall act in goodfaith

1113 Waiver The failure of any party hereto to insist in any one instance upon the strictperformance by another party hereto of its obligations hereunder the Instruments theExemption Orders the Primary Production Order and the Mining Lease or the failure of any

34

party hereto to exercise any right option or remedy shall not constitute a waiver orrelinquishment for the future of any such obligation right option or remedy nor shall itconstitute a waiver of a subsequent breach No covenant or condition of this Agreementmay be waived by any party hereto except by the written consent of that party andforbearance or indulgence by that party in any regard whatsoever for no matter how longshall not constitute a waiver of such covenant or condition and until such covenant orcondition has been performed or waived in writing that party shall be entitled to invoke anyremedy available to that party under this Agreement the Instruments the ExemptionOrders the Primary Production Order and the Mining Lease despite its forbearance orindulgence

1114 No Partnership Joint Venture or Agency The Government and the Proponent expresslydisclaim any intention to create a partnership joint venture or joint enterprise It isunderstood acknowledged and agreed that nothing contained in this Agreement nor anyacts of the parties shall constitute or be deemed to constitute the Government and theProponent as partners joint venturers or principal and agent in any way or for any purpose

THE HONOURABLE THE PREMIER

THE HONOURABLE THE MINISTER OFMINES AND ENERGY

THE HONOURABLE THE MINISTER OFLABRADOR AND ABORIGINAL AFFAIRS

INCO LIMITED

ByChairman and Chief Executive Officer

VOISEYrsquoS BAY NICKEL COMPANY LIMITED

ByPresident

SCHEDULE 11ANICKEL CONCENTRATE EXEMPTION ORDER

This document can be found at the following web address httpwwwgovnfcahoaregulationsrc020066htm

5

(b) the Proponent is wound up its constating documents or by-laws are forfeited orsurrendered or the corporate or other existence of the Proponent is otherwiseterminated

(c) the Proponent is in breach of its obligations in Section 415 or

(d) subject to an Event of Force Majeure andor Section 652

(i) the Decision has not been delivered by 15 November 2008

(ii) the applicable Implementation Plan has not been delivered as required bySection 474 or 475

(iii) the Processing Plant has not been completed on or before 31 December2011 or

(iv) an Engineer has determined that the Proponent is not proceeding diligentlyto complete the engineering work for and the construction of the ProcessingPlant so that it will be completed on or before 31 December 2011 asrequired by Section 474 or 475

ldquoEvent of Force Majeurerdquo has the meaning ascribed thereto in Section 51

ldquoExemption Ordersrdquo means collectively the Nickel Concentrate Exemption Order theCopper Concentrate Exemption Order and the Matte Plant Exemption Order

ldquoExpertsrdquo means collectively (a) an Engineer or firm of Engineers who will make thetechnical feasibility review of the Decision and (b) a recognized third party financial expertindependent of the Government and the Proponent who will make the financial feasibilityreview of the Decision and who will jointly deliver the Expertsrsquo Report if requested by theGovernment pursuant to Section 475 The Experts shall be selected at the time and in themanner provided for in Section 473

ldquoExpertsrsquo Reportrdquo has the meaning ascribed thereto in Section 475

ldquoFeasibility Studyrdquo means the study undertaken by or on behalf of the Proponentcontaining the technical and economic evaluations which form the basis for the Decision

ldquoFinished Copper Productrdquo means finished copper product(s) having a copper contentof not less than 99

ldquoFinished Nickel Productrdquo means finished nickel product(s) having a nickel content of notless than 998

ldquoGovernmentrdquo means the Government of the Province

6

ldquoGovernment Entityrdquo means (a) any federal provincial state regional municipal localor other government governmental or public department commission board bureau oragency whether domestic or foreign (b) any subdivision agency commission board orauthority of any of the foregoing or (c) any quasi governmental or private body exercisingany regulatory expropriation or taxing authority under or for the account of any of theforegoing in each case which has jurisdiction in respect of the Project or any part thereof

ldquoHydromet Plantrdquo has the meaning ascribed thereto in Section 461

ldquoIBAsrdquo means collectively the Impacts and Benefits Agreements made as of 29 July 2002between the Proponent and each of Innu Nation and the LIA without any amendment orvariation

ldquoIEBArdquo means the Industrial and Employment Benefits Agreement in the form set out inSchedule 49

ldquoImplementation Planrdquo means a detailed description of and time schedule for thecompletion of the engineering work for and the construction of the Processing Plant by 31December 2011

ldquoIncordquo means Inco Limited a corporation organized under the laws of Canada

ldquoInformationrdquo has the meaning ascribed thereto in Section 911

ldquoInnovation Centrerdquo has the meaning ascribed thereto in Section 34

ldquoInnu Nationrdquo means Innu Nation a corporation incorporated under the laws of Canada

ldquoInstrumentsrdquo means collectively the University Agreement the Tax Agreement and theIEBA

ldquoLeased Landsrdquo means the lands described in Schedule ldquoArdquo to the Mining Lease asamended from time to time

ldquoLegislative Frameworkrdquo means the Applicable Laws of the Province in existence as ofthe date hereof applicable to the Project or any part thereof

ldquoLIArdquo means the Labrador Inuit Association a corporation incorporated under the laws ofthe Province

ldquoMatterdquo means any form of granular nickel in matte product containing not less than 50nickel which can be processed by the Matte Plant to produce Finished Nickel Product

ldquoMatte Plantrdquo has the meaning ascribed thereto in Section 462

7

ldquoMatte Plant Exemption Order means the Matte Plant Exemption Order in the form ofSchedule 11C

ldquoMinerdquo means collectively (a) the open pit mine or mines to be developed by the Proponentfor the extraction of the mineral ores located on the Leased Lands and (b) the undergroundmine or mines as contemplated by Section 45 for the extraction of the mineral ores atdepth located under the Leased Lands

ldquoMineral Actrdquo means the Mineral Act (Newfoundland and Labrador) and the regulationsthereunder

ldquoMining Leaserdquo means the Mining Lease in the form of Schedule 63

ldquoMining Tax Actrdquo means the Mining and Mineral Rights Tax Act (Newfoundland andLabrador) and the regulations thereunder

ldquoMining Tax Act Amendmentsrdquo means the proposed amendments to the Mining Tax Actset out in Schedule 69

ldquoNickel Concentraterdquo means the intermediate concentrate or similar product produced bythe Concentrator Plant containing the principal quantities of nickel and cobalt from oreextracted or removed from the Leased Lands

ldquoNickel Concentrate Exemption Order means the Nickel Concentrate Exemption Orderin the form of Schedule 11A

ldquoPersonrdquo means any individual partnership limited partnership joint venture syndicatesole proprietorship company or corporation with or without share capital unincorporatedassociation trust trustee executor administrator or other legal personal representativeor Government Entity however designated or constituted

ldquoPrimary Production Orderrdquo means the Primary Production Order in the form of Schedule610

ldquoProcessing Plantrdquo means either the Hydromet Plant or the Matte Plant which theProponent shall construct and operate in the Province as contemplated by Section 46

ldquoProcessing Related Reasonrdquo means any situation where the Proponent is unable tomeet its obligations under Section 4131 as a result of either (a) the unavailability forwhatever bona fide reason of Replacement Concentrate or (b) the unavailability ofReplacement Concentrate on reasonable commercial terms including without limitationwhere the terms relating to price or specifications would make it not economically ortechnically feasible for processing at the Processing Plant

ldquoProjectrdquo has the meaning ascribed thereto in Section 31

8

ldquoProponentrdquo means collectively VBNC Inco their respective Affiliates or any Personwhich (as permitted by this Agreement) individually or together with any of them by way ofpartnership joint venture sub-contract or otherwise holds or is entitled to a majority interestin or Control of the Project or is the operator of the Project and their respective successorsand permitted assigns

ldquoProvincerdquo means the Province of Newfoundland and Labrador Canada

ldquoR amp D Programrdquo has the meaning ascribed thereto in Section 35

ldquoReplacement Concentraterdquo means any product containing nickel or cobalt or bothderived from ores or any other source of nickel or cobalt or both mined extracted orproduced outside the Province that in each case does not represent Finished NickelProduct but which can be further processed at the Processing Plant to produce FinishedNickel Product

ldquoSufficient Reservesrdquo means the estimated quantities of ldquoProven Mineral Reservesrdquo orldquoProbable Mineral Reservesrdquo or both within the meaning of National Instrument 43-101ldquoStandards of Disclosure for Mineral Projectsrdquo (as amended from time to time) determinedby the Proponent in accordance with its standard methodologies and assumptions for suchestimates

ldquoTax Agreementrdquo means the Tax Agreement to be entered into between the Governmentand the Proponent as contemplated by Sections 412 and 68

ldquoTime of Closingrdquo means 1000 orsquoclock in the morning in the Province on the ClosingDate

ldquoUnderground Exploration Programrdquo means the underground exploration programcontemplated by Section 44

ldquoUniversityrdquo means Memorial University of Newfoundland

ldquoUniversity Agreementrdquo means the agreement to be entered into between the Proponentand the University as contemplated by Section 48

ldquoVBN Undertaking Orderrdquo means the Voiseyrsquos Bay Nickel Company Limited Mine and MillUndertaking Order under the Environmental Assessment Act (Newfoundland and Labrador)dated 5 August 1999 (OC 99-286) as amended from time to time and

ldquoVBNCrdquo means Voiseyrsquos Bay Nickel Company Limited a corporation incorporated underthe laws of the Province

9

12 Schedules

The documents attached hereto and identified below shall form an integral part of thisAgreement

Schedule 11A - Nickel Concentrate Exemption OrderSchedule 11B - Copper Concentrate Exemption OrderSchedule 11C - Matte Plant Exemption OrderSchedule 49 - IEBASchedule 4132 - Assaying ProceduresSchedule 63 - Mining LeaseSchedule 69 - Mining Tax Act AmendmentsSchedule 610 - Primary Production OrderSchedule 81 - Dispute Resolution Procedures

13 Subdivisions Unless otherwise stated a reference herein or in a Schedule by numericalor alphabetical designation to an Article Section Subsection Paragraph Subparagraphor Schedule shall refer to the Article Section Subsection Paragraph Subparagraph orSchedule bearing that designation in this Agreement or in a Schedule

14 Headings The division of this Agreement into Articles Sections SubsectionsParagraphs and Subparagraphs and the insertion of headings are for convenience ofreference only and shall not affect the construction or interpretation of this Agreement

15 Number and Gender Words importing the singular shall include the plural and vice versaand words importing a particular gender shall include all genders The use of the neutersingular pronoun to refer to a party is deemed a proper reference The necessarygrammatical changes required to make the provisions of this Agreement apply shall in allinstances be assumed as though in each case fully expressed

16 Statutes Regulations Rules and Orders Any reference in this Agreement to all or anypart of any statute regulation rule or order shall unless otherwise stated be a referenceto that statute regulation rule or order or the relevant part thereof as amendedsubstituted replaced or reenacted from time to time

17 Business Day If the day on which any act or payment is required to be done or madeunder this Agreement is a day which is not a Business Day then such act or payment shallbe performed or made on the next following Business Day

18 Contract Always Speaking With the exception of the representations and warranties ofthe parties set out in Article 2 and any estimates referred to in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic and relatedbenefits and costs of facilities referred to in this Agreement made by the Proponent wherea matter or thing is expressed in the present tense it shall be applied to the circumstancesas they arise

10

19 Governing Law and Choice of Forum This Agreement shall be interpreted inaccordance with the laws in force in the Province subject to any applicable federal laws andfor all purposes this Agreement shall be treated as a Newfoundland and Labrador contractThe Proponent irrevocably submits and attorns to the exclusive jurisdiction of the courts ofthe Province

110 Construed Covenants Each obligation or agreement of this Agreement (other than therepresentations and warranties of the parties) even though not expressed as a covenantis to be construed as a covenant

111 Inconsistency or Conflict Except where otherwise provided either expressly or bynecessary implication in this Agreement a Schedule hereto or any Instrument in the eventof any inconsistency or conflict between any such Schedule or Instrument and any provisioncontained in this Agreement the provision of this Agreement shall prevail to the extent ofthe inconsistency or conflict

112 Severability If any provision of this Agreement or the application thereof to any Personor circumstance is to any extent held or rendered invalid void illegal or unenforceablefor any reason then the particular provision

1121 shall be deemed to be independent of and severed from the remainder of thisAgreement and all the other provisions of this Agreement shall neverthelesscontinue in full force and effect and

1122 shall continue to be applicable and enforceable to the fullest extent permitted by lawagainst any Persons and in any circumstances other than those as to which it hasbeen held or rendered invalid void illegal or unenforceable

If a severance occurs under this Section 112 the parties shall use their respective bestefforts to negotiate in good faith an enforceable replacement provision that to the greatestextent possible reflects the intent or serves the purpose of the severed provision

113 Currency All references in this Agreement to currency are to Canadian dollars

114 Knowledge In this Agreement where ldquoKnowledgerdquo of a party is referred to

1141 in respect of the Proponent it shall mean the actual knowledge of the executiveofficers of the Proponent after due inquiry in respect thereof and

1142 in respect of the Government it shall mean the actual knowledge of the responsibleexecutives of the applicable department of Government after due inquiry in respectthereof

11

ARTICLE 2REPRESENTATIONS AND WARRANTIES

21 Proponentrsquos Representations and Warranties Acknowledging that the Government isrelying on such representations and warranties VBNC and Inco jointly and severallyrepresent and warrant to the Government that

211 each is a corporation which has been duly incorporated or organized as applicableunder the laws of its jurisdiction of incorporation or organization as applicable andis validly existing under such laws

212 Inco is extra-provincially registered in the Province

213 each has all necessary corporate power authority and capacity

2131 to cause the design engineering and construction of and to operateand maintain all parts of the Project and

2132 to enter into this Agreement and the Instruments and to perform itsrespective obligations herein and therein

214 the execution and delivery of this Agreement and each of the Instruments and theconsummation of the transactions contemplated herein and therein by each ofthem have been duly authorized by all necessary corporate action on the part ofeach of them

215 neither is a party to bound or affected by or subject to any indenture mortgagelease agreement instrument charter or by-law provision which with or without thegiving of notice or the lapse of time or both would be violated contravened orbreached by or under which default would occur as a result of the executiondelivery or performance of this Agreement or any of the Instruments or theconsummation of any of the transactions provided for in any of them

216 neither is bound or affected by or subject to any Applicable Law which with orwithout the giving of notice or the lapse of time or both would be violatedcontravened or breached by or under which default would occur as a result of theexecution delivery or performance of this Agreement or any of the Instruments orthe consummation of any of the transactions provided for in any of them

217 no approval authorization consent permit or other action by or filing with anyGovernment Entity is required in connection with the execution and delivery of thisAgreement or any of the Instruments and the performance of their respectiveobligations hereunder or thereunder except as otherwise stated herein

218 there is no suit action litigation arbitration proceeding or proceeding by aGovernmental Entity including appeals and applications for review in progresspending or to the Knowledge of either of them threatened against or involving

12

either of them or any judgment decree injunction or order of any court or arbitratorwhich could adversely affect their capacity or power to execute and deliver thisAgreement or any of the Instruments or to consummate the transactionscontemplated herein or therein or which could materially adversely affect theirrespective assets financial condition or future prospects

219 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of each of them enforceable against them inaccordance with their respective terms except as limited by (a) applicablebankruptcy laws or laws affecting the enforcement of creditorsrsquo rights generally and(b) the general principles of equity

2110 all references to estimates made by Inco and VBNC in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic andrelated benefits and costs of facilities are made as of the date of this Agreementhave been determined by them based upon information available at the date of thisAgreement and have been estimated by each of them bona fide and reasonablyand neither of them has any reason to believe that any such estimate isunreasonable or unfounded at the date of this Agreement and

2111 VBNC is a wholly owned subsidiary of Inco and to the Knowledge of the Proponentno Person individually or with any other Person or Persons currently Controls Inco

22 Government Acknowledgments The Government acknowledges that (a) none of VBNCInco or any Person for whom either of them may be responsible in law have made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments and (b) the Proponent shall use the most efficient and cost effective miningtechniques including state of the art automated mining technologies aimed at loweringoperating costs and extending the life of the Project

23 Governmentrsquos Representations and Warranties Acknowledging that the Proponent isrelying on such representations and warranties the Government represents and warrantsto the Proponent that

231 the execution and delivery of this Agreement and each of the Instruments and theconsummation by the Government of the transactions contemplated herein andtherein have been duly authorized by all necessary Government action

232 it is not a party to bound or affected by or subject to any indenture agreement orinstrument which with or without the giving of notice or the lapse of time or bothwould be violated contravened or breached by or under which default would occuras a result of the execution delivery or performance of this Agreement or any ofthe Instruments or the consummation of any of the transactions provided for in anyof them and

13

233 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of it enforceable against it in accordance with itsterms except as they may be limited by the general principles of equity

24 Proponent Acknowledgements Each of Inco and VBNC acknowledges that neither theGovernment nor any Person for whom it may be responsible in law has made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments

ARTICLE 3DESCRIPTION OF THE PROJECT AND RELATED FACILITIES

31 The Project The ldquoProjectrdquo will comprise collectively the Underground ExplorationProgram the Mine the Concentrator Plant the R amp D Program the Demonstration Plantthe Processing Plant and if applicable the Concentrator Plant expansion referred to inSection 45 The Processing Plant will be capable of processing concentrate andintermediate feeds containing nickel from other sources world wide which will give theProcessing Plant the capability of operating well beyond the life of the Mine

32 Capital Investment The Proponent estimates that the aggregate capital investment in theProject and related facilities will be $29 billion over the estimated 30-year life of the Projectinclusive of sustaining capital expenditures

33 Employment The Proponent estimates that

331 the construction phase of the Mine and Concentrator Plant will create approximately1700 person-years of employment in the Province the construction phase of theHydromet Plant will create approximately 3000 person-years of employment in theProvince and the construction phase of the Matte Plant will create approximately2500 person-years of employment in the Province

332 during the various operating phases the Project will create the followingemployment levels in the Province Mine and Concentrator Plant - 400 people R ampD Program - 200 people Underground Exploration Program - 85 people HydrometPlant - 400 people Matte Plant - 350 people

333 over the estimated 30-year life of the Project total employment benefits from theProject in the Province will be 76000 direct and indirect person-years and

334 gross domestic product impact to the Province with respect to the Project will be$11 billion

34 Innovation Centre The Proponent shall spend $10 million on and provide an endowmentof $1 million per year over a ten-year period to cover operational costs for an IncoInnovation Centre (the ldquoInnovation Centrerdquo) at St Johnrsquos in conjunction with theUniversity pursuant to the University Agreement The focus of the Innovation Centre willbe on education and research in mineral exploration mining and metallurgical processing

14

The Innovation Centre will provide world-class education research and training related tothe mining industry to 50-60 students per year to be engaged in Bachelors Masters andDoctorate level programs The Proponent shall commence work on the Innovation Centrein 2002 with target completion in 2004

35 R amp D Program The Proponent shall undertake a comprehensive research anddevelopment program intended to establish the commercial technical and economicfeasibility of hydrometallurgical process technology to process the Nickel Concentrate (theldquoR amp D Programrdquo) The R amp D Program will include the evaluation of chemical engineeringsub-processes for the hydrometallurgical process the mechanical equipment design for theDemonstration Plant and the construction and operation of the Demonstration Plant

ARTICLE 4PROPONENTrsquoS UNDERTAKINGS

41 Infrastructure and Initial Work Commencing in 2002 the Proponent shall

411 at the Mine site undertake site mobilization including the establishment of aconstruction camp initiation of work on temporary port facilities and construction ofaccess roads

412 at Argentia undertake leasing or other arrangements for occupancy and sitepreparation including demolition fencing security and signage

413 undertake the construction of a warehouse building and establish staging areas andlay down areas in support of Labrador activities

414 establish a project office at Argentia and information centres at St Johnrsquos andHappy Valley-Goose Bay and

415 complete site selection and commence architectural design and engineering workfor the Innovation Centre

The Proponent estimates that this infrastructure and initial work program will employ inaggregate approximately 250 persons and the Proponent shall spend not less than $55million on this program in the Province on or before 31 March 2003

42 R amp D Program421 The Proponent shall undertake the R amp D Program and as a part thereof shall

construct the Demonstration Plant at a cost which the Proponent estimates will be$130 million The Proponent shall commence the site development for theDemonstration Plant in 2002 and continue such development into 2003 Theinitiatives in support of these activities will include the operation of an informationcentre preparation of environmental baseline studies and continued upgrading orreplacement of utility services required for the Demonstration Plant maintainingstaging areas and cleanup and civil works at Argentia consisting of demolition

15

grading and earth works construction The Proponent has scheduled thecompletion of the engineering design and construction of the Demonstration Plantso that the Demonstration Plant Completion Date shall have occurred on or before31 December 2006

422 The Proponent shall provide to the Government within 15 days of the end of eachcalendar quarter commencing with the calendar quarter ending 31 December 2002a detailed progress report on the results during such calendar quarter of the R amp DProgram which report will detail costs incurred to the end of such calendar quarterand contain sufficient documentation and information to enable the Government toevaluate the Proponentrsquos progress with respect to the R amp D Program and thedevelopment of hydrometallurgical process technology for processing the NickelConcentrate If requested by the Government upon reasonable notice theProponent shall provide the Government and its representatives and advisorsaccess at reasonable times to the facilities where the R amp D Program is beingconducted and make appropriate personnel of the Proponent available to respondto any requests for additional information

423 In addition to the utilization of the Demonstration Plant for the purposes ofdeveloping hydrometallurgical process technology for processing the NickelConcentrate the Proponent shall explore business opportunities for the ongoingutilization of the Demonstration Plant for the evaluation of other concentrates andintermediate feeds after completion of the R amp D Program

43 Mine and Concentrator Plant

431 The Proponent shall cause the development of the Mine and the designengineering and construction of a millconcentrator plant which will be capable ofprocessing 6000 tonnes of ore per day (the ldquoConcentrator Plantrdquo) TheConcentrator Plant will produce the Copper Concentrate and the NickelConcentrate The Proponent has scheduled to begin the development of the Mineand the construction of the Concentrator Plant in 2003 and estimates that the Mineand Concentrator Plant will require three years to construct at a cost ofapproximately $710 million

432 The Proponent

4321 shall not ship any Nickel Concentrate out of the Province aspermitted by the Nickel Concentrate Exemption Order before theDemonstration Plant Completion Date and

4322 shall ship Nickel Concentrate from the Concentrator Plant to theDemonstration Plant in sufficient quantities for the continuedoperation of the Demonstration Plant during the R amp D Programfollowing successful start up of the Concentrator Plant

16

44 Underground Exploration Program The Proponent shall undertake an undergroundexploration program which it estimates will cost $95 million and employ approximately 85people This program is intended to identify Sufficient Reserves at depth under the LeasedLands and if there are such Sufficient Reserves the Proponent shall develop a mining planfor the economic extraction of such Reserves The initial phase of this undergroundexploration program will be an advanced surface program which the Proponent estimateswill cost $20 million to commence in 2002 with completion targeted for 2006 Subsequentunderground exploration will be scheduled to ensure that Sufficient Reserves under theLeased Lands are available to sustain full operation of the Concentrator Plant during thetransition from open-pit operations to full underground mining operations if applicable

45 Underground Mine Development and Concentrator Plant Expansion If theunderground exploration program described in Section 44 identifies Sufficient Reservesas contemplated by Section 44 the Proponent shall commence the development of anunderground mine or mines on the Leased Lands and an expansion of the ConcentratorPlant in order to supply sufficient Nickel Concentrate to maintain the operation of theProcessing Plant at full capacity The Proponent estimates that this program will costapproximately $750 million and employ an aggregate of 800 people

46 Processing Plant

461 In order to maximize long-term benefits for the Province and the people of theProvince the Proponent shall use its best efforts through the R amp D Program todevelop a technically and economically feasible hydrometallurgical processtechnology for processing the Nickel Concentrate in the Province If suchtechnology is successfully developed the Proponent shall cause the designengineering and construction of and operate and maintain a hydrometallurgicalprocessing plant with a design capacity to produce annually approximately 50000tonnes of Finished Nickel Product together with associated cobalt and copperproducts (the ldquoHydromet Plantrdquo) The Proponent estimates that the HydrometPlant will have a capital cost of approximately $800 million and during the three-yearconstruction period will generate approximately 3000 person-years of employmentThe Proponent estimates that the Hydromet Plant will employ approximately 400people during operations

462 If pursuant to Section 47 it is determined that a Hydromet Plant is not technicallyor economically feasible the Proponent shall construct a commercialhydrometallurgical nickel-matte processing facility or other similar facilityincorporating a proven state of the art technology to produce Finished NickelProduct (the ldquoMatte Plantrdquo) The Matte Plant will have a design capacity toproduce annually approximately 50000 tonnes of Finished Nickel Product togetherwith associated cobalt and copper products The Proponent estimates the MattePlant will have a capital cost of approximately $670 million and during the estimatedthree-year construction period will generate approximately 2500 person-years ofemployment The Proponent estimates that the Matte Plant will employapproximately 350 people during operations

17

463 The Proponent has represented to the Government that its objective is to operatethe Processing Plant well beyond the life of the Mine Accordingly the Proponentundertakes to explore technically and economically feasible opportunities for theexpansion of the Processing Plant and to secure opportunities to supply theProcessing Plant with feed from world wide sources to fully utilize the Proponentrsquoslarge capital investment in the Processing Plant

464 The Proponent shall establish the Processing Plant at Argentia unlessenvironmental conditions at Argentia would make it not economically feasible toestablish the Processing Plant at Argentia and in such circumstances theProponent shall locate the Processing Plant at another site in the Province

47 Selection of Applicable Processing Plant

471 The Proponent shall use commercially reasonable efforts to deliver as soon aspossible but in any event shall deliver on or before 15 November 2008 theDecision and the Decision Materials to the Government and the Experts

472 If the Proponent has not on or before 30 June 2008 delivered to the Governmentthe Decision and the Decision Materials

4721 it shall forthwith meet with the Government to review on aconfidential basis the status of its efforts towards being able todeliver the Decision

4722 thereafter it shall promptly update the Government from time to timeon its efforts to be able to deliver the Decision and the outstandingissues relevant to whether the Decision will be to build the HydrometPlant or the Matte Plant and

4723 to the extent that the Proponent is not by 30 June 2008 in aposition to deliver the Decision which confirms that the Proponentintends to proceed with the construction of the Hydromet Plant theProponent shall use commercially reasonable efforts to developImplementation Plans for both a Hydromet Plant and a Matte Plantso that it will be able to deliver the Implementation Plan for theHydromet Plant or Matte Plant as applicable on or before 31December 2008

473 The Government may at any time after the earlier of the Decision Date or 30 June2008 give the Proponent notice in writing that it wishes to proceed with theappointment of the Experts When the Government gives notice to the Proponentrequiring the appointment of the Experts the Government and the Proponent shallthen forthwith agree upon the appointment of the Experts If the Government andthe Proponent cannot so agree within 15 days after the giving by the Governmentof such notice the appointment of the Experts shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter to

18

the Joint Committee or the Mediation Procedure referred to therein If the Expertsare appointed prior to the delivery by the Proponent of the Decision and theDecision Materials the Proponent shall provide to the Government and the Expertssuch data and information as is then available that will assist the Experts in theirreview under Section 475 The Proponent and the Government shall each pay50 of the fees and expenses of the Experts Before receiving the Decision theDecision Materials or any other information or data from the Proponent under thisAgreement the Experts shall first execute a confidentiality agreement containingsubstantially the same terms as provided for in Article 9

474 If in the Decision the Proponent confirms it intends to construct the Hydromet Plantthe Proponent shall deliver the Implementation Plan for the Hydromet Plant on orbefore 31 December 2008 and thereafter shall proceed diligently to complete thedetailed engineering for and construction of the Hydromet Plant in accordance withsuch Implementation Plan so that it shall be completed on or before 31 December2011

475 If in the Decision the Proponent confirms it intends to construct the Matte Plant theGovernment shall on or before the seventh Business Days after the Decision Datedeliver to the Proponent and the Experts a notice in writing (in this Section 475 theldquoGovernment Decisionrdquo) that the Government either (a) accepts the Decision tobuild the Matte Plant or (b) intends to refer such Decision to the Experts for reviewIf in the Government Decision the Government states it intends to refer theDecision to the Experts the Proponent shall promptly deliver to the Experts theDecision and the Decision Materials if it has not previously done so The Expertswill review the Decision the Decision Materials and any other information or datawhich the Experts deem appropriate or which the Government requests them toconsider and render their report (the ldquoExpertsrsquo Reportrdquo) within 30 days of the dateon which the Government delivers the Government Decision If the Governmentrequests the Experts to consider any other information or data in addition to theDecision Materials it shall provide to the Experts and the Proponent copies of suchrequest and any such information and data at the time it delivers the GovernmentDecision and the Proponent shall have the right within five Business Days tocomment on or respond to such information and data to the Experts with a copy tothe Government The Expertsrsquo Report shall determine whether in the opinion of theExperts it would be technically and economically feasible for the Proponent to buildthe Hydromet Plant together with reasons for such determination If the ExpertsrsquoReport determines that it is technically and economically feasible for the Proponentto build the Hydromet Plant the Proponent shall on or before 31 December 2008deliver to the Government an Implementation Plan for the Hydromet Plant andthereafter shall proceed diligently to complete the detailed engineering for andconstruction of the Hydromet Plant so that it shall be completed on or before 31December 2011 If the Expertsrsquo Report confirms that it would not be technically oreconomically feasible to build the Hydromet Plant the Proponent shall on or before31 December 2008 deliver to the Government an Implementation Plan for the MattePlant and thereafter shall proceed diligently to complete the detailed engineering forand construction of the Matte Plant in accordance with such Implementation Plan

19

so that it shall be completed on or before 31 December 2011 Subject to Section477 the Expertsrsquo Report shall be final and binding on the Government and theProponent

476 The determination as to whether the Proponent is proceeding diligently with thecompletion of the engineering work for and the construction of the Processing Plantfor completion on or before 31 December 2011 as required by Section 474 or475 shall be made annually on the anniversary date of the Decision Date by anEngineer who shall certify to both the Government and the Proponent as to whetherthe actual engineering work for and construction of the Processing Plant is onschedule with the applicable Implementation Plan

477 If there is a manifest error in the Expertsrsquo Report which if corrected would result ina different determination by the Experts the Expertsrsquo Report shall be referred backto the Experts for the purpose of forthwith correcting such manifest error changingthe determination in the Expertsrsquo Report and submitting a revised Expertsrsquo Reportto the Proponent and the Government

478 Where an Engineer is required to be appointed from time to time for the purposesof Section 476 or for determining the Commercial Production Date theConstruction Completion Date or the Demonstration Plant Completion Date theGovernment and the Proponent shall forthwith agree upon the appointment of suchEngineer If the Government and the Proponent cannot so agree within 15 daysof the Government or the Proponent giving the other notice requiring appointmentof an Engineer the appointment of the Engineer shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter tothe Joint Committee or the Mediation Procedure referred to therein The Proponentand the Government shall each pay 50 of the fees and expenses of any Engineer

48 Innovation Centre The Proponent shall enter into an agreement (the ldquoUniversityAgreementrdquo) with the University in form and content satisfactory to the Government on orbefore the Closing Date The University Agreement shall contain among other things theProponentrsquos commitments and intentions set out in Section 34

49 Industrial and Employment Benefits The Proponent shall execute the IEBA to beeffective 7 October 2002

410 IBAs The Proponent represents and warrants to the Government that it has entered intothe IBAs

411 VBN Undertaking Order The Proponent agrees to abide by and implement the terms andconditions contained in the VBN Undertaking Order

412 Corporate Income Tax The Proponent shall use its best efforts to negotiate and executewith the Government an agreement covering the matters set forth in this Section 412 andSection 68 (the ldquoTax Agreementrdquo) as soon as possible but in any event on or before theClosing Date The Tax Agreement will contain provisions which to the extent permitted by

20

law will result in an allocation to the Province for the purposes of Part IV of the FederalIncome Tax Regulations of the Proponentrsquos gross revenues from the sale or disposition ofnickel copper and cobalt products whether in intermediate or final form from the Project

413 Return of Concentrate

4131 In consideration of the Government granting the Exemption Orders the Proponentguarantees that it shall prior to Cessation of Mining Operations commenceshipping into the Province Replacement Concentrate for processing into FinishedNickel Product at the Processing Plant Such Replacement Concentrate shall beshipped to and processed by the Processing Plant in sufficient quantities to permitthe Processing Plant to operate continuously at a rate that will produce not less than25000 tonnes of Finished Nickel Product annually and such shipments shallcontinue at least until such time as the contained nickel and cobalt in theReplacement Concentrate shall have equalled the total quantity of contained nickeland cobalt in the Nickel Concentrate shipped out of the Province under the termsof the Nickel Concentrate Exemption Order and otherwise than under the provisionsof an Exemption Order

4132 The Proponent shall undertake the Assaying Procedures set out in Schedule 4132with respect to the Nickel Concentrate and the Replacement Concentrate

4133 The Proponent acknowledges that if it does not perform its contractual obligationsunder Section 4131 (a) the Province and the economy of the Province will suffersubstantial loss (b) the Government would not be properly compensated for its lossby monetary damages which therefore will not be considered an adequate remedyfor such breach and (c) the Government may at any time subsequent to suchbreach commence an action against the Proponent for any one or more of thefollowing remedies whether claimed as primary or secondary alternative relief

41331 an order for specific performance

41332 appropriate injunctive relief whether mandatory or prohibitory and

41333 monetary damages including for consequential and economic lossreflecting the substantial losses suffered by the Government and theeconomy of the Province as a result of such breach

The Proponent expressly waives any right to claim or argue that the Governmentcannot claim the relief set out in Sections 41331 41332 and 41333 in any suitcommenced by the Government against the Proponent for the Proponentrsquos failureto perform its obligations under Section 4131

