**Exhibit 1**

** **

****

 

 

**ANNUAL INFORMATION FORM**

 

**FALCONBRIDGE LIMITED**

 

 

**March 22, 2006**

 

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**TABLE OF CONTENTS**

 
| ** ** | ** **                                                        | ** **                                               | **Page**                            |
|------------|-------------------------------------------------------------------|----------------------------------------------------------|-------------------------------------|
| * *   | *GLOSSARY OF TERMS*                                               |                                                     | 3                                   |
| * *   | *CURRENCY*                                                        |                                                     | 5                                   |
| * *   | *METRIC/IMPERIAL CONVERSION TABLE*                                |                                                     | 5                                   |
| * *   | *EXCHANGE RATE DATA*                                              |                                                     | 5                                   |
| * *   | *FORWARD-LOOKING STATEMENTS*                                      |                                                     | 6                                   |
| 1.         | CORPORATE STRUCTURE                                               |                                                     | 7                                   |
|       | 1.1                                                               | Incorporation                                            |                                | 7 |
|       | 1.2                                                               | Corporate Profile                                        |                                | 7 |
|       | 1.3                                                               | Organizational Chart                                     |                                | 8 |
| 2.         | GENERAL BUSINESS DEVELOPMENTS                                     |                                                     | 9                                   |
|       | 2.1                                                               | Three-Year History                                       |                                | 9 |
|       | 2.2                                                               | Principal Products                                       |                                | 13 |
| 3.         | DESCRIPTION OF THE BUSINESS                                       |                                                     | 17                                  |
|       | 3.1                                                               | Main Businesses                                          |                                | 18 |
|       |                                                              | 3.1.1                                                    | Nickel                              |   | 18 |
|       |                                                              | 3.1.2                                                    | Copper                              |   | 23 |
|       |                                                              | 3.1.3                                                    | Aluminum                            |   | 29 |
|       |                                                              | 3.1.4                                                    | Zinc                                |   | 31 |
|       |                                                              | 3.1.5                                                    | Exploration and Project Development |   | 34 |
|       | 3.2                                                               | Other Subsidiaries                                       |                                | 41 |
|       | 3.3                                                               | Technology                                               |                                | 42 |
|       | 3.4                                                               | Environment                                              |                                | 42 |
|       | 3.5                                                               | Labour Relations                                         |                                | 43 |
|       | 3.6                                                               | Legal Proceedings                                        |                                | 43 |
|       | 3.7                                                               | Combination of Noranda and Former Falconbridge           |                                | 44 |
|       | 3.8                                                               | Trends, Risks and Uncertainties                          |                                | 44 |
|       | 3.9                                                               | Statistical Tables                                       |                                | 49 |
|       |                                                              | 3.9.1                                                    | Production Volumes                  |   |   | 49 |
|       |                                                              | 3.9.2                                                    | Sales Volumes and Realized Prices   |   |   | 52 |
|       |                                                              | 3.9.3                                                    | Mineral Reserves and Resources      |   |   | 54 |
|       |                                                              | 3.9.4                                                    | Reconciliation of Mineral Reserves  |   |   | 58 |
| 4.         | DIVIDEND POLICY                                                   |                                                     | 63                                  |
| 5.         | CAPITAL STRUCTURE OF THE COMPANY                                  |                                                     | 63                                  |
| 6.         | MARKET FOR SECURITIES                                             |                                                     | 92                                  |
|       | 6.1                                                               | Trading Price and Volume                                 |                                | 92 |
|       | 6.2                                                               | Prior Sales                                              |                                | 93 |
|       | 6.3                                                               | Ownership of Common Shares                               |                                | 93 |
| 7.         | CREDIT RATINGS                                                    |                                                     | 94                                  |
| 8.         | DIRECTORS AND EXECUTIVE OFFICERS                                  |                                                     | 95                                  |
|       | 8.1                                                               | Directors                                                |                                | 95 |
|       | 8.2                                                               | Executive Officers                                       |                                | 96 |
|       | 8.3                                                               | Cease Trade Orders, Bankruptcies, Penalties or Sanctions |                                | 99 |
| 9.         | AUDIT COMMITTEE                                                   |                                                     | 99                                  |
| 10.        | INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS        |                                                     | 101                                 |
| 11.        | TRANSFER AGENTS AND REGISTRARS                                    |                                                     | 101                                 |
| 12.        | EXPERTS                                                           |                                                     | 101                                 |
|       | 12.1                                                              | Names of Experts                                         |                                | 101 |
|       | 12.2                                                              | Interests of Experts                                     |                                | 102 |
| 13.        | MATERIAL CONTRACTS                                                |                                                     | 102                                 |
| 14.        | ADDITIONAL INFORMATION                                            |                                                     | 103                                 |
| * *   | *SCHEDULE “A” AUDIT COMMITTEE TERMS OF  REFERENCE* |                                                     | 104                                 |

 

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**GLOSSARY OF TERMS**

 
| anode                         |   | a rectangular plate of metal cast in a  shape suitable for refining by the electrolytic process. An anode is the  finished product of the copper smelting process.                                                                                                                                                                                                                                                                                                                                                                             |
|-------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| bankable feasibility study    |   | a comprehensive study of a deposit in which  all geological, engineering, operating, economic and other relevant factors  are considered in sufficient detail that it could reasonably serve as a basis  for a financial decision by a financial institution to finance the development  of the deposit for mineral production.                                                                                                                                                                                                                |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| blister copper                |   | a crude form of copper (assaying about  99%) produced in a smelter, which requires further refining before being used  for industrial purposes.                                                                                                                                                                                                                                                                                                                                                                                           |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| capacity                      |   | the design number of units that can be  produced in a given time period based on operations with a normal number of  shifts and maintenance interruptions.                                                                                                                                                                                                                                                                                                                                                                                     |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| cathode                       |   | a rectangular plate of metal, produced by  electrolytic refining, which is melted into commercial shapes such as billets,  ingots, etc. A cathode is typically the finished product of the copper  refining process.                                                                                                                                                                                                                                                                                                                           |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| COMEX                         |   | The New York Commodity Exchange.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| concentrate                   |   | a product containing valuable minerals from  which most of the waste material in the ore has been separated.                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| ferronickel                   |   | an alloy containing nickel and iron  (approximately 38% nickel and 62% iron in the case of ferronickel produced by  Falcondo). The volumes produced are expressed in terms of the nickel  contained.                                                                                                                                                                                                                                                                                                                                           |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| LME                           |   | London Metal Exchange.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| matte                         |   | a mixture of metal sulphides enriched with  nickel, cobalt, copper, silver, gold and platinum group metals.                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| mill                          |   | a plant where ore is ground and undergoes  physical or chemical treatment to extract and produce a concentrate of the  valuable minerals.                                                                                                                                                                                                                                                                                                                                                                                                      |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| mineral resource(1)           |   | a concentration or occurrence of diamonds,  natural solid inorganic material, or natural solid fossilized organic  material including base and precious metals, coal, and industrial minerals in  or on the Earth’s crust in such form and quantity and of such a grade or  quality that it has reasonable prospects for economic extraction. The  location, quantity, grade, geological characteristics and continuity of a  mineral resource are known, estimated or interpreted from specific geological  evidence and knowledge. |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| inferred mineral resource(1)  |   | part of a mineral resource for which  quantity and grade or quality can be estimated on the basis of geological  evidence and limited sampling and reasonably assumed, but not verified,  geological and grade continuity. The estimate is based on limited information  and sampling gathered through appropriate techniques from locations such as  outcrops, trenches, pits, workings and drill holes.                                                                                                                                 |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| indicated mineral resource(1) |   | part of a mineral resource for which  quantity, grade or quality, densities, shape and physical characteristics,  can be estimated with a level of confidence sufficient to allow the  appropriate application of technical and economic parameters, to support mine  planning and evaluation of the economic viability of the deposit. The                                                                                                                                                                                               |

 

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|                         |   | estimate is based on detailed and reliable  exploration and testing information gathered through appropriate techniques  from locations such as outcrops, trenches, pits, workings and drill holes  that are spaced closely enough for geological and grade continuity to be  reasonably assumed.                                                                                                                                                                                                                                                                                                                                                                        |
|------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| measured mineral resource(1) |   | part of a mineral resource for which  quantity, grade or quality, densities, shape, physical characteristics are so  well established that they can be estimated with confidence sufficient to  allow the appropriate application of technical and economic parameters, to  support production planning and evaluation of the economic viability of the deposit.  The estimate is based on detailed and reliable exploration, sampling and  testing information gathered through appropriate techniques from locations  such as outcrops, trenches, pits, workings and drill holes that are spaced  closely enough to confirm both geological and grade continuity. |
|                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| mineral reserve(1)           |   | economical mineable part of a measured  or indicated mineral resource demonstrated by at least a preliminary  feasibility study. This study must include adequate information on mining,  processing, metallurgical, economic and other relevant factors that  demonstrate, at the time of reporting, that economic extraction can be  justified. A mineral reserve includes diluting materials and allowances for  losses that may occur when the material is mined.                                                                                                                                                                                          |
|                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| NI 43-101(1)            |   | National Instrument 43-101 “Standards of  Disclosure for Mineral Projects” of the Canadian Securities Administrators.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| probable mineral reserve(1)  |   | economical mineable part of an  indicated, and in some circumstances a measured mineral resource demonstrated  by at least a preliminary feasibility study. This study must include adequate  information on mining, processing, metallurgical, economic, and other  relevant factors that demonstrate, at the time of reporting, that economic  extraction can be justified.                                                                                                                                                                                                                                                                                       |
|                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| proven mineral reserve(1)    |   | economical mineable part of a measured  mineral resource demonstrated by at least a preliminary feasibility study.  This study must include adequate information on mining, processing,  metallurgical, economic, and other relevant factors that demonstrate, at the  time of reporting, that economic extraction is justified.                                                                                                                                                                                                                                                                                                                                    |
|                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| platinum group metals        |   | platinum, palladium, rhodium and related  metals present in some nickel/copper ores.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| refinery                     |   | a plant where concentrates or matte are  processed into one or more refined metals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| smelter                      |   | a plant in which concentrates are processed  into an upgraded product.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| SX-EW                        |   | solvent extraction-electrowinning is a  metallurgical technique, so far applied only to copper ores, in which metal  is dissolved from the rock by organic solvents and recovered from solution by  electrolysis.                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

 

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Notes:

 

(1)           NI 43-101 definitions

 

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**CURRENCY**

 

All references in this annual information form to“dollars” or “$” are to United States dollars, unless otherwise indicated.

 

**METRIC/IMPERIAL CONVERSION TABLE**

 

The imperial equivalents of the metric unitsof measurement used in this Annual Information Form are as follows:

 
| **Wherever referred to in this Annual Information  Form:** | ** ** | **Metric Unit** | ** ** | **Metric Symbol** | ** ** | **Imperial Equivalent** |
|------------------------------------------------------------------------------------------|------------|----------------------|------------|------------------------|------------|------------------------------|
|                                                                                     |       |                 |       |                   |       |                         |
| “kg” means kilogram                                                            |       | Tonne                |       | mt                     |       | 1.102311 tons                |
| “lb” means pound                                                               |       | Kilogram             |       | kg                     |       | 2.20462 pounds               |
| “oz” means troy ounces                                                         |       | Gram                 |       | g                      |       | 0.032151 troy ounces         |
| “tonne” or “mt” means 1,000 kilograms                           |       | Metre                |       | m                      |       | 3.2808 feet                  |
|                                                                                     |       | Cubic metre          |       | m3                     |       | 35.315 cubic feet            |
|                                                                                     |       | Kilometre            |       | km                     |       | 0.6214 miles                 |
|                                                                                     |       | Hectare              |       | ha                     |       | 2.4711 acres                 |

 

**EXCHANGE RATE DATA**

 

We have historically published ourconsolidated financial statements in Canadian dollars. Effective July 1,2003, we began reporting our financial results in U.S. dollars. In this AnnualInformation Form, unless otherwise specified or the context otherwise requires,all dollar amounts are expressed in United States dollars and references to $or “US$” are to United States dollars and references to “Cdn$” are to Canadiandollars.

 

The following table sets forth, for eachperiod indicated, information concerning the exchange rates between U.S.dollars and Canadian dollars based on the noon buying rate in the City of NewYork for cable transfers as certified for customs purposes by the FederalReserve Bank of New York (the “noon buying rate”). The table illustrates howmany Canadian dollars it would take to buy one United States dollar. 

 

| ** **  | ** ** | **Year Ended  December 31,** | ** ** |
|-------------|------------|----------------------------------------|------------|
| ** **  | ** ** | **2003**                               | ** ** | **2004** | ** ** | **2005** | ** ** |
| Low         |       | 1.2923                                 |       | 1.1775 |   | 1.1507 |   |
| High        |       | 1.5750                                 |       | 1.3970 |   | 1.2703 |   |
| Average (1) |       | 1.3916                                 |       | 1.2984 |   | 1.2083 |   |
| Period End  |       | 1.2923                                 |       | 1.2034 |   | 1.1656 |   |

 

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Notes

(1)           The average of the daily noonbuying rates on the last business day of each month during the applicableperiod.

 

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**FORWARD-LOOKINGSTATEMENTS**

 

Certain statements contained in this Annual Information Form areforward-looking statements (as defined in applicable securities legislation).Examples of such statements include, but are not limited to, statementsconcerning (i) our assessment of the outlook for metal markets in 2006, (ii) Inco’soffer to acquire all of the common shares of Falconbridge Limited and thebenefits of such combination, (iii) our future financial requirements andfunding of those requirements, (iv) our expectations with respect to ourdevelopment projects, (v) our production forecast for 2006, (vi) ourcapital expenditure forecasts, and (vii) our dividend schedule. Inherentin forward-looking statements are risks and uncertainties well beyond ourability to predict or control. Actual results and developments are likely todiffer, and may differ materially, from those expressed or implied by theforward-looking statements contained in this Annual Information Form. Suchstatements are based on a number of assumptions which may prove to beincorrect, including, but not limited to, assumptions about the timing, stepsto be taken and completion of Inco’s offer to acquire all of our common shares,the ability to successfully compete against global metals and mining andexploration companies by creating through such a combination an enterprise ofincreased scale; strong demand for nickel, copper and other metals in emergingmarkets such as China; approximately $350 million per annum in pre-taxoperating and other synergies and cost savings, and other benefits beingrealized based on the achievement of operational efficiencies fromrestructuring, integration and other initiatives relating to the combination ofFalconbridge and Inco; the approvals or clearances required to be obtained byInco and Falconbridge from regulatory and other agencies and bodies beingobtained in a timely manner; divestitures required by regulatory agencies beingacceptable and completed in a timely manner; there being limited costs,difficulties or delays related to the integration of the Falconbridge’soperations with those of Inco; the timely completion of the steps required tobe taken for the eventual combination of the two companies; business andeconomic conditions generally; exchange rates, energy and other anticipated andunanticipated costs and pension contributions and expenses; the supply anddemand for, deliveries of, and the level and volatility of prices of, nickel,copper, aluminum, zinc and other primary metals products and other metalproducts Inco and Falconbridge produce; the timing of the receipt of remainingregulatory and governmental approvals for the development projects and otheroperations; the continued availability of financing on appropriate terms fordevelopment projects; Falconbridge’s costs of production and production andproductivity levels, as well as those of its competitors; market competition;mining, processing, exploration and research and development activities; theaccuracy of ore/mineral reserve estimates; premiums realized over LME cash andother benchmark prices; tax benefits/charges; the resolution of environmentaland other proceedings and the impact on the combined company of variousenvironmental regulations and initiatives; assumptions concerning political andeconomic stability in countries or locations in which Falconbridge operates orotherwise and the ability to continue to pay quarterly cash dividends in suchamounts as Falconbridge’s Board of Directors may determine in light ofother uses for such funds and other factors.

 

While Falconbridge anticipates that subsequent events and developments may causeFalconbridge’s views to change, the Company specifically disclaims anyobligation to update these forward-looking statements. These forward-lookingstatements should not be relied upon as representing the Company’s views as ofany date subsequent to the date of this Annual Information Form. Although theCompany has attempted to identify important factors that could cause actualactions, events or

results to differ materially from those described in forward-lookingstatements, there may be other factors that cause actions, events orresults not to be as anticipated, estimated or intended. There can be noassurance that forward-looking statements will prove to be accurate, as actualresults and future events could differ materially from those anticipated insuch statements. Accordingly, readers should not place undue reliance onforward-looking statements. These factors are not intended to represent acomplete list of the factors that could affect Falconbridge and the combinationof Inco and Falconbridge.

 

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**1.****             CORPORATE STRUCTURE**

 

***1.1******          Incorporation***

 

Falconbridge Limited is the continuingcorporation resulting from the amalgamation under the *BusinessCorporations Act*(Ontario) on June 30, 2005 of Noranda Inc. (“Noranda”)and the former Falconbridge Limited (“Former Falconbridge”). Predecessors ofthe Company have carried on business under the Falconbridge Limited name since1928 and under the Noranda Inc. name since 1922.  The registered and head office of the Companyis at BCE Place, Suite 200, 181 Bay Street, Toronto, Ontario, M5J 2T3. Theprincipal operation’s office of the Company is at Queen’s Quay Terminal, 207Queen’s Quay West, Suite 800, Toronto, Ontario, M5J 1A7.

 

In this Annual Information Form, FalconbridgeLimited and its wholly-owned subsidiaries may be collectively referred toas the “Company”, and the Company, together with its other subsidiaries andjoint ventures, may also be referred to as “Falconbridge”, “we”, “us” or “ours”.

 

***1.2******          Corporate Profile***

 

We are a leading international copper andnickel company with investments in fully integrated zinc and aluminum assets. Ourprimary focus is the identification and development of world-class copperand nickel mining deposits.

 

We are one of the world’s largest producersof zinc and nickel and a significant producer of copper, primary and fabricatedaluminum, cobalt, lead, molybdenum, silver, gold and sulphuric acid. We arealso one of the world’s largest recyclers and processors of metal-bearingmaterials. We sell commodity and value-added products to customers around theworld.

 

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***1.3******          Organizational Chart***

 

The principal direct and indirectsubsidiaries of the Company and the jurisdictions in which they wereincorporated or organized are set out below: 

 

 

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Notes:

(1).      The Corporation owns 100% of theshares of Natresco Incorporated which, in turn, own 100% of the shares of FalconbridgeU.S., Inc.

(2).      NorFalco LLC is indirectlywholly-owned by the Corporation, through its subsidiaries Noranda Commodities, Inc.(65%) and NACID, Inc (35%).

(3).      The common shares of NovicourtInc. are listed and posted for trading on the Toronto Stock Exchange.

(4).      The Corporation owns 100% of theshares of 3086143 Nova Scotia Company which, in turn, owns 100% of the sharesof Noranda Finance Inc.

(5).      The Corporation holds a 25%interest in the Noranda Income Fund, a trust formed under the laws of Ontario,which indirectly owns a zinc processing facility in Valleyfield, Québec.

(6).      The Corporation holds 100% ofthe shares of Noranda Antamina Ltd. which, in turn, owns 33.75% interest inCompañia Minera Antamina S.A.

(7).      Falconbridge Chile S.A., CMDICHoldings Limited and Falconbridge Collahuasi Limited own 19.93%, 20.09% and3.98% respectively, and 44%, collectively, of the shares of Compañia Minera DoñaInés de Collahuasi S.C.M. (“Collahuasi”), which owns 100% of Collahuasi.

(8).      CMLB Holdings Limited owns 100%of the shares of Compañia Minera Falconbridge Lomas Bayas (“Lomas Bayas”),which owns 100% of Lomas Bayas.

 

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**2.****             GENERAL BUSINESS DEVELOPMENTS**

 

***2.1******          Three-Year History***

 

**Recent Developments**

 

The Company announced on March 15, 2006that it intends to make an offer by way of a takeover bid for all of the outstandingshares of Novicourt Inc. (“Novicourt”) that it does not already own at a cashoffer price of Cdn$2.30 per Novicourt share. The Company presently holdsapproximately 62.1% of the outstanding common shares of Novicourt. The proposedoffer would be subject to a number of conditions including that not less than50% of the shares of Novicourt not already owned by the Company are tendered.

 

The Company announced on March 16, 2006that it intends to redeem a total of 20,000,000, or $500 million, of its outstandingjunior preference shares. The junior preference shares will be redeemed on April 26,2006 from holders of record on March 22, 2006. The Company intends toutilize its internal cash resources to fund the redemption.

 

The Companyannounced on March 21, 2006 that it had enacted a new shareholder rightsplan, effective on that date, to replace the September 22, 2005 rightsplan previously enacted by the Company. The new rights plan is designed toprevent a creeping takeover of the Company and preserve its ability to obtainthe best value for all shareholders. The plan is also designed to provide theshare ownership stability to protect the opportunity for shareholders to tenderto the existing Inco Limited takeover offer or any other bid for the Company.  The full text of the plan is available atwww.sedar.com.

 

**2005**

 

Major developments in 2005 included:

 

•              The continued progress on the Raglan Optimization project, which isexpected to increase annual production by approximately 5,000 tonnes of nickelper year, beginning in 2007;

 

•              The construction at the molybdenum recovery plant, with scheduledstart-up in early 2006, at Compañia Minera Doña Inés de Collahuasi S.C.M. (“Collahuasi”);

 

•              The continuation of the feasibility study on the second expansion ofthe copper concentrator at Collahuasi;

 

•              The development of the new leaching pad for run-of-mine ore at LomasBayas;

 

•              The Kidd Mine D shaft progress with the ramp and lateral developmentbeing at 97% of plan;

 

•              The finalization of a joint-venture agreement between Falconbridgeand Barrick Gold Corporation regarding the Kabanga nickel deposit in Tanzaniaand related concessions;

 

•              The earn-in of a 70% joint venture interest in the El Morro (Chile)copper/gold property from Metallica Resources Inc.

 

•              The completion on May 5, 2005, of Noranda’s issuer bid toexchange Noranda common shares for new Junior Preference Shares. A total of63,377,140 Noranda common shares were repurchased as a result of this offer anda total of 50,000,000 new junior preference shares were issued as consideration;

 

•              The completion of Noranda’s takeover bid of the Former Falconbridgewhereby it offered to exchange 1.77 Noranda common shares for each outstandingFormer Falconbridge common share that it did not own.

 

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58,476,589 Former Falconbridge common shareswere validly deposited under the offer, increasing Noranda’s ownership to164,235,689 or 91% of the outstanding Former Falconbridge common shares;

 

•              The issue and sale of $250 million of 12-year 5.5% and $250 millionof 30-year 6.2% unsecured notes of Noranda;

 

•              The redemption of $500 million (20,000,000 shares)  of the Company’s outstanding Junior PreferenceShares;

 

•              The sale of the assets and liabilities of the Company’s Lockerby Minein Sudbury, including all closure obligations, to First Nickel Inc.

 

•              The approval on June 30, 2005 by Noranda and FormerFalconbridge shareholders of the amalgamation of the two companies. Theamalgamated company chose to continue under the operating name FalconbridgeLimited and effective July 6, 2005 began trading under a new stock symbol(TSX: FAL.LV and NYSE: FAL);

 

•              The depletion of ore reserves at the Louvicourt mine and finalproduction on July 12, 2005. The Louvicourt mine was a major supplier ofcopper and zinc concentrates to the Company’s Horne smelter;

 

•              The commencement of molybdenum production at the Company’s AltonorteSmelter following the completion of the roaster transformation;

 

•              The sale by the Company’s subsidiary Noranda Aluminum Inc. of itsaftermarket automobile wheel manufacturing and distribution operations,American Racing Equipment, to Platinum Equity for proceeds of $40.5 million;

 

•              The acquisition by Switzerland-based Xstrata plc (“Xstrata”) of 73.1million common shares of the Company, or approximately 19.9% of the outstandingcommon shares, from Brascan Corporation (now Brookfield Asset Management Inc.”)(“Brascan”) at a price of Cdn$28 per share making Xstrata the largest singleFalconbridge shareholder;

 

•              The announcement that the Board of Directors of the Company hasadopted a shareholder rights plan effective September 22, 2005, designedto enhance the Company’s ability to obtain the best value for all shareholdersand prevent a bidder from acquiring control of Falconbridge in a mannerdetrimental to shareholders. This plan expired on March 21, 2006. See “2.1  Three Year History – Recent Developments”;

 

•              The realization of a pre-tax gain of $13 million on the sale of theCompany’s stake in Canico Resources Inc. following its acquisition by anothermetals and mining company;

 

•              The settlement of a Falconbridge Limited Kidd Metallurgical Divisionnew three-year collective Agreement with Canadian Auto Workers – Local 599which represents the facility’s production and maintenance employees;

 

•              The announcement on October 11, 2005 of a friendly takeover bidby Inco Limited for all of the outstanding shares of Falconbridge andendorsement of the acquisition offer by both Boards of Directors and therecommendation by the Falconbridge board that the Company’s shareholders tendertheir shares to the offer. The offer remains outstanding as the parties seekvarious regulatory approvals;

 

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•              The announcement on December 23, 2005 that Falconbridge reachedan agreement on the financing of the Koniambo nickel project with SocietéMinière du Sud Pacifique S.A. (“SMSP”), its joint venture partner in theKoniambo nickel project in New Caledonia; and

 

•              The satisfaction of the two conditions precedents under the BercyAccord prior to December 31, 2005, allowing for the eventual transfer ofthe Koniambo property to Koniambo Nickel, a company owned 49% by the Companyand 51% by its partners SMSP.

 

**2004**

 

Major developments in 2004 included:

 

•              The achievement of increased profitability in all four businessunits, including zinc and aluminum;

 

•              The advancement of new production capacity at the Collahuasi mine;

 

•              The commencement of an underground definition program at the NickelRim South project with production targeted for 2009;

 

•              The successful ramp-up at Lomas Bayas following completion of thecrusher expansion project ahead of schedule and under budget;

 

•              The achievement of planned nickel production following the three weekstrike at the Sudbury mines;

 

•              The advancement of Phase One of the Raglan Optimization Program,which is expected to increase annual production by approximately 5,000 tonnesof nickel per year;

 

•              The procurement of additional long-term zinc concentrate supply forthe Kidd Creek refinery;

 

•              The execution of an agreement to acquire a 50% interest in theLennard Shelf zinc mine in Australia;

 

•              The acquisition of a 50% interest in Kaiser Aluminum’s Gramercyalumina plant in Gramercy, Louisiana, and related bauxite mining assets inJamaica;

 

•              The completion of the removal of residual lake sediment at theAntamina copper/zinc mine enabling access to higher-grade ores;

 

•              The advancement and near completion of the Kidd Mine D expansionproject;

 

•              The commencement of scoping studies for further expansions atFalcondo, Lomas Bayas and Collahuasi;

 

•              The completion of the bankable feasibility study for the Koniamboproject in New Caledonia;

 

•              The renewal of collective labour agreements at the Collahuasi mine, CCRrefinery, CEZ refinery, Matagami mine, Noranda Recycling – Roseville,Nikkelverk, Altonorte and American Racing;

 

•              The completion of the Montcalm mine development, ahead of time, andunder budget, with the milling of ore commencing in October;

 

•              The continued advancement of exploration programs at Raglan andSudbury, Canada and West Wall and El Morro, Chile; and

 

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•              The announcement by Noranda that it had entered into exclusivenegotiations with China Minmetals Corporation regarding the acquisition ofNoranda, and the subsequent announcement by Noranda in November 2004 thatthe period for such exclusive negotiations would not be extended.

 

**2003**

 

Major developments in 2003 included:

 

•              The announcement of our plans to rationalize our magnesium businessand the temporary shutdown of our Magnola magnesium plant in Danville, Québec,as a result of adverse market conditions. The plant was closed in April 2003and is expected to remain closed until market conditions improve. A further $33million pre-tax charge related to costs incurred to shut down the plant wasrecorded in 2003;

 

•              The advancement of important development programs at Collahuasi andKidd Creek, ensuring copper productions levels are maintained;

 

•              The shut down of the zinc refining operations located at the KiddMetallurgical site in Timmins, Ontario for 13 weeks during the summer formarket and supply-related reasons;

 

•              The completion by the Altonorte smelter, in Chile, of a majormodernization and $170 million Phase 3 expansion project;

 

•              The public offering by Noranda of 6,000,000 Cumulative Redeemable Series HShares with a quarterly cumulative dividend at a rate of 6.25% per annum (the “Series HShares”) for gross proceeds of Cdn$150 million;

 

•              Noranda’s private placement by the Company of 6,000,000 CumulativePreferred Shares, Series I with a quarterly cumulative dividend at a rateof 8% per annum (the “Series I Shares”) for gross proceeds ofCdn$150 million. All of the Series I Shares were purchased by Brascanpursuant to the exercise by the Company of a put option previously granted byBrascan. The Series I Shares were redeemed by Noranda in August 2003in accordance with their terms;

 

•              Purchase of a 3.3% net proceeds interest relating to the Antaminacopper and zinc mine in Peru from Inmet Mining Corporation for $22.5 million. Thepurchase was completed under a put-call agreement entered into between thecompanies in February 2002;

 

•              Advancement on the work at the Koniambo Project in New Caledoniaincluding the mobilization of the project team to begin the bankablefeasibility study and financing discussions progression with the Frenchgovernment;

 

•              The completion of the following transactions, among others, as part ofthe Company’s recapitalization plan to improve the Company’s balance sheet byreducing debt:

 

(a)           The reduction of Noranda’squarterly dividend from Cdn$0.20 per share to Cdn$0.12 per share;

 

(b)           The release of guarantees of Norandain the amount of $442 million on July 1, 2003 with respect to the Antaminaproject loan by converting these facilities to a non-recourse basis;

 

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(c)           The secondary offering of Noranda’sremaining 11,984,900 Priority Units of the Noranda Income Fund in July 2003for gross proceeds of approximately $84 million. Subsequent to the offering, weretained a 25% interest in the Noranda Income Fund through our holding ofOrdinary Units of Noranda Income Limited Partnership, which are exchangeable ona one for one basis for Priority Units of Noranda Income Fund upon theoccurrence of certain events;

 

(d)           The issue and sale in August 2003of 28.52 million common shares of Noranda to a syndicate of underwriters and of20 million common shares to Brascan, for total net proceeds of approximatelyCdn$601 million. The outstanding Series I Shares were redeemed as part ofthis transaction;

 

(e)           The issue and sale in September 2003,of 12-year 6% unsecured notes of Noranda in an aggregate principal amount of$350 million;

 

•              Our announcement that the ore reserves at the Bell Allard zinc minein Matagami, Québec will be depleted in 2004 and that operations at the BellAllard mine would cease in the fourth quarter of 2004;

 

•              The retirement of Lars-Eric Johansson from his position as ExecutiveVice-President and Chief Financial Officer of Noranda and the appointment ofSteven Douglas, previously the Executive Vice-President and Chief FinancialOfficer of real estate company Brookfield Properties Corporation, as his successor;and

 

•              Our signing of new collective agreements in respect of ouroperations at:

 

•   Brunswick Mine

•   Brunswick Smelter

•   Brunswick Smelter Bulk Handling

•   General Smelting

•   Horne

•   Lomas Bayas

•   Antamina

•   Norandal Salisbury

•   Noranda Recycling – Roseville

•   Altonorte

 

**2.2****          Principal Products**

 

Our principal products are copper, nickel,zinc and aluminum, with the balance of our products coming from by-products andco-products that include silver, gold, platinum group metals, lead, selenium,tellurium, cadmium, indium, cobalt, nickel sulphate and sulphuric acid.

 

The principal markets for our productsinclude the steel, refinery and foundry, construction, telecommunications,automotive, agricultural and chemical industries. The United States wasthe principal market for our products in 2005, accounting for 36%****of consolidated sales (2004 – 36%),****with Canada accounting for 16% ofconsolidated sales (2004 – 17%), Europe 23%****of consolidated sales (2004 – 26%) and other countries25% of consolidated sales (2004– 21%).

 

***Principal Metals***

 

**Nickel**

 

Nickel is a metal with the characteristics ofcorrosion resistance, high strength over a wide range of temperatures, and highductility. The principal uses for nickel include stainless steel, nickel-basedalloys, electroplating, low-alloy steel, foundry products and copper-basedalloys. Nickel is also used in batteries and catalysts.

 

We market and sell nickel and ferronickel tocustomers in 31 countries. The largest markets are Western Europe, theUnited States and Asia/Pacific, which in 2005 accounted for approximately50%, 22% and 28%, respectively, of total nickel sales.

 

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**Copper**

 

Copper is a metal with inherentcharacteristics of excellent electrical conductivity, heat transfer andresistance to corrosion. The principal use of copper is for electrical wire andcable products, a sector which consumes approximately 60% of all refined copper.Other significant end-use markets are tubing for plumbing and air-conditioningand copper alloy strips and rods used in the electrical/electronic,construction and transportation markets.

 

Falconbridge markets copper cathodes directlyto producers of industrial products from our CCR refinery in Montreal-East,Québec, the Kidd Creek refinery in Timmins, Ontario, and the Lomas Bayasoperation in Chile. Falconbridge Chile also markets cathodes made available viatoll refining agreements with Altonorte anodes.   Altogether, sales of copper metal cathodes in2005 were made to more than 30 customers in ten countries. Approximately 80% of our sales of copper metal in2005 were made in North America and the balance was made in Europe and Asia. FalconbridgeChile produces approximately 280,000tonnes of copper anodes per year that are sold in Canada, Chile, Europe andAsia.

 

Copper production is dependent on mineconcentrates and secondary recycled materials purchased from third parties. Mineconcentrates are sourced globally while recycled materials are primarily ofNorth American origin. In 2005, 74%of Horne, 73% of Altonorte, and 13%of Kidd Creek’s primary feedstocks came from non–related third parties. Inaddition, approximately 12% ofFalconbridge’s Horne smelter’s feed tonnage came from recycled electronics andother copper and precious metal bearing secondary materials, which were sourcedfrom third parties. Antamina copper concentrates are sold to customersglobally.

 

**Zinc**

 

Zinc is a metal with many important uses inindustry, as well as in health and nutrition. Its major use, accounting forapproximately 49% of total World consumption, is for galvanizing steel sold tothe construction and automobile industries. Galvanizing involves coating steelwith zinc to protect the steel from corrosion. Zinc is also used in theproduction of die-cast alloys for precision machine parts, brass alloys used ina wide range of industrial parts and household wares, and zinc powders, oxidesand dusts used in the manufacture of batteries, tires and pigments.

 

Falconbridge markets zinc metal directly fromits Kidd Creek division and acts as a marketing agent for the Noranda IncomeFund’s Canadian Electrolytic Zinc refinery (CEZ). Most of the production fromthese facilities is sold directly to the steel industry and other majorconsumers of zinc. CEZ and Kidd Creek are jointly a major supplier of zincmetal and zinc powders, accounting for approximately 4% of world refinedproduction. In 2005, over 95% of Falconbridge’s consolidated sales of zincon behalf of Kidd Creek and CEZ were in North America, with the balance sold tocustomers in Europe and Asia. The galvanizing sector representedapproximately 55% of Falconbridge’s consolidated zinc sales on behalf of KiddCreek and CEZ in 2005.

 

Zinc production is dependent on concentratesfrom mines. The raw material feed stream for the CEZ and Kidd Creek zincrefineries is managed through a combination of third-party purchases and theintegrated mine production of Falconbridge. This allows us to take advantage oftransportation, cost differentials and the treatment capabilities of ourrefineries. Concentrate purchases originate with both local mines and, subjectto market conditions, foreign mines. Antamina zinc concentrates are sold tocustomers globally.

 

**Aluminum**

 

Aluminum is a metal with many desirablecharacteristics. It is ductile, malleable and an efficient conductor of heatand electricity. Although very reactive chemically, aluminum resists corrosionand has a high strength-to-weight ratio.

 

Alumina (aluminum oxide) is produced frombauxite, the basic aluminum-bearing ore, by a chemical process. Aluminum is, inturn, produced from alumina by an electrolytic process which uses largequantities of electrical energy to separate the aluminum from the oxygen inalumina. The smelting of one tonne of aluminum requires between 14 and 

 

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18.5 megawatt-hours of electric energy. Dependingupon quality, between four and five tonnes of bauxite are required toproduce approximately two tonnes of alumina, which yield approximately onetonne of aluminum.

 

Our aluminum products include primaryaluminum in the form of 1,500 lb. standard ingots (sows), billet,electrical conductor rod and foundry alloy. Our aluminum fabricated productsinclude fin stock for the air conditioning, refrigeration and automotiveindustries; container stock used for semi-rigid food packaging and disposablecookware; converter foil used in flexible packaging for the food, juice andpharmaceutical industries; conductor strip for transformers.

 

In 2005, 94% of our consolidated aluminumsales were made in North America.

 

***Other Products***

 

**Lead Metal**

 

Worldwide, approximately 79% of lead metal isused in the production of lead-acid batteries for end-uses such as theautomotive industry and back-up power systems for the computer andtelecommunications markets.

 

Falconbridge is engaged in the mining of leadand the refining and recycling of lead metal at our wholly-owned Brunswick Mineand Brunswick Smelter. The marketing of lead metal and its alloys is carried outfrom offices in Toronto, Canada, Cleveland, Ohio, USA, and Zug, Switzerland. In2005, over 90% of our consolidated lead metal sales were made in Canada and theUnited States.

 

As is the case for copper and zincproduction, lead production is dependent upon the availability of mineconcentrates. In 2005, approximately 65% of the Brunswick lead smelter feed wassupplied by our Brunswick Mine, with the balance sourced from lead/silverconcentrates and metal-bearing residues.

 

**Sulphuric Acid**

 

Sulphur dioxide gas is a by-product ofsmelting and refining operations. Most of the sulphur dioxide gas produced at Falconbridge’sCanadian and Chilean smelters is captured before stack emission and convertedinto sulphuric acid or liquid sulphur dioxide in order to comply with sulphurdioxide emission limits. The Canadian sulphuric acid production is sold toNorFalco, which markets, transports and distributes sulphuric acid in NorthAmerica. In 2005, NorFalco and its wholly-owned Canadian subsidiary marketedapproximately 1.9 million tonnes of sulphuric acid from us and third-partysuppliers. Sulphuric acid produced at Falconbridge’s Chilean smelter is sold byFalconbridge Chile Limitada locally to mining companies using this productfor their copper leaching operations.

 

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**Magnesium**

 

Falconbridge’s Danville Québec magnesiumplant has a design capacity of 58,000 tonnes of pure and alloy magnesiumproducts and is owned 80% by Falconbridge and 20% by Société générale de financementdu Québec.

 

Magnesium is classified as a light metal. Byvolume, it is approximately two-thirds the weight of aluminum and one quarterthe weight of steel. Magnesium is used in several applications, including theproduction of aluminum alloys typically containing between 0.5% and 3.5%magnesium (can stock for aluminum beverage containers is the largestapplication) and die-casting of component parts for the automotive, electronicsand manufacturing industries. Magnesium die-cast alloys have excellentstrength-to-weight ratios and are attractive for many applications.

 

**MetalsMarketing**

 

Our marketing and sales strategy is to sellour production at prices that are equal to or greater than the average cashprice reported on Comex, the LME or other relevant terminal markets. Premiumsabove the Comex or LME settlement price are negotiated based on product form andquality, packaging, delivery terms, supply commitments, delivery location andavailability of product. For the intermediate copper products sold by FalconbridgeChile Limitada (blister and anodes), discounts are negotiated periodically fromLME prices which largely reflect inherent third party processing charges. Forproducts for which there is no terminal market, our objective is to obtainprices that equal or exceed benchmarks that reflect the average price realizedin the marketplace.

 

We procure custom feed materials forprocessing in the metallurgical facilities. In order to minimize metal pricerisk exposure on purchased metals and fluctuations in inventory levels, and toobtain the average Comex/LME prices or better, the Company employs the use ofderivatives in the form of forward or options contracts to hedge theserisks. Generally, we do not hedge the price we realize on the sale of our ownproduction, and accept prices based on the market price prevailing around thetime of delivery of these metals. From time to time, however, we may fixthe metal price associated with our own future production to lock in certainprofits or cash flows.

 

Fluctuations in currency exchange rates,principally the Canadian/US dollar exchange rate, significantly affect ourearnings and cash flows. Most of our debt is denominated in US dollars, whereasa significant portion of our Canadian operating costs are incurred in Canadiandollars.

 

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**3.****             DESCRIPTIONOF THE BUSINESS**

 

Our operations explore for, develop, mine,process and market metals and minerals. We conduct these activities through ourfour operating business units: Nickel, Copper, Aluminum and Zinc.

 

We are one of the world’s largest producersof zinc and nickel and a significant producer of copper, primary and fabricatedaluminum, lead, silver, gold, sulphuric acid and cobalt. We are also a majorrecycler of secondary copper, nickel and precious metals.

 

 

The following table shows revenue byoperating segment and the relative percentage of each operating segment’scontribution to total revenue for the past three years:

 
| ** **    | ** ** | **2005**              | ** ** | **2004** | ** ** | **2003** | ** ** |
|---------------|------------|-----------------------|------------|----------|------------|----------|------------|
| ** **    | ** ** | **($ millions)** | ** ** |
| Nickel        |       | 2,146                 |       | 26       | %          | 1,824    |       | 27 | % | 1,288 |   | 29 | % |
| Copper        |       | 4,421                 |       | 55       | %          | 3,592    |       | 53 | % | 2,119 |   | 48 | % |
| Zinc          |       | 504                   |       | 6        | %          | 415      |       | 6 | % | 363 |   | 8 | % |
| Aluminum      |       | 1,077                 |       | 13       | %          | 935      |       | 14 | % | 686 |   | 15 | % |
| Other         |       | —                |       | —   |       | (2       | )          | — |   | — |   | — |   |
|          |       |                  |       |     |       |     |       |   |   |   |   |   |   |
| Total Revenue |       | 8,148                 |       | 100      | %          | 6,764    |       | 100 | % | 4,456 |   | 100 | % |

 

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***3.1******          Main Businesses***

 

**3.1.1****       Nickel**

 

Falconbridge is the fourth largest producerof refined nickel in the world, and one of the largest recyclers and processorsof nickel and cobalt-bearing materials. Our operations include mines andprocessing facilities in Canada, Norway and the Dominican Republic.

 

**Falconbridge Dominicana C. por A. (“Falcondo”)**

 

Falconbridge owns85.26% of the outstanding shares of Falcondo. Of the balance, the Government ofthe Dominican Republic owns approximately 10%, Redstone Resources Inc. ownsapproximately 4.1% and various individuals own the remainder. Falcondo holds amining concession and owns mining and mineral processing facilities for the productionof ferronickel located near the town of Bonao, approximately 80 kilometresnorthwest of Santo Domingo, Dominican Republic.

 

*Properties and Mines*

 

Falcondo has beenmining and processing nickel laterite ore in the Dominican Republic since 1971.Falcondo’s mining concession covers approximately 21,830 hectares. Falcondoowns 4,831 hectares, 4,802 of which are inside the mining concession andinclude the mining areas and the mineral processing facilities, and 29 of whichare outside the mining concession and include the townsite at Bonao. The termof the mining concession is for an unlimited period.

 

Mining at Falcondo is carried out from thesurface using bulldozers, hydraulic shovels and trucks. Falcondo’s total mineproduction for the year ended December 31, 2005, as obtained through ametallurgical balance calculation, was 3,920,220 dry tonnes (2004 – 3,736,800dry tonnes) of ore at an average nickel grade of 1.18%.

