##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-Q





|  |  |                                                                                            
|- |  | -------------------------------------------------------------------------------------------
|þ |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

| |  |                                                   
| |  | --------------------------------------------------
| |  | For the quarterly period ended: September 30, 2005

Commission file number 1-1143


Inco Limited


(Name of Registrant as specified in its charter)


|                                      |  |                                               
|------------------------------------- |  | ----------------------------------------------
|Canada(Jurisdiction of Incorporation) |  | 98-0000676(I.R.S. Employer Identification No.)

145 King Street West, Suite 1500, Toronto, Ontario M5H
4B7*


(Address of principal executive offices, including zip
code)


(416) 361-7511


(Telephone number)






o þ
















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TABLE OF CONTENTS


|                                   |  |                                                                                                                                                                                                                                |  |          |    | 
|---------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------- | -- | 
|                                   |  |                                                                                                                                                                                                                                |  | Page No. |   
|                                   |  |                                                                                                                                                                                                                                |  |          |   
|PART I  FINANCIAL
    INFORMATION
|Item 1.                            |  | Financial Statements
    (Unaudited)  Inco Limited and Subsidiaries                                                                                                                                                           |  |          | 2  | 
|                                   |  | Consolidated Statement of Earnings
    (Unaudited)  Three and Nine Months Ended
    September 30, 2005 and 2004                                                                                                               |  |          | 2  | 
|                                   |  | Consolidated Statement of Retained Earnings
    (Deficit) (Unaudited)  Nine Months Ended
    September 30, 2005 and 2004                                                                                                      |  |          | 3  | 
|                                   |  | Consolidated Balance Sheet
    (Unaudited)  September 30, 2005 and
    December 31, 2004                                                                                                                                      |  |          | 4  | 
|                                   |  | Consolidated Statements of Cash Flows
    (Unaudited)  Three and Nine Months Ended
    September 30, 2005 and 2004                                                                                                            |  |          | 5  | 
|                                   |  | Notes to Consolidated Financial Statements
    (Unaudited)                                                                                                                                                                     |  |          | 6  | 
|Item 2.                            |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                                                                                                                      |  |          | 23 | 
|Item 3.                            |  | Quantitative and Qualitative Disclosures
    About Market Risks                                                                                                                                                                |  |          | 36 | 
|Item 4.                            |  | Controls and Procedures                                                                                                                                                                                                        |  |          | 37 | 
|                                  
|PART II  OTHER
    INFORMATION   
|Item 6.                            |  | Exhibits                                                                                                                                                                                                                       |  |          |    | 
|                                   |  | 2.1. Support Agreement dated as of October 10, 2005
    between Inco Limited and Falconbridge Limited (incorporated by
    reference to Exhibit 2.1 to the Companys Current
    Report on Form 8-K filed on October 13, 2005) |  |          | 39 | 
|                                   |  | 31.1. Certification of the Chief Executive Officer of the
    Registrant pursuant to Rule 13a - 14(a) of the
    U.S. Securities Exchange Act of 1934, as amended                                                              |  |          | 39 | 
|                                   |  | 31.2. Certification of the Chief Financial Officer of the
    Registrant pursuant to Rule 13a - 14(a) of the
    U.S. Securities Exchange Act of 1934, as amended                                                              |  |          | 39 | 
|                                   |  | 32.1. Certification of the Chief Executive Officer and
    Chief Financial Officer of the Registrant pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002          |  |          | 39 | 
|EX-31.1                           
|EX-31.2                           
|EX-32.1                           



1



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##### Table of Contents






PART I  FINANCIAL INFORMATION







|        |                     
|------- | --------------------
|Item 1. | Financial Statements

INCO LIMITED AND SUBSIDIARIES





Consolidated Statement of Earnings


(Unaudited)