21

414 Copper Processing in the Province

4141 The Government acknowledges that at the date hereof the quantity of coppercurrently identified in the mineralized zones on or under the Leased Lands togetherwith identified copper deposits elsewhere in the Province are not sufficient to justifythe construction and operation of a copper processing facility in the Province on aneconomically feasible basis

4142 If at any time in the future

41421 Sufficient Reserves of copper are discovered by the Proponent inthe Province (including on or under the Leased Lands) to makeeconomic the processing on a commercial basis of the CopperConcentrate or any other product containing the principal quantitiesof copper extracted from the Leased Lands into Finished CopperProduct in the Province the Proponent shall process such CopperConcentrate into Finished Copper Product in the Province or

41422 a third party establishes a facility in the Province for the commercialprocessing of copper concentrate the Proponent shall offer for saleits then available Copper Concentrate from the Concentrator Plantto such third party for processing in such facility on then prevailingcommercial terms and conditions subject to the Proponentrsquos thenexisting contractual obligations

4143 In the circumstances set out in Section 4142 the Proponent acknowledges thatthe Government has the right pursuant to Section 311(3) of the Mineral Act torescind the Copper Concentrate Exemption Order

415 Parties in Contract Change of Control and Assignment

4151 The Proponent covenants with the Government that without the prior Approval ofthe Government it

41511 shall not take or threaten or purport to take any action whether byway of contract corporate reorganization or arrangement orotherwise that would have the effect of transferring assigningsubletting or otherwise divesting itself of a majority interest in orControl of (a) the Project or (b) all or substantially all of theProponentsrsquo rights under this Agreement the Instruments theExemption Orders the Primary Production Order and subject toApplicable Laws the Mining Lease and

41512 shall not take or threaten or purport to take any action which directlyor indirectly results in a change of Control of VBNC to a party otherthan Inco

22

4152 Wherever pursuant to Section 4151 the Government is requested to grant itsApproval such Approval may be withheld by the Government in its sole andabsolute discretion for any reason whatsoever

4153 For bona fide tax or other corporate reasons the Proponent may without theApproval of the Government transfer assign sublet or otherwise divest to anAffiliate a majority interest in or Control of (a) the Project or (b) all or substantiallyall of the Proponentrsquos rights under this Agreement the Instruments the ExemptionOrders the Primary Production Order and subject to Applicable Laws the MiningLease Notwithstanding Section 111 no such transfer assignment sublet ordivestiture shall relieve the Proponent of its obligations hereunder or thereunder

4154 The Proponent shall promptly give written notice to the Government of any actionit takes under Section 4151 or 4153

416 Members of House of Assembly The Proponent undertakes to (a) ensure that nomember of the House of Assembly of the Province shall have any interest in thisAgreement and (b) use its best efforts to ensure that no Member of the House of Assemblyof the Province receives any benefit to arise herefrom or from any report study review oranalysis required to be made or submitted pursuant to this Agreement

417 Mining Lease VBNC shall execute the Mining Lease effective 30 September 2002

418 Proponentrsquos Financing The Proponent shall use best efforts to obtain the financingcontemplated by Section 1024 including without limitation the preparation of all feasibilitystudies required in order to obtain such financing

ARTICLE 5FORCE MAJEURE

51 Events of Force Majeure For the purposes of this Article 5 and subject to the exceptionsand qualifications below each of the following shall be an ldquoEvent of Force Majeurerdquo

511 acts of God or natural disasters adverse weather conditions or other similaroccurrences

512 acts of war (declared or undeclared) or conditions arising out of or attributable toany such acts of war revolutions insurrections civil strife formal or informalhostilities mob violence riots and similar disturbances blockades or any otherunlawful acts against public order or authority

513 strikes lockouts work stoppages or labour disturbances unless directly andproximately caused by an unlawful act or omission of the Proponent

514 (a) delay or failure by suppliers of labour transportation materials machineryequipment parts supplies utilities or services (b) contractorsrsquo or sub-contractorsrsquoshortage of or inability to obtain labour transportation materials machinery

23

equipment parts supplies utilities or services or (c) breakdown of equipmentmachinery or facilities unless any of the foregoing are directly and proximatelycaused by or result from an unlawful act or omission of the Proponent

515 accidents and

516 solely in respect of the Proponentrsquos obligations in Section 4131 a ProcessingRelated Reason provided that a Processing Related Reason shall not be an Eventof Force Majeure at any time after three years following Cessation of MiningOperations

52 Obligation to Perform In order to obtain relief for an Event of Force Majeure theProponent shall (a) use commercially reasonable efforts to (i) prevent the occurrence of(ii) perform its obligations in the face of and (iii) terminate any such Event of Force Majeure(other than the events described in Section 513 relied upon) and (b) give the Governmentwritten notice of the facts which the Proponent claims constitute an Event of Force Majeureas soon as reasonably practical upon becoming aware of their existence

53 Force Majeure Relief If the Proponent establishes that it is prevented from performingany of its obligations under this Agreement the Nickel Concentrate Exemption Order or theMatte Plant Exemption Order by reason of an Event of Force Majeure such obligations willbe suspended for the period of the existence of such Event of Force Majeure and theProponent will be entitled to an extension of all dates referred to in this Agreement theNickel Concentrate Exemption Order and the Matte Plant Exemption Order for a reasonableperiod of time that reflects (a) the period during which the Proponent is prevented fromperforming its obligations by reason of the Event of Force Majeure and (b) the impact thatsuch Event of Force Majeure has on the Project including without limitation shippingschedules and construction schedules that have been delayed by reason of such Event ofForce Majeure Even though the Proponentrsquos obligations will be suspended for suchreasonable period of time when the applicable Event of Force Majeure is no longerpreventing the Proponent from performing its obligations the Proponent will again beobliged to perform such obligations

ARTICLE 6GOVERNMENT UNDERTAKINGS

61 Aboriginal Agreements The Government represents and warrants that it has entered into(a) interim measures agreements with the Innu Nation and the LIA that include the VoiseyrsquosBay chapter of the respective land claims agreements and (b) the EMA

62 Electrical Rights and Provision of Power The Government shall cause Newfoundlandand Labrador Hydro or its successors to

621 provide to the Proponent electrical power for the Processing Plant at the lower of(a) the island industrial electrical rate or (b) any lower electrical rate that may be

24

offered from time to time by Newfoundland and Labrador Hydro or its successorsto its industrial customers in comparable circumstances and

622 ensure that Newfoundland and Labrador Hydro or its successors can supply to theProponent sufficient electrical power for the operation of the Processing Plant

63 Mining Lease The Government shall issue the Mining Lease effective 30 September2002

64 Exemption Orders The Government shall issue the Exemption Orders effective 30September 2002

65 Issue of Authorizations

651 Where the Proponent has submitted all information and data in accordance withApplicable Laws and required by the Government for it to issue or grant any permitauthorization order or other approval necessary for the Proponent to implement theProject or any part thereof (in this Section 65 the ldquoAuthorization(s)rdquo) theGovernment shall issue or grant any such Authorization on a timely basis

652 If the Government does not issue or grant an Authorization on a timely basis

6521 the Government shall grant the Proponent an extension of all datesreferred to in this Agreement the Nickel Concentrate ExemptionOrder and the Matte Plant Exemption Order for a reasonable periodof time that reflects (a) the period of delay in granting suchAuthorization and (b) the impact that such delay has on the Projectincluding without limitation shipping schedules and constructionschedules that will have been delayed by Governmentrsquos failure toissue or grant such Authorization on a timely basis and

6522 if as a result of the Governmentrsquos failure to issue or grant anAuthorization on a timely basis the completion date for theProcessing Plant is delayed and provided that the Proponentestablishes that it is likely it will ship out of the Province the totalvolume of contained nickel in the Nickel Concentrate permittedunder the Nickel Concentrate Exemption Order prior to the revisedcompletion date of the Processing Plant the Government shallamend the Nickel Concentrate Exemption Order to allow anadditional quantity of contained nickel in Nickel Concentrate to beshipped out of the Province which quantity will reflect thereasonable period of time of the extension referred to in Section6521

653 The Government shall not be responsible for any delays nor shall the Proponent beentitled to any relief under this Section 65 unless such delays are directly and

25

proximately caused by or result from an act or omission of the Government or adepartment regulatory body board agent or employee of the Government

66 Legislative Framework

661 The Government represents to the Proponent (and acknowledges that theProponent is relying upon such representation) that it shall maintain substantiallythe Legislative Framework for the duration of the Project subject to legislativeamendments contemplated in this Agreement and legislation of general applicationThe Government shall maintain the Legislative Framework consistent with thisAgreement subject to Governmental responsibilities including the responsibility forensuring proper management of the Provincersquos resources the protection andmaintenance of public health and safety and the protection of the environment TheGovernment acknowledges that this Agreement is consistent with current public lawand Governmental responsibilities

662 The Proponent represents to the Government (and the Proponent acknowledgesthat the Government in consideration of agreeing to maintain the LegislativeFramework has relied upon such representation) that the Proponent shall performits obligations set out in this Agreement the Instruments the Exemption Orders thePrimary Production Order and the Mining Lease

67 Special Project Orders The Government shall issue a Special Project Order or SpecialProject Orders under Section 70 of the Labour Relations Act (Newfoundland and Labrador)to ensure a stable labour relations environment throughout the construction phases of theProject This Order or these Orders shall include without limitation provisions such as nostrikes and lock-outs and the ability to designate the union organization and employerrsquosrepresentative for the purposes of collective bargaining

68 Corporate Income Tax The Government shall use best efforts to negotiate and executewith the Proponent the Tax Agreement as soon as possible but in any event on or beforethe Closing Date The Tax Agreement will contain provisions

681 whereby the Government will provide that the rate of the Provincersquos corporateincome tax applicable to the Proponent will be the lower of the ldquoall provincesaveragerdquo or the Provincersquos income tax rate

682 which to the extent permitted by law will result in an allocation to the Province forthe purposes of Part IV of the Federal Income Tax Regulations of the Proponentrsquosgross revenues from the sale or disposition of nickel copper and cobalt productswhether in intermediate or final form from the Project and

683 whereby the Government will undertake to indemnify the Proponent for any doubletaxation resulting from the allocation referred to in Section 682

26

69 Mining Tax Act At the next session of the House of Assembly of the Province theGovernment shall introduce and support legislation to amend the Mining Tax Act inaccordance with the Mining Tax Act Amendments

610 Primary Production Order The Government shall issue the Primary Production Ordereffective 30 September 2002

611 Industrial and Employment Benefits The Government shall execute the IEBA to beeffective 7 October 2002

ARTICLE 7PROPONENTrsquoS DEFAULT

71 Notice of an Event of Default Upon the happening of an Event of Default theGovernment may deliver to the Proponent a notice of default setting forth in reasonabledetail the nature of the Event of Default and if the Government intends to exercise its rightsunder Section 72 indicating the date upon which the Government intends to exercise suchrights

72 Termination Subject to an Event of Force Majeure or the provisions of Section 652where an Event of Default has occurred and in each of such cases and so often as anEvent of Default happens after giving the notice provided for in Section 71 theGovernment may at any time in its sole discretion do any one or more of the following (a)terminate this Agreement (b) terminate the Mining Lease (c) rescind the ExemptionOrders and (d) take action for any remedy at law or in equity

73 Release by Proponent and Proponentrsquos Indemnity The Proponent hereby releases anddischarges and agrees to indemnify and save harmless the Government from every claimof every nature whether in damages (including consequential or indirect damages) or notwhich may arise or be suffered by the Proponent or any Person claiming through or underthe Proponent by reason of or as a result of anything done by the Government or anysuccessor or assign claiming through or under the Government under the provisions ofSection 72

ARTICLE 8DISPUTE RESOLUTION

81 Dispute Resolution Any dispute or difference between the parties hereto arising

811 as to whether a Processing Related Reason exists

27

812 as to the selection of an Engineer or firm of Engineers the Experts or an umpireunder Schedule 4132

813 under Section 45 as to whether the Underground Exploration Program hasidentified Sufficient Reserves under the Leased Lands

814 as to the determination of the date of Cessation of Mining Operations

815 as to whether commercial processing is economic as contemplated by Section41421

816 as to then prevailing commercial terms and conditions as contemplated by Section41422

817 under Section 51 as to whether an Event of Force Majeure exists

818 under Section 53 as to whether an Event of Force Majeure prevents the Proponentfrom performing any of its obligations under this Agreement

819 under Section 53 or Section 652 as to the reasonable period of time for theextension of the dates of performance of the Proponentrsquos obligations

8110 under Section 6522 the additional quantity of contained nickel in NickelConcentrate to be shipped out of the Province or

8111 as to whether the Proponent is complying with its obligations under Section 52

shall in each case be resolved in the manner provided for in Schedule 81

ARTICLE 9CONFIDENTIAL INFORMATION

91 Confidential Information The Government

911 acknowledges that information (the Information) supplied to it by or on behalf ofthe Proponent pursuant to or in connection with this Agreement or the Instrumentsincluding without limitation information provided pursuant to or in connection withSections 422 471 472 475 52 and 81 is of a financial commercialscientific or technical nature and is supplied in confidence and

912 subject to Sections 93 and 94 shall keep the Information confidential and shallnot use or disclose the Information to any third party without the Approval of theProponent and in doing so shall use the same care as it applies to avoid disclosureor dissemination of its own confidential information to prevent the disclosure ofInformation to any third party

28

92 Effect of Disclosure The Government acknowledges that disclosure of the Informationcontrary to the provisions of this Article 9 could reasonably be expected to921 harm significantly the competitive position or interfere significantly with the

negotiating position of the Proponent

922 result in similar information no longer being supplied by or on behalf of theProponent to the Government when it is in the public interest that similar informationcontinued to be supplied and

923 result in material financial loss to the Proponent or result in material financial gainto competitors of the Proponent and other Persons

93 Approval The Government may disclose Information if Approved by the Proponent

94 Permitted Disclosure of Information The provisions of this Article 9 shall not apply toInformation which

941 is now or which hereafter through no act or omission of the Government becomesgenerally known or available to the public without breach of this Agreement

942 after disclosure to the Government becomes generally known or available to thepublic by publication or otherwise through no act or omission of the Government

943 the Government can establish was in its possession at the time of disclosure andwas not previously acquired directly or indirectly from the Proponent

944 is disclosed to the Government by a third party on a non-confidential basis whichparty to the Knowledge of the Government is not prohibited from disclosing suchInformation to the Government by any legal contractual or fiduciary obligation towhich such party is bound or subject or

945 is required to be disclosed by law

95 Remedy Without limiting the Proponentrsquos rights and recourses for a breach by theGovernment of its obligations in this Article 9

951 the Government acknowledges that the Proponent shall suffer irreparable harm ifthe Government discloses Information contrary to the provisions of this Article 9and unless prohibited by law the Proponent shall be entitled to an injunction orinjunctions to prevent such disclosure

952 the Government shall be liable for and shall indemnify and save the Proponentharmless from and against costs losses damages and claims that it may sufferpay incur or be liable for as a result of any breach by the Government of thisArticle 9 and

29

953 in the event there are any measures which the Government can take to ensurecompliance with the provisions of Section 912 the Proponent shall be relieved ofthe obligation to provide information of the type with respect to which the breachoccurred until the Government has taken such measures

ARTICLE 10CONDITIONS CLOSING AND TERMINATION

101 Conditions for the Benefit of the Government Subject to Section 1061 the obligationsof the Government in this Agreement are subject to the satisfaction of or compliance withat or prior to the Time of Closing each of the following conditions

1011 the representations and warranties of the Proponent made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Proponent at or prior to the Time of Closing shallhave been performed the Proponent shall not be in breach of any agreement onits part contained in this Agreement at the Time of Closing and the Governmentshall have received a certificate confirming the foregoing signed for and on behalfof the Proponent in form and content satisfactory to the Government

1012 the University Agreement shall have been executed by the Proponent and a copythereof shall have been delivered to the Government

1013 the Tax Agreement shall have been executed by the Proponent and delivered to theGovernment and

1014 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

102 Conditions for the Benefit of the Proponent Subject to Section 1061 the obligationsof the Proponent in this Agreement are subject to the satisfaction of or compliance with ator prior to the Time of Closing each of the following conditions

1021 the representations and warranties of the Government made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Government at or prior to the Time of Closingshall have been performed the Government shall not be in breach of anyagreement on its part contained in this Agreement at the Time of Closing and theProponent shall have received a certificate confirming the foregoing signed for andon behalf of the Government in form and content satisfactory to the Proponent

30

1022 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

1023 the Tax Agreement shall have been executed by the Government and delivered bythe Government to the Proponent

1024 the Proponent shall have secured financing on reasonable commercial terms toenable it to develop the Mine and construct the Concentrator Plant and

1025 the Mining Tax Act Amendments shall have become law

103 Closing Notice If the Proponent (a) wishes to waive the condition set out in Section1024 or (b) has obtained the financing contemplated by Section 1024 it shall forthwithdeliver to the Government a notice (the ldquoClosing Noticerdquo) confirming that it has eitherwaived the condition set out in Section 1024 or that such condition has been satisfied

104 Deliveries and Closing1041 The Closing shall take place at the Time of Closing on the Closing Date at a

location to be agreed by the parties

1042 At the Closing

10421 the Proponent shall deliver to the Government the certificatecontemplated by Section 1011 and if not previously delivered theexecuted University Agreement and the executed Tax Agreementand

10422 the Government shall deliver to the Proponent the certificatecontemplated by Section 1021 and if not previously delivered theexecuted Tax Agreement

105 Termination This Agreement and the IBEA may be terminated at any time prior to theTime of Closing1051 by agreement of the Government and the Proponent

1052 by the Government if the conditions set out in Section 101 have not been satisfiedor waived by the Government or the Closing Notice has not been delivered to theGovernment on or before 31 March 2003 or

1053 by the Proponent if the conditions set out in Section 102 have not been satisfiedor waived by the Proponent (except the condition set out in Section 1024 in theevent the Proponent has delivered the Closing Notice)

106 Effect of Agreement and Termination

1061 Notwithstanding Section 1062 and subject to Section 1063 the Government andthe Proponent shall be bound by the provisions of Sections 41 421 422 410

31

411 412 415 416 417 418 61 63 64 65 66 67 68 69 610 and 611and Articles 5 8 9 and 11 effective as of and from the date of execution of thisAgreement

1062 Subject to Section 1061 the obligations of the Proponent and the Government inthis Agreement shall be effective as of and from the Time of Closing

1063 If this Agreement and the IEBA are terminated in accordance with the provisions ofSection 105 this Agreement and the IEBA shall thereafter become null and voidand have no effect and no party shall have any liability to the other except

10631 the obligations contained in Sections 41421 411 69 and Article9 hereof and

10632 the liability of a party in respect of its breach of this Agreement andthe IEBA prior to such termination

all of which shall survive such termination for a period of twelve months followingsuch termination

ARTICLE 11GENERAL MATTERS

111 Enurement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease shall be binding upon and shall enure to the benefitof the parties hereto the successors and assigns of the Government and the successorsand permitted assigns of the Proponent Any such assignment permitted by this Agreementshall become effective only when the assignee executes with the Government aninstrument whereby it agrees to be bound by and perform all of the Proponentrsquos obligationsunder this Agreement the Instruments the Exemption Orders the Primary ProductionOrder and the Mining Lease Subject to Section 4153 from and after the execution ofsuch instrument the assignor shall be relieved of and released from all its obligations underthis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease with effect from and after the date of execution of such instrument

112 Counterparts This Agreement and the other documents referred to herein andorotherwise required to complete the transactions contemplated hereby may be executed intwo or more counterparts including by facsimile each of which shall be deemed an originaland all of which together shall constitute one and the same instrument

113 Notices All notices requests demands and other communications hereunder shall bedeemed to have been duly given if in writing and either delivered personally sent byfacsimile transmission or by air courier service to the addresses designated below or suchother addresses as may be designated in writing by notice given hereunder and shall be

32

effective upon personal delivery or facsimile transmission thereof with proof of transmissionreceipt or upon delivery by air courier serviceIf to VBNC Voiseyrsquos Bay Nickel Company Limited

Suite 700 Baine Johnston Centre10 Fort William PlaceSt Johnrsquos NewfoundlandA1C 1K4Attention PresidentFacsimile (709) 758-8820

If to Inco Inco Limited145 King Street WestSuite 1500Toronto OntarioM5H 4B7Attention PresidentFacsimile (416) 361-7734

If to the Government Government of Newfoundland amp LabradorDepartment of Mines amp EnergyNatural Resources Building7th Floor 50 Elizabeth AvenueSt Johnrsquos NewfoundlandA1A 1W5Attention The MinisterFacsimile (709) 729-0059

114 Legal Fees In the event of any dispute or controversy between the Proponent on the onehand and the Government on the other hand relating to the interpretation of this Agreementor to the transactions contemplated herein the prevailing party shall be entitled to recoverfrom the other party reasonable legal fees and expenses incurred by the prevailing partySuch award shall include reasonable post judgment legal fees and costs

115 Payment of Fees and Expenses Each party hereto shall pay its own fees expenses anddisbursements incurred in connection with this Agreement and the transactionscontemplated hereby and all other costs and expenses incurred in its performance andcompliance with all conditions to be performed hereunder and thereunder

116 Time of Essence Time is of the essence of this Agreement

117 Further Assurances Each of the parties shall promptly do make execute deliver orcause to be done made executed or delivered all such further acts documents and thingsas the other parties hereto may reasonably require from time to time for the purpose ofgiving effect to this Agreement and the transactions contemplated hereby and shall usereasonable efforts and take all such steps as may be reasonably within its power toimplement to their full extent the provisions hereof and thereof

33

118 Public Notices No press release or other announcement concerning the transactionscontemplated by this Agreement shall be made either by the Proponent or the Governmentwithout the prior Approval of the other (such Approval not to be unreasonably withheld)provided however that the Proponent may without such Approval make such disclosureif the same is required by law or any stock exchange on which any of the securities of theProponent or any of its Affiliates are listed or by any securities commission or other similarregulatory authority having jurisdiction over the Proponent or any of its Affiliates and if suchdisclosure is required the Person making the disclosure shall use best efforts to give priororal or written notice to the Government and if such prior notice is not possible to givesuch notice immediately following the making of such disclosure Notwithstanding theforegoing the Proponent acknowledges that the Government will make this Agreement andthe Schedules hereto public

119 Independent Legal Advice Each of the parties acknowledges having obtained its ownindependent legal advice with respect to this Agreement and the transactions contemplatedhereby to the fullest extent deemed necessary by each party prior to its execution anddelivery Furthermore the parties acknowledge that neither acted under any duress innegotiating drafting and executing this Agreement the Instruments and any documentscontemplated hereby There shall be no presumption that any ambiguity in this Agreementthe Instruments and any documents contemplated hereby be resolved in favour of any ofthe parties

1110 Compliance with Laws Without limiting the generality of any other covenant herein theProponent shall at its own cost and expense comply with and shall use best efforts toensure that all Persons for whom the Proponent is at law responsible comply with allApplicable Laws in connection with the Project

1111 Entire Agreement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease set forth the entire agreement and all thecovenants promises assurances agreements representations conditions warrantiesstatements and understandings (collectively ldquoRepresentationsrdquo) between the partiesconcerning the subject matter hereof No Representations are made by the Governmentto the Proponent or by the Proponent to the Government except as expressly set out in thisAgreement the Instruments the Exemption Orders the Primary Production Order and theMining Lease For greater certainty the Statement of Principles between the Governmentand the Proponent dated as of 11 June 2002 shall have no application to the parties or thematters contemplated by this Agreement after the date hereof and is replaced entirely bythis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease

1112 Good Faith Each of the Government and the Proponent shall at all times exercise all itsrights hereunder in a manner consistent with good business practices and shall act in goodfaith

1113 Waiver The failure of any party hereto to insist in any one instance upon the strictperformance by another party hereto of its obligations hereunder the Instruments theExemption Orders the Primary Production Order and the Mining Lease or the failure of any

34

party hereto to exercise any right option or remedy shall not constitute a waiver orrelinquishment for the future of any such obligation right option or remedy nor shall itconstitute a waiver of a subsequent breach No covenant or condition of this Agreementmay be waived by any party hereto except by the written consent of that party andforbearance or indulgence by that party in any regard whatsoever for no matter how longshall not constitute a waiver of such covenant or condition and until such covenant orcondition has been performed or waived in writing that party shall be entitled to invoke anyremedy available to that party under this Agreement the Instruments the ExemptionOrders the Primary Production Order and the Mining Lease despite its forbearance orindulgence

1114 No Partnership Joint Venture or Agency The Government and the Proponent expresslydisclaim any intention to create a partnership joint venture or joint enterprise It isunderstood acknowledged and agreed that nothing contained in this Agreement nor anyacts of the parties shall constitute or be deemed to constitute the Government and theProponent as partners joint venturers or principal and agent in any way or for any purpose

THE HONOURABLE THE PREMIER

THE HONOURABLE THE MINISTER OFMINES AND ENERGY

THE HONOURABLE THE MINISTER OFLABRADOR AND ABORIGINAL AFFAIRS

INCO LIMITED

ByChairman and Chief Executive Officer

VOISEYrsquoS BAY NICKEL COMPANY LIMITED

ByPresident

SCHEDULE 11ANICKEL CONCENTRATE EXEMPTION ORDER

This document can be found at the following web address httpwwwgovnfcahoaregulationsrc020066htm

6

ldquoGovernment Entityrdquo means (a) any federal provincial state regional municipal localor other government governmental or public department commission board bureau oragency whether domestic or foreign (b) any subdivision agency commission board orauthority of any of the foregoing or (c) any quasi governmental or private body exercisingany regulatory expropriation or taxing authority under or for the account of any of theforegoing in each case which has jurisdiction in respect of the Project or any part thereof

ldquoHydromet Plantrdquo has the meaning ascribed thereto in Section 461

ldquoIBAsrdquo means collectively the Impacts and Benefits Agreements made as of 29 July 2002between the Proponent and each of Innu Nation and the LIA without any amendment orvariation

ldquoIEBArdquo means the Industrial and Employment Benefits Agreement in the form set out inSchedule 49

ldquoImplementation Planrdquo means a detailed description of and time schedule for thecompletion of the engineering work for and the construction of the Processing Plant by 31December 2011

ldquoIncordquo means Inco Limited a corporation organized under the laws of Canada

ldquoInformationrdquo has the meaning ascribed thereto in Section 911

ldquoInnovation Centrerdquo has the meaning ascribed thereto in Section 34

ldquoInnu Nationrdquo means Innu Nation a corporation incorporated under the laws of Canada

ldquoInstrumentsrdquo means collectively the University Agreement the Tax Agreement and theIEBA

ldquoLeased Landsrdquo means the lands described in Schedule ldquoArdquo to the Mining Lease asamended from time to time

ldquoLegislative Frameworkrdquo means the Applicable Laws of the Province in existence as ofthe date hereof applicable to the Project or any part thereof

ldquoLIArdquo means the Labrador Inuit Association a corporation incorporated under the laws ofthe Province

ldquoMatterdquo means any form of granular nickel in matte product containing not less than 50nickel which can be processed by the Matte Plant to produce Finished Nickel Product

ldquoMatte Plantrdquo has the meaning ascribed thereto in Section 462

7

ldquoMatte Plant Exemption Order means the Matte Plant Exemption Order in the form ofSchedule 11C

ldquoMinerdquo means collectively (a) the open pit mine or mines to be developed by the Proponentfor the extraction of the mineral ores located on the Leased Lands and (b) the undergroundmine or mines as contemplated by Section 45 for the extraction of the mineral ores atdepth located under the Leased Lands

ldquoMineral Actrdquo means the Mineral Act (Newfoundland and Labrador) and the regulationsthereunder

ldquoMining Leaserdquo means the Mining Lease in the form of Schedule 63

ldquoMining Tax Actrdquo means the Mining and Mineral Rights Tax Act (Newfoundland andLabrador) and the regulations thereunder

ldquoMining Tax Act Amendmentsrdquo means the proposed amendments to the Mining Tax Actset out in Schedule 69

ldquoNickel Concentraterdquo means the intermediate concentrate or similar product produced bythe Concentrator Plant containing the principal quantities of nickel and cobalt from oreextracted or removed from the Leased Lands

ldquoNickel Concentrate Exemption Order means the Nickel Concentrate Exemption Orderin the form of Schedule 11A

ldquoPersonrdquo means any individual partnership limited partnership joint venture syndicatesole proprietorship company or corporation with or without share capital unincorporatedassociation trust trustee executor administrator or other legal personal representativeor Government Entity however designated or constituted

ldquoPrimary Production Orderrdquo means the Primary Production Order in the form of Schedule610

ldquoProcessing Plantrdquo means either the Hydromet Plant or the Matte Plant which theProponent shall construct and operate in the Province as contemplated by Section 46

ldquoProcessing Related Reasonrdquo means any situation where the Proponent is unable tomeet its obligations under Section 4131 as a result of either (a) the unavailability forwhatever bona fide reason of Replacement Concentrate or (b) the unavailability ofReplacement Concentrate on reasonable commercial terms including without limitationwhere the terms relating to price or specifications would make it not economically ortechnically feasible for processing at the Processing Plant

ldquoProjectrdquo has the meaning ascribed thereto in Section 31

8

ldquoProponentrdquo means collectively VBNC Inco their respective Affiliates or any Personwhich (as permitted by this Agreement) individually or together with any of them by way ofpartnership joint venture sub-contract or otherwise holds or is entitled to a majority interestin or Control of the Project or is the operator of the Project and their respective successorsand permitted assigns

ldquoProvincerdquo means the Province of Newfoundland and Labrador Canada

ldquoR amp D Programrdquo has the meaning ascribed thereto in Section 35

ldquoReplacement Concentraterdquo means any product containing nickel or cobalt or bothderived from ores or any other source of nickel or cobalt or both mined extracted orproduced outside the Province that in each case does not represent Finished NickelProduct but which can be further processed at the Processing Plant to produce FinishedNickel Product

ldquoSufficient Reservesrdquo means the estimated quantities of ldquoProven Mineral Reservesrdquo orldquoProbable Mineral Reservesrdquo or both within the meaning of National Instrument 43-101ldquoStandards of Disclosure for Mineral Projectsrdquo (as amended from time to time) determinedby the Proponent in accordance with its standard methodologies and assumptions for suchestimates

ldquoTax Agreementrdquo means the Tax Agreement to be entered into between the Governmentand the Proponent as contemplated by Sections 412 and 68

ldquoTime of Closingrdquo means 1000 orsquoclock in the morning in the Province on the ClosingDate

ldquoUnderground Exploration Programrdquo means the underground exploration programcontemplated by Section 44

ldquoUniversityrdquo means Memorial University of Newfoundland

ldquoUniversity Agreementrdquo means the agreement to be entered into between the Proponentand the University as contemplated by Section 48

ldquoVBN Undertaking Orderrdquo means the Voiseyrsquos Bay Nickel Company Limited Mine and MillUndertaking Order under the Environmental Assessment Act (Newfoundland and Labrador)dated 5 August 1999 (OC 99-286) as amended from time to time and

ldquoVBNCrdquo means Voiseyrsquos Bay Nickel Company Limited a corporation incorporated underthe laws of the Province

9

12 Schedules

The documents attached hereto and identified below shall form an integral part of thisAgreement

Schedule 11A - Nickel Concentrate Exemption OrderSchedule 11B - Copper Concentrate Exemption OrderSchedule 11C - Matte Plant Exemption OrderSchedule 49 - IEBASchedule 4132 - Assaying ProceduresSchedule 63 - Mining LeaseSchedule 69 - Mining Tax Act AmendmentsSchedule 610 - Primary Production OrderSchedule 81 - Dispute Resolution Procedures

13 Subdivisions Unless otherwise stated a reference herein or in a Schedule by numericalor alphabetical designation to an Article Section Subsection Paragraph Subparagraphor Schedule shall refer to the Article Section Subsection Paragraph Subparagraph orSchedule bearing that designation in this Agreement or in a Schedule

14 Headings The division of this Agreement into Articles Sections SubsectionsParagraphs and Subparagraphs and the insertion of headings are for convenience ofreference only and shall not affect the construction or interpretation of this Agreement

15 Number and Gender Words importing the singular shall include the plural and vice versaand words importing a particular gender shall include all genders The use of the neutersingular pronoun to refer to a party is deemed a proper reference The necessarygrammatical changes required to make the provisions of this Agreement apply shall in allinstances be assumed as though in each case fully expressed

16 Statutes Regulations Rules and Orders Any reference in this Agreement to all or anypart of any statute regulation rule or order shall unless otherwise stated be a referenceto that statute regulation rule or order or the relevant part thereof as amendedsubstituted replaced or reenacted from time to time

17 Business Day If the day on which any act or payment is required to be done or madeunder this Agreement is a day which is not a Business Day then such act or payment shallbe performed or made on the next following Business Day

18 Contract Always Speaking With the exception of the representations and warranties ofthe parties set out in Article 2 and any estimates referred to in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic and relatedbenefits and costs of facilities referred to in this Agreement made by the Proponent wherea matter or thing is expressed in the present tense it shall be applied to the circumstancesas they arise

10

19 Governing Law and Choice of Forum This Agreement shall be interpreted inaccordance with the laws in force in the Province subject to any applicable federal laws andfor all purposes this Agreement shall be treated as a Newfoundland and Labrador contractThe Proponent irrevocably submits and attorns to the exclusive jurisdiction of the courts ofthe Province

110 Construed Covenants Each obligation or agreement of this Agreement (other than therepresentations and warranties of the parties) even though not expressed as a covenantis to be construed as a covenant

111 Inconsistency or Conflict Except where otherwise provided either expressly or bynecessary implication in this Agreement a Schedule hereto or any Instrument in the eventof any inconsistency or conflict between any such Schedule or Instrument and any provisioncontained in this Agreement the provision of this Agreement shall prevail to the extent ofthe inconsistency or conflict

112 Severability If any provision of this Agreement or the application thereof to any Personor circumstance is to any extent held or rendered invalid void illegal or unenforceablefor any reason then the particular provision