 

*Mineral Reserves and Resources(1)*

 

As of December 31, 2005, proven andprobable reserves totaled 54,373,000 tonnes averaging 1.19% nickel. Indicatedresources in addition to mineral reserves total 13,840,000 tonnes with anaverage grade of 1.53% nickel. Inferred resources total 6,300,000 tonnesgrading 1.4% nickel.

 

Mineral resources are reported using cut-offgrades and minimum mining widths appropriate to the particular mining depositand mining method. Dilution and mining extraction recovery factors are appliedto the mineral resource to arrive at the mineral reserves. The assumed metalprice was nickel $3.25 per lb.

 

The proven andprobable mineral reserves at Falcondo showed a total decrease of 3.0 milliontonnes after production of 3.9 million tonnes in 2005. Gains of 2.0 milliontonnes in previously undrilled areas and a gain of 1.3 million tonnes due torevisions to tonnage and grade factors were mostly offset by a write-down of2.4 million tonnes in three large reserve blocks in Caribe and Peguera depositsfollowing an economic evaluation study.

 

At plannedoperating rates, mineral reserves at Falcondo are equal to approximately 14years of production, not including 13.8 million tonnes of indicated resourcesthat are in large part anticipated to be converted into reserves.

 

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(1)   For Qualified Person informationwith respect to the mineral reserve and mining resource estimate, see “MineralReserves and Resources” in Item 3.9.3 of this Annual Information Form.

 

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*Milling, Smelting, Refining and Marketing*

 

The ore mined at Falcondo is milled, smeltedand refined at Falcondo’s mineral processing facilities, which have a capacityof approximately 29,000 tonnes of nickel contained in ferronickel per year. Thefacilities include a metallurgical treatment plant, a crude oil processor and a200-megawatt thermal power plant. In 2005, Falcondo rented back up power energyfrom the national grid during the period of maintenance of the three ownedunits and that initiative allowed the metallurgical plant to comply with theproduction budget. Falcondo has dock facilities and a crude oil tank farm atthe port of Haina (near Santo Domingo) and a 70-kilometre crude oil pipelinefrom the port to its mineral processing facilities. Falcondo’s production ofnickel in ferronickel for 2005 was 28,700 tonnes (2004 - 29,500 tonnes).

 

Marketing and sales of ferronickel producedat Falcondo are conducted through Falconbridge U.S., Inc., FalconbridgeEurope S.A. and Falconbridge (Japan) Limited.

 

**Raglan**

 

*Mining Operation*

 

The Raglanproperty is located 105 kilometres south of the northern tip of the Ungava(Nunavik) Peninsula in the Province of Quebec, approximately 1,800 kilometresnorth of Montreal. The property comprises 1,226 map-designated claims covering48,149 hectares and ten 20-year mining leases covering 963 hectares. The firstof the leases expires in June 2016. All are renewable for three 10-yearterms, provided that mining has taken place for at least two of the precedingten years. One mining lease application covering 32 hectares remainsoutstanding from 2004.

 

Commercial production at Raglan began on April 1,1998. Raglan’s annual production capacity is one million tonnes of ore milledper year. Net production for 2005 totaled 22,200 tonnes of nickel (26,600tonnes in 2004), 5,800 tonnes of copper (6,900 tonnes in 2004) and 350 tonnesof cobalt (400 tonnes in 2004).

 

*Mineral Reserves and Resources(1)*

 

As of December 31, 2005, proven andprobable reserves totaled 14,850,000 tonnes averaging 2.80% nickel and 0.77%copper. The overall Mineral Reserve was decreased by 0.8 million tonnes in2005, resulting from production of 934,000 tonnes and minor reserve adjustmentrelated to delineation drilling, a cut-off grade change for open pit productionand incremental ore additions during underground mining. At the current milloperating rates, the Proven and Probable mineral reserves are equal toapproximately 15 years of production.

 

As of December 31, 2005, Measured andIndicated Resources totalled 3,390,500 tonnes with an average grade of 2.42%nickel and 0.80% copper, Inferred Resources totalled 7,700,000 tonnes grading3.0% nickel and 0.8% copper. A negative adjustment of 374,000 tonnes wasrealised for Indicated Resources in 2005, while Inferred Resources increased by2,500,000 tonnes due to new discoveries and additions through exploration atZone 5-8, Donaldson, West Boundary, East Lake, and Mine 3.

 

Mineral resources are reported using cut-offgrades and minimum mining widths appropriate to the particular ore zone andmining method. Dilution (planned, overbreak and fill) and mining extractionrecoveries are applied to the mineral resource to arrive at the mineral reserves.Assumed metal prices and exchange rate were nickel $3.25 per lb., copper $0.90per lb. and Cdn$1.50 for US$1.00.

 

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(1)   ForQualified Person information with respect to the mineral reserve and miningresource estimate, see “Mineral Reserves and Resources” in Item 3.9.3 ofthis Annual Information Form.

 

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*Milling Operation*

 

The ore from the Raglan mines is crushed,ground and treated at the Raglan mill to produce nickel/copper concentrate.Raglan concentrate is trucked to Deception Bay for marine shipment to QuébecCity and then transported by rail to the Sudbury smelter for treatment. There weresix shipments from Deception Bay during 2005.

 

The current mill throughput is 3,000 tonnesof ore per day. Total ore milled in 2005 was 934,000****tonnes (935,000 tonnes in 2004).

 

**Sudbury**

 

*Mining Operations*

 

We have been mining nickel/copper ores in theSudbury area of northern Ontario since 1929. The Sudbury Mines/Mill principalnickel/copper producing properties in the Sudbury area are located in theTownships of Falconbridge, Levack, Garson, Dowling and Blezard. The propertiescomprise 2,345 hectares owned by the Company and 14 hectares held under twolicences of occupation of mining rights from the Province of Ontario. Thelicences of occupation are held in perpetuity.

 

*Mines/Mill*

 

Sudbury Mines/Mill operates three undergroundnickel/copper mines in the Sudbury area: the Craig, Fraser and Lindsley mines.In 2005, the Craig mine provided 42% of Sudbury Mines/Mill’s ore production.

 

Metal in concentrate produced during 2005amounted to 19,700 tonnes of nickel (2004 – 22,600 tonnes), 23,400 tonnesof copper (2004 – 24,700 tonnes) and 525 tonnes of cobalt (2004 – 565tonnes).

 

The ore from Sudbury Mines/Mill is crushedand ground and the nickel/copper bearing sulphide materials contained in theore are separated from waste materials at the Strathcona mill to producenickel/copper concentrate and copper concentrate. The Sudbury Mines/Mill totalore milled for 2005 was 2,248,000 tonnes (2004 – 2,259,000 tonnes). TheStrathcona mill has a capacity of approximately 8,500 tonnes of ore per day. Thecopper concentrate from the Strathcona Mill is delivered to Kidd CreekMetallurgical’s mineral processing facilities for smelting and refining. Thenickel/copper concentrate from the Strathcona mill is delivered to the Sudburysmelter for smelting.

 

*Mineral Reserves and Resources(1)*

 

Our exploration successes in the Sudburybasin over the course of the last few years have significantly increased theoverall mineral resources available for the INO Sudbury Mines Mill BusinessUnit. There are 20.5 million tonnes of Measured and Indicated Mineral Resourceswith an average grade of 2.30% nickel and 1.02% copper and 29.0 million tonnesof Inferred Mineral Resources grading 1.8% nickel and 2.6% copper. Measured andIndicated Resources decreased by 1.2 million tonnes in 2005 and InferredResources by 0.7 million tonnes during the same period mainly due to theprovisional sale of properties containing resources. Total mineral reserves inSudbury consist of 8.1 million tonnes in the Proven and Probable categoriesaveraging 1.18% nickel and 1.47% copper. After production of 2.2 milliontonnes, proven and probable reserves were further decreased by 1.6 milliontonnes due to new detailed drill information in the mines plus revised cut-offgrades and engineering studies.

 

As of December 31, 2005, Nickel RimSouth is estimated to contain 13.4 million tonnes grading 1.8% nickel and 3.3%copper. Drilling at Fraser Morgan Zones 8, 9, 10 and a newly discovered Zone 11upgraded the geological confidence and

 

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(1)   For Qualified Person informationwith respect to the mineral reserve and mining resource estimate, see “MineralReserves and Resources” in Item 3.9.3 of this Annual Information Form.

 

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added to the available Mineral Resources. TheFraser Morgan Mineral Resource as of December 31, 2005, consisted of 3.3million tonnes of measured resources grading 1.85% nickel and 0.61% copper, 1.6million tonnes of indicated resources grading 1.69% nickel, 0.46% copper and2.4 million tonnes of inferred resources grading 1.8% nickel, 0.5% copper.

 

Mineral Resources are reported usingshort-term and long-term price forecasting, cut-off grades and minimum miningwidths appropriate to the particular deposit, production forecast and miningmethod. Engineering design, dilution and mining recoveries are applied to theMineral Resource to arrive at the Mineral Reserve.

 

Approximately 2,171,000 tonnes of Proven andProbable Mineral Reserves were milled in 2005. At planned operating rates,existing Proven and Probable Mineral Reserves, not including new MineralResources largely anticipated to be converted to Mineral Reserves in thefuture, represent approximately 4 years of production. The upgrade of mineralresources to reserves by planned future work would result in an extension ofthe operating life of the Sudbury mines, mill and smelter. The Nickel Rim Southdeposit currently under development is projected to support mining operationsuntil approximately 2021.

 

*Smelter*

 

The nickel/copper concentrate from the Strathconamill is treated at the Sudbury smelter along with Raglan and Montcalm concentratesand custom feed from other sources. The smelter produces a matte containingnickel, copper and cobalt, as well as silver, gold and platinum group metals. TheSudbury smelter has the capacity to produce approximately 130,000 tonnes ofmatte per year. The matte produced is shipped by rail to Québec City and by seato the Nikkelverk refinery in Norway for further processing.

 

The Sudbury smelter’s output for 2005 from allsources was 63,090 tonnes of nickel (2004 – 52,600 tonnes), 20,800 tonnesof copper (2004 – 18,400 tonnes) and 2,420 tonnes of cobalt (2004 –1,840 tonnes). Copper concentrate sent to the Kidd Creek smelter contained 18,125 tonnes of copper(2004 – 17,600 tonnes). Sulphuric acid produced as a result of smeltingactivity in Sudbury was 310,600 tonnes in 2005 (2004 – 244,600 tonnes).

 

**Falconbridge Nikkelverk, AS (“Nikkelverk”)**

 

Nikkelverk, a wholly-owned subsidiary ofFalconbridge, operates a refinery and a sulphuric acid plant at Kristiansand,Norway. The refinery processes the matte produced by the Sudbury smelter aswell as custom feed from other sources, which includes the treatment of thesilver, gold and platinum group metals contained in the matte and custom feed.The refinery has an annual capacity of approximately 86,000 tonnes of nickel,39,000 tonnes of copper and 5,200 tonnes of cobalt. The sulphuric acid planthas a capacity of approximately 115,000 tonnes of sulphuric acid per year. In2005, the refinery produced 84,900 tonnes of nickel (2004 – 71,400tonnes), 38,700 tonnes of copper (2004 – 35,600 tonnes), 5,020 tonnes ofcobalt (2004 – 4,670 tonnes) and 108,800 tonnes of sulphuric acid(2004 –95,200 tonnes).

 

Mattes from the Sudbury smelter and from BCLLimited (“BCL”) in Botswana were the main sources of nickel/copper feedmaterials for the Nikkelverk refinery during the year.

 

In 2005 the refinery produced approximately405,500 ounces of platinum group metals (2004 — 438,000 ounces).

 

Significant expansion of the nickel andcobalt capacity, based on matte or laterite intermediates, are possible ifmarket conditions warrant such expansion.

 

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# **Montcalm**

 

TheMontcalm nickel mine was brought into production in 2004. It is located 100kilometres east of the Kidd Metallurgical Site in Montcalm Township in theProvince of Ontario and comprises four 21 year leases covering mining andsurface rights over 831 hectares.

 

The Montcalm project reached its designedproduction capacity of 750,000 tonnes annually during the fourth quarter of2004. This included conversion of a redundant mill line at the Kiddconcentrator to handle the Montcalm ores. Two concentrates are produced, acopper concentrate which is treated at the Kidd Metallurgical Complex and anickel concentrate which is transported to Falconbridge’s smelter in Sudbury.

 

In 2005 a total of 750,070 tonnes of Montcalmore were milled (2004 — 220,570 tonnes) grading 1.52% nickel and 0.79% copper. During2005 both the mine and mill were successfully test run at an 875,000 tonneannualized rate (116% of design capacity). The current plan is to increaseMontcalm mine and mill production to the 875,000 tonne a year rate starting inthe second half of 2006, effectively milling 845,000 tonnes in 2006 and 875,000tonnes a year thereafter until the mine is depleted.

 

*Mineral Reserves and Resources(1)*

 

As of December 31, 2005, proven andprobable reserves totaled 4,507,000 tonnes averaging 1.46% nickel and 0.68% copper.Montcalm is expected to contribute approximately 9,000 tonnes of nickelannually to output from the Sudbury smelter.

 

Mineral resources are estimated using cut-offgrades and minimum mining widths appropriate to the particular ore zone andmining method. Dilution (planned and overbreak) and mining extractionrecoveries are applied to the mineral resource to arrive at the mineralreserves. Assumed metal prices and exchange rate were nickel $3.25 per lb.,copper $0.90 per lb. and the Cdn$1.50 for US$1.00.

 

Mineral reservesdecreased from 4.9 million tonnes to 4.5 million tonnes due to a 2005production total of 0.8 million tonnes which was partly replaced by 0.4 milliontonnes from upgrade drilling on the final mineral resources at the mine.  No mineral resources remain. At plannedoperating rates, the mineral reserves are equal to approximately 5 years ofproduction.

 

**FalconbridgeInternational Limited (“FIL”)**

 

FIL, through its offices in Bridgetown,Barbados and Brussels, Belgium, is responsible for managing the INO’s customfeed business outside Canada. Custom feed, or third-party primary smelter mineproduction (concentrate), primary smelter production (matte) and secondary rawmaterials, provides a significant source of feed to the Sudbury Smelter and theNikkelverk refinery. The availability of and profit margins associated with thecustom feed processed at the Sudbury Smelter and the Nikkelverk refinery arelargely a function of metal grade and the level and relationship of nickel,copper, cobalt, silver, gold and platinum group metals prices and competitionfor such materials.

 

The custom feed processed at the SudburySmelter consists largely of nickel/copper/cobalt secondary raw materials andnickel concentrates. Most secondary raw materials are sourced on a spot basisor under contracts of one to three years’ duration. Concentrates are sourced ona spot basis and multi-year contracts. In 2005, Sudbury Smelter’s output fromall third-party feeds included 9,300 tonnes of nickel, 6,600 tonnes of copperand 1,360 tonnes of cobalt.

 

In 1985, FIL entered into a long-termagreement with BCL to treat complex nickel/copper matte from BCL’s smelter inBotswana. The BCL matte represented approximately 65% of the nickel and copper-bearingcustom feeds processed at the

 

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Nikkelverk refinery in 2005. Under theagreement, which was extended in 2002 to the end of 2015, BCL has agreed todeliver approximately 10,000 tonnes of nickel in matte per year.

 

*Custom FeedProduction at the Refinery*

 

In 2005, custom feed represented approximately37% of the nickel (2004 – 34%), 64% of the copper (2004 – 59%) and 80% of thecobalt (2004 – 83%) output at the Nikkelverk refinery.

 

**3.1.2****       Copper**

 

The copper business unit is afully-integrated producer of copper metal and concentrate. The copper businessunit includes the operation of the Company’s 33.75%-owned Antamina copper and zinc mine in Peru and the 100%-owned****Altonortecopper smelter located near Antofagasta, Chile, Falconbridge’s 44% stake in the Collahuasi coppermine in Chile and 100% interestin the Lomas Bayas operations, as well as refining, smelting and recyclingfacilities in Canada and in the United States, which are referred to asCanadian Copper and Recycling (“CC&R”).

 

**Altonorte Smelter**

 

We own 100% of the Altonorte copper smelterlocated in northern Chile. The smelter recently completed a major modernizationand $170 million Phase 3 expansion project, which more than doubledits capacity to a nominal 835,000 tonnes/year of copper concentrate throughput,copper anode output capacity to approximately 290,000 tonnes and sulphuric acidcapacity to 790,000 tonnes.

 

The Altonorte custom smelter processes copperconcentrate from third-party mines located mainly in Chile. Approximately 35%of the Altonorte smelter’s production is sold to Codelco and is refined atCodelco’s Chuquicamata refinery near Calama, Chile, a portion of which isreturned to us in the form of cathodes. The balance of the smelter’sblister anode production is exported. The smelter’s sulphuric acid productionis sold to customers located in the northern region of Chile. In 2005,Altonorte processed 894,700 tonnes of feed material (2004 – 832,800 tonnes),produced 297,600 tonnes of copper anodes (2004 – 266,400 tonnes) and produced808,200 tonnes of sulphuric acid (2004 –751,300 tonnes).

 

**CompañíaMinera Antamina S.A. (“Antamina”)**

 

*History and Location*

 

Located in the Andes mountains in Peru,approximately 270 kilometres north of Lima and at an elevation of4,300 metres, the Antamina deposit is one of the largest copper/zincorebodies in the world, with a milling rate of 100,000 tonnes per day. Antaminais expected to produce 277,000 tonnes of copper and 163,000 tonnes ofzinc annually over an 18-year mine life, producing an annual average of710 million pounds of copper and 625 million pounds of zinc in thenext 10 years.

 

A capital investment of $2,148 millionwas made to bring Antamina into production. Of this amount, $1,320 millionwas financed using senior project debt.

 

Our beneficial interest in Antamina is33.75%, with the beneficial owners comprising BHP Billiton PLC at 33.75%,Teck Cominco Limited at 22.5% and Mitsubishi Corporation with a 10% interest.

 

*Operations*

 

Antamina begancommercial production in October 2001. In 2005, Antamina produced1,287,257 tonnes of copper concentrate grading 29.10% copper, 343,559 tonnes ofzinc concentrate grading 53.66% zinc and 12,875 tonnes of molybdeniteconcentrate containing 52.20% molybdenum. In 2005, payable copper contained onthe concentrates sales was 

 

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815,703 pounds of copper,355,711 pounds of zinc, 16,124 pounds of molybdenum and 8,797 metric ounces ofSilver.

 

*Mineral Reserves and Resources(1)*

 

Antamina is classified as acopper-zinc-silver skarn deposit and occurs at the contact between a quartzmonzonite intrusive of Tertiary Age (< 70 million years) and limestoneof Cretaceous Age (70-135 million years).

 

Proven and probable mineral reserves total450,000,000 tonnes with an average grade of 1.18% copper, 0.93% zinc, 0.031%molybdenum and 12.9 grams of silver per tonne. Proven and probable mineralreserves are based on the mineral resource model after applying open-pit designand cut-off criteria. Measured and indicated resources, in addition to mineralreserves in the current pit design, total 60,000,000 tonnes with an averagegrade of 0.49% copper, 0.33% zinc, 0.030% molybdenum and 6.7 grams of silverper tonne. Inferred mineral resources total 41,000,000 tonnes with a grade of0.8% copper, 0.6% zinc, 0.02% molybdenum and 16 grams of silver per tonne.

 

Due to the polymetallic nature of thedeposit, multiple ore types, and variable metallurgical recoveries, proven andprobable mineral reserves are reported using a profitability economic cut-offvalue (US$1500/hour) and also include all measured and indicated material witha positive net value to be processed directly through the concentrator in thelife-of-mine plan. Low grade ore has a value between US$1500/hour and the highgrade ore value of 3US$14,000/hour. Marginal material is specified as having a valuebetween that of material treated as waste and the low-grade cut-off value.Measured resources are specified as all in-situ pit measured marginal material.Indicated resources are specified as all in-pit indicated marginal valueblocks. Inferred resources are estimated for all other inferred in-pit highgrade, low grade and marginal material.

 

The mineral resource and mineral reserveestimates were prepared under the supervision of Dan Gurtler, Mine Manager, andEric Lipten, Geology Superintendent who are qualified persons for the purposesof NI 43-101. Assumed metal prices were zinc $0.50 per lb., copper $0.95 perlb., molybdenum $5.00 per lb. and silver $5.00 per troy ounce.

 

The Antamina orebody is highly variable andis currently described by more than six different ore classifications. Thecurrent reserve estimate is the result of a three year program of diamonddrilling plus significant geological, engineering and metallurgical input. Theestimate includes substantive improvements in geological interpretation andmodelling interpolation methodologies. The new resource model providesincreased geological information and a superior reserve estimate for productionpurposes.

 

At planned operating rates, the proven andprobable mineral reserves are equal to approximately 14 years of mineproduction. Mill operations could continue for another few years on stockpiledmaterial. The mineral reserves decreased by 18 million tonnes in 2005 dueto production. There was 30 million tonnes of production which was partlyreplaced by the addition of 12 million tonnes of ore resulting from a majorinfill drilling campaign and a new reserve estimation.

 

**CompañiaMinera Doña Inés de Collahuasi (“Collahuasi”)**

 

Falconbridge owns a 44% interest in CompañíaMinera Doña Inés de Collahuasi S.C.M., an independent company which owns themining and water rights and other assets comprising the Collahuasi operation,together with Anglo American Plc which also holds a 44% interest, and aJapanese consortium holding the remaining 12% interest.

 

A capital investment of $1,792 millionwas required to bring Collahuasi into commercial production. The financingrequirement, including working capital, was approximately $1,870 million.

 

The Collahuasi property covers 446exploitation concessions over 133,803 hectares and 185 explorationconcessions over 66,500 hectares. The property is located in northern Chile,about 180 kilometres southeast of the port of Iquique, at an

 

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elevation of 4,300 metres. It containstwo separate porphyry copper deposits, known as Ujina and Rosario: the Ujinahigh grade secondary enrichment has been mined already but an important reserveof primary copper ore remains; Rosario has large tonnages of high grade primaryore and important secondary enrichment zones. The Huinquintipa oxide copperdeposit is located downstream from the Rosario deposit. In addition, theproperty contains high-grade copper mineralization at the adjacent RosarioOeste deposit.

 

*Mining and Milling Operations*

 

Commercial production at the Collahuasioperation began in January 1999. Production is expected to average 350,000tonnes per year of copper in concentrates and 50,000 tonnes per year of coppercathode during the initial 10 years of mine life. The mine site isserviced under a 20-year power supply contract with Empresa Nacional deElectricidad S.A., a Chilean electric utility company.

 

During 2005, 161.3 million tonnes of materialwas mined (2004 – 165.6 million tonnes), 40.1 million tonnes of ore wasmilled at the concentrator (2004 – 34.8 million tonnes) and 6.5million tonnes of ore was processed at the copper oxide leaching plant (2004 –6.6 million tonnes). Falconbridge’s share of copper produced by Collahuasi during2005 was 26,700 tonnes of cathode copper and 155,600 payable tonnes (161,200contained tonnes) of copper in concentrate (2004 – 211,600 copper tonnes wasproduced considering cathodes and concentrates).

 

The Ujina pit was practically depleted duringthe year 2004 and ore extraction ramped-up in the Rosario Pit during the year2004. In the last months of 2004, production at the Rosario Pit had achievedits full capacity.

 

*Mineral Reserves and Mineral Resources(1)*

 

As of December 31, 2005, proven andprobable mineral reserves totaled 1,804,332,000 tonnes with an average grade of0.90% copper. Measured and indicated resources are in addition to mineralreserves and totaled 478,360,000 tonnes with an average grade of 0.64% copper. Inferredmineral resources totaled 1,820,000,000 tonnes with a grade of 0.75% copper.

 

Proven and probable mineral reserves arebased on the mineral resource model after applying open-pit design and cut-offcriteria. Proven and probable mineral reserves are reported using a 0.45%copper cut-off for sulphide ore, 0.40% cut-off for oxide ore and 0.50% copperfor mixed ore, and include all stockpiled material above the cut-off grade. Theassumed metal price was $0.95 per lb. of copper. Mineral resources are inaddition to mineral reserves and are estimated using an average 0.40% coppercut-off grade. Measured and indicated mineral resources consist of materialinside an encompassing pit outline based on a copper price of $1.15 butexcluding the mineral reserves contained in the interior reserve pit outline. Inferredresources were estimated for material contained in both pit designs.

 

At planned operating rates, the proven andprobable mineral reserves are equal to more than 40 years ofproduction not including substantial measured and indicated mineral resourcesof 478.4 million tonnes and 1.8 billion tonnes of inferred resources. The December 31,2005 total mineral reserves were decreased solely by production of 45,273,000tonnes from the reserves.

 

**Canadian Copper and Recycling (“CC&R”)**

 

CC&R mines and procures copper andprecious metal concentrates and secondary materials for processing at ourcopper smelters and refineries and markets copper and related by-products.

 

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(1)   ForQualified Person information with respect to the mineral reserve and miningresource estimate, see “Mineral Reserves and Resources” in Item 3.9.3 ofthis Annual Information Form.

 

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*Mineral Reserves and Mineral Resources(1)*

 

The Kidd Creek ore body is intersected by anumber of major faults and other discontinuities. Mining and the resultingstress redistribution cause periodic ground adjustment along these faultsresulting in seismic activity. Falconbridge has taken steps to minimize theimpact of seismic activity on its Kidd Creek mining operations. These stepsinclude the use of seismic monitoring equipment and the development and use ofsafe and cost-effective mining systems and procedures. On occasion a seismicevent may occur that has the potential to cause personal injury, equipmentdamage or production interruption. Such events have been infrequent.

 

As of December 31, 2005, Kidd Creekreported reserves of 19.0 million tonnes grading 1.84% copper and 5.53% zinc.At planned operating rates (~2.4 million tonnes/year), the mineral reserves atKidd Creek Mining Division are equal to approximately 8 years of production. Mineralresources below the 88 level in Mine D are currently undergoing evaluation todetermine if they can be converted to mineral reserves and extend the life ofthe mine for another 5 years.

 

*Mining Operations*

 

Falconbridge and its predecessors in titlehave been mining the Kidd Creek copper/zinc deposits since 1966. The Kidd Creekmining operation’s principal copper/zinc properties in the Timmins area arelocated in Kidd Township, Porcupine mining division, Ontario. The property inthe Timmins area of northern Ontario comprises six half lots, or 960 acres, inthe Porcupine Mining Division, District of Cochrane, Ontario. The propertyparcel numbers are: 12757 SEC, 14980 SEC, 13574 SEC, 15114 SEC, 13571 SEC,13569 SEC and are 100% held by the Company. The Kidd Creek deposits are minedthrough two separate shafts, accessing mining areas known as the upper andlower mines, which access progressively deeper levels. In 2005, the upper mine(formerly No. 1 and No. 2 mines) accounted for 23% of production, thelower mine (formerly No. 3 mine) accounted for 56%, and Mine D 21% of theKidd Creek Mining Division’s mine ore production.

 

Ore production at the Kidd Creek MiningDivision (“Kidd Creek Mining”) for 2005 was approximately 2.38 million tonnes(2004 Actual – 2.09 million tonnes) The 2005 milled grades as at the end of December were;copper 1.99%, and zinc 6.21% (2004 Actual – copper grade 2.09%, zinc 5.04%). Metalsin concentrate produced as at the end of December 2005 totaled 42,700tonnes of copper (2004 Actual – 41,000 tonnes); and 120,000 tonnes of zinc(2004 Actual – 87,800).

 

In 2000, the Company approved the developmentof Mine D, the depth extension of the Kidd Creek ore body beyond the limits ofthe No. 3 mine at 6,800 feet (2,070 metres) to a depth of 8,800 feet(2,682 metres) for Stage 1. Stage 2, going down to 10,200 feet (3,109 meters)is still under feasibility study. Production from Mine D began in thesecond half of 2004 and production reached 480,000 tonnes in 2005 with ramp-upcontinuing into 2006.  Mine D, Stage 1 ofthe project is scheduled to be completed in 2006.

 

*Metallurgical Operations*

 

CC&R operates the Horne copper smelterlocated in Rouyn-Noranda, Québec, the Canadian Copper and Recycling refinery (“CCRrefinery”) in Montreal-East, Québec, the Kidd Creek Metallurgical Division, acopper-zinc complex located in Timmins, Ontario and five recycling facilitieslocated in the United States and Canada.

 

CC&R has the capacity to process approximately1,300,000 tonnes per year of copper and precious metal-bearing feed materialsat the Horne and Kidd Creek smelters. In 2005, Falconbridge processed 1,102,100tonnes of feed at the Horne and Kidd Creek smelters (2004 - 1,058,300 tonnes).In 2005, approximately 75% of the CC&R feed was procured from North Americawith the balance mainly from South America.

 

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The ore from Kidd Creek Mining Division istransported by a company-owned railway to the Kidd Creek Metallurgical Division’smineral processing facilities, located 27 kilometers southeast of the mine.The mill produces copper and zinc concentrates, and treats all ores from theKidd Creek Mining Division in two of four circuits. The remaining two circuits areavailable to process custom feed. In 2004, one of these circuits wasrehabilitated and converted to treat 750,000 tonnes per year of nickel ore fromFalconbridge’s new Montcalm mine, located approximately 100 kilometers west ofthe metallurgical site. Nickel concentrate from the circuit is shipped toSudbury for processing. The Kidd copper concentrate produced as well as theby-product Montcalm copper concentrate, are processed at the Kidd CreekMetallurgical Division’s copper smelter. In addition to these feeds, thesmelter also treats copper concentrate from Falconbridge’s Sudbury Strathconamill as well as other copper custom feeds. The smelter has the capacity toproduce 150,000 tonnes of blister copper per year. The 119,000 tonnes(2004 – 118,200 tonnes) of blister produced at the Kidd Creek smelter in 2005were either sent as anode for refining at its refinery, or shipped to theCompany’s CCR refinery. In 2005, the Kidd Creek copper refinery produced111,200 tonnes (2004 – 115,600 tonnes) of copper cathode.

 

The Kidd Creek zinc plant has the capacity toproduce 147,000 tonnes of zinc per year. In October 2004 a new preciousmetal recovery circuit was commissioned in the zinc plant. The new circuitallows the plant to process Agnico-Eagle’s Laronde Mine precious metal bearingzinc concentrates, and to recover the gold and silver as precious metals/leadresidue that is further refined at Falconbridge’s Brunswick smelter.Approximately 100,000 tonnes of Laronde zinc concentrate are received on anannual basis. The balance of the zinc plant’s feed is Kidd zinc concentrate,and any surplus Kidd zinc concentrate is available for processing at facilitiessuch as the Noranda Income Trust’s CEZ refinery located in Valleyfield Quebec.In 2005, the Kidd Creek zinc plant produced 113,700 tonnes (2004 –121,600 tonnes) of saleable zinc.

 

In addition to the mineral processingfacilities, the copper smelter, the copper refinery and the zinc plant, theKidd Creek Metallurgical Division also operates a cadmium plant, an indiumplant, two sulphuric acid plants, and a liquid SO2 plant. In 2005 the KiddCreek Metallurgical Division produced 472,300 tonnes of sulphuric acid.

 

In October 2005, the copper, zinc, andmilling operations of the Kidd Creek Metallurgical Division were impacted tovarying degrees by a 4 week strike by the site’s unionized workforce, CAW local599.

 

The Horne smelter utilizes two technologiesthat work together to optimize its production; concentrate injection andcontinuous smelting. Through its continuous smelting process, the Horne smelteris able to treat concentrates containing impurities such as arsenic, antimony,bismuth and other materials in addition to conventional copper concentrates. In2005, of the total volumes treated by the Horne smelter, approximately 22% ofthis feed was obtained from the Louvicourt, Antamina and Collahuasi mines andthe balance was sourced from third parties under contracts having durations ofone to three years or purchased on a spot basis. In September 2005, theNCV (Noranda Converter) at the Horne smelter was brought back on line. Theoperating rate increased from 600,000 tonnes to 790,000 tonnes of concentrate. Anodeproduction capacity increased to 170,000 tonnes from 140,000 tonnes. Thisincrease in operations was based on the availability of concentrates ateconomical treatment terms. Anode output from the Horne smelter totaled 147,000tonnes in 2005 (2004 –149,700 tonnes). All anodes produced at the Hornecopper smelter were refined at the Company’s CCR refinery. The smelter alsoproduced 517,900 tonnes of sulphuric acid in 2005.

 

The CCR refinery processes copper anodes fromthe Horne, Altonorte and Inco smelters as well as other unrefined copper andprecious metals from Falconbridge and third-party sources. In 2005, therefinery produced 304,200 tonnes (2004 – 288,400 tonnes) of coppercathode, approximately 908,350 thousand ounces of gold (2004 –1.1 million),33.2 million ounces of silver (2004 – 37.3 million) and otherby-products including selenium, tellurium, nickel sulphate, and a concentrateof platinum group metals. A contract was signed in early 2005 for the refiningof Inco anodes at CCR with shipments commencing in August 2005. InSeptember, the CCR refinery moved to a 7 day operation in preparation toincrease 2006 production to 372,000 tonnes.

 

CC&R is a leader in the recovery ofcopper, gold, silver and platinum group metals from the recycling ofelectronics and other copper and precious metal-bearing secondary materials. Priorto processing at the Horne smelter, a portion of the secondary stream is receivedand sampled. Falconbridge operates two sampling facilities in California andRhode Island. In

 

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addition, the Company operates plants inRoseville, California, Lavergne, Tennessee and Brampton, Ontario that provideasset management and recycling services for end-of-life electronic hardware forHewlett-Packard-a strategic partner, and other original equipment manufacturers.During 2005, a new commercial office and warehouse was opened in Penang,Malaysia to assist Asian based customers with the collection and shipment ofelectronic scrap from production facilities to the sampling plants in San Joseor Rhode Island. This new company is called Noranda Recycling Malaysia.

 

Falconbridge’s processing plants andtechnology enable the treatment of large tonnages of recycled materials. In2005, recycled materials comprised 12% (2004 –11%) of the feed for thecopper smelters and approximately 17% of the copper (2004 –9%), 20% of thegold (2004 –18%), 10% of the silver (2004 –8 %) and 95% of theplatinum group metals (2004 —80%) produced by the CCR refinery.

 

# **Lomas Bayas**

 

The Lomas Bayas mine comprises sevenexploitation concessions covering approximately 2,022 hectares. TheFortuna de Cobre deposit comprises 11 exploitation concessions coveringapproximately 1,216.5 hectares. Falconbridge also holds 25 exploitationconcessions and two exploitation concession application coveringapproximately  4,669 hectares between theLomas Bayas mine and the Fortuna de Cobre deposit as well as61 exploration concessions and two exploitation concession applicationscovering an area around the Fortuna de Cobre deposit.

 

The Lomas Bayas mine is located in the SecondRegion of Chile, approximately 110 kilometres north-east of the port cityof Antofagasta. The mine is situated at an altitude of 1,500 metres in theAtacama Desert. The Fortuna de Cobre deposit is situated 3 kilometres to thesouth of the Lomas Bayas mine.

 

*Mining Operations*

 

In July 2001, Falconbridge acquired 100%of the Lomas Bayas copper mine and adjacent Fortuna de Cobre copper depositfrom Boliden Limited for a cash payment of $66 million. Falconbridge isalso required to pay $15 million if it exercises its right to retain theFortuna de Cobre deposit before the fifth anniversary of closing.  The Fortuna de Cobre deposit could expandproduction or extend the mine life by five years, to 2020.

 

*Mining and Processing*

 

Lomas Bayas currently operates one open pitmine. Heap-leach grade ore is crushed and placed on leach pads by a series ofportable conveyors and a stacking system. Lower-grade ore that does noteconomically justify the cost of crushing and additional handling is placeddirectly on separate leach pads by mine haulage trucks. Solutions containingsulphuric acid are then applied to leach the ores and copper recovery occurs bya solvent extraction-electrowinning process. The copper cathode is transportedby truck and rail to the port at Antofagasta and shipped to customers overseas.Lomas Bayas is serviced by the electrical grid of northern Chile underlong-term contracts with a local electricity supplier.

 

In 2005, Lomas Bayas mined 35.8 milliontonnes (30.4 million tonnes in 2004) of ore from which 63,100 tonnes of cathodecopper were produced (62,000 tonnes were produced in 2004).

 

*Mineral Reserves and Mineral Resources(1)*

 

As of December 31, 2005, proven andprobable mineral reserves totaled 239,220,000 tonnes with an average grade of0.36% copper. Measured and indicated resources are in addition to mineralreserves and totaled 280,618,000 tonnes with an average grade of 0.28% copper. Inferredmineral resources totaled 31,000,000 tonnes with a grade of 0.3% copper.

 

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Proven and probable mineral reserves arebased on the mineral resource model after applying open-pit design and cut-offcriteria. Proven and probable mineral reserves are reported as percent totalcopper using an average 0.08% recoverable copper cut-off and include allstockpiled material above the cut-off grade. The assumed metal price was $0.90per lb. of copper. Mineral resources are in addition to mineral reserves andare estimated using a 0.08% recoverable copper cut-off grade. Measured andindicated mineral resources consist of material inside an encompassing pitoutline based on a copper price of $1.15 but excluding the mineral reservescontained in the interior pit outline. Inferred resources were estimated formaterial contained in both pit designs.

 

At current operating rates, the proven andprobable mineral reserves are equal to approximately 7 years of production. Themineral reserves decreased by 103.5 million tonnes due to mine production of34.3 million tonnes and negative reserve adjustments of 69.2 million tonnes. Thenegative impact on the reserve total resulted from a new reserve estimationwhich is based on 23,000 metres of new infill drilling and new estimationparameters including significantly higher mining, processing and sales costs. Alarge percentage of the material removed from the reserves and mining plan atthe current long term copper price can be moved back into the mine plan if thelong term copper price is increased.

 

Much of the material deleted from thereserves was downgraded to resources resulting in an increase of 35.6 milliontonnes to the measured and indicated resources. It is likely that theseresources will be mined at a future date if copper prices remain above US$1.15.

 

**3.1.3****       Aluminum**

 

The Company operates six plants in theUnited States that produce alumina, primary aluminum and aluminum foil, aswell as a mining operation in St. Ann, Jamaica. The alumina plant and thebauxite mining operations are operated under a 50% joint interest with CenturyAluminum, Inc. In 2005, approximately 94% (2004 – 95%) of sales wereto United States customers.

 

Our fabricated products operations purchasethe majority of our primary metal requirements from third parties. This allowsthe primary reduction plant to optimize product mix by selling value-addedproducts to third parties. St. Ann Bauxite produces all of the bauxite used atthe Gramercy alumina refinery, and sells excess bauxite to third parties. TheGramercy alumina refinery, which currently has the capacity to produce justover one million tonnes of smelter grade alumina, plus an additional 200,000tonnes of chemical grade alumina, supplies all of the alumina used at our NewMadrid smelter, and sells the balance of its alumina to Century Aluminum Inc.or third parties.

 

*Primary Products*

 

Alumina requirements were supplied undermedium-term contracts with third parties at prices that generally varied withaluminum prices until September 30, 2004. On October 1, 2004, Norandaand Century Aluminum Inc. each purchased, from Kaiser Aluminum Inc., a 50%ownership interest in Gramercy Alumina LLC (“Gramercy”) in Louisiana, and a 50%economic interest in the St. Ann Bauxite mine in Jamaica.

 

We operate a primary aluminum reduction plantlocated adjacent to the Mississippi River, near New Madrid, Missouri.The plant has three potlines that produced 245,600 tonnes of molten aluminumin 2005 (2004 – 247,500  tonnes), acarbon plant that produces anodes for the reduction cells, and a cast housecapable of producing 1,500 lb. standard ingots and value-added products such asbillet, electrical conductor rod and foundry alloy.

 

Our aluminum smelter in New Madrid,Missouri uses approximately 500 megawatts of power annually. Our previoustwo-year power contract expired May 31, 2005. A 15 year contract for allof the plant’s power needs was signed with Ameren A.E. Power Company ofMissouri in March 2005. The contract provides for power mill rates atapproximately $35/MWh, with any future rate changes subject to approval by theregulatory authorities of the State of Missouri.

 

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*Fabricated Products*

 

We operate four plants in the South-easternUnited States that combine to serve a broad range of customer needs. Weare the second largest producer of aluminum foil products in North America. In2005, third-party shipments increased by 2% totaling 178,000 tonnes,(2004 – 174,000 tonnes). Our market share in North America increased to23% of its target markets.

 

The original Huntingdon, Tennessee plant,which we have operated since 1979, has an approximate annual productioncapacity of 60,000 tonnes. It produces heavy-gauge foil from continuous castmetal, serving the electrical, simi-rigid container and air conditioning finstock markets. The Salisbury, North Carolina plant also operates continuouscasters and has an approximate annual production capacity of 45,000 tonnesof light and heavy-gauge foil. The Newport, Arkansas facility processes re-rollmaterial into lighter gauge coated and uncoated foil. It can produceapproximately 15,000 tonnes annually. The major products produced at theSalisbury and Newport plants are flexible packaging materials, air-conditioningfin stock and converter foil used in food containers.

 

We recently completed construction of amodern aluminum foil plant at a cost of $226 million (excluding financing)to reinforce our position as a leading, low-cost supplier of heavy-gauge foilproducts. The foil plant is located adjacent to the existing Huntingdon plantand has an annual production capacity of approximately 107,000 tonnes of heavy-gaugefoil, bringing our total foil production capacity to 227,000 tonnes. The plantutilizes state-of-the-art technology in casting, rolling and material handling.The new foil plant includes four new continuous casting machines, a high-speed,wide-width rolling mill with associated finishing equipment and an automatedproduct storage and retrieval system. The automated storage and retrievalsystem is designed to reduce cooling time and lower handling costs. The highspeed, low-gauge casters and wide-width rolling mill are designed to improveproduct quality, lower scrap rates and increase productivity.

 

**St. Ann Bauxite**

 

*Mineral Reserves and Resources(1)*

 

The Discovery Bay bauxite deposits areclassic karst-hosted Jamaican bauxite deposits. The individual zones occur inbasin like areas that represent karst depressions between steep hills oflimestone. The host unit is a very pure white Eocene limestone. The origin ofthe bauxite is thought to be the bauxitization of Tertiary volcanic tuffs orother rocks that were alluvially transported into karst depressions after weathering.The Tertiary volcanics have up to 20% Al2O3 and consequently wouldrequire relatively little volume reduction in order to achieve bauxite gradesof 45-50% Al2O3.

 

The mineral reserve estimate is based onassays from tractor-mounted auger drilling and geological interpretation of thedimensions of the mineralized basin. The data is entered into Arcinfo forpolygonal estimation of the reserve. Proven reserves are based on a 50 footspaced drill grid and probable reserves are based on a 100 foot spaced drillgrid.

 

Proven and probable reserves as at December 31,2005, total 29.3 million tonnes averaging 25.1% aluminum. Approximately4.1 million tonnes grading 24.8% aluminum was produced in 2005. At forecastmining rates, the reserves are sufficient for 6 years of production. Othermineralized basins exist on the mining leases which need to be sampled prior toinclusion in the mineral reserves or resources. From past experience, it isestimated that there is approximately 25 million tonnes of this material. Aswell, an agreement with the Government of Jamaica conditionally grants accessto other bauxite leases as necessary to provide sufficient feed to produce 4.5million tonnes per year until the year 2030.

 

The St. Ann Bauxite reserves estimate has beenprepared, classified and forwarded by St. Ann Jamaica Bauxite Partners, theoperator of the joint venture.