|                                                                           |         |                    |       |            |                   |   |       |      |            |   |       |      |  |   |       |      | 
|-------------------------------------------------------------------------- | ------- | ------------------ | ----- | ---------- | ----------------- | - | ----- | ---- | ---------- | - | ----- | ---- |  | - | ----- | ---- | 
|                                                                           |         | Three Months Ended |       |            | Nine Months Ended |  
|                                                                           |         | September 30,      |       |            | September 30,     |  
|                                                                           |         |                    |       |            |                   |  
|                                                                           |         | 2005               |       |            | 2004              |   |       | 2005 |            |   | 2004  |     
|                                                                           |         |                    |       |            |                   |   |       |      |            |   |       |     
|                                                                           |         |                    |       | (Restated) |                   |   |       |      | (Restated) |  
|(in millions of United States dollars except per share
    amounts)        |         |                    |       |            |                   |   |       |      |            |   |       |      |  |   |       |     
|Revenues                                                                   |         |                    |       |            |                   |   |       |      |            |   |       |      |  |   |       |     
|Net sales                                                                  |         | $                  | 1,082 |            |                   | $ | 1,031 |      |            | $ | 3,397 |      |  | $ | 3,117 |     
|Other income (loss), net (Note 3)                                          |         |                    | (11   | )          |                   |   | 17    |      |            |   | (8    | )    |  |   | 32    |     
|                                                                           |         |                    |       |            |                   |   |       |      |            |   |       |     
|                                                                           |         |                    | 1,071 |            |                   |   | 1,048 |      |            |   | 3,389 |      |  |   | 3,149 |     
|                                                                           |         |                    |       |            |                   |   |       |      |            |   |       |     
|Costs and expenses (income)                                                |         |                    |       |            |                   |   |       |      |            |   |       |      |  |   |       |     
|Cost of sales and other expenses, excluding depreciation and
    depletion |         |                    | 688   |            |                   |   | 568   |      |            |   | 1,907 |      |  |   | 1,705 |     
|Depreciation and depletion                                                 |         |                    | 62    |            |                   |   | 59    |      |            |   | 187   |      |  |   | 178   |     
|Selling, general and administrative                                        |         |                    | 64    |            |                   |   | 57    |      |            |   | 156   |      |  |   | 132   |     
|Research and development                                                   |         |                    | 9     |            |                   |   | 6     |      |            |   | 23    |      |  |   | 22    |     
|Exploration                                                                |         |                    | 10    |            |                   |   | 7     |      |            |   | 30    |      |  |   | 19    |     
|Currency translation adjustments                                           |         |                    | 52    |            |                   |   | 62    |      |            |   | 48    |      |  |   | 29    |     
|Interest expense                                                           |         |                    | 4     |            |                   |   | 9     |      |            |   | 16    |      |  |   | 29    |     
|Asset impairment charge (Note 4)                                           |         |                    |      |            |                   |   |      |      |            |   | 25    |      |  |   | 201   |     
|Goro project suspension                                                    |         |                    |      |            |                   |   | 1     |      |            |   |      |      |  |   | (2    | )   
|                                                                           |         |                    |       |            |                   |   |       |      |            |   |       |     
|                                                                           |         |                    | 889   |            |                   |   | 769   |      |            |   | 2,392 |      |  |   | 2,313 |     
|                                                                           |         |                    |       |            |                   |   |       |      |            |   |       |     
|Earnings before income and mining taxes and minority interest              |         |                    | 182   |            |                   |   | 279   |      |            |   | 997   |      |  |   | 836   |     
|Income and mining taxes (Note 5)                                           |         |                    | 90    |            |                   |   | 103   |      |            |   | 338   |      |  |   | 364   |     
|                                                                           |         |                    |       |            |                   |   |       |      |            |   |       |     
|Earnings before minority interest                                          |         |                    | 92    |            |                   |   | 176   |      |            |   | 659   |      |  |   | 472   |     
|Minority interest (Note 16)                                                |         |                    | 30    |            |                   |   | 34    |      |            |   | 69    |      |  |   | 90    |     
|                                                                           |         |                    |       |            |                   |   |       |      |            |   |       |     
|Net earnings                                                               |         | $                  | 62    |            |                   | $ | 142   |      |            | $ | 590   |      |  | $ | 382   |     
|                                                                           |         |                    |       |            |                   |   |       |      |            |   |       |     
|Net earnings per common share (Note 8)                                     |         |                    |       |            |                   |   |       |      |            |   |       |      |  |   |       |     
|                                                                           | Basic   |                    | $     | 0.33       |                   |   | $     | 0.76 |            |   | $     | 3.12 |  |   | $     | 2.04 | 
|                                                                           |         |                    |       |            |                   |   |       |      |            |   |       |     
|                                                                           | Diluted |                    | $     | 0.30       |                   |   | $     | 0.69 |            |   | $     | 2.70 |  |   | $     | 1.85 | 
|                                                                           |         |                    |       |            |                   |   |       |      |            |   |       |     



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##### Table of Contents



INCO LIMITED AND SUBSIDIARIES





Consolidated Statement of Retained Earnings (Deficit)