1121 shall be deemed to be independent of and severed from the remainder of thisAgreement and all the other provisions of this Agreement shall neverthelesscontinue in full force and effect and

1122 shall continue to be applicable and enforceable to the fullest extent permitted by lawagainst any Persons and in any circumstances other than those as to which it hasbeen held or rendered invalid void illegal or unenforceable

If a severance occurs under this Section 112 the parties shall use their respective bestefforts to negotiate in good faith an enforceable replacement provision that to the greatestextent possible reflects the intent or serves the purpose of the severed provision

113 Currency All references in this Agreement to currency are to Canadian dollars

114 Knowledge In this Agreement where ldquoKnowledgerdquo of a party is referred to

1141 in respect of the Proponent it shall mean the actual knowledge of the executiveofficers of the Proponent after due inquiry in respect thereof and

1142 in respect of the Government it shall mean the actual knowledge of the responsibleexecutives of the applicable department of Government after due inquiry in respectthereof

11

ARTICLE 2REPRESENTATIONS AND WARRANTIES

21 Proponentrsquos Representations and Warranties Acknowledging that the Government isrelying on such representations and warranties VBNC and Inco jointly and severallyrepresent and warrant to the Government that

211 each is a corporation which has been duly incorporated or organized as applicableunder the laws of its jurisdiction of incorporation or organization as applicable andis validly existing under such laws

212 Inco is extra-provincially registered in the Province

213 each has all necessary corporate power authority and capacity

2131 to cause the design engineering and construction of and to operateand maintain all parts of the Project and

2132 to enter into this Agreement and the Instruments and to perform itsrespective obligations herein and therein

214 the execution and delivery of this Agreement and each of the Instruments and theconsummation of the transactions contemplated herein and therein by each ofthem have been duly authorized by all necessary corporate action on the part ofeach of them

215 neither is a party to bound or affected by or subject to any indenture mortgagelease agreement instrument charter or by-law provision which with or without thegiving of notice or the lapse of time or both would be violated contravened orbreached by or under which default would occur as a result of the executiondelivery or performance of this Agreement or any of the Instruments or theconsummation of any of the transactions provided for in any of them

216 neither is bound or affected by or subject to any Applicable Law which with orwithout the giving of notice or the lapse of time or both would be violatedcontravened or breached by or under which default would occur as a result of theexecution delivery or performance of this Agreement or any of the Instruments orthe consummation of any of the transactions provided for in any of them

217 no approval authorization consent permit or other action by or filing with anyGovernment Entity is required in connection with the execution and delivery of thisAgreement or any of the Instruments and the performance of their respectiveobligations hereunder or thereunder except as otherwise stated herein

218 there is no suit action litigation arbitration proceeding or proceeding by aGovernmental Entity including appeals and applications for review in progresspending or to the Knowledge of either of them threatened against or involving

12

either of them or any judgment decree injunction or order of any court or arbitratorwhich could adversely affect their capacity or power to execute and deliver thisAgreement or any of the Instruments or to consummate the transactionscontemplated herein or therein or which could materially adversely affect theirrespective assets financial condition or future prospects

219 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of each of them enforceable against them inaccordance with their respective terms except as limited by (a) applicablebankruptcy laws or laws affecting the enforcement of creditorsrsquo rights generally and(b) the general principles of equity

2110 all references to estimates made by Inco and VBNC in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic andrelated benefits and costs of facilities are made as of the date of this Agreementhave been determined by them based upon information available at the date of thisAgreement and have been estimated by each of them bona fide and reasonablyand neither of them has any reason to believe that any such estimate isunreasonable or unfounded at the date of this Agreement and

2111 VBNC is a wholly owned subsidiary of Inco and to the Knowledge of the Proponentno Person individually or with any other Person or Persons currently Controls Inco

22 Government Acknowledgments The Government acknowledges that (a) none of VBNCInco or any Person for whom either of them may be responsible in law have made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments and (b) the Proponent shall use the most efficient and cost effective miningtechniques including state of the art automated mining technologies aimed at loweringoperating costs and extending the life of the Project

23 Governmentrsquos Representations and Warranties Acknowledging that the Proponent isrelying on such representations and warranties the Government represents and warrantsto the Proponent that

231 the execution and delivery of this Agreement and each of the Instruments and theconsummation by the Government of the transactions contemplated herein andtherein have been duly authorized by all necessary Government action

232 it is not a party to bound or affected by or subject to any indenture agreement orinstrument which with or without the giving of notice or the lapse of time or bothwould be violated contravened or breached by or under which default would occuras a result of the execution delivery or performance of this Agreement or any ofthe Instruments or the consummation of any of the transactions provided for in anyof them and

13

233 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of it enforceable against it in accordance with itsterms except as they may be limited by the general principles of equity

24 Proponent Acknowledgements Each of Inco and VBNC acknowledges that neither theGovernment nor any Person for whom it may be responsible in law has made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments

ARTICLE 3DESCRIPTION OF THE PROJECT AND RELATED FACILITIES

31 The Project The ldquoProjectrdquo will comprise collectively the Underground ExplorationProgram the Mine the Concentrator Plant the R amp D Program the Demonstration Plantthe Processing Plant and if applicable the Concentrator Plant expansion referred to inSection 45 The Processing Plant will be capable of processing concentrate andintermediate feeds containing nickel from other sources world wide which will give theProcessing Plant the capability of operating well beyond the life of the Mine

32 Capital Investment The Proponent estimates that the aggregate capital investment in theProject and related facilities will be $29 billion over the estimated 30-year life of the Projectinclusive of sustaining capital expenditures

33 Employment The Proponent estimates that

331 the construction phase of the Mine and Concentrator Plant will create approximately1700 person-years of employment in the Province the construction phase of theHydromet Plant will create approximately 3000 person-years of employment in theProvince and the construction phase of the Matte Plant will create approximately2500 person-years of employment in the Province

332 during the various operating phases the Project will create the followingemployment levels in the Province Mine and Concentrator Plant - 400 people R ampD Program - 200 people Underground Exploration Program - 85 people HydrometPlant - 400 people Matte Plant - 350 people

333 over the estimated 30-year life of the Project total employment benefits from theProject in the Province will be 76000 direct and indirect person-years and

334 gross domestic product impact to the Province with respect to the Project will be$11 billion

34 Innovation Centre The Proponent shall spend $10 million on and provide an endowmentof $1 million per year over a ten-year period to cover operational costs for an IncoInnovation Centre (the ldquoInnovation Centrerdquo) at St Johnrsquos in conjunction with theUniversity pursuant to the University Agreement The focus of the Innovation Centre willbe on education and research in mineral exploration mining and metallurgical processing

14

The Innovation Centre will provide world-class education research and training related tothe mining industry to 50-60 students per year to be engaged in Bachelors Masters andDoctorate level programs The Proponent shall commence work on the Innovation Centrein 2002 with target completion in 2004

35 R amp D Program The Proponent shall undertake a comprehensive research anddevelopment program intended to establish the commercial technical and economicfeasibility of hydrometallurgical process technology to process the Nickel Concentrate (theldquoR amp D Programrdquo) The R amp D Program will include the evaluation of chemical engineeringsub-processes for the hydrometallurgical process the mechanical equipment design for theDemonstration Plant and the construction and operation of the Demonstration Plant

ARTICLE 4PROPONENTrsquoS UNDERTAKINGS

41 Infrastructure and Initial Work Commencing in 2002 the Proponent shall

411 at the Mine site undertake site mobilization including the establishment of aconstruction camp initiation of work on temporary port facilities and construction ofaccess roads

412 at Argentia undertake leasing or other arrangements for occupancy and sitepreparation including demolition fencing security and signage

413 undertake the construction of a warehouse building and establish staging areas andlay down areas in support of Labrador activities

414 establish a project office at Argentia and information centres at St Johnrsquos andHappy Valley-Goose Bay and

415 complete site selection and commence architectural design and engineering workfor the Innovation Centre

The Proponent estimates that this infrastructure and initial work program will employ inaggregate approximately 250 persons and the Proponent shall spend not less than $55million on this program in the Province on or before 31 March 2003

42 R amp D Program421 The Proponent shall undertake the R amp D Program and as a part thereof shall

construct the Demonstration Plant at a cost which the Proponent estimates will be$130 million The Proponent shall commence the site development for theDemonstration Plant in 2002 and continue such development into 2003 Theinitiatives in support of these activities will include the operation of an informationcentre preparation of environmental baseline studies and continued upgrading orreplacement of utility services required for the Demonstration Plant maintainingstaging areas and cleanup and civil works at Argentia consisting of demolition

15

grading and earth works construction The Proponent has scheduled thecompletion of the engineering design and construction of the Demonstration Plantso that the Demonstration Plant Completion Date shall have occurred on or before31 December 2006

422 The Proponent shall provide to the Government within 15 days of the end of eachcalendar quarter commencing with the calendar quarter ending 31 December 2002a detailed progress report on the results during such calendar quarter of the R amp DProgram which report will detail costs incurred to the end of such calendar quarterand contain sufficient documentation and information to enable the Government toevaluate the Proponentrsquos progress with respect to the R amp D Program and thedevelopment of hydrometallurgical process technology for processing the NickelConcentrate If requested by the Government upon reasonable notice theProponent shall provide the Government and its representatives and advisorsaccess at reasonable times to the facilities where the R amp D Program is beingconducted and make appropriate personnel of the Proponent available to respondto any requests for additional information

423 In addition to the utilization of the Demonstration Plant for the purposes ofdeveloping hydrometallurgical process technology for processing the NickelConcentrate the Proponent shall explore business opportunities for the ongoingutilization of the Demonstration Plant for the evaluation of other concentrates andintermediate feeds after completion of the R amp D Program

43 Mine and Concentrator Plant

431 The Proponent shall cause the development of the Mine and the designengineering and construction of a millconcentrator plant which will be capable ofprocessing 6000 tonnes of ore per day (the ldquoConcentrator Plantrdquo) TheConcentrator Plant will produce the Copper Concentrate and the NickelConcentrate The Proponent has scheduled to begin the development of the Mineand the construction of the Concentrator Plant in 2003 and estimates that the Mineand Concentrator Plant will require three years to construct at a cost ofapproximately $710 million

432 The Proponent

4321 shall not ship any Nickel Concentrate out of the Province aspermitted by the Nickel Concentrate Exemption Order before theDemonstration Plant Completion Date and

4322 shall ship Nickel Concentrate from the Concentrator Plant to theDemonstration Plant in sufficient quantities for the continuedoperation of the Demonstration Plant during the R amp D Programfollowing successful start up of the Concentrator Plant

16

44 Underground Exploration Program The Proponent shall undertake an undergroundexploration program which it estimates will cost $95 million and employ approximately 85people This program is intended to identify Sufficient Reserves at depth under the LeasedLands and if there are such Sufficient Reserves the Proponent shall develop a mining planfor the economic extraction of such Reserves The initial phase of this undergroundexploration program will be an advanced surface program which the Proponent estimateswill cost $20 million to commence in 2002 with completion targeted for 2006 Subsequentunderground exploration will be scheduled to ensure that Sufficient Reserves under theLeased Lands are available to sustain full operation of the Concentrator Plant during thetransition from open-pit operations to full underground mining operations if applicable

45 Underground Mine Development and Concentrator Plant Expansion If theunderground exploration program described in Section 44 identifies Sufficient Reservesas contemplated by Section 44 the Proponent shall commence the development of anunderground mine or mines on the Leased Lands and an expansion of the ConcentratorPlant in order to supply sufficient Nickel Concentrate to maintain the operation of theProcessing Plant at full capacity The Proponent estimates that this program will costapproximately $750 million and employ an aggregate of 800 people

46 Processing Plant

461 In order to maximize long-term benefits for the Province and the people of theProvince the Proponent shall use its best efforts through the R amp D Program todevelop a technically and economically feasible hydrometallurgical processtechnology for processing the Nickel Concentrate in the Province If suchtechnology is successfully developed the Proponent shall cause the designengineering and construction of and operate and maintain a hydrometallurgicalprocessing plant with a design capacity to produce annually approximately 50000tonnes of Finished Nickel Product together with associated cobalt and copperproducts (the ldquoHydromet Plantrdquo) The Proponent estimates that the HydrometPlant will have a capital cost of approximately $800 million and during the three-yearconstruction period will generate approximately 3000 person-years of employmentThe Proponent estimates that the Hydromet Plant will employ approximately 400people during operations

462 If pursuant to Section 47 it is determined that a Hydromet Plant is not technicallyor economically feasible the Proponent shall construct a commercialhydrometallurgical nickel-matte processing facility or other similar facilityincorporating a proven state of the art technology to produce Finished NickelProduct (the ldquoMatte Plantrdquo) The Matte Plant will have a design capacity toproduce annually approximately 50000 tonnes of Finished Nickel Product togetherwith associated cobalt and copper products The Proponent estimates the MattePlant will have a capital cost of approximately $670 million and during the estimatedthree-year construction period will generate approximately 2500 person-years ofemployment The Proponent estimates that the Matte Plant will employapproximately 350 people during operations

17

463 The Proponent has represented to the Government that its objective is to operatethe Processing Plant well beyond the life of the Mine Accordingly the Proponentundertakes to explore technically and economically feasible opportunities for theexpansion of the Processing Plant and to secure opportunities to supply theProcessing Plant with feed from world wide sources to fully utilize the Proponentrsquoslarge capital investment in the Processing Plant

464 The Proponent shall establish the Processing Plant at Argentia unlessenvironmental conditions at Argentia would make it not economically feasible toestablish the Processing Plant at Argentia and in such circumstances theProponent shall locate the Processing Plant at another site in the Province

47 Selection of Applicable Processing Plant

471 The Proponent shall use commercially reasonable efforts to deliver as soon aspossible but in any event shall deliver on or before 15 November 2008 theDecision and the Decision Materials to the Government and the Experts

472 If the Proponent has not on or before 30 June 2008 delivered to the Governmentthe Decision and the Decision Materials

4721 it shall forthwith meet with the Government to review on aconfidential basis the status of its efforts towards being able todeliver the Decision

4722 thereafter it shall promptly update the Government from time to timeon its efforts to be able to deliver the Decision and the outstandingissues relevant to whether the Decision will be to build the HydrometPlant or the Matte Plant and

4723 to the extent that the Proponent is not by 30 June 2008 in aposition to deliver the Decision which confirms that the Proponentintends to proceed with the construction of the Hydromet Plant theProponent shall use commercially reasonable efforts to developImplementation Plans for both a Hydromet Plant and a Matte Plantso that it will be able to deliver the Implementation Plan for theHydromet Plant or Matte Plant as applicable on or before 31December 2008

473 The Government may at any time after the earlier of the Decision Date or 30 June2008 give the Proponent notice in writing that it wishes to proceed with theappointment of the Experts When the Government gives notice to the Proponentrequiring the appointment of the Experts the Government and the Proponent shallthen forthwith agree upon the appointment of the Experts If the Government andthe Proponent cannot so agree within 15 days after the giving by the Governmentof such notice the appointment of the Experts shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter to

18

the Joint Committee or the Mediation Procedure referred to therein If the Expertsare appointed prior to the delivery by the Proponent of the Decision and theDecision Materials the Proponent shall provide to the Government and the Expertssuch data and information as is then available that will assist the Experts in theirreview under Section 475 The Proponent and the Government shall each pay50 of the fees and expenses of the Experts Before receiving the Decision theDecision Materials or any other information or data from the Proponent under thisAgreement the Experts shall first execute a confidentiality agreement containingsubstantially the same terms as provided for in Article 9

474 If in the Decision the Proponent confirms it intends to construct the Hydromet Plantthe Proponent shall deliver the Implementation Plan for the Hydromet Plant on orbefore 31 December 2008 and thereafter shall proceed diligently to complete thedetailed engineering for and construction of the Hydromet Plant in accordance withsuch Implementation Plan so that it shall be completed on or before 31 December2011

475 If in the Decision the Proponent confirms it intends to construct the Matte Plant theGovernment shall on or before the seventh Business Days after the Decision Datedeliver to the Proponent and the Experts a notice in writing (in this Section 475 theldquoGovernment Decisionrdquo) that the Government either (a) accepts the Decision tobuild the Matte Plant or (b) intends to refer such Decision to the Experts for reviewIf in the Government Decision the Government states it intends to refer theDecision to the Experts the Proponent shall promptly deliver to the Experts theDecision and the Decision Materials if it has not previously done so The Expertswill review the Decision the Decision Materials and any other information or datawhich the Experts deem appropriate or which the Government requests them toconsider and render their report (the ldquoExpertsrsquo Reportrdquo) within 30 days of the dateon which the Government delivers the Government Decision If the Governmentrequests the Experts to consider any other information or data in addition to theDecision Materials it shall provide to the Experts and the Proponent copies of suchrequest and any such information and data at the time it delivers the GovernmentDecision and the Proponent shall have the right within five Business Days tocomment on or respond to such information and data to the Experts with a copy tothe Government The Expertsrsquo Report shall determine whether in the opinion of theExperts it would be technically and economically feasible for the Proponent to buildthe Hydromet Plant together with reasons for such determination If the ExpertsrsquoReport determines that it is technically and economically feasible for the Proponentto build the Hydromet Plant the Proponent shall on or before 31 December 2008deliver to the Government an Implementation Plan for the Hydromet Plant andthereafter shall proceed diligently to complete the detailed engineering for andconstruction of the Hydromet Plant so that it shall be completed on or before 31December 2011 If the Expertsrsquo Report confirms that it would not be technically oreconomically feasible to build the Hydromet Plant the Proponent shall on or before31 December 2008 deliver to the Government an Implementation Plan for the MattePlant and thereafter shall proceed diligently to complete the detailed engineering forand construction of the Matte Plant in accordance with such Implementation Plan

19

so that it shall be completed on or before 31 December 2011 Subject to Section477 the Expertsrsquo Report shall be final and binding on the Government and theProponent

476 The determination as to whether the Proponent is proceeding diligently with thecompletion of the engineering work for and the construction of the Processing Plantfor completion on or before 31 December 2011 as required by Section 474 or475 shall be made annually on the anniversary date of the Decision Date by anEngineer who shall certify to both the Government and the Proponent as to whetherthe actual engineering work for and construction of the Processing Plant is onschedule with the applicable Implementation Plan

477 If there is a manifest error in the Expertsrsquo Report which if corrected would result ina different determination by the Experts the Expertsrsquo Report shall be referred backto the Experts for the purpose of forthwith correcting such manifest error changingthe determination in the Expertsrsquo Report and submitting a revised Expertsrsquo Reportto the Proponent and the Government

478 Where an Engineer is required to be appointed from time to time for the purposesof Section 476 or for determining the Commercial Production Date theConstruction Completion Date or the Demonstration Plant Completion Date theGovernment and the Proponent shall forthwith agree upon the appointment of suchEngineer If the Government and the Proponent cannot so agree within 15 daysof the Government or the Proponent giving the other notice requiring appointmentof an Engineer the appointment of the Engineer shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter tothe Joint Committee or the Mediation Procedure referred to therein The Proponentand the Government shall each pay 50 of the fees and expenses of any Engineer

48 Innovation Centre The Proponent shall enter into an agreement (the ldquoUniversityAgreementrdquo) with the University in form and content satisfactory to the Government on orbefore the Closing Date The University Agreement shall contain among other things theProponentrsquos commitments and intentions set out in Section 34

49 Industrial and Employment Benefits The Proponent shall execute the IEBA to beeffective 7 October 2002

410 IBAs The Proponent represents and warrants to the Government that it has entered intothe IBAs

411 VBN Undertaking Order The Proponent agrees to abide by and implement the terms andconditions contained in the VBN Undertaking Order

412 Corporate Income Tax The Proponent shall use its best efforts to negotiate and executewith the Government an agreement covering the matters set forth in this Section 412 andSection 68 (the ldquoTax Agreementrdquo) as soon as possible but in any event on or before theClosing Date The Tax Agreement will contain provisions which to the extent permitted by

20

law will result in an allocation to the Province for the purposes of Part IV of the FederalIncome Tax Regulations of the Proponentrsquos gross revenues from the sale or disposition ofnickel copper and cobalt products whether in intermediate or final form from the Project

413 Return of Concentrate

4131 In consideration of the Government granting the Exemption Orders the Proponentguarantees that it shall prior to Cessation of Mining Operations commenceshipping into the Province Replacement Concentrate for processing into FinishedNickel Product at the Processing Plant Such Replacement Concentrate shall beshipped to and processed by the Processing Plant in sufficient quantities to permitthe Processing Plant to operate continuously at a rate that will produce not less than25000 tonnes of Finished Nickel Product annually and such shipments shallcontinue at least until such time as the contained nickel and cobalt in theReplacement Concentrate shall have equalled the total quantity of contained nickeland cobalt in the Nickel Concentrate shipped out of the Province under the termsof the Nickel Concentrate Exemption Order and otherwise than under the provisionsof an Exemption Order

4132 The Proponent shall undertake the Assaying Procedures set out in Schedule 4132with respect to the Nickel Concentrate and the Replacement Concentrate

4133 The Proponent acknowledges that if it does not perform its contractual obligationsunder Section 4131 (a) the Province and the economy of the Province will suffersubstantial loss (b) the Government would not be properly compensated for its lossby monetary damages which therefore will not be considered an adequate remedyfor such breach and (c) the Government may at any time subsequent to suchbreach commence an action against the Proponent for any one or more of thefollowing remedies whether claimed as primary or secondary alternative relief

41331 an order for specific performance

41332 appropriate injunctive relief whether mandatory or prohibitory and

41333 monetary damages including for consequential and economic lossreflecting the substantial losses suffered by the Government and theeconomy of the Province as a result of such breach

The Proponent expressly waives any right to claim or argue that the Governmentcannot claim the relief set out in Sections 41331 41332 and 41333 in any suitcommenced by the Government against the Proponent for the Proponentrsquos failureto perform its obligations under Section 4131

21

414 Copper Processing in the Province

4141 The Government acknowledges that at the date hereof the quantity of coppercurrently identified in the mineralized zones on or under the Leased Lands togetherwith identified copper deposits elsewhere in the Province are not sufficient to justifythe construction and operation of a copper processing facility in the Province on aneconomically feasible basis

4142 If at any time in the future

41421 Sufficient Reserves of copper are discovered by the Proponent inthe Province (including on or under the Leased Lands) to makeeconomic the processing on a commercial basis of the CopperConcentrate or any other product containing the principal quantitiesof copper extracted from the Leased Lands into Finished CopperProduct in the Province the Proponent shall process such CopperConcentrate into Finished Copper Product in the Province or

41422 a third party establishes a facility in the Province for the commercialprocessing of copper concentrate the Proponent shall offer for saleits then available Copper Concentrate from the Concentrator Plantto such third party for processing in such facility on then prevailingcommercial terms and conditions subject to the Proponentrsquos thenexisting contractual obligations

4143 In the circumstances set out in Section 4142 the Proponent acknowledges thatthe Government has the right pursuant to Section 311(3) of the Mineral Act torescind the Copper Concentrate Exemption Order

415 Parties in Contract Change of Control and Assignment

4151 The Proponent covenants with the Government that without the prior Approval ofthe Government it

41511 shall not take or threaten or purport to take any action whether byway of contract corporate reorganization or arrangement orotherwise that would have the effect of transferring assigningsubletting or otherwise divesting itself of a majority interest in orControl of (a) the Project or (b) all or substantially all of theProponentsrsquo rights under this Agreement the Instruments theExemption Orders the Primary Production Order and subject toApplicable Laws the Mining Lease and

41512 shall not take or threaten or purport to take any action which directlyor indirectly results in a change of Control of VBNC to a party otherthan Inco

22

4152 Wherever pursuant to Section 4151 the Government is requested to grant itsApproval such Approval may be withheld by the Government in its sole andabsolute discretion for any reason whatsoever

4153 For bona fide tax or other corporate reasons the Proponent may without theApproval of the Government transfer assign sublet or otherwise divest to anAffiliate a majority interest in or Control of (a) the Project or (b) all or substantiallyall of the Proponentrsquos rights under this Agreement the Instruments the ExemptionOrders the Primary Production Order and subject to Applicable Laws the MiningLease Notwithstanding Section 111 no such transfer assignment sublet ordivestiture shall relieve the Proponent of its obligations hereunder or thereunder

4154 The Proponent shall promptly give written notice to the Government of any actionit takes under Section 4151 or 4153

416 Members of House of Assembly The Proponent undertakes to (a) ensure that nomember of the House of Assembly of the Province shall have any interest in thisAgreement and (b) use its best efforts to ensure that no Member of the House of Assemblyof the Province receives any benefit to arise herefrom or from any report study review oranalysis required to be made or submitted pursuant to this Agreement

417 Mining Lease VBNC shall execute the Mining Lease effective 30 September 2002

418 Proponentrsquos Financing The Proponent shall use best efforts to obtain the financingcontemplated by Section 1024 including without limitation the preparation of all feasibilitystudies required in order to obtain such financing

ARTICLE 5FORCE MAJEURE

51 Events of Force Majeure For the purposes of this Article 5 and subject to the exceptionsand qualifications below each of the following shall be an ldquoEvent of Force Majeurerdquo

511 acts of God or natural disasters adverse weather conditions or other similaroccurrences

512 acts of war (declared or undeclared) or conditions arising out of or attributable toany such acts of war revolutions insurrections civil strife formal or informalhostilities mob violence riots and similar disturbances blockades or any otherunlawful acts against public order or authority

513 strikes lockouts work stoppages or labour disturbances unless directly andproximately caused by an unlawful act or omission of the Proponent

514 (a) delay or failure by suppliers of labour transportation materials machineryequipment parts supplies utilities or services (b) contractorsrsquo or sub-contractorsrsquoshortage of or inability to obtain labour transportation materials machinery

23

equipment parts supplies utilities or services or (c) breakdown of equipmentmachinery or facilities unless any of the foregoing are directly and proximatelycaused by or result from an unlawful act or omission of the Proponent

515 accidents and

516 solely in respect of the Proponentrsquos obligations in Section 4131 a ProcessingRelated Reason provided that a Processing Related Reason shall not be an Eventof Force Majeure at any time after three years following Cessation of MiningOperations

52 Obligation to Perform In order to obtain relief for an Event of Force Majeure theProponent shall (a) use commercially reasonable efforts to (i) prevent the occurrence of(ii) perform its obligations in the face of and (iii) terminate any such Event of Force Majeure(other than the events described in Section 513 relied upon) and (b) give the Governmentwritten notice of the facts which the Proponent claims constitute an Event of Force Majeureas soon as reasonably practical upon becoming aware of their existence

53 Force Majeure Relief If the Proponent establishes that it is prevented from performingany of its obligations under this Agreement the Nickel Concentrate Exemption Order or theMatte Plant Exemption Order by reason of an Event of Force Majeure such obligations willbe suspended for the period of the existence of such Event of Force Majeure and theProponent will be entitled to an extension of all dates referred to in this Agreement theNickel Concentrate Exemption Order and the Matte Plant Exemption Order for a reasonableperiod of time that reflects (a) the period during which the Proponent is prevented fromperforming its obligations by reason of the Event of Force Majeure and (b) the impact thatsuch Event of Force Majeure has on the Project including without limitation shippingschedules and construction schedules that have been delayed by reason of such Event ofForce Majeure Even though the Proponentrsquos obligations will be suspended for suchreasonable period of time when the applicable Event of Force Majeure is no longerpreventing the Proponent from performing its obligations the Proponent will again beobliged to perform such obligations

ARTICLE 6GOVERNMENT UNDERTAKINGS

61 Aboriginal Agreements The Government represents and warrants that it has entered into(a) interim measures agreements with the Innu Nation and the LIA that include the VoiseyrsquosBay chapter of the respective land claims agreements and (b) the EMA

62 Electrical Rights and Provision of Power The Government shall cause Newfoundlandand Labrador Hydro or its successors to

621 provide to the Proponent electrical power for the Processing Plant at the lower of(a) the island industrial electrical rate or (b) any lower electrical rate that may be

24

offered from time to time by Newfoundland and Labrador Hydro or its successorsto its industrial customers in comparable circumstances and

622 ensure that Newfoundland and Labrador Hydro or its successors can supply to theProponent sufficient electrical power for the operation of the Processing Plant

63 Mining Lease The Government shall issue the Mining Lease effective 30 September2002

64 Exemption Orders The Government shall issue the Exemption Orders effective 30September 2002

65 Issue of Authorizations

651 Where the Proponent has submitted all information and data in accordance withApplicable Laws and required by the Government for it to issue or grant any permitauthorization order or other approval necessary for the Proponent to implement theProject or any part thereof (in this Section 65 the ldquoAuthorization(s)rdquo) theGovernment shall issue or grant any such Authorization on a timely basis

652 If the Government does not issue or grant an Authorization on a timely basis

6521 the Government shall grant the Proponent an extension of all datesreferred to in this Agreement the Nickel Concentrate ExemptionOrder and the Matte Plant Exemption Order for a reasonable periodof time that reflects (a) the period of delay in granting suchAuthorization and (b) the impact that such delay has on the Projectincluding without limitation shipping schedules and constructionschedules that will have been delayed by Governmentrsquos failure toissue or grant such Authorization on a timely basis and

6522 if as a result of the Governmentrsquos failure to issue or grant anAuthorization on a timely basis the completion date for theProcessing Plant is delayed and provided that the Proponentestablishes that it is likely it will ship out of the Province the totalvolume of contained nickel in the Nickel Concentrate permittedunder the Nickel Concentrate Exemption Order prior to the revisedcompletion date of the Processing Plant the Government shallamend the Nickel Concentrate Exemption Order to allow anadditional quantity of contained nickel in Nickel Concentrate to beshipped out of the Province which quantity will reflect thereasonable period of time of the extension referred to in Section6521

653 The Government shall not be responsible for any delays nor shall the Proponent beentitled to any relief under this Section 65 unless such delays are directly and

25

proximately caused by or result from an act or omission of the Government or adepartment regulatory body board agent or employee of the Government

66 Legislative Framework

661 The Government represents to the Proponent (and acknowledges that theProponent is relying upon such representation) that it shall maintain substantiallythe Legislative Framework for the duration of the Project subject to legislativeamendments contemplated in this Agreement and legislation of general applicationThe Government shall maintain the Legislative Framework consistent with thisAgreement subject to Governmental responsibilities including the responsibility forensuring proper management of the Provincersquos resources the protection andmaintenance of public health and safety and the protection of the environment TheGovernment acknowledges that this Agreement is consistent with current public lawand Governmental responsibilities

662 The Proponent represents to the Government (and the Proponent acknowledgesthat the Government in consideration of agreeing to maintain the LegislativeFramework has relied upon such representation) that the Proponent shall performits obligations set out in this Agreement the Instruments the Exemption Orders thePrimary Production Order and the Mining Lease

67 Special Project Orders The Government shall issue a Special Project Order or SpecialProject Orders under Section 70 of the Labour Relations Act (Newfoundland and Labrador)to ensure a stable labour relations environment throughout the construction phases of theProject This Order or these Orders shall include without limitation provisions such as nostrikes and lock-outs and the ability to designate the union organization and employerrsquosrepresentative for the purposes of collective bargaining

68 Corporate Income Tax The Government shall use best efforts to negotiate and executewith the Proponent the Tax Agreement as soon as possible but in any event on or beforethe Closing Date The Tax Agreement will contain provisions

681 whereby the Government will provide that the rate of the Provincersquos corporateincome tax applicable to the Proponent will be the lower of the ldquoall provincesaveragerdquo or the Provincersquos income tax rate

682 which to the extent permitted by law will result in an allocation to the Province forthe purposes of Part IV of the Federal Income Tax Regulations of the Proponentrsquosgross revenues from the sale or disposition of nickel copper and cobalt productswhether in intermediate or final form from the Project and

683 whereby the Government will undertake to indemnify the Proponent for any doubletaxation resulting from the allocation referred to in Section 682

26

69 Mining Tax Act At the next session of the House of Assembly of the Province theGovernment shall introduce and support legislation to amend the Mining Tax Act inaccordance with the Mining Tax Act Amendments

610 Primary Production Order The Government shall issue the Primary Production Ordereffective 30 September 2002

611 Industrial and Employment Benefits The Government shall execute the IEBA to beeffective 7 October 2002

ARTICLE 7PROPONENTrsquoS DEFAULT

71 Notice of an Event of Default Upon the happening of an Event of Default theGovernment may deliver to the Proponent a notice of default setting forth in reasonabledetail the nature of the Event of Default and if the Government intends to exercise its rightsunder Section 72 indicating the date upon which the Government intends to exercise suchrights

72 Termination Subject to an Event of Force Majeure or the provisions of Section 652where an Event of Default has occurred and in each of such cases and so often as anEvent of Default happens after giving the notice provided for in Section 71 theGovernment may at any time in its sole discretion do any one or more of the following (a)terminate this Agreement (b) terminate the Mining Lease (c) rescind the ExemptionOrders and (d) take action for any remedy at law or in equity

73 Release by Proponent and Proponentrsquos Indemnity The Proponent hereby releases anddischarges and agrees to indemnify and save harmless the Government from every claimof every nature whether in damages (including consequential or indirect damages) or notwhich may arise or be suffered by the Proponent or any Person claiming through or underthe Proponent by reason of or as a result of anything done by the Government or anysuccessor or assign claiming through or under the Government under the provisions ofSection 72

ARTICLE 8DISPUTE RESOLUTION

81 Dispute Resolution Any dispute or difference between the parties hereto arising

811 as to whether a Processing Related Reason exists

27

812 as to the selection of an Engineer or firm of Engineers the Experts or an umpireunder Schedule 4132

813 under Section 45 as to whether the Underground Exploration Program hasidentified Sufficient Reserves under the Leased Lands

814 as to the determination of the date of Cessation of Mining Operations

815 as to whether commercial processing is economic as contemplated by Section41421

816 as to then prevailing commercial terms and conditions as contemplated by Section41422