 

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(1)   For Qualified Person informationwith respect to the mineral reserve and mining resource estimate, see “MineralReserves and Resources” in Item 3.9.3 of this Annual Information Form.

 

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**3.1.4       Zinc**

 

OurZinc business unit produces zinc concentrate and copper concentrates at ourmines and procures and processes zinc concentrate at the Canadian ElectrolyticZinc Limited (“CEZ”) refinery owned by the Noranda Income Fund.  The zinc business unit also produces leadconcentrates at the Brunswick mine and procures and processes lead/silverconcentrates, residues and recycle materials at the Brunswick smelter.  Marketing of the CEZ refinery andFalconbridge’s zinc metal and related alloys, as well as the Company’s leadmetal and related alloys, is carried out through our head office in Toronto,Ontario and affiliated marketing offices in Zug, Switzerland and Cleveland,Ohio.  The marketing office in Zug alsopurchases and sells base metals within the European market.  In addition, the zinc business unit operatesthe General Smelting of Canada foundry in Lachine, Québec, which producesvarious lead and zinc alloys and anodes. The zinc business unit also operatesNorFalco LLC, which markets, transports and distributes Falconbridge’ssulphuric acid in North America.

 

**Brunswick Mine**

** **

*History and Location*

* *

TheBrunswick mine was developed and commenced operations in the early 1960s. Weacquired a controlling interest in the mine in 1971 and a 100% interest in1996. The mine is located approximately 27 kilometres southwest ofBathurst, New Brunswick. We have surface rights and 100% ownership of themineral rights on 1,030 hectares comprising the No. 12 Crown Grant(Nos. 35097 and 34300).

 

*Mineral Reserves and Resources(1)*

 

TheBrunswick ore body is hosted in steeply dipping volcanic and sedimentary rockunits. The deposit comprises massive sulphides intimately associated withvarious iron formation facies, with zinc, lead, copper and silver being theprincipal metals produced. The host rocks and the mineralization have undergonefour significant deformation events, resulting in intense folding and faulting.

 

Mineralresource and mineral reserve estimates are based on assays from diamonddrilling and geological interpretation of drilling and underground mapping ofdevelopment areas. The data are interpreted by the mine’s geologists and usedto develop a three-dimensional model of the geology, mineralization andunderground development areas.

 

Provenand probable mineral reserves as at December 31, 2005, total 14.7 milliontonnes averaging 8.77% zinc, 3.53% lead, 0.36% copper and 104 grams of silverper tonne.  Measured and indicatedmineral resources in addition to mineral reserves total 3.5 million tonnes withan average grade of 9.36% zinc, 3.83% lead, 0.32% copper and 98 grams of silverper tonne.

 

Allmineral reserve stope blocks and additional mineral resource blocks aredesigned by the mining engineers based on the geological model and grade blockmodel.  Parameters such as mineralizationgeometry, NSR value distribution, ground conditions, accessibility, conditionof adjacent mined out stopes are considered during stope design. Estimateddilution (planned and wall), estimated extraction recoveries and economics areapplied to the mineral reserve blocks only (mineral resource figures contain nodilution).  The assumed metal prices andexchange rate for the mineral reserves and resources were zinc $0.65 per lb.,copper $1.50 per lb., lead $0.35 per lb., silver $6.50 per troy ounce andCdn$1.25 for US$1.00.

 

At planned operating rates, theBrunswick Mine has an estimated life of 4 years. The mineral reserves decreasedby 2.7 million tonnes to 14.7 million tonnes. The decrease is due to production of 3.5 million tonnes of ore which waspartly replaced

 

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(1)          ForQualified Person information with respect to the mineral reserve and miningresource estimate, see “Mineral Reserves and Resources” in Item 3.9.3 of thisAnnual Information Form.

 

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by a gain of0.8 million tonnes of reserves due to comprehensive mining evaluations toupgrade some mineral resource blocks to mineral reserve status and the on-goingoptimization of several reserve stope blocks based on more favourable metalprice forecasts. Detailed technical and economic studies of the additionalmineral resources and other mining remnants located throughout the mine arecontinuing.  If this evaluation issuccessful in converting remaining resources to reserves, the 4 year mine lifecould be extended by an additional year of operation, subject to the risks andhazards associated with the mining business and the mine in its final stage ofextraction.

 

*Operations*

* *

Productionoccurs on five main levels to a depth of 1,125 metres. Two shafts provideaccess. The No. 3 shaft is 1,337 metres deep and is used to hoistpersonnel, ore and equipment. The No. 2 shaft is 963 metres deep and isused to hoist personnel and supplies. This shaft carries all compressed air andwater services for the mine. The remaining cage hoist is used intermittently asa backup to the No. 3 shaft facilities and a second means of egress fromthe mine.

 

Miningmethods are open stoping with delayed backfill including pillar-less, pyramid-shapedopen stope sequences and end-slicing. The ore body consists of a series ofsub-parallel ore lenses with an average dip of 70 degrees, a composite width ofup to 200 metres, a maximum strike length of 1,300 metres and a maximum depthof 1,150 metres.

 

Oreis processed in the concentrator using grinding, differential flotation,concentrate filtering and drying technologies to produce four products,including zinc, lead, bulk and copper concentrate. Flotation tailings are sentto a paste plant for recovery and production of required amount of pastebackfill. Residual tailings are sent to the tailings impoundment facility.Process water is recycled back to the concentrator while the excess runsthrough an effluent treatment facility prior to discharge to the environment.

 

Mineore processed increased to 9,700 tonnes per day average in 2005 (2004 - 9,400tonnes per day) and produced 265,600 tonnes of zinc in concentrate (2004 -268,100 tonnes). Zinc recoveries in the mill were 88% (2004 - 88%). A rockburst on the 1,000 metre level negatively affected production in the fourthquarter.

 

The425 Main Ore Zone project was fully commissioned and produced 17% of the minedtonnage.

 

**Matagami Division**

** **

*History and Location*

* *

TheBell Allard zinc/copper mine commenced commercial production inJanuary 2000 with an anticipated life of approximately five years.  As planned, mineral reserves at the BellAllard mine were depleted in 2004.  As aresult, we ceased operations at the mine during the fourth quarter of 2004.

 

TheMatagami concentrator and other support facilities were placed on care andmaintenance to support other potential mining projects such as Perseverance inthis favorable geologic area.  Thefacilities are located 10 kilometres southwest of the town of Matagami innorthwestern Quebec.

 

**Brunswick Smelter**

** **

TheBrunswick smelter, located in Belledune, New Brunswick, is a lead smelterthat processes lead concentrates from the Brunswick mine as well as a widerange of offshore lead and lead/silver concentrates and residues. Consistentwith our strategy of increasing our flexibility to treat complex feedmaterials, construction was completed on a new silver refinery in the firstquarter of 2001.

 

TheBrunswick smelter also operates a battery recycling facility in Belledune,New Brunswick with a processing capacity of 15,000 tonnes of batteries peryear.  Most of the used batteries aresourced from the Atlantic Provinces with

 

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Québec and theNew England states providing the balance.

 

InDecember 2002, we announced that the Brunswick smelter would change to aseasonal operation effective July 1, 2003 due to the shortage of economicfeed material. Under a seasonal operation the plant will run for eight months ayear on Brunswick mine concentrates and third-party sulphates and other third-partymaterial and will be shut down for the remaining four months each year.  However, in 2004 and 2005, the plant ran forover nine months due to the availability of concentrate and other materials.

 

**CEZ Refinery**

** **

TheCEZ refinery (in which we have a 25% interest through our interest in theNoranda Income Fund) located in Salaberry-de-Valleyfield, Québec procures andprocesses zinc concentrate for the production of zinc metal and powders. It islocated near the St. Lawrence Seaway and has access to road, rail and seatransportation links. In 2003, 2004 and 2005, over 80% of the zinc concentrateprocessed at the CEZ refinery was sourced from mines owned or partly owned byus, including the Brunswick mine, Bell Allard mine and Antamina. The refinery’sproducts are marketed in the United States, Canada, Europe and Asia.

 

Aplant optimization project increased nominal annual plant capacity from 225,000tonnes to 255,000 tonnes in 1999. Further plant debottlenecking andcontinuous improvement projects are proceeding and in 2004 the plant achieved arecord output of 277,300 tonnes.  In 2005,the plant achieved near record production of 272,400. Production was negativelyimpacted by the higher iron levels in the feed mix.

 

InMay 2002, Noranda sold the CEZ processing facility to the Noranda IncomeFund for a combination of cash and ordinary and priority units of the Fund.These priority units were then sold by Noranda pursuant to two separate public offerings.  Falconbridge continues to own a 25% interestin the Fund in the form of ordinary units, which are subordinated in respect ofcash distributions to the priority units until 2017.

 

Falconbridgehas entered into a processing agreement to sell to the refinery up to550,000 tonnes of zinc concentrate annually until 2017, an amount expectedto support 100% of its annual production at planned rates for that period. Therefinery pays Falconbridge for the concentrate based on the LME price for “payablezinc metal” contained in the concentrate less a treatment charge or processingfee, initially set at Cdn$0.352 per pound of payable zinc metal. The processingfee is adjusted annually to reflect changes in certain costs and was Cdn $0.361per pound in 2005.

 

Pursuantto various management agreements, Falconbridge will continue to operate andmanage the refinery and also provide management, marketing and otheradministrative services to the Fund.

 

**NorFalco LLC (“NorFalco”)**

** **

InApril 1998, Noranda, Falconbridge and DuPont agreed to form NorandaDuPont LLC, a joint venture to market, transport and distribute sulphuricacid in North America. On June 29, 2001, Noranda DuPont LLC redeemedDuPont’s 50% voting interest in Noranda DuPont LLC and its name waschanged to NorFalco LLC. NorFalco purchases and resells to consumersall of the Company’s Canadian sulphuric acid production.

 

NorFalcohas developed an extensive distribution infrastructure of tank cars, trucks,marine tankers and terminals in order to supply approximately 1.9 milliontonnes of sulphuric acid to consumers in North America. Its staff is based atits head office near Cleveland, Ohio and at the office of its wholly-ownedCanadian subsidiary, NorFalco Sales Inc., near Toronto, Ontario. NorFalcowas owned by Noranda (65%) and Former Falconbridge (35%) prior to theamalgamation and is now 100% owned by Falconbridge.

 

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**3.1.5       Exploration and Project Development**

** **

TheFalconbridge exploration group is organized around four activities: explorationsupport for existing operations; project and business development support;world-wide “greenfields” exploration and project generation; and technicalsupport, technology and mineral reserve/resource estimation and reporting.

 

Themandate of the Falconbridge exploration group is to add mineral reserves at theexisting operations; add new low cost nickel and copper mineral reservesthrough exploration or acquisitions to enable Falconbridge to pursue profitablegrowth.  In addition to explorationactivities, the exploration group provides support to business developmentwithin the Company through participation in advanced project evaluations.  Our exploration management is committed toenvironmentally and socially responsible exploration.  The group also emphasizes utilization of bestexploration technologies to achieve competitive advantage and increase thelikelihood of success.

 

Explorationin support of existing operations in Canada is conducted from offices inSudbury, at the Kidd Creek mine site and from a field office at the Raglansite. Greenfields exploration in North America is carried out from an office inLaval, Quebec. International greenfields exploration is conducted fromFalconbridge’s Toronto office and from offices in Brisbane, Australia, BeloHorizonte, Brazil, Santiago, Chile and Hermosillo, Mexico. Administration,accounting, legal and technical support is provided from Falconbridge’s Torontocorporate office.

 

AtDecember 31, 2005, Falconbridge had a permanent exploration staff of 119,including 92 geologists and geophysicists.

 

Falconbridge’sexploration expenditures, excluding capitalized expenditures, for the two yearsended December 31, 2005 and its planned exploration expenditures for 2006are as follows:

 

| ** **                                | ** ** | **2006  (Planned)**   | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|-------------------------------------------|------------|-----------------------|------------|------------|------------|------------|------------|
| ** **                                | ** ** | **($ millions)** | ** ** |
| ** **                                | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Support of core operations in  Canada** | ** ** | **16**                | ** ** | **20**     | ** ** | **16**     | ** ** |
| **Exploration projects in  Canada**       | ** ** | **4**                 | ** ** | **5**      | ** ** | **6**      | ** ** |
| **Exploration projects outside  Canada**  | ** ** | **29**                | ** ** | **22**     | ** ** | **13**     | ** ** |
| ** **                                | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Total**                                 | ** ** | **49**                | ** ** | **47**     | ** ** | **35**     | ** ** |

 

During2006, exploration projects are planned in Canada (Québec, New Brunswick, theYukon and British Columbia) and internationally (Mexico, Brazil, Chile, Norway,Turkey, Mongolia, Papua New Guinea and Australia).  Exploration activity in other areas will bepredicated on suitable acquisitions or new projects that meet corporateobjectives.

 

**SudburyOperations, Ontario**

** **

TheSudbury area is one of the world’s largest sources of nickel and containssignificant copper, cobalt, silver, gold and platinum group metals. In additionto its operating mines, Falconbridge has large property holdings coveringfavourable geology of the Sudbury Igneous Complex.

 

Explorationhas defined a mineral resource at Nickel Rim South located 2.7 kilometresnorth of the airport at a depth of approximately 1100-1600 metres. The inferredresource consists of 13.4 million tonnes of 1.8% nickel,3.3% copper, 1.8 grams per tonne platinum, 2.0 grams per tonnepalladium and 0.8 grams per tonne gold. A decision to proceed with afive-year underground definition program costing $368 million was announced onMarch 11, 2004 and preliminary underground

 

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drilling onthe resource will begin in 2006. Drilling on the Fraser Morgan zones resultedin measured plus indicated resources totalling 4.9 million tonnes grading 1.80%nickel and 0.56% copper.  Fraser Morganalso contains 2.4 million tonnes of inferred resources grading 1.8% nickel and0.5% copper.

 

Falconbridgespent $12.8 million on exploration in support of the Sudbury operations in2005 and plans to spend $17.4 million in 2006. This includes diamond drilling and other exploration that was carriedout on certain of Falconbridge’s properties by option and joint venturepartners, who also have exploration programs planned for 2006.

 

**Raglan,Quebec**

** **

Anannual exploration program in 2005 resulted in the discovery of approximately2.5 million tonnes of mineral resources at Zones 3, 5-8, West Boundary,Donaldson and East Lake.  This is morethan double the annual production rate at Raglan which milled 934,000 tonnes ofore in 2005.  The most significant resultwas the expansion of lens 8H which now is estimated to contain 2.3 milliontonnes grading 2.8% nickel.  This is thelargest single lens ever discovered in Raglan. This lens along with other adjacent lenses in Zone 7 and 8 will beplaced in the Mining Stage Gate Process and may become the next major miningcentre at Raglan.

 

Falconbridgespent $10.8 million ($6.2 million after Quebec tax credits) in 2005 insupport of the Raglan operation, and plans to spend $20.7 million ($11.6million after Quebec tax credits) in 2006.

 

**KiddCreek Operations, Ontario**

** **

Explorationsupport of the Kidd Creek operations in 2005 were conducted in three areaswithin 200 kilometres of Falconbridge’s core infrastructure in Timmins.  Exploration was undertaken in conjunctionwith junior mining company partners as part of a plan to test all prospectiveairborne EM targets on properties in the Detour-Normetal, Halliday Dome andFedNor areas by the end of 2007.  Nosignificant results were returned in 2005.

 

Significantly,the exploration expenditures in 2006 are starting to shift back to the FocusedExploration Zone - a region underlain by 150 square kilometers of highly prospectivebase metal stratigraphy immediately north of Kidd Mine. Previously, the Companyconducted exploration in this same area but aimed above a depth of 200m belowsurface. Now with plans to use the Titan-24 ground geophysics system which iscapable of seeing to greater than 500m in vertical depth, anomalies between 200and 500m depth will be tested over the next 2 years. This work will be entirelyfunded by our exploration partner.

 

Ongoingexploration at the Kidd Creek mine is focused in Mine D between the 98 and 102levels to upgrade the mineralization to the inferred resource category.

 

**ElPachón, Argentina**

** **

Theacquisition of the El Pachón project was completed in September 2001. Theproperty is located in the province of San Juan, Argentina at an elevation of3,600 to 4,100 metres about three kilometres from the Chilean border and sevenkilometres from the Los Pelambres mine. Diamond drilling, geological mapping and reinterpretation of theresource model were completed in 2003 with the objective to identify highergrade resources within the known resource and test exploration targets.  Geological work and the drilling campaignresulted in the estimation of mineral resources as follows:

 
| ** **         | ** ** | **Mineral Resources at a 0.4% Cu Cut-off Grade** | ** ** |
|--------------------|------------|--------------------------------------------------|------------|
| **Classification** | ** ** | **Tonnage Mt**                              | ** ** | **% Copper** | ** ** | **% Molybdenum** | ** ** | **g/t Silver** | ** ** |
| Measured           |       | 37                                               |       | 1.15 |   | 0.033 |   | 4.0 |   |
| Indicated          |       | 687                                              |       | 0.62 |   | 0.014 |   | 2.5 |   |
| **Sub-total**      | ** ** | **724**                                          | ** ** | **0.65** | ** ** | **0.015** | ** ** | **2.6** | ** ** |
| Inferred           |       | 560                                              |       | 0.52 |   | 0.014 |   | 2.6 |   |

 

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Workin 2004 included an external review of the resource estimate and work to updatethe Feasibility Study prepared by Cambior in 1997.   A proposal to place the project in thePrefeasibility Stage of the Mining Stage Gate Process was presented to senior managementin 2005.  Work on the PrefeasibilityStudy will begin in 2006.

 

**ElMorro, Chile**

** **

TheEl Morro property is located in Region III, 140 kilometres east of theport of Huasco at an elevation of 4,000 to 4,300 metres. The La Fortuna zone onthe El Morro property contains an inferred mineral resource estimated at466 million tonnes grading 0.61 percent copper and 0.50 grams pertonne gold at a copper cut-off of 0.4 percent copper.  The El Morro resource, located fivekilometres west-northwest of La Fortuna, contains an inferred mineral resourceestimated at 45 million tonnes grading 0.5% copper and 0.2 gram per tonne goldat a cut-off grade of 0.4% copper.

 

Wehave earned a 70% interest in the El Morro property from MetallicaResources Inc. by paying $10 million in cash to Metallica ResourcesInc. and are now preparing a feasibility study due by September 14, 2007.  If either party dilutes its interest in theproperty to 10% or less, their interest will convert to 2% net smelterroyalty.  Other agreement obligationshave been met, including an initial cash payment of $300,000, subscribing for$1 million in shares of Metallica Resources Inc. and completing aggregateexpenditures on the property of more than $10 million.  We intend to maintain the property andsatisfy its outstanding legal and environmental obligations.  In 2006 pre-feasibility level work will becarried out.  Key elements of this workinclude metallurgical studies as well as an infill diamond drill programdesigned to upgrade the La Fortuna resource to the measured and indicatedcategories.

** **

**Rosario Oeste, Chile**

 

The first stage of the Inferred Resourceestimate on Collahuasi’s Rosario Oeste zone was completed in 2005. Explorationresults indicate the Rosario Oeste zone contains an inferred mineral resource estimated at248 million tonnes grading 1.54% copper at a 0.4% copper cut-off. Thejoint venture partners (Anglo Americanplc, Falconbridge Limited and a Japanese consortium led by Mitsui & Co.,Ltd.) believe that these exploration results further demonstrate thepotential of developing resources at Collahuasi.

 

Themineral resource is located in the central part of the Rosario Oeste zone, andonly 300 metres from the projected edge of the Rosario open pit. Themineralized zone, as currently defined, remains open to the north, south and atdepth, and is thought to occupy approximately 50% of the total prospectivearea.

 

Copper mineralization is principallycontained in a structurally controlled chalcocite supergene blanket that formedover a swarm of high sulfidation veins. These results indicate potential toextend the life of the current operation, and add leachable resources to theexisting reserve base. Portions of the resource contain elevated arseniccontent that will be subject to further study.

 

Collahuasi will extend the drill program into2006. Although Rosario Oeste is the main focus of the current diamond-drillcampaign, exploration drilling is also in progress on the Poderosa zone,located immediately southeast of the Rosario operation, where geophysicalsurveys have yielded strong anomalies.

 

**WestWall, Chile**

** **

TheWest Wall property is located in Region V, about 100 kilometres north ofSantiago, Chile at an elevation of 3,000 –3,700 metres.  The company has satisfied all outstandingearn-in obligations in 2005 under a joint venture with Minera Anglo AmericanChile, and is currently vested at 50%. A low grade porphyry resource wasidentified on the property in the 1980’s by Minera Anglo-American Chile andNoranda discovered a new porphyry system, referred to as the Lagunillas zone,located three kilometres to the southwest. Diamond drilling in 2002 and 2005outlined a secondary enriched blanket of copper mineralization underlain bysignificant primary mineralization. The zone extends over an area of 1,200metres north-south and

 

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ranges from350 to 450 metres in width.  Followingthe 2005 drill campaign, a preliminary resource estimate of the Lagunilla zonewas prepared using the results of 15,563 metres of drilling in forty drillholes. Economic evaluation of the mineralization revealed the zone to beuneconomic due to moderate grade and significant thickness of barren leach cap.

 

Theplan for 2006 is to maintain the property. Anglo American has agreed to conduct their technical due diligence bySeptember 30, 2006 to determine their level of interest and futureparticipation.

 

**FriedaRiver, Papua New Guinea**

** **

We optioned the Frieda River property in Papua NewGuinea from Highlands Pacific Ltd. (“Highlands Pacific”) in January 2002.  The property is located in northern Papua NewGuinea and contains mineral resources in three separate copper deposits(Horse-Ivaal-Trukai, Koki and Nena).  Theagreement with Highlands Pacific allows for the Company to earn a 72% interestin any or all of the properties by spending an aggregate $5 million over fiveyears and completing a feasibility study on an elected property orproperties.  The 72% interest is subjectto reduction if the Papua New Guinea government exercises its right to acquireup to a 30% interest in the project. During the option period, the Company may acquire 72% of the Nenacopper-gold deposit, which is located within the Frieda River Property bypaying $10.8 million and completing a feasibility study.

 

As part of a 1996 prefeasibility study,Highlands Pacific estimated an inferred resource of 270 million tonnes of 0.4%copper and 0.3 grams per tonne gold, at a 0.2% copper cut-off grade for theKoki system and the Nena deposit was estimated to contain measured and indicatedresources totaling 49.8 million tonnes at 2.2% copper and 0.6 grams of gold pertonne at a 0.5% copper cut-off grade. Incorporation of more recent drilling into a revised block model in2003, followed by an optimization study in 2004, estimated theHorse-Ivaal-Trukai deposit to contain indicated mineral resources totaling 74.6million tonnes at a grade of 0.63% copper and 0.37 grams per tonne gold plusinferred mineral resources totaling 360 million tonnes grading 0.6% copper and0.38 grams per tonne gold in a potential open pit.

 

The2005 work program on the Frieda River project closed off the northern andsouthern extensions of the Nena deposit and focused on identifying high gradeNena-style copper-gold mineralization at North Debom, Hiro Ridge and EkwaiDebom.   The best intersections came from Ekwai Debom wherehole 053NOR05 cored 204m of 0.81% copper and 0.22 g/t gold, including 48m of1.85% copper and 0.22grams per tonne Au (18m to 66m).  A follow-up hole (076NOR05) located 50m tothe north intersected 24m of 3.20% copper, 0.36 grams per tonne gold startingat a hole depth of 42m.  Drilling in2004-2005 increased the Nena mineral resource in-situ copper tonnes by 20%. Thenew optimized resource stands at 42.7 million tonnes at 3.09% Cu and 0.59 g/tAu in a potential open pit.  Ametallurgical drilling program in 2005 has been successful in collectinggeological end members for processing at the Falconbridge Technology Centre.The overall objective is aimed at enhancing potential recoveries andconcentrate grades within the Nena high sulfidation system.

 

Theplanned work program for 2006 will concentrate on increasing the porphyryhypogene mineral resource in order to facilitate a large tonnage mining andprocessing operation.  Areas such asKokomo, Koki, Horse East and Guria are considered to have the highest potentialfor discovering additional tonnes. Higher grade, near surface secondaryenriched zones associated with the porphyries will also be targeted.  Pending a favorable outcome of the phase 1 metallurgicaltests, phase 2 will be implemented involving laboratory flotation tests inorder to arrive at a statement of expected grades and recoveries.  Hydrometallurgical test work will beundertaken to further explore the leaching process alternatives.

 

**PerseveranceDeposits, Quebec**

** **

ThePerseverance deposits are located close to our existing mill infrastructure inMatagami, Quebec. A feasibility study on the Perseverance and Equinox depositshas been completed under the Company’s internal review process. The Company hasnot yet taken a decision on the timing of any production.

 

ThePerseverance property is controlled under the terms of a joint ventureagreement between us and Société de Développement de la Baie James (“SDBJ”).Under the terms of the agreement, we hold a 90% interest in the property and

 

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SDBJ has theright to participate to the extent of a 10% interest in the property aftercompletion of a positive feasibility study or to convert its interest to a 2%net smelter royalty. Should SDBJ elect to participate, it will be required tofund its share of development costs. Should SDBJ convert its interest to a 2%net smelter royalty, we will hold a 100% interest in the property and will havethe option to reduce the royalty to a 1% net smelter royalty by making apayment of Cdn$1 million to SDBJ.

 

Afeasibility update is currently underway on the Perseverance project to assessthe benefits of an increase in the mining rate to 2,600 tonnes per day. In anticipation of a positive decision on this project a four-year collectiveagreement was negotiated in 2004 with the local union to cover the closure ofthe Bell Allard mine, facilitate the standby period and the possible opening ofPerseverance during the four-year term.

 

**LadyLoretta, Australia**

** **

TheLady Loretta project is located north of Mount Isa, in Queensland, Australia.After completing a preliminary feasibility on the project, the Companyexercised its option to acquire a 75% interest in the Lady Loretta project inDecember, 2000 from its partner, BUKA Minerals Limited. Permitting is complete.Queensland government approval has been granted for the transfer to BUKAMinerals Limited of the Lady Annie part of the property, defined as the LadyAnnie sublease.  We have not yet taken adecision on the timing of any production.

 

**LennardShelf, Australia**

** **

InApril 2004, we entered into an agreement with Teck Cominco Limited (“TeckCominco”) to earn a 50% interest in the Lennard Shelf mineral properties, plantand equipment and infrastructure in Western Australia.  In order to earn its 50% interest, Falconbridgewill be required to effectively invest approximately A$26 million inexploration, operating, capital expenditures or other advances in LennardShelf.  The property was acquired by TeckCominco from Western Metals Limited (“Western Metals”) in October 2003 for A$26million (A$1=US$0.68).

 

LennardShelf, located in the Kimberly region of Western Australia, 2,500 kilometresnorth-east of Perth, consists of a number of Mississippi Valley type lead/zincdeposits and a mill with an annual capacity of 3.1 million tonnes of ore.  In the year ended June 30, 2003, LennardShelf produced 176,000 tonnes of zinc and 70,000 tonnes of lead.  Work was suspended by Western Metals in lateNovember 2003.

 

TheLennard Shelf mines are currently on care and maintenance.  We and Teck Cominco are endeavouring toproduce a redevelopment plan for the assets. Work includes a detailed review of resources, as well as mine planningand other optimization work, and an exploration program to expand the currentresources.  A revised block model wascompleted in 2004 and used as a basis for a preliminary mine planningexercise.  A mineral resource wasestimated to contain measured and indicated resources of 2.8 million tonnesgrading 8.47% zinc and 1.96% lead. Inferred resources totaling 300,000 tonnes grading 8.2% zinc and 1.7%lead were also estimated.  Theseresources contain factors for mining recovery and dilution because they werederived from the mining study.

 

In 2005, a total of 18,066m in 33 holestested targets at Pilijippa (9,431m in 14 holes), Limestone Billy Hills (3,473min 8 holes), Road Gossan (1,556m in 5 holes) and Pillara Range North (3,603m in7 holes).  The best grades andintersections came from the Pilijippa area, however, a detailed review ofresults is required to determine whether follow-up drilling is warranted.  The 2005 program was aided with 52.2 km ofGradient IP, 22 km of MIMDAS, 2,690 station gravity survey, along with 2 soilsurveys.   An integration of these datasets will help in selecting the 2006 drill targets.

 

TeckCominco Limited has provided a 2006 work plan that has been reviewed andapproved by the Joint Venture Operating Committee. The objective of the programis to identify sufficient additional resources that would justify there-opening of the mine site.  Anaggressive drill program comprised of 32,000m in 52 holes is planned toevaluate the Emanuel Range and Pillara areas with the assistance of additionalIP and gravity geophysics.  IP surveyingis planned for the Mt. Talbot area.

 

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**KoniamboProject, New Caledonia**

 

Good progresswas made during 2005 in advancing Falconbridge’s objectives with respect to theKoniambo ferronickel project in the Northern Province of New Caledonia.  Final agreements were put in place by andamong Falconbridge, Société Minière du Sud Pacifique S.A. (“SMSP”), and otherrelevant parties to provide for the transfer of the Koniambo ore body in NewCaledonia to Koniambo Nickel SAS, a company owned 49% by Falconbridge and 51%by SMSP.  Falconbridge had announced inlate December 2005 that it had met the relevant conditions of the Bercy Accordfor this transfer to take place, including having placed firm orders for atleast $100 million in total for equipment and services relating to the project.

 

It iscurrently planned that the Koniambo project will encompass the construction ofa 60,000 tonne per year ferronickel processing plant and related development ofthe mine site and infrastructure.  Adetailed feasibility study was completed in December 2004.  The feasibility study was subject to twoindependent reviews in 2005 by two international engineering firms and feedbackfrom both reviews has been positive.

 

The capitalcost of the project is estimated to be $2.2 billion in 2004 dollars excludinginterest to be incurred during construction and initial working capitalrequirements.  The capital cost of $2.2billion includes the construction of a $600 million power station with aninstalled generating capacity of 390 MW. The remaining $1.6 billion relates tothe metallurgical plant, mine development, and other infrastructure such as theport and road facilities.

 

Detailed engineering for the projectcontinues in 2006.  Falconbridge expectsto receive the necessary construction and operating permits in 2006, enablingthe construction phase to commence in 2007. Based on these key milestones being met as currently planned, start-upof the project is expected to occur in 2009/2010.

 

Falconbridgehas, subject to certain terms and conditions, agreed to arrange for or provideup to 100 percent of the financing required for the project.  Given these financing arrangements, theproject’s free cash flow would first be used to service and repay debt incurredto finance the construction of the project before any distributions would beavailable to the equity owners in the project.

 

At a 2.0%nickel cut-off grade, the Koniambo deposit contains measured plus indicatedresources of 75.6 million tonnes at 2.47% nickel plus inferred resources of 82.7million tonnes grading 2.5% nickel.  Themeasured and indicated resources were converted to proven and probable reservestotalling 62.5 million tonnes grading 2.40% nickel.  In addition, the project has an inferredlimonite resource estimated at 100 million tonnes at 1.6% nickel and 0.2%cobalt that could be developed at a later date.

 

In 1998,Falconbridge entered into a joint-venture agreement with SMSP and itscontrolling shareholder, Société de Financement et d’Investissement de laProvince Nord, for the evaluation and development of the 60,000-tonne per yearnickel in ferronickel mining and smelting complex.

 

Whendeveloped, Koniambo will be one of the largest nickel producers in the worldwith initial production of 60,000 tonnes per year. In addition, futureexpansion could take advantage of the large resource base, which has anestimated life in excess of 50 years.

 

**Kabanga,Tanzania**

 

InApril 2005, Falconbridge announced a joint venture agreement with Barrick GoldCorporation on the Kabanga nickel deposit, located in northwestern Tanzania.The current estimated inferred resource is 26.4 million tonnes grading 2.6%nickel.  Under the terms of the agreement, Falconbridge acquired a 50%indirect joint venture interest in respect of the Kabanga Project for $15million and will be the operator of the joint venture.  Over the nextseveral years, Falconbridge will

 

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fund andconduct a further $50-million work plan. Current work, including explorationand infill diamond drilling, metallurgical testing and engineering study workwill lead to the completion of a scoping study in the first quarter of 2006.

 

**Araguaia,Brazil**

 

Falconbridge announced in September 2005 thatit had discovered two new significant nickel laterite deposits on its Araguaiaproperties in the Para State of northern Brazil.  These are new grassroots discoveries in anarea where the first recorded drilling for base metals was completed byFalconbridge’s exploration team in October 2004.

 

The Araguaia Belt includes a number ofophiolitic complexes that were obducted along the border of the Araguaia Neoproterozoicmobile belt. It comprises a variety of sedimentary rocks and several largeultramafic bodies that extends in excess of 400 kilometers in the north-southdirection. Development of significant laterite profiles with nickel gradesabove 1% and thicknesses ranging from 10 to 110m have been identified overlyingsome of these ophiolite bodies.

 

Approximately40% of the entire belt has been subjected to an airborne geophysical survey,including radiometric and magnetic data covering covered some 32,700 line-km at500 meter line spacing. Falconbridge has drilled 786 holes (30,412) in theAraguaia Belt which are distributed as follows:

 

| **Target**     | ** ** | **# Holes** | ** ** | **Meters** | ** ** |
|----------------|------------|------------------|------------|------------|------------|
| Serra do Tapa  |       | 399              |       | 19,308     |       |
| Vale Sonhos    |       | 152              |       | 4,257      |       |
| Cinzeiro Scout |       | 53               |       | 1,498      |       |
| Quatipuru      |       | 137              |       | 4,192      |       |
| Muricilandia   |       | 20               |       | 601        |       |
| Santa Tereza   |       | 13               |       | 321        |       |
| Arapoema       |       | 12               |       | 235        |       |
| **TOTAL**      | ** ** | **786**          | ** ** | **30,412** | ** ** |

 

Serra do Tapa is the top priority target identified to date based on significantnickel intercepts particularly in the north part of the target.  The target is at least 4.5 km long in anorth-south direction and ranges from approximately 500m to 1000m wide based on320m by 80m drilling carried out to date. The southern extension is also beingtested with scout drill holes.  Valedos Sonhos is located approximately 15 km southeast of the Serra do Tapadeposit. The target area extends 2.5 km in a north-south direction, is open tothe north and south and averages approximately 800m wide based on currentdrilling.

 

Workin 2006 will include 14,000m of drilling at Serra do Tapa and Vale do Sonhos toclose the drill grid to a spacing of 80m by 160m, followed by resourceestimation when assay results are obtained. The drill program continues with the objective of achieving a drillspacing of 80m by 80m to improve the level of confidence in the resourceestimate.  Other drilling is planned totest the southern extensions of these zones as well as continue regional scoutdrilling along the Araguaia belt.

 

Theproject area is well positioned with respect to infrastructure. Ample hydropower is available and the distance to main transmission lines is20-100km.  Rail service is availablewithin 100-200 km, while roads and rail lines are being upgraded and extended tothe South Network at 100km per year. Barge access to a sea port is possiblefrom Maraba (200km from Cinzeiro) on the completion of the lock system atTucurui which is planned for the end of 2007.

 

The deposits occur on properties owned byFalconbridge or where Falconbridge has the right to earn a 100% interestby completing a series of cash payments totaling $2.4 million staged overeight years. On the basis of airborne surveys

 

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coveringapproximately 22,000 square kilometres in the region, Falconbridge hasconsolidated its ground position over the key targets such that it now controlsmineral rights (Exploration Licenses) to almost 5,400 square kilometres(539,000 hectares).

 

***3.2          Other Subsidiaries***

 

**Novicourt Inc. (“Novicourt”)**

 

Weown approximately 62% interest in Novicourt Inc., a publicly traded Quebeccompany. Novicourt is a Canadian exploration and development company focused onthe discovery of new mineral deposits mainly in Canada and Brazil. Novicourt’sprimary asset until the depletion of ore in July 2005 was a 45% direct interestin the Louvicourt copper/zinc mine located near Val-d’Or, Quebec. Novicourtalso owns a 45% interest in the Louvaur/Alexis Joint Venture, which carries outexploration on land surrounding the Louvicourt deposit.  Novicourt also participates in explorationjoint ventures with others, including Falconbridge.

 

OnJuly 12, 2005, the Louvicourt mill completed the processing of the final oreproduced from the Louvicourt Mine as the ore reserves were depleted.

 

Copper production from the Louvicourt mine in 2005 was 17,000 tonnes(2004 – 33,000 tonnes) reflecting the reduced ore production and lower copperore grades averaging 2.2% (2004 – 2.8%).  Zinc production was13,000 tonnes of contained zinc (2004 – 21,000 tonnes). Due to the mine’s closure in July 2005, Novicourt’s total net revenue in 2005was Cdn$36.6 million, 40% lower than the total net revenue of Cdn$59.8million in 2004.

 

*Mineral Reserves and Resources(1)*

* *

Miningof the deposit was completed in July 2005.  All mineral reserves were depleted leaving noproven and probable mineral reserves at December 31, 2005.  Approximately 819,920 tonnes of mineralreserves were milled in 2005.

 

TheLouvicourt mine reserves estimate was prepared and classified by AUR ResourcesInc. as operator of the Louvicourt Joint Venture.  Mineral reserve estimates were theresponsibility of Sylvie Lampron (P.Eng, Chief Engineer, Louvicourt Mine).

 

**Magnola Metallurgy Inc.****(“Magnola”)**

 

InJanuary 2003, we announced plans for a temporary shutdown of our magnesiumbusiness, which is held by Magnola, a company owned 80% by us, in response tomajor structural changes which had taken place in the global magnesiumindustry. A pre-tax charge of $520 million was recorded in the Company’s 2002year-end financial results to reduce the carrying value of the magnesiumproject, as a result of the market conditions.

 

In1997 when the decision to proceed with the Magnola project was made, magnesiumoffered very attractive growth opportunities, on the premise of its inherentstrength-to-weight characteristics and the potential demand in the automobileindustry. Since that time, exports of low-cost Chinese production havecontinued to grow and have depressed prices.

 

Atthe time of the announcement of the shutdown, there were approximately 380employees located at the magnesium operations in Danville, Québec.

 

In2003, a further $33 million pre-tax charge related to costs incurred to shutdown the plant was recorded in the first quarter.  As of December 31,2005 the book value of our magnesium business is approximately $280million (December 31, 2004 - $272 million).

 

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(1)   For Qualified Person information with respect tothe mineral reserve and mining resource estimate, see “Mineral Reserves andResources” in Item 3.9.4 of this Annual Information Form.

 

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***3.3          Technology***

 

Falconbridgeparticipates in a number of focused explorations research projects designed toreduce the cost of mineral exploration and increase the likelihood of success.Projects include the areas of geophysics, geology, geochemistry and remotesensing.

 

Falconbridgeis also involved in the development, acquisition and application oftechnologies to improve the performance of its mining and metallurgicalbusinesses and create opportunities for business growth.

 

Falconbridgehas metallurgical technology facilities at the Falconbridge Technology Centrein Sudbury and the Nikkelverk refinery. Research is conducted at thesefacilities to provide mineral analyses, to develop new methods for treatingores and custom feeds, to improve nickel, copper and cobalt products and todevelop environmentally sustainable production technologies.

 

Theprimary focus at the Technology Centre in Sudbury is on developing newtechnologies for Falconbridge in hydrometallurgy and pyrometallurgy for nickellaterites and nickel and copper sulphides. The majority of the technical support is provided to the Nickel Businessunit.  Other business units receivesupport on an as-needed basis.  Pilotplant facilities for metallurgical testing are located at Sudbury, theNikkelverk refinery, Kidd Creek Metallurgical site, and at Lomas Bayas.  In 2005 several industrial scalemetallurgical tests were also conducted including testing at the SudburySmelter, at Kidd Creek in Timmins and at CCR in Montreal.

 

Expendituresby Falconbridge on research and process development for the two years endedDecember 31, 2004 and 2005 were $22 million and $29 million,respectively.

 

***3.4          Environment***

 

The mining and mineral processing operationsof Falconbridge are subject to extensive government regulations relating to theprotection of the environment, including those relating to air and waterquality, solid and hazardous waste handling and disposal, mine reclamation andclosure, and occupational health and safety. In addition to mandatedenvironmental safeguards, Falconbridge has many initiatives to improve both theinternal and external environment, such as health research, auditing and riskmanagement programs.  These aspects arealigned with and support Falconbridge’s commitments to sustainable development,where economic prosperity, environmental quality and social equity drivebusiness activities.  At Falconbridge, **sustainabledevelopment** is the implementation of practices and policiesthat contribute to the well-being of the environment, economy and society toaddress the needs of customers, suppliers, shareholders, employees, government,the general public and the communities in which it operates, withoutcompromising the ability of future generations to meet their own needs.

 

Falconbridgehas in place a comprehensive environmental management system consisting of asustainable development policy, codes of practice, audit frameworks, job descriptionsand procedures, roles and responsibilities, employee training, public andemployee reporting, emergency prevention and response, risk management andcommunity awareness.

 

Alloperations are guided by an Environment, Health and Safety (EHS) and SustainableDevelopment Operating Manual that assists corporate, site, project managers andEHS professionals to implement the elements of the Falconbridge LimitedSustainable Development Policy.

 

All operations are also guided by theFalconbridge Code of Ethics which sets a high standard of ethical behaviourthroughout the Company. The code requires that decision-making include dueconsideration for human rights, the provision of a living wage to all workersworldwide, a diverse workforce that encourages upward mobility, respectfor indigenous rights, environmental improvement, transparency in our conductand a commitment to sustainable communities. A procedure exists

 

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for employeesto confidentially report issues of non-compliance to designated individuals orthrough the Company’s Ethics Hotline.

 

Falconbridge’sobjective is to meet or surpass environmental standards set by relevantlegislation, through the application of innovative and technically-proven economicmeasures in advance of prescribed deadlines. In addition, Falconbridge incurssubstantial waste removal and site restoration costs on an ongoing basis, whichit believes will minimize future liabilities for site closure.

 

***3.5          Labour Relations***

*** ***

At December 31, 2005, we had approximately 14,500 employees in 18 countries.    Falconbridge is a party to collectiveagreements with unions representing employees at a number of operations.  In2005, collective agreements were signed in respect of the following operations:

 

*Three-yearagreements:*

* *

•                  Norandal – Newport

•                  Kidd Metallurgical Division

•                  St. Ann Bauxite Mine (Production &Maintenance, Staff)

•                  Falcondo

 

*Five-year agreement:*

* *

•                  Gramercy Alumina Refinery

 

*Collective bargaining agreements for thefollowing operations have expired or are scheduled to expire in 2006 in themonths indicated:*

* *

•                  General Smelting (Montreal) – January31

•                  Brunswick Mine (Bathurst) – February28

•                  Brunswick Smelter (Bathurst) –February 28

•                  Horne Smelter (Rouyn) – March 1

•                  Bulk Handling Operation (Bathurst) –March 31

•                  Raglan Mine (Rouyn) – April 30

•                  Lomas Bayas (Chile) –April 30

•                  Nikkelverk (Norway) – April 1

•                  Antamina (Peru) – July 24

•                  Norandal – Salisbury (Salisbury) –November 20

•                  Altonorte (Chile) – December 12

 

***3.6          Legal Proceedings***

 

TheUnited States Department of Justice convened a grand jury in 1999 toinvestigate possible criminal antitrust violations by Falconbridge and othersulphuric acid producers in the United States. While still technically open, the Company is unaware of any ongoingactivity and believes the investigation can be properly considered dormant.

