The federal government has denied the province�s request for indemnity for Inco to allow for construction of a commercial processing facility to proceed at Argentia.

"We have taken every reasonable step to ensure that the facility remains in Argentia," said the Honourable Kathy Dunderdale, Minister of Natural Resources. "However, with this latest refusal of the federal government to provide the company with an indemnity, it appears as though we have limited options available."

The province had requested that Inco be provided with the indemnity for costs and business losses Inco may incur as a result of past contamination at the former American naval base. Public Works and Government Services Canada has turned down that request and will only agree to remediate any future contamination based on past uses.

"We must remember that our government inherited this agreement, and we have no choice but to live within the legal framework," the minister said. "However, we feel very strongly that the company has an obligation to the people of Argentia that must be addressed. Individuals and companies invested significant money into that community based on the company's commitment. It was only a few short months ago the president of Inco was in the community turning sod for the facility. For the company to now leave Argentia and the people who live there high and dry is not acceptable."

Inco notified government on November 30, 2005 of its decision to locate the planned processing plant at a site in the province other than Argentia, as per Section 4.6.4 of the Development Agreement. Based on its own assessment of environmental, legal and business risks, Inco has concluded that it is not economically feasible to use Argentia as the site for a commercial nickel processing facility. The company has since registered a proposed site in Long Harbour for environmental assessment.

"It is our position that the company should provide proper and fair compensation to the community in the absence of facility being constructed there," Minister Dunderdale said. "The member for the area, MHA Felix Collins, is adamant that the people he represents deserve compensation from the company and we will work to ensure this happens."

In the Development Agreement Inco signed with the province in 2002, Inco committed to constructing a commercial processing plant at Argentia unless the environmental conditions at Argentia would make it not economically feasible to do so. In that event, Inco committed to locating the plant at another site in the province.

The province had asked the federal government to make it possible for the operation to remain at Argentia by providing Inco with full indemnity in an attempt to mitigate some of the environmental concerns.

Media contact:
Tracy Barron
Director of Communications
Natural Resources
709-729-5282, 690-1703