817 under Section 51 as to whether an Event of Force Majeure exists

818 under Section 53 as to whether an Event of Force Majeure prevents the Proponentfrom performing any of its obligations under this Agreement

819 under Section 53 or Section 652 as to the reasonable period of time for theextension of the dates of performance of the Proponentrsquos obligations

8110 under Section 6522 the additional quantity of contained nickel in NickelConcentrate to be shipped out of the Province or

8111 as to whether the Proponent is complying with its obligations under Section 52

shall in each case be resolved in the manner provided for in Schedule 81

ARTICLE 9CONFIDENTIAL INFORMATION

91 Confidential Information The Government

911 acknowledges that information (the Information) supplied to it by or on behalf ofthe Proponent pursuant to or in connection with this Agreement or the Instrumentsincluding without limitation information provided pursuant to or in connection withSections 422 471 472 475 52 and 81 is of a financial commercialscientific or technical nature and is supplied in confidence and

912 subject to Sections 93 and 94 shall keep the Information confidential and shallnot use or disclose the Information to any third party without the Approval of theProponent and in doing so shall use the same care as it applies to avoid disclosureor dissemination of its own confidential information to prevent the disclosure ofInformation to any third party

28

92 Effect of Disclosure The Government acknowledges that disclosure of the Informationcontrary to the provisions of this Article 9 could reasonably be expected to921 harm significantly the competitive position or interfere significantly with the

negotiating position of the Proponent

922 result in similar information no longer being supplied by or on behalf of theProponent to the Government when it is in the public interest that similar informationcontinued to be supplied and

923 result in material financial loss to the Proponent or result in material financial gainto competitors of the Proponent and other Persons

93 Approval The Government may disclose Information if Approved by the Proponent

94 Permitted Disclosure of Information The provisions of this Article 9 shall not apply toInformation which

941 is now or which hereafter through no act or omission of the Government becomesgenerally known or available to the public without breach of this Agreement

942 after disclosure to the Government becomes generally known or available to thepublic by publication or otherwise through no act or omission of the Government

943 the Government can establish was in its possession at the time of disclosure andwas not previously acquired directly or indirectly from the Proponent

944 is disclosed to the Government by a third party on a non-confidential basis whichparty to the Knowledge of the Government is not prohibited from disclosing suchInformation to the Government by any legal contractual or fiduciary obligation towhich such party is bound or subject or

945 is required to be disclosed by law

95 Remedy Without limiting the Proponentrsquos rights and recourses for a breach by theGovernment of its obligations in this Article 9

951 the Government acknowledges that the Proponent shall suffer irreparable harm ifthe Government discloses Information contrary to the provisions of this Article 9and unless prohibited by law the Proponent shall be entitled to an injunction orinjunctions to prevent such disclosure

952 the Government shall be liable for and shall indemnify and save the Proponentharmless from and against costs losses damages and claims that it may sufferpay incur or be liable for as a result of any breach by the Government of thisArticle 9 and

29

953 in the event there are any measures which the Government can take to ensurecompliance with the provisions of Section 912 the Proponent shall be relieved ofthe obligation to provide information of the type with respect to which the breachoccurred until the Government has taken such measures

ARTICLE 10CONDITIONS CLOSING AND TERMINATION

101 Conditions for the Benefit of the Government Subject to Section 1061 the obligationsof the Government in this Agreement are subject to the satisfaction of or compliance withat or prior to the Time of Closing each of the following conditions

1011 the representations and warranties of the Proponent made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Proponent at or prior to the Time of Closing shallhave been performed the Proponent shall not be in breach of any agreement onits part contained in this Agreement at the Time of Closing and the Governmentshall have received a certificate confirming the foregoing signed for and on behalfof the Proponent in form and content satisfactory to the Government

1012 the University Agreement shall have been executed by the Proponent and a copythereof shall have been delivered to the Government

1013 the Tax Agreement shall have been executed by the Proponent and delivered to theGovernment and

1014 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

102 Conditions for the Benefit of the Proponent Subject to Section 1061 the obligationsof the Proponent in this Agreement are subject to the satisfaction of or compliance with ator prior to the Time of Closing each of the following conditions

1021 the representations and warranties of the Government made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Government at or prior to the Time of Closingshall have been performed the Government shall not be in breach of anyagreement on its part contained in this Agreement at the Time of Closing and theProponent shall have received a certificate confirming the foregoing signed for andon behalf of the Government in form and content satisfactory to the Proponent

30

1022 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

1023 the Tax Agreement shall have been executed by the Government and delivered bythe Government to the Proponent

1024 the Proponent shall have secured financing on reasonable commercial terms toenable it to develop the Mine and construct the Concentrator Plant and

1025 the Mining Tax Act Amendments shall have become law

103 Closing Notice If the Proponent (a) wishes to waive the condition set out in Section1024 or (b) has obtained the financing contemplated by Section 1024 it shall forthwithdeliver to the Government a notice (the ldquoClosing Noticerdquo) confirming that it has eitherwaived the condition set out in Section 1024 or that such condition has been satisfied

104 Deliveries and Closing1041 The Closing shall take place at the Time of Closing on the Closing Date at a

location to be agreed by the parties

1042 At the Closing

10421 the Proponent shall deliver to the Government the certificatecontemplated by Section 1011 and if not previously delivered theexecuted University Agreement and the executed Tax Agreementand

10422 the Government shall deliver to the Proponent the certificatecontemplated by Section 1021 and if not previously delivered theexecuted Tax Agreement

105 Termination This Agreement and the IBEA may be terminated at any time prior to theTime of Closing1051 by agreement of the Government and the Proponent

1052 by the Government if the conditions set out in Section 101 have not been satisfiedor waived by the Government or the Closing Notice has not been delivered to theGovernment on or before 31 March 2003 or

1053 by the Proponent if the conditions set out in Section 102 have not been satisfiedor waived by the Proponent (except the condition set out in Section 1024 in theevent the Proponent has delivered the Closing Notice)

106 Effect of Agreement and Termination

1061 Notwithstanding Section 1062 and subject to Section 1063 the Government andthe Proponent shall be bound by the provisions of Sections 41 421 422 410

31

411 412 415 416 417 418 61 63 64 65 66 67 68 69 610 and 611and Articles 5 8 9 and 11 effective as of and from the date of execution of thisAgreement

1062 Subject to Section 1061 the obligations of the Proponent and the Government inthis Agreement shall be effective as of and from the Time of Closing

1063 If this Agreement and the IEBA are terminated in accordance with the provisions ofSection 105 this Agreement and the IEBA shall thereafter become null and voidand have no effect and no party shall have any liability to the other except

10631 the obligations contained in Sections 41421 411 69 and Article9 hereof and

10632 the liability of a party in respect of its breach of this Agreement andthe IEBA prior to such termination

all of which shall survive such termination for a period of twelve months followingsuch termination

ARTICLE 11GENERAL MATTERS

111 Enurement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease shall be binding upon and shall enure to the benefitof the parties hereto the successors and assigns of the Government and the successorsand permitted assigns of the Proponent Any such assignment permitted by this Agreementshall become effective only when the assignee executes with the Government aninstrument whereby it agrees to be bound by and perform all of the Proponentrsquos obligationsunder this Agreement the Instruments the Exemption Orders the Primary ProductionOrder and the Mining Lease Subject to Section 4153 from and after the execution ofsuch instrument the assignor shall be relieved of and released from all its obligations underthis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease with effect from and after the date of execution of such instrument

112 Counterparts This Agreement and the other documents referred to herein andorotherwise required to complete the transactions contemplated hereby may be executed intwo or more counterparts including by facsimile each of which shall be deemed an originaland all of which together shall constitute one and the same instrument

113 Notices All notices requests demands and other communications hereunder shall bedeemed to have been duly given if in writing and either delivered personally sent byfacsimile transmission or by air courier service to the addresses designated below or suchother addresses as may be designated in writing by notice given hereunder and shall be

32

effective upon personal delivery or facsimile transmission thereof with proof of transmissionreceipt or upon delivery by air courier serviceIf to VBNC Voiseyrsquos Bay Nickel Company Limited

Suite 700 Baine Johnston Centre10 Fort William PlaceSt Johnrsquos NewfoundlandA1C 1K4Attention PresidentFacsimile (709) 758-8820

If to Inco Inco Limited145 King Street WestSuite 1500Toronto OntarioM5H 4B7Attention PresidentFacsimile (416) 361-7734

If to the Government Government of Newfoundland amp LabradorDepartment of Mines amp EnergyNatural Resources Building7th Floor 50 Elizabeth AvenueSt Johnrsquos NewfoundlandA1A 1W5Attention The MinisterFacsimile (709) 729-0059

114 Legal Fees In the event of any dispute or controversy between the Proponent on the onehand and the Government on the other hand relating to the interpretation of this Agreementor to the transactions contemplated herein the prevailing party shall be entitled to recoverfrom the other party reasonable legal fees and expenses incurred by the prevailing partySuch award shall include reasonable post judgment legal fees and costs

115 Payment of Fees and Expenses Each party hereto shall pay its own fees expenses anddisbursements incurred in connection with this Agreement and the transactionscontemplated hereby and all other costs and expenses incurred in its performance andcompliance with all conditions to be performed hereunder and thereunder

116 Time of Essence Time is of the essence of this Agreement

117 Further Assurances Each of the parties shall promptly do make execute deliver orcause to be done made executed or delivered all such further acts documents and thingsas the other parties hereto may reasonably require from time to time for the purpose ofgiving effect to this Agreement and the transactions contemplated hereby and shall usereasonable efforts and take all such steps as may be reasonably within its power toimplement to their full extent the provisions hereof and thereof

33

118 Public Notices No press release or other announcement concerning the transactionscontemplated by this Agreement shall be made either by the Proponent or the Governmentwithout the prior Approval of the other (such Approval not to be unreasonably withheld)provided however that the Proponent may without such Approval make such disclosureif the same is required by law or any stock exchange on which any of the securities of theProponent or any of its Affiliates are listed or by any securities commission or other similarregulatory authority having jurisdiction over the Proponent or any of its Affiliates and if suchdisclosure is required the Person making the disclosure shall use best efforts to give priororal or written notice to the Government and if such prior notice is not possible to givesuch notice immediately following the making of such disclosure Notwithstanding theforegoing the Proponent acknowledges that the Government will make this Agreement andthe Schedules hereto public

119 Independent Legal Advice Each of the parties acknowledges having obtained its ownindependent legal advice with respect to this Agreement and the transactions contemplatedhereby to the fullest extent deemed necessary by each party prior to its execution anddelivery Furthermore the parties acknowledge that neither acted under any duress innegotiating drafting and executing this Agreement the Instruments and any documentscontemplated hereby There shall be no presumption that any ambiguity in this Agreementthe Instruments and any documents contemplated hereby be resolved in favour of any ofthe parties

1110 Compliance with Laws Without limiting the generality of any other covenant herein theProponent shall at its own cost and expense comply with and shall use best efforts toensure that all Persons for whom the Proponent is at law responsible comply with allApplicable Laws in connection with the Project

1111 Entire Agreement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease set forth the entire agreement and all thecovenants promises assurances agreements representations conditions warrantiesstatements and understandings (collectively ldquoRepresentationsrdquo) between the partiesconcerning the subject matter hereof No Representations are made by the Governmentto the Proponent or by the Proponent to the Government except as expressly set out in thisAgreement the Instruments the Exemption Orders the Primary Production Order and theMining Lease For greater certainty the Statement of Principles between the Governmentand the Proponent dated as of 11 June 2002 shall have no application to the parties or thematters contemplated by this Agreement after the date hereof and is replaced entirely bythis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease

1112 Good Faith Each of the Government and the Proponent shall at all times exercise all itsrights hereunder in a manner consistent with good business practices and shall act in goodfaith

1113 Waiver The failure of any party hereto to insist in any one instance upon the strictperformance by another party hereto of its obligations hereunder the Instruments theExemption Orders the Primary Production Order and the Mining Lease or the failure of any

34

party hereto to exercise any right option or remedy shall not constitute a waiver orrelinquishment for the future of any such obligation right option or remedy nor shall itconstitute a waiver of a subsequent breach No covenant or condition of this Agreementmay be waived by any party hereto except by the written consent of that party andforbearance or indulgence by that party in any regard whatsoever for no matter how longshall not constitute a waiver of such covenant or condition and until such covenant orcondition has been performed or waived in writing that party shall be entitled to invoke anyremedy available to that party under this Agreement the Instruments the ExemptionOrders the Primary Production Order and the Mining Lease despite its forbearance orindulgence

1114 No Partnership Joint Venture or Agency The Government and the Proponent expresslydisclaim any intention to create a partnership joint venture or joint enterprise It isunderstood acknowledged and agreed that nothing contained in this Agreement nor anyacts of the parties shall constitute or be deemed to constitute the Government and theProponent as partners joint venturers or principal and agent in any way or for any purpose

THE HONOURABLE THE PREMIER

THE HONOURABLE THE MINISTER OFMINES AND ENERGY

THE HONOURABLE THE MINISTER OFLABRADOR AND ABORIGINAL AFFAIRS

INCO LIMITED

ByChairman and Chief Executive Officer

VOISEYrsquoS BAY NICKEL COMPANY LIMITED

ByPresident

SCHEDULE 11ANICKEL CONCENTRATE EXEMPTION ORDER

This document can be found at the following web address httpwwwgovnfcahoaregulationsrc020066htm

7

ldquoMatte Plant Exemption Order means the Matte Plant Exemption Order in the form ofSchedule 11C

ldquoMinerdquo means collectively (a) the open pit mine or mines to be developed by the Proponentfor the extraction of the mineral ores located on the Leased Lands and (b) the undergroundmine or mines as contemplated by Section 45 for the extraction of the mineral ores atdepth located under the Leased Lands

ldquoMineral Actrdquo means the Mineral Act (Newfoundland and Labrador) and the regulationsthereunder

ldquoMining Leaserdquo means the Mining Lease in the form of Schedule 63

ldquoMining Tax Actrdquo means the Mining and Mineral Rights Tax Act (Newfoundland andLabrador) and the regulations thereunder

ldquoMining Tax Act Amendmentsrdquo means the proposed amendments to the Mining Tax Actset out in Schedule 69

ldquoNickel Concentraterdquo means the intermediate concentrate or similar product produced bythe Concentrator Plant containing the principal quantities of nickel and cobalt from oreextracted or removed from the Leased Lands

ldquoNickel Concentrate Exemption Order means the Nickel Concentrate Exemption Orderin the form of Schedule 11A

ldquoPersonrdquo means any individual partnership limited partnership joint venture syndicatesole proprietorship company or corporation with or without share capital unincorporatedassociation trust trustee executor administrator or other legal personal representativeor Government Entity however designated or constituted

ldquoPrimary Production Orderrdquo means the Primary Production Order in the form of Schedule610

ldquoProcessing Plantrdquo means either the Hydromet Plant or the Matte Plant which theProponent shall construct and operate in the Province as contemplated by Section 46

ldquoProcessing Related Reasonrdquo means any situation where the Proponent is unable tomeet its obligations under Section 4131 as a result of either (a) the unavailability forwhatever bona fide reason of Replacement Concentrate or (b) the unavailability ofReplacement Concentrate on reasonable commercial terms including without limitationwhere the terms relating to price or specifications would make it not economically ortechnically feasible for processing at the Processing Plant

ldquoProjectrdquo has the meaning ascribed thereto in Section 31

8

ldquoProponentrdquo means collectively VBNC Inco their respective Affiliates or any Personwhich (as permitted by this Agreement) individually or together with any of them by way ofpartnership joint venture sub-contract or otherwise holds or is entitled to a majority interestin or Control of the Project or is the operator of the Project and their respective successorsand permitted assigns

ldquoProvincerdquo means the Province of Newfoundland and Labrador Canada

ldquoR amp D Programrdquo has the meaning ascribed thereto in Section 35

ldquoReplacement Concentraterdquo means any product containing nickel or cobalt or bothderived from ores or any other source of nickel or cobalt or both mined extracted orproduced outside the Province that in each case does not represent Finished NickelProduct but which can be further processed at the Processing Plant to produce FinishedNickel Product

ldquoSufficient Reservesrdquo means the estimated quantities of ldquoProven Mineral Reservesrdquo orldquoProbable Mineral Reservesrdquo or both within the meaning of National Instrument 43-101ldquoStandards of Disclosure for Mineral Projectsrdquo (as amended from time to time) determinedby the Proponent in accordance with its standard methodologies and assumptions for suchestimates

ldquoTax Agreementrdquo means the Tax Agreement to be entered into between the Governmentand the Proponent as contemplated by Sections 412 and 68

ldquoTime of Closingrdquo means 1000 orsquoclock in the morning in the Province on the ClosingDate

ldquoUnderground Exploration Programrdquo means the underground exploration programcontemplated by Section 44

ldquoUniversityrdquo means Memorial University of Newfoundland

ldquoUniversity Agreementrdquo means the agreement to be entered into between the Proponentand the University as contemplated by Section 48

ldquoVBN Undertaking Orderrdquo means the Voiseyrsquos Bay Nickel Company Limited Mine and MillUndertaking Order under the Environmental Assessment Act (Newfoundland and Labrador)dated 5 August 1999 (OC 99-286) as amended from time to time and

ldquoVBNCrdquo means Voiseyrsquos Bay Nickel Company Limited a corporation incorporated underthe laws of the Province

9

12 Schedules

The documents attached hereto and identified below shall form an integral part of thisAgreement

Schedule 11A - Nickel Concentrate Exemption OrderSchedule 11B - Copper Concentrate Exemption OrderSchedule 11C - Matte Plant Exemption OrderSchedule 49 - IEBASchedule 4132 - Assaying ProceduresSchedule 63 - Mining LeaseSchedule 69 - Mining Tax Act AmendmentsSchedule 610 - Primary Production OrderSchedule 81 - Dispute Resolution Procedures

13 Subdivisions Unless otherwise stated a reference herein or in a Schedule by numericalor alphabetical designation to an Article Section Subsection Paragraph Subparagraphor Schedule shall refer to the Article Section Subsection Paragraph Subparagraph orSchedule bearing that designation in this Agreement or in a Schedule

14 Headings The division of this Agreement into Articles Sections SubsectionsParagraphs and Subparagraphs and the insertion of headings are for convenience ofreference only and shall not affect the construction or interpretation of this Agreement

15 Number and Gender Words importing the singular shall include the plural and vice versaand words importing a particular gender shall include all genders The use of the neutersingular pronoun to refer to a party is deemed a proper reference The necessarygrammatical changes required to make the provisions of this Agreement apply shall in allinstances be assumed as though in each case fully expressed

16 Statutes Regulations Rules and Orders Any reference in this Agreement to all or anypart of any statute regulation rule or order shall unless otherwise stated be a referenceto that statute regulation rule or order or the relevant part thereof as amendedsubstituted replaced or reenacted from time to time

17 Business Day If the day on which any act or payment is required to be done or madeunder this Agreement is a day which is not a Business Day then such act or payment shallbe performed or made on the next following Business Day

18 Contract Always Speaking With the exception of the representations and warranties ofthe parties set out in Article 2 and any estimates referred to in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic and relatedbenefits and costs of facilities referred to in this Agreement made by the Proponent wherea matter or thing is expressed in the present tense it shall be applied to the circumstancesas they arise

10

19 Governing Law and Choice of Forum This Agreement shall be interpreted inaccordance with the laws in force in the Province subject to any applicable federal laws andfor all purposes this Agreement shall be treated as a Newfoundland and Labrador contractThe Proponent irrevocably submits and attorns to the exclusive jurisdiction of the courts ofthe Province

110 Construed Covenants Each obligation or agreement of this Agreement (other than therepresentations and warranties of the parties) even though not expressed as a covenantis to be construed as a covenant

111 Inconsistency or Conflict Except where otherwise provided either expressly or bynecessary implication in this Agreement a Schedule hereto or any Instrument in the eventof any inconsistency or conflict between any such Schedule or Instrument and any provisioncontained in this Agreement the provision of this Agreement shall prevail to the extent ofthe inconsistency or conflict

112 Severability If any provision of this Agreement or the application thereof to any Personor circumstance is to any extent held or rendered invalid void illegal or unenforceablefor any reason then the particular provision

1121 shall be deemed to be independent of and severed from the remainder of thisAgreement and all the other provisions of this Agreement shall neverthelesscontinue in full force and effect and

1122 shall continue to be applicable and enforceable to the fullest extent permitted by lawagainst any Persons and in any circumstances other than those as to which it hasbeen held or rendered invalid void illegal or unenforceable

If a severance occurs under this Section 112 the parties shall use their respective bestefforts to negotiate in good faith an enforceable replacement provision that to the greatestextent possible reflects the intent or serves the purpose of the severed provision

113 Currency All references in this Agreement to currency are to Canadian dollars

114 Knowledge In this Agreement where ldquoKnowledgerdquo of a party is referred to

1141 in respect of the Proponent it shall mean the actual knowledge of the executiveofficers of the Proponent after due inquiry in respect thereof and

1142 in respect of the Government it shall mean the actual knowledge of the responsibleexecutives of the applicable department of Government after due inquiry in respectthereof

11

ARTICLE 2REPRESENTATIONS AND WARRANTIES

21 Proponentrsquos Representations and Warranties Acknowledging that the Government isrelying on such representations and warranties VBNC and Inco jointly and severallyrepresent and warrant to the Government that

211 each is a corporation which has been duly incorporated or organized as applicableunder the laws of its jurisdiction of incorporation or organization as applicable andis validly existing under such laws

212 Inco is extra-provincially registered in the Province

213 each has all necessary corporate power authority and capacity

2131 to cause the design engineering and construction of and to operateand maintain all parts of the Project and

2132 to enter into this Agreement and the Instruments and to perform itsrespective obligations herein and therein

214 the execution and delivery of this Agreement and each of the Instruments and theconsummation of the transactions contemplated herein and therein by each ofthem have been duly authorized by all necessary corporate action on the part ofeach of them

215 neither is a party to bound or affected by or subject to any indenture mortgagelease agreement instrument charter or by-law provision which with or without thegiving of notice or the lapse of time or both would be violated contravened orbreached by or under which default would occur as a result of the executiondelivery or performance of this Agreement or any of the Instruments or theconsummation of any of the transactions provided for in any of them

216 neither is bound or affected by or subject to any Applicable Law which with orwithout the giving of notice or the lapse of time or both would be violatedcontravened or breached by or under which default would occur as a result of theexecution delivery or performance of this Agreement or any of the Instruments orthe consummation of any of the transactions provided for in any of them

217 no approval authorization consent permit or other action by or filing with anyGovernment Entity is required in connection with the execution and delivery of thisAgreement or any of the Instruments and the performance of their respectiveobligations hereunder or thereunder except as otherwise stated herein

218 there is no suit action litigation arbitration proceeding or proceeding by aGovernmental Entity including appeals and applications for review in progresspending or to the Knowledge of either of them threatened against or involving

12

either of them or any judgment decree injunction or order of any court or arbitratorwhich could adversely affect their capacity or power to execute and deliver thisAgreement or any of the Instruments or to consummate the transactionscontemplated herein or therein or which could materially adversely affect theirrespective assets financial condition or future prospects

219 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of each of them enforceable against them inaccordance with their respective terms except as limited by (a) applicablebankruptcy laws or laws affecting the enforcement of creditorsrsquo rights generally and(b) the general principles of equity

2110 all references to estimates made by Inco and VBNC in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic andrelated benefits and costs of facilities are made as of the date of this Agreementhave been determined by them based upon information available at the date of thisAgreement and have been estimated by each of them bona fide and reasonablyand neither of them has any reason to believe that any such estimate isunreasonable or unfounded at the date of this Agreement and

2111 VBNC is a wholly owned subsidiary of Inco and to the Knowledge of the Proponentno Person individually or with any other Person or Persons currently Controls Inco

22 Government Acknowledgments The Government acknowledges that (a) none of VBNCInco or any Person for whom either of them may be responsible in law have made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments and (b) the Proponent shall use the most efficient and cost effective miningtechniques including state of the art automated mining technologies aimed at loweringoperating costs and extending the life of the Project

23 Governmentrsquos Representations and Warranties Acknowledging that the Proponent isrelying on such representations and warranties the Government represents and warrantsto the Proponent that

231 the execution and delivery of this Agreement and each of the Instruments and theconsummation by the Government of the transactions contemplated herein andtherein have been duly authorized by all necessary Government action

232 it is not a party to bound or affected by or subject to any indenture agreement orinstrument which with or without the giving of notice or the lapse of time or bothwould be violated contravened or breached by or under which default would occuras a result of the execution delivery or performance of this Agreement or any ofthe Instruments or the consummation of any of the transactions provided for in anyof them and

13

233 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of it enforceable against it in accordance with itsterms except as they may be limited by the general principles of equity

24 Proponent Acknowledgements Each of Inco and VBNC acknowledges that neither theGovernment nor any Person for whom it may be responsible in law has made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments

ARTICLE 3DESCRIPTION OF THE PROJECT AND RELATED FACILITIES

31 The Project The ldquoProjectrdquo will comprise collectively the Underground ExplorationProgram the Mine the Concentrator Plant the R amp D Program the Demonstration Plantthe Processing Plant and if applicable the Concentrator Plant expansion referred to inSection 45 The Processing Plant will be capable of processing concentrate andintermediate feeds containing nickel from other sources world wide which will give theProcessing Plant the capability of operating well beyond the life of the Mine

32 Capital Investment The Proponent estimates that the aggregate capital investment in theProject and related facilities will be $29 billion over the estimated 30-year life of the Projectinclusive of sustaining capital expenditures

33 Employment The Proponent estimates that

331 the construction phase of the Mine and Concentrator Plant will create approximately1700 person-years of employment in the Province the construction phase of theHydromet Plant will create approximately 3000 person-years of employment in theProvince and the construction phase of the Matte Plant will create approximately2500 person-years of employment in the Province

332 during the various operating phases the Project will create the followingemployment levels in the Province Mine and Concentrator Plant - 400 people R ampD Program - 200 people Underground Exploration Program - 85 people HydrometPlant - 400 people Matte Plant - 350 people

333 over the estimated 30-year life of the Project total employment benefits from theProject in the Province will be 76000 direct and indirect person-years and

334 gross domestic product impact to the Province with respect to the Project will be$11 billion

34 Innovation Centre The Proponent shall spend $10 million on and provide an endowmentof $1 million per year over a ten-year period to cover operational costs for an IncoInnovation Centre (the ldquoInnovation Centrerdquo) at St Johnrsquos in conjunction with theUniversity pursuant to the University Agreement The focus of the Innovation Centre willbe on education and research in mineral exploration mining and metallurgical processing

14

The Innovation Centre will provide world-class education research and training related tothe mining industry to 50-60 students per year to be engaged in Bachelors Masters andDoctorate level programs The Proponent shall commence work on the Innovation Centrein 2002 with target completion in 2004

35 R amp D Program The Proponent shall undertake a comprehensive research anddevelopment program intended to establish the commercial technical and economicfeasibility of hydrometallurgical process technology to process the Nickel Concentrate (theldquoR amp D Programrdquo) The R amp D Program will include the evaluation of chemical engineeringsub-processes for the hydrometallurgical process the mechanical equipment design for theDemonstration Plant and the construction and operation of the Demonstration Plant

ARTICLE 4PROPONENTrsquoS UNDERTAKINGS

41 Infrastructure and Initial Work Commencing in 2002 the Proponent shall

411 at the Mine site undertake site mobilization including the establishment of aconstruction camp initiation of work on temporary port facilities and construction ofaccess roads

412 at Argentia undertake leasing or other arrangements for occupancy and sitepreparation including demolition fencing security and signage

413 undertake the construction of a warehouse building and establish staging areas andlay down areas in support of Labrador activities

414 establish a project office at Argentia and information centres at St Johnrsquos andHappy Valley-Goose Bay and

415 complete site selection and commence architectural design and engineering workfor the Innovation Centre

The Proponent estimates that this infrastructure and initial work program will employ inaggregate approximately 250 persons and the Proponent shall spend not less than $55million on this program in the Province on or before 31 March 2003

42 R amp D Program421 The Proponent shall undertake the R amp D Program and as a part thereof shall

construct the Demonstration Plant at a cost which the Proponent estimates will be$130 million The Proponent shall commence the site development for theDemonstration Plant in 2002 and continue such development into 2003 Theinitiatives in support of these activities will include the operation of an informationcentre preparation of environmental baseline studies and continued upgrading orreplacement of utility services required for the Demonstration Plant maintainingstaging areas and cleanup and civil works at Argentia consisting of demolition

15

grading and earth works construction The Proponent has scheduled thecompletion of the engineering design and construction of the Demonstration Plantso that the Demonstration Plant Completion Date shall have occurred on or before31 December 2006

422 The Proponent shall provide to the Government within 15 days of the end of eachcalendar quarter commencing with the calendar quarter ending 31 December 2002a detailed progress report on the results during such calendar quarter of the R amp DProgram which report will detail costs incurred to the end of such calendar quarterand contain sufficient documentation and information to enable the Government toevaluate the Proponentrsquos progress with respect to the R amp D Program and thedevelopment of hydrometallurgical process technology for processing the NickelConcentrate If requested by the Government upon reasonable notice theProponent shall provide the Government and its representatives and advisorsaccess at reasonable times to the facilities where the R amp D Program is beingconducted and make appropriate personnel of the Proponent available to respondto any requests for additional information

423 In addition to the utilization of the Demonstration Plant for the purposes ofdeveloping hydrometallurgical process technology for processing the NickelConcentrate the Proponent shall explore business opportunities for the ongoingutilization of the Demonstration Plant for the evaluation of other concentrates andintermediate feeds after completion of the R amp D Program

43 Mine and Concentrator Plant

431 The Proponent shall cause the development of the Mine and the designengineering and construction of a millconcentrator plant which will be capable ofprocessing 6000 tonnes of ore per day (the ldquoConcentrator Plantrdquo) TheConcentrator Plant will produce the Copper Concentrate and the NickelConcentrate The Proponent has scheduled to begin the development of the Mineand the construction of the Concentrator Plant in 2003 and estimates that the Mineand Concentrator Plant will require three years to construct at a cost ofapproximately $710 million

432 The Proponent

4321 shall not ship any Nickel Concentrate out of the Province aspermitted by the Nickel Concentrate Exemption Order before theDemonstration Plant Completion Date and

4322 shall ship Nickel Concentrate from the Concentrator Plant to theDemonstration Plant in sufficient quantities for the continuedoperation of the Demonstration Plant during the R amp D Programfollowing successful start up of the Concentrator Plant

16

44 Underground Exploration Program The Proponent shall undertake an undergroundexploration program which it estimates will cost $95 million and employ approximately 85people This program is intended to identify Sufficient Reserves at depth under the LeasedLands and if there are such Sufficient Reserves the Proponent shall develop a mining planfor the economic extraction of such Reserves The initial phase of this undergroundexploration program will be an advanced surface program which the Proponent estimateswill cost $20 million to commence in 2002 with completion targeted for 2006 Subsequentunderground exploration will be scheduled to ensure that Sufficient Reserves under theLeased Lands are available to sustain full operation of the Concentrator Plant during thetransition from open-pit operations to full underground mining operations if applicable

45 Underground Mine Development and Concentrator Plant Expansion If theunderground exploration program described in Section 44 identifies Sufficient Reservesas contemplated by Section 44 the Proponent shall commence the development of anunderground mine or mines on the Leased Lands and an expansion of the ConcentratorPlant in order to supply sufficient Nickel Concentrate to maintain the operation of theProcessing Plant at full capacity The Proponent estimates that this program will costapproximately $750 million and employ an aggregate of 800 people

46 Processing Plant

461 In order to maximize long-term benefits for the Province and the people of theProvince the Proponent shall use its best efforts through the R amp D Program todevelop a technically and economically feasible hydrometallurgical processtechnology for processing the Nickel Concentrate in the Province If suchtechnology is successfully developed the Proponent shall cause the designengineering and construction of and operate and maintain a hydrometallurgicalprocessing plant with a design capacity to produce annually approximately 50000tonnes of Finished Nickel Product together with associated cobalt and copperproducts (the ldquoHydromet Plantrdquo) The Proponent estimates that the HydrometPlant will have a capital cost of approximately $800 million and during the three-yearconstruction period will generate approximately 3000 person-years of employmentThe Proponent estimates that the Hydromet Plant will employ approximately 400people during operations

462 If pursuant to Section 47 it is determined that a Hydromet Plant is not technicallyor economically feasible the Proponent shall construct a commercialhydrometallurgical nickel-matte processing facility or other similar facilityincorporating a proven state of the art technology to produce Finished NickelProduct (the ldquoMatte Plantrdquo) The Matte Plant will have a design capacity toproduce annually approximately 50000 tonnes of Finished Nickel Product togetherwith associated cobalt and copper products The Proponent estimates the MattePlant will have a capital cost of approximately $670 million and during the estimatedthree-year construction period will generate approximately 2500 person-years ofemployment The Proponent estimates that the Matte Plant will employapproximately 350 people during operations

17

463 The Proponent has represented to the Government that its objective is to operatethe Processing Plant well beyond the life of the Mine Accordingly the Proponentundertakes to explore technically and economically feasible opportunities for theexpansion of the Processing Plant and to secure opportunities to supply theProcessing Plant with feed from world wide sources to fully utilize the Proponentrsquoslarge capital investment in the Processing Plant

464 The Proponent shall establish the Processing Plant at Argentia unlessenvironmental conditions at Argentia would make it not economically feasible toestablish the Processing Plant at Argentia and in such circumstances theProponent shall locate the Processing Plant at another site in the Province

47 Selection of Applicable Processing Plant

471 The Proponent shall use commercially reasonable efforts to deliver as soon aspossible but in any event shall deliver on or before 15 November 2008 theDecision and the Decision Materials to the Government and the Experts

472 If the Proponent has not on or before 30 June 2008 delivered to the Governmentthe Decision and the Decision Materials

4721 it shall forthwith meet with the Government to review on aconfidential basis the status of its efforts towards being able todeliver the Decision