 

Inconnection with this matter, class action lawsuits filed in variousjurisdictions in the United States have been consolidated into the District Courtin Chicago.  In addition, class actionsfiled in state court in California have been consolidated in the San Franciscostate court.  Falconbridge is vigorouslydefending these actions and has asserted that they are without merit.

 

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***3.7******                               Combination of Noranda and Former Falconbridge***

 

Following the successful issuer bid ofNoranda and its takeover bid for all of the common shares of FormerFalconbridge that it did not already own, on June 30, 2005 Noranda and FormerFalconbridge amalgamated under the laws of the Province of Ontario andcontinued as one company under the name “Falconbridge Limited”.  Further details of this amalgamation are setout in the joint management circular of these companies dated June 2, 2005.

 

***3.8          Trends, Risks andUncertainties***

 

*Fluctuating Metal Prices*

* *

Falconbridge’s earnings are affected byfluctuations in the prices of the metals it produces. Their prices are subjectto volatile price movements over short periods of time. Falconbridge generallydoes not hedge prices of the metals we produce. Market prices can be affectedby numerous factors beyond our control, including expectations for inflation,speculative activities, relative exchange rates to the U.S. dollar,production activities of our competitors, global and regional demand andsupply, political and economic conditions including availability of subsidiesand tax incentives to our competitors and production costs in major producingregions. The prices for copper, nickel, zinc, aluminum or other metals producedby us may decline significantly from current levels. A reduction in the pricesof one or more of these metals could materially adversely affect the value andamount of our reserves and our business, financial condition, liquidity andoperating results.

 

*Mining and Processing Risks*

* *

The business of mining and processing ofmetals is generally subject to a number of risks and hazards, including unusualor unexpected geological conditions, ground conditions, phenomena such asinclement weather conditions, floods and earthquakes and the handling ofhazardous substances, the emissions of contaminants and other liabilityexposures. Such risks and hazards could result in personal injury or death,damage to, or destruction of, mineral properties, processing or productionfacilities or the environment, monetary losses and possible legal liability.Falconbridge’s business, financial condition, liquidity and operating resultscould be materially adversely affected if any of these developments were tooccur.

 

Although Falconbridge maintains insurancewhich Falconbridge believes is consistent with mining industry practice to theextent available to cover some of these risks and hazards, no assurance can begiven that such insurance will continue to be available, or that it will beavailable at economically feasible premiums. Falconbridge’s property, businessinterruption and liability and other insurance may not provide sufficientcoverage for losses related to these or other risks or hazards. In such event,Falconbridge’s business, financial condition, liquidity and results ofoperations could be materially adversely affected.

 

*Environmental Risks*

* *

Environmental legislation affects nearly allaspects of our operations worldwide. This type of legislation requiresFalconbridge to obtain operating licenses and imposes standards and controls onactivities relating to mining, exploration, development, production, closureand the refining, distribution and marketing of copper, nickel, zinc and othermetals products. Environmental assessments are required before initiating mostnew products or undertaking significant changes to existing operations.Compliance with environmental legislation can require significant expenditures,including expenditures for clean-up costs and damages arising out ofcontaminated properties. In addition to current requirements, Falconbridgeexpects that additional environmental regulations will likely be implemented toprotect the environment and quality of life, given issues of sustainabledevelopment and other similar requirements which governmental andsupragovernmental organizations and other bodies have been pursuing. Some ofthe issues currently under review by environmental regulatory agencies includereducing or stabilizing various emissions, including sulphur dioxide andgreenhouse gas emissions, mine reclamation and restoration, and water, air andsoil quality and absolute liability for spills and exceedences.

 

Canada ratified the Kyoto Protocol to theUnited Nations Framework Convention on Climate Change in late 2002. The

 

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protocolentered into force in February 2005. Various levels of government in Canada aredeveloping a number of policy measures in order to meet Canada’s emissionreduction obligations under the protocol. While the impact of the protocol andmeasures cannot be quantified at this time, the likely effect will be toincrease costs for fossil fuels, electricity and transportation, restrict industrialemission levels, impose added costs for emissions in excess of permitted levelsand increase costs for monitoring, reporting and financial accounting.Compliance with these initiatives could have a material adverse effect on ourbusiness, financial condition, liquidity and operating results.

 

Further changes in environmental laws, newinformation on existing environmental conditions or other events, includinglegal proceedings brought based upon such conditions or an inability to obtainnecessary permits, could have a material adverse effect on product demand,product quality and methods of production and distribution or could requireincreased financial reserves or compliance expenditures or otherwise have amaterial adverse effect on Falconbridge’s business, financial condition,liquidity and operating results.

 

Failure to comply with environmentallegislation may result in the imposition of fines and penalties, liability forclean-up costs, damages and the loss of important permits. There can be no assurancethat Falconbridge will at all times be in compliance with all environmentalregulations or that steps required to bring us into compliance would notmaterially adversely affect Falconbridge’s business, financial condition,liquidity or operating results.

 

In view of the uncertainties concerningfuture removal and site restoration costs on Falconbridge’s properties, theultimate costs for future removal and site restoration to Falconbridge coulddiffer from the amounts estimated. The estimate for this future liability issubject to change based on amendments to applicable laws and legislation, thenature of ongoing operations and technological innovations. Future changes, ifany, due to their nature and unpredictability, could have a significant impactand would be reflected prospectively as a change in an accounting estimate. Inaddition, regulatory authorities in various jurisdictions around the world mayrequire Falconbridge to post financial security to secure in whole or in partfuture reclamation and restoration obligations in such jurisdictions. In someinstances, Falconbridge has already provided this security. In other instances,such security may be required to be posted upon the occurrence of certainevents including if Falconbridge ceases to maintain a minimum investment gradecredit rating, if the regulatory authority ceases to accept alternative formsof comfort to secure the obligation or as a property nears the end of itsoperation. Although the posting of this security does not increase the futurereclamation and restoration costs (other than costs associated with postingsuch security), a portion of Falconbridge’s credit may be required to back upthese commitments, which could adversely affect Falconbridge’s liquidity.

 

*Labour Relations*

* *

Collectiveagreements covering our unionized employees at Norandal-Newport, St. Ann(production & maintenance employees), and Gramercy were all renewed in 2005. At the Timmins Metallurgical site, acollective agreement was signed with the CAW after a one month strike inOctober, 2005. Bargaining has just been completed for the renewal of thecollective agreements at Falcondo and St. Ann (staff employees only).

 

Eleven collective agreements have expired or willexpire in 2006:

 

•                  General Smelting (Montreal) – January31

•                  Brunswick Mine (Bathurst) – February28

•                  Brunswick Smelter (Bathurst) –February 28

•                  Horne Smelter (Rouyn) – March 1

•                  Bulk Handling Operation (Bathurst) –March 31

•                  Raglan Mine (Rouyn) – April 30

•                  Lomas Bayas (Chile) –April 30

•                  Nikkelverk (Norway) – April 1

•                  Antamina (Peru) – July 24

•                  Norandal – Salisbury (Salisbury) –November 20

•                  Altonorte (Chile) – December 12

 

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Collective agreements coveringour unionized hourly employees at CEZ, CEZ (Effluent Treatment Operators), CCR,CCR (Security), Noranda Recycling -Roseville (two agreements), NorandaRecycling – San Jose, Sudbury Operations (Production & Maintenance),Sudbury Operations (Office, Clerical & Technical), Collahuasi, New Madrid,Norandal – Newport, Gramercy, St. Ann (Production & Maintenance) and KiddMetallurgical division are currently in place and will expire between 2007 and2008.

 

*Uncertainty of ReserveEstimates and Production Estimates*

* *

Falconbridge’s reported mineral reserves asof December 31, 2005 are estimated quantities of proven and probable orethat under present and anticipated conditions can be legally and economicallymined and processed by the extraction of their mineral content. Falconbridgedetermines the amount of our mineral reserves in accordance with therequirements of the applicable Canadian securities regulatory authorities andestablished mining standards. Falconbridge does not use outside sources toverify our reserves. The volume and grade of reserves actually recovered andrates of production from Falconbridge’s present mineral reserves may be lessthan geological measurements of the reserves. Market price fluctuations innickel, copper, other metals and exchange rates, and changes in operating and capitalcosts, may in the future render certain mineral reserves uneconomic to mine. Inaddition, short-term operating factors relating to the mineral reserves, suchas the need for orderly development of ore bodies or the processing of new ordifferent ore grades, may cause mineral reserves to be modified or Falconbridge’soperations to be unprofitable in any particular fiscal period.

 

No assurance can be given that the estimatedamount of ore will be recovered or that it will be recovered at the prices assumedby Falconbridge in determining reserves. Mineral reserve estimates are based onlimited sampling and, consequently, are uncertain because the samples may notbe representative of the entire orebody. As more knowledge and understanding ofthe orebody are obtained, the reserve estimates may change significantly,either positively or negatively.

 

Falconbridge prepares estimates of futureproduction for particular operations. These production estimates are based on,among other things, reserve estimates; assumptions regarding ground conditionsand physical characteristics of ores, such as hardness and presence or absenceof particular metallurgical characteristics; and estimated rates and costs ofmining and processing. Falconbridge’s actual production may vary from estimatesfor a variety of reasons, including actual ore mined varying from estimates ofgrade, tonnage, dilution and metallurgical and other characteristics;short-term operating factors relating to the mineral reserves, such as the needfor sequential development of ore bodies and the processing of new or differentore grades; risks and hazards associated with mining; natural phenomena, suchas inclement weather conditions, floods, and earthquakes; and unexpected labourshortages or strikes. No assurance can be given that production estimates willbe achieved. Failure to achieve production estimates could have a materialadverse impact on Falconbridge’s future cash flows, earnings, results ofoperations and financial condition.

 

*Exchange Rate Fluctuations*

* *

Fluctuations in currency exchange rates,principally the Canadian/U.S. dollar exchange rate and, to a lesserextent, Chilean Peso, Peruvian Sole, Norwegian Kroner and Euro exchange ratesagainst the U.S. dollar, can significantly impact Falconbridge’s earningsand cash flows. These exchange rates have fluctuated substantially over time,including over the last five years. Most of Falconbridge’s revenues and debtare denominated in U.S. dollars, whereas a significant portion ofoperating costs at Falconbridge’s Canadian sites are incurred in Canadiandollars. Furthermore, a portion of Chilean operating costs are Peso denominatedand Nikkelverk’s costs are incurred in Norwegian kroner.   Falconbridgehas been reporting its financial results in U.S. dollars since July 1,2003. Fluctuations in exchange rates between the U.S. dollar and theCanadian dollar and between the U.S. dollar and other currencies may giverise to foreign currency exposure and gains and losses, either favourable orunfavourable, which may in the future materially impact Falconbridge’sfinancial results. Falconbridge, from time to time, may hedge a portion of itscurrency exposures and requirements to try to limit any adverse effect ofexchange rate fluctuations with respect to Falconbridge’s Canadian dollar andother costs, but there can be no assurance that such hedges will eliminate thepotential material adverse effect of such fluctuations.

 

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*Interest Rate and CounterpartyRisk*

* *

Falconbridge’s exposure to changes ininterest rates results from investing and borrowing activities undertaken tomanage Falconbridge’s liquidity and capital requirements. Falconbridge hasentered into interest rate swap agreements to manage the interest rate riskassociated with a portion of our fixed-rate debt. The interest rate swapchanges our exposure to interest risk by effectively converting a portion ofour fixed-rate debt to a floating rate. Falconbridge may elect in the future toenter into interest rate swaps to effectively convert floating-rate debt tofixed-rate debt or to enter into additional fixed-rate to floating-rate swaps.There can be no assurance that Falconbridge will not be materially adverselyaffected by interest rate changes in the future, notwithstanding our use ofinterest rate swaps.

 

In addition, Falconbridge’s interest rateswaps, metals hedging and foreign currency and energy risk managementactivities expose us to the risk of default by the counterparties to sucharrangements. Any such default could have a material adverse effect onFalconbridge’s business, financial condition and results of operations.

 

*Energy Supply and Prices*

* *

Falconbridge’s operations and facilities areintensive users of natural gas, electricity and oil. The procurement dynamicsof these energy types are becoming more connected as supply and demandconditions become more interdependent on a global basis. Uncontrollable factorssuch as strong demand from the Asia-Pacific region, political, regulatory and economicuncertainties, and the cost of emissions from fossil fuels, as well as problemsrelated to local production and delivery conditions, continue to put upwardpressure on prices.  Falconbridge’ssupply contracts are governed by standard energy risk management principles,which ensure that supply, price and credit risks are managed effectively.

 

The security of energy supply is of primaryimportance.  Falconbridge’s businessoperations could be adversely affected, including loss of production and damageto our plants and equipment, if, even temporarily, the supply of energy to oneor more of our facilities was interrupted. Additionally, prolonged loss ofsupply could materially adversely affect our business, financial condition,liquidity and results of operations. As a significant portion of Falconbridge’scosts relate to energy consumption, Falconbridge’s earnings are directlyrelated to fluctuations in the cost of natural gas, electricity and oil. Thecurrent trend of increasing energy prices is expected to continue and as aresult there is an increased focus within the operations on the management ofenergy use and the impact of rising energy costs on financial performance.

 

*Foreign Operations*

* *

Some of Falconbridge’s activities and relatedassets are located in countries outside North America, some of which may beconsidered to be, or may become, politically or economically unstable.Exploration or development activities in such countries may require protractednegotiations with host governments, international organizations and other thirdparties, including non-governmental organizations, and are frequently subjectto economic and political considerations, such as taxation, nationalization,inflation, currency fluctuations and governmental regulation and approvalrequirements, which could adversely affect the economics of projects. Theseprojects and investments could be adversely affected by war, civil disturbancesand activities of foreign governments which limit or disrupt markets, restrictthe movement of funds or supplies or result in the restriction of contractualrights or the taking of property without fair compensation.

 

Falconbridge performs a thorough riskassessment on a country-by-country basis when considering foreign activitiesand attempt to conduct our business and financial affairs so as to protectagainst political, legal, regulatory and economic risks applicable tooperations in the various countries where we operate, but there can be noassurance that Falconbridge will be successful in so protecting ourselves.These projects and investments could also be adversely affected by changes inCanadian laws and regulations relating to foreign trade, investment andtaxation.

 

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*Market Access*

* *

Global and regional demand for metals isinfluenced by regulatory and voluntary initiatives to restrict or eliminate theuse of certain metals in particular products or applications. Impacts of suchmeasures can be global, creating non-tariff barriers to international trade andaffecting product design and specifications on a global basis. Such measurescould affect the balance between supply and demand and depress metal prices andtreatment/refining charges. Metals with a limited number of major applicationsare most susceptible to changes in demand and price in response to suchmeasures.

 

*Production Technology*

* *

Falconbridge believes that the technology weuse to produce and process metals is significantly advanced and, in part due tohigh investment costs, subject only to slow technological change. However,there can be no assurance that more economical production or processingtechnology will not be developed or that the economic conditions in whichcurrent technology is applied will not change.

 

*Legal Proceedings*

* *

The nature of Falconbridge’s businesssubjects us to numerous regulatory investigations, claims, lawsuits and otherproceedings in the ordinary course of our business. The results of these legalproceedings cannot be predicted with certainty. There can be no assurance thatthese matters will not have a material adverse effect on our results ofoperations in any future period, and a substantial judgment could have amaterial adverse impact on Falconbridge’s business, financial condition,liquidity and results of operations.

 

*Sulphuric Acid*

* *

Sulphur dioxide is a by-product from thesmelting of copper, zinc, nickel and lead sulphide concentrates. Falconbridgecaptures sulphur dioxide to minimize acid rain emissions, and converts it intosulphuric acid.  Due to increasinglystrict environmental standards worldwide for sulphur dioxide emissions,involuntary production of sulphuric acid by smelters is growing. The balance ofworld acid production is largely based on elemental sulphur, whose supply isnow a by-product of oil and gas production, and growing more rapidly thandemand. Long term, these factors may make it more difficult for us to obtainsatisfactory prices for our sulphuric acid. However, Falconbridge’s productionof sulphuric acid cannot be reduced in response to low prices, or droppingsales volumes, without a corresponding reduction in our production of metals.

 

*Raw Material Procurement Risks*

* *

Procurement of raw materials involves therisks typically connected with commercial transactions, which can include tradebarriers, political instability and problems due to local productionconditions. In addition, Falconbridge’s supply contracts provide that suppliersof concentrate may be released from their delivery obligations to us if certain“force majeure” events occur. Falconbridge’s business operations could beadversely affected, at least temporarily, if supplies of raw materials areinterrupted as a result of the imposition of trade barriers or other events andif Falconbridge is unable, on short notice, to shift to alternative sources ofsupply. Falconbridge also processes copper scrap, the availability of which inpast years has been subject to significant fluctuations.  The availability of scrap, blister copper andother material we process can be significantly affected by competing demandfrom industrializing nations along with unforeseen production and logisticaldisruptions.

 

*Takeover Bid*

* *

TheCompany is currently the subject of a takeover bid by Inco Limited. Uponsuccessful completion of this transaction, there could be significant changesto the business, operations and management of the Company.  Should the takeover not be completed, theCompany expects to continue operating as it has in the past and the anticipatedbenefits from the combination of Inco and the Company, as previously discussed,would not occur.

 

48

----

 

***3.9          Statistical Tables***

 

**3.9.1       Production Volumes**

 

Thefollowing table set out our mine, smelter and refinery production, as well asour primary aluminum production for the three years ended December 31,2005:

 

**MineProduction – Metal in concentrate(1)**

 
| ** **                  | ** ** | **Falconbridge’s  Average  Beneficial  Interest(3)** | ** ** | **2005(2)(3)** | ** ** | **2004(2)(3)** | ** ** | **2003(2)(3)** | ** ** |
|-----------------------------|------------|-----------------------------------------------------------|------------|----------------|------------|----------------|------------|----------------|------------|
| ** **                  | ** ** | **(%)**                                                   | ** ** | **(tonnes)**   | ** ** |
| **Copper**                  |       |                                                      |       |           |       |           |       |           |       |
| Antamina                    |       | 33.75                                                     |       | 126,417        |       | 122,205        |       | 85,188         |       |
| Collahuasi                  |       | 37.3                                                      |       | 182,248        |       | 205,116        |       | 168,578        |       |
| Kidd Creek                  |       | 84.9                                                      |       | 42,738         |       | 41,029         |       | 46,409         |       |
| Lomas Bayas                 |       | 84.9                                                      |       | 63,147         |       | 62,041         |       | 60,427         |       |
| Louvicourt                  |       | 28.0                                                      |       | 7,452          |       | 14,387         |       | 17,002         |       |
| Montcalm                    |       | 84.9                                                      |       | 4,996          |       | 1,188          |       | —         |       |
| Raglan                      |       | 84.9                                                      |       | 5,842          |       | 6,867          |       | 6,628          |       |
| Sudbury Operations          |       | 84.9                                                      |       | 23,367         |       | 24,694         |       | 29,161         |       |
| Other                       |       | 100                                                       |       | 5,894          |       | 13,164         |       | 16,517         |       |
| Total                       |       |                                                      |       | 462,101        |       | 490,691        |       | 429,910        |       |
| Falconbridge share          |       |                                                      |       | 410,606        |       | 345,114        |       | 297,429        |       |
|                        |       |                                                      |       |           |       |           |       |           |       |
| **Nickel**                  |       |                                                      |       |           |       |           |       |           |       |
| Sudbury Operations          |       | 84.9                                                      |       | 19,708         |       | 22,602         |       | 24,143         |       |
| Raglan                      |       | 84.9                                                      |       | 22,224         |       | 26,552         |       | 25,110         |       |
| Montcalm                    |       | 84.9                                                      |       | 9,006          |       | 2,152          |       | —         |       |
| Falcondo – ferronickel |       | 72.4                                                      |       | 28,668         |       | 29,477         |       | 27,227         |       |
| Total                       |       |                                                      |       | 79,606         |       | 80,783         |       | 76,480         |       |
| Falconbridge share          |       |                                                      |       | 64,002         |       | 45,016         |       | 43,110         |       |
|                        |       |                                                      |       |           |       |           |       |           |       |
| **Zinc**                    |       |                                                      |       |           |       |           |       |           |       |
| Antamina                    |       | 33.75                                                     |       | 62,216         |       | 64,157         |       | 122,422        |       |
| Matagami                    |       | 100                                                       |       | —         |       | 98,901         |       | 109,679        |       |
| Brunswick                   |       | 100                                                       |       | 265,648        |       | 268,068        |       | 286,457        |       |
| Kidd Creek                  |       | 84.9                                                      |       | 119,960        |       | 87,847         |       | 75,528         |       |
| Louvicourt                  |       | 28.0                                                      |       | 5,827          |       | 9,277          |       | 8,045          |       |
| Total                       |       |                                                      |       | 453,651        |       | 528,250        |       | 602,131        |       |
| Falconbridge share          |       |                                                      |       | 433,329        |       | 488,629        |       | 568,493        |       |
|                        |       |                                                      |       |           |       |           |       |           |       |
| **Lead**                    |       |                                                      |       |           |       |           |       |           |       |
| Brunswick                   |       | 100                                                       |       | 75,417         |       | 73,735         |       | 77,724         |       |
| Falconbridge share          |       |                                                      |       | 75,417         |       | 73,735         |       | 77,724         |       |
|                        |       |                                                      |       |           |       |           |       |           |       |
| **Cobalt**                  |       |                                                      |       |           |       |           |       |           |       |
| Sudbury Operations          |       | 84.9                                                      |       | 525            |       | 313            |       | 611            |       |
| Raglan                      |       | 84.9                                                      |       | 354            |       | 427            |       | 381            |       |
| Total                       |       |                                                      |       | 879            |       | 740            |       | 992            |       |
| Falconbridge share          |       |                                                      |       | 747            |       | 436            |       | 590            |       |
|                        |       |                                                      |       |           |       |           |       |           |       |
| **Silver***(000 ounces)*    |       |                                                      |       |           |       |           |       |           |       |
| Brunswick                   |       | 100                                                       |       | 5,924          |       | 5,999          |       | 6,172          |       |
| Kidd Creek                  |       | 84.9                                                      |       | 3,677          |       | 3,848          |       | 2,676          |       |
| Antamina                    |       | 33.75                                                     |       | 3,307          |       | 2,718          |       | 2,293          |       |
| Other                       |       | 100                                                       |       | 179            |       | 623            |       | 643            |       |
| Total                       |       |                                                      |       | 13,087         |       | 13,188         |       | 11,784         |       |
| Falconbridge share          |       |                                                      |       | 12,532         |       | 11,606         |       | 10,700         |       |

 

49

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**Smelterand Refinery Production(1)**

 
| ** **                                | ** ** | **Falconbridge’s  Average  Beneficial  Interest(3)** | ** ** | **2005(2)(3)** | ** ** | **2004(2)(3)** | ** ** | **2003(2)(3)** | ** ** |
|-------------------------------------------|------------|-----------------------------------------------------------|------------|----------------|------------|----------------|------------|----------------|------------|
| ** **                                | ** ** | **(%)**                                                   | ** ** | **(tonnes)**   | ** ** |
| **Copper smelted**                        |       |                                                      |       |           |       |           |       |           |       |
| Horne                                     |       | 100                                                       |       | 146,952        |       | 149,730        |       | 132,739        |       |
| Altonorte                                 |       | 100                                                       |       | 297,567        |       | 266,640        |       | 260,971        |       |
| Sudbury Operations                        |       | 84.9                                                      |       | 20,798         |       | 18,402         |       | 20,779         |       |
| Kidd Creek                                |       | 84.9                                                      |       | 118,973        |       | 118,240        |       | 131,405        |       |
| Total                                     |       |                                                      |       | 584,290        |       | 552,812        |       | 545,894        |       |
| Falconbridge share                        |       |                                                      |       | 563,185        |       | 496,652        |       | 484,259        |       |
|                                      |       |                                                      |       |           |       |           |       |           |       |
| **Copper refined**                        |       |                                                      |       |           |       |           |       |           |       |
| CCR                                       |       | 100                                                       |       | 304,184        |       | 288,395        |       | 235,425        |       |
| Kidd Creek                                |       | 84.9                                                      |       | 111,231        |       | 115,578        |       | 132,364        |       |
| Nikkelverk                                |       | 84.9                                                      |       | 38,681         |       | 35,643         |       | 35,852         |       |
| Collahuasi                                |       | 37.3                                                      |       | 26,698         |       | 25,610         |       | 27,895         |       |
| Lomas Bayas                               |       | 84.9                                                      |       | 63,147         |       | 62,041         |       | 60,427         |       |
| Total                                     |       |                                                      |       | 543,941        |       | 527,267        |       | 491,963        |       |
| Falconbridge share                        |       |                                                      |       | 507,738        |       | 429,091        |       | 388,065        |       |
|                                      |       |                                                      |       |           |       |           |       |           |       |
| **Nickel smelted**                        |       |                                                      |       |           |       |           |       |           |       |
| Sudbury Operations                        |       | 84.9                                                      |       | 63,093         |       | 52,595         |       | 59,831         |       |
| Falconbridge share                        |       |                                                      |       | 53,566         |       | 30,978         |       | 35,599         |       |
|                                      |       |                                                      |       |           |       |           |       |           |       |
| **Nickel refined**                        |       |                                                      |       |           |       |           |       |           |       |
| Nikkelverk                                |       | 84.9                                                      |       | 84,886         |       | 71,410         |       | 77,183         |       |
| Falcondo                                  |       | 72.4                                                      |       | 28,668         |       | 29,477         |       | 27,227         |       |
| Total                                     |       |                                                      |       | 113,554        |       | 100,887        |       | 104,410        |       |
| Falconbridge share                        |       |                                                      |       | 92,824         |       | 56,857         |       | 59,728         |       |
|                                      |       |                                                      |       |           |       |           |       |           |       |
| **Zinc refined**                          |       |                                                      |       |           |       |           |       |           |       |
| Noranda Income Fund(4)                    |       | 25.0                                                      |       | 272,418        |       | 277,283        |       | 267,270        |       |
| Kidd Creek                                |       | 84.9                                                      |       | 113,711        |       | 121,557        |       | 94,719         |       |
| Total                                     |       |                                                      |       | 386,129        |       | 398,840        |       | 361,989        |       |
| Falconbridge share                        |       |                                                      |       | 164,646        |       | 140,918        |       | 157,653        |       |
|                                      |       |                                                      |       |           |       |           |       |           |       |
| **Lead refined**                          |       |                                                      |       |           |       |           |       |           |       |
| Brunswick                                 |       | 100                                                       |       | 76,116         |       | 83,829         |       | 60,776         |       |
| Falconbridge share                        |       |                                                      |       | 76,116         |       | 83,829         |       | 60,776         |       |
|                                      |       |                                                      |       |           |       |           |       |           |       |
| **Bauxite**                               |       |                                                      |       |           |       |           |       |           |       |
| St. Ann                                   |       | 50.0                                                      |       | 1,872,394      |       | 447,000        |       | —         |       |
| Falconbridge share                        |       |                                                      |       | 1,872,394      |       | 447,000        |       | —         |       |
|                                      |       |                                                      |       |           |       |           |       |           |       |
| **Alumina**                               |       |                                                      |       |           |       |           |       |           |       |
| Gramercy                                  |       | 50.0                                                      |       | 588,313        |       | 139,345        |       | —         |       |
| Falconbridge share                        |       |                                                      |       | 588,313        |       | 139,345        |       | —         |       |
|                                      |       |                                                      |       |           |       |           |       |           |       |
| **Aluminum**                              |       |                                                      |       |           |       |           |       |           |       |
| Primary operations                        |       | 100                                                       |       | 245,581        |       | 247,472        |       | 244,044        |       |
| Falconbridge share                        |       |                                                      |       | 245,581        |       | 247,472        |       | 244,044        |       |
|                                      |       |                                                      |       |           |       |           |       |           |       |
| **Cobalt smelted**                        |       |                                                      |       |           |       |           |       |           |       |
| Sudbury Operations                        |       | 84.9                                                      |       | 2,423          |       | 1,838          |       | 2,196          |       |
| Falconbridge share                        |       |                                                      |       | 2,057          |       | 1,083          |       | 1,307          |       |
|                                      |       |                                                      |       |           |       |           |       |           |       |
| **Cobalt refined**                        |       |                                                      |       |           |       |           |       |           |       |
| Nikkelverk                                |       | 84.9                                                      |       | 5,021          |       | 4,670          |       | 4,556          |       |
| Falconbridge share                        |       |                                                      |       | 4,263          |       | 2,751          |       | 2,711          |       |
|                                      |       |                                                      |       |           |       |           |       |           |       |
| **Silver refined* ****(000  ounces)* |       |                                                      |       |           |       |           |       |           |       |
| CCR Refinery                              |       | 100                                                       |       | 33,215         |       | 37,274         |       | 30,311         |       |
| Falconbridge share                        |       |                                                      |       | 33,215         |       | 37,274         |       | 30,311         |       |
|                                      |       |                                                      |       |           |       |           |       |           |       |
| **Gold refined* ****(000  ounces)*   |       |                                                      |       |           |       |           |       |           |       |
| CCR Refinery                              |       | 100                                                       |       | 908            |       | 1,102          |       | 1,132          |       |
| Falconbridge share                        |       |                                                      |       | 908            |       | 1,102          |       | 1,132          |       |

 

50

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----

Notes:

 

(1)           All production figures are shown on a 100%basis, except as otherwise noted and with the exception of Collahuasi, which representsFalconbridge’s 44% joint-venture interest, Louvicourt, which representsNovicourt’s 45% joint-venture interest, Antamina, which represents Falconbridge’s33.75% joint-venture interest, St. Ann, which represents Falconbridge’s 50%joint-venture interest and Gramercy, which represents Falconbridge’s 50%joint-venture interest.

(2)           Falconbridge’s average beneficial interest inLouvicourt was 62.1% in 2005, 2004 and 2003.

(3)           Noranda Inc. amalgamated with Former Falconbridgeon June 30, 2005 and was renamed to Falconbridge Limited (“the amalgamatedCompany”).  After June 30, 2005, theamalgamated Company owned a 100% beneficial interest in the operations of theold Falconbridge and the annual weighted average beneficial interest in the oldFalconbridge held by the amalgamated Company was 84.9% (2004 - 58.9% and 2003 -59.5%).

(4)           The Company sold the CEZ refinery to theNoranda Income Fund in May 2002 and sold the remainder of its priorityunits in a secondary offering in 2003. It currently owns 25.0% of the NorandaIncome Fund’s outstanding units.

 

51

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**3.9.2       Sales Volumes and Realized Prices**

 

Thefollowing tables present Falconbridge’s metal sales and concentrate sales, aswell as average realized prices for the three years ended December 31,2005.

 

**MetalSales – payable metal(1)**

 
| ** **              | ** ** | **Falconbridge’s  Average  Beneficial  Interest(2)** | ** ** | **2005(2)**  | ** ** | **2004(2)** | ** ** | **2003(2)** | ** ** |
|-------------------------|------------|-----------------------------------------------------------|------------|--------------|------------|-------------|------------|-------------|------------|
| ** **              | ** ** | **(%)**                                                   | ** ** | **(tonnes)** | ** ** |
| **Copper**              |       |                                                      |       |         |       |        |       |        |       |
| CCR                     |       | 100                                                       |       | 298,286      |       | 293,174     |       | 235,339     |       |
| Collahuasi              |       | 37.3                                                      |       | 26,137       |       | 25,330      |       | 33,721      |       |
| Kidd Creek              |       | 84.9                                                      |       | 84,827       |       | 82,188      |       | 95,916      |       |
| Lomas Bayas             |       | 84.9                                                      |       | 63,746       |       | 60,190      |       | 61,289      |       |
| Nikkelverk              |       | 84.9                                                      |       | 59,470       |       | 51,057      |       | 59,208      |       |
| Total                   |       |                                                      |       | 532,466      |       | 511,939     |       | 485,473     |       |
| Falconbridge share      |       |                                                      |       | 497,104      |       | 422,027     |       | 384,169     |       |
|                    |       |                                                      |       |         |       |        |       |        |       |
| **Nickel**              |       |                                                      |       |         |       |        |       |        |       |
| Nikkelverk              |       | 84.9                                                      |       | 85,374       |       | 71,374      |       | 78,978      |       |
| Falconbridge share      |       |                                                      |       | 72,483       |       | 42,039      |       | 46,992      |       |
|                    |       |                                                      |       |         |       |        |       |        |       |
| **Ferronickel**         |       |                                                      |       |         |       |        |       |        |       |
| Falcondo                |       | 72.4                                                      |       | 26,289       |       | 28,936      |       | 27,133      |       |
| Falconbridge share      |       |                                                      |       | 19,033       |       | 14,526      |       | 13,764      |       |
|                    |       |                                                      |       |         |       |        |       |        |       |
| **Zinc**                |       |                                                      |       |         |       |        |       |        |       |
| Kidd Creek              |       | 84.9                                                      |       | 116,071      |       | 119,535     |       | 98,628      |       |
| Noranda Income Fund(3)  |       | 25.0                                                      |       | 271,824      |       | 274,793     |       | 265,797     |       |
| Total                   |       |                                                      |       | 387,895      |       | 394,328     |       | 364,425     |       |
| Falconbridge share      |       |                                                      |       | 166,500      |       | 139,104     |       | 159,421     |       |
|                    |       |                                                      |       |         |       |        |       |        |       |
| **Lead**                |       |                                                      |       |         |       |        |       |        |       |
| Brunswick               |       | 100                                                       |       | 73,730       |       | 83,194      |       | 60,452      |       |
| Falconbridge share      |       |                                                      |       | 73,730       |       | 83,194      |       | 60,452      |       |
|                    |       |                                                      |       |         |       |        |       |        |       |
| **Aluminum**            |       |                                                      |       |         |       |        |       |        |       |
| Primary operations      |       | 100                                                       |       | 247,771      |       | 248,977     |       | 246,737     |       |
| Falconbridge share      |       |                                                      |       | 247,771      |       | 248,977     |       | 246,737     |       |
|                    |       |                                                      |       |         |       |        |       |        |       |
| **Fabricated aluminum** |       |                                                      |       |         |       |        |       |        |       |
| Noranda Rolling Mills   |       | 100                                                       |       | 177,910      |       | 173,853     |       | 146,716     |       |
| Falconbridge share      |       |                                                      |       | 177,910      |       | 173,853     |       | 146,716     |       |
|                    |       |                                                      |       |         |       |        |       |        |       |
| **Cobalt**              |       |                                                      |       |         |       |        |       |        |       |
| Nikkelverk              |       | 84.9                                                      |       | 3,836        |       | 3,648       |       | 3,400       |       |
| Falconbridge share      |       |                                                      |       | 3,257        |       | 2,149       |       | 2,023       |       |
|                    |       |                                                      |       |         |       |        |       |        |       |
| **Gold** (000 ounces)   |       |                                                      |       |         |       |        |       |        |       |
| CCR                     |       | 100                                                       |       | 775          |       | 967         |       | 1,004       |       |
| Falconbridge share      |       |                                                      |       | 775          |       | 967         |       | 1,004       |       |
|                    |       |                                                      |       |         |       |        |       |        |       |
| **Silver** (000 ounces) |       |                                                      |       |         |       |        |       |        |       |
| CCR                     |       | 100                                                       |       | 32,786       |       | 36,467      |       | 30,870      |       |
| Falconbridge share      |       |                                                      |       | 32,786       |       | 36,467      |       | 30,870      |       |

 

52

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**PayableMetal in Concentrate(1)**

 
| ** **                                                                          | ** ** | **Falconbridge’s  Average  Beneficial  Interest(2)** | ** ** | **2005(2)**  | ** ** | **2004(2)** | ** ** | **2003(2)** | ** ** |
|-------------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|--------------|------------|-------------|------------|-------------|------------|
| ** **                                                                          | ** ** | **(%)**                                                   | ** ** | **(tonnes)** | ** ** |
| **Copper**                                                                          |       |                                                      |       |         |       |        |       |        |       |
| Antamina                                                                            |       | 33.75                                                     |       | 91,567       |       | 80,905      |       | 72,143      |       |
| Collahuasi                                                                          |       | 37.3                                                      |       | 119,212      |       | 167,261     |       | 114,874     |       |
| Horne                                                                               |       | 100                                                       |       | 56,385       |       | 27,091      |       | —      |       |
| Total                                                                               |       |                                                      |       | 267,164      |       | 275,257     |       | 187,017     |       |
| Falconbridge share                                                                  |       |                                                      |       | 249,163      |       | 206,513     |       | 140,493     |       |
|                                                                                |       |                                                      |       |         |       |        |       |        |       |
| **Zinc**                                                                            |       |                                                      |       |         |       |        |       |        |       |
| Antamina                                                                            |       | 33.75                                                     |       | 40,699       |       | 51,951      |       | 100,142     |       |
| Matagami                                                                            |       | 100                                                       |       | —       |       | 70,371      |       | 89,128      |       |
| Brunswick                                                                           |       | 100                                                       |       | 219,417      |       | 222,141     |       | 245,931     |       |
| Kidd Creek                                                                          |       | 84.9                                                      |       | 42,020       |       | 15,724      |       | 11,964      |       |
| Total                                                                               |       |                                                      |       | 302,136      |       | 360,187     |       | 447,165     |       |
| Falconbridge share                                                                  |       |                                                      |       | 295,791      |       | 353,724     |       | 442,320     |       |
|                                                                                |       |                                                      |       |         |       |        |       |        |       |
| **Bauxite**                                                                         |       |                                                      |       |         |       |        |       |        |       |
| St. Ann                                                                             |       | 50.0                                                      |       | 928,735      |       | 21,320      |       | —      |       |
| Falconbridge share                                                                  |       |                                                      |       | 928,735      |       | 21,320      |       | —      |       |
|                                                                                |       |                                                      |       |         |       |        |       |        |       |
| **Alumina**                                                                         |       |                                                      |       |         |       |        |       |        |       |
| Gramercy                                                                            |       | 50.0                                                      |       | 355,221      |       | 80,625      |       | —      |       |
| Falconbridge share                                                                  |       |                                                      |       | 355,221      |       | 80,625      |       | —      |       |
|                                                                                |       |                                                      |       |         |       |        |       |        |       |
|                                                                                |       |                                                      |       |         |       |        |       |        |       |
| **Molybdenum Concentrate**                                                          |       |                                                      |       |         |       |        |       |        |       |
| Collahuasi                                                                          |       | 37.3                                                      |       | 251          |       | —      |       | —      |       |
| Antamina                                                                            |       | 33.75                                                     |       | 2,468        |       | 613         |       | 246         |       |
| Total                                                                               |       |                                                      |       | 2,719        |       | 613         |       | 246         |       |
| Falconbridge share                                                                  |       |                                                      |       | 2,681        |       | 613         |       | 246         |       |
|                                                                                |       |                                                      |       |         |       |        |       |        |       |
| **Silver** (000’s ounces)                                                      |       |                                                      |       |         |       |        |       |        |       |
| Antamina                                                                            |       | 33.75                                                     |       | 1,633        |       | 2,334       |       | 1,921       |       |
| Falconbridge share                                                                  |       |                                                      |       | 1,633        |       | 2,334       |       | 1,921       |       |
| **Average Realized Prices** –  ($US per pound, except as noted) |       |                                                      |       |         |       |        |       |        |       |
| Copper                                                                              |       |                                                      |       | 1.71         |       | 1.30        |       | 0.82        |       |
| Nickel                                                                              |       |                                                      |       | 6.85         |       | 6.40        |       | 4.40        |       |
| Ferronickel                                                                         |       |                                                      |       | 6.74         |       | 6.37        |       | 4.20        |       |
| Zinc                                                                                |       |                                                      |       | 0.70         |       | 0.52        |       | 0.43        |       |
| Aluminum                                                                            |       |                                                      |       | 0.91         |       | 0.84        |       | 0.68        |       |
| Lead                                                                                |       |                                                      |       | 0.50         |       | 0.43        |       | 0.27        |       |
| Cobalt                                                                              |       |                                                      |       | 14.97        |       | 22.48       |       | 9.42        |       |
| Molybdenum                                                                          |       |                                                      |       | 31.09        |       | 16.21       |       | 5.27        |       |
| Gold – ($ per ounce)                                                      |       |                                                      |       | 444.08       |       | 402.17      |       | 362.97      |       |
| Silver – ($ per ounce)                                                    |       |                                                      |       | 7.32         |       | 6.51        |       | 4.89        |       |
| **Exchange Rate  (Cdn$1 = US$)**                                               |       |                                                      |       | 0.83         |       | 0.77        |       | 0.71        |       |

 

53

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----

Notes:

 

(1)           All sales figures are shown on a 100% basis,with the exception of Collahuasi, which represents Falconbridge’s 44%joint-venture interest, Antamina, which represents Falconbridge’s 33.75% joint-ventureinterest, St. Ann, which represents Falconbridge’s 50% joint-venture interestand Gramercy, which represents Falconbridge’s 50% joint-venture interest

(2)           Noranda Inc. amalgamated with Former Falconbridgeon June 30, 2005 and was renamed to Falconbridge Limited (“the amalgamatedCompany”).  After June 30, 2005, theamalgamated Company owned 100% beneficial interest in the operations of the oldFalconbridge and the annual weighted average beneficial interest in the oldFalconbridge held by the amalgamated Company was 84.9% (2004 -58.9%, 2003 -59.5%).

(3)           Falconbridge sold the CEZ zinc refinery to theNoranda Income Fund in May 2002 and sold its priority units in a secondaryoffering in 2003. It currently owns indirectly 25.0% of the Noranda Income Fund’soutstanding units.

 

**3.9.3       Mineral Reserves and Resources**

 

Unlessotherwise indicated, all estimates of mineral reserves and mineral resources:

 

•                  have been estimated in accordance with the CIM Definition Standardson Mineral Resources and Reserves, adopted by CIM Council on November 14, 2004,and the CIM Estimation of Mineral Resources and Mineral Reserves Best PracticeGuidelines, adopted by the CIM council on November 23, 2003 usinggeostatistical or classical methods, plus economic and mining parametersappropriate to each operation.

 

•                  were compiled, indirectly supervised and verified by Chester Moorewho is Falconbridge’s Director, Mineral Reserve Estimation and Reporting, amember of the Professional Geoscientists of Ontario with over 30 yearsexperience as a geologist and is a qualified person as defined inNI 43-101.

 

•                  are shown on a 100% basis.

 

•                  Used the following long term metal prices for estimates: nickel$3.25/lb, copper $0.90/lb, zinc $0.50/lb with a nickel premium added at SudburyOperations. Exchange rate of CDN$1.50 to US$1.00.

 

•                  have no known environmental, permitting, legal, taxation, politicalor other relevant issues that would materially affect the estimates.