4722 thereafter it shall promptly update the Government from time to timeon its efforts to be able to deliver the Decision and the outstandingissues relevant to whether the Decision will be to build the HydrometPlant or the Matte Plant and

4723 to the extent that the Proponent is not by 30 June 2008 in aposition to deliver the Decision which confirms that the Proponentintends to proceed with the construction of the Hydromet Plant theProponent shall use commercially reasonable efforts to developImplementation Plans for both a Hydromet Plant and a Matte Plantso that it will be able to deliver the Implementation Plan for theHydromet Plant or Matte Plant as applicable on or before 31December 2008

473 The Government may at any time after the earlier of the Decision Date or 30 June2008 give the Proponent notice in writing that it wishes to proceed with theappointment of the Experts When the Government gives notice to the Proponentrequiring the appointment of the Experts the Government and the Proponent shallthen forthwith agree upon the appointment of the Experts If the Government andthe Proponent cannot so agree within 15 days after the giving by the Governmentof such notice the appointment of the Experts shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter to

18

the Joint Committee or the Mediation Procedure referred to therein If the Expertsare appointed prior to the delivery by the Proponent of the Decision and theDecision Materials the Proponent shall provide to the Government and the Expertssuch data and information as is then available that will assist the Experts in theirreview under Section 475 The Proponent and the Government shall each pay50 of the fees and expenses of the Experts Before receiving the Decision theDecision Materials or any other information or data from the Proponent under thisAgreement the Experts shall first execute a confidentiality agreement containingsubstantially the same terms as provided for in Article 9

474 If in the Decision the Proponent confirms it intends to construct the Hydromet Plantthe Proponent shall deliver the Implementation Plan for the Hydromet Plant on orbefore 31 December 2008 and thereafter shall proceed diligently to complete thedetailed engineering for and construction of the Hydromet Plant in accordance withsuch Implementation Plan so that it shall be completed on or before 31 December2011

475 If in the Decision the Proponent confirms it intends to construct the Matte Plant theGovernment shall on or before the seventh Business Days after the Decision Datedeliver to the Proponent and the Experts a notice in writing (in this Section 475 theldquoGovernment Decisionrdquo) that the Government either (a) accepts the Decision tobuild the Matte Plant or (b) intends to refer such Decision to the Experts for reviewIf in the Government Decision the Government states it intends to refer theDecision to the Experts the Proponent shall promptly deliver to the Experts theDecision and the Decision Materials if it has not previously done so The Expertswill review the Decision the Decision Materials and any other information or datawhich the Experts deem appropriate or which the Government requests them toconsider and render their report (the ldquoExpertsrsquo Reportrdquo) within 30 days of the dateon which the Government delivers the Government Decision If the Governmentrequests the Experts to consider any other information or data in addition to theDecision Materials it shall provide to the Experts and the Proponent copies of suchrequest and any such information and data at the time it delivers the GovernmentDecision and the Proponent shall have the right within five Business Days tocomment on or respond to such information and data to the Experts with a copy tothe Government The Expertsrsquo Report shall determine whether in the opinion of theExperts it would be technically and economically feasible for the Proponent to buildthe Hydromet Plant together with reasons for such determination If the ExpertsrsquoReport determines that it is technically and economically feasible for the Proponentto build the Hydromet Plant the Proponent shall on or before 31 December 2008deliver to the Government an Implementation Plan for the Hydromet Plant andthereafter shall proceed diligently to complete the detailed engineering for andconstruction of the Hydromet Plant so that it shall be completed on or before 31December 2011 If the Expertsrsquo Report confirms that it would not be technically oreconomically feasible to build the Hydromet Plant the Proponent shall on or before31 December 2008 deliver to the Government an Implementation Plan for the MattePlant and thereafter shall proceed diligently to complete the detailed engineering forand construction of the Matte Plant in accordance with such Implementation Plan

19

so that it shall be completed on or before 31 December 2011 Subject to Section477 the Expertsrsquo Report shall be final and binding on the Government and theProponent

476 The determination as to whether the Proponent is proceeding diligently with thecompletion of the engineering work for and the construction of the Processing Plantfor completion on or before 31 December 2011 as required by Section 474 or475 shall be made annually on the anniversary date of the Decision Date by anEngineer who shall certify to both the Government and the Proponent as to whetherthe actual engineering work for and construction of the Processing Plant is onschedule with the applicable Implementation Plan

477 If there is a manifest error in the Expertsrsquo Report which if corrected would result ina different determination by the Experts the Expertsrsquo Report shall be referred backto the Experts for the purpose of forthwith correcting such manifest error changingthe determination in the Expertsrsquo Report and submitting a revised Expertsrsquo Reportto the Proponent and the Government

478 Where an Engineer is required to be appointed from time to time for the purposesof Section 476 or for determining the Commercial Production Date theConstruction Completion Date or the Demonstration Plant Completion Date theGovernment and the Proponent shall forthwith agree upon the appointment of suchEngineer If the Government and the Proponent cannot so agree within 15 daysof the Government or the Proponent giving the other notice requiring appointmentof an Engineer the appointment of the Engineer shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter tothe Joint Committee or the Mediation Procedure referred to therein The Proponentand the Government shall each pay 50 of the fees and expenses of any Engineer

48 Innovation Centre The Proponent shall enter into an agreement (the ldquoUniversityAgreementrdquo) with the University in form and content satisfactory to the Government on orbefore the Closing Date The University Agreement shall contain among other things theProponentrsquos commitments and intentions set out in Section 34

49 Industrial and Employment Benefits The Proponent shall execute the IEBA to beeffective 7 October 2002

410 IBAs The Proponent represents and warrants to the Government that it has entered intothe IBAs

411 VBN Undertaking Order The Proponent agrees to abide by and implement the terms andconditions contained in the VBN Undertaking Order

412 Corporate Income Tax The Proponent shall use its best efforts to negotiate and executewith the Government an agreement covering the matters set forth in this Section 412 andSection 68 (the ldquoTax Agreementrdquo) as soon as possible but in any event on or before theClosing Date The Tax Agreement will contain provisions which to the extent permitted by

20

law will result in an allocation to the Province for the purposes of Part IV of the FederalIncome Tax Regulations of the Proponentrsquos gross revenues from the sale or disposition ofnickel copper and cobalt products whether in intermediate or final form from the Project

413 Return of Concentrate

4131 In consideration of the Government granting the Exemption Orders the Proponentguarantees that it shall prior to Cessation of Mining Operations commenceshipping into the Province Replacement Concentrate for processing into FinishedNickel Product at the Processing Plant Such Replacement Concentrate shall beshipped to and processed by the Processing Plant in sufficient quantities to permitthe Processing Plant to operate continuously at a rate that will produce not less than25000 tonnes of Finished Nickel Product annually and such shipments shallcontinue at least until such time as the contained nickel and cobalt in theReplacement Concentrate shall have equalled the total quantity of contained nickeland cobalt in the Nickel Concentrate shipped out of the Province under the termsof the Nickel Concentrate Exemption Order and otherwise than under the provisionsof an Exemption Order

4132 The Proponent shall undertake the Assaying Procedures set out in Schedule 4132with respect to the Nickel Concentrate and the Replacement Concentrate

4133 The Proponent acknowledges that if it does not perform its contractual obligationsunder Section 4131 (a) the Province and the economy of the Province will suffersubstantial loss (b) the Government would not be properly compensated for its lossby monetary damages which therefore will not be considered an adequate remedyfor such breach and (c) the Government may at any time subsequent to suchbreach commence an action against the Proponent for any one or more of thefollowing remedies whether claimed as primary or secondary alternative relief

41331 an order for specific performance

41332 appropriate injunctive relief whether mandatory or prohibitory and

41333 monetary damages including for consequential and economic lossreflecting the substantial losses suffered by the Government and theeconomy of the Province as a result of such breach

The Proponent expressly waives any right to claim or argue that the Governmentcannot claim the relief set out in Sections 41331 41332 and 41333 in any suitcommenced by the Government against the Proponent for the Proponentrsquos failureto perform its obligations under Section 4131

21

414 Copper Processing in the Province

4141 The Government acknowledges that at the date hereof the quantity of coppercurrently identified in the mineralized zones on or under the Leased Lands togetherwith identified copper deposits elsewhere in the Province are not sufficient to justifythe construction and operation of a copper processing facility in the Province on aneconomically feasible basis

4142 If at any time in the future

41421 Sufficient Reserves of copper are discovered by the Proponent inthe Province (including on or under the Leased Lands) to makeeconomic the processing on a commercial basis of the CopperConcentrate or any other product containing the principal quantitiesof copper extracted from the Leased Lands into Finished CopperProduct in the Province the Proponent shall process such CopperConcentrate into Finished Copper Product in the Province or

41422 a third party establishes a facility in the Province for the commercialprocessing of copper concentrate the Proponent shall offer for saleits then available Copper Concentrate from the Concentrator Plantto such third party for processing in such facility on then prevailingcommercial terms and conditions subject to the Proponentrsquos thenexisting contractual obligations

4143 In the circumstances set out in Section 4142 the Proponent acknowledges thatthe Government has the right pursuant to Section 311(3) of the Mineral Act torescind the Copper Concentrate Exemption Order

415 Parties in Contract Change of Control and Assignment

4151 The Proponent covenants with the Government that without the prior Approval ofthe Government it

41511 shall not take or threaten or purport to take any action whether byway of contract corporate reorganization or arrangement orotherwise that would have the effect of transferring assigningsubletting or otherwise divesting itself of a majority interest in orControl of (a) the Project or (b) all or substantially all of theProponentsrsquo rights under this Agreement the Instruments theExemption Orders the Primary Production Order and subject toApplicable Laws the Mining Lease and

41512 shall not take or threaten or purport to take any action which directlyor indirectly results in a change of Control of VBNC to a party otherthan Inco

22

4152 Wherever pursuant to Section 4151 the Government is requested to grant itsApproval such Approval may be withheld by the Government in its sole andabsolute discretion for any reason whatsoever

4153 For bona fide tax or other corporate reasons the Proponent may without theApproval of the Government transfer assign sublet or otherwise divest to anAffiliate a majority interest in or Control of (a) the Project or (b) all or substantiallyall of the Proponentrsquos rights under this Agreement the Instruments the ExemptionOrders the Primary Production Order and subject to Applicable Laws the MiningLease Notwithstanding Section 111 no such transfer assignment sublet ordivestiture shall relieve the Proponent of its obligations hereunder or thereunder

4154 The Proponent shall promptly give written notice to the Government of any actionit takes under Section 4151 or 4153

416 Members of House of Assembly The Proponent undertakes to (a) ensure that nomember of the House of Assembly of the Province shall have any interest in thisAgreement and (b) use its best efforts to ensure that no Member of the House of Assemblyof the Province receives any benefit to arise herefrom or from any report study review oranalysis required to be made or submitted pursuant to this Agreement

417 Mining Lease VBNC shall execute the Mining Lease effective 30 September 2002

418 Proponentrsquos Financing The Proponent shall use best efforts to obtain the financingcontemplated by Section 1024 including without limitation the preparation of all feasibilitystudies required in order to obtain such financing

ARTICLE 5FORCE MAJEURE

51 Events of Force Majeure For the purposes of this Article 5 and subject to the exceptionsand qualifications below each of the following shall be an ldquoEvent of Force Majeurerdquo

511 acts of God or natural disasters adverse weather conditions or other similaroccurrences

512 acts of war (declared or undeclared) or conditions arising out of or attributable toany such acts of war revolutions insurrections civil strife formal or informalhostilities mob violence riots and similar disturbances blockades or any otherunlawful acts against public order or authority

513 strikes lockouts work stoppages or labour disturbances unless directly andproximately caused by an unlawful act or omission of the Proponent

514 (a) delay or failure by suppliers of labour transportation materials machineryequipment parts supplies utilities or services (b) contractorsrsquo or sub-contractorsrsquoshortage of or inability to obtain labour transportation materials machinery

23

equipment parts supplies utilities or services or (c) breakdown of equipmentmachinery or facilities unless any of the foregoing are directly and proximatelycaused by or result from an unlawful act or omission of the Proponent

515 accidents and

516 solely in respect of the Proponentrsquos obligations in Section 4131 a ProcessingRelated Reason provided that a Processing Related Reason shall not be an Eventof Force Majeure at any time after three years following Cessation of MiningOperations

52 Obligation to Perform In order to obtain relief for an Event of Force Majeure theProponent shall (a) use commercially reasonable efforts to (i) prevent the occurrence of(ii) perform its obligations in the face of and (iii) terminate any such Event of Force Majeure(other than the events described in Section 513 relied upon) and (b) give the Governmentwritten notice of the facts which the Proponent claims constitute an Event of Force Majeureas soon as reasonably practical upon becoming aware of their existence

53 Force Majeure Relief If the Proponent establishes that it is prevented from performingany of its obligations under this Agreement the Nickel Concentrate Exemption Order or theMatte Plant Exemption Order by reason of an Event of Force Majeure such obligations willbe suspended for the period of the existence of such Event of Force Majeure and theProponent will be entitled to an extension of all dates referred to in this Agreement theNickel Concentrate Exemption Order and the Matte Plant Exemption Order for a reasonableperiod of time that reflects (a) the period during which the Proponent is prevented fromperforming its obligations by reason of the Event of Force Majeure and (b) the impact thatsuch Event of Force Majeure has on the Project including without limitation shippingschedules and construction schedules that have been delayed by reason of such Event ofForce Majeure Even though the Proponentrsquos obligations will be suspended for suchreasonable period of time when the applicable Event of Force Majeure is no longerpreventing the Proponent from performing its obligations the Proponent will again beobliged to perform such obligations

ARTICLE 6GOVERNMENT UNDERTAKINGS

61 Aboriginal Agreements The Government represents and warrants that it has entered into(a) interim measures agreements with the Innu Nation and the LIA that include the VoiseyrsquosBay chapter of the respective land claims agreements and (b) the EMA

62 Electrical Rights and Provision of Power The Government shall cause Newfoundlandand Labrador Hydro or its successors to

621 provide to the Proponent electrical power for the Processing Plant at the lower of(a) the island industrial electrical rate or (b) any lower electrical rate that may be

24

offered from time to time by Newfoundland and Labrador Hydro or its successorsto its industrial customers in comparable circumstances and

622 ensure that Newfoundland and Labrador Hydro or its successors can supply to theProponent sufficient electrical power for the operation of the Processing Plant

63 Mining Lease The Government shall issue the Mining Lease effective 30 September2002

64 Exemption Orders The Government shall issue the Exemption Orders effective 30September 2002

65 Issue of Authorizations

651 Where the Proponent has submitted all information and data in accordance withApplicable Laws and required by the Government for it to issue or grant any permitauthorization order or other approval necessary for the Proponent to implement theProject or any part thereof (in this Section 65 the ldquoAuthorization(s)rdquo) theGovernment shall issue or grant any such Authorization on a timely basis

652 If the Government does not issue or grant an Authorization on a timely basis

6521 the Government shall grant the Proponent an extension of all datesreferred to in this Agreement the Nickel Concentrate ExemptionOrder and the Matte Plant Exemption Order for a reasonable periodof time that reflects (a) the period of delay in granting suchAuthorization and (b) the impact that such delay has on the Projectincluding without limitation shipping schedules and constructionschedules that will have been delayed by Governmentrsquos failure toissue or grant such Authorization on a timely basis and

6522 if as a result of the Governmentrsquos failure to issue or grant anAuthorization on a timely basis the completion date for theProcessing Plant is delayed and provided that the Proponentestablishes that it is likely it will ship out of the Province the totalvolume of contained nickel in the Nickel Concentrate permittedunder the Nickel Concentrate Exemption Order prior to the revisedcompletion date of the Processing Plant the Government shallamend the Nickel Concentrate Exemption Order to allow anadditional quantity of contained nickel in Nickel Concentrate to beshipped out of the Province which quantity will reflect thereasonable period of time of the extension referred to in Section6521

653 The Government shall not be responsible for any delays nor shall the Proponent beentitled to any relief under this Section 65 unless such delays are directly and

25

proximately caused by or result from an act or omission of the Government or adepartment regulatory body board agent or employee of the Government

66 Legislative Framework

661 The Government represents to the Proponent (and acknowledges that theProponent is relying upon such representation) that it shall maintain substantiallythe Legislative Framework for the duration of the Project subject to legislativeamendments contemplated in this Agreement and legislation of general applicationThe Government shall maintain the Legislative Framework consistent with thisAgreement subject to Governmental responsibilities including the responsibility forensuring proper management of the Provincersquos resources the protection andmaintenance of public health and safety and the protection of the environment TheGovernment acknowledges that this Agreement is consistent with current public lawand Governmental responsibilities

662 The Proponent represents to the Government (and the Proponent acknowledgesthat the Government in consideration of agreeing to maintain the LegislativeFramework has relied upon such representation) that the Proponent shall performits obligations set out in this Agreement the Instruments the Exemption Orders thePrimary Production Order and the Mining Lease

67 Special Project Orders The Government shall issue a Special Project Order or SpecialProject Orders under Section 70 of the Labour Relations Act (Newfoundland and Labrador)to ensure a stable labour relations environment throughout the construction phases of theProject This Order or these Orders shall include without limitation provisions such as nostrikes and lock-outs and the ability to designate the union organization and employerrsquosrepresentative for the purposes of collective bargaining

68 Corporate Income Tax The Government shall use best efforts to negotiate and executewith the Proponent the Tax Agreement as soon as possible but in any event on or beforethe Closing Date The Tax Agreement will contain provisions

681 whereby the Government will provide that the rate of the Provincersquos corporateincome tax applicable to the Proponent will be the lower of the ldquoall provincesaveragerdquo or the Provincersquos income tax rate

682 which to the extent permitted by law will result in an allocation to the Province forthe purposes of Part IV of the Federal Income Tax Regulations of the Proponentrsquosgross revenues from the sale or disposition of nickel copper and cobalt productswhether in intermediate or final form from the Project and

683 whereby the Government will undertake to indemnify the Proponent for any doubletaxation resulting from the allocation referred to in Section 682

26

69 Mining Tax Act At the next session of the House of Assembly of the Province theGovernment shall introduce and support legislation to amend the Mining Tax Act inaccordance with the Mining Tax Act Amendments

610 Primary Production Order The Government shall issue the Primary Production Ordereffective 30 September 2002

611 Industrial and Employment Benefits The Government shall execute the IEBA to beeffective 7 October 2002

ARTICLE 7PROPONENTrsquoS DEFAULT

71 Notice of an Event of Default Upon the happening of an Event of Default theGovernment may deliver to the Proponent a notice of default setting forth in reasonabledetail the nature of the Event of Default and if the Government intends to exercise its rightsunder Section 72 indicating the date upon which the Government intends to exercise suchrights

72 Termination Subject to an Event of Force Majeure or the provisions of Section 652where an Event of Default has occurred and in each of such cases and so often as anEvent of Default happens after giving the notice provided for in Section 71 theGovernment may at any time in its sole discretion do any one or more of the following (a)terminate this Agreement (b) terminate the Mining Lease (c) rescind the ExemptionOrders and (d) take action for any remedy at law or in equity

73 Release by Proponent and Proponentrsquos Indemnity The Proponent hereby releases anddischarges and agrees to indemnify and save harmless the Government from every claimof every nature whether in damages (including consequential or indirect damages) or notwhich may arise or be suffered by the Proponent or any Person claiming through or underthe Proponent by reason of or as a result of anything done by the Government or anysuccessor or assign claiming through or under the Government under the provisions ofSection 72

ARTICLE 8DISPUTE RESOLUTION

81 Dispute Resolution Any dispute or difference between the parties hereto arising

811 as to whether a Processing Related Reason exists

27

812 as to the selection of an Engineer or firm of Engineers the Experts or an umpireunder Schedule 4132

813 under Section 45 as to whether the Underground Exploration Program hasidentified Sufficient Reserves under the Leased Lands

814 as to the determination of the date of Cessation of Mining Operations

815 as to whether commercial processing is economic as contemplated by Section41421

816 as to then prevailing commercial terms and conditions as contemplated by Section41422

817 under Section 51 as to whether an Event of Force Majeure exists

818 under Section 53 as to whether an Event of Force Majeure prevents the Proponentfrom performing any of its obligations under this Agreement

819 under Section 53 or Section 652 as to the reasonable period of time for theextension of the dates of performance of the Proponentrsquos obligations

8110 under Section 6522 the additional quantity of contained nickel in NickelConcentrate to be shipped out of the Province or

8111 as to whether the Proponent is complying with its obligations under Section 52

shall in each case be resolved in the manner provided for in Schedule 81

ARTICLE 9CONFIDENTIAL INFORMATION

91 Confidential Information The Government

911 acknowledges that information (the Information) supplied to it by or on behalf ofthe Proponent pursuant to or in connection with this Agreement or the Instrumentsincluding without limitation information provided pursuant to or in connection withSections 422 471 472 475 52 and 81 is of a financial commercialscientific or technical nature and is supplied in confidence and

912 subject to Sections 93 and 94 shall keep the Information confidential and shallnot use or disclose the Information to any third party without the Approval of theProponent and in doing so shall use the same care as it applies to avoid disclosureor dissemination of its own confidential information to prevent the disclosure ofInformation to any third party

28

92 Effect of Disclosure The Government acknowledges that disclosure of the Informationcontrary to the provisions of this Article 9 could reasonably be expected to921 harm significantly the competitive position or interfere significantly with the

negotiating position of the Proponent

922 result in similar information no longer being supplied by or on behalf of theProponent to the Government when it is in the public interest that similar informationcontinued to be supplied and

923 result in material financial loss to the Proponent or result in material financial gainto competitors of the Proponent and other Persons

93 Approval The Government may disclose Information if Approved by the Proponent

94 Permitted Disclosure of Information The provisions of this Article 9 shall not apply toInformation which

941 is now or which hereafter through no act or omission of the Government becomesgenerally known or available to the public without breach of this Agreement

942 after disclosure to the Government becomes generally known or available to thepublic by publication or otherwise through no act or omission of the Government

943 the Government can establish was in its possession at the time of disclosure andwas not previously acquired directly or indirectly from the Proponent

944 is disclosed to the Government by a third party on a non-confidential basis whichparty to the Knowledge of the Government is not prohibited from disclosing suchInformation to the Government by any legal contractual or fiduciary obligation towhich such party is bound or subject or

945 is required to be disclosed by law

95 Remedy Without limiting the Proponentrsquos rights and recourses for a breach by theGovernment of its obligations in this Article 9

951 the Government acknowledges that the Proponent shall suffer irreparable harm ifthe Government discloses Information contrary to the provisions of this Article 9and unless prohibited by law the Proponent shall be entitled to an injunction orinjunctions to prevent such disclosure

952 the Government shall be liable for and shall indemnify and save the Proponentharmless from and against costs losses damages and claims that it may sufferpay incur or be liable for as a result of any breach by the Government of thisArticle 9 and

29

953 in the event there are any measures which the Government can take to ensurecompliance with the provisions of Section 912 the Proponent shall be relieved ofthe obligation to provide information of the type with respect to which the breachoccurred until the Government has taken such measures

ARTICLE 10CONDITIONS CLOSING AND TERMINATION

101 Conditions for the Benefit of the Government Subject to Section 1061 the obligationsof the Government in this Agreement are subject to the satisfaction of or compliance withat or prior to the Time of Closing each of the following conditions

1011 the representations and warranties of the Proponent made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Proponent at or prior to the Time of Closing shallhave been performed the Proponent shall not be in breach of any agreement onits part contained in this Agreement at the Time of Closing and the Governmentshall have received a certificate confirming the foregoing signed for and on behalfof the Proponent in form and content satisfactory to the Government

1012 the University Agreement shall have been executed by the Proponent and a copythereof shall have been delivered to the Government

1013 the Tax Agreement shall have been executed by the Proponent and delivered to theGovernment and

1014 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

102 Conditions for the Benefit of the Proponent Subject to Section 1061 the obligationsof the Proponent in this Agreement are subject to the satisfaction of or compliance with ator prior to the Time of Closing each of the following conditions

1021 the representations and warranties of the Government made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Government at or prior to the Time of Closingshall have been performed the Government shall not be in breach of anyagreement on its part contained in this Agreement at the Time of Closing and theProponent shall have received a certificate confirming the foregoing signed for andon behalf of the Government in form and content satisfactory to the Proponent

30

1022 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

1023 the Tax Agreement shall have been executed by the Government and delivered bythe Government to the Proponent

1024 the Proponent shall have secured financing on reasonable commercial terms toenable it to develop the Mine and construct the Concentrator Plant and

1025 the Mining Tax Act Amendments shall have become law

103 Closing Notice If the Proponent (a) wishes to waive the condition set out in Section1024 or (b) has obtained the financing contemplated by Section 1024 it shall forthwithdeliver to the Government a notice (the ldquoClosing Noticerdquo) confirming that it has eitherwaived the condition set out in Section 1024 or that such condition has been satisfied

104 Deliveries and Closing1041 The Closing shall take place at the Time of Closing on the Closing Date at a

location to be agreed by the parties

1042 At the Closing

10421 the Proponent shall deliver to the Government the certificatecontemplated by Section 1011 and if not previously delivered theexecuted University Agreement and the executed Tax Agreementand

10422 the Government shall deliver to the Proponent the certificatecontemplated by Section 1021 and if not previously delivered theexecuted Tax Agreement

105 Termination This Agreement and the IBEA may be terminated at any time prior to theTime of Closing1051 by agreement of the Government and the Proponent

1052 by the Government if the conditions set out in Section 101 have not been satisfiedor waived by the Government or the Closing Notice has not been delivered to theGovernment on or before 31 March 2003 or

1053 by the Proponent if the conditions set out in Section 102 have not been satisfiedor waived by the Proponent (except the condition set out in Section 1024 in theevent the Proponent has delivered the Closing Notice)

106 Effect of Agreement and Termination

1061 Notwithstanding Section 1062 and subject to Section 1063 the Government andthe Proponent shall be bound by the provisions of Sections 41 421 422 410

31

411 412 415 416 417 418 61 63 64 65 66 67 68 69 610 and 611and Articles 5 8 9 and 11 effective as of and from the date of execution of thisAgreement

1062 Subject to Section 1061 the obligations of the Proponent and the Government inthis Agreement shall be effective as of and from the Time of Closing

1063 If this Agreement and the IEBA are terminated in accordance with the provisions ofSection 105 this Agreement and the IEBA shall thereafter become null and voidand have no effect and no party shall have any liability to the other except

10631 the obligations contained in Sections 41421 411 69 and Article9 hereof and

10632 the liability of a party in respect of its breach of this Agreement andthe IEBA prior to such termination

all of which shall survive such termination for a period of twelve months followingsuch termination

ARTICLE 11GENERAL MATTERS

111 Enurement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease shall be binding upon and shall enure to the benefitof the parties hereto the successors and assigns of the Government and the successorsand permitted assigns of the Proponent Any such assignment permitted by this Agreementshall become effective only when the assignee executes with the Government aninstrument whereby it agrees to be bound by and perform all of the Proponentrsquos obligationsunder this Agreement the Instruments the Exemption Orders the Primary ProductionOrder and the Mining Lease Subject to Section 4153 from and after the execution ofsuch instrument the assignor shall be relieved of and released from all its obligations underthis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease with effect from and after the date of execution of such instrument

112 Counterparts This Agreement and the other documents referred to herein andorotherwise required to complete the transactions contemplated hereby may be executed intwo or more counterparts including by facsimile each of which shall be deemed an originaland all of which together shall constitute one and the same instrument

113 Notices All notices requests demands and other communications hereunder shall bedeemed to have been duly given if in writing and either delivered personally sent byfacsimile transmission or by air courier service to the addresses designated below or suchother addresses as may be designated in writing by notice given hereunder and shall be

32

effective upon personal delivery or facsimile transmission thereof with proof of transmissionreceipt or upon delivery by air courier serviceIf to VBNC Voiseyrsquos Bay Nickel Company Limited

Suite 700 Baine Johnston Centre10 Fort William PlaceSt Johnrsquos NewfoundlandA1C 1K4Attention PresidentFacsimile (709) 758-8820

If to Inco Inco Limited145 King Street WestSuite 1500Toronto OntarioM5H 4B7Attention PresidentFacsimile (416) 361-7734

If to the Government Government of Newfoundland amp LabradorDepartment of Mines amp EnergyNatural Resources Building7th Floor 50 Elizabeth AvenueSt Johnrsquos NewfoundlandA1A 1W5Attention The MinisterFacsimile (709) 729-0059

114 Legal Fees In the event of any dispute or controversy between the Proponent on the onehand and the Government on the other hand relating to the interpretation of this Agreementor to the transactions contemplated herein the prevailing party shall be entitled to recoverfrom the other party reasonable legal fees and expenses incurred by the prevailing partySuch award shall include reasonable post judgment legal fees and costs

115 Payment of Fees and Expenses Each party hereto shall pay its own fees expenses anddisbursements incurred in connection with this Agreement and the transactionscontemplated hereby and all other costs and expenses incurred in its performance andcompliance with all conditions to be performed hereunder and thereunder

116 Time of Essence Time is of the essence of this Agreement

117 Further Assurances Each of the parties shall promptly do make execute deliver orcause to be done made executed or delivered all such further acts documents and thingsas the other parties hereto may reasonably require from time to time for the purpose ofgiving effect to this Agreement and the transactions contemplated hereby and shall usereasonable efforts and take all such steps as may be reasonably within its power toimplement to their full extent the provisions hereof and thereof

33

118 Public Notices No press release or other announcement concerning the transactionscontemplated by this Agreement shall be made either by the Proponent or the Governmentwithout the prior Approval of the other (such Approval not to be unreasonably withheld)provided however that the Proponent may without such Approval make such disclosureif the same is required by law or any stock exchange on which any of the securities of theProponent or any of its Affiliates are listed or by any securities commission or other similarregulatory authority having jurisdiction over the Proponent or any of its Affiliates and if suchdisclosure is required the Person making the disclosure shall use best efforts to give priororal or written notice to the Government and if such prior notice is not possible to givesuch notice immediately following the making of such disclosure Notwithstanding theforegoing the Proponent acknowledges that the Government will make this Agreement andthe Schedules hereto public

119 Independent Legal Advice Each of the parties acknowledges having obtained its ownindependent legal advice with respect to this Agreement and the transactions contemplatedhereby to the fullest extent deemed necessary by each party prior to its execution anddelivery Furthermore the parties acknowledge that neither acted under any duress innegotiating drafting and executing this Agreement the Instruments and any documentscontemplated hereby There shall be no presumption that any ambiguity in this Agreementthe Instruments and any documents contemplated hereby be resolved in favour of any ofthe parties

1110 Compliance with Laws Without limiting the generality of any other covenant herein theProponent shall at its own cost and expense comply with and shall use best efforts toensure that all Persons for whom the Proponent is at law responsible comply with allApplicable Laws in connection with the Project

1111 Entire Agreement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease set forth the entire agreement and all thecovenants promises assurances agreements representations conditions warrantiesstatements and understandings (collectively ldquoRepresentationsrdquo) between the partiesconcerning the subject matter hereof No Representations are made by the Governmentto the Proponent or by the Proponent to the Government except as expressly set out in thisAgreement the Instruments the Exemption Orders the Primary Production Order and theMining Lease For greater certainty the Statement of Principles between the Governmentand the Proponent dated as of 11 June 2002 shall have no application to the parties or thematters contemplated by this Agreement after the date hereof and is replaced entirely bythis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease

1112 Good Faith Each of the Government and the Proponent shall at all times exercise all itsrights hereunder in a manner consistent with good business practices and shall act in goodfaith

1113 Waiver The failure of any party hereto to insist in any one instance upon the strictperformance by another party hereto of its obligations hereunder the Instruments theExemption Orders the Primary Production Order and the Mining Lease or the failure of any

34

party hereto to exercise any right option or remedy shall not constitute a waiver orrelinquishment for the future of any such obligation right option or remedy nor shall itconstitute a waiver of a subsequent breach No covenant or condition of this Agreementmay be waived by any party hereto except by the written consent of that party andforbearance or indulgence by that party in any regard whatsoever for no matter how longshall not constitute a waiver of such covenant or condition and until such covenant orcondition has been performed or waived in writing that party shall be entitled to invoke anyremedy available to that party under this Agreement the Instruments the ExemptionOrders the Primary Production Order and the Mining Lease despite its forbearance orindulgence

1114 No Partnership Joint Venture or Agency The Government and the Proponent expresslydisclaim any intention to create a partnership joint venture or joint enterprise It isunderstood acknowledged and agreed that nothing contained in this Agreement nor anyacts of the parties shall constitute or be deemed to constitute the Government and theProponent as partners joint venturers or principal and agent in any way or for any purpose

THE HONOURABLE THE PREMIER

THE HONOURABLE THE MINISTER OFMINES AND ENERGY

THE HONOURABLE THE MINISTER OFLABRADOR AND ABORIGINAL AFFAIRS

INCO LIMITED

ByChairman and Chief Executive Officer

VOISEYrsquoS BAY NICKEL COMPANY LIMITED

ByPresident

SCHEDULE 11ANICKEL CONCENTRATE EXEMPTION ORDER

This document can be found at the following web address httpwwwgovnfcahoaregulationsrc020066htm