 

54

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**MineralReserves(1)**

 
| ** **           | ** ** | **Falconbridge’s  beneficial  Interest ** | ** ** | ** ** | ** ** | **Dec. 31,  2005**      | ** ** | **Copper** | ** ** | **Zinc** | ** ** | **Nickel** | ** ** | **Lead** | ** ** | **Silver** | ** ** | **Molybdenum** | ** ** | **Aluminum** | ** ** |
|----------------------|------------|-----------------------------------------------------|------------|------------|------------|------------------------------|------------|------------|------------|----------|------------|------------|------------|----------|------------|------------|------------|----------------|------------|--------------|------------|
| ** **           | ** ** | **(%)**                                             | ** ** | ** ** | ** ** | **(000’s tonnes)** | ** ** | **(%)**    | ** ** | **(%)**  | ** ** | **(%)**    | ** ** | **(%)**  | ** ** | **(g/mt)** | ** ** | **(%)**        | ** ** | **(%)**      | ** ** |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
| *Copper  Deposits*   |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
| Kidd  Creek          |       | 100.0                                               |       | Proven     |       | 17,836                       |       | 1.82       |       | 5.61     |       | —     |       | 0.18     |       | 54         |       | —         |       | —       |       |
|                 |       | 100.0                                               |       | Probable   |       | 1,178                        |       | 2.05       |       | 4.41     |       | —     |       | 0.09     |       | 33         |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
|                 |       |                                                |       | Total      |       | 19,014                       |       | 1.84       |       | 5.53     |       | —     |       | 0.18     |       | 53         |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
| Lomas  Bayas         |       | 100.0                                               |       | Proven     |       | 72,797                       |       | 0.36       |       | —   |       | —     |       | —   |       | —     |       | —         |       | —       |       |
|                 |       | 100.0                                               |       | Probable   |       | 166,423                      |       | 0.36       |       | —   |       | —     |       | —   |       | —     |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
|                 |       |                                                |       | Total      |       | 239,220                      |       | 0.36       |       | —   |       | —     |       | —   |       | —     |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
| Collahuasi(2)        |       | 44.0                                                |       | Proven     |       | 245,275                      |       | 1.10       |       | —   |       | —     |       | —   |       | —     |       | —         |       | —       |       |
|                 |       | 44.0                                                |       | Probable   |       | 1,559,057                    |       | 0.86       |       | —   |       | —     |       | —   |       | —     |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
|                 |       |                                                |       | Total      |       | 1,804,332                    |       | 0.90       |       | —   |       | —     |       | —   |       | —     |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
| Antamina(3)          |       | 33.75                                               |       | Proven     |       | 76,000                       |       | 1.12       |       | 1.40     |       | —     |       | —   |       | 14.9       |       | 0.029          |       | —       |       |
|                 |       | 33.75                                               |       | Probable   |       | 374,000                      |       | 1.19       |       | 0.84     |       | —     |       | —   |       | 12.4       |       | 0.031          |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
|                 |       |                                                |       | Total      |       | 450,000                      |       | 1.18       |       | 0.93     |       | —     |       | —   |       | 12.9       |       | 0.031          |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
| *Nickel  Deposits*   |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
| Sudbury              |       | 100.0                                               |       | Proven     |       | 3,155                        |       | 1.78       |       | —   |       | 1.26       |       | —   |       | —     |       | —         |       | —       |       |
|                 |       | 100.0                                               |       | Probable   |       | 4,900                        |       | 1.27       |       | —   |       | 1.13       |       | —   |       | —     |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
|                 |       |                                                |       | Total      |       | 8,055                        |       | 1.47       |       | —   |       | 1.18       |       | —   |       | —     |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
| Raglan               |       | 100.0                                               |       | Proven     |       | 5,942                        |       | 0.72       |       | —   |       | 2.58       |       | —   |       | —     |       | —         |       | —       |       |
|                 |       | 100.0                                               |       | Probable   |       | 8,908                        |       | 0.81       |       | —   |       | 2.95       |       | —   |       | —     |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
|                 |       |                                                |       | Total      |       | 14,850                       |       | 0.77       |       | —   |       | 2.80       |       | —   |       | —     |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
| Montcalm             |       | 100.0                                               |       | Proven     |       | 4,157                        |       | 0.69       |       | —   |       | 1.45       |       | —   |       | —     |       | —         |       | —       |       |
|                 |       | 100.0                                               |       | Probable   |       | 350                          |       | 0.63       |       | —   |       | 1.59       |       | —   |       | —     |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
|                 |       |                                                |       | Total      |       | 4,507                        |       | 0.68       |       | —   |       | 1.46       |       | —   |       | —     |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
| Falcondo             |       | 85.26                                               |       | Proven     |       | 45,337                       |       | —     |       | —   |       | 1.22       |       | —   |       | —     |       | —         |       | —       |       |
|                 |       | 85.26                                               |       | Probable   |       | 9,036                        |       | —     |       | —   |       | 1.05       |       | —   |       | —     |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
|                 |       |                                                |       | Total      |       | 54,373                       |       | —     |       | —   |       | 1.19       |       | —   |       | —     |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
| Koniambo             |       | 49.0                                                |       | Proven     |       | 17,182                       |       | —     |       | —   |       | 2.50       |       | —   |       | —     |       | —         |       | —       |       |
|                 |       | 49.0                                                |       | Probable   |       | 45,293                       |       | —     |       | —   |       | 2.36       |       | —   |       | —     |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
|                 |       |                                                |       | Total      |       | 62,475                       |       | —     |       | —   |       | 2.40       |       | —   |       | —     |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
| *Zinc  Deposits*     |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
| Brunswick  Mine(4)   |       | 100.0                                               |       | Proven     |       | 13,230                       |       | 0.38       |       | 8.83     |       | —     |       | 3.52     |       | 104        |       | —         |       | —       |       |
|                 |       | 100.0                                               |       | Probable   |       | 1,462                        |       | 0.21       |       | 8.26     |       | —     |       | 3.63     |       | 106        |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
|                 |       |                                                |       | Total      |       | 14,692                       |       | 0.36       |       | 8.77     |       | —     |       | 3.53     |       | 104        |       | —         |       | —       |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
| *Aluminum  Deposits* |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
| St.  Ann Bauxite(5)  |       | 50.0                                                |       | Proven     |       | 9,708                        |       | —     |       | —   |       | —     |       | —   |       | —     |       | —         |       | 25.37        |       |
|                 |       | 50.0                                                |       | Probable   |       | 19,593                       |       | —     |       | —   |       | —     |       | —   |       | —     |       | —         |       | 24.91        |       |
|                 |       |                                                |       |       |       |                         |       |       |       |     |       |       |       |     |       |       |       |           |       |         |       |
|                 |       |                                                |       | Total      |       | 29,301                       |       | —     |       | —   |       | —     |       | —   |       | —     |       | —         |       | 25.06        |       |

 

55

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----

Notes:

 

(1)           No adjustments have been made for metal losses during processing.

(2)           The Collahuasi mineral reserves have beenestimated and provided by the operator of the joint venture based on a copperprice of $0.95. The mineral reserves are estimated and classified using theAustralasian code for Reporting of Mineral Resources and Ore Reserves (the “JORC”code). The estimates are inspected annually by Chester Moore.  Proven plus probable molybdenum reserves atthe Rosario deposit total 1,055,694 tonnes at 0.025% molybdenum and are part ofthe total reserves as stated.

(3)           The Antamina mineral reserves have beenestimated and provided by the operator of the joint venture. The estimates areinspected annually by Chester Moore. Estimates used the following metal prices: copper $0.95/lb, zinc$0.50/lb, molybdenum $5.00/lb, and silver $5.00/oz.

(4)           Estimates used the following metal prices andexchange rate: zinc $0.65/lb, copper $1.50/lb, lead $0.35/lb, silver $6.50/ozand Cdn$1.50 for US$1.00.

(5)           The St. Ann Bauxite mineral reserves have beenestimated and provided by the operator of the joint venture. The estimates areinspected annually by Chester Moore.

 

56

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**Mineral Resources(1) (inaddition to Mineral Reserves)**

 
| ** **             | ** ** | **Falconbridge’s  beneficial  interest** | ** ** | **Category** | ** ** | **Dec. 31,  2005**  | ** ** | **Copper** | ** ** | **Zinc**   | ** ** | **Nickel** | ** ** | **Lead**   | ** ** | **Silver** | ** ** | **Molybdenum** | ** ** |
|------------------------|------------|-----------------------------------------------|------------|--------------|------------|--------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|----------------|------------|
|                   |       | **(%)**                                       |       |         |       | **(000’s  tonnes)** |       | **(%)**    |       | **(%)**    |       | **(%)**    |       | **(%)**    |       | **(g/mt)** |       | **(%)**        |       |
|                   |       | ** **                                    |       |         |       | ** **               |       | ** ** |       | ** ** |       | ** ** |       | ** ** |       | ** ** |       | ** **     |       |
| *Copper Deposits*      |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
| Kidd Creek  Operations |       | 100.0                                         |       | Measured     |       | 891                      |       | 2.37       |       | 3.75       |       | —     |       | 0.18       |       | 35         |       | —         |       |
|                   |       |                                          |       | Indicated    |       | 1,706                    |       | 2.06       |       | 7.59       |       | —     |       | 0.19       |       | 55         |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
|                   |       |                                          |       | Total        |       | 2,597                    |       | 2.17       |       | 6.28       |       | —     |       | 0.18       |       | 48         |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
|                   |       |                                          |       | Inferred     |       | 11,900                   |       | 2.7        |       | 4.8        |       | —     |       | 0.3        |       | 81         |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
| Lomas Bayas            |       | 100.0                                         |       | Measured     |       | 22,791                   |       | 0.30       |       | —     |       | —     |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       | Indicated    |       | 257,827                  |       | 0.28       |       | —     |       | —     |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
|                   |       |                                          |       | Total        |       | 280,618                  |       | 0.28       |       | —     |       | —     |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
|                   |       |                                          |       | Inferred     |       | 31,000                   |       | 0.30       |       | —     |       | —     |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
| Collahuasi(2)          |       | 44.0                                          |       | Measured     |       | 48,674                   |       | 0.55       |       | —     |       | —     |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       | Indicated    |       | 429,686                  |       | 0.65       |       | —     |       | —     |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
|                   |       |                                          |       | Total        |       | 478,360                  |       | 0.64       |       | —     |       | —     |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
|                   |       |                                          |       | Inferred     |       | 1,820,000                |       | 0.75       |       | —     |       | —     |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
| Antamina(3)            |       | 33.75                                         |       | Measured     |       | 35,000                   |       | 0.53       |       | 0.39       |       | —     |       | —     |       | 7.0        |       | 0.033          |       |
|                   |       |                                          |       | Indicated    |       | 25,000                   |       | 0.44       |       | 0.26       |       | —     |       | —     |       | 6.4        |       | 0.026          |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
|                   |       |                                          |       | Total        |       | 60,000                   |       | 0.49       |       | 0.33       |       | —     |       | —     |       | 6.7        |       | 0.030          |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
|                   |       |                                          |       | Inferred     |       | 41,000                   |       | 0.8        |       | 0.6        |       | —     |       | —     |       | 16         |       | 0.02           |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
| *Nickel Deposits*      |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
| Sudbury Operations     |       | 100.0                                         |       | Measured     |       | 3,347                    |       | 0.61       |       | —     |       | 1.85       |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       | Indicated    |       | 17,187                   |       | 1.09       |       | —     |       | 2.38       |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
|                   |       |                                          |       | Total        |       | 20,534                   |       | 1.02       |       | —     |       | 2.30       |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
|                   |       |                                          |       | Inferred     |       | 29,000                   |       | 2.6        |       | —     |       | 1.8        |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
| Raglan                 |       | 100.0                                         |       | Measured     |       | 55                       |       | 1.12       |       | —     |       | 3.92       |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       | Indicated    |       | 3,336                    |       | 0.80       |       | —     |       | 2.40       |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
|                   |       |                                          |       | Total        |       | 3,391                    |       | 0.80       |       | —     |       | 2.42       |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
|                   |       |                                          |       | Inferred     |       | 7,700                    |       | 0.8        |       | —     |       | 3.0        |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
| Falcondo               |       | 85.26                                         |       | Measured     |       | —                   |       | —     |       | —     |       | —     |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       | Indicated    |       | 13,840                   |       | —     |       | —     |       | 1.53       |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
|                   |       |                                          |       | Total        |       | 13,840                   |       | —     |       | —     |       | 1.53       |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
|                   |       |                                          |       | Inferred     |       | 6,300                    |       | —     |       | —     |       | 1.4        |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
| Koniambo (4)           |       | 49.0                                          |       | Inferred     |       | 156,000                  |       | —     |       | —     |       | 2.2        |       | —     |       | —     |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
| *Zinc Deposits*        |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
| Brunswick Mine         |       | 100.0                                         |       | Measured     |       | 1,542                    |       | 0.34       |       | 9.07       |       | —     |       | 3.53       |       | 94         |       | —         |       |
|                   |       |                                          |       | Indicated    |       | 1,942                    |       | 0.30       |       | 9.60       |       | —     |       | 4.07       |       | 101        |       | —         |       |
|                   |       |                                          |       |         |       |                     |       |       |       |       |       |       |       |       |       |       |       |           |       |
|                   |       |                                          |       | Total        |       | 3,484                    |       | 0.32       |       | 9.36       |       | —     |       | 3.83       |       | 98         |       | —         |       |

 

57

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----

Notes:

 

(1)           Mineral resources do not include allowancesfor dilution or mining recovery.

(2)           The mineral resources have been estimated andprovided by the operator of the joint venture based on a copper price of $1.15.The mineral resources are estimated and classified using the Australasian codefor Reporting of Mineral Resources and Ore Reserves (the “JORC” code).  The estimates are inspected annually byChester Moore.   The inferred resourcetotal does not include the inferred resource estimate of 248 million tonnesgrading 1.5% copper at Rosario Oeste.

(3)           The Antamina mineral resources have been estimatedand provided by the operator of the joint venture.  The estimates are inspected annually byChester Moore.  Estimates used thefollowing metal prices:  copper $0.95/lb,zinc $0.50/lb, molybdenum $5.00/lb, and silver $5.00/oz.

(4)           Mineral resource total does not containlimonite inferred resource of 100 million tonnes grading 1.6% nickel and 0.2%cobalt.

 

**3.9.4****       Reconciliation of MineralReserves**

 

The reconciliation of mineral reserves at each of the mines as atDecember 31, 2004 to December 31, 2005 are as follows:

 
| ** **      | ** ** | ** ** | ** ** | **Falconbridge’s  beneficial interest** | ** ** | **December 31,  2004** | ** ** | **Ore treated  in 2005** | ** ** | **Additions/  revisions** | ** ** | **December 31,  2005** | ** ** |
|-----------------|------------|------------|------------|----------------------------------------------|------------|-----------------------------|------------|--------------------------|------------|---------------------------|------------|-----------------------------|------------|
| ** **      | ** ** | ** ** | ** ** | **(%)**                                      | ** ** | **(000 mt)**           | ** ** | **(000 mt)**        | ** ** | **(000 mt)**         | ** ** | **(000 mt)**           | ** ** |
|            |       |       |       |                                         |       |                        |       |                     |       |                      |       |                        |       |
| **Copper**      |       |       |       |                                         |       |                        |       |                     |       |                      |       |                        |       |
| Kidd Creek      |       | Proven     |       | 100.0                                        |       | 14,286                      |       | (2,320                   | )          | 5,870                     |       | 17,836                      |       |
|            |       | Probable   |       | 100.0                                        |       | 3,780                       |       | —                   |       | (2,602                    | )          | 1,178                       |       |
| Lomas Bayas     |       | Proven     |       | 100.0                                        |       | 41,180                      |       | (19,508                  | )          | 51,125                    |       | 72,797                      |       |
|            |       | Probable   |       | 100.0                                        |       | 301,521                     |       | (14,742                  | )          | (120,356                  | )          | 166,423                     |       |
| Collahuasi      |       | Proven     |       | 44.0                                         |       | 310,503                     |       | (41,986                  | )          | (23,242                   | )          | 245,275                     |       |
|            |       | Probable   |       | 44.0                                         |       | 1,539,102                   |       | (3,287                   | )          | 23,242                    |       | 1,559,057                   |       |
| Antamina        |       | Proven     |       | 33.8                                         |       | 251,000                     |       | (30,000                  | )          | (145,000                  | )          | 76,000                      |       |
|            |       | Probable   |       | 33.8                                         |       | 217,000                     |       | —                   |       | 157,000                   |       | 374,000                     |       |
| Louvicourt      |       | Proven     |       | 28.0                                         |       | 544                         |       | (820                     | )          | 276                       |       | —                      |       |
|            |       | Probable   |       | 28.0                                         |       | 13                          |       | —                   |       | (13                       | )          | —                      |       |
|            |       |       |       |                                         |       |                        |       |                     |       |                      |       |                        |       |
| **Nickel**      |       |       |       |                                         |       |                        |       |                     |       |                      |       |                        |       |
| Sudbury         |       | Proven     |       | 100.0                                        |       | 4,554                       |       | (1,877                   | )          | 478                       |       | 3,155                       |       |
|            |       | Probable   |       | 100.0                                        |       | 7,310                       |       | (294                     | )          | (2,116                    | )          | 4,900                       |       |
| Raglan          |       | Proven     |       | 100.0                                        |       | 6,270                       |       | (934                     | )          | 606                       |       | 5,942                       |       |
| Montcalm        |       | Probable   |       | 100.0                                        |       | 9,382                       |       | —                   |       | (474                      | )          | 8,908                       |       |
|            |       | Proven     |       | 100.0                                        |       | 3,162                       |       | (750                     | )          | 1,745                     |       | 4,157                       |       |
|            |       | Probable   |       | 100.0                                        |       | 1,724                       |       | —                   |       | (1,374                    | )          | 350                         |       |
| Falcondo        |       | Proven     |       | 85.3                                         |       | 47,846                      |       | (3,920                   | )          | 1,411                     |       | 45,337                      |       |
|            |       | Probable   |       | 85.3                                         |       | 9,557                       |       | —                   |       | (521                      | )          | 9,036                       |       |
| Koniambo        |       | Proven     |       | 49.0                                         |       | —                      |       | —                   |       | 17,182                    |       | 17,182                      |       |
|            |       | Probable   |       | 49.0                                         |       | —                      |       | —                   |       | 45,293                    |       | 45,293                      |       |
|            |       |       |       |                                         |       |                        |       |                     |       |                      |       |                        |       |
| **Zinc**        |       |       |       |                                         |       |                        |       |                     |       |                      |       |                        |       |
| Brunswick       |       | Proven     |       | 100.0                                        |       | 14,937                      |       | (3,373                   | )          | 1,666                     |       | 13,230                      |       |
|            |       | Probable   |       | 100.0                                        |       | 2,498                       |       | (156                     | )          | (880                      | )          | 1,462                       |       |
|            |       |       |       |                                         |       |                        |       |                     |       |                      |       |                        |       |
| **Aluminum**    |       | Proven     |       | 50.0                                         |       | 7,214                       |       | (4,056                   | )          | 6,550                     |       | 9,708                       |       |
| St Ann  Bauxite |       | Probable   |       | 50.0                                         |       | 25,586                      |       | —                   |       | (5,993                    | )          | 19,593                      |       |

 

58

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The following table sets out the Company’s share of the metals andminerals contained in Falconbridge’s mineral reserves:

 

**Metal Contained in Reserves(1) – Falconbridge’s Share**

 
| ** **                                  | ** ** | ** **                           | ** ** | **Tonnes (000)** | ** ** | **Ounces*** | ** ** |
|---------------------------------------------|------------|--------------------------------------|------------|------------------|------------|-------------|------------|
| ** **                                  | ** ** | ** **                           | ** ** | **Copper**       | ** ** | **Zinc**    | ** ** | **Nickel** | ** ** | **Lead** | ** ** | **Molybdenum** | ** ** | **Aluminum** | ** ** | **Silver** | ** ** |
|                                        |       |                                 |       |             |       |        |       |   |   |   |   |   |   |   |   | **(millions)** |   |
| **Wholly-owned**                            |       |                                 |       |             |       |        |       |   |   |   |   |   |   |   |   |   |   |
| *Copper  Deposits*                          |       | Kidd Creek                           |       | 349              |       | 1,052       |       | — |   | 34 |   | — |   | — |   | 32 |   |
|                                        |       | Lomas Bayas                          |       | 861              |       | —      |       | — |   | — |   | — |   | — |   | — |   |
| *Nickel  Deposits*                          |       | Sudbury                              |       | 118              |       | —      |       | 95 |   | — |   | — |   | — |   | — |   |
|                                        |       | Raglan                               |       | 115              |       | —      |       | 416 |   | — |   | — |   | — |   | — |   |
|                                        |       | Montcalm                             |       | 31               |       | —      |       | 66 |   | — |   | — |   | — |   | — |   |
| *Zinc  Deposits*                            |       | Brunswick                            |       | 53               |       | 1,289       |       | — |   | 519 |   | — |   | — |   | 49 |   |
|                                        |       |                                 |       |             |       |        |       |   |   |   |   |   |   |   |   |   |   |
|                                        |       | Sub-Total Proven & Probable |       | 1,527            |       | 2,341       |       | 577 |   | 553 |   | — |   | — |   | 81 |   |
|                                        |       |                                 |       |             |       |        |       |   |   |   |   |   |   |   |   |   |   |
| **Divided  Interest**                       |       |                                 |       |             |       |        |       |   |   |   |   |   |   |   |   |   |   |
| *Copper  Deposits*                          |       | Collahuasi (44%)                     |       | 7,114            |       | —      |       | — |   | — |   | — |   | — |   | — |   |
|                                        |       | Antamina (33.8%)                     |       | 1,789            |       | 1,419       |       | — |   | — |   | 47 |   | — |   | 63 |   |
| *Nickel  Deposits*                          |       | Falcondo (85.3%)                     |       | —           |       | —      |       | 553 |   | — |   | — |   | — |   | — |   |
|                                        |       | Koniambo (49%)                       |       | —           |       | —      |       | 734 |   | — |   | — |   | — |   | — |   |
| *Aluminum  Deposits*                        |       | St. Ann Bauxite (50%)                |       | —           |       | —      |       | — |   | — |   | — |   | 3,672 |   | — |   |
|                                        |       |                                 |       |             |       |        |       |   |   |   |   |   |   |   |   |   |   |
|                                        |       | Sub-Total Proven & Probable |       | 8,903            |       | 1,419       |       | 1,287 |   | — |   | 47 |   | 3,672 |   | 63 |   |
|                                        |       |                                 |       |             |       |        |       |   |   |   |   |   |   |   |   |   |   |
| **Totals – Falconbridge’s share** |       |                                 |       |             |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Proven &  Probable                 |       |                                 |       | 10,430           |       | 3,760       |       | 1,864 |   | 553 |   | 47 |   | 3,672 |   | 144 |   |

 

59

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----

*Troy ounce.

 

Notes:

 

(1)   Calculated from the mineral reserves containedin the table entitled “Mineral Reserves” in this Item 3.9.4.   Does not consider processing losses.

 

**Exploration & Advanced Projects(1)**

 
| ** **                           | ** ** | **Falconbridge’s  beneficial  interest** | ** ** | **Resource/  Reserve Category** | ** ** | ** **     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | ** **  | ** ** | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------------------------|------------|-----------------------------------------------|------------|---------------------------------|------------|----------------|------------|------------|------------|------------|------------|------------|------------|----------------|------------|-------------|------------|-------------|------------|------------|------------|------------|------------|
| ** **                           | ** ** | **Grade**                                     |
| **Tonnes**                           | ** ** | **Copper**                                    | ** ** | **Zinc**                        | ** ** | **Nickel**     | ** ** | **Lead**   | ** ** | **Silver** | ** ** | **Gold**   | ** ** | **Molybdenum** | ** ** | **Cobalt**  |
| ** **                           | ** ** | **(%)**                                       | ** ** | ** **                      | ** ** | **(millions)** | ** ** | **(%)**    | ** ** | **(%)**    | ** ** | **(%)**    | ** ** | **(%)**        | ** ** | **(gm/mt)** | ** ** | **(gm/mt)** | ** ** | **(%)**    | ** ** | **(%)**    | ** ** |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
| *Copper  Deposits*                   |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
| El Pachón,  Argentina(2)        |       | 100.0                                         |       | Measured                        |       | 37.1           |       | 1.15       |       | —     |       | —     |       | —         |       | 4.0         |       | —      |       | 0.03       |       | —     |       |
|                                 |       |                                          |       | Indicated                       |       | 686.8          |       | 0.62       |       | —     |       | —     |       | —         |       | 2.5         |       | —      |       | 0.01       |       | —     |       |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
|                                 |       |                                          |       | Total                           |       | 723.9          |       | 0.65       |       | —     |       | —     |       | —         |       | 2.6         |       | —      |       | 0.02       |       | —     |       |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
|                                 |       |                                          |       | Inferred                        |       | 560.0          |       | 0.52       |       | —     |       | —     |       | —         |       | 2.6         |       | —      |       | 0.01       |       | —     |       |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
| El Morro,  Chile(2)                  |       | 70.0                                          |       | Inferred                        |       | 466.0          |       | 0.61       |       | —     |       | —     |       | —         |       | —      |       | 0.50        |       | —     |       | —     |       |
| Rosario Oeste,  Chile(3)             |       | 44.0                                          |       | Inferred                        |       | 248.0          |       | 1.54       |       | —     |       | —     |       | —         |       | —      |       | —      |       | —     |       | —     |       |
| El Pilar, Mexico                     |       | 100.0                                         |       | Inferred                        |       | 210.0          |       | 0.34       |       | —     |       | —     |       | —         |       | —      |       | —      |       | —     |       | —     |       |
| Frieda River,  Papua New Guinea |       | 72.0                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
| Horse / Ivaal /  Trukai              |       |                                          |       | Indicated                       |       | 74.6           |       | 0.63       |       | —     |       | —     |       | —         |       | —      |       | 0.37        |       | —     |       | —     |       |
|                                 |       |                                          |       | Inferred                        |       | 360.0          |       | 0.60       |       | —     |       | —     |       | —         |       | —      |       | 0.38        |       | —     |       | —     |       |
| Koki(4)                              |       |                                          |       | Inferred                        |       | 270.0          |       | 0.40       |       | —     |       | —     |       | —         |       | —      |       | 0.30        |       | —     |       | —     |       |
| Nena(4)                              |       |                                          |       | Measured                        |       | 25.9           |       | 3.04       |       | —     |       | —     |       | —         |       | —      |       | 0.66        |       | —     |       | —     |       |
|                                 |       |                                          |       | Indicated                       |       | 16.8           |       | 3.16       |       | —     |       | —     |       | —         |       | —      |       | 0.48        |       | —     |       | —     |       |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
|                                 |       |                                          |       | Total                           |       | 42.7           |       | 3.09       |       | —     |       | —     |       | —         |       | —      |       | 0.59        |       | —     |       | —     |       |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
|                                 |       |                                          |       | Inferred                        |       | 0.02           |       | 2.1        |       | —     |       | —     |       | —         |       | —      |       | 0.2         |       | —     |       | —     |       |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
| Mine D,  Ontario(5)                  |       | 100.0                                         |       | Indicated                       |       | 1.63           |       | 2.02       |       | 7.55       |       | —     |       | 0.19           |       | 55          |       | —      |       | —     |       | —     |       |
|                                 |       |                                          |       | Inferred                        |       | 11.8           |       | 2.7        |       | 4.8        |       | —     |       | 0.3            |       | 82          |       | —      |       | —     |       | —     |       |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
| Lomas Bayas II,  Chile(6)            |       | 100.0                                         |       | Measured                        |       | 125.2          |       | 0.31       |       | —     |       | —     |       | —         |       | —      |       | —      |       | —     |       | —     |       |
|                                 |       |                                          |       | Indicated                       |       | 345.1          |       | 0.28       |       | —     |       | —     |       | —         |       | —      |       | —      |       | —     |       | —     |       |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
|                                 |       |                                          |       | Total                           |       | 470.3          |       | 0.29       |       | —     |       | —     |       | —         |       | —      |       | —      |       | —     |       | —     |       |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
|                                 |       |                                          |       | Inferred                        |       | 150.0          |       | 0.21       |       | —     |       | —     |       | —         |       | —      |       | —      |       | —     |       | —     |       |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
| *Nickel  Deposits*                   |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
| Nickel Rim South,  Ontario(7)        |       | 100.0                                         |       | Inferred                        |       | 13.4           |       | 3.3        |       | —     |       | 1.8        |       | —         |       | 15          |       | 0.8         |       | —     |       | 0.04       |       |
| Onaping Depth,  Ontario(7)           |       | 100.0                                         |       | Indicated                       |       | 14.6           |       | 1.15       |       | —     |       | 2.52       |       | —         |       | 2.3         |       | 0.12        |       | —     |       | 0.06       |       |
|                                 |       |                                          |       | Inferred                        |       | 1.2            |       | 1.2        |       | —     |       | 3.6        |       | —         |       | 3.0         |       | 0.1         |       | —     |       | 0.07       |       |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
| Fraser Morgan(7),  Ontario           |       | 100.0                                         |       | Measured                        |       | 3.33           |       | 0.61       |       | —     |       | 1.85       |       | —         |       | 2.28        |       | 0.05        |       | —     |       | 0.06       |       |
|                                 |       |                                          |       | Indicated                       |       | 1.55           |       | 0.46       |       | —     |       | 1.69       |       | —         |       | 1.61        |       | 0.04        |       | —     |       | 0.06       |       |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
|                                 |       |                                          |       | Total                           |       | 4.88           |       | 0.56       |       | —     |       | 1.80       |       | —         |       | 2.07        |       | 0.05        |       | —     |       | 0.06       |       |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
|                                 |       |                                          |       | Inferred                        |       | 2.4            |       | 0.5        |       | —     |       | 1.8        |       | —         |       | 1.2         |       | —      |       | —     |       | 0.1        |       |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
| Kabanga(2)                           |       | 50.0                                          |       | Inferred                        |       | 26.4           |       | —     |       | —     |       | 2.6        |       | —         |       | —      |       | —      |       | —     |       | —     |       |
|                                 |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
| *Zinc  Deposits*                     |       |                                          |       |                            |       |           |       |       |       |       |       |       |       |           |       |        |       |        |       |       |       |       |       |
| Perseverance,  Quebec                |       | 90.0                                          |       | Measured                        |       | 4.36           |       | 1.28       |       | 16.19      |       | —     |       | 0.04           |       | 30          |       | 0.38        |       | —     |       | —     |       |

 

60

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| ** **                      | ** ** | **Falconbridge’s  beneficial  interest** | ** ** | **Resource/  Reserve Category** | ** ** | **Tonnes**     | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | ** ** | ** ** | ** **  | ** ** | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** |
|---------------------------------|------------|-----------------------------------------------|------------|---------------------------------|------------|----------------|------------|------------|------------|------------|------------|----------------|------------|------------|------------|-------------|------------|-------------|------------|------------|------------|------------|------------|
| **Grade**                       |
| **Copper**                      | ** ** | **Zinc**                                      | ** ** | **Nickel**                      | ** ** | **Lead**       | ** ** | **Silver** | ** ** | **Gold**   | ** ** | **Molybdenum** | ** ** | **Cobalt** |
| ** **                      | ** ** | **(%)**                                       | ** ** | ** **                      | ** ** | **(millions)** | ** ** | **(%)**    | ** ** | **(%)**    | ** ** | **(%)**        | ** ** | **(%)**    | ** ** | **(gm/mt)** | ** ** | **(gm/mt)** | ** ** | **(%)**    | ** ** | **(%)**    | ** ** |
|                            |       |                                          |       |                            |       |           |       |       |       |       |       |           |       |       |       |        |       |        |       |       |       |       |       |
|                            |       |                                          |       | Indicated                       |       | 0.76           |       | 1.03       |       | 13.68      |       | —         |       | 0.04       |       | 27          |       | 0.34        |       | —     |       | —     |       |
|                            |       |                                          |       |                            |       |           |       |       |       |       |       |           |       |       |       |        |       |        |       |       |       |       |       |
|                            |       |                                          |       | Total                           |       | 5.12           |       | 1.24       |       | 15.82      |       | —         |       | 0.04       |       | 29          |       | 0.38        |       | —     |       | —     |       |
|                            |       |                                          |       |                            |       |           |       |       |       |       |       |           |       |       |       |        |       |        |       |       |       |       |       |
| Lady Loretta, Australia(8)      |       | 75.0                                          |       | Measured                        |       | 8.5            |       | —     |       | 15.6       |       | —         |       | 5.9        |       | 95          |       | —      |       | —     |       | —     |       |
|                            |       |                                          |       | Indicated                       |       | 3.1            |       | —     |       | 17.5       |       | —         |       | 5.2        |       | 94          |       | —      |       | —     |       | —     |       |
|                            |       |                                          |       |                            |       |           |       |       |       |       |       |           |       |       |       |        |       |        |       |       |       |       |       |
|                            |       |                                          |       | Total                           |       | 11.6           |       | —     |       | 16.1       |       | —         |       | 5.7        |       | 95          |       | —      |       | —     |       | —     |       |
|                            |       |                                          |       |                            |       |           |       |       |       |       |       |           |       |       |       |        |       |        |       |       |       |       |       |
|                            |       |                                          |       | Inferred                        |       | 0.1            |       | —     |       | 13.7       |       | —         |       | 3.5        |       | 84          |       | —      |       | —     |       | —     |       |
|                            |       |                                          |       |                            |       |           |       |       |       |       |       |           |       |       |       |        |       |        |       |       |       |       |       |
| Lennard Shelf, Australia(8),(9) |       | 50.0                                          |       | Measured                        |       | 1.40           |       | —     |       | 8.80       |       | —         |       | 2.15       |       | —      |       | —      |       | —     |       | —     |       |
|                            |       |                                          |       | Indicated                       |       | 1.37           |       | —     |       | 8.15       |       | —         |       | 1.75       |       | —      |       | —      |       | —     |       | —     |       |
|                            |       |                                          |       |                            |       |           |       |       |       |       |       |           |       |       |       |        |       |        |       |       |       |       |       |
|                            |       |                                          |       | Total                           |       | 2.77           |       | —     |       | 8.47       |       | —         |       | 1.96       |       | —      |       | —      |       | —     |       | —     |       |
|                            |       |                                          |       |                            |       |           |       |       |       |       |       |           |       |       |       |        |       |        |       |       |       |       |       |
|                            |       |                                          |       | Inferred                        |       | 0.3            |       | —     |       | 8.2        |       | —         |       | 1.7        |       | —      |       | —      |       | —     |       | —     |       |

 

----

Notes:

 

(1)           The mineral resources/reserves are shown on a100% basis.

(2)           Subject to fulfillment of certain conditions.

(3)           The mineral resources are supplied by theoperator of the Collahuasi joint venture

(4)           Mineral reserves and resources estimated byHighlands Pacific Limited, the optionor of the property.

(5)           Also included as part of the Kidd Creekmineral resources on the Mineral Reserves and Mineral Resources table in thisItem 3.9.4.

(6)           Option to purchase.

(7)           Also included as part of the Sudbury mineralresources on the Mineral Reserves and Mineral Resources table in thisItem 3.9.4.

(8)           The mineral resources were estimated andclassified using the Australasian Code for Reporting of Mineral Resources andOre Reserves (the “JORC” code) which are comparable to the NI 43-101definitions. These estimates would not have been materially different if madeusing the CIM definitions.

(9)           Resource estimate supplied by Teck ComincoLimited.  Estimate developed as part ofeconomic evaluation study with dilution and mining recovery included.

 

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**4.****             DIVIDEND POLICY**

 

The Company views common share dividends as an important part of ashareholder’s return on investment. As a result, the Company attempts to pay acommon share dividend at all points of the economic cycle, so long as thepayment does not impair the Company’s financial position. It is expected thatthe common share dividend will increase or decrease to reflect the Company’soperating results and financial position.

 

The preferred shares of each series issued by the Company, rank inpriority to the common shares with respect to the payment of dividends.  The following chart shows the amount of cashdividends declared per share for each class of the Company’s shares for thelast three years.

 
| **DIVIDENDS**                     | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Per common share                  |       | Cdn$0.48 |       | Cdn$0.48 |       | Cdn$0.64 |       |
| Per preferred share               |       |     |       |     |       |     |       |
| Series F (floating dividend) |       | Cdn$0.94 |       | Cdn$0.99 |       | Cdn$1.17 |       |
| Series G                     |       | Cdn$1.53 |       | Cdn$1.53 |       | Cdn$1.53 |       |
| Series H(1)                       |       | Cdn$1.63 |       | Cdn$1.63 |       | Cdn$1.25 |       |
| Series 1                          |       | Cdn$0.08 |       | Cdn$0.08 |       | Cdn$0.08 |       |
| Series 2 (floating dividend)      |       | Cdn$0.98 |       | Cdn$0.74 |       | Cdn$1.47 |       |
| Series 3(2)                       |       | Cdn$1.15 |       | Cdn$0.86 |       | —   |       |
| Per junior preference share(3)    |       |     |       |     |       |     |       |
| Series 1                          |       | US$0.98  |       | —   |       |     |       |
| Series 2                          |       | US$1.03  |       | —   |       | —   |       |
| Series 3                          |       | US$1.07  |       | —   |       | —   |       |

 

----

Notes:

 

(1)   The Preferred Shares, Series H were issued onMarch 25, 2003.  Amounts shown in respectof 2003 represent total dividends paid during the period from March 25, 2003 toDecember 31, 2003.

 

(2)   The Preferred Shares, Series 3 were issued onMarch 1, 2004.  Amounts shown in respectof 2004 represent total dividends paid from March 1, 2004 until December 312004.

 

(3)   The junior preference shares were issued onMarch 24, 2005.  Amounts shown in respectof 2005 represent total dividends paid during the period March 25, 2005 toDecember 31, 2005.

 

**5.****             CAPITALSTRUCTURE OF THE COMPANY**

 

The Company’s capital structure consists of an unlimited number ofcommon shares, an unlimited number of preferred shares issuable in series, anunlimited number of junior preference shares issuable in series and anunlimited number of participating shares issuable in series of which, as atDecember 31, 2005, 370,688,138 common shares, 3,246,057 Preferred Shares, SeriesF, 8,753,943 Preferred Shares, Series G , 6,000,000 Preferred Shares, Series H,89,835 Preferred Shares, Series 1, 4,787,283 Preferred Shares, Series 2,3,122,882 Preferred Shares, Series 3, 11,999,899 Junior Preference Shares,Series 1, 11,999,899 Junior Preference Shares, Series 2, 5,999,903 JuniorPreference Shares, Series 3 and no Participating Shares were issued andoutstanding.

 

The Falconbridge Common Shares, Preferred Shares, Junior PreferenceShares and Participating Shares will have attached thereto the provisionssummarized below. Falconbridge will furnish upon request a copy of the text ofthe provisions attaching to any class or series of Falconbridge shares.

 

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**Common Shares**

 

Each Common Share entitles the holder to dividends if, as and whendeclared by the board of directors of Falconbridge, to one vote at all meetingsof shareholders and to participate rateably in any distribution of the assetsof Falconbridge upon liquidation, dissolution or winding-up, subject to theprior rights of holders of Preferred Shares and Junior Preference Shares.

 

See “2.1  Three Year History –Recent Developments” for a description of the Shareholder Rights Plan inrelation to the Common Shares.

 

**Preferred Shares**

 

The Preferred Shares may at any time or from time to time be issued inone or more series. Falconbridge’s board of directors may by resolution fix thenumber of shares in, and determine the designation, rights, privileges,restrictions and conditions attaching to the shares of, each series ofPreferred Shares.

 

The Preferred Shares will be entitled to a preference over the CommonShares, the Junior Preference Shares and any other of Falconbridge’s sharesranking junior to the Preferred Shares in the distribution of assets in theevent of Falconbridge’s liquidation, dissolution or winding-up or otherdistribution of its assets among its shareholders for the purpose of winding-upits affairs.

 

Each series of Preferred Shares will rank in parity with every otherseries of Preferred Shares with respect to priority in the payment of dividendsand in the distribution of assets in the event of Falconbridge’s liquidation,dissolution or winding-up or other distribution of its assets among itsshareholders for the purpose of winding-up its affairs.

 

In the event of the liquidation, dissolution or winding-up ofFalconbridge or any other distribution of assets of Falconbridge among itsshareholders for the purpose of winding-up its affairs, the holders ofPreferred Shares will be entitled to payment of an amount equal to the amountpaid up on such shares in the case of any liquidation, dissolution, winding-upor other distribution which is involuntary, and to payment of an amount equalto the amount paid up thereon plus the premium on redemption applicable at thedate thereof, if any, if the same is voluntary, together in all cases with allunpaid dividends accrued thereon (which will for such purpose be treated asaccruing up to the date of distribution), the whole before any amount is paidor any assets of Falconbridge are distributed to the holders of any CommonShares, Junior Preference Shares or shares of any other class ranking junior tothe Preferred Shares but the whole subject to the rights of the holders of anyother class of shares of Falconbridge entitled to receive the assets ofFalconbridge upon such distribution in priority to or rateably with the holdersof the Preferred Shares. Upon payment to the holders of the Preferred Shares ofthe amount so payable to them, they will not be entitled to share in anyfurther distribution of assets of Falconbridge.

 

**Preferred Shares, Series F**

 

The Preferred Shares, Series F will have attached thereto theseries provisions summarized below.

 

*Definitions of Terms*

 

The following definitions are relevant to the Preferred Shares,Series F:

 

“**Banks**” means any two ofRoyal Bank of Canada, Bank of Montreal, The Bank of Nova Scotia, The Toronto-DominionBank and Canadian Imperial Bank of Commerce and any successor of any of them asmay be designated from time to time by the board of directors of Falconbridgeby notice given to the transfer agent for the Preferred Shares, Series F,such notice to take effect on, and to be given at least two (2) businessdays prior to, the commencement of a particular Dividend Period and, until suchnotice is first given, means Canadian Imperial Bank of Commerce and The Bank ofNova Scotia.

 

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“**Calculated Trading Price**”for any month means:

 

(a)           theaggregate of the Daily Adjusted Trading Value for all Trading Days in suchmonth;

 

divided by

 

(b)           theaggregate of the Daily Trading Volume for all Trading Days in such month.

 

“**Daily Accrued Dividend Deduction**”for any Trading Day means:

 

(a)           theproduct obtained by multiplying the dividend accrued on an Preferred Share,Series F in respect of the month in which the Trading Day falls by thenumber of days elapsed from but excluding the day prior to the Ex-Dividend Dateimmediately preceding such Trading Day to and including such Trading Day(or if such Trading Day is an Ex-Dividend Date, by one (1) day);

 

divided by

 

(b)           thenumber of days from and including such Ex-Dividend Date to but excluding thefollowing Ex-Dividend Date.

 

“**Daily Adjusted Trading Value**”for any Trading Day means:

 

(a)           theaggregate dollar value of all transactions of Preferred Shares, Series Fon the Exchange (made on the basis of the normal settlement period in effect onthe Exchange) occurring during such Trading Day;

 

less

 

(b)           theDaily Trading Volume for such Trading Day multiplied by the Daily AccruedDividend Deduction for such Trading Day.

 

“**Daily Trading Volume**” forany Trading Day means the aggregate number of Preferred Shares, Series Ftraded in all transactions (made on the basis of the normal settlement periodin effect on the Exchange) occurring during such Trading Day on the Exchange.

 

“**Deemed Record Date**” meansthe last Trading Day of a month with respect to which no dividend is declaredby the board of directors of Falconbridge.

 

“**Dividend Payment Date**”means the 12th day of each month.

 

“**Dividend Period**” means amonth.

 

“**Exchange**” means the TSXor such other exchange or trading market in Canada as may be determined fromtime to time by Falconbridge as being the principal trading market for thePreferred Shares, Series F.

 

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“**Ex-Dividend Date**” means:

 

(a)           theTrading Day which, under the rules or normal practices of the Exchange, isdesignated or recognized as the Ex-Dividend Date relative to any dividendrecord date for the Preferred Shares, Series F; or

 

(b)           ifthe board of directors of Falconbridge fails to declare a dividend in respectof a month, the Trading Day which, under the rules or normal practices of theExchange, would be recognized as the Ex-Dividend Date relative to any DeemedRecord Date for the Preferred Shares, Series F.