8

ldquoProponentrdquo means collectively VBNC Inco their respective Affiliates or any Personwhich (as permitted by this Agreement) individually or together with any of them by way ofpartnership joint venture sub-contract or otherwise holds or is entitled to a majority interestin or Control of the Project or is the operator of the Project and their respective successorsand permitted assigns

ldquoProvincerdquo means the Province of Newfoundland and Labrador Canada

ldquoR amp D Programrdquo has the meaning ascribed thereto in Section 35

ldquoReplacement Concentraterdquo means any product containing nickel or cobalt or bothderived from ores or any other source of nickel or cobalt or both mined extracted orproduced outside the Province that in each case does not represent Finished NickelProduct but which can be further processed at the Processing Plant to produce FinishedNickel Product

ldquoSufficient Reservesrdquo means the estimated quantities of ldquoProven Mineral Reservesrdquo orldquoProbable Mineral Reservesrdquo or both within the meaning of National Instrument 43-101ldquoStandards of Disclosure for Mineral Projectsrdquo (as amended from time to time) determinedby the Proponent in accordance with its standard methodologies and assumptions for suchestimates

ldquoTax Agreementrdquo means the Tax Agreement to be entered into between the Governmentand the Proponent as contemplated by Sections 412 and 68

ldquoTime of Closingrdquo means 1000 orsquoclock in the morning in the Province on the ClosingDate

ldquoUnderground Exploration Programrdquo means the underground exploration programcontemplated by Section 44

ldquoUniversityrdquo means Memorial University of Newfoundland

ldquoUniversity Agreementrdquo means the agreement to be entered into between the Proponentand the University as contemplated by Section 48

ldquoVBN Undertaking Orderrdquo means the Voiseyrsquos Bay Nickel Company Limited Mine and MillUndertaking Order under the Environmental Assessment Act (Newfoundland and Labrador)dated 5 August 1999 (OC 99-286) as amended from time to time and

ldquoVBNCrdquo means Voiseyrsquos Bay Nickel Company Limited a corporation incorporated underthe laws of the Province

9

12 Schedules

The documents attached hereto and identified below shall form an integral part of thisAgreement

Schedule 11A - Nickel Concentrate Exemption OrderSchedule 11B - Copper Concentrate Exemption OrderSchedule 11C - Matte Plant Exemption OrderSchedule 49 - IEBASchedule 4132 - Assaying ProceduresSchedule 63 - Mining LeaseSchedule 69 - Mining Tax Act AmendmentsSchedule 610 - Primary Production OrderSchedule 81 - Dispute Resolution Procedures

13 Subdivisions Unless otherwise stated a reference herein or in a Schedule by numericalor alphabetical designation to an Article Section Subsection Paragraph Subparagraphor Schedule shall refer to the Article Section Subsection Paragraph Subparagraph orSchedule bearing that designation in this Agreement or in a Schedule

14 Headings The division of this Agreement into Articles Sections SubsectionsParagraphs and Subparagraphs and the insertion of headings are for convenience ofreference only and shall not affect the construction or interpretation of this Agreement

15 Number and Gender Words importing the singular shall include the plural and vice versaand words importing a particular gender shall include all genders The use of the neutersingular pronoun to refer to a party is deemed a proper reference The necessarygrammatical changes required to make the provisions of this Agreement apply shall in allinstances be assumed as though in each case fully expressed

16 Statutes Regulations Rules and Orders Any reference in this Agreement to all or anypart of any statute regulation rule or order shall unless otherwise stated be a referenceto that statute regulation rule or order or the relevant part thereof as amendedsubstituted replaced or reenacted from time to time

17 Business Day If the day on which any act or payment is required to be done or madeunder this Agreement is a day which is not a Business Day then such act or payment shallbe performed or made on the next following Business Day

18 Contract Always Speaking With the exception of the representations and warranties ofthe parties set out in Article 2 and any estimates referred to in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic and relatedbenefits and costs of facilities referred to in this Agreement made by the Proponent wherea matter or thing is expressed in the present tense it shall be applied to the circumstancesas they arise

10

19 Governing Law and Choice of Forum This Agreement shall be interpreted inaccordance with the laws in force in the Province subject to any applicable federal laws andfor all purposes this Agreement shall be treated as a Newfoundland and Labrador contractThe Proponent irrevocably submits and attorns to the exclusive jurisdiction of the courts ofthe Province

110 Construed Covenants Each obligation or agreement of this Agreement (other than therepresentations and warranties of the parties) even though not expressed as a covenantis to be construed as a covenant

111 Inconsistency or Conflict Except where otherwise provided either expressly or bynecessary implication in this Agreement a Schedule hereto or any Instrument in the eventof any inconsistency or conflict between any such Schedule or Instrument and any provisioncontained in this Agreement the provision of this Agreement shall prevail to the extent ofthe inconsistency or conflict

112 Severability If any provision of this Agreement or the application thereof to any Personor circumstance is to any extent held or rendered invalid void illegal or unenforceablefor any reason then the particular provision

1121 shall be deemed to be independent of and severed from the remainder of thisAgreement and all the other provisions of this Agreement shall neverthelesscontinue in full force and effect and

1122 shall continue to be applicable and enforceable to the fullest extent permitted by lawagainst any Persons and in any circumstances other than those as to which it hasbeen held or rendered invalid void illegal or unenforceable

If a severance occurs under this Section 112 the parties shall use their respective bestefforts to negotiate in good faith an enforceable replacement provision that to the greatestextent possible reflects the intent or serves the purpose of the severed provision

113 Currency All references in this Agreement to currency are to Canadian dollars

114 Knowledge In this Agreement where ldquoKnowledgerdquo of a party is referred to

1141 in respect of the Proponent it shall mean the actual knowledge of the executiveofficers of the Proponent after due inquiry in respect thereof and

1142 in respect of the Government it shall mean the actual knowledge of the responsibleexecutives of the applicable department of Government after due inquiry in respectthereof

11

ARTICLE 2REPRESENTATIONS AND WARRANTIES

21 Proponentrsquos Representations and Warranties Acknowledging that the Government isrelying on such representations and warranties VBNC and Inco jointly and severallyrepresent and warrant to the Government that

211 each is a corporation which has been duly incorporated or organized as applicableunder the laws of its jurisdiction of incorporation or organization as applicable andis validly existing under such laws

212 Inco is extra-provincially registered in the Province

213 each has all necessary corporate power authority and capacity

2131 to cause the design engineering and construction of and to operateand maintain all parts of the Project and

2132 to enter into this Agreement and the Instruments and to perform itsrespective obligations herein and therein

214 the execution and delivery of this Agreement and each of the Instruments and theconsummation of the transactions contemplated herein and therein by each ofthem have been duly authorized by all necessary corporate action on the part ofeach of them

215 neither is a party to bound or affected by or subject to any indenture mortgagelease agreement instrument charter or by-law provision which with or without thegiving of notice or the lapse of time or both would be violated contravened orbreached by or under which default would occur as a result of the executiondelivery or performance of this Agreement or any of the Instruments or theconsummation of any of the transactions provided for in any of them

216 neither is bound or affected by or subject to any Applicable Law which with orwithout the giving of notice or the lapse of time or both would be violatedcontravened or breached by or under which default would occur as a result of theexecution delivery or performance of this Agreement or any of the Instruments orthe consummation of any of the transactions provided for in any of them

217 no approval authorization consent permit or other action by or filing with anyGovernment Entity is required in connection with the execution and delivery of thisAgreement or any of the Instruments and the performance of their respectiveobligations hereunder or thereunder except as otherwise stated herein

218 there is no suit action litigation arbitration proceeding or proceeding by aGovernmental Entity including appeals and applications for review in progresspending or to the Knowledge of either of them threatened against or involving

12

either of them or any judgment decree injunction or order of any court or arbitratorwhich could adversely affect their capacity or power to execute and deliver thisAgreement or any of the Instruments or to consummate the transactionscontemplated herein or therein or which could materially adversely affect theirrespective assets financial condition or future prospects

219 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of each of them enforceable against them inaccordance with their respective terms except as limited by (a) applicablebankruptcy laws or laws affecting the enforcement of creditorsrsquo rights generally and(b) the general principles of equity

2110 all references to estimates made by Inco and VBNC in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic andrelated benefits and costs of facilities are made as of the date of this Agreementhave been determined by them based upon information available at the date of thisAgreement and have been estimated by each of them bona fide and reasonablyand neither of them has any reason to believe that any such estimate isunreasonable or unfounded at the date of this Agreement and

2111 VBNC is a wholly owned subsidiary of Inco and to the Knowledge of the Proponentno Person individually or with any other Person or Persons currently Controls Inco

22 Government Acknowledgments The Government acknowledges that (a) none of VBNCInco or any Person for whom either of them may be responsible in law have made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments and (b) the Proponent shall use the most efficient and cost effective miningtechniques including state of the art automated mining technologies aimed at loweringoperating costs and extending the life of the Project

23 Governmentrsquos Representations and Warranties Acknowledging that the Proponent isrelying on such representations and warranties the Government represents and warrantsto the Proponent that

231 the execution and delivery of this Agreement and each of the Instruments and theconsummation by the Government of the transactions contemplated herein andtherein have been duly authorized by all necessary Government action

232 it is not a party to bound or affected by or subject to any indenture agreement orinstrument which with or without the giving of notice or the lapse of time or bothwould be violated contravened or breached by or under which default would occuras a result of the execution delivery or performance of this Agreement or any ofthe Instruments or the consummation of any of the transactions provided for in anyof them and

13

233 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of it enforceable against it in accordance with itsterms except as they may be limited by the general principles of equity

24 Proponent Acknowledgements Each of Inco and VBNC acknowledges that neither theGovernment nor any Person for whom it may be responsible in law has made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments

ARTICLE 3DESCRIPTION OF THE PROJECT AND RELATED FACILITIES

31 The Project The ldquoProjectrdquo will comprise collectively the Underground ExplorationProgram the Mine the Concentrator Plant the R amp D Program the Demonstration Plantthe Processing Plant and if applicable the Concentrator Plant expansion referred to inSection 45 The Processing Plant will be capable of processing concentrate andintermediate feeds containing nickel from other sources world wide which will give theProcessing Plant the capability of operating well beyond the life of the Mine

32 Capital Investment The Proponent estimates that the aggregate capital investment in theProject and related facilities will be $29 billion over the estimated 30-year life of the Projectinclusive of sustaining capital expenditures

33 Employment The Proponent estimates that

331 the construction phase of the Mine and Concentrator Plant will create approximately1700 person-years of employment in the Province the construction phase of theHydromet Plant will create approximately 3000 person-years of employment in theProvince and the construction phase of the Matte Plant will create approximately2500 person-years of employment in the Province

332 during the various operating phases the Project will create the followingemployment levels in the Province Mine and Concentrator Plant - 400 people R ampD Program - 200 people Underground Exploration Program - 85 people HydrometPlant - 400 people Matte Plant - 350 people

333 over the estimated 30-year life of the Project total employment benefits from theProject in the Province will be 76000 direct and indirect person-years and

334 gross domestic product impact to the Province with respect to the Project will be$11 billion

34 Innovation Centre The Proponent shall spend $10 million on and provide an endowmentof $1 million per year over a ten-year period to cover operational costs for an IncoInnovation Centre (the ldquoInnovation Centrerdquo) at St Johnrsquos in conjunction with theUniversity pursuant to the University Agreement The focus of the Innovation Centre willbe on education and research in mineral exploration mining and metallurgical processing

14

The Innovation Centre will provide world-class education research and training related tothe mining industry to 50-60 students per year to be engaged in Bachelors Masters andDoctorate level programs The Proponent shall commence work on the Innovation Centrein 2002 with target completion in 2004

35 R amp D Program The Proponent shall undertake a comprehensive research anddevelopment program intended to establish the commercial technical and economicfeasibility of hydrometallurgical process technology to process the Nickel Concentrate (theldquoR amp D Programrdquo) The R amp D Program will include the evaluation of chemical engineeringsub-processes for the hydrometallurgical process the mechanical equipment design for theDemonstration Plant and the construction and operation of the Demonstration Plant

ARTICLE 4PROPONENTrsquoS UNDERTAKINGS

41 Infrastructure and Initial Work Commencing in 2002 the Proponent shall

411 at the Mine site undertake site mobilization including the establishment of aconstruction camp initiation of work on temporary port facilities and construction ofaccess roads

412 at Argentia undertake leasing or other arrangements for occupancy and sitepreparation including demolition fencing security and signage

413 undertake the construction of a warehouse building and establish staging areas andlay down areas in support of Labrador activities

414 establish a project office at Argentia and information centres at St Johnrsquos andHappy Valley-Goose Bay and

415 complete site selection and commence architectural design and engineering workfor the Innovation Centre

The Proponent estimates that this infrastructure and initial work program will employ inaggregate approximately 250 persons and the Proponent shall spend not less than $55million on this program in the Province on or before 31 March 2003

42 R amp D Program421 The Proponent shall undertake the R amp D Program and as a part thereof shall

construct the Demonstration Plant at a cost which the Proponent estimates will be$130 million The Proponent shall commence the site development for theDemonstration Plant in 2002 and continue such development into 2003 Theinitiatives in support of these activities will include the operation of an informationcentre preparation of environmental baseline studies and continued upgrading orreplacement of utility services required for the Demonstration Plant maintainingstaging areas and cleanup and civil works at Argentia consisting of demolition

15

grading and earth works construction The Proponent has scheduled thecompletion of the engineering design and construction of the Demonstration Plantso that the Demonstration Plant Completion Date shall have occurred on or before31 December 2006

422 The Proponent shall provide to the Government within 15 days of the end of eachcalendar quarter commencing with the calendar quarter ending 31 December 2002a detailed progress report on the results during such calendar quarter of the R amp DProgram which report will detail costs incurred to the end of such calendar quarterand contain sufficient documentation and information to enable the Government toevaluate the Proponentrsquos progress with respect to the R amp D Program and thedevelopment of hydrometallurgical process technology for processing the NickelConcentrate If requested by the Government upon reasonable notice theProponent shall provide the Government and its representatives and advisorsaccess at reasonable times to the facilities where the R amp D Program is beingconducted and make appropriate personnel of the Proponent available to respondto any requests for additional information

423 In addition to the utilization of the Demonstration Plant for the purposes ofdeveloping hydrometallurgical process technology for processing the NickelConcentrate the Proponent shall explore business opportunities for the ongoingutilization of the Demonstration Plant for the evaluation of other concentrates andintermediate feeds after completion of the R amp D Program

43 Mine and Concentrator Plant

431 The Proponent shall cause the development of the Mine and the designengineering and construction of a millconcentrator plant which will be capable ofprocessing 6000 tonnes of ore per day (the ldquoConcentrator Plantrdquo) TheConcentrator Plant will produce the Copper Concentrate and the NickelConcentrate The Proponent has scheduled to begin the development of the Mineand the construction of the Concentrator Plant in 2003 and estimates that the Mineand Concentrator Plant will require three years to construct at a cost ofapproximately $710 million

432 The Proponent

4321 shall not ship any Nickel Concentrate out of the Province aspermitted by the Nickel Concentrate Exemption Order before theDemonstration Plant Completion Date and

4322 shall ship Nickel Concentrate from the Concentrator Plant to theDemonstration Plant in sufficient quantities for the continuedoperation of the Demonstration Plant during the R amp D Programfollowing successful start up of the Concentrator Plant

16

44 Underground Exploration Program The Proponent shall undertake an undergroundexploration program which it estimates will cost $95 million and employ approximately 85people This program is intended to identify Sufficient Reserves at depth under the LeasedLands and if there are such Sufficient Reserves the Proponent shall develop a mining planfor the economic extraction of such Reserves The initial phase of this undergroundexploration program will be an advanced surface program which the Proponent estimateswill cost $20 million to commence in 2002 with completion targeted for 2006 Subsequentunderground exploration will be scheduled to ensure that Sufficient Reserves under theLeased Lands are available to sustain full operation of the Concentrator Plant during thetransition from open-pit operations to full underground mining operations if applicable

45 Underground Mine Development and Concentrator Plant Expansion If theunderground exploration program described in Section 44 identifies Sufficient Reservesas contemplated by Section 44 the Proponent shall commence the development of anunderground mine or mines on the Leased Lands and an expansion of the ConcentratorPlant in order to supply sufficient Nickel Concentrate to maintain the operation of theProcessing Plant at full capacity The Proponent estimates that this program will costapproximately $750 million and employ an aggregate of 800 people

46 Processing Plant

461 In order to maximize long-term benefits for the Province and the people of theProvince the Proponent shall use its best efforts through the R amp D Program todevelop a technically and economically feasible hydrometallurgical processtechnology for processing the Nickel Concentrate in the Province If suchtechnology is successfully developed the Proponent shall cause the designengineering and construction of and operate and maintain a hydrometallurgicalprocessing plant with a design capacity to produce annually approximately 50000tonnes of Finished Nickel Product together with associated cobalt and copperproducts (the ldquoHydromet Plantrdquo) The Proponent estimates that the HydrometPlant will have a capital cost of approximately $800 million and during the three-yearconstruction period will generate approximately 3000 person-years of employmentThe Proponent estimates that the Hydromet Plant will employ approximately 400people during operations

462 If pursuant to Section 47 it is determined that a Hydromet Plant is not technicallyor economically feasible the Proponent shall construct a commercialhydrometallurgical nickel-matte processing facility or other similar facilityincorporating a proven state of the art technology to produce Finished NickelProduct (the ldquoMatte Plantrdquo) The Matte Plant will have a design capacity toproduce annually approximately 50000 tonnes of Finished Nickel Product togetherwith associated cobalt and copper products The Proponent estimates the MattePlant will have a capital cost of approximately $670 million and during the estimatedthree-year construction period will generate approximately 2500 person-years ofemployment The Proponent estimates that the Matte Plant will employapproximately 350 people during operations

17

463 The Proponent has represented to the Government that its objective is to operatethe Processing Plant well beyond the life of the Mine Accordingly the Proponentundertakes to explore technically and economically feasible opportunities for theexpansion of the Processing Plant and to secure opportunities to supply theProcessing Plant with feed from world wide sources to fully utilize the Proponentrsquoslarge capital investment in the Processing Plant

464 The Proponent shall establish the Processing Plant at Argentia unlessenvironmental conditions at Argentia would make it not economically feasible toestablish the Processing Plant at Argentia and in such circumstances theProponent shall locate the Processing Plant at another site in the Province

47 Selection of Applicable Processing Plant

471 The Proponent shall use commercially reasonable efforts to deliver as soon aspossible but in any event shall deliver on or before 15 November 2008 theDecision and the Decision Materials to the Government and the Experts

472 If the Proponent has not on or before 30 June 2008 delivered to the Governmentthe Decision and the Decision Materials

4721 it shall forthwith meet with the Government to review on aconfidential basis the status of its efforts towards being able todeliver the Decision

4722 thereafter it shall promptly update the Government from time to timeon its efforts to be able to deliver the Decision and the outstandingissues relevant to whether the Decision will be to build the HydrometPlant or the Matte Plant and

4723 to the extent that the Proponent is not by 30 June 2008 in aposition to deliver the Decision which confirms that the Proponentintends to proceed with the construction of the Hydromet Plant theProponent shall use commercially reasonable efforts to developImplementation Plans for both a Hydromet Plant and a Matte Plantso that it will be able to deliver the Implementation Plan for theHydromet Plant or Matte Plant as applicable on or before 31December 2008

473 The Government may at any time after the earlier of the Decision Date or 30 June2008 give the Proponent notice in writing that it wishes to proceed with theappointment of the Experts When the Government gives notice to the Proponentrequiring the appointment of the Experts the Government and the Proponent shallthen forthwith agree upon the appointment of the Experts If the Government andthe Proponent cannot so agree within 15 days after the giving by the Governmentof such notice the appointment of the Experts shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter to

18

the Joint Committee or the Mediation Procedure referred to therein If the Expertsare appointed prior to the delivery by the Proponent of the Decision and theDecision Materials the Proponent shall provide to the Government and the Expertssuch data and information as is then available that will assist the Experts in theirreview under Section 475 The Proponent and the Government shall each pay50 of the fees and expenses of the Experts Before receiving the Decision theDecision Materials or any other information or data from the Proponent under thisAgreement the Experts shall first execute a confidentiality agreement containingsubstantially the same terms as provided for in Article 9

474 If in the Decision the Proponent confirms it intends to construct the Hydromet Plantthe Proponent shall deliver the Implementation Plan for the Hydromet Plant on orbefore 31 December 2008 and thereafter shall proceed diligently to complete thedetailed engineering for and construction of the Hydromet Plant in accordance withsuch Implementation Plan so that it shall be completed on or before 31 December2011

475 If in the Decision the Proponent confirms it intends to construct the Matte Plant theGovernment shall on or before the seventh Business Days after the Decision Datedeliver to the Proponent and the Experts a notice in writing (in this Section 475 theldquoGovernment Decisionrdquo) that the Government either (a) accepts the Decision tobuild the Matte Plant or (b) intends to refer such Decision to the Experts for reviewIf in the Government Decision the Government states it intends to refer theDecision to the Experts the Proponent shall promptly deliver to the Experts theDecision and the Decision Materials if it has not previously done so The Expertswill review the Decision the Decision Materials and any other information or datawhich the Experts deem appropriate or which the Government requests them toconsider and render their report (the ldquoExpertsrsquo Reportrdquo) within 30 days of the dateon which the Government delivers the Government Decision If the Governmentrequests the Experts to consider any other information or data in addition to theDecision Materials it shall provide to the Experts and the Proponent copies of suchrequest and any such information and data at the time it delivers the GovernmentDecision and the Proponent shall have the right within five Business Days tocomment on or respond to such information and data to the Experts with a copy tothe Government The Expertsrsquo Report shall determine whether in the opinion of theExperts it would be technically and economically feasible for the Proponent to buildthe Hydromet Plant together with reasons for such determination If the ExpertsrsquoReport determines that it is technically and economically feasible for the Proponentto build the Hydromet Plant the Proponent shall on or before 31 December 2008deliver to the Government an Implementation Plan for the Hydromet Plant andthereafter shall proceed diligently to complete the detailed engineering for andconstruction of the Hydromet Plant so that it shall be completed on or before 31December 2011 If the Expertsrsquo Report confirms that it would not be technically oreconomically feasible to build the Hydromet Plant the Proponent shall on or before31 December 2008 deliver to the Government an Implementation Plan for the MattePlant and thereafter shall proceed diligently to complete the detailed engineering forand construction of the Matte Plant in accordance with such Implementation Plan

19

so that it shall be completed on or before 31 December 2011 Subject to Section477 the Expertsrsquo Report shall be final and binding on the Government and theProponent

476 The determination as to whether the Proponent is proceeding diligently with thecompletion of the engineering work for and the construction of the Processing Plantfor completion on or before 31 December 2011 as required by Section 474 or475 shall be made annually on the anniversary date of the Decision Date by anEngineer who shall certify to both the Government and the Proponent as to whetherthe actual engineering work for and construction of the Processing Plant is onschedule with the applicable Implementation Plan

477 If there is a manifest error in the Expertsrsquo Report which if corrected would result ina different determination by the Experts the Expertsrsquo Report shall be referred backto the Experts for the purpose of forthwith correcting such manifest error changingthe determination in the Expertsrsquo Report and submitting a revised Expertsrsquo Reportto the Proponent and the Government

478 Where an Engineer is required to be appointed from time to time for the purposesof Section 476 or for determining the Commercial Production Date theConstruction Completion Date or the Demonstration Plant Completion Date theGovernment and the Proponent shall forthwith agree upon the appointment of suchEngineer If the Government and the Proponent cannot so agree within 15 daysof the Government or the Proponent giving the other notice requiring appointmentof an Engineer the appointment of the Engineer shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter tothe Joint Committee or the Mediation Procedure referred to therein The Proponentand the Government shall each pay 50 of the fees and expenses of any Engineer

48 Innovation Centre The Proponent shall enter into an agreement (the ldquoUniversityAgreementrdquo) with the University in form and content satisfactory to the Government on orbefore the Closing Date The University Agreement shall contain among other things theProponentrsquos commitments and intentions set out in Section 34

49 Industrial and Employment Benefits The Proponent shall execute the IEBA to beeffective 7 October 2002

410 IBAs The Proponent represents and warrants to the Government that it has entered intothe IBAs

411 VBN Undertaking Order The Proponent agrees to abide by and implement the terms andconditions contained in the VBN Undertaking Order

412 Corporate Income Tax The Proponent shall use its best efforts to negotiate and executewith the Government an agreement covering the matters set forth in this Section 412 andSection 68 (the ldquoTax Agreementrdquo) as soon as possible but in any event on or before theClosing Date The Tax Agreement will contain provisions which to the extent permitted by

20

law will result in an allocation to the Province for the purposes of Part IV of the FederalIncome Tax Regulations of the Proponentrsquos gross revenues from the sale or disposition ofnickel copper and cobalt products whether in intermediate or final form from the Project

413 Return of Concentrate

4131 In consideration of the Government granting the Exemption Orders the Proponentguarantees that it shall prior to Cessation of Mining Operations commenceshipping into the Province Replacement Concentrate for processing into FinishedNickel Product at the Processing Plant Such Replacement Concentrate shall beshipped to and processed by the Processing Plant in sufficient quantities to permitthe Processing Plant to operate continuously at a rate that will produce not less than25000 tonnes of Finished Nickel Product annually and such shipments shallcontinue at least until such time as the contained nickel and cobalt in theReplacement Concentrate shall have equalled the total quantity of contained nickeland cobalt in the Nickel Concentrate shipped out of the Province under the termsof the Nickel Concentrate Exemption Order and otherwise than under the provisionsof an Exemption Order

4132 The Proponent shall undertake the Assaying Procedures set out in Schedule 4132with respect to the Nickel Concentrate and the Replacement Concentrate

4133 The Proponent acknowledges that if it does not perform its contractual obligationsunder Section 4131 (a) the Province and the economy of the Province will suffersubstantial loss (b) the Government would not be properly compensated for its lossby monetary damages which therefore will not be considered an adequate remedyfor such breach and (c) the Government may at any time subsequent to suchbreach commence an action against the Proponent for any one or more of thefollowing remedies whether claimed as primary or secondary alternative relief

41331 an order for specific performance

41332 appropriate injunctive relief whether mandatory or prohibitory and

41333 monetary damages including for consequential and economic lossreflecting the substantial losses suffered by the Government and theeconomy of the Province as a result of such breach

The Proponent expressly waives any right to claim or argue that the Governmentcannot claim the relief set out in Sections 41331 41332 and 41333 in any suitcommenced by the Government against the Proponent for the Proponentrsquos failureto perform its obligations under Section 4131

21

414 Copper Processing in the Province

4141 The Government acknowledges that at the date hereof the quantity of coppercurrently identified in the mineralized zones on or under the Leased Lands togetherwith identified copper deposits elsewhere in the Province are not sufficient to justifythe construction and operation of a copper processing facility in the Province on aneconomically feasible basis

4142 If at any time in the future

41421 Sufficient Reserves of copper are discovered by the Proponent inthe Province (including on or under the Leased Lands) to makeeconomic the processing on a commercial basis of the CopperConcentrate or any other product containing the principal quantitiesof copper extracted from the Leased Lands into Finished CopperProduct in the Province the Proponent shall process such CopperConcentrate into Finished Copper Product in the Province or

41422 a third party establishes a facility in the Province for the commercialprocessing of copper concentrate the Proponent shall offer for saleits then available Copper Concentrate from the Concentrator Plantto such third party for processing in such facility on then prevailingcommercial terms and conditions subject to the Proponentrsquos thenexisting contractual obligations

4143 In the circumstances set out in Section 4142 the Proponent acknowledges thatthe Government has the right pursuant to Section 311(3) of the Mineral Act torescind the Copper Concentrate Exemption Order

415 Parties in Contract Change of Control and Assignment

4151 The Proponent covenants with the Government that without the prior Approval ofthe Government it

41511 shall not take or threaten or purport to take any action whether byway of contract corporate reorganization or arrangement orotherwise that would have the effect of transferring assigningsubletting or otherwise divesting itself of a majority interest in orControl of (a) the Project or (b) all or substantially all of theProponentsrsquo rights under this Agreement the Instruments theExemption Orders the Primary Production Order and subject toApplicable Laws the Mining Lease and

41512 shall not take or threaten or purport to take any action which directlyor indirectly results in a change of Control of VBNC to a party otherthan Inco

22

4152 Wherever pursuant to Section 4151 the Government is requested to grant itsApproval such Approval may be withheld by the Government in its sole andabsolute discretion for any reason whatsoever

4153 For bona fide tax or other corporate reasons the Proponent may without theApproval of the Government transfer assign sublet or otherwise divest to anAffiliate a majority interest in or Control of (a) the Project or (b) all or substantiallyall of the Proponentrsquos rights under this Agreement the Instruments the ExemptionOrders the Primary Production Order and subject to Applicable Laws the MiningLease Notwithstanding Section 111 no such transfer assignment sublet ordivestiture shall relieve the Proponent of its obligations hereunder or thereunder

4154 The Proponent shall promptly give written notice to the Government of any actionit takes under Section 4151 or 4153

416 Members of House of Assembly The Proponent undertakes to (a) ensure that nomember of the House of Assembly of the Province shall have any interest in thisAgreement and (b) use its best efforts to ensure that no Member of the House of Assemblyof the Province receives any benefit to arise herefrom or from any report study review oranalysis required to be made or submitted pursuant to this Agreement

417 Mining Lease VBNC shall execute the Mining Lease effective 30 September 2002

418 Proponentrsquos Financing The Proponent shall use best efforts to obtain the financingcontemplated by Section 1024 including without limitation the preparation of all feasibilitystudies required in order to obtain such financing

ARTICLE 5FORCE MAJEURE

51 Events of Force Majeure For the purposes of this Article 5 and subject to the exceptionsand qualifications below each of the following shall be an ldquoEvent of Force Majeurerdquo

511 acts of God or natural disasters adverse weather conditions or other similaroccurrences

512 acts of war (declared or undeclared) or conditions arising out of or attributable toany such acts of war revolutions insurrections civil strife formal or informalhostilities mob violence riots and similar disturbances blockades or any otherunlawful acts against public order or authority

513 strikes lockouts work stoppages or labour disturbances unless directly andproximately caused by an unlawful act or omission of the Proponent

514 (a) delay or failure by suppliers of labour transportation materials machineryequipment parts supplies utilities or services (b) contractorsrsquo or sub-contractorsrsquoshortage of or inability to obtain labour transportation materials machinery

23

equipment parts supplies utilities or services or (c) breakdown of equipmentmachinery or facilities unless any of the foregoing are directly and proximatelycaused by or result from an unlawful act or omission of the Proponent

515 accidents and

516 solely in respect of the Proponentrsquos obligations in Section 4131 a ProcessingRelated Reason provided that a Processing Related Reason shall not be an Eventof Force Majeure at any time after three years following Cessation of MiningOperations

52 Obligation to Perform In order to obtain relief for an Event of Force Majeure theProponent shall (a) use commercially reasonable efforts to (i) prevent the occurrence of(ii) perform its obligations in the face of and (iii) terminate any such Event of Force Majeure(other than the events described in Section 513 relied upon) and (b) give the Governmentwritten notice of the facts which the Proponent claims constitute an Event of Force Majeureas soon as reasonably practical upon becoming aware of their existence

53 Force Majeure Relief If the Proponent establishes that it is prevented from performingany of its obligations under this Agreement the Nickel Concentrate Exemption Order or theMatte Plant Exemption Order by reason of an Event of Force Majeure such obligations willbe suspended for the period of the existence of such Event of Force Majeure and theProponent will be entitled to an extension of all dates referred to in this Agreement theNickel Concentrate Exemption Order and the Matte Plant Exemption Order for a reasonableperiod of time that reflects (a) the period during which the Proponent is prevented fromperforming its obligations by reason of the Event of Force Majeure and (b) the impact thatsuch Event of Force Majeure has on the Project including without limitation shippingschedules and construction schedules that have been delayed by reason of such Event ofForce Majeure Even though the Proponentrsquos obligations will be suspended for suchreasonable period of time when the applicable Event of Force Majeure is no longerpreventing the Proponent from performing its obligations the Proponent will again beobliged to perform such obligations

ARTICLE 6GOVERNMENT UNDERTAKINGS

61 Aboriginal Agreements The Government represents and warrants that it has entered into(a) interim measures agreements with the Innu Nation and the LIA that include the VoiseyrsquosBay chapter of the respective land claims agreements and (b) the EMA

62 Electrical Rights and Provision of Power The Government shall cause Newfoundlandand Labrador Hydro or its successors to

621 provide to the Proponent electrical power for the Processing Plant at the lower of(a) the island industrial electrical rate or (b) any lower electrical rate that may be

24

offered from time to time by Newfoundland and Labrador Hydro or its successorsto its industrial customers in comparable circumstances and

622 ensure that Newfoundland and Labrador Hydro or its successors can supply to theProponent sufficient electrical power for the operation of the Processing Plant

63 Mining Lease The Government shall issue the Mining Lease effective 30 September2002

64 Exemption Orders The Government shall issue the Exemption Orders effective 30September 2002

65 Issue of Authorizations

651 Where the Proponent has submitted all information and data in accordance withApplicable Laws and required by the Government for it to issue or grant any permitauthorization order or other approval necessary for the Proponent to implement theProject or any part thereof (in this Section 65 the ldquoAuthorization(s)rdquo) theGovernment shall issue or grant any such Authorization on a timely basis

652 If the Government does not issue or grant an Authorization on a timely basis

6521 the Government shall grant the Proponent an extension of all datesreferred to in this Agreement the Nickel Concentrate ExemptionOrder and the Matte Plant Exemption Order for a reasonable periodof time that reflects (a) the period of delay in granting suchAuthorization and (b) the impact that such delay has on the Projectincluding without limitation shipping schedules and constructionschedules that will have been delayed by Governmentrsquos failure toissue or grant such Authorization on a timely basis and

6522 if as a result of the Governmentrsquos failure to issue or grant anAuthorization on a timely basis the completion date for theProcessing Plant is delayed and provided that the Proponentestablishes that it is likely it will ship out of the Province the totalvolume of contained nickel in the Nickel Concentrate permittedunder the Nickel Concentrate Exemption Order prior to the revisedcompletion date of the Processing Plant the Government shallamend the Nickel Concentrate Exemption Order to allow anadditional quantity of contained nickel in Nickel Concentrate to beshipped out of the Province which quantity will reflect thereasonable period of time of the extension referred to in Section6521

653 The Government shall not be responsible for any delays nor shall the Proponent beentitled to any relief under this Section 65 unless such delays are directly and

25

proximately caused by or result from an act or omission of the Government or adepartment regulatory body board agent or employee of the Government