 

“**Prime**” for a monthmeans the average (rounded to the nearest one-thousandth (1/1000) of onepercent (1%)) of the Prime Rate in effect on each day of such month.

 

“**Prime Rate**” for any daymeans the average (rounded to the nearest one-thousandth (1/1000) of onepercent (1%)) of the annual rates of interest announced from time to time bythe Banks as the reference rates then in effect for such day for determininginterest rates on Canadian dollar commercial loans made to prime commercialborrowers in Canada. If one of the Banks does not have such an interest rate ineffect on a day, the Prime Rate for such day shall be such interest rate in effectfor that day of the other Bank; if both Banks do not have such an interest ratein effect on a day, the Prime Rate for that day shall be equal to 1.5% perannum plus the average yield expressed as a percentage per annum on 91-dayGovernment of Canada Treasury Bills, as reported by the Bank of Canada, for theweekly tender for the week immediately preceding that day; and if both of suchBanks do not have such an interest rate in effect on a day and the Bank ofCanada does not report such average yield per annum, the Prime Rate for thatday shall be equal to the Prime Rate for the next preceding day. The Prime Rateand Prime shall be determined from time to time by an officer of Falconbridgefrom quotations supplied by the Banks or otherwise publicly available. Suchdetermination shall, in the absence of manifest error, be final and bindingupon Falconbridge and upon all holders of Preferred Shares, Series F.

 

“**Trading Day**” means, ifthe Exchange is a stock exchange in Canada, a day on which the Exchange is openfor trading or, in any other case, a business day.

 

*Stated Value*

 

The Preferred Shares, Series F will have a stated value ofCdn$25.00 per share.

 

*Dividends*

 

The holders of the Preferred Shares, Series F will be entitled toreceive floating adjustable cumulative preferred cash dividends as and whendeclared by the board of directors of Falconbridge, to accrue from theEffective Time of the Amalgamation and to be paid on the 12th day ofeach month. The dividend rate will float in relation to changes in Prime andwill be adjusted upwards or downwards on a monthly basis by an adjustmentfactor whenever the Calculated Trading Price of the Preferred Shares,Series F is Cdn$24.875 or less or Cdn$25.125 or more, respectively. Themaximum monthly adjustment for changes in the Calculated Trading Price will be ±4.00% of Prime. The annual floating dividend rate applicable for a month willin no event be less than 50% of Prime or greater than Prime.

 

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The Adjustment Factor for a month will be based on the CalculatedTrading Price of the Preferred Shares, Series F for the precedingmonth determined in accordance with the following table:

 
| **If the Calculated Trading Price  for the Preceding Month is** | ** ** | **The Adjustment Factor as  a Percentage of Prime shall be** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------|------------|
|                                                                                                    |       |                                                                                                 |       |
| Cdn$25.50 or more                                                                                       |       | -4.00                                                                                                | %          |
| Cdn$25.375 and less than Cdn$25.50                                                                      |       | -3.00                                                                                                | %          |
| Cdn$25.25 and less than Cdn$25.375                                                                      |       | -2.00                                                                                                | %          |
| Cdn$25.125 and less than Cdn$25.25                                                                      |       | -1.00                                                                                                | %          |
| Greater than Cdn$24.875 and less than  Cdn$25.125                                                       |       | nil                                                                                                  |       |
| Greater than Cdn$24.75 to Cdn$24.875                                                                    |       | 1.00                                                                                                 | %          |
| Greater than Cdn$24.625 to Cdn$24.75                                                                    |       | 2.00                                                                                                 | %          |
| Greater than Cdn$24.50 to Cdn$24.625                                                                    |       | 3.00                                                                                                 | %          |
| Cdn$24.50 or less                                                                                       |       | 4.00                                                                                                 | %          |

 

The maximum Adjustment Factor for any month will be ±4.00% of Prime.

 

If in any month there is no trade of at least a board lot of thePreferred Shares, Series F on the Exchange, the Adjustment Factor for thefollowing month will be nil.

 

The annual floating dividend rate for a month will be calculated byFalconbridge as promptly as practicable, and notice thereof will be given toeach stock exchange on which the Preferred Shares, Series F are listed fortrading.

 

*Redemption*

 

The Preferred Shares, Series F will be redeemable at the option ofFalconbridge, in whole but not in part at Cdn$25.50 per share, plus an amountequal to all accrued and unpaid dividends up to but excluding the date ofredemption. Notice of the redemption will be given by Falconbridge not lessthan 45 days nor more than 60 days prior to the date fixed forredemption.

 

*Purchase for Cancellation*

 

Falconbridge may at any time or times purchase for cancellation all orany part of the Preferred Shares, Series F in the open market, by privateagreement or otherwise at the lowest price or prices at which in the opinion ofthe board of directors of Falconbridge such shares are obtainable.

 

*Restrictions on Dividends and Retirement ofShares*

 

Falconbridge will not, without the approval of the holders ofoutstanding Preferred Shares, Series F:

 

(a)           declare,pay or set apart for payment any dividends (other than stock dividends payablein shares of Falconbridge ranking junior to the Preferred Shares,Series F) on the Falconbridge Common Shares, Junior Preference Shares orany other shares of Falconbridge ranking junior to the Preferred Shares,Series F;

 

(b)           redeem,purchase or otherwise retire or make any capital distribution on or in respectof the Falconbridge Common Shares, Junior Preference Shares or any other sharesof Falconbridge ranking junior to the Preferred Shares, Series F (exceptout of the net cash proceeds of a substantially concurrent issue of shares ofFalconbridge ranking junior to the Preferred Shares, Series F);

 

(c)           purchaseor otherwise retire less than all the Preferred Shares, Series F thenoutstanding; or

 

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(d)           redeem,purchase or otherwise retire (except in connection with the exercise of anyretraction privilege or mandatory redemption or purchase obligation attachingthereto) any other shares of Falconbridge ranking on a parity with thePreferred Shares, Series F;

 

unless, in each such case, all dividends on outstanding PreferredShares, Series F accrued up to and including the dividend payable on thelast preceding Dividend Payment Date shall have been declared and paid. Anyapproval of the holders of the Preferred Shares, Series F required withrespect to the foregoing may be given by the affirmative vote of the holders ofthe majority of the shares represented at a meeting, or adjourned meeting, ofthe holders of Preferred Shares, Series F duly called for the purpose andat which a quorum is present.

 

*Rights on Liquidation*

 

In the event of any liquidation, dissolution or winding-up ofFalconbridge, the holders of the Preferred Shares, Series F will be entitledto receive Cdn$25.00 per Falconbridge Preferred Share, Series F plus anamount equal to all accrued and unpaid dividends up to but excluding the dateof payment or distribution before any payment or distribution is made to theholders of the Falconbridge Common Shares, Junior Preference Shares or anyother shares of Falconbridge ranking junior to the Preferred Shares,Series F. Upon payment of such amounts, the holders of the PreferredShares, Series F will not be entitled to share in any further distributionof assets of Falconbridge.

 

*Voting Rights*

 

The holders of Preferred Shares, Series F will not be entitled(except as otherwise provided by law) to receive notice of, attend, or vote at,any meeting of the shareholders of Falconbridge unless Falconbridge shall havefailed to pay twenty-four dividends, on the Preferred Shares, Series F,whether or not consecutive. In that event, and for only so long as any suchdividends remain in arrears, the holders of Preferred Shares, Series Fwill be entitled to receive notice of and to attend all shareholders’ meetings,and to one vote for each share held, except meetings at which only holders ofanother specified class or series are entitled to vote.

 

In connection with any action to be taken by Falconbridge whichrequires the approval of the holders of Preferred Shares, Series F votingas a series or as part of the class, each such share shall entitle the holderthereof to one vote.

 

*Tax on Dividends*

 

Falconbridge will elect, in the manner and within the time providedunder Part VI.1 of the Tax Act, to pay tax at a rate such thatholders of Preferred Shares, Series F will not be required to pay tax ondividends received on the Preferred Shares, Series F underPart IV.1 of the Tax Act.

 

*Modification*

 

The provisions attaching to the Preferred Shares, Series F as aseries may be repealed, altered, modified or amended with such approvals as maythen be required by the OBCA, currently being at least two-thirds of the votescast at a meeting or adjourned meeting of the holders of Preferred Shares,Series F duly called for the purpose and at which a quorum is present.

 

*Conversion of Preferred Shares, Series Finto Preferred Shares, Series G*

 

Holders of Preferred Shares, Series F shall have the right, attheir option, on November 1, 2006 and on November 1 in every fifthyear thereafter (a “Conversion Date”), to convert, subject to the terms andconditions attaching to such shares, all or any Preferred Shares, Series Fregistered in their name into Preferred Shares, Series G on the basis ofone Falconbridge Preferred Share, Series G for each FalconbridgePreferred Share, Series F. The conversion of Preferred Shares,Series F may be effected by surrender of thecertificate(s) representing the same not earlier than 45 days priorto the Conversion Date but not later than the close of business on the 14th day preceding theConversion Date at any office of any transfer agent of Falconbridge at whichthe

 

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Preferred Shares, Series Fare transferable accompanied by payment or evidence of payment of the tax(if any) payable, as provided in the terms and conditions attaching to thePreferred Shares, Series F, and a written instrument of surrender inform satisfactory to Falconbridge duly executed by the holder or their attorneyauthorized in writing.

 

Falconbridge shall, not less than 45 days nor more than60 days prior to the applicable Conversion Date, give notice in writing tothe then holders of the Preferred Shares, Series F of the above-mentionedconversion right and of the Selected Percentage Rate (as defined belowunder “Preferred Shares, Series G”) determined by the board of directorsof Falconbridge to be applicable for the next succeeding Fixed Dividend RatePeriod (as defined below under “Preferred Shares, Series G”)applicable to the Preferred Shares, Series G. Falconbridge shall givenotice as provided under “Preferred Shares, Series G” of the AnnualDividend Rate (as defined below under “Preferred Shares, Series G”)applicable to the Preferred Shares, Series G for such Fixed DividendRate Period.

 

Holders of Preferred Shares, Series F shall not be entitled toconvert their shares into Preferred Shares, Series G if, following theclose of business on the 14th day preceding a Conversion Date, Falconbridgedetermines that there would remain outstanding on a Conversion Date less than1,000,000 Preferred Shares, Series G, after having taken into accountall Preferred Shares, Series F tendered for conversion into PreferredShares, Series G and all Preferred Shares, Series G tendered forconversion into Preferred Shares, Series F. Falconbridge shall give noticein writing thereof to all the holders of the Preferred Shares, Series F atleast seven (7) days prior to the applicable Conversion Date and willissue, prior to such Conversion Date, to the holders of Preferred Shares,Series F who have tendered Preferred Shares, Series Ffor conversion, new certificates evidencing the Preferred Shares,Series F tendered for conversion. Furthermore, if following the close ofbusiness on the 14th day preceding a Conversion Date Falconbridgedetermines that there would remain outstanding on a Conversion Date less than1,000,000 Preferred Shares, Series F after having taken into accountall Preferred Shares, Series F tendered for conversion into PreferredShares, Series G and all Preferred Shares, Series G tendered forconversion into Preferred Shares, Series F, then, all, but not part, ofthe remaining outstanding Preferred Shares, Series F shall automaticallybe converted into Preferred Shares, Series G on the basis of oneFalconbridge Preferred Share, Series G for each FalconbridgePreferred Share, Series F on the applicable Conversion Date andFalconbridge shall give notice in writing thereof to the holders of suchremaining Preferred Shares, Series F at least seven (7) days prior tothe Conversion Date.

 

If Falconbridge gives notice to the holders of the Preferred Shares,Series F of the redemption on a Conversion Date of all Preferred Shares, Series F,Falconbridge shall not be required to give notice as provided hereunder to theholders of the Preferred Shares, Series F of a Selected Percentage Rate ofthe Preferred Shares, Series G or of the conversion right of holdersof Preferred Shares, Series F and the right of any holder ofPreferred Shares, Series F to convert such Preferred Shares,Series F shall cease and terminate in that event.

 

***Preferred Shares,Series G***

 

The Preferred Shares, Series G will have attached thereto theseries provisions summarized below.

 

*Definitions of Terms*

 

The following definitions are relevant to the Preferred Shares,Series G:

 

“**Annual Dividend Rate**”means for any Fixed Dividend Rate Period the rate of interest expressed as apercentage per annum (rounded to the nearest one-thousandth (1/1000) of onepercent (1%)) which is equal to the Government of Canada Yield multiplied bythe Selected Percentage Rate for such Fixed Dividend Rate Period.

 

“**Fixed Dividend Rate Period**”means for the initial Fixed Dividend Rate Period, the period ending on andincluding October 31, 2006, and for each succeeding Fixed Dividend RatePeriod, the period commencing on the day immediately following the end of theimmediately preceding Fixed Dividend Rate Period and ending on and includingOctober 31 in the fifth year immediately thereafter.

 

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“**Government of Canada Yield**”on any date shall mean the average of the yields determined by two registeredCanadian investment dealers, selected by the board of directors ofFalconbridge, as being the yield to maturity on such date compoundedsemi-annually and calculated in accordance with generally accepted financialpractice, which a non-callable Government of Canada Bond would carry if issuedin Canadian dollars in Canada at 100% of its principal amount on such date witha term to maturity of five years.

 

“**Selected Percentage Rate**”for each Fixed Dividend Rate Period means the rate of interest, expressed as apercentage of the Government of Canada Yield, determined by the board ofdirectors of Falconbridge as set forth in the notice to the holders of thePreferred Shares, Series G, which rate of interest shall be not less than80% of the Government of Canada Yield.

 

*Stated Value*

 

The Preferred Shares, Series G will have a stated value ofCdn$25.00 per share.

 

*Dividends*

 

The holders of the Preferred Shares, Series G will be entitled toreceive fixed cumulative preferred cash dividends as and when declared by theboard of directors of Falconbridge, in the amount per share per annumdetermined by multiplying the Annual Dividend Rate by Cdn$25.00, to accrue fromthe date of issue and payable quarterly in respect of each 12 month periodon the first day of February, May, August and November.

 

The board of directors of Falconbridge will, not less than 45 daysnor more than 60 days prior to each Conversion Date (as definedbelow), determine the Selected Percentage Rate to be applicable to thefollowing Fixed Dividend Rate Period and give notice in writing thereof to thethen holders of the Preferred Shares, Series G.

 

The Annual Dividend Rate for each Fixed Dividend Rate Period will becalculated by Falconbridge on the 21st day prior to the first day ofeach Fixed Dividend Rate Period based upon the Selected Percentage Ratedetermined with respect to the relevant Fixed Dividend Rate Period and theGovernment of Canada Yield in effect at 10:00 a.m. (Toronto time) on thesaid 21st day prior to the first day of the relevant Fixed DividendRate Period. Notice of each Annual Dividend Rate shall be provided byFalconbridge within one business day following its determination to all stockexchanges in Canada on which the Preferred Shares, Series G are listed fortrading, and within three business days following its determination bypublication once in the national edition of the *Globe and Mail* in the English language and once in the Cityof Montreal in both the French and English languages in a daily newspaper ofgeneral circulation in Montreal.

 

*Redemption*

 

The Preferred Shares, Series G will not be redeemable prior toNovember 1, 2006. The Preferred Shares, Series G will be redeemable,subject to applicable law and to the restrictions described under “— Restrictionson Dividends and Retirement of Shares”, on November 1, 2006 or onNovember 1 in every fifth year thereafter, at the option of Falconbridgein whole but not in part at Cdn$25.00 per share, plus an amount equal to allaccrued and unpaid dividends up to but excluding the date of redemption. Noticeof the redemption will be given by Falconbridge not less than 45 days normore than 60 days prior to the date fixed for redemption.

 

*Conversion of Preferred Shares, Series Ginto Preferred Shares, Series F*

 

Holders of Preferred Shares, Series G shall have the right, at theiroption, on November 1, 2006 and on November 1 in every fifth yearthereafter (a ”Conversion Date”), to convert, subject to the terms andconditions attaching to such shares, all or any Preferred Shares, Series Gregistered in their name into Preferred Shares, Series F on the basis ofone Falconbridge Preferred Share, Series F for each FalconbridgePreferred Share, Series G. The conversion of Preferred Shares,Series G may be effected by surrender of the certificate(s) representingthe same not earlier than 45 days prior to the Conversion Date but notlater than the close of business on the 14th day preceding theConversion Date at any office of any transfer agent of Falconbridge at whichthe

 

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Preferred Shares, Series Gare transferable accompanied by payment or evidence of payment of the tax(if any) payable, as provided in the terms and conditions attaching to thePreferred Shares, Series G, and a written instrument of surrender inform satisfactory to Falconbridge duly executed by the holder or their attorneyauthorized in writing.

 

Falconbridge shall, not less than 45 days nor more than60 days prior to the applicable Conversion Date, give notice in writing tothe then holders of the Preferred Shares, Series G of the above-mentionedconversion right and of the Selected Percentage Rate determined by the board ofdirectors of Falconbridge to be applicable for the next succeeding FixedDividend Rate Period.

 

Holders of Preferred Shares, Series G shall not be entitled toconvert their shares into Preferred Shares, Series F if, following theclose of business on the 14th day preceding a Conversion Date, Falconbridgedetermines that there would remain outstanding on a Conversion Date less than1,000,000 Preferred Shares, Series F, after having taken into accountall Preferred Shares, Series G tendered for conversion into PreferredShares, Series F and all Preferred Shares, Series F tendered forconversion into Preferred Shares, Series G. Falconbridge shall give noticein writing thereof to all the holders of the Preferred Shares, Series G atleast seven (7) days prior to the applicable Conversion Date and willissue, prior to such Conversion Date, to the holders of Preferred Shares,Series G who have tendered Preferred Shares, Series Gfor conversion, new certificates evidencing the Preferred Shares,Series G tendered for conversion. Furthermore, if following the close ofbusiness on the 14th day preceding a Conversion Date Falconbridgedetermines that there would remain outstanding on a Conversion Date less than1,000,000 Preferred Shares, Series G after having taken into accountall Preferred Shares, Series G tendered for conversion into PreferredShares, Series F and all Preferred Shares, Series F tendered forconversion into Preferred Shares, Series G, then, all, but not part, ofthe remaining outstanding Preferred Shares, Series G shall automaticallybe converted into Preferred Shares, Series F on the basis of oneFalconbridge Preferred Share, Series F for each FalconbridgePreferred Share, Series G on the applicable Conversion Date andFalconbridge shall give notice in writing thereof to the holders of suchremaining Preferred Shares, Series G at least seven (7) days prior tothe Conversion Date.

 

If Falconbridge gives notice to the holders of the Preferred Shares,Series G of the redemption on a Conversion Date of all the PreferredShares, Series G, Falconbridge shall not be required to give notice asprovided hereunder to the holders of the Preferred Shares, Series G of aSelected Percentage Rate or of the conversion right of holders of PreferredShares, Series G and the right of any holder of Preferred Shares,Series G to convert such Preferred Shares, Series G shall ceaseand terminate in that event.

 

*Purchase for Cancellation*

 

Falconbridge may at any time or times purchase for cancellation all orany part of the Preferred Shares, Series G in the open market, by privateagreement or otherwise at the lowest price or prices at which in the opinion ofthe board of directors of Falconbridge such shares are obtainable.

 

*Restrictions on Dividends and Retirement ofShares*

 

Falconbridge will not, without the approval of the holders ofoutstanding Preferred Shares, Series G:

 

(a)           declare,pay or set apart for payment any dividends (other than stock dividends payablein shares of Falconbridge ranking junior to the Preferred Shares,Series G) on Falconbridge Shares of or any other shares of Falconbridgeranking junior to the Preferred Shares, Series G;

 

(b)           redeem,purchase or otherwise retire or make any capital distribution on or in respectof the Falconbridge Common Shares, Junior Preference Shares or any other sharesof Falconbridge ranking junior to the Preferred Shares, Series G (exceptout of the net cash proceeds of a substantially concurrent issue of shares ofFalconbridge ranking junior to the Preferred Shares, Series G);

 

(c)           purchaseor otherwise retire less than all the Preferred Shares, Series G thenoutstanding; or

 

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(d)           redeem,purchase or otherwise retire (except in connection with the exercise of anyretraction privilege or mandatory redemption obligation attaching thereto) anyother shares of Falconbridge ranking on a parity with the Preferred Shares,Series G;

 

unless, in each such case, all dividends on outstanding PreferredShares, Series G accrued up to and including the dividend payable on thelast preceding payment date shall have been declared and paid. Any approval ofthe holders of the Preferred Shares, Series G required with respect to theforegoing may be given by the affirmative vote of the holders of the majorityof the shares represented at a meeting, or adjourned meeting, of the holders ofPreferred Shares, Series G duly called for the purpose and at which aquorum is present.

 

*Rights on Liquidation*

 

In the event of any liquidation, dissolution or winding-up ofFalconbridge, the holders of the Preferred Shares, Series G will beentitled to receive Cdn$25.00 per Falconbridge Preferred Share, Series Gplus an amount equal to all accrued and unpaid dividends up to but excludingthe date of payment or distribution before any payment or distribution is madeto the holders of the Falconbridge Common Shares, Junior Preference Shares orany other shares of Falconbridge ranking junior to the Preferred Shares,Series G. Upon payment of such amounts, the holders of the PreferredShares, Series G will not be entitled to share in any further distributionof assets of Falconbridge.

 

*Voting Rights*

 

The holders of Preferred Shares, Series G will not be entitled(except as otherwise provided by law) to receive notice of, attend, or vote at,any meeting of the shareholders of Falconbridge unless Falconbridge shall havefailed to pay eight dividends on the Preferred Shares, Series G, whetheror not consecutive. In that event, and for only so long as any such dividendsremain in arrears, the holders of Preferred Shares, Series G will beentitled to receive notice of and to attend all shareholders’ meetings, and toone vote for each share held, except meetings at which only holders of anotherspecified class or series are entitled to vote.

 

In connection with any action to be taken by Falconbridge whichrequires the approval of the holders of Preferred Shares, Series G votingas a series or as part of the class, each such share shall entitle the holderthereof to one vote.

 

*Tax on Dividends*

 

Falconbridge will elect, in the manner and within the time providedunder Part VI.l of the Tax Act to pay tax at a rate such that holders ofPreferred Shares, Series G will not be required to pay tax ondividends received on the Preferred Shares, Series G underPart IV.1 of the Tax Act.

 

*Modification*

 

The provisions attaching to the Preferred Shares, Series G as aseries may be repealed, altered, modified or amended with such approvals as maythen be required by the OBCA currently being at least two-thirds of the votescast at a meeting or adjourned meeting of the holders of Preferred Shares,Series G duly called for the purpose and at which a quorum is present.

 

***Preferred Shares,Series H***

 

The Preferred Shares, Series H will have attached thereto theseries provisions summarized below.

 

*Stated Value*

 

The Preferred Shares, Series H will have a stated value ofCdn$25.00 per share.

 

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*Dividends*

 

The holders of the Preferred Shares, Series H will be entitled toreceive fixed cumulative preferential cash dividends, if, as and when declaredby Falconbridge’s board of directors, in an amount per share per annum equal toCdn$1.625, accruing daily from the date of issue payable quarterly, in equalinstalments of Cdn$0.40625 per share, on the last day of March, June, Septemberand December in each year.

 

*Redemption*

 

The Preferred Shares, Series H are not redeemable beforeMarch 31, 2008. On or after March 31, 2008, but subject to applicablelaw and to the provisions described under “— Restrictions on Dividends andRetirement and Issue of Shares”, Falconbridge may, at its option, at any timeredeem all, or from time to time any part, of the then outstanding PreferredShares, Series H by the payment of an amount in cash for each such shareso redeemed of Cdn$25.00, together with all accrued and unpaid dividends up tobut excluding the date fixed for redemption (less any tax required to bededucted and withheld by us).

 

Falconbridge will give notice of any redemption not less than30 days nor more than 60 days prior to the date fixed for redemption.If less than all the outstanding Preferred Shares, Series H are at anytime to be redeemed, the shares will be redeemed on a pro-rata basis.

 

*Purchase for Cancellation*

 

Subject to applicable law and to the provisions described under “— Restrictionson Dividends and Retirement and Issue of Shares” below, Falconbridge may at anytime or times purchase for cancellation all or any part of the PreferredShares, Series H in the open market, by private agreement or otherwise atthe lowest price or prices at which, in the opinion of Falconbridge’s board ofdirectors, such shares are obtainable.

 

*Conversion at the Option of Falconbridge*

 

Falconbridge will not be entitled to convert the Preferred Shares,Series H prior to March 31, 2008. On or after this date,Falconbridge may, subject to applicable law and any requirement to obtainregulatory relief, and upon notice, convert all, or from time to time any part,of the then outstanding Preferred Shares, Series H into that numberof Falconbridge Common Shares determined (per Cumulative Preferred Share,Series H) by dividing Cdn$25.00, together with all accrued and unpaiddividends up to but excluding the date fixed for conversion, by the greater ofCdn$2.00 and 95% of the weighted average trading price of Falconbridge CommonShares on the TSX or, if not then traded on that exchange, on another exchangeor market chosen by the Falconbridge board of directors on which Falconbridgecommon shares are then traded, during the 20 consecutive trading-dayperiod ending on the fourth day immediately prior to the date of redemption,or, if that fourth day is not a trading day, on the immediately precedingtrading day (the ”**Current Market Price**”).Fractional Falconbridge Common Shares will not be issued on any conversion ofPreferred Shares, Series H but in lieu thereof Falconbridge will make cashpayments.

 

Notice of any conversion will be given by Falconbridge not less than30 days nor more than 60 days prior to the date fixed for conversion.If less than all the outstanding Preferred Shares, Series H are at anytime to be converted, the shares to be converted will be selected on a pro-ratabasis.

 

If Falconbridge exercises its right to convert Preferred Shares,Series H into Falconbridge Common Shares, Falconbridge reserves theright not to issue Falconbridge Common Shares to any person whose address isin, or whom Falconbridge or its transfer agent has reason to believe is aresident of, any jurisdiction outside Canada, to the extent that such issuewould require compliance by Falconbridge with the securities or other laws ofsuch jurisdiction.

 

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*Conversion at the Option of the Holder*

 

Subject to applicable law and Falconbridge’s rights described below, onor after June 30, 2008, each Series H Share will be convertible atthe option of the holder on the last day of each of March, June, September andDecember in each year on at least 30 days notice (which notice will beirrevocable) into that number of Falconbridge Common Shares determined(per Falconbridge Preferred Share, Series H) by dividing Cdn$25.00,together with all accrued and unpaid dividends up to but excluding the datefixed for conversion, by the greater of Cdn$2.00 and 95% of the then CurrentMarket Price. Fractional Falconbridge Common Shares will not be issued on anyconversion of Preferred Shares, Series H, but in lieu thereof,Falconbridge will make cash payments.

 

Upon exercise of the conversion privilege by the holder of PreferredShares, Series H, Falconbridge reserves the right not to issueFalconbridge Common Shares to any person whose address is in, or whomFalconbridge or its transfer agent has reason to believe is a resident of, anyjurisdiction outside Canada, to the extent that such issue would requirecompliance by Falconbridge with the securities or other laws of suchjurisdiction.

 

Falconbridge may, subject to the provisions described under “— Restrictionson Dividends and Retirement and Issue of Shares”, as applicable, by noticegiven not later than 20 days before the date fixed for conversion to allholders who have given a conversion notice, either (i) redeem on the firstbusiness day after the date fixed for conversion all or any part of thePreferred Shares, Series H forming the subject matter of the applicableconversion notice, or (ii) cause the holder of such Preferred Shares,Series H to sell on the first business day after the date fixed forconversion all or any part of such Preferred Shares, Series Hto another purchaser or purchasers in the event that a purchaser orpurchasers willing to purchase all or any part of such Preferred Shares,Series H is or are found. Any such redemption or purchase shall be made bythe payment of an amount in cash of Cdn$25.00 per share, together with allaccrued and unpaid dividends up to but excluding the date fixed for redemptionor purchase (less any tax required to be deducted and withheld byFalconbridge). As a result, the Preferred Shares, Series H to be soredeemed or purchased will not be converted on the date set forth in theconversion notice.

 

If Falconbridge elects to redeem or arrange for the purchase of anyPreferred Shares, Series H that are the subject of a conversion notice(the ”**Subject Shares**”),Falconbridge will, at least 20 days prior to the conversion date, givenotice to all holders who have given Falconbridge a conversion notice, stating:

 

(a)           thenumber of Subject Shares to be redeemed for cash by Falconbridge;

 

(b)           thenumber of Subject Shares to be sold to another purchaser; and

 

(c)           thenumber of Subject Shares to be converted into Falconbridge Common Shares,

 

such that all of the Subject Shares will be redeemed, purchased orconverted on or before the first business day after the date fixed forconversion and that the proportion of the Subject Shares which are eitherredeemed, purchased or converted on that conversion date will, to the extentpracticable, be the same for each holder delivering a conversion notice.

 

*Rights on Liquidation*

 

In the event of the liquidation, dissolution or winding-up ofFalconbridge or any other distribution of assets of Falconbridge among itsshareholders for the purpose of winding-up its affairs, the holders of thePreferred Shares, Series H will be entitled to receive Cdn$25.00 pershare, together with all accrued and unpaid dividends up to but excluding thedate of payment or distribution (less any tax required to be deducted orwithheld by Falconbridge), before any amount is paid or any assets ofFalconbridge are distributed to the holders of any Falconbridge shares rankingjunior as to capital to the Preferred Shares, Series H. Upon payment ofsuch amounts, the holders of the Preferred Shares, Series H will not beentitled to share in any further distribution of assets of Falconbridge.

 

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*Restrictions on Dividends and Retirement andIssue of Shares*

 

So long as any of the Preferred Shares, Series H are outstanding,Falconbridge will not, without the approval of the holders of the PreferredShares, Series H:

 

(a)           declare,pay or set apart for payment any dividends (other than stock dividends payablein Falconbridge shares ranking as to capital and dividends junior to thePreferred Shares, Series H) on shares of Falconbridge ranking as todividends junior to the Preferred Shares, Series H;

 

(b)           exceptout of the net cash proceeds of a substantially concurrent issue ofFalconbridge shares ranking as to return of capital and dividends junior to thePreferred Shares, Series H, redeem or call for redemption, purchase orotherwise pay off, retire or make any return of capital in respect of anyFalconbridge shares ranking as to capital junior to the Preferred Shares,Series H;

 

(c)           redeemor call for redemption, purchase or otherwise retire for value or make anyreturn of capital in respect of less than all of the Preferred Shares, Series Hthen outstanding;

 

(d)           exceptpursuant to any purchase obligation, sinking fund, retraction privilege ormandatory redemption provisions attaching thereto, redeem or call forredemption, purchase or otherwise pay off, retire or make any return of capitalin respect of any Preferred Shares, ranking as to the payment of dividends orreturn of capital on a parity with the Preferred Shares, Series H; or

 

(e)           issueany additional Preferred Shares, Series H or any shares ranking as tothe payment of dividends or the return of capital prior to or on a parity withthe Preferred Shares, Series H,

 

unless, in each such case, all accrued and unpaid dividends up to andincluding the dividend payable for the last completed period for whichdividends were payable on the Preferred Shares, Series H and on allother shares of Falconbridge ranking prior to or on a parity with the PreferredShares, Series H with respect to the payment of dividends have beendeclared paid or set apart for payment.

 

*Shareholder Approvals*

 

In addition to any other approvals required by law, the approval of allamendments to the rights, privileges, restrictions and conditions attaching tothe Preferred Shares, Series H as a series and any other approval to begiven by the holders of the Preferred Shares, Series H may be given by aresolution carried by an affirmative vote of at least 662/3% of the votes cast at a meeting at which the holders ofa majority of the outstanding Preferred Shares, Series H are present orrepresented by proxy or, if no quorum is present at such meeting, at anadjourned meeting at which the holders of Preferred Shares, Series H thenpresent would form the necessary quorum. At any meeting of holders of PreferredShares, Series H as a series, each such holder shall be entitled to onevote in respect of each Falconbridge Preferred Share, Series H held.

 

*Voting Rights*

 

The holders of the Preferred Shares, Series H will not (except asotherwise provided by law and except for meetings of the holders of PreferredShares as a class and meetings of all holders of Preferred Shares,Series H as a series) be entitled to receive notice of, attend, or voteat, any meeting of Falconbridge shareholders unless and until Falconbridge hasfailed to pay eight quarterly dividends on the Preferred Shares, Series H,whether or not consecutive and whether or not such dividends have been declaredand whether or not there are any monies of Falconbridge properly applicable tothe payment of dividends. In the event of such non-payment, and for only aslong as any such dividends remain in arrears, the holders of the PreferredShares, Series H will be entitled to receive notice of and to attend eachmeeting of Falconbridge shareholders (other than any meetings at which onlyholders of another specified class or series are entitled to vote), and to onevote for each Falconbridge Preferred Share,

 

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Series H held. The votingrights of the holders of the Preferred Shares, Series H will cease uponpayment by Falconbridge of the amount of the dividends in arrears on suchPreferred Shares, Series H.

 

*Tax on Dividends*

 

Falconbridge will elect, in the manner and within the time providedunder Part VI.1 of the Tax Act, to pay or cause payment of thetax, under Part VI.1 at a rate such that the corporate holders ofPreferred Shares, Series H will not be required to pay tax underPart IV.1 of the Tax Act on dividends received on such shares.

 

***Preferred Shares,Series 1***

 

The Preferred Shares, Series 1 will have attached thereto theseries provisions summarized below.

 

*Dividends*

 

The holders of the Preferred Shares, Series 1 will be entitled toreceive fixed cumulative preferential cash dividends, as and when declared bythe board of directors of Falconbridge, payable quarterly on the first day ofJune, September, December and March in each year. The quarterly preferentialcash dividend will be Cdn$0.02 per Falconbridge Preferred Share, Series 1.

 

*Redemption*

 

Subject to applicable law and the provisions described below under“— Restrictions on Dividends and Retirement of Shares”, Falconbridge mayredeem at any time all, or from time to time any part, of the outstandingPreferred Shares, Series 1 at its option without the consent of theholder, by the payment of an amount in cash of Cdn$10.00 for each such share soredeemed together with accrued and unpaid dividends to the date fixed forredemption.

 

Notice of any redemption will be given by Falconbridge at least30 days and not more than 60 days prior to the date fixed forredemption. If less than all the outstanding Preferred Shares, Series 1are to be redeemed at any time, the shares to be redeemed will be selected bylot or in such other manner as Falconbridge may determine.

 

*Purchase for Cancellation*

 

Subject to applicable law, Falconbridge may at any time purchase forcancellation any Preferred Shares, Series 1 at the lowest price or pricesat which, in the opinion of the board of directors of Falconbridge, such sharesare obtainable.

 

*Rights on Liquidation*

 

In the event of the liquidation, dissolution or winding-up ofFalconbridge, the holders of the Preferred Shares, Series 1 shall beentitled to receive Cdn$10.00 per share, together with all dividends accruedand unpaid to the date of payment before any amount shall be paid or any assetsof Falconbridge distributed to the holders of any shares ranking junior to thePreferred Shares, Series 1. Upon such payment, the holders of thePreferred Shares, Series 1 shall not be entitled to share in any furtherdistribution of the assets of Falconbridge.

 

*Restrictions on Dividends and Retirement ofShares*

 

So long as any of the Preferred Shares, Series 1 are outstanding,Falconbridge will not, without the approval of the holders of the PreferredShares, Series 1:

 

(a)           declare,pay or set apart for payment any dividends on the Falconbridge Common Shares,Junior Preference Shares or any other shares ranking junior to the PreferredShares, Series 1 (other than stock dividends in shares of Falconbridgeranking junior to the Preferred Shares, Series 1); or

 

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(b)           redeem,purchase or otherwise retire or make any capital distribution on or in respectof the Falconbridge Common Shares, Junior Preference Shares or any other sharesof Falconbridge ranking junior to the Preferred Shares, Series 1 (exceptout of the net cash proceeds of a substantially concurrent issue of shares ofFalconbridge ranking junior to the Preferred Shares, Series 1); or

 

(c)           purchaseor otherwise retire less than all the Preferred Shares, Series 1; or

 

(d)           exceptpursuant to any purchase obligation, sinking fund, retraction privilege ormandatory redemption provisions attaching to any series of Preferred Shares,redeem, purchase or otherwise retire or make any capital distribution on or inrespect of any other shares of Falconbridge ranking on a parity with thePreferred Shares, Series 1;

 

unless, in each case, all dividends on outstanding Preferred Shares,Series 1 accrued up to and payable on the last preceding dividend paymentdate shall have been declared and paid. Any approval of the holders of thePreferred Shares, Series 1 required with respect to the foregoing may begiven by the affirmative vote of the holders of the majority of the sharesrepresented at a meeting, or adjourned meeting, of the holders of PreferredShares, Series 1 duly called for the purpose and at which a quorum ispresent.

 

*Modification*

 

The provisions attaching to the Preferred Shares, Series 1 as aseries may be repealed, altered, modified or amended with such approvals as maythen be required by the OBCA, currently being at least two-thirds of the votescast at a meeting or adjourned meeting of the holders of Preferred Shares,Series 1 duly called for the purpose and at which a quorum is present.

 

*Voting Rights*

 

The holders of Preferred Shares, Series 1 will be entitled to voteif Falconbridge shall have failed to pay eight dividends, whether or notconsecutive, on the Preferred Shares, Series 1. In that event, and foronly so long as any such dividends remain in arrears, the holders of PreferredShares, Series 1 will be entitled to receive notice of and to attend allmeetings of shareholders and to one vote for each share held, except meetingsat which only holders of another class or series are entitled to vote.

 

*Tax on Dividends*

 

Falconbridge will elect, in the manner and within the time providedunder Part V1.I of the Tax Act, to pay tax at a rate such that holders ofPreferred Shares, Series 1 will not be required to pay tax on dividends receivedon the Preferred Shares, Series 1 under Part IV.I of theTax Act.

 

***Preferred Shares,Series 2***

 

The Preferred Shares, Series 2 will have attached thereto theseries provisions summarized below.

 

*Definitions of Terms*

 

The following definitions are relevant to the Preferred Shares,Series 2:

 

“**Banks**” means any two ofCanadian Imperial Bank of Commerce, Bank of Montreal, Royal Bank of Canada, TheBank of Nova Scotia and The Toronto-Dominion Bank and any successor of any ofthem as may be designated from time to time by the Falconbridge board ofdirectors by notice given to the transfer agent for the Preferred Shares,Series 2, such notice to take effect on, and to be given at least twobusiness days prior to, the commencement of a particular Dividend Period and,until such notice is first given, means Canadian Imperial Bank of Commerce andBank of Montreal.

 

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“**Calculated Trading Price**”for any month means:

 

(a)           theaggregate of the Daily Adjusted Trading Value for all Trading Days in suchmonth;

 

divided by

 

(b)           theaggregate of the Daily Trading Volume for all Trading Days in such month.

 

“**Daily Accrued Dividend Deduction**”for any Trading Day means:

 

(a)           theproduct obtained by multiplying the dividend accrued on an FalconbridgePreferred Share, Series 2 in respect of the month in which the Trading Dayfalls by the number of days elapsed from but excluding the day prior to theEx-Dividend Date immediately preceding such Trading Day to and including such TradingDay (or if such Trading Day is an Ex-Dividend Date, by one day);

 

divided by

 

(b)           thenumber of days from and including such Ex-Dividend Date to but excluding thefollowing Ex-Dividend Date.

 

“**Daily Adjusted Trading Value**”for any Trading Day means:

 

(a)           theaggregate dollar value of all transactions of Preferred Shares, Series 2on the Exchange (made on the basis of the normal settlement period in effect onthe Exchange) occurring during such Trading Day,

 

less

 

(b)           theDaily Trading Volume for such Trading Day multiplied by the Daily AccruedDividend Deduction for such Trading Day.

 

“**Daily Trading Volume**” forany Trading Day means the aggregate number of Preferred Shares, Series 2traded in all transactions (made on the basis of the normal settlement periodin effect on the Exchange) occurring during such Trading Day on the Exchange.

 

“**Deemed Record Date**” meansthe last Trading Day of a month with respect to which no dividend is declaredby the board of directors of Falconbridge.

 

“**Dividend Payment Date**”means the 12th day of each month.

 

“**Dividend Period**” means amonth.

 

“**Exchange**” means the TSXor such other exchange or trading market in Canada as may be determined fromtime to time by Falconbridge as being the principal trading market for thePreferred Shares, Series 2.

 

“**Ex-Dividend Date**” means:

 

(a)           theTrading Day which, under the rules or normal practices of the Exchange, isdesignated or recognized as the Ex-Dividend Date relative to any dividendrecord date for the Preferred Shares, Series 2; or

 

(b)           ifthe board of directors of Falconbridge fails to declare a dividend in respectof a month, the Trading Day which, under the rules or normal practices of theExchange, would be recognized as the Ex-Dividend Date relative to any DeemedRecord Date for the Preferred Shares, Series 2.

 

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“**Prime**” for a monthmeans the average (rounded to the nearest one-thousandth (1/1000) of onepercent (1%)) of the Prime Rate in effect on each day of such month.

 

“**Prime Rate**” for any daymeans the average (rounded to the nearest one-thousandth (1/1000) of onepercent (1%)) of the annual rates of interest announced from time to time bythe Banks as the reference rates then in effect for such day for determininginterest rates on Canadian dollar commercial loans made to prime commercialborrowers in Canada. If one of the Banks does not have such an interest rate ineffect on a day, the Prime Rate for such day shall be such interest rate ineffect for that day of the other Bank; if both Banks do not have such aninterest rate in effect on a day, the Prime Rate for that day shall be equal to1.5% per annum plus the average yield expressed as a percentage per annum on91-day Government of Canada Treasury Bills, as reported by the Bank of Canada,for the weekly tender for the week immediately preceding that day; and if bothof such Banks do not have such an interest rate in effect on a day and the Bankof Canada does not report such average yield per annum, the Prime Rate for thatday shall be equal to the Prime Rate for the next preceding day. The Prime Rateand Prime shall be determined from time to time by an officer of Falconbridgefrom quotations supplied by the Banks or otherwise publicly available. Suchdetermination shall, in the absence of manifest error, be final and bindingupon Falconbridge and upon all holders of Preferred Shares, Series 2.

 

“**Trading Day**” means, ifthe Exchange is a stock exchange in Canada, a day on which the Exchange is openfor trading or, in any other case, a business day.

 

*Dividends*

 

The holders of the Preferred Shares, Series 2 will be entitled toreceive floating adjustable cumulative preferential cash dividends, as and whendeclared by the Falconbridge board of directors, to accrue from the EffectiveDate and to be paid on the 12th day of each month. The dividend ratewill float in relation to changes in Prime and will be adjusted upwards ordownwards on a monthly basis by an adjustment factor whenever the CalculatedTrading Price of the Preferred Shares, Series 2 is Cdn$24.875 or less orCdn$25.125 or more, respectively. The maximum monthly adjustment for changes inthe Calculated Trading Price will be ±4.00% of Prime. The annual floating dividend rate applicable for a month willin no event be less than 50% of Prime or greater than Prime.