66 Legislative Framework

661 The Government represents to the Proponent (and acknowledges that theProponent is relying upon such representation) that it shall maintain substantiallythe Legislative Framework for the duration of the Project subject to legislativeamendments contemplated in this Agreement and legislation of general applicationThe Government shall maintain the Legislative Framework consistent with thisAgreement subject to Governmental responsibilities including the responsibility forensuring proper management of the Provincersquos resources the protection andmaintenance of public health and safety and the protection of the environment TheGovernment acknowledges that this Agreement is consistent with current public lawand Governmental responsibilities

662 The Proponent represents to the Government (and the Proponent acknowledgesthat the Government in consideration of agreeing to maintain the LegislativeFramework has relied upon such representation) that the Proponent shall performits obligations set out in this Agreement the Instruments the Exemption Orders thePrimary Production Order and the Mining Lease

67 Special Project Orders The Government shall issue a Special Project Order or SpecialProject Orders under Section 70 of the Labour Relations Act (Newfoundland and Labrador)to ensure a stable labour relations environment throughout the construction phases of theProject This Order or these Orders shall include without limitation provisions such as nostrikes and lock-outs and the ability to designate the union organization and employerrsquosrepresentative for the purposes of collective bargaining

68 Corporate Income Tax The Government shall use best efforts to negotiate and executewith the Proponent the Tax Agreement as soon as possible but in any event on or beforethe Closing Date The Tax Agreement will contain provisions

681 whereby the Government will provide that the rate of the Provincersquos corporateincome tax applicable to the Proponent will be the lower of the ldquoall provincesaveragerdquo or the Provincersquos income tax rate

682 which to the extent permitted by law will result in an allocation to the Province forthe purposes of Part IV of the Federal Income Tax Regulations of the Proponentrsquosgross revenues from the sale or disposition of nickel copper and cobalt productswhether in intermediate or final form from the Project and

683 whereby the Government will undertake to indemnify the Proponent for any doubletaxation resulting from the allocation referred to in Section 682

26

69 Mining Tax Act At the next session of the House of Assembly of the Province theGovernment shall introduce and support legislation to amend the Mining Tax Act inaccordance with the Mining Tax Act Amendments

610 Primary Production Order The Government shall issue the Primary Production Ordereffective 30 September 2002

611 Industrial and Employment Benefits The Government shall execute the IEBA to beeffective 7 October 2002

ARTICLE 7PROPONENTrsquoS DEFAULT

71 Notice of an Event of Default Upon the happening of an Event of Default theGovernment may deliver to the Proponent a notice of default setting forth in reasonabledetail the nature of the Event of Default and if the Government intends to exercise its rightsunder Section 72 indicating the date upon which the Government intends to exercise suchrights

72 Termination Subject to an Event of Force Majeure or the provisions of Section 652where an Event of Default has occurred and in each of such cases and so often as anEvent of Default happens after giving the notice provided for in Section 71 theGovernment may at any time in its sole discretion do any one or more of the following (a)terminate this Agreement (b) terminate the Mining Lease (c) rescind the ExemptionOrders and (d) take action for any remedy at law or in equity

73 Release by Proponent and Proponentrsquos Indemnity The Proponent hereby releases anddischarges and agrees to indemnify and save harmless the Government from every claimof every nature whether in damages (including consequential or indirect damages) or notwhich may arise or be suffered by the Proponent or any Person claiming through or underthe Proponent by reason of or as a result of anything done by the Government or anysuccessor or assign claiming through or under the Government under the provisions ofSection 72

ARTICLE 8DISPUTE RESOLUTION

81 Dispute Resolution Any dispute or difference between the parties hereto arising

811 as to whether a Processing Related Reason exists

27

812 as to the selection of an Engineer or firm of Engineers the Experts or an umpireunder Schedule 4132

813 under Section 45 as to whether the Underground Exploration Program hasidentified Sufficient Reserves under the Leased Lands

814 as to the determination of the date of Cessation of Mining Operations

815 as to whether commercial processing is economic as contemplated by Section41421

816 as to then prevailing commercial terms and conditions as contemplated by Section41422

817 under Section 51 as to whether an Event of Force Majeure exists

818 under Section 53 as to whether an Event of Force Majeure prevents the Proponentfrom performing any of its obligations under this Agreement

819 under Section 53 or Section 652 as to the reasonable period of time for theextension of the dates of performance of the Proponentrsquos obligations

8110 under Section 6522 the additional quantity of contained nickel in NickelConcentrate to be shipped out of the Province or

8111 as to whether the Proponent is complying with its obligations under Section 52

shall in each case be resolved in the manner provided for in Schedule 81

ARTICLE 9CONFIDENTIAL INFORMATION

91 Confidential Information The Government

911 acknowledges that information (the Information) supplied to it by or on behalf ofthe Proponent pursuant to or in connection with this Agreement or the Instrumentsincluding without limitation information provided pursuant to or in connection withSections 422 471 472 475 52 and 81 is of a financial commercialscientific or technical nature and is supplied in confidence and

912 subject to Sections 93 and 94 shall keep the Information confidential and shallnot use or disclose the Information to any third party without the Approval of theProponent and in doing so shall use the same care as it applies to avoid disclosureor dissemination of its own confidential information to prevent the disclosure ofInformation to any third party

28

92 Effect of Disclosure The Government acknowledges that disclosure of the Informationcontrary to the provisions of this Article 9 could reasonably be expected to921 harm significantly the competitive position or interfere significantly with the

negotiating position of the Proponent

922 result in similar information no longer being supplied by or on behalf of theProponent to the Government when it is in the public interest that similar informationcontinued to be supplied and

923 result in material financial loss to the Proponent or result in material financial gainto competitors of the Proponent and other Persons

93 Approval The Government may disclose Information if Approved by the Proponent

94 Permitted Disclosure of Information The provisions of this Article 9 shall not apply toInformation which

941 is now or which hereafter through no act or omission of the Government becomesgenerally known or available to the public without breach of this Agreement

942 after disclosure to the Government becomes generally known or available to thepublic by publication or otherwise through no act or omission of the Government

943 the Government can establish was in its possession at the time of disclosure andwas not previously acquired directly or indirectly from the Proponent

944 is disclosed to the Government by a third party on a non-confidential basis whichparty to the Knowledge of the Government is not prohibited from disclosing suchInformation to the Government by any legal contractual or fiduciary obligation towhich such party is bound or subject or

945 is required to be disclosed by law

95 Remedy Without limiting the Proponentrsquos rights and recourses for a breach by theGovernment of its obligations in this Article 9

951 the Government acknowledges that the Proponent shall suffer irreparable harm ifthe Government discloses Information contrary to the provisions of this Article 9and unless prohibited by law the Proponent shall be entitled to an injunction orinjunctions to prevent such disclosure

952 the Government shall be liable for and shall indemnify and save the Proponentharmless from and against costs losses damages and claims that it may sufferpay incur or be liable for as a result of any breach by the Government of thisArticle 9 and

29

953 in the event there are any measures which the Government can take to ensurecompliance with the provisions of Section 912 the Proponent shall be relieved ofthe obligation to provide information of the type with respect to which the breachoccurred until the Government has taken such measures

ARTICLE 10CONDITIONS CLOSING AND TERMINATION

101 Conditions for the Benefit of the Government Subject to Section 1061 the obligationsof the Government in this Agreement are subject to the satisfaction of or compliance withat or prior to the Time of Closing each of the following conditions

1011 the representations and warranties of the Proponent made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Proponent at or prior to the Time of Closing shallhave been performed the Proponent shall not be in breach of any agreement onits part contained in this Agreement at the Time of Closing and the Governmentshall have received a certificate confirming the foregoing signed for and on behalfof the Proponent in form and content satisfactory to the Government

1012 the University Agreement shall have been executed by the Proponent and a copythereof shall have been delivered to the Government

1013 the Tax Agreement shall have been executed by the Proponent and delivered to theGovernment and

1014 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

102 Conditions for the Benefit of the Proponent Subject to Section 1061 the obligationsof the Proponent in this Agreement are subject to the satisfaction of or compliance with ator prior to the Time of Closing each of the following conditions

1021 the representations and warranties of the Government made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Government at or prior to the Time of Closingshall have been performed the Government shall not be in breach of anyagreement on its part contained in this Agreement at the Time of Closing and theProponent shall have received a certificate confirming the foregoing signed for andon behalf of the Government in form and content satisfactory to the Proponent

30

1022 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

1023 the Tax Agreement shall have been executed by the Government and delivered bythe Government to the Proponent

1024 the Proponent shall have secured financing on reasonable commercial terms toenable it to develop the Mine and construct the Concentrator Plant and

1025 the Mining Tax Act Amendments shall have become law

103 Closing Notice If the Proponent (a) wishes to waive the condition set out in Section1024 or (b) has obtained the financing contemplated by Section 1024 it shall forthwithdeliver to the Government a notice (the ldquoClosing Noticerdquo) confirming that it has eitherwaived the condition set out in Section 1024 or that such condition has been satisfied

104 Deliveries and Closing1041 The Closing shall take place at the Time of Closing on the Closing Date at a

location to be agreed by the parties

1042 At the Closing

10421 the Proponent shall deliver to the Government the certificatecontemplated by Section 1011 and if not previously delivered theexecuted University Agreement and the executed Tax Agreementand

10422 the Government shall deliver to the Proponent the certificatecontemplated by Section 1021 and if not previously delivered theexecuted Tax Agreement

105 Termination This Agreement and the IBEA may be terminated at any time prior to theTime of Closing1051 by agreement of the Government and the Proponent

1052 by the Government if the conditions set out in Section 101 have not been satisfiedor waived by the Government or the Closing Notice has not been delivered to theGovernment on or before 31 March 2003 or

1053 by the Proponent if the conditions set out in Section 102 have not been satisfiedor waived by the Proponent (except the condition set out in Section 1024 in theevent the Proponent has delivered the Closing Notice)

106 Effect of Agreement and Termination

1061 Notwithstanding Section 1062 and subject to Section 1063 the Government andthe Proponent shall be bound by the provisions of Sections 41 421 422 410

31

411 412 415 416 417 418 61 63 64 65 66 67 68 69 610 and 611and Articles 5 8 9 and 11 effective as of and from the date of execution of thisAgreement

1062 Subject to Section 1061 the obligations of the Proponent and the Government inthis Agreement shall be effective as of and from the Time of Closing

1063 If this Agreement and the IEBA are terminated in accordance with the provisions ofSection 105 this Agreement and the IEBA shall thereafter become null and voidand have no effect and no party shall have any liability to the other except

10631 the obligations contained in Sections 41421 411 69 and Article9 hereof and

10632 the liability of a party in respect of its breach of this Agreement andthe IEBA prior to such termination

all of which shall survive such termination for a period of twelve months followingsuch termination

ARTICLE 11GENERAL MATTERS

111 Enurement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease shall be binding upon and shall enure to the benefitof the parties hereto the successors and assigns of the Government and the successorsand permitted assigns of the Proponent Any such assignment permitted by this Agreementshall become effective only when the assignee executes with the Government aninstrument whereby it agrees to be bound by and perform all of the Proponentrsquos obligationsunder this Agreement the Instruments the Exemption Orders the Primary ProductionOrder and the Mining Lease Subject to Section 4153 from and after the execution ofsuch instrument the assignor shall be relieved of and released from all its obligations underthis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease with effect from and after the date of execution of such instrument

112 Counterparts This Agreement and the other documents referred to herein andorotherwise required to complete the transactions contemplated hereby may be executed intwo or more counterparts including by facsimile each of which shall be deemed an originaland all of which together shall constitute one and the same instrument

113 Notices All notices requests demands and other communications hereunder shall bedeemed to have been duly given if in writing and either delivered personally sent byfacsimile transmission or by air courier service to the addresses designated below or suchother addresses as may be designated in writing by notice given hereunder and shall be

32

effective upon personal delivery or facsimile transmission thereof with proof of transmissionreceipt or upon delivery by air courier serviceIf to VBNC Voiseyrsquos Bay Nickel Company Limited

Suite 700 Baine Johnston Centre10 Fort William PlaceSt Johnrsquos NewfoundlandA1C 1K4Attention PresidentFacsimile (709) 758-8820

If to Inco Inco Limited145 King Street WestSuite 1500Toronto OntarioM5H 4B7Attention PresidentFacsimile (416) 361-7734

If to the Government Government of Newfoundland amp LabradorDepartment of Mines amp EnergyNatural Resources Building7th Floor 50 Elizabeth AvenueSt Johnrsquos NewfoundlandA1A 1W5Attention The MinisterFacsimile (709) 729-0059

114 Legal Fees In the event of any dispute or controversy between the Proponent on the onehand and the Government on the other hand relating to the interpretation of this Agreementor to the transactions contemplated herein the prevailing party shall be entitled to recoverfrom the other party reasonable legal fees and expenses incurred by the prevailing partySuch award shall include reasonable post judgment legal fees and costs

115 Payment of Fees and Expenses Each party hereto shall pay its own fees expenses anddisbursements incurred in connection with this Agreement and the transactionscontemplated hereby and all other costs and expenses incurred in its performance andcompliance with all conditions to be performed hereunder and thereunder

116 Time of Essence Time is of the essence of this Agreement

117 Further Assurances Each of the parties shall promptly do make execute deliver orcause to be done made executed or delivered all such further acts documents and thingsas the other parties hereto may reasonably require from time to time for the purpose ofgiving effect to this Agreement and the transactions contemplated hereby and shall usereasonable efforts and take all such steps as may be reasonably within its power toimplement to their full extent the provisions hereof and thereof

33

118 Public Notices No press release or other announcement concerning the transactionscontemplated by this Agreement shall be made either by the Proponent or the Governmentwithout the prior Approval of the other (such Approval not to be unreasonably withheld)provided however that the Proponent may without such Approval make such disclosureif the same is required by law or any stock exchange on which any of the securities of theProponent or any of its Affiliates are listed or by any securities commission or other similarregulatory authority having jurisdiction over the Proponent or any of its Affiliates and if suchdisclosure is required the Person making the disclosure shall use best efforts to give priororal or written notice to the Government and if such prior notice is not possible to givesuch notice immediately following the making of such disclosure Notwithstanding theforegoing the Proponent acknowledges that the Government will make this Agreement andthe Schedules hereto public

119 Independent Legal Advice Each of the parties acknowledges having obtained its ownindependent legal advice with respect to this Agreement and the transactions contemplatedhereby to the fullest extent deemed necessary by each party prior to its execution anddelivery Furthermore the parties acknowledge that neither acted under any duress innegotiating drafting and executing this Agreement the Instruments and any documentscontemplated hereby There shall be no presumption that any ambiguity in this Agreementthe Instruments and any documents contemplated hereby be resolved in favour of any ofthe parties

1110 Compliance with Laws Without limiting the generality of any other covenant herein theProponent shall at its own cost and expense comply with and shall use best efforts toensure that all Persons for whom the Proponent is at law responsible comply with allApplicable Laws in connection with the Project

1111 Entire Agreement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease set forth the entire agreement and all thecovenants promises assurances agreements representations conditions warrantiesstatements and understandings (collectively ldquoRepresentationsrdquo) between the partiesconcerning the subject matter hereof No Representations are made by the Governmentto the Proponent or by the Proponent to the Government except as expressly set out in thisAgreement the Instruments the Exemption Orders the Primary Production Order and theMining Lease For greater certainty the Statement of Principles between the Governmentand the Proponent dated as of 11 June 2002 shall have no application to the parties or thematters contemplated by this Agreement after the date hereof and is replaced entirely bythis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease

1112 Good Faith Each of the Government and the Proponent shall at all times exercise all itsrights hereunder in a manner consistent with good business practices and shall act in goodfaith

1113 Waiver The failure of any party hereto to insist in any one instance upon the strictperformance by another party hereto of its obligations hereunder the Instruments theExemption Orders the Primary Production Order and the Mining Lease or the failure of any

34

party hereto to exercise any right option or remedy shall not constitute a waiver orrelinquishment for the future of any such obligation right option or remedy nor shall itconstitute a waiver of a subsequent breach No covenant or condition of this Agreementmay be waived by any party hereto except by the written consent of that party andforbearance or indulgence by that party in any regard whatsoever for no matter how longshall not constitute a waiver of such covenant or condition and until such covenant orcondition has been performed or waived in writing that party shall be entitled to invoke anyremedy available to that party under this Agreement the Instruments the ExemptionOrders the Primary Production Order and the Mining Lease despite its forbearance orindulgence

1114 No Partnership Joint Venture or Agency The Government and the Proponent expresslydisclaim any intention to create a partnership joint venture or joint enterprise It isunderstood acknowledged and agreed that nothing contained in this Agreement nor anyacts of the parties shall constitute or be deemed to constitute the Government and theProponent as partners joint venturers or principal and agent in any way or for any purpose

THE HONOURABLE THE PREMIER

THE HONOURABLE THE MINISTER OFMINES AND ENERGY

THE HONOURABLE THE MINISTER OFLABRADOR AND ABORIGINAL AFFAIRS

INCO LIMITED

ByChairman and Chief Executive Officer

VOISEYrsquoS BAY NICKEL COMPANY LIMITED

ByPresident

SCHEDULE 11ANICKEL CONCENTRATE EXEMPTION ORDER

This document can be found at the following web address httpwwwgovnfcahoaregulationsrc020066htm

9

12 Schedules

The documents attached hereto and identified below shall form an integral part of thisAgreement

Schedule 11A - Nickel Concentrate Exemption OrderSchedule 11B - Copper Concentrate Exemption OrderSchedule 11C - Matte Plant Exemption OrderSchedule 49 - IEBASchedule 4132 - Assaying ProceduresSchedule 63 - Mining LeaseSchedule 69 - Mining Tax Act AmendmentsSchedule 610 - Primary Production OrderSchedule 81 - Dispute Resolution Procedures

13 Subdivisions Unless otherwise stated a reference herein or in a Schedule by numericalor alphabetical designation to an Article Section Subsection Paragraph Subparagraphor Schedule shall refer to the Article Section Subsection Paragraph Subparagraph orSchedule bearing that designation in this Agreement or in a Schedule

14 Headings The division of this Agreement into Articles Sections SubsectionsParagraphs and Subparagraphs and the insertion of headings are for convenience ofreference only and shall not affect the construction or interpretation of this Agreement

15 Number and Gender Words importing the singular shall include the plural and vice versaand words importing a particular gender shall include all genders The use of the neutersingular pronoun to refer to a party is deemed a proper reference The necessarygrammatical changes required to make the provisions of this Agreement apply shall in allinstances be assumed as though in each case fully expressed

16 Statutes Regulations Rules and Orders Any reference in this Agreement to all or anypart of any statute regulation rule or order shall unless otherwise stated be a referenceto that statute regulation rule or order or the relevant part thereof as amendedsubstituted replaced or reenacted from time to time

17 Business Day If the day on which any act or payment is required to be done or madeunder this Agreement is a day which is not a Business Day then such act or payment shallbe performed or made on the next following Business Day

18 Contract Always Speaking With the exception of the representations and warranties ofthe parties set out in Article 2 and any estimates referred to in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic and relatedbenefits and costs of facilities referred to in this Agreement made by the Proponent wherea matter or thing is expressed in the present tense it shall be applied to the circumstancesas they arise

10

19 Governing Law and Choice of Forum This Agreement shall be interpreted inaccordance with the laws in force in the Province subject to any applicable federal laws andfor all purposes this Agreement shall be treated as a Newfoundland and Labrador contractThe Proponent irrevocably submits and attorns to the exclusive jurisdiction of the courts ofthe Province

110 Construed Covenants Each obligation or agreement of this Agreement (other than therepresentations and warranties of the parties) even though not expressed as a covenantis to be construed as a covenant

111 Inconsistency or Conflict Except where otherwise provided either expressly or bynecessary implication in this Agreement a Schedule hereto or any Instrument in the eventof any inconsistency or conflict between any such Schedule or Instrument and any provisioncontained in this Agreement the provision of this Agreement shall prevail to the extent ofthe inconsistency or conflict

112 Severability If any provision of this Agreement or the application thereof to any Personor circumstance is to any extent held or rendered invalid void illegal or unenforceablefor any reason then the particular provision

1121 shall be deemed to be independent of and severed from the remainder of thisAgreement and all the other provisions of this Agreement shall neverthelesscontinue in full force and effect and

1122 shall continue to be applicable and enforceable to the fullest extent permitted by lawagainst any Persons and in any circumstances other than those as to which it hasbeen held or rendered invalid void illegal or unenforceable

If a severance occurs under this Section 112 the parties shall use their respective bestefforts to negotiate in good faith an enforceable replacement provision that to the greatestextent possible reflects the intent or serves the purpose of the severed provision

113 Currency All references in this Agreement to currency are to Canadian dollars

114 Knowledge In this Agreement where ldquoKnowledgerdquo of a party is referred to

1141 in respect of the Proponent it shall mean the actual knowledge of the executiveofficers of the Proponent after due inquiry in respect thereof and

1142 in respect of the Government it shall mean the actual knowledge of the responsibleexecutives of the applicable department of Government after due inquiry in respectthereof

11

ARTICLE 2REPRESENTATIONS AND WARRANTIES

21 Proponentrsquos Representations and Warranties Acknowledging that the Government isrelying on such representations and warranties VBNC and Inco jointly and severallyrepresent and warrant to the Government that

211 each is a corporation which has been duly incorporated or organized as applicableunder the laws of its jurisdiction of incorporation or organization as applicable andis validly existing under such laws

212 Inco is extra-provincially registered in the Province

213 each has all necessary corporate power authority and capacity

2131 to cause the design engineering and construction of and to operateand maintain all parts of the Project and

2132 to enter into this Agreement and the Instruments and to perform itsrespective obligations herein and therein

214 the execution and delivery of this Agreement and each of the Instruments and theconsummation of the transactions contemplated herein and therein by each ofthem have been duly authorized by all necessary corporate action on the part ofeach of them

215 neither is a party to bound or affected by or subject to any indenture mortgagelease agreement instrument charter or by-law provision which with or without thegiving of notice or the lapse of time or both would be violated contravened orbreached by or under which default would occur as a result of the executiondelivery or performance of this Agreement or any of the Instruments or theconsummation of any of the transactions provided for in any of them

216 neither is bound or affected by or subject to any Applicable Law which with orwithout the giving of notice or the lapse of time or both would be violatedcontravened or breached by or under which default would occur as a result of theexecution delivery or performance of this Agreement or any of the Instruments orthe consummation of any of the transactions provided for in any of them

217 no approval authorization consent permit or other action by or filing with anyGovernment Entity is required in connection with the execution and delivery of thisAgreement or any of the Instruments and the performance of their respectiveobligations hereunder or thereunder except as otherwise stated herein

218 there is no suit action litigation arbitration proceeding or proceeding by aGovernmental Entity including appeals and applications for review in progresspending or to the Knowledge of either of them threatened against or involving

12

either of them or any judgment decree injunction or order of any court or arbitratorwhich could adversely affect their capacity or power to execute and deliver thisAgreement or any of the Instruments or to consummate the transactionscontemplated herein or therein or which could materially adversely affect theirrespective assets financial condition or future prospects

219 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of each of them enforceable against them inaccordance with their respective terms except as limited by (a) applicablebankruptcy laws or laws affecting the enforcement of creditorsrsquo rights generally and(b) the general principles of equity

2110 all references to estimates made by Inco and VBNC in this Agreement includingwithout limitation the estimated dollar amounts employment levels economic andrelated benefits and costs of facilities are made as of the date of this Agreementhave been determined by them based upon information available at the date of thisAgreement and have been estimated by each of them bona fide and reasonablyand neither of them has any reason to believe that any such estimate isunreasonable or unfounded at the date of this Agreement and

2111 VBNC is a wholly owned subsidiary of Inco and to the Knowledge of the Proponentno Person individually or with any other Person or Persons currently Controls Inco

22 Government Acknowledgments The Government acknowledges that (a) none of VBNCInco or any Person for whom either of them may be responsible in law have made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments and (b) the Proponent shall use the most efficient and cost effective miningtechniques including state of the art automated mining technologies aimed at loweringoperating costs and extending the life of the Project

23 Governmentrsquos Representations and Warranties Acknowledging that the Proponent isrelying on such representations and warranties the Government represents and warrantsto the Proponent that

231 the execution and delivery of this Agreement and each of the Instruments and theconsummation by the Government of the transactions contemplated herein andtherein have been duly authorized by all necessary Government action

232 it is not a party to bound or affected by or subject to any indenture agreement orinstrument which with or without the giving of notice or the lapse of time or bothwould be violated contravened or breached by or under which default would occuras a result of the execution delivery or performance of this Agreement or any ofthe Instruments or the consummation of any of the transactions provided for in anyof them and

13

233 this Agreement and the Instruments shall upon execution and delivery constitutelegal valid and binding obligations of it enforceable against it in accordance with itsterms except as they may be limited by the general principles of equity

24 Proponent Acknowledgements Each of Inco and VBNC acknowledges that neither theGovernment nor any Person for whom it may be responsible in law has made anyrepresentations and warranties with respect to this Agreement or any of the Instrumentsexcept the representations and warranties expressly made in this Agreement or in any ofthe Instruments

ARTICLE 3DESCRIPTION OF THE PROJECT AND RELATED FACILITIES

31 The Project The ldquoProjectrdquo will comprise collectively the Underground ExplorationProgram the Mine the Concentrator Plant the R amp D Program the Demonstration Plantthe Processing Plant and if applicable the Concentrator Plant expansion referred to inSection 45 The Processing Plant will be capable of processing concentrate andintermediate feeds containing nickel from other sources world wide which will give theProcessing Plant the capability of operating well beyond the life of the Mine

32 Capital Investment The Proponent estimates that the aggregate capital investment in theProject and related facilities will be $29 billion over the estimated 30-year life of the Projectinclusive of sustaining capital expenditures

33 Employment The Proponent estimates that

331 the construction phase of the Mine and Concentrator Plant will create approximately1700 person-years of employment in the Province the construction phase of theHydromet Plant will create approximately 3000 person-years of employment in theProvince and the construction phase of the Matte Plant will create approximately2500 person-years of employment in the Province

332 during the various operating phases the Project will create the followingemployment levels in the Province Mine and Concentrator Plant - 400 people R ampD Program - 200 people Underground Exploration Program - 85 people HydrometPlant - 400 people Matte Plant - 350 people

333 over the estimated 30-year life of the Project total employment benefits from theProject in the Province will be 76000 direct and indirect person-years and

334 gross domestic product impact to the Province with respect to the Project will be$11 billion

34 Innovation Centre The Proponent shall spend $10 million on and provide an endowmentof $1 million per year over a ten-year period to cover operational costs for an IncoInnovation Centre (the ldquoInnovation Centrerdquo) at St Johnrsquos in conjunction with theUniversity pursuant to the University Agreement The focus of the Innovation Centre willbe on education and research in mineral exploration mining and metallurgical processing

14

The Innovation Centre will provide world-class education research and training related tothe mining industry to 50-60 students per year to be engaged in Bachelors Masters andDoctorate level programs The Proponent shall commence work on the Innovation Centrein 2002 with target completion in 2004

35 R amp D Program The Proponent shall undertake a comprehensive research anddevelopment program intended to establish the commercial technical and economicfeasibility of hydrometallurgical process technology to process the Nickel Concentrate (theldquoR amp D Programrdquo) The R amp D Program will include the evaluation of chemical engineeringsub-processes for the hydrometallurgical process the mechanical equipment design for theDemonstration Plant and the construction and operation of the Demonstration Plant

ARTICLE 4PROPONENTrsquoS UNDERTAKINGS

41 Infrastructure and Initial Work Commencing in 2002 the Proponent shall

411 at the Mine site undertake site mobilization including the establishment of aconstruction camp initiation of work on temporary port facilities and construction ofaccess roads

412 at Argentia undertake leasing or other arrangements for occupancy and sitepreparation including demolition fencing security and signage

413 undertake the construction of a warehouse building and establish staging areas andlay down areas in support of Labrador activities

414 establish a project office at Argentia and information centres at St Johnrsquos andHappy Valley-Goose Bay and

415 complete site selection and commence architectural design and engineering workfor the Innovation Centre

The Proponent estimates that this infrastructure and initial work program will employ inaggregate approximately 250 persons and the Proponent shall spend not less than $55million on this program in the Province on or before 31 March 2003

42 R amp D Program421 The Proponent shall undertake the R amp D Program and as a part thereof shall

construct the Demonstration Plant at a cost which the Proponent estimates will be$130 million The Proponent shall commence the site development for theDemonstration Plant in 2002 and continue such development into 2003 Theinitiatives in support of these activities will include the operation of an informationcentre preparation of environmental baseline studies and continued upgrading orreplacement of utility services required for the Demonstration Plant maintainingstaging areas and cleanup and civil works at Argentia consisting of demolition

15

grading and earth works construction The Proponent has scheduled thecompletion of the engineering design and construction of the Demonstration Plantso that the Demonstration Plant Completion Date shall have occurred on or before31 December 2006

422 The Proponent shall provide to the Government within 15 days of the end of eachcalendar quarter commencing with the calendar quarter ending 31 December 2002a detailed progress report on the results during such calendar quarter of the R amp DProgram which report will detail costs incurred to the end of such calendar quarterand contain sufficient documentation and information to enable the Government toevaluate the Proponentrsquos progress with respect to the R amp D Program and thedevelopment of hydrometallurgical process technology for processing the NickelConcentrate If requested by the Government upon reasonable notice theProponent shall provide the Government and its representatives and advisorsaccess at reasonable times to the facilities where the R amp D Program is beingconducted and make appropriate personnel of the Proponent available to respondto any requests for additional information

423 In addition to the utilization of the Demonstration Plant for the purposes ofdeveloping hydrometallurgical process technology for processing the NickelConcentrate the Proponent shall explore business opportunities for the ongoingutilization of the Demonstration Plant for the evaluation of other concentrates andintermediate feeds after completion of the R amp D Program

43 Mine and Concentrator Plant

431 The Proponent shall cause the development of the Mine and the designengineering and construction of a millconcentrator plant which will be capable ofprocessing 6000 tonnes of ore per day (the ldquoConcentrator Plantrdquo) TheConcentrator Plant will produce the Copper Concentrate and the NickelConcentrate The Proponent has scheduled to begin the development of the Mineand the construction of the Concentrator Plant in 2003 and estimates that the Mineand Concentrator Plant will require three years to construct at a cost ofapproximately $710 million

432 The Proponent

4321 shall not ship any Nickel Concentrate out of the Province aspermitted by the Nickel Concentrate Exemption Order before theDemonstration Plant Completion Date and

4322 shall ship Nickel Concentrate from the Concentrator Plant to theDemonstration Plant in sufficient quantities for the continuedoperation of the Demonstration Plant during the R amp D Programfollowing successful start up of the Concentrator Plant

16

44 Underground Exploration Program The Proponent shall undertake an undergroundexploration program which it estimates will cost $95 million and employ approximately 85people This program is intended to identify Sufficient Reserves at depth under the LeasedLands and if there are such Sufficient Reserves the Proponent shall develop a mining planfor the economic extraction of such Reserves The initial phase of this undergroundexploration program will be an advanced surface program which the Proponent estimateswill cost $20 million to commence in 2002 with completion targeted for 2006 Subsequentunderground exploration will be scheduled to ensure that Sufficient Reserves under theLeased Lands are available to sustain full operation of the Concentrator Plant during thetransition from open-pit operations to full underground mining operations if applicable

45 Underground Mine Development and Concentrator Plant Expansion If theunderground exploration program described in Section 44 identifies Sufficient Reservesas contemplated by Section 44 the Proponent shall commence the development of anunderground mine or mines on the Leased Lands and an expansion of the ConcentratorPlant in order to supply sufficient Nickel Concentrate to maintain the operation of theProcessing Plant at full capacity The Proponent estimates that this program will costapproximately $750 million and employ an aggregate of 800 people

46 Processing Plant

461 In order to maximize long-term benefits for the Province and the people of theProvince the Proponent shall use its best efforts through the R amp D Program todevelop a technically and economically feasible hydrometallurgical processtechnology for processing the Nickel Concentrate in the Province If suchtechnology is successfully developed the Proponent shall cause the designengineering and construction of and operate and maintain a hydrometallurgicalprocessing plant with a design capacity to produce annually approximately 50000tonnes of Finished Nickel Product together with associated cobalt and copperproducts (the ldquoHydromet Plantrdquo) The Proponent estimates that the HydrometPlant will have a capital cost of approximately $800 million and during the three-yearconstruction period will generate approximately 3000 person-years of employmentThe Proponent estimates that the Hydromet Plant will employ approximately 400people during operations

462 If pursuant to Section 47 it is determined that a Hydromet Plant is not technicallyor economically feasible the Proponent shall construct a commercialhydrometallurgical nickel-matte processing facility or other similar facilityincorporating a proven state of the art technology to produce Finished NickelProduct (the ldquoMatte Plantrdquo) The Matte Plant will have a design capacity toproduce annually approximately 50000 tonnes of Finished Nickel Product togetherwith associated cobalt and copper products The Proponent estimates the MattePlant will have a capital cost of approximately $670 million and during the estimatedthree-year construction period will generate approximately 2500 person-years ofemployment The Proponent estimates that the Matte Plant will employapproximately 350 people during operations

17

463 The Proponent has represented to the Government that its objective is to operatethe Processing Plant well beyond the life of the Mine Accordingly the Proponentundertakes to explore technically and economically feasible opportunities for theexpansion of the Processing Plant and to secure opportunities to supply theProcessing Plant with feed from world wide sources to fully utilize the Proponentrsquoslarge capital investment in the Processing Plant

464 The Proponent shall establish the Processing Plant at Argentia unlessenvironmental conditions at Argentia would make it not economically feasible toestablish the Processing Plant at Argentia and in such circumstances theProponent shall locate the Processing Plant at another site in the Province

47 Selection of Applicable Processing Plant

471 The Proponent shall use commercially reasonable efforts to deliver as soon aspossible but in any event shall deliver on or before 15 November 2008 theDecision and the Decision Materials to the Government and the Experts

472 If the Proponent has not on or before 30 June 2008 delivered to the Governmentthe Decision and the Decision Materials

4721 it shall forthwith meet with the Government to review on aconfidential basis the status of its efforts towards being able todeliver the Decision

4722 thereafter it shall promptly update the Government from time to timeon its efforts to be able to deliver the Decision and the outstandingissues relevant to whether the Decision will be to build the HydrometPlant or the Matte Plant and

4723 to the extent that the Proponent is not by 30 June 2008 in aposition to deliver the Decision which confirms that the Proponentintends to proceed with the construction of the Hydromet Plant theProponent shall use commercially reasonable efforts to developImplementation Plans for both a Hydromet Plant and a Matte Plantso that it will be able to deliver the Implementation Plan for theHydromet Plant or Matte Plant as applicable on or before 31December 2008

473 The Government may at any time after the earlier of the Decision Date or 30 June2008 give the Proponent notice in writing that it wishes to proceed with theappointment of the Experts When the Government gives notice to the Proponentrequiring the appointment of the Experts the Government and the Proponent shallthen forthwith agree upon the appointment of the Experts If the Government andthe Proponent cannot so agree within 15 days after the giving by the Governmentof such notice the appointment of the Experts shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter to

18

the Joint Committee or the Mediation Procedure referred to therein If the Expertsare appointed prior to the delivery by the Proponent of the Decision and theDecision Materials the Proponent shall provide to the Government and the Expertssuch data and information as is then available that will assist the Experts in theirreview under Section 475 The Proponent and the Government shall each pay50 of the fees and expenses of the Experts Before receiving the Decision theDecision Materials or any other information or data from the Proponent under thisAgreement the Experts shall first execute a confidentiality agreement containingsubstantially the same terms as provided for in Article 9

474 If in the Decision the Proponent confirms it intends to construct the Hydromet Plantthe Proponent shall deliver the Implementation Plan for the Hydromet Plant on orbefore 31 December 2008 and thereafter shall proceed diligently to complete thedetailed engineering for and construction of the Hydromet Plant in accordance withsuch Implementation Plan so that it shall be completed on or before 31 December2011

475 If in the Decision the Proponent confirms it intends to construct the Matte Plant theGovernment shall on or before the seventh Business Days after the Decision Datedeliver to the Proponent and the Experts a notice in writing (in this Section 475 theldquoGovernment Decisionrdquo) that the Government either (a) accepts the Decision tobuild the Matte Plant or (b) intends to refer such Decision to the Experts for reviewIf in the Government Decision the Government states it intends to refer theDecision to the Experts the Proponent shall promptly deliver to the Experts theDecision and the Decision Materials if it has not previously done so The Expertswill review the Decision the Decision Materials and any other information or datawhich the Experts deem appropriate or which the Government requests them toconsider and render their report (the ldquoExpertsrsquo Reportrdquo) within 30 days of the dateon which the Government delivers the Government Decision If the Governmentrequests the Experts to consider any other information or data in addition to theDecision Materials it shall provide to the Experts and the Proponent copies of suchrequest and any such information and data at the time it delivers the GovernmentDecision and the Proponent shall have the right within five Business Days tocomment on or respond to such information and data to the Experts with a copy tothe Government The Expertsrsquo Report shall determine whether in the opinion of theExperts it would be technically and economically feasible for the Proponent to buildthe Hydromet Plant together with reasons for such determination If the ExpertsrsquoReport determines that it is technically and economically feasible for the Proponentto build the Hydromet Plant the Proponent shall on or before 31 December 2008deliver to the Government an Implementation Plan for the Hydromet Plant andthereafter shall proceed diligently to complete the detailed engineering for andconstruction of the Hydromet Plant so that it shall be completed on or before 31December 2011 If the Expertsrsquo Report confirms that it would not be technically oreconomically feasible to build the Hydromet Plant the Proponent shall on or before31 December 2008 deliver to the Government an Implementation Plan for the MattePlant and thereafter shall proceed diligently to complete the detailed engineering forand construction of the Matte Plant in accordance with such Implementation Plan

19

so that it shall be completed on or before 31 December 2011 Subject to Section477 the Expertsrsquo Report shall be final and binding on the Government and theProponent

476 The determination as to whether the Proponent is proceeding diligently with thecompletion of the engineering work for and the construction of the Processing Plantfor completion on or before 31 December 2011 as required by Section 474 or475 shall be made annually on the anniversary date of the Decision Date by anEngineer who shall certify to both the Government and the Proponent as to whetherthe actual engineering work for and construction of the Processing Plant is onschedule with the applicable Implementation Plan

477 If there is a manifest error in the Expertsrsquo Report which if corrected would result ina different determination by the Experts the Expertsrsquo Report shall be referred backto the Experts for the purpose of forthwith correcting such manifest error changingthe determination in the Expertsrsquo Report and submitting a revised Expertsrsquo Reportto the Proponent and the Government

478 Where an Engineer is required to be appointed from time to time for the purposesof Section 476 or for determining the Commercial Production Date theConstruction Completion Date or the Demonstration Plant Completion Date theGovernment and the Proponent shall forthwith agree upon the appointment of suchEngineer If the Government and the Proponent cannot so agree within 15 daysof the Government or the Proponent giving the other notice requiring appointmentof an Engineer the appointment of the Engineer shall be submitted to arbitration inaccordance with the provisions of Schedule 81 without first referring the matter tothe Joint Committee or the Mediation Procedure referred to therein The Proponentand the Government shall each pay 50 of the fees and expenses of any Engineer

48 Innovation Centre The Proponent shall enter into an agreement (the ldquoUniversityAgreementrdquo) with the University in form and content satisfactory to the Government on orbefore the Closing Date The University Agreement shall contain among other things theProponentrsquos commitments and intentions set out in Section 34

49 Industrial and Employment Benefits The Proponent shall execute the IEBA to beeffective 7 October 2002

410 IBAs The Proponent represents and warrants to the Government that it has entered intothe IBAs

411 VBN Undertaking Order The Proponent agrees to abide by and implement the terms andconditions contained in the VBN Undertaking Order

412 Corporate Income Tax The Proponent shall use its best efforts to negotiate and executewith the Government an agreement covering the matters set forth in this Section 412 andSection 68 (the ldquoTax Agreementrdquo) as soon as possible but in any event on or before theClosing Date The Tax Agreement will contain provisions which to the extent permitted by

20

law will result in an allocation to the Province for the purposes of Part IV of the FederalIncome Tax Regulations of the Proponentrsquos gross revenues from the sale or disposition ofnickel copper and cobalt products whether in intermediate or final form from the Project

413 Return of Concentrate

4131 In consideration of the Government granting the Exemption Orders the Proponentguarantees that it shall prior to Cessation of Mining Operations commenceshipping into the Province Replacement Concentrate for processing into FinishedNickel Product at the Processing Plant Such Replacement Concentrate shall beshipped to and processed by the Processing Plant in sufficient quantities to permitthe Processing Plant to operate continuously at a rate that will produce not less than25000 tonnes of Finished Nickel Product annually and such shipments shallcontinue at least until such time as the contained nickel and cobalt in theReplacement Concentrate shall have equalled the total quantity of contained nickeland cobalt in the Nickel Concentrate shipped out of the Province under the termsof the Nickel Concentrate Exemption Order and otherwise than under the provisionsof an Exemption Order

4132 The Proponent shall undertake the Assaying Procedures set out in Schedule 4132with respect to the Nickel Concentrate and the Replacement Concentrate

4133 The Proponent acknowledges that if it does not perform its contractual obligationsunder Section 4131 (a) the Province and the economy of the Province will suffersubstantial loss (b) the Government would not be properly compensated for its lossby monetary damages which therefore will not be considered an adequate remedyfor such breach and (c) the Government may at any time subsequent to suchbreach commence an action against the Proponent for any one or more of thefollowing remedies whether claimed as primary or secondary alternative relief

41331 an order for specific performance

41332 appropriate injunctive relief whether mandatory or prohibitory and

41333 monetary damages including for consequential and economic lossreflecting the substantial losses suffered by the Government and theeconomy of the Province as a result of such breach

The Proponent expressly waives any right to claim or argue that the Governmentcannot claim the relief set out in Sections 41331 41332 and 41333 in any suitcommenced by the Government against the Proponent for the Proponentrsquos failureto perform its obligations under Section 4131

21

414 Copper Processing in the Province

4141 The Government acknowledges that at the date hereof the quantity of coppercurrently identified in the mineralized zones on or under the Leased Lands togetherwith identified copper deposits elsewhere in the Province are not sufficient to justifythe construction and operation of a copper processing facility in the Province on aneconomically feasible basis

4142 If at any time in the future

41421 Sufficient Reserves of copper are discovered by the Proponent inthe Province (including on or under the Leased Lands) to makeeconomic the processing on a commercial basis of the CopperConcentrate or any other product containing the principal quantitiesof copper extracted from the Leased Lands into Finished CopperProduct in the Province the Proponent shall process such CopperConcentrate into Finished Copper Product in the Province or

41422 a third party establishes a facility in the Province for the commercialprocessing of copper concentrate the Proponent shall offer for saleits then available Copper Concentrate from the Concentrator Plantto such third party for processing in such facility on then prevailingcommercial terms and conditions subject to the Proponentrsquos thenexisting contractual obligations

4143 In the circumstances set out in Section 4142 the Proponent acknowledges thatthe Government has the right pursuant to Section 311(3) of the Mineral Act torescind the Copper Concentrate Exemption Order

415 Parties in Contract Change of Control and Assignment

4151 The Proponent covenants with the Government that without the prior Approval ofthe Government it

41511 shall not take or threaten or purport to take any action whether byway of contract corporate reorganization or arrangement orotherwise that would have the effect of transferring assigningsubletting or otherwise divesting itself of a majority interest in orControl of (a) the Project or (b) all or substantially all of theProponentsrsquo rights under this Agreement the Instruments theExemption Orders the Primary Production Order and subject toApplicable Laws the Mining Lease and

41512 shall not take or threaten or purport to take any action which directlyor indirectly results in a change of Control of VBNC to a party otherthan Inco

22

4152 Wherever pursuant to Section 4151 the Government is requested to grant itsApproval such Approval may be withheld by the Government in its sole andabsolute discretion for any reason whatsoever

4153 For bona fide tax or other corporate reasons the Proponent may without theApproval of the Government transfer assign sublet or otherwise divest to anAffiliate a majority interest in or Control of (a) the Project or (b) all or substantiallyall of the Proponentrsquos rights under this Agreement the Instruments the ExemptionOrders the Primary Production Order and subject to Applicable Laws the MiningLease Notwithstanding Section 111 no such transfer assignment sublet ordivestiture shall relieve the Proponent of its obligations hereunder or thereunder

4154 The Proponent shall promptly give written notice to the Government of any actionit takes under Section 4151 or 4153

416 Members of House of Assembly The Proponent undertakes to (a) ensure that nomember of the House of Assembly of the Province shall have any interest in thisAgreement and (b) use its best efforts to ensure that no Member of the House of Assemblyof the Province receives any benefit to arise herefrom or from any report study review oranalysis required to be made or submitted pursuant to this Agreement

417 Mining Lease VBNC shall execute the Mining Lease effective 30 September 2002

418 Proponentrsquos Financing The Proponent shall use best efforts to obtain the financingcontemplated by Section 1024 including without limitation the preparation of all feasibilitystudies required in order to obtain such financing

ARTICLE 5FORCE MAJEURE

51 Events of Force Majeure For the purposes of this Article 5 and subject to the exceptionsand qualifications below each of the following shall be an ldquoEvent of Force Majeurerdquo

511 acts of God or natural disasters adverse weather conditions or other similaroccurrences

512 acts of war (declared or undeclared) or conditions arising out of or attributable toany such acts of war revolutions insurrections civil strife formal or informalhostilities mob violence riots and similar disturbances blockades or any otherunlawful acts against public order or authority

513 strikes lockouts work stoppages or labour disturbances unless directly andproximately caused by an unlawful act or omission of the Proponent

514 (a) delay or failure by suppliers of labour transportation materials machineryequipment parts supplies utilities or services (b) contractorsrsquo or sub-contractorsrsquoshortage of or inability to obtain labour transportation materials machinery

23

equipment parts supplies utilities or services or (c) breakdown of equipmentmachinery or facilities unless any of the foregoing are directly and proximatelycaused by or result from an unlawful act or omission of the Proponent

515 accidents and

516 solely in respect of the Proponentrsquos obligations in Section 4131 a ProcessingRelated Reason provided that a Processing Related Reason shall not be an Eventof Force Majeure at any time after three years following Cessation of MiningOperations

52 Obligation to Perform In order to obtain relief for an Event of Force Majeure theProponent shall (a) use commercially reasonable efforts to (i) prevent the occurrence of(ii) perform its obligations in the face of and (iii) terminate any such Event of Force Majeure(other than the events described in Section 513 relied upon) and (b) give the Governmentwritten notice of the facts which the Proponent claims constitute an Event of Force Majeureas soon as reasonably practical upon becoming aware of their existence

53 Force Majeure Relief If the Proponent establishes that it is prevented from performingany of its obligations under this Agreement the Nickel Concentrate Exemption Order or theMatte Plant Exemption Order by reason of an Event of Force Majeure such obligations willbe suspended for the period of the existence of such Event of Force Majeure and theProponent will be entitled to an extension of all dates referred to in this Agreement theNickel Concentrate Exemption Order and the Matte Plant Exemption Order for a reasonableperiod of time that reflects (a) the period during which the Proponent is prevented fromperforming its obligations by reason of the Event of Force Majeure and (b) the impact thatsuch Event of Force Majeure has on the Project including without limitation shippingschedules and construction schedules that have been delayed by reason of such Event ofForce Majeure Even though the Proponentrsquos obligations will be suspended for suchreasonable period of time when the applicable Event of Force Majeure is no longerpreventing the Proponent from performing its obligations the Proponent will again beobliged to perform such obligations

ARTICLE 6GOVERNMENT UNDERTAKINGS

61 Aboriginal Agreements The Government represents and warrants that it has entered into(a) interim measures agreements with the Innu Nation and the LIA that include the VoiseyrsquosBay chapter of the respective land claims agreements and (b) the EMA

62 Electrical Rights and Provision of Power The Government shall cause Newfoundlandand Labrador Hydro or its successors to

621 provide to the Proponent electrical power for the Processing Plant at the lower of(a) the island industrial electrical rate or (b) any lower electrical rate that may be

24

offered from time to time by Newfoundland and Labrador Hydro or its successorsto its industrial customers in comparable circumstances and

622 ensure that Newfoundland and Labrador Hydro or its successors can supply to theProponent sufficient electrical power for the operation of the Processing Plant

63 Mining Lease The Government shall issue the Mining Lease effective 30 September2002

64 Exemption Orders The Government shall issue the Exemption Orders effective 30September 2002

65 Issue of Authorizations

651 Where the Proponent has submitted all information and data in accordance withApplicable Laws and required by the Government for it to issue or grant any permitauthorization order or other approval necessary for the Proponent to implement theProject or any part thereof (in this Section 65 the ldquoAuthorization(s)rdquo) theGovernment shall issue or grant any such Authorization on a timely basis

652 If the Government does not issue or grant an Authorization on a timely basis

6521 the Government shall grant the Proponent an extension of all datesreferred to in this Agreement the Nickel Concentrate ExemptionOrder and the Matte Plant Exemption Order for a reasonable periodof time that reflects (a) the period of delay in granting suchAuthorization and (b) the impact that such delay has on the Projectincluding without limitation shipping schedules and constructionschedules that will have been delayed by Governmentrsquos failure toissue or grant such Authorization on a timely basis and

6522 if as a result of the Governmentrsquos failure to issue or grant anAuthorization on a timely basis the completion date for theProcessing Plant is delayed and provided that the Proponentestablishes that it is likely it will ship out of the Province the totalvolume of contained nickel in the Nickel Concentrate permittedunder the Nickel Concentrate Exemption Order prior to the revisedcompletion date of the Processing Plant the Government shallamend the Nickel Concentrate Exemption Order to allow anadditional quantity of contained nickel in Nickel Concentrate to beshipped out of the Province which quantity will reflect thereasonable period of time of the extension referred to in Section6521

653 The Government shall not be responsible for any delays nor shall the Proponent beentitled to any relief under this Section 65 unless such delays are directly and

25

proximately caused by or result from an act or omission of the Government or adepartment regulatory body board agent or employee of the Government

66 Legislative Framework

661 The Government represents to the Proponent (and acknowledges that theProponent is relying upon such representation) that it shall maintain substantiallythe Legislative Framework for the duration of the Project subject to legislativeamendments contemplated in this Agreement and legislation of general applicationThe Government shall maintain the Legislative Framework consistent with thisAgreement subject to Governmental responsibilities including the responsibility forensuring proper management of the Provincersquos resources the protection andmaintenance of public health and safety and the protection of the environment TheGovernment acknowledges that this Agreement is consistent with current public lawand Governmental responsibilities

662 The Proponent represents to the Government (and the Proponent acknowledgesthat the Government in consideration of agreeing to maintain the LegislativeFramework has relied upon such representation) that the Proponent shall performits obligations set out in this Agreement the Instruments the Exemption Orders thePrimary Production Order and the Mining Lease

67 Special Project Orders The Government shall issue a Special Project Order or SpecialProject Orders under Section 70 of the Labour Relations Act (Newfoundland and Labrador)to ensure a stable labour relations environment throughout the construction phases of theProject This Order or these Orders shall include without limitation provisions such as nostrikes and lock-outs and the ability to designate the union organization and employerrsquosrepresentative for the purposes of collective bargaining

68 Corporate Income Tax The Government shall use best efforts to negotiate and executewith the Proponent the Tax Agreement as soon as possible but in any event on or beforethe Closing Date The Tax Agreement will contain provisions

681 whereby the Government will provide that the rate of the Provincersquos corporateincome tax applicable to the Proponent will be the lower of the ldquoall provincesaveragerdquo or the Provincersquos income tax rate

682 which to the extent permitted by law will result in an allocation to the Province forthe purposes of Part IV of the Federal Income Tax Regulations of the Proponentrsquosgross revenues from the sale or disposition of nickel copper and cobalt productswhether in intermediate or final form from the Project and

683 whereby the Government will undertake to indemnify the Proponent for any doubletaxation resulting from the allocation referred to in Section 682

26

69 Mining Tax Act At the next session of the House of Assembly of the Province theGovernment shall introduce and support legislation to amend the Mining Tax Act inaccordance with the Mining Tax Act Amendments

610 Primary Production Order The Government shall issue the Primary Production Ordereffective 30 September 2002

611 Industrial and Employment Benefits The Government shall execute the IEBA to beeffective 7 October 2002

ARTICLE 7PROPONENTrsquoS DEFAULT

71 Notice of an Event of Default Upon the happening of an Event of Default theGovernment may deliver to the Proponent a notice of default setting forth in reasonabledetail the nature of the Event of Default and if the Government intends to exercise its rightsunder Section 72 indicating the date upon which the Government intends to exercise suchrights

72 Termination Subject to an Event of Force Majeure or the provisions of Section 652where an Event of Default has occurred and in each of such cases and so often as anEvent of Default happens after giving the notice provided for in Section 71 theGovernment may at any time in its sole discretion do any one or more of the following (a)terminate this Agreement (b) terminate the Mining Lease (c) rescind the ExemptionOrders and (d) take action for any remedy at law or in equity

73 Release by Proponent and Proponentrsquos Indemnity The Proponent hereby releases anddischarges and agrees to indemnify and save harmless the Government from every claimof every nature whether in damages (including consequential or indirect damages) or notwhich may arise or be suffered by the Proponent or any Person claiming through or underthe Proponent by reason of or as a result of anything done by the Government or anysuccessor or assign claiming through or under the Government under the provisions ofSection 72

ARTICLE 8DISPUTE RESOLUTION

81 Dispute Resolution Any dispute or difference between the parties hereto arising

811 as to whether a Processing Related Reason exists

27

812 as to the selection of an Engineer or firm of Engineers the Experts or an umpireunder Schedule 4132

813 under Section 45 as to whether the Underground Exploration Program hasidentified Sufficient Reserves under the Leased Lands

814 as to the determination of the date of Cessation of Mining Operations

815 as to whether commercial processing is economic as contemplated by Section41421

816 as to then prevailing commercial terms and conditions as contemplated by Section41422

817 under Section 51 as to whether an Event of Force Majeure exists

818 under Section 53 as to whether an Event of Force Majeure prevents the Proponentfrom performing any of its obligations under this Agreement

819 under Section 53 or Section 652 as to the reasonable period of time for theextension of the dates of performance of the Proponentrsquos obligations

8110 under Section 6522 the additional quantity of contained nickel in NickelConcentrate to be shipped out of the Province or

8111 as to whether the Proponent is complying with its obligations under Section 52

shall in each case be resolved in the manner provided for in Schedule 81

ARTICLE 9CONFIDENTIAL INFORMATION

91 Confidential Information The Government

911 acknowledges that information (the Information) supplied to it by or on behalf ofthe Proponent pursuant to or in connection with this Agreement or the Instrumentsincluding without limitation information provided pursuant to or in connection withSections 422 471 472 475 52 and 81 is of a financial commercialscientific or technical nature and is supplied in confidence and

912 subject to Sections 93 and 94 shall keep the Information confidential and shallnot use or disclose the Information to any third party without the Approval of theProponent and in doing so shall use the same care as it applies to avoid disclosureor dissemination of its own confidential information to prevent the disclosure ofInformation to any third party

28

92 Effect of Disclosure The Government acknowledges that disclosure of the Informationcontrary to the provisions of this Article 9 could reasonably be expected to921 harm significantly the competitive position or interfere significantly with the

negotiating position of the Proponent

922 result in similar information no longer being supplied by or on behalf of theProponent to the Government when it is in the public interest that similar informationcontinued to be supplied and

923 result in material financial loss to the Proponent or result in material financial gainto competitors of the Proponent and other Persons

93 Approval The Government may disclose Information if Approved by the Proponent

94 Permitted Disclosure of Information The provisions of this Article 9 shall not apply toInformation which

941 is now or which hereafter through no act or omission of the Government becomesgenerally known or available to the public without breach of this Agreement

942 after disclosure to the Government becomes generally known or available to thepublic by publication or otherwise through no act or omission of the Government

943 the Government can establish was in its possession at the time of disclosure andwas not previously acquired directly or indirectly from the Proponent

944 is disclosed to the Government by a third party on a non-confidential basis whichparty to the Knowledge of the Government is not prohibited from disclosing suchInformation to the Government by any legal contractual or fiduciary obligation towhich such party is bound or subject or

945 is required to be disclosed by law

95 Remedy Without limiting the Proponentrsquos rights and recourses for a breach by theGovernment of its obligations in this Article 9

951 the Government acknowledges that the Proponent shall suffer irreparable harm ifthe Government discloses Information contrary to the provisions of this Article 9and unless prohibited by law the Proponent shall be entitled to an injunction orinjunctions to prevent such disclosure

952 the Government shall be liable for and shall indemnify and save the Proponentharmless from and against costs losses damages and claims that it may sufferpay incur or be liable for as a result of any breach by the Government of thisArticle 9 and

29

953 in the event there are any measures which the Government can take to ensurecompliance with the provisions of Section 912 the Proponent shall be relieved ofthe obligation to provide information of the type with respect to which the breachoccurred until the Government has taken such measures

ARTICLE 10CONDITIONS CLOSING AND TERMINATION

101 Conditions for the Benefit of the Government Subject to Section 1061 the obligationsof the Government in this Agreement are subject to the satisfaction of or compliance withat or prior to the Time of Closing each of the following conditions

1011 the representations and warranties of the Proponent made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Proponent at or prior to the Time of Closing shallhave been performed the Proponent shall not be in breach of any agreement onits part contained in this Agreement at the Time of Closing and the Governmentshall have received a certificate confirming the foregoing signed for and on behalfof the Proponent in form and content satisfactory to the Government

1012 the University Agreement shall have been executed by the Proponent and a copythereof shall have been delivered to the Government

1013 the Tax Agreement shall have been executed by the Proponent and delivered to theGovernment and

1014 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

102 Conditions for the Benefit of the Proponent Subject to Section 1061 the obligationsof the Proponent in this Agreement are subject to the satisfaction of or compliance with ator prior to the Time of Closing each of the following conditions

1021 the representations and warranties of the Government made in or pursuant to thisAgreement shall be true and correct at the Time of Closing with the same force andeffect as if made at and as of the Time of Closing the covenants contained in thisAgreement to be performed by the Government at or prior to the Time of Closingshall have been performed the Government shall not be in breach of anyagreement on its part contained in this Agreement at the Time of Closing and theProponent shall have received a certificate confirming the foregoing signed for andon behalf of the Government in form and content satisfactory to the Proponent

30

1022 no action or proceeding shall be pending or threatened by any Person to restrainor prohibit the consummation of the actions or transactions contemplated by thisAgreement

1023 the Tax Agreement shall have been executed by the Government and delivered bythe Government to the Proponent

1024 the Proponent shall have secured financing on reasonable commercial terms toenable it to develop the Mine and construct the Concentrator Plant and

1025 the Mining Tax Act Amendments shall have become law

103 Closing Notice If the Proponent (a) wishes to waive the condition set out in Section1024 or (b) has obtained the financing contemplated by Section 1024 it shall forthwithdeliver to the Government a notice (the ldquoClosing Noticerdquo) confirming that it has eitherwaived the condition set out in Section 1024 or that such condition has been satisfied

104 Deliveries and Closing1041 The Closing shall take place at the Time of Closing on the Closing Date at a

location to be agreed by the parties

1042 At the Closing

10421 the Proponent shall deliver to the Government the certificatecontemplated by Section 1011 and if not previously delivered theexecuted University Agreement and the executed Tax Agreementand

10422 the Government shall deliver to the Proponent the certificatecontemplated by Section 1021 and if not previously delivered theexecuted Tax Agreement

105 Termination This Agreement and the IBEA may be terminated at any time prior to theTime of Closing1051 by agreement of the Government and the Proponent

1052 by the Government if the conditions set out in Section 101 have not been satisfiedor waived by the Government or the Closing Notice has not been delivered to theGovernment on or before 31 March 2003 or

1053 by the Proponent if the conditions set out in Section 102 have not been satisfiedor waived by the Proponent (except the condition set out in Section 1024 in theevent the Proponent has delivered the Closing Notice)

106 Effect of Agreement and Termination

1061 Notwithstanding Section 1062 and subject to Section 1063 the Government andthe Proponent shall be bound by the provisions of Sections 41 421 422 410

31

411 412 415 416 417 418 61 63 64 65 66 67 68 69 610 and 611and Articles 5 8 9 and 11 effective as of and from the date of execution of thisAgreement

1062 Subject to Section 1061 the obligations of the Proponent and the Government inthis Agreement shall be effective as of and from the Time of Closing

1063 If this Agreement and the IEBA are terminated in accordance with the provisions ofSection 105 this Agreement and the IEBA shall thereafter become null and voidand have no effect and no party shall have any liability to the other except

10631 the obligations contained in Sections 41421 411 69 and Article9 hereof and

10632 the liability of a party in respect of its breach of this Agreement andthe IEBA prior to such termination

all of which shall survive such termination for a period of twelve months followingsuch termination

ARTICLE 11GENERAL MATTERS

111 Enurement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease shall be binding upon and shall enure to the benefitof the parties hereto the successors and assigns of the Government and the successorsand permitted assigns of the Proponent Any such assignment permitted by this Agreementshall become effective only when the assignee executes with the Government aninstrument whereby it agrees to be bound by and perform all of the Proponentrsquos obligationsunder this Agreement the Instruments the Exemption Orders the Primary ProductionOrder and the Mining Lease Subject to Section 4153 from and after the execution ofsuch instrument the assignor shall be relieved of and released from all its obligations underthis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease with effect from and after the date of execution of such instrument

112 Counterparts This Agreement and the other documents referred to herein andorotherwise required to complete the transactions contemplated hereby may be executed intwo or more counterparts including by facsimile each of which shall be deemed an originaland all of which together shall constitute one and the same instrument

113 Notices All notices requests demands and other communications hereunder shall bedeemed to have been duly given if in writing and either delivered personally sent byfacsimile transmission or by air courier service to the addresses designated below or suchother addresses as may be designated in writing by notice given hereunder and shall be

32

effective upon personal delivery or facsimile transmission thereof with proof of transmissionreceipt or upon delivery by air courier serviceIf to VBNC Voiseyrsquos Bay Nickel Company Limited

Suite 700 Baine Johnston Centre10 Fort William PlaceSt Johnrsquos NewfoundlandA1C 1K4Attention PresidentFacsimile (709) 758-8820

If to Inco Inco Limited145 King Street WestSuite 1500Toronto OntarioM5H 4B7Attention PresidentFacsimile (416) 361-7734

If to the Government Government of Newfoundland amp LabradorDepartment of Mines amp EnergyNatural Resources Building7th Floor 50 Elizabeth AvenueSt Johnrsquos NewfoundlandA1A 1W5Attention The MinisterFacsimile (709) 729-0059

114 Legal Fees In the event of any dispute or controversy between the Proponent on the onehand and the Government on the other hand relating to the interpretation of this Agreementor to the transactions contemplated herein the prevailing party shall be entitled to recoverfrom the other party reasonable legal fees and expenses incurred by the prevailing partySuch award shall include reasonable post judgment legal fees and costs

115 Payment of Fees and Expenses Each party hereto shall pay its own fees expenses anddisbursements incurred in connection with this Agreement and the transactionscontemplated hereby and all other costs and expenses incurred in its performance andcompliance with all conditions to be performed hereunder and thereunder

116 Time of Essence Time is of the essence of this Agreement

117 Further Assurances Each of the parties shall promptly do make execute deliver orcause to be done made executed or delivered all such further acts documents and thingsas the other parties hereto may reasonably require from time to time for the purpose ofgiving effect to this Agreement and the transactions contemplated hereby and shall usereasonable efforts and take all such steps as may be reasonably within its power toimplement to their full extent the provisions hereof and thereof

33

118 Public Notices No press release or other announcement concerning the transactionscontemplated by this Agreement shall be made either by the Proponent or the Governmentwithout the prior Approval of the other (such Approval not to be unreasonably withheld)provided however that the Proponent may without such Approval make such disclosureif the same is required by law or any stock exchange on which any of the securities of theProponent or any of its Affiliates are listed or by any securities commission or other similarregulatory authority having jurisdiction over the Proponent or any of its Affiliates and if suchdisclosure is required the Person making the disclosure shall use best efforts to give priororal or written notice to the Government and if such prior notice is not possible to givesuch notice immediately following the making of such disclosure Notwithstanding theforegoing the Proponent acknowledges that the Government will make this Agreement andthe Schedules hereto public

119 Independent Legal Advice Each of the parties acknowledges having obtained its ownindependent legal advice with respect to this Agreement and the transactions contemplatedhereby to the fullest extent deemed necessary by each party prior to its execution anddelivery Furthermore the parties acknowledge that neither acted under any duress innegotiating drafting and executing this Agreement the Instruments and any documentscontemplated hereby There shall be no presumption that any ambiguity in this Agreementthe Instruments and any documents contemplated hereby be resolved in favour of any ofthe parties

1110 Compliance with Laws Without limiting the generality of any other covenant herein theProponent shall at its own cost and expense comply with and shall use best efforts toensure that all Persons for whom the Proponent is at law responsible comply with allApplicable Laws in connection with the Project

1111 Entire Agreement This Agreement the Instruments the Exemption Orders the PrimaryProduction Order and the Mining Lease set forth the entire agreement and all thecovenants promises assurances agreements representations conditions warrantiesstatements and understandings (collectively ldquoRepresentationsrdquo) between the partiesconcerning the subject matter hereof No Representations are made by the Governmentto the Proponent or by the Proponent to the Government except as expressly set out in thisAgreement the Instruments the Exemption Orders the Primary Production Order and theMining Lease For greater certainty the Statement of Principles between the Governmentand the Proponent dated as of 11 June 2002 shall have no application to the parties or thematters contemplated by this Agreement after the date hereof and is replaced entirely bythis Agreement the Instruments the Exemption Orders the Primary Production Order andthe Mining Lease

1112 Good Faith Each of the Government and the Proponent shall at all times exercise all itsrights hereunder in a manner consistent with good business practices and shall act in goodfaith

1113 Waiver The failure of any party hereto to insist in any one instance upon the strictperformance by another party hereto of its obligations hereunder the Instruments theExemption Orders the Primary Production Order and the Mining Lease or the failure of any

34

party hereto to exercise any right option or remedy shall not constitute a waiver orrelinquishment for the future of any such obligation right option or remedy nor shall itconstitute a waiver of a subsequent breach No covenant or condition of this Agreementmay be waived by any party hereto except by the written consent of that party andforbearance or indulgence by that party in any regard whatsoever for no matter how longshall not constitute a waiver of such covenant or condition and until such covenant orcondition has been performed or waived in writing that party shall be entitled to invoke anyremedy available to that party under this Agreement the Instruments the ExemptionOrders the Primary Production Order and the Mining Lease despite its forbearance orindulgence

1114 No Partnership Joint Venture or Agency The Government and the Proponent expresslydisclaim any intention to create a partnership joint venture or joint enterprise It isunderstood acknowledged and agreed that nothing contained in this Agreement nor anyacts of the parties shall constitute or be deemed to constitute the Government and theProponent as partners joint venturers or principal and agent in any way or for any purpose

THE HONOURABLE THE PREMIER

THE HONOURABLE THE MINISTER OFMINES AND ENERGY

THE HONOURABLE THE MINISTER OFLABRADOR AND ABORIGINAL AFFAIRS

INCO LIMITED

ByChairman and Chief Executive Officer

VOISEYrsquoS BAY NICKEL COMPANY LIMITED

ByPresident

SCHEDULE 11ANICKEL CONCENTRATE EXEMPTION ORDER

This document can be found at the following web address httpwwwgovnfcahoaregulationsrc020066htm