 

The Adjustment Factor for a month will be based on the CalculatedTrading Price of the Preferred Shares, Series 2 for the precedingmonth determined in accordance with the following table:

 
| **If the Calculated Trading Price  for the Preceding Month is** | ** ** | **The Adjustment Factor as a  Percentage of Prime shall be** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------|------------|
|                                                                                                    |       |                                                                                                 |       |
| Cdn$25.50 or more                                                                                       |       | -4.00                                                                                                | %          |
| Cdn$25.375 and less than Cdn$25.50                                                                      |       | -3.00                                                                                                | %          |
| Cdn$25.25 and less than Cdn$25.375                                                                      |       | -2.00                                                                                                | %          |
| Cdn$25.125 and less than Cdn$25.25                                                                      |       | -1.00                                                                                                | %          |
| Greater than Cdn$24.875 and less than  Cdn$25.125                                                       |       | nil                                                                                                  |       |
| Greater than Cdn$24.75 to Cdn$24.875                                                                    |       | 1.00                                                                                                 | %          |
| Greater than Cdn$24.625 to Cdn$24.75                                                                    |       | 2.00                                                                                                 | %          |
| Greater than Cdn$24.50 to Cdn$24.625                                                                    |       | 3.00                                                                                                 | %          |
| Cdn$24.50 or less                                                                                       |       | 4.00                                                                                                 | %          |

 

The maximum Adjustment Factor for any month will be ±4.00%of Prime.

 

If in any month there is no trade of at least a board lot of thePreferred Shares, Series 2 on the Exchange, the Adjustment Factor for thefollowing month will be nil.

 

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The annual floating dividend rate for a month will be calculated byFalconbridge as promptly as practicable, and notice thereof will be given toeach stock exchange on which the Preferred Shares, Series 2 are listed fortrading.

 

*Redemption*

 

The Preferred Shares, Series 2 will be redeemable at the option ofFalconbridge, in whole but not in part, at Cdn$25.50 per share, plus an amountequal to all accrued and unpaid dividends up to but excluding the date ofredemption. Notice of the redemption will be given by Falconbridge not lessthan 45 days nor more than 60 days prior to the date fixed forredemption.

 

*Conversion*

 

Holders of Preferred Shares, Series 2 shall have the right, attheir option, on March 1, 2009 and on March 1 in every fifth yearthereafter (a “**Conversion Date**”),to convert, subject to the terms and conditions attaching to such shares, allor any Preferred Shares, Series 2 registered in their name into PreferredShares, Series 3 of Falconbridge on the basis of one Falconbridge PreferredShare, Series 3 for each Falconbridge Preferred Share, Series 2.The conversion of Preferred Shares, Series 2 may be effected by surrenderof the certificate(s) representing the same not earlier than 45 daysprior to the Conversion Date but not later than the close of business on the 14th day preceding theConversion Date at any office of any transfer agent of Falconbridge at whichthe Preferred Shares, Series 2 are transferable accompanied by payment orevidence of payment of the tax (if any) payable, as provided in the termsand conditions attaching to the Preferred Shares, Series 2, and awritten instrument of surrender in form satisfactory to Falconbridge dulyexecuted by the holder or their attorney authorized in writing.

 

Falconbridge shall, not less than 45 days nor more than60 days prior to the applicable Conversion Date, give notice in writing tothe then holders of the Preferred Shares, Series 2 of the above-mentionedconversion right and of the Selected Percentage Rate (as defined below under“Preferred Shares, Series 3”) determined by the Falconbridge board ofdirectors to be applicable for the next succeeding Fixed Dividend Rate Period(as defined below under “Preferred Shares, Series 3”) applicable tothe Preferred Shares, Series 3. Falconbridge shall give notice as providedunder “Preferred Shares, Series 3” of the Annual Dividend Rate(as defined below under “Preferred Shares, Series 3”) applicable tothe Preferred Shares, Series 3 for such Fixed DividendRate Period.

 

Holders of Preferred Shares, Series 2 shall not be entitled toconvert their shares into Preferred Shares, Series 3 if, following theclose of business on the 14th day preceding a Conversion Date, Falconbridgedetermines that there would remain outstanding on a Conversion Date less than500,000 Preferred Shares, Series 3, after having taken into accountall Preferred Shares, Series 2 tendered for conversion into PreferredShares, Series 3 and all Preferred Shares, Series 3 tendered forconversion into Preferred Shares, Series 2. Falconbridge shall give noticein writing thereof to all the holders of the Preferred Shares, Series 2 atleast seven (7) days prior to the applicable Conversion Date and willissue, prior to such Conversion Date, to the holders of Preferred Shares,Series 2 who have tendered Preferred Shares, Series 2for conversion, new certificates evidencing the Preferred Shares,Series 2 tendered for conversion. Furthermore, if following the close ofbusiness on the 14th day preceding a Conversion Date Falconbridgedetermines that there would remain outstanding on a Conversion Date less than500,000 Preferred Shares, Series 2 after having taken into accountall Preferred Shares, Series 2 tendered for conversion into PreferredShares, Series 3 and all Preferred Shares, Series 3 tendered forconversion into Preferred Shares, Series 2, then, all, but not part, ofthe remaining outstanding Preferred Shares, Series 2 shall automaticallybe converted into Preferred Shares, Series 3 on the basis of oneFalconbridge Preferred Share, Series 3 for each FalconbridgePreferred Share, Series 2 on the applicable Conversion Date andFalconbridge shall give notice in writing thereof to the holders of suchremaining Preferred Shares, Series 2 at least seven (7) days prior tothe Conversion Date.

 

If Falconbridge gives notice to the holders of the Preferred Shares,Series 2 of the redemption on a Conversion Date of all Preferred Shares,Series 2, Falconbridge shall not be required to give notice as providedhereunder to the holders of the Preferred Shares, Series 2 of a SelectedPercentage Rate of the Preferred Shares, Series 3 or of theconversion right of holders of Preferred Shares, Series 2 and theright of any holder of Preferred Shares, Series 2 to convert suchPreferred Shares, Series 2 shall cease and terminate in that event.

 

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*Purchase for Cancellation*

 

Subject to applicable law and to the provisions described below under “— Restrictionson Dividends and Retirement of Shares”, Falconbridge may at any time purchasefor cancellation any Preferred Shares, Series 2 at the lowest price orprices at which, in the opinion of the Falconbridge board of directors, suchshares are obtainable.

 

*Rights on Liquidation*

 

In the event of the liquidation, dissolution or winding-up ofFalconbridge, the holders of the Preferred Shares, Series 2 shall beentitled to receive Cdn$25.00 per share, together with all dividends accruedand unpaid to the date of payment before any amount shall be paid or any assetsof Falconbridge distributed to the holders of any shares ranking junior to thePreferred Shares, Series 2. Upon such payment, the holders of thePreferred Shares, Series 2 shall not be entitled to share in any furtherdistribution of the assets of Falconbridge.

 

*Restrictions on Dividends and Retirement ofShares*

 

So long as any of the Preferred Shares, Series 2 are outstanding,Falconbridge will not, without the approval of the holders of the PreferredShares, Series 2:

 

(a)           declare,pay or set apart for payment any dividends on the Falconbridge Common Shares,Junior Preference Shares or any other shares of Falconbridge ranking junior tothe Preferred Shares, Series 2 (other than stock dividends in shares ofFalconbridge ranking junior to the Preferred Shares, Series 2); or

 

(b)           redeem,purchase or otherwise retire or make any capital distribution on or in respectof any Falconbridge Common Shares, Junior Preference Shares or any other sharesof Falconbridge ranking junior to the Preferred Shares, Series 2 (exceptout of the net cash proceeds of a substantially concurrent issue of sharesranking junior to the Preferred Shares, Series 2); or

 

(c)           purchaseor otherwise retire less than all the Preferred Shares, Series 2; or

 

(d)           exceptpursuant to any purchase obligation, sinking fund, retraction privilege ormandatory redemption provisions attaching to any series of Preferred Shares,redeem, purchase or otherwise retire any other shares ranking on a parity withthe Preferred Shares, Series 2;

 

unless, in each case, all dividends on outstanding Preferred Shares,Series 2 accrued up to and including the dividend payment payable on thelast preceding dividend payment date shall have been declared and paid. Anyapproval of the holders of the Preferred Shares, Series 2 required withrespect to the foregoing may be given by the affirmative vote of the holders ofthe majority of the shares represented at a meeting, or adjourned meeting, ofthe holders of Preferred Shares, Series 2 duly called for the purpose andat which a quorum is present.

 

*Modification*

 

The provisions attaching to the Preferred Shares, Series 2 as aseries may be repealed, altered, modified or amended with such approvals as maythen be required by the OBCA, currently being at least two-thirds of the votescast at a meeting or adjourned meeting of the holders of Preferred Shares,Series 2 duly called for the purpose and at which a quorum is present.

 

*Voting Rights*

 

The holders of the Preferred Shares, Series 2 will be entitled tovote if Falconbridge shall have failed to pay twenty-four dividends on thePreferred Shares, Series 2, in each case whether or not consecutive. Inthat event, and for only so long as any such dividends remain in arrears, theholders of Preferred Shares Series 2 will be entitled to receive notice ofand to attend all

 

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meetings of shareholders and toone vote for each share held, except meetings at which only holders of anotherclass or series are entitled to vote.

 

*Tax on Dividends*

 

Falconbridge will elect, in the manner and within the time providedunder Part VI.I of the Tax Act to pay tax at a rate such that holdersof Preferred Shares, Series 2 will not be required to pay tax on dividendsreceived on the Preferred Shares, Series 2 under Part IV.l of theTax Act.

 

***Preferred Shares,Series 3***

 

The Preferred Shares, Series 3 will have attached thereto theseries provisions summarized below.

 

*Definitions of Terms*

 

The following definitions are relevant to the Preferred Shares,Series 3:

 

“**Annual Dividend Rate**”means for any Fixed Dividend Rate Period the rate of interest expressed as apercentage per annum (rounded to the nearest one thousandth (1/1000) of onepercent (1%)) which is equal to the Government of Canada Yield multiplied bythe Selected Percentage Rate for such Fixed Dividend Rate Period.

 

“**Fixed Dividend Rate Period**”means for the initial Fixed Dividend Rate Period, the period ending on andincluding February 28, 2009, and for each succeeding Fixed Dividend Rate Period,the period commencing on the day immediately following the end of theimmediately preceding Fixed Dividend Rate Period and ending on and includingthe last day of February in the fifth year immediately thereafter.

 

“**Government of Canada Yield**”on any date shall mean the average of the yields determined by two registeredCanadian investment dealers, selected by the Falconbridge board of directors,as being the yield to maturity on such date compounded semi-annually andcalculated in accordance with generally accepted financial practice, which anon-callable Government of Canada Bond would carry if issued in Canadiandollars in Canada at 100% of its principal amount on such date with a term tomaturity of five years.

 

“**Selected Percentage Rate**”for each Fixed Dividend Rate Period means the rate of interest, expressed as apercentage of the Government of Canada Yield, determined by the Falconbridgeboard of directors as set forth in the notice to the holders of the PreferredShares, Series 3, which percentage shall be not less than 80%.

 

*Dividends*

 

The holders of the Preferred Shares, Series 3 will be entitled toreceive fixed cumulative preferential cash dividends, as and when declared bythe Falconbridge board of directors, in the amount per share per annumdetermined by multiplying the Annual Dividend Rate by Cdn$25.00, to accrue fromthe date of issue and payable quarterly in respect of each 12 month periodon the first day of March, June, September and December.

 

The Falconbridge board of directors will, not less than 45 daysnor more than 60 days prior to each Conversion Date (as definedbelow) determine the Selected Percentage Rate to be applicable to the followingFixed Dividend Rate Period and give notice in writing thereof to the thenholders of the Preferred Shares, Series 3.

 

The Annual Dividend Rate for each Fixed Dividend Rate Period will becalculated by Falconbridge on the 21st day prior to the first day ofeach Fixed Dividend Rate Period based upon the Selected Percentage Ratedetermined with respect to the relevant Fixed Dividend Rate Period and theGovernment of Canada Yield in effect at 10:00 a.m. (Toronto time) on thesaid 21st day prior to the first day of the relevant Fixed DividendRate Period. Notice of each Annual Dividend Rate shall be provided by

 

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Falconbridge within onebusiness day following its determination to all stock exchanges in Canada onwhich the Preferred Shares, Series 3 are listed for trading, and withinthree business days following its determination by publication once in thenational edition of the *Globe and Mail*in the English language and once in the City of Montreal in both the French andEnglish languages in a daily newspaper of general circulation in Montreal.

 

*Redemption*

 

The Preferred Shares, Series 3 will not be redeemable prior toMarch 1, 2009. The Preferred Shares, Series 3 will be redeemable,subject to applicable law and to the restrictions described under “— Restrictionson Dividends and Retirement of Shares”, on March 1, 2009 or onMarch 1 in every fifth year thereafter, at the option of Falconbridge, inwhole but not in part, at Cdn$25.00 per share, plus an amount equal to allaccrued and unpaid dividends up to but excluding the date of redemption. Noticeof the redemption will be given by Falconbridge not less than 45 days normore than 60 days prior to the date fixed for redemption.

 

*Conversion of Preferred Shares, Series 3into Preferred Shares, Series 2*

 

Holders of Preferred Shares, Series 3 shall have the right, attheir option, on March 1, 2009 and on March 1 in every fifth yearthereafter (a “**Conversion Date**”),to convert, subject to the terms and conditions attaching to such shares, allor any Preferred Shares, Series 3 registered in their name into PreferredShares, Series 2 on the basis of one Falconbridge Preferred Share,Series 2 for each Falconbridge Preferred Share, Series 3. Theconversion of Preferred Shares, Series 3 may be effected by surrender ofthe certificate(s) representing the same not earlier than 45 daysprior to the Conversion Date but not later than the close of business on the 14 th day precedingthe Conversion Date at any office of any transfer agent of Falconbridge atwhich the Preferred Shares, Series 3 are transferable accompanied bypayment or evidence of payment of the tax (if any) payable, as provided inthe terms and conditions attaching to the Preferred Shares, Series 3,and a written instrument of surrender in form satisfactory to Falconbridgeduly executed by the holder or their attorney authorized in writing.

 

Falconbridge shall, not less than 45 days nor more than60 days prior to the applicable Conversion Date, give notice in writing tothe then holders of the Preferred Shares, Series 3 of the above-mentionedconversion right and of the Selected Percentage Rate determined by theFalconbridge board of directors to be applicable for the next succeeding FixedDividend Rate Period.

 

Holders of Preferred Shares, Series 3 shall not be entitled toconvert their shares into Preferred Shares, Series 2 if, following theclose of business on the 14 th day preceding a Conversion Date, Falconbridgedetermines that there would remain outstanding on a Conversion Date less than500,000 Preferred Shares, Series 2, after having taken into accountall Preferred Shares, Series 3 tendered for conversion into PreferredShares, Series 2 and all Preferred Shares, Series 2 tendered forconversion in Preferred Shares, Series 3. Falconbridge shall give noticein writing thereof to all the holders of the Preferred Shares, Series 3 atleast seven (7) days prior to the applicable Conversion Date and willissue, prior to such Conversion Date, to the holders of Preferred Shares,Series 3 who have tendered Preferred Shares, Series 3for conversion, new certificates evidencing the Preferred Shares,Series 3 tendered for conversion.

 

Furthermore, if following the close of business on the 14thday preceding a Conversion Date Falconbridge determines that there would remainoutstanding on a Conversion Date less than 500,000 Preferred Shares,Series 3 after having taken into account all Preferred Shares,Series 3 tendered for conversion into Preferred Shares, Series 2and all Preferred Shares, Series 2 tendered for conversion intoPreferred Shares, Series 3, then, all, but not part, of the remainingoutstanding Preferred Shares, Series 3 shall automatically be convertedinto Preferred Shares, Series 2 on the basis of one Falconbridge PreferredShare, Series 2 for each Falconbridge Preferred Share, Series 3on the applicable Conversion Date and Falconbridge shall give notice in writingthereof to the holders of such remaining Preferred Shares, Series 3 atleast seven (7) days prior to the Conversion Date.

 

If Falconbridge gives notice to the holders of the Preferred Shares,Series 3 of the redemption on a Conversion Date of all Preferred Shares,Series 3, Falconbridge shall not be required to give notice as providedhereunder to the holders of the Preferred Shares, Series 3 of a SelectedPercentage Rate of the Preferred Shares, Series 3 or of theconversion right of holders of Preferred

 

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Shares, Series 3and the right of any holder of Preferred Shares, Series 3to convert such Preferred Shares, Series 3 shall cease and terminatein that event.

 

*Purchase for Cancellation*

 

Subject to applicable law and to the provisions described below under “— Restrictionson Dividends and Retirement of Shares”, Falconbridge may at any time purchasefor cancellation any Preferred Shares, Series 3 at the lowest price orprices at which, in the opinion of the Falconbridge board of directors, suchshares are obtainable.

 

*Rights on Liquidation*

 

In the event of the liquidation, dissolution or winding-up ofFalconbridge, the holders of the Preferred Shares, Series 3 shall beentitled to receive Cdn$25.00 per share, together with all dividends accruedand unpaid to the date of payment before any amount shall be paid or any assetsof Falconbridge distributed to the holders of any shares ranking junior to thePreferred Shares, Series 3. Upon such payment, the holders of thePreferred Shares, Series 3 shall not be entitled to share in any furtherdistribution of the assets of Falconbridge.

 

*Restrictions on Dividends and Retirement ofShares*

 

So long as any of the Preferred Shares, Series 3 are outstanding,Falconbridge will not, without the approval of the holders of the PreferredShares, Series 3:

 

(a)           declare,pay or set apart for payment any dividends on the Falconbridge Common Shares,Junior Preference Shares or any other shares of Falconbridge ranking junior tothe Preferred Shares, Series 3 (other than stock dividends in shares ofFalconbridge ranking junior to the Preferred Shares, Series 3); or

 

(b)           redeem,purchase or otherwise retire or make any capital distribution on or in respectof any Falconbridge Common Shares, Junior Preference Shares or any other sharesof Falconbridge ranking junior to the Preferred Shares, Series 3 (exceptout of the net cash proceeds of a substantially concurrent issue of sharesranking junior to the Preferred Shares, Series 3); or

 

(c)           purchaseor otherwise retire less than all the Preferred Shares, Series 3; or

 

(d)           exceptpursuant to any purchase obligation, sinking fund, retraction privilege ormandatory redemption provisions attaching to any series of Preferred Shares,redeem, purchase or otherwise retire any other shares ranking on a parity withthe Preferred Shares, Series 3;

 

unless, in each case, all dividends on outstanding Preferred Shares,Series 3 accrued up to and including the dividend payment payable on thelast preceding divided payment date shall have been declared and paid. Anyapproval of the holders of the Preferred Shares, Series 3 required withrespect to the foregoing may be given by the affirmative vote of the holders ofthe majority of the shares represented at a meeting, or adjourned meeting, ofthe holders of Preferred Shares, Series 3 duly called for the purpose andat which a quorum is present.

 

*Modification*

 

The provisions attaching to the Preferred Shares, Series 3 as aseries may be repealed, altered, modified or amended with such approvals as maythen be required by the OBCA, currently being at least two-thirds of the votescast at a meeting or adjourned meeting of the holders of Preferred Shares,Series 3 duly called for the purpose and at which a quorum is present.

 

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*Voting Rights*

 

The holders of the Preferred Shares, Series 3 will be entitled tovote if Falconbridge shall have failed to pay eight dividends, whether or notconsecutive, on the Preferred Shares, Series 3. In that event, and foronly so long as any such dividends remain in arrears, the holders of PreferredShares, Series 3 will be entitled to receive notice of and to attend allmeetings of shareholders and to one vote for each share held except meetings atwhich only holders of another class or series are entitled to vote.

 

*Tax on Dividends*

 

Falconbridge will elect, in the manner and within the time providedunder Part VI.1 of the Tax Act, to pay tax at a rate such thatholders of Preferred Shares, Series 3 will not be required to pay tax ondividends received on the Preferred Shares, Series 3 under Part IV.lof the Tax Act.

 

**Junior Preference Shares**

 

The Junior Preference Shares may at any time or from time to time beissued in one or more series. The Falconbridge board of directors may byresolution fix the number of shares in, and determine the designation, rights,privileges, restrictions and conditions attaching to the shares of, each seriesof Junior Preference Shares.

 

The Junior Preference Shares rank junior to the Preferred Shares withrespect to priority in the payment of dividends and in the distribution ofassets in the event of Falconbridge liquidation, dissolution or winding up orother distribution of Falconbridge assets among its shareholders for thepurpose of winding-up its affairs.

 

The Junior Preference Shares of each series rank in a parity with theJunior Preference Shares of every other series with respect to priority in thepayment of dividends and in the distribution of assets in the event ofFalconbridge liquidation, dissolution or winding-up or other distribution ofFalconbridge assets among its shareholders for the purpose of winding-up itsaffairs.

 

As long as any of the Preferred Shares are outstanding, Falconbridgemust not at any time, without the approval of the holders of each series ofPreferred Shares then outstanding, given in accordance with the terms of thePreferred Shares, declare, pay or set apart for payment any dividends (otherthan stock dividends payable in shares of Falconbridge) on the JuniorPreference Shares or redeem or call for redemption, purchase or otherwise payoff, retire or make any return of capital in respect of any series of JuniorPreference Shares, if such action is prohibited by the terms of the PreferredShares or the terms of any series of Preferred Shares that are thenoutstanding.

 

In the event of the liquidation, dissolution or winding-up ofFalconbridge or any other distribution of assets of Falconbridge among itsshareholders for the purpose of winding-up its affairs, the holders of theJunior Preference Shares will be entitled to payment of an amount equal to theamount paid up on such shares in the case of any liquidation, dissolution,winding-up or other distribution which is involuntary, and to payment of anamount equal to the amount paid up thereon plus the premium on redemptionapplicable at the date thereof, if any, if the same is voluntary, together in allcases with all unpaid dividends accrued thereon (which will for such purpose betreated as accruing up to the date of distribution), the whole before anyamount is paid or any assets of Falconbridge distributed to the holders of anyFalconbridge Common Shares or shares of any other class ranking junior to theJunior Preference Shares but the whole subject to the rights of the holders ofany other class of shares of Falconbridge entitled to receive the assets ofFalconbridge upon such distribution in priority to or rateably with the holdersof the Junior Preference Shares. Upon payment to the holders of the JuniorPreference Shares of the amount so payable to them, they will not be entitledto share in any further distribution of assets of Falconbridge.

 

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The three series of Junior Preference Shareswill have attached thereto the series provisions summarized below.

 

**Certain Provisions ofthe Three Series of Junior Preference Shares**

 

The definitions set out below are relevant tothe Junior Preference Shares.

 
| Stated Value:    |   | $25 per Falconbridge Junior Preference  Share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| Dividends:       |   | Junior Preference Shares, Series 1:  Holders of the Junior Preference Shares, Series 1 will be entitled to  receive fixed preferential cumulative cash dividends, if, as and when  declared by the board of directors of Falconbridge, in an amount equal to  $1.50 per share per annum, payable quarterly in equal instalments on the  last day of March, June, September and December of each year.                                                                                                                                                                                 |
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|             |   | Junior Preference Shares, Series 2:  Until June 30, 2010, holders of the Junior Preference Shares,  Series 2 will be entitled to receive fixed preferential cumulative cash  dividends, if, as and when declared by the board of directors of  Falconbridge, in an amount equal to $1.5625 per share per annum, payable  quarterly in equal instalments on the last day of March, June, September and  December of each year.                                                                                                                                                                   |
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|             |   | From June 30, 2010 until June 30,  2012, holders of Junior Preference Shares, Series 2 will be entitled to  fixed preferential cumulative cash dividends at a rate per annum equal to the  greater of (i) 6.25%; and (ii) a rate equal to 2.05% over the seven  year US treasury bond yield, at the commencement of such subsequent fixed  rate period, payable quarterly in equal instalments on the last day of March,  June, September and December of each year.                                                                                                                  |
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|             |   | Junior Preference Shares, Series 3:  Until June 30, 2010, holders of the Junior Preference Shares,  Series 3 will be entitled to receive fixed preferential cumulative cash  dividends, if, as and when declared by the board of directors of Falconbridge  in an amount equal to $1.625 per share per annum, payable quarterly in equal  instalments on the last day of March, June, September and December of each  year.                                                                                                                                                                     |
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|             |   | From June 30, 2010 until June 30,  2012 and for each succeeding 2-year (or less, as applicable) subsequent  fixed rate period until June 30, 2015, holders of Junior Preference  Shares, Series 3 will be entitled to fixed preferential cumulative cash  dividends at a rate per annum equal to the greater of (i) 6.5%; and  (ii) a rate equal to 2.35% over the ten year US treasury bond yield at  the commencement of each subsequent fixed rate period, payable quarterly in  equal instalments on the last day of March, June, September and December of each  year. |
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| Payment Options: |   | Falconbridge will be entitled to satisfy  payment of the quarterly dividend payments in:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|             |   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | cash; and/or |
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |
|             |   | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | that number of freely tradeable  Falconbridge Common Shares determined by dividing the declared dividend amount  by 95% of the US dollar equivalent of the volume weighted average  trading price of the Falconbridge Common Shares on the TSX for a period of  20 consecutive trading days ending on the fourth day prior to the date  (if such date is a trading day) specified for payment of the dividend,  provided that (A) the issuance or delivery of such Falconbridge Common  Shares is not prohibited pursuant to any agreement or arrangement entered  into by Falconbridge to assure Falconbridge solvency or continued operation,  (B) the issuance or delivery of such Falconbridge Common Shares is not  prohibited by law or by any regulatory or other authority having jurisdiction  over |

 

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|                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Falconbridge and acting in conformity with  law; (C) Falconbridge is able to issue and deliver such Falconbridge  Common Shares; and (D) such Falconbridge Common Shares are listed on  each exchange on which the Falconbridge Common Shares are then listed for  trading |
|-------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                 |
| Redemption:                                                                               |   | Subject to applicable law and to the  provisions described under “Restrictions on Dividends and Retirement and  Issue of Shares”:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                      |   | Junior Preference Shares, Series 1:  The Junior Preference Shares, Series 1 (i) are redeemable, in cash,  by Falconbridge at any time on at least 30 and not more than  60 days prior notice, on or before June 30, 2008 at $25.25 per  share plus all accrued and unpaid dividends and thereafter at $25.00 per  share plus all accrued and unpaid dividends, and (ii) must be redeemed  by Falconbridge on the date that is five years from the date of issue of the  Junior Preference Shares, Series 1 at $25.00 per share plus accrued and  unpaid dividends thereon (the “**Series 1  Final Redemption Date**”). |
|                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                      |   | Any redemptions of Junior Preference  Shares, Series 1 prior to June 30, 2009 must be made on a  pro rata basis with all other Junior Preference Shares then outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                      |   | Junior Preference Shares, Series 2:  The Junior Preference Shares, Series 2 (i) are redeemable, in cash,  by Falconbridge at any time on at least 30 and not more than  60 days prior notice, on or before June 30, 2010 at $25.25 per  share plus all accrued and unpaid dividends and thereafter until  June 29, 2012 at $25.00 per share plus all accrued and unpaid dividends,  and (ii) must be redeemed by Falconbridge on June 30, 2012 at  $25.00 per share plus accrued and unpaid dividends thereon (the “**Series 2 Final Redemption Date**”).                                                         |
|                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                      |   | Any redemptions of Junior Preference  Shares, Series 2 prior to June 30, 2011 must be made on a  pro rata basis with all other Junior Preference Shares then outstanding.  From June 30, 2010 to June 29, 2012, no Junior Preference Shares,  Series 2 may be redeemed until all the Junior Preference Shares,  Series 1 have been redeemed. Following June 30, 2012, any  redemption of the Junior Preference Shares, Series 2 must be made on a  pro rata basis with any Junior Preference Shares, Series 1 then  outstanding.                                                                                  |
|                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                      |   | Junior Preference Shares, Series 3:  The Junior Preference Shares, Series 3 (i) are redeemable, in cash,  by Falconbridge at any time on at least 30 and not more than  60 days prior notice, on or before June 30, 2013 at $25.25 per  share plus all accrued and unpaid dividends and thereafter until  June 29, 2015 at $25.00 per share plus accrued and unpaid dividends, and  (ii) must be redeemed by Falconbridge on June 30, 2015 at $25.00  per share plus accrued and unpaid dividends thereon (the “**Series 3 Final Redemption Date**”).                                                             |
|                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                      |   | Any redemptions of Junior Preference  Shares, Series 3 prior to June 30, 2012 must be made on a  pro rata basis with all other Junior Preference Shares then outstanding.  From June 30, 2012 to June 29, 2015, no Junior Preference Shares,  Series 3 may be redeemed until all Junior Preference Shares,  Series 2 have been redeemed. Following June 30, 2015, any redemption  of the Junior Preference Shares, Series 3 must be made on a  pro rata basis with any Junior Preference Shares, Series 1  and Junior Preference Shares, Series 2 outstanding.                                          |
|                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Conversion into Falconbridge Common Shares by Falconbridge on the  Final Redemption Date: |   | On the Series 1 Final Redemption Date, the Series 2 Final  Redemption Date and the Series 3 Final Redemption Date, so long as:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                      |   |
|                                                                                      | (i)    | a Change of Control Event (as defined  below) has not occurred (unless the applicable take-over bid or control  transaction has been withdrawn, is terminated or expires without any person  other than Brascan Corporation, any affiliate of Brascan Corporation or any  party                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                           |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                      |  |

 

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|                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | acting jointly or in concert with Brascan  Corporation or any of its affiliates (collectively, “**Brascan**”) beneficially owning 30% or more  of the voting shares of Falconbridge);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|---------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                            |   | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | an Extraordinary Dividend (as defined  below) has not been paid; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                            |   | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | (A) the issuance or delivery of such  Falconbridge Common Shares is not prohibited pursuant to any agreement or  arrangement entered into by Falconbridge to assure Falconbridge’s  solvency or continued operation, is (B) the issuance or delivery of  such Falconbridge Common Shares is not prohibited by law or by any regulatory  or other authority having jurisdiction over Falconbridge and acting in  conformity with law; (C) Falconbridge is able to issue and deliver such  Falconbridge Common Shares; and (D) such Falconbridge Common Shares are  listed on each exchange on which the Falconbridge Common Shares are then  listed for trading; |
|                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                            |   | the Junior Preference Shares are  convertible, in whole or in part, at the option of Falconbridge, on at least  30 and not more than 60 days prior notice into that number of  freely tradable Falconbridge Common Shares determined by dividing the  aggregate of $25.00, plus an amount equal to accrued and unpaid dividends up  to but excluding the final redemption date, by the greater of $2.00  (as adjusted) and 90% of the US dollar equivalent of weighted average  trading price of the Falconbridge Common Shares on the TSX (or, if  traded on the TSX in U.S. dollars, the volume weighted average trading  price of the Falconbridge Common Shares on the TSX) for a period of  20 consecutive trading days ending on the fourth day prior to the date  (if such date is a trading day) specified for conversion. |
|                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                            |   | “**Change  of Control Event**” means the occurrence of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                            |   | (i)            the  first date of public announcement (which, for purposes of this definition,  includes, without limitation, a report filed pursuant to section 101 of  the *Securities Act* (Ontario))  by Falconbridge or a person who beneficially owns 30% or more of the  outstanding voting shares of Falconbridge (other than Brascan and except in  certain limited circumstances, an “**Acquiring  Person**”) of facts indicating that an Acquiring Person has become  such;                                                                                                                                                                                                                                                                                                          |
|                            |   | (ii)           the  date of the commencement of, or first public announcement of the intent of  any person (other than Brascan, Falconbridge or any subsidiary of  Falconbridge) to commence a bid to acquire 30% or more of the voting shares  of Falconbridge (other than by Brascan, Falconbridge, or any subsidiary of  Falconbridge); or                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                            |   | (iii)          the  date of the commencement of, or first public announcement of the intent of  any person (other than Brascan) to commence, a transaction which would result  in any person beneficially owning 30% or more of the voting shares of  Falconbridge (other than by Brascan, Falconbridge or any subsidiary of Falconbridge).                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Retraction Rights:              |   | Upon the occurrence of a Change of Control  Event (unless the applicable bid or control transaction has been withdrawn,  is terminated or expires without any person beneficially owning 30% of more  of the voting shares of Falconbridge), a holder of Junior Preference Shares  has the right to require Falconbridge to redeem all of the holder’s then  outstanding Junior Preference Shares at the same prices as set out under  “Redemption”.                                                                                                                                                                                                                                                                                                                                                                                                   |
|                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Purchase for Cancellation: |   | Subject to applicable law and to the  provisions described under “Restrictions on Dividends and Retirement and  Issue of Shares”, Falconbridge may at any time or times purchase for  cancellation all or any part of the Junior Preference Shares in the open  market, by private agreement or otherwise at the lowest price or prices at  which, in the opinion of Falconbridge’s board of directors, such shares are  obtainable.                                                                                                                                                                                                                                                                                                                                                                                                                   |

 

87

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| Voting Rights and Election of Directors: |   | Except as otherwise provided by law or as  specifically set out in the Falconbridge Junior Preference Share provisions,  and except for meetings of the Junior Preference Shares as a class and  meetings of the Junior Preference Shares as series, the holders of Junior  Preference Shares will not be entitled as such to receive notice of, or to  attend, or to vote at, any meeting of shareholders of Falconbridge.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                     |   | The Junior Preference Shares will be  entitled, voting collectively, to elect two directors to the board of directors  at each meeting of shareholders of Falconbridge at which directors are to be  elected.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                     |   | Forthwith upon the occurrence of a Board  Event (as defined below), and for so long as it is continuing, the  holders of the Junior Preference Shares will be entitled, voting  collectively, to elect three additional directors (for a total of five).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                     |   | “**Board  Event**” means any one of the following events:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                     |   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | if four quarterly dividends on the Junior  Preference Shares are in arrears, whether or not such dividends have been  declared and whether or not there are any monies of Falconbridge properly  applicable to the payment of dividends; or |
|                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
|                                     |   | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | if the Adjusted Net Worth for any fiscal  quarter is less than $2,500,000,000. |
|                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
|                                     |   | “**Adjusted  Net Worth**” means, as at the end of any fiscal quarter, the  aggregate value of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
|                                     |   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | the outstanding share capital for all  shares ranking junior to Falconbridge the Junior Preference Shares; |
|                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
|                                     |   | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | without duplication, any surplus, whether  contributed or capital; |
|                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
|                                     |   | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | retained earnings; and |
|                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
|                                     |   | (iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | consolidated non-controlling interest, |
|                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                     |   | all as set forth in Falconbridge’s  consolidated balance sheet for such fiscal quarter filed in accordance with  applicable securities laws.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Shareholder Approvals:                   |   | In addition to any other approvals required  by law, the approval of all amendments to the rights, privileges,  restrictions and conditions attaching to the any of the Junior Preference  Shares as a series and any other approval to be given by the holders of any  of the Junior Preference Shares as a series may be given by a resolution  carried by an affirmative vote of at least 662/3%  of the votes cast at a meeting at which the holders of a majority of the  outstanding Junior Preference Shares of that series are present or  represented by proxy or, if no quorum is present at such meeting, at an  adjourned meeting at which the holders of Junior Preference Shares of that  series then present would form the necessary quorum. At any meeting of  holders of Junior Preference Shares, Series 1, Junior Preference Shares,  Series 2 or Junior Preference Shares, Series 3, as a series,  each such holder will be entitled to one vote in respect of each Falconbridge  Junior Preference Share of that series held. |
|                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Covenants:                               |   | As long as the Junior Preference Shares  having an aggregate issue price of at least $300 million remain  outstanding, Falconbridge will not at any time, without the approval of the  holders of the Junior Preference Shares, pay or set apart for payment any  Extraordinary Dividend.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                     |   | “**Extraordinary  Dividend**” means:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

 

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|                                                           |   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | any dividend, other than a stock dividend  paid wholly in Falconbridge Common Shares, declared or paid on the  Falconbridge Common Shares that is, when taken together with the amount or  value of all other dividends declared or paid in the 12 month period  preceding the date of declaration of the dividend (the ”**measurement period**”) more than 125% of  the aggregate amount or value of the dividends declared or paid on the  Falconbridge Common Shares, other than stock dividends paid wholly in  Falconbridge Common Shares, during the 12 month period ended on the day  prior to the measurement period (or, where there were no dividends paid  in the 12 month period ended on the day prior to the measurement period,  the period of 12 months ending on the date on which Falconbridge last  paid a dividend, other than a stock dividend paid wholly in Falconbridge  Common Shares, on the Falconbridge Common Shares); or |
|----------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                           |   | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | any dividend, other than a stock dividend  paid wholly in Falconbridge Common Shares, declared or paid on the  Falconbridge Common Shares that results in the Falconbridge Annual Dividend  Rate exceeding a 10% compound annual growth rate, measured from and following  May 4, 2005. For this purpose, the “**Falconbridge  Annual Dividend Rate**” is initially the aggregate amount or value  of all dividends declared or paid on the Falconbridge Common Shares, other  than stock dividends paid wholly in Falconbridge Common Shares, in the  12 month period immediately preceding May 4, 2005 and thereafter is  the aggregate amount or value of all dividends declared or paid in any  12 month period immediately preceding the date of declaration of any  other dividend on the Falconbridge Common Shares, together with the dividend  then being declared; or                                                                                  |
|                                                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                           |   | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | any other “special” dividend on, or  distribution with respect to, the Falconbridge Common Shares which is, by its  terms or declared intent, declared and paid outside the normal operations or  normal dividend procedures of Falconbridge.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                           |   | From and after June 30, 2010,  Falconbridge will apply the full net proceeds from (i) the issuance of  Falconbridge Common Shares, Preferred Shares, Junior Preference Shares or any  securities that, under Canadian generally accepted accounting principles,  would be treated as equity on the balance sheet of Falconbridge  (collectively, “**Equity Securities**”)  for cash (other than in certain limited circumstances) or (ii) the sale  of any capital assets outside of the ordinary course of business with a sale  price exceeding Cdn$250 million, to the redemption of the Junior  Preference Shares, Series 1, Junior Preference Shares,  Series 2 and Junior Preference Shares, Series 3. |
|                                                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Restrictions on Dividends and Retirement  and Issue of Shares: |   | As long as any Junior Preference Shares are  outstanding, Falconbridge may not at any time, without the approval of the  holders of the Junior Preference Shares:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                           |   |
|                                                           | (i)    | declare, pay or set apart for payment any  dividends (other than stock dividends payable in shares of Falconbridge  ranking junior to the Junior Preference Shares, Series 1) on shares of  Falconbridge ranking junior to the Junior Preference Shares, Series 1,  Junior Preference Shares, Series 2 or Junior Preference Shares,  Series 3;                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                           |   | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | except out of the net cash proceeds of a  substantially concurrent issue of shares of Falconbridge ranking junior to  the Junior Preference Shares, Series 1, redeem or call for redemption,  purchase or otherwise pay off, retire or make any return of capital in  respect of any shares of Falconbridge ranking as to capital junior to the  Junior Preference Shares, Series 1, Junior Preference Shares,  Series 2 or Junior Preference Shares, Series 3;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                           |   | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | redeem or call for redemption,  purchase or otherwise retire for value or make any return of capital in  respect of less than all of the Junior Preference Shares, Series 1,  Junior Preference                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

 

89

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|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Shares, Series 2 or Junior Preference  Shares, Series 3 then outstanding;                                                                                                                                                                                                                                                                                                                                                            |
|--------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|               |   | (iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | except pursuant to any purchase obligation,  sinking fund, retraction privilege or mandatory redemption provisions  attaching thereto, redeem or call for redemption, purchase or otherwise pay  off, retire or make any return of capital in respect of any Preferred Shares,  ranking on a parity with the Junior Preference Shares, Series 1, Junior  Preference Shares, Series 2 or Junior Preference Shares, Series 3;  or |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|               |   | (v)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | issue any additional Junior Preference  Shares, Series 1, Junior Preference Shares, Series 2 or Junior  Preference Shares, Series 3 or any shares ranking senior to or on a  parity with the Junior Preference Shares, Series 1, Junior Preference Shares,  Series 2 or Junior Preference Shares, Series 3                                                                                                  |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|               |   | unless, in each such case, all accrued  dividends up to and including those payable on the dividend payment date for  the last completed period for which dividends are payable on the Junior  Preference Shares, Series 1, Junior Preference Shares, Series 2 or  Junior Preference Shares, Series 3 in respect of which the rights of  holders have not been extinguished, and all dividends then accrued on all  other shares ranking senior to or on a parity with the Junior Preference  Shares, Series 1, Junior Preference Shares, Series 2 or Junior  Preference Shares, Series 3 with respect to the payment of dividends up  to the immediately preceding respective date or dates for payment in respect  of which the rights of holders of those shares have not been extinguished,  have been declared, paid or set apart for payment.                                                                                                                                                                                                                              |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| Additional Series: |   | As long as any of the Junior Preference  Shares are outstanding, Falconbridge may not issue any additional Preferred  Shares, other than Preferred Shares, Series F issuable upon the  conversion of Preferred Shares, Series G, Preferred Shares,  Series G issuable upon the conversion of Preferred Shares,  Series F, Preferred Shares, Series 2 issuable upon the conversion  of Preferred Shares, Series 3 and Preferred Shares, Series 3  issuable upon the conversion of Preferred Shares, Series 2 without the  approval of the holders of the Junior Preference Shares, expressed by  resolution of the holders of all such shares voting together, given by a  resolution carried by an affirmative vote of at least 662/3%  of the votes cast at a meeting at which the holders of a majority of the  outstanding Junior Preference Shares are present or represented by proxy or,  if no quorum is present at such meeting, at an adjourned meeting at which the  holders of Junior Preference Shares then present would form the necessary  quorum. |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| Tax on Dividends:  |   | Corporate holders of Junior Preference  Shares will not be required to pay tax under Part IV.1 of the  Tax Act on dividends received on such shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

 

**FalconbridgeParticipating Shares**

 

The Falconbridge board of directors may, byresolution, fix from time to time before the issue thereof, the number ofFalconbridge Participating Shares in, and determine the designation, rights,privileges, restrictions and conditions attaching to the shares of each seriesof Falconbridge Participating Shares. Each Falconbridge Participating Shareentitles the holder to participate rateably with the holders of Common Sharesin any distribution of the assets of Falconbridge upon liquidation, dissolutionor winding-up, subject to the prior rights of Preferred Shares. Each series ofFalconbridge Participating Shares ranks on a parity with shares of every otherseries with respect to priority, in the distribution of assets uponliquidation, dissolution or winding-up.

 

90

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**6.****             MARKETFOR SECURITIES**

 

Our common shares are listed and posted for trading on the TorontoStock Exchange (“TSX”) (trading symbol “FAL.LV”) and on The New York StockExchange (trading symbol “FAL”). Our Preferred Shares, Series F (FAL.PR.F),Series G (FAL.PR.G), Series H (FAL.PR.H), Series 2 (FAL.PR.A), and Series 3(FAL.PR.B) as well as our Junior Preference Shares, Series 1 (FAL.PR.X), Series2 (FAL.PR.Y) and Series 3 (FAL.PR.Z) are also listed and posted for trading onthe TSX.

 

***6.1******          Trading Price and Volume***

 

The following table sets forth the price range per share and tradingvolume on the TSX for the Common Shares, for the fiscal year endedDecember 31, 2005.

 

| ** ** | ** ** | **Common Shares** | ** ** |
|------------|------------|------------------------|------------|
| **2005**   | ** ** | **Volume**             | ** ** | **High** | ** ** | **Low** | ** ** |
| ** ** | ** ** | **(millions)**         | ** ** | **(Cdn$)** | ** ** |
| January    |       | 12.1686                |       | 20.98 |   | 19.67 |   |
| February   |       | 23.0341                |       | 23.47 |   | 20.81 |   |
| March      |       | 90.7838                |       | 25.44 |   | 21.75 |   |
| April      |       | 51.4908                |       | 24.99 |   | 22.80 |   |
| May        |       | 40.029                 |       | 23.51 |   | 19.60 |   |
| June       |       | 27.8754                |       | 23.05 |   | 20.60 |   |
| July       |       | 26.8051                |       | 25.35 |   | 20.77 |   |
| August     |       | 49.1781                |       | 29.80 |   | 25.15 |   |
| September  |       | 27.5589                |       | 32.31 |   | 27.22 |   |
| October    |       | 76.3148                |       | 35.85 |   | 29.25 |   |
| November   |       | 56.3043                |       | 36.00 |   | 32.53 |   |
| December   |       | 21.2132                |       | 36.06 |   | 33.56 |   |

 

The following table sets forth the price range per share and tradingvolume on the TSX for the Preferred Shares Series F, the Preferred SharesSeries G, and the Preferred Shares Series H for the fiscal year endedDecember 31, 2005.

 
| ** ** | ** ** | **Preferred Shares Series F** | ** ** | **Preferred Shares Series G** | ** ** | **Preferred Shares Series H** | ** ** |
|------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|
| **2005**   | ** ** | **Volume**                                   | ** ** | **High**                                     | ** ** | **Low**                                      | ** ** | **Volume** | ** ** | **High** | ** ** | **Low** | ** ** | **Volume** | ** ** | **High** | ** ** | **Low** | ** ** |
| ** ** | ** ** | ** **                                   | ** ** | **(Cdn$)**                                   | ** ** | ** **                                   | ** ** | **(Cdn$)** | ** ** | ** ** | ** ** | **(Cdn$)** | ** ** |
| January    |       | 45,480                                       |       | 25.50                                        |       | 25.00                                        |       | 618,669 |   | 26.35 |   | 25.80 |   | 40,054 |   | 27.70 |   | 26.73 |   |
| February   |       | 19,755                                       |       | 25.30                                        |       | 24.60                                        |       | 84,700 |   | 26.40 |   | 25.70 |   | 36,635 |   | 27.40 |   | 26.75 |   |
| March      |       | 18,265                                       |       | 25.39                                        |       | 24.75                                        |       | 808,590 |   | 26.95 |   | 25.50 |   | 67,865 |   | 27.29 |   | 26.60 |   |
| April      |       | 20,620                                       |       | 25.50                                        |       | 24.90                                        |       | 2,595,016 |   | 26.33 |   | 25.40 |   | 75,700 |   | 27.00 |   | 26.60 |   |
| May        |       | 211,000                                      |       | 25.15                                        |       | 24.90                                        |       | 342,665 |   | 26.75 |   | 25.52 |   | 301,585 |   | 27.40 |   | 26.65 |   |
| June       |       | 57,106                                       |       | 25.20                                        |       | 24.90                                        |       | 220,586 |   | 26.50 |   | 25.50 |   | 246,067 |   | 27.50 |   | 26.60 |   |
| July       |       | 48,075                                       |       | 25.15                                        |       | 24.90                                        |       | 73,281 |   | 26.09 |   | 25.27 |   | 25,397 |   | 26.94 |   | 26.60 |   |
| August     |       | 194,239                                      |       | 25.25                                        |       | 24.91                                        |       | 57,831 |   | 26.10 |   | 25.40 |   | 17,626 |   | 27.25 |   | 26.66 |   |
| September  |       | 227,710                                      |       | 25.25                                        |       | 24.91                                        |       | 45,980 |   | 26.75 |   | 25.75 |   | 29,137 |   | 27.10 |   | 26.61 |   |
| October    |       | 85,250                                       |       | 25.23                                        |       | 25.00                                        |       | 59,127 |   | 26.00 |   | 24.67 |   | 76,527 |   | 26.95 |   | 26.66 |   |
| November   |       | 31,495                                       |       | 26.00                                        |       | 25.00                                        |       | 81,601 |   | 25.59 |   | 25.00 |   | 83,456 |   | 27.10 |   | 26.70 |   |
| December   |       | 131,425                                      |       | 25.30                                        |       | 24.90                                        |       | 61,648 |   | 25.98 |   | 25.15 |   | 66,300 |   | 28.50 |   | 26.60 |   |

 

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The following table sets forth the price range per share and tradingvolume on the TSX for the Preferred Shares, Series 2 and Series 3 for thefiscal year ended December 31, 2005.

 

| ** ** | ** ** | **Preferred Shares Series 2** | ** ** | **Preferred Shares Series 3** | ** ** |
|------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|
| **2005**   | ** ** | **Volume**                                   | ** ** | **High**                                     | ** ** | **Low** | ** ** | **Volume** | ** ** | **High** | ** ** | **Low** | ** ** |
| ** ** | ** ** | ** **                                   | ** ** | **(Cdn$)**                                   | ** ** | ** ** | ** ** | ** ** | ** ** | **(Cdn$)** | ** ** | ** ** | ** ** |
| January    |       | 14,308                                       |       | 26.00                                        |       | 24.80 |   | 296,842 |   | 26.85 |   | 25.40 |   |
| February   |       | 32,186                                       |       | 25.25                                        |       | 24.75 |   | 278,738 |   | 29.00 |   | 26.50 |   |
| March      |       | 31,170                                       |       | 26.25                                        |       | 24.81 |   | 19,126 |   | 28.00 |   | 27.10 |   |
| April      |       | 83,389                                       |       | 25.75                                        |       | 24.50 |   | 472,457 |   | 27.95 |   | 26.00 |   |
| May        |       | 11,525                                       |       | 26.25                                        |       | 24.93 |   | 239,958 |   | 26.95 |   | 26.00 |   |
| June       |       | 48,762                                       |       | 25.20                                        |       | 24.55 |   | 23,517 |   | 26.80 |   | 25.53 |   |
| July       |       | 14,553                                       |       | 25.05                                        |       | 24.82 |   | 311,178 |   | 25.75 |   | 25.00 |   |
| August     |       | 17,251                                       |       | 25.50                                        |       | 24.60 |   | 204,056 |   | 25.75 |   | 24.95 |   |
| September  |       | 37,260                                       |       | 25.20                                        |       | 24.61 |   | 214,417 |   | 25.55 |   | 25.03 |   |
| October    |       | 78,691                                       |       | 25.14                                        |       | 24.70 |   | 117,570 |   | 25.48 |   | 25.20 |   |
| November   |       | 105,019                                      |       | 25.50                                        |       | 24.60 |   | 218,968 |   | 25.84 |   | 25.15 |   |
| December   |       | 138,770                                      |       | 25.85                                        |       | 24.95 |   | 29,227 |   | 25.75 |   | 25.20 |   |

 

The following table sets forth the price range per share and tradingvolume on the TSX for the Junior Preference Shares Series 1, Series 2, andSeries 3 for the fiscal year ended December 31, 2005.

 

| ** ** | ** ** | **Junior Preference Shares  Series 1** | ** ** | **Junior Preference Shares  Series 2** | ** ** | **Junior Preference Shares  Series 3** | ** ** |
|------------|------------|-------------------------------------------------------|------------|-------------------------------------------------------|------------|-------------------------------------------------------|------------|
| **2005**   | ** ** | **Volume**                                            | ** ** | **High**                                              | ** ** | **Low**                                               | ** ** | **Volume** | ** ** | **High** | ** ** | **Low** | ** ** | **Volume** | ** ** | **High** | ** ** | **Low** | ** ** |
| ** ** | ** ** | ** **                                            | ** ** | **(US$)**                                             | ** ** | ** **                                            | ** ** | **(US$)** | ** ** | ** ** | ** ** | **(US$)** | ** ** |
| January    |       |                                                  |       |                                                  |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
| February   |       |                                                  |       |                                                  |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
| March      |       |                                                  |       |                                                  |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
| April      |       |                                                  |       |                                                  |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
| May        |       | 1,733,074                                             |       | 26.00                                                 |       | 25.10                                                 |       | 1,751,453 |   | 26.35 |   | 24.60 |   | 914,147 |   | 26.40 |   | 24.75 |   |
| June       |       | 81,217                                                |       | 25.80                                                 |       | 25.35                                                 |       | 51,808 |   | 25.85 |   | 25.25 |   | 31,955 |   | 25.96 |   | 25.25 |   |
| July       |       | 50,374                                                |       | 25.45                                                 |       | 25.26                                                 |       | 8,474 |   | 25.45 |   | 24.90 |   | 16,503 |   | 25.45 |   | 25.31 |   |
| August     |       | 256,819                                               |       | 25.55                                                 |       | 25.35                                                 |       | 53,751 |   | 25.60 |   | 25.30 |   | 29,722 |   | 25.75 |   | 25.40 |   |
| September  |       | 698,244                                               |       | 25.70                                                 |       | 25.31                                                 |       | 300,098 |   | 25.75 |   | 25.31 |   | 113,041 |   | 25.75 |   | 25.30 |   |
| October    |       | 119,676                                               |       | 25.50                                                 |       | 25.25                                                 |       | 158,095 |   | 25.50 |   | 25.25 |   | 66,223 |   | 25.40 |   | 25.25 |   |
| November   |       | 14,954                                                |       | 25.75                                                 |       | 25.31                                                 |       | 8,328 |   | 25.50 |   | 25.30 |   | 21,563 |   | 25.75 |   | 25.00 |   |
| December   |       | 3,253                                                 |       | 25.58                                                 |       | 25.25                                                 |       | 5,219 |   | 25.50 |   | 25.20 |   | 5,269 |   | 25.75 |   | 25.25 |   |

 

***6.2******          Prior Sales***

 

Our Preferred Shares, Series 1 are not listed or quoted on amarketplace. During the most recently completed financial year, no PreferredShares, Series 1 have been sold.

 

***6.3          Ownershipof Common Shares***

*** ***

As of December 31, 2005, we estimate that approximately 63.6% of ourcommon shares are held by shareholders of record resident in Canada, 16.5% byshareholders of record resident in the United States and 19.9% by shareholdersof record resident in other countries.

 

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**7.****             CREDITRATINGS**

 

The Company currently has the following ratings on its publicly tradeddebt and preferred share securities:

 
| **Approved Rating  Organization** | ** ** | **Long Term  Debt** | ** ** | **Short Term  Debt** | ** ** | **Preferred  Shares** |
|-----------------------------------|------------|---------------------|------------|----------------------|------------|-----------------------|
| Dominion Bond Rating Service      |       | BBB (high)          |       | R-1(low)             |       | Pfd-3 (high)          |
| Moody’s Investor Service     |       | Baa3                |       |                 |       |                  |
| Standard & Poor’s        |       | BBB-                |       | A-3                  |       | P-3                   |

 

Standard &Poor’s (“S&P”) long-term ratings are on a rating scale that ranges from AAAto D, which represents the range from highest to lowest quality of suchsecurities rated. According to the S&P rating system, debt securities ratedBBB exhibit adequate protection parameters. The ratings from AA to CCC may bemodified by the addition of a plus (+) or minus (-) sign to show relativestanding within the major rating categories.

 

On March 9, 2005 following the announcement of Noranda’s plans to acquirethe remainder of Former Falconbridge and to issues $1.25 billion of JuniorPreference Shares, S&P placed us on Credit Watch (negative). On May 25,2005, following the successful completion of the announced transaction, S&Paffirmed the Company’s BBB- credit rating and removed us from their CreditWatch (negative) list. On October 11, 2005, S&P once again placed theCompany’s ratings on CreditWatch (negative) following the announcement by IncoLimited that it had made a friendly offer to acquire 100% of the outstandingcommon shares of the Company.

 

Moody’sInvestors Service (“Moody’s”) long-term ratings are on a rating scale from Aaato C, which represents the range from highest to lowest quality of suchsecurities rated. According to the Moody’s rating system, debt securities ratedBaa are considered as medium grade obligations. Moody’s applies numericalmodifiers 1, 2, and 3 in each generic rating classification from Aa through Caain its corporate bond rating system. The modifier 1 indicates that the issueranks in the higher end of its generic rating category, the modifier 2indicates a mid-range ranking and the modifier 3 indicates that the issue ranksin the lower end of its generic rating category.

 

On May 26,2005, following the successful takeover bid of Former Falconbridge, Moody’saffirmed the Company’s debt ratings. Moody’s also affirmed our long-term debtratings at Baa3 on October 11, 2005, following Inco Limited’s announced offerto acquire 100% of the outstanding common shares of the Company.

 

Dominion Bond Rating Service’s (“DBRS”) long-term ratings are on arating scale that ranges from AAA to D, which represents the range from highestto lowest quality of such securities rated. According to the DBRS ratingsystem, debt securities rated BBB are of adequate credit quality. Theassignment of a “(high)” or “(low)” modifier within each rating categoryindicates relative standing within such category.

 

On June 30, 2005, following the formal amalgamation of Noranda Inc. andFormer Falconbridge, DBRS upgraded the Company’s Senior Debt rating from BBB(low) to BBB (high), and the Company’s Short-term Debt rating from R2 (high) toR1 (low). On October 11, 2005, DBRS placed the ratings of the Company “UnderReview with Developing Implications,” following Inco Limited’s announced offerto acquire 100% of the outstanding common shares of the Company.

 

The creditratings assigned by the rating organizations are not recommendations to buy,sell, or hold securities and may be subject to revision or withdrawal at anytime by the rating organization.

 

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**8.****             DIRECTORSAND EXECUTIVE OFFICERS**

 

***8.1******          Directors***

 

The names, committee memberships (as at the date hereof), province orstate of residence, principal occupations within the five preceding years andperiods of service of our directors as directors of Falconbridge are asfollows:

 
| **Name (Committee Memberships)  and Municipality of Residence**        | ** ** | **Principal Occupation**                                                                                                                                                                                                                                                                                                                                                                        | ** ** | **Director since** |
|------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|
|                                                                   |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |               |
| Alex G. Balogh(3),(6)  Ontario, Canada                                 |       | Corporate Director; a non-executive Deputy Chairman, Noranda from  July 1997 to April 2003; executive Deputy Chairman, Noranda prior  thereto.                                                                                                                                                                                                                                             |       | 1994               |
|                                                                   |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |               |
| André Bérard, O.C.(1), (4),(6)  Québec, Canada          |       | Corporate Director; retired Chairman of the Board, National Bank of  Canada (banking); Chief Executive Officer, National Bank of Canada prior to  March 2002.                                                                                                                                                                                                                                   |       | 1990               |
|                                                                   |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |               |
| A.L. (Al) Flood, C.M.(2), (4), (5),(6)  Ontario, Canada                |       | Independent Board Leader since March 1, 2005; retired Chairman, and  Chief Executive Officer, Canadian Imperial Bank of Commerce (banking).                                                                                                                                                                                                                                                     |       | 1999               |
|                                                                   |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |               |
| Norman R. Gish(2),(6)  Calgary, Alberta                                |       | President, Gish Consulting Inc. (pipeline, energy and  international marketing advisory services) since April 2001; Chairman  and Chief Executive Officer, Alliance Pipeline Ltd. (natural gas  transmission) from January 2001 to March 2001; Chairman, President  and Chief Executive Officer from October 1999 to December 2000;  Chairman prior thereto. |       | 2001               |
|                                                                   |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |               |
| V. Maureen Kempston Darkes,  O.C., O.O.(2),(6)  Florida, United States |       | GM Group Vice-President and President, Latin America, Africa and  Middle East, General Motors Corporation (international motor vehicle  manufacturer) since January 2002; President and General Manager, General  Motors of Canada Limited prior thereto.                                                                                                                                  |       | 1998               |
|                                                                   |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |               |
| David W. Kerr, C.A.  Ontario, Canada                                   |       | Chairman, Falconbridge; Chairman of the Board and Chief Executive  Officer, Noranda prior to 2001; President and Chief Executive Officer prior  thereto.                                                                                                                                                                                                                                        |       | 1987               |
|                                                                   |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |               |
| G. Edmund King(2),(6)  Ontario, Canada                                 |       | Chairman, M30 Communications Inc.(produces Internet content)                                                                                                                                                                                                                                                                                                                                    |       | 1994               |
|                                                                   |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |               |
| Neville W. Kirchmann, C.A.  (SA)(1),(4), (6)  Ontario, Canada          |       | President, Kirchmann Holdings Ltd.(holding company)                                                                                                                                                                                                                                                                                                                                             |       | 1997               |
|                                                                   |       |                                                                                                                                                                                                                                                                                                                                                                                            |       |               |
| James W. McCutcheon, Q.C.(1), (3),(6)  Ontario, Canada                 |       | Counsel and Corporate Director; Counsel to McCarthy Tétrault LLP  (law firm) prior thereto.                                                                                                                                                                                                                                                                                           |       | 1993               |

 

94

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| **Name (Committee Memberships)  and Municipality of Residence** | ** ** | **Principal Occupation**                                                                                                                                                                                                                 | ** ** | **Director since** |
|-----------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|
|                                                            |       |                                                                                                                                                                                                                                     |       |               |
| Mary A. Mogford, ICD.D(1),(3),(6)  Ontario, Canada              |       | Corporate Director.                                                                                                                                                                                                                      |       | 1995               |
|                                                            |       |                                                                                                                                                                                                                                     |       |               |
| Derek Pannell, ing, BSc, ARSM  Ontario, Canada                  |       | Chief Executive Officer, Falconbridge; President and Chief Operating  Officer, Noranda and Chief Executive Officer, Falconbridge prior to April  2002; Vice-President of Compañia Minera Antamina in Peru prior to September  2001. |       | 2002               |
|                                                            |       |                                                                                                                                                                                                                                     |       |               |
| David H. Race(2),(3),(6)  Ontario, Canada                       |       | Corporate Director.                                                                                                                                                                                                                      |       | 1994               |
|                                                            |       |                                                                                                                                                                                                                                     |       |               |
| James D. Wallace, F.C.A.  Ontario, Canada                       |       | President, Pioneer Construction Inc.(road construction)                                                                                                                                                                                  |       | 2001               |

 

The term of office of each director will expire at the next annualmeeting of our common shareholders.

 

----

Notes:

 

(1)           Member of the Audit Committee

(2)           Member of the Governance Committee

(3)           Member of the Environment, Health & SafetyCommittee

(4)           Member of the Human Resources Committee

(5)           Designated by the Board of Directors as itsIndependent Board Leader

(6)           Member of Independent Directors Committee

 

***8.2******          Executive Officers***

 

The names, province or state of residence and positions of ourexecutive officers are set out below. For those of our executive officers whohave not held management or senior positions with us or associated companiesfor the past five years, the principal occupations of such persons during thepast five years are also set out below.

 
| **Name and Municipality of  Residence** | ** ** | **Position**             |
|-----------------------------------------|------------|--------------------------|
|                                    |       |                     |
| David W. Kerr  Ontario, Canada          |       | Chairman of the Board.   |
|                                    |       |                     |
| Derek G. Pannell  Ontario, Canada       |       | Chief Executive Officer. |

 

95

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| **Name and Municipality of  Residence**     | ** ** | **Position**                                                                                                                                                                                                                                                                                                                     |
|---------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                        |       |                                                                                                                                                                                                                                                                                                                             |
| Aaron W. Regent  Ontario, Canada            |       | President.                                                                                                                                                                                                                                                                                                                       |
|                                        |       |                                                                                                                                                                                                                                                                                                                             |
| Steven J. Douglas  Ontario, Canada          |       | Executive Vice-President and Chief Financial Officer; Chief Financial  Officer Brookfield Properties Corporation from January 1997 to November 2003.                                                                                                                                                                             |
|                                        |       |                                                                                                                                                                                                                                                                                                                             |
| Peter G.J. Kukielski  Ontario, Canada       |       | Chief Operating Officer; Executive Vice-President, Projects and  Aluminum from September 2001 to February 2005; Engineering and  Commissioning Manager, Antamina Project at Billiton PLC from  October 1997 to August 2001.                                                                                  |
|                                        |       |                                                                                                                                                                                                                                                                                                                             |
| William H. Brooks  Tennessee, United States |       | President, Noranda Aluminum since August 1998; prior thereto  President Norandal, USA Inc.; President, Primary Operations.                                                                                                                                                                                             |
|                                        |       |                                                                                                                                                                                                                                                                                                                             |
| Claude Ferron  Quebec, Canada               |       | President, CC&R since August 2004; Vice President & General  Manager, Horne & CC&R Divisions from June 2002 to September 2004;  General Manager of Falconbridge’s Kidd Metallurgical Division prior thereto.                                                                                                |
|                                        |       |                                                                                                                                                                                                                                                                                                                             |
| Joseph Laezza  Ontario, Canada              |       | President, Nickel.                                                                                                                                                                                                                                                                                                               |
|                                        |       |                                                                                                                                                                                                                                                                                                                             |
| Fernando E. Porcile  Santiago, Chile        |       | President, Copper effective September 2002; Senior Vice-President,  Copper from April 2002 to September 2002 Vice-President, Project  Development of BHP Billiton Base metals from August 2001 to  March 2002; President of Compañia Minera Cerro Colorado Limitada prior  thereto;                     |
|                                        |       |                                                                                                                                                                                                                                                                                                                             |
| Robert H. Sippel  Ontario, Canada           |       | President, Zinc since August 2003; President, Magnesium 2002 to 2003;  Senor Vice-President, Magnesium 2001 to 2002; Senior Vice-President,  Recycling 1997 to 2001.                                                                                                                                                             |
|                                        |       |                                                                                                                                                                                                                                                                                                                             |
| Michael J. Agnew  Ontario, Canada           |       | Senior Vice-President, Technology since September 2003;  Vice-President and General Manager, Magnola Metallurgy Inc. 2002 to 2003;  Vice-President and Start-Up Manager, Magnola Metallurgy Inc. 2001 to 2002;  General Manager, Canadian Electrolytic Zinc Ltd. 1998 to 2001; Canadian  Electrolytic Zinc Ltd. 1975 to 2001.    |
|                                        |       |                                                                                                                                                                                                                                                                                                                             |
| Brian E. Barr  Ontario, Canada              |       | Senior Vice-President, Special Projects; formerly Executive Chairman  of American Racing Equipment; Managing Director Rudolf  Wolff & Co., Noranda’s metal trading company in London,  England; Prior to 2000, Managing Director of Gentra Limited and senior  officer of Royal Trust, both based in England. |
|                                        |       |                                                                                                                                                                                                                                                                                                                             |
| Denis Couture  Ontario, Canada              |       | Senior Vice-President, Investor Relations, Public Affairs and  Communications.                                                                                                                                                                                                                                                   |

 

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| **Name and Municipality of  Residence** | ** ** | **Position**                                                                                                                                                                                                                                             |
|-----------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                    |       |                                                                                                                                                                                                                                                     |
| André Joron  Ontario, Canada       |       | Senior Vice-President, Human Resources; Vice-President, Human  Resources, Hudson’s Bay Company (Retail Chain) prior thereto.                                                                                                                   |
|                                    |       |                                                                                                                                                                                                                                                     |
| Ian W. Pearce  Ontario, Canada          |       | Senior Vice-President, Projects and Engineering since August 2003;  Formerly Executive Project Director, Fluor Corporation prior thereto.                                                                                                                |
|                                    |       |                                                                                                                                                                                                                                                     |
| Katherine A. Rethy  Ontario, Canada     |       | Senior Vice-President, Information Services, Procurement, Logistics,  Enterprise Risk Management and Facilities since April 2002; Senior Vice  President, Shared Business Services from October 1999 to  April 2002.                      |
|                                    |       |                                                                                                                                                                                                                                                     |
| Martin G.R. Schady  Ontario, Canada     |       | Senior Vice-President, Business Development.                                                                                                                                                                                                             |
|                                    |       |                                                                                                                                                                                                                                                     |
| Paul W.A. Severin  Ontario, Canada      |       | Senior Vice-President, Exploration effective April 2002;  Vice-President, Exploration from February 1995 to April 2002.                                                                                                                   |
|                                    |       |                                                                                                                                                                                                                                                     |
| Jeffery A. Snow  Ontario, Canada        |       | Senior Vice-President and General Counsel since April 2002;  Senior Vice-President, Corporate Affairs at Falconbridge from  October 2001 to April 2002; Vice-President, Legal at Falconbridge  from April 1998 to October 2001. |
|                                    |       |                                                                                                                                                                                                                                                     |
| Robert G. Telewiak  Ontario, Canada     |       | Senior Vice-President, Environment, Health & Safety since  April 2002; Vice-President, Environment at Falconbridge from  March 1998 to April 2002.                                                                                    |
|                                    |       |                                                                                                                                                                                                                                                     |
| Michael R. Boone  Ontario, Canada       |       | Vice-President, Finance and Controller since December 2004 and Chief  Financial Officer for Canadian Electrolytic Zinc, Noranda Income Fund’s  Administrator.                                                                                       |
|                                    |       |                                                                                                                                                                                                                                                     |
| John M. Doyle  Ontario, Canada          |       | Vice-President, Taxation since July 2002; Director, Taxation for  Falconbridge from 1989 to July 2002.                                                                                                                                         |
|                                    |       |                                                                                                                                                                                                                                                     |
| Michael R. Frilegh  Ontario, Canada     |       | Vice-President, Treasurer.                                                                                                                                                                                                                               |
|                                    |       |                                                                                                                                                                                                                                                     |
| Edward H. Laks  Ontario, Canada         |       | Vice President, Performance/Six Sigma since July 2001; General  Manager Operations, Canadian National Railway prior thereto.                                                                                                                        |

 

As of December 31, 2005, the directors and executive officers of theCompany, as a group, beneficially owned, directly or indirectly, or exercisedcontrol or direction over approximately 396,239 common shares, representingless than 1% of the Company’s outstanding common shares, and less than 1% ofeach class of voting securities of any of the Company’s subsidiaries. Theinformation as to securities beneficially owned or over which control ordirection is exercised, not being within our knowledge, has been furnished byour directors and executive officers individually.

 

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***8.3******          Cease Trade Orders,Bankruptcies, Penalties or Sanctions***

 

To the knowledge of the Company, afterreasonable enquiry, no director or executive officer of the Company is or hasbeen, in the last 10 years, a director or executive officer of a company that,while that person was acting in that capacity or within a year of that personceasing to act in that capacity, was the subject of a cease trader order,became bankrupt or made a proposal under any legislation relating to bankruptcyor insolvency, except for Mr. G. Edmund King who was, but is no longer, amember of the board of directors of Afton Food Group Inc., which filed forcreditor protection under the *Companies’Creditors Arrangement Act* (Canada) in 2004.

 

**9.****             AUDITCOMMITTEE**

 

**Audit Committee Mandate**

 

The text of the Audit Committee terms of reference (acting as itsmandate) adopted by the Company’s Board of Directors is attached hereto asSchedule “A”.

 

**Composition of the Audit Committee**

 

Prior to the amalgamation of Noranda and Former Falconbridge, the AuditCommittee of Noranda consisted of André Bérard (Chair), James W. McCutcheon andNorman R. Gish. The Audit Committee of Falconbridge presently comprises AndréBérard (Chair), James W. McCutcheon, Mary A. Mogford and Neville W. Kirchmann.

 

The Board of Directors believes that the composition of the AuditCommittee reflects a high level of financial literacy and expertise. Eachmember of the Audit Committee has been determined by the Board to be “independent”and “financially literate” as such terms are defined under Canadian and UnitedStates securities laws and stock exchange rules. In addition, the Board hasdetermined that at least one member, Mr. Bérard, the Chair of the AuditCommittee, is an “audit committee financial expert” for the purposes of auditcommittee rules adopted by the United States Securities and Exchange Commission.The Board has made these determinations based on the education as well as thebreadth and depth of experience of each member of the Committee. The followingis a brief summary of the education and experience of each member of theCommittee that is relevant to the performance of his or her responsibilities asan Audit Committee member:

 

**1)****    André Bérard**

 

Mr. Bérard was appointed to the Company’s Board in 1990. Mr. Bérard hasspent over four decades with the National Bank of Canada including as itsformer Chief Executive Officer and Chairman of the Board, and he now serves asa Director. Mr. Bérard is also a member of the Advisory Committee to the PrimeMinister on the Business/Government Executive Exchange Program and of thePolicy Committee of the Business Council on National Issues.

 

**2)****    James W. McCutcheon**

 

Mr. McCutcheon was appointed to the Company’s Board in 1993. Hereceived his LLB from Osgoode Hall Law School in 1960 and was legal counsel inthe Corporate Finance and Mergers and Acquisition Group at McCarthy TétraultLLP. As a lawyer who has acted throughout his career for both public andprivate corporations, Mr. McCutcheon participated in complex businesstransactions requiring an in-depth knowledge of financial statements.

 

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**3)****    Mary A. Mogford**

 

Ms. Mogford was appointed to the Company’s Board in 1995. In her roleas former Ontario Deputy Minister of Finance (Treasury and Economics), Ms.Mogford assisted the Minister of Finance in managing the fiscal, financial andrelated regulatory affairs of the Province of Ontario. Ms. Mogford has alsoserved on the boards of directors of other TSX and NYSE-listed public companiessince 1990, and has been a member of five audit committees during this timeperiod.

 

**4)****    Neville W. Kirchmann**

 

Mr. Kirchmann was appointed to the Company’s Board in 1997. Mr.Kirchmann acquired significant experience and exposure to complex accountingand financial reporting issues in the course of his 30 years with The Coca-ColaCompany, during which time he served as President and CEO of Coca-Cola, Canadaand South Africa. Mr. Kirchmann is a Chartered Accountant (South Africa).

 

**Pre-Approval Policies and Procedures**

 

The Audit Committee has instituted a policy to pre-approve audit andnon-audit services. The Chair of the Audit Committee is given limited delegatedauthority from time to time by the Committee to pre-approve permitted non-auditservices. The Audit Committee also considers on a continuing basis whether theprovision of non-audit services is compatible with maintaining the independenceof the external auditors.

 

**External Auditor Service Fees**

 

Aggregate fees billed to the Company and its reporting issuersubsidiaries for the fiscal years ended December 31, 2005 and 2004 byErnst & Young are set forth in the following table:

 
| ** **         | ** ** | **Falconbridge  (Cdn$)  2005/2004** | ** ** | **Reporting Issuer  Subsidiaries  (Cdn$)  2005/2004** | ** ** | **Total  (Cdn$)  2005/2004** | ** ** |
|--------------------|------------|-------------------------------------|------------|------------------------------------------------------------|------------|------------------------------|------------|
| ** **         | ** ** | ** **                          | ** ** | ** **                                                 | ** ** | ** **                   | ** ** |
| Audit fees         |       | 3,644,869/2,031,663                 |       | 27,500/14,939                                              |       | 3,672,369/2,046,602          |       |
| Audit-related fees |       | 1,411,313/392,914                   |       | —/20,393                                              |       | 1,411,313/413,307            |       |
| Tax fees           |       | 1,233,735/2,485,579                 |       | —/97,525                                              |       | 1,233,735/2,583,104          |       |
| All other fees     |       | 125,000/—                      |       | —/—                                              |       | 125,000/—               |       |
|               |       |                                |       |                                                       |       |                         |       |
| Total              |       | 6,414,917/4,910,156                 |       | 27,500/132,857                                             |       | 6,442,417/5,043,013          |       |

 

Fees for audit services include fees associated with the annual auditand fees associated with regulatory filings. Audit-related fees are forservices provided by Ernst & Young that are reasonably related to itsrole as auditor, and consist principally of audits of employee benefit fundsand advice on accounting standards and other specific transactions. Tax feesinclude tax compliance, tax advice and tax planning, including expatriate taxservices. All other fees would principally include all other support andadvisory services.

 

It is the Company’s policy not to engage its auditors to provideservices in connection with financial information systems design andimplementation.

 

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**10.****          INTERESTOF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS**

 

Brascan, which was a majority shareholder of the Company prior to theamalgamation of Noranda and Former Falconbridge, sold its ownership in theCompany in August, 2005. The transactions of the Company with Brascan and itssubsidiaries prior to the sale of its ownership are as follows:

 

Noranda Aluminum Inc. (“Aluminum”), a wholly-owned subsidiary of Noranda,entered into a power supply agreement with Brascan Energy Marketing Inc. (“BEMI”),a wholly-owned subsidiary of Brascan, on June 1, 2003. Under thearrangement, BEMI is obliged to provide Aluminum’s New Madrid primaryaluminum smelter with up to 490 MWh of electricity annually for a two-yearperiod commencing June 1, 2003 at rates with a variable component based onmarket prices. Aluminum has purchased $52 million (2004 - $127) under thiscontract. Upon completion of the contract on June 1, 2005, the contract was notrenewed.

 

The Company has sold certain trade receivables to a securitizationtrust which is owned by Brascan for a total of $4 (2004-$315) in cash, under anagreement that came into effect in November 2003. The arrangement wasterminated in October, 2005.

 

Brascan Financial Corporation, a subsidiary of Brascan, provided theCompany with a committed credit facility in the principal amount ofCdn$25 million with an expiry date of January 31, 2006. The facilitywas cancelled after it sold its ownership in the Company in August, 2005.

 

**11.****          TRANSFERAGENTS AND REGISTRARS**

 

The transfer agent and registrar of all of the Company’s outstandingshares is CIBC Mellon Trust Company, P.O. Box 7010 Adelaide Street PostalStation Toronto, Ontario, M5C 2W9.

 

**12.****          EXPERTS**

 

***12.1******        Names of Experts***

 

Ernst & Young LLP (“Ernst & Young”) have prepared the auditorreport on the audited consolidated financial statements of the Company as atDecember 31, 2005 and 2004 and for the years then ended.

 

Deloitte & Touche LLP (“Deloitte & Touche”) have prepared theirauditor report on the consolidated statements of financial position of FormerFalconbride as at December 31, 2004 and 2003; and the consolidated statementsof earnings, shareholders’ equity and cash flows for the years then ended.

 

McCarthy Tétrault LLP (“McCarthy Tétrault”) have prepared a tax opinionin connection with the joint management information circular of Noranda andFormer Falconbridge dated June 2, 2005.

 

Fried, Frank, Harris, Shriver & Jacobson LLP (“Fried Frank”) haveprepared a tax opinion in connection with the joint management informationcircular of Noranda and Former Falconbridge dated June 2, 2005.

 

TD Securities Inc. (“TD Securities”), the independent valuator retainedby the Special Committee of Former Falconbridge in connection with itsconsideration of the offer by Noranda to acquire all of the outstanding commonshares of Former Falconbridge not owned by Noranda or any of its affiliates,prepared a Valuation and Fairness Opinion.

 

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***12.2******        Interests of Experts***

 

As of December 31, 2005, neither Deloitte & Touche, McCarthyTétrault nor Fried Frank beneficially owned, directly or indirectly, orexercised control or direction over more than 1% of the Company’s outstandingcommon shares or more than 1% of each class of voting securities of any of theCompany’s subsidiaries. The information as to securities beneficially owned orover which control or direction is exercised, not being within our knowledge,has been furnished by such experts.

 

Ernst & Young is independent with respect to the Company within themeaning of the Rules of Professional Conduct of the Institute of CharteredAccountants of Ontario.

 

TD Securities acts as a trader and a dealer, both as principal andagent, in major financial markets and, as such, may have and may in future havepositions in the securities of the Company and, from time to time, may haveexecuted or may execute transactions on behalf of such companies or other clientsfor which it may have received or may receive compensation. As an investmentdealer, TD Securities conducts research on securities and may, in the ordinarycourse of business, provide research reports and investment advice to itsclients on investment matters with respect to the Company.

 

**13.****          MATERIALCONTRACTS**

 

The only material contracts entered into by Falconbridge within thelast year other than in the ordinary course of business are as follows:

 

•      **Amalgamation Agreement dated June 30, 2005**- On June 30, 2005, Noranda completed the second step of the acquisition byproceeding with its intent to acquire the remaining 9.2% of the FormerFalconbridge common shares and assumed 100% of the preferred shares and stockoptions obligations of the Former Falconbridge. The second step of theacquisition was completed by way of an amalgamation of Noranda and the FormerFalconbridge and the newly amalgamated company is continued under the nameFalconbridge Limited.

 

•      **Support Agreement dated October 10, 2005, as amendedon January 12, 2006 , February 20, 2006 and March 21, 2006**– OnOctober 10, 2005, Falconbridge and Inco Limited entered into a supportagreement pursuant to which Inco agreed that, subject to the terms andconditions of the Support Agreement, it would make an offer (the “Offer”) toacquire all of the outstanding common shares of Falconbridge, pursuant to whicheach holder of Falconbridge common shares may elect to receive either Cdn$34.00in cash per Falconbridge common share held or 0.6713 of a common share of Incoplus Cdn$0.05 in cash for each Falconbridge common share held, subject, in eachcase, to proration based upon the maximum amount of cash available, and themaximum number of Inco common shares available under the Offer.

 

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**14.****          ADDITIONALINFORMATION**

 

The Company will provide to any personwithout charge, upon request to the Corporate Secretary of the Company at itsregistered office, BCE Place, 181 Bay Street, Suite 200, Toronto,Ontario M5J 2T3, one copy of:

 

(i)            thisAnnual Information Form;

 

(ii)           theCompany’s most recent Management Information Circular; and

 

(iii)          anyunaudited interim reports to shareholders issued subsequent to suchConsolidated Financial Statements.

 

Additional information, including directors’ and officers’compensation, personal loans to directors and officers, principal holders ofFalconbridge’s securities and securities authorized for issuance under equitycompensation plans, if applicable, is contained in our management informationcircular for our most recent annual meeting of shareholders that involved theelection of directors.

 

Current financial information on the Company is provided in the Company’scomparative financial statements and Management’s Discussion and Analysis ofFinancial Condition and Results of Operations for the most recently completedfinancial year.

 

These documents, as well as the Company’s annual and quarterly reportsand news releases, are also available on Falconbridge’s website at www.falconbridge.com.

 

Additional information relating to Falconbridge is available on SEDARat www.sedar.com and on EDGAR at www.sec.gov.

 

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**SCHEDULE “A”**

 

**FALCONBRIDGE LIMITED**

 

**AUDIT COMMITTEE – TERMS OF REFERENCE**

 

The purpose of the Audit Committee shall be to assist the Board in itsoversight of the integrity of the financial statements of the Company, of theCompany’s compliance with legal and regulatory requirements, of theindependence and qualification of the independent auditor, and of theperformance of the Company’s internal audit function and its independentauditors.

 

**CHAIR**

 

The Board appoints or re-appoints the Chairof the Committee annually when it completes the appointments for all Boardcommittee members following the Annual General Meeting of shareholders. Inselecting the Chair, the Board takes into consideration those directors whobring background skills and experience relevant to financial statement reviewand analysis. The Chair shall also be “financially literate” and considered an “auditcommittee financial expert”, as such terms are defined under applicableCanadian and U.S. regulatory requirements.

 

The Chair shall provide leadership toCommittee members in fulfilling the mandate set out in these terms of reference.He or she shall work with the Chief Executive Officer and the Chairman of theBoard, liaising with the Secretary, in planning Committee meetings and agendas.The Chair of the Committee reports to the Board on behalf of the Committee onthe matters and issues covered or determined at each Committee meeting.

 

**RESPONSIBILITIES**

 

In assisting the Board in fulfilling its responsibilities relating tothe Company’s corporate accounting and reporting practices the Audit Committeeshall:

 

1.             reviewand discuss with management and the independent auditor, the annual auditedfinancial statements, the quarterly financial statements, Management’sDiscussion and Analysis accompanying such financial statements and any othermatter required to be reviewed under applicable legal, regulatory or stockexchange requirements, and report thereon to the Board;

 

2.             reviewthe results of the external audits and any changes in accounting practices orpolicies and the financial statement impact thereof;

 

3.             reviewthe Annual Information Form of the Company and to report thereon to the Board;

 

4.             reviewthe terms of engagement and audit plans of the external auditors and determinethrough discussion with the auditors that no restrictions were placed bymanagement on the scope of their examination or on its implementation;

 

5.             assessmanagement’s programs and policies regarding the adequacy and effectiveness ofinternal controls over the accounting and financial reporting system within theCompany;

 

6.             evaluate and recommendto the Board a firm of independent auditors for appointment by the shareholdersand report to the Board on the fees and expenses of such auditors. TheCommittee shall have the authority and responsibility to, if necessary, replacethe independent auditor. The Committee shall have the authority to approve allaudit engagement fees and terms and the Committee, or a member of theCommittee, must review and pre-approve any non-audit service provided to theCompany by the Company’s independent auditor and consider the impact on theindependence of the auditor;

 

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7.             enquireinto and report regularly to the Board, with associated recommendations, on anymatter referred to the Committee;

 

8.             discusswith management and the independent auditor, as appropriate, earnings pressreleases and any financial information provided to analysts and ratingagencies;

 

9.             discusswith management and the independent auditor, as appropriate, any audit problemsor difficulties and management’s response, and the Company’s risk assessmentand risk management policies, including the Company’s major financial riskexposure and steps taken by management to monitor and mitigate such exposure;

 

10.           obtainand review at least annually a formal written report from the independentauditor delineating:  the auditing firm’sprocedures for reviewing internal controls; any material issues raised withinthe preceding five years by the auditing firm’s internal quality-controlreviews, by peer reviews of the firm, or by any governmental or other inquiryor investigation relating to any audit conducted by the firm. The Committeewill also review steps taken by the auditing firm to address any findings inany of the foregoing reviews. Also, in order to assess auditor independence,the Committee will review at least annually all relationships between theindependent auditor and the Company;

 

11.           prepare and publish anannual committee report in the Company’s proxy circular;

 

12.           conduct an annualself-evaluation in respect of the effectiveness of the Committee;

 

13.           set clear hiringpolicies for employees or former employees of the independent auditors; and

 

14.           establish proceduresfor the receipt, retention and treatment of complaints regarding accounting,internal accounting controls or auditing matters, including procedures for theconfidential, anonymous submission by employees of the Company of concernsregarding questionable accounting or auditing matters.

 

At each meeting, the Committee shall hold an *in camera* session without members of management present.

 

The Committee shall have authority to retain such outside counsel,experts and other advisors as the Committee may deem appropriate in its solediscretion. The Committee shall have sole authority to approve related fees andretention terms.

 

The Committee shall meet separately at least quarterly with each ofmanagement and the Company’s independent auditors.

 

The Committee shall review at least annually the adequacy of thischarter and recommend any proposed changes to the Board for approval.

 
| **Committee Composition:** |   | Three or more members, none of whom shall be considered an affiliated  person under the *Sarbanes-Oxley Act**of 2002*, and all of whom shall be  independent directors pursuant to Multilateral Instrument 52-110 *Audit Committees* and under the standards  of applicable stock exchange rules including the New York Stock Exchange’s  rules for members of the audit committee; provided that, none of the  Committee members shall be related to the principal shareholder of the  Company. All members shall have sufficient financial experience, financial  literacy and ability to enable them to discharge their responsibilities and  at least one member shall be an “audit committee financial expert” (under applicable  U.S. regulatory requirements). |
|----------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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|        |   | The  Company’s Governance Committee shall, on an annual basis and in consultation  with the Chair of the Committee, review the Committee membership for any appropriate  changes or changes to its structure, as well as the required qualifications  for any new members. |
|-------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |   |                                                                                                                                                                                                                                                                            |
| **Quorum:** |   | Majority of members.                                                                                                                                                                                                                                                            |

 

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