(Unaudited)


|                                                                               |  |                   |     |            |      |   |      |  
|------------------------------------------------------------------------------ |  | ----------------- | --- | ---------- | ---- | - | ---- | -
|                                                                               |  | Nine Months Ended |    
|                                                                               |  | September 30,     |    
|                                                                               |  |                   |    
|                                                                               |  | 2005              |     |            | 2004 |  
|                                                                               |  |                   |     |            |      |  
|                                                                               |  |                   |     | (Restated) |     
|(in millions of United States dollars)                                         |  |                   |     |            |      |   |      |  
|Retained earnings (deficit) at beginning of period, as
    previously reported |  | $                 | 397 |            |      | $ | (206 | )
|Change in accounting policy (Note 2)                                           |  |                   | (7  | )          |      |   | (9   | )
|                                                                               |  |                   |     |            |      |  
|Retained earnings (deficit) at beginning of year, as
    restated              |  |                   | 390 |            |      |   | (215 | )
|Net earnings                                                                   |  |                   | 590 |            |      |   | 382  |  
|Cash settlement of LYON Notes tendered for conversion
    (Note 10)            |  |                   | (22 | )          |      |   |     |  
|Common dividends paid                                                          |  |                   | (38 | )          |      |   |     |  
|                                                                               |  |                   |     |            |      |  
|Retained earnings at end of period                                             |  | $                 | 920 |            |      | $ | 167  |  
|                                                                               |  |                   |     |            |      |  



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INCO LIMITED AND SUBSIDIARIES





Consolidated Balance Sheet


(Unaudited)


|                                                   |                                                                                           |               |        |            |              |   |        |       | 
|-------------------------------------------------- | ----------------------------------------------------------------------------------------- | ------------- | ------ | ---------- | ------------ | - | ------ | ----- | 
|                                                   |                                                                                           | September 30, |        |            | December 31, |  
|                                                   |                                                                                           | 2005          |        |            | 2004         |  
|                                                   |                                                                                           |               |        |            |              |  
|                                                   |                                                                                           |               |        | (Restated) |             
|(in millions of United States dollars)             |                                                                                           |               |        |            |              |   |        |      
|ASSETS                                            
|Current assets                                     |                                                                                           |               |        |            |              |   |        |      
|Cash and cash equivalents (Note 14)                |                                                                                           | $             | 916    |            |              | $ | 1,076  |      
|Accounts receivable                                |                                                                                           |               | 580    |            |              |   | 601    |      
|Inventories (Note 14)                              |                                                                                           |               | 869    |            |              |   | 834    |      
|Other                                              |                                                                                           |               | 114    |            |              |   | 63     |      
|                                                   |                                                                                           |               |        |            |              |  
|Total current assets                               |                                                                                           |               | 2,479  |            |              |   | 2,574  |      
|Property, plant and equipment (Note 14)            |                                                                                           |               | 8,261  |            |              |   | 7,587  |      
|Deferred charges and other assets                  |                                                                                           |               | 663    |            |              |   | 576    |      
|                                                   |                                                                                           |               |        |            |              |  
|Total assets                                       |                                                                                           | $             | 11,403 |            |              | $ | 10,737 |      
|                                                   |                                                                                           |               |        |            |              |  
|                                                  
|LIABILITIES AND SHAREHOLDERS EQUITY              
|Current liabilities                                |                                                                                           |               |        |            |              |   |        |      
|Long-term debt due within one year (Notes 2 and 9) |                                                                                           | $             | 113    |            |              | $ | 107    |      
|Accounts payable                                   |                                                                                           |               | 245    |            |              |   | 331    |      
|Accrued payrolls and benefits                      |                                                                                           |               | 199    |            |              |   | 208    |      
|Other accrued liabilities                          |                                                                                           |               | 474    |            |              |   | 399    |      
|Income and mining taxes payable                    |                                                                                           |               | 76     |            |              |   | 279    |      
|                                                   |                                                                                           |               |        |            |              |  
|Total current liabilities                          |                                                                                           |               | 1,107  |            |              |   | 1,324  |      
|Deferred credits and other liabilities             |                                                                                           |               |        |            |              |   |        |      
|Long-term debt (Notes 2 and 9)                     |                                                                                           |               | 1,669  |            |              |   | 1,761  |      
|Deferred income and mining taxes                   |                                                                                           |               | 1,983  |            |              |   | 1,891  |      
|Post-retirement benefits                           |                                                                                           |               | 725    |            |              |   | 671    |      
|Asset retirement obligation (Note 7)               |                                                                                           |               | 186    |            |              |   | 171    |      
|Other deferred credits                             |                                                                                           |               | 61     |            |              |   | 58     |      
|                                                   |                                                                                           |               |        |            |              |  
|Total liabilities                                  |                                                                                           |               | 5,731  |            |              |   | 5,876  |      
|                                                   |                                                                                           |               |        |            |              |  
|Minority interest (Note 16)                        |                                                                                           |               | 781    |            |              |   | 529    |      
|                                                   |                                                                                           |               |        |            |              |  
|Commitments and contingencies (Note 12)            |                                                                                           |               |        |            |              |   |        |      
|Shareholders equity                               |                                                                                           |               |        |            |              |   |        |      
|Convertible debt (Notes 2 and 10)                  |                                                                                           |               | 398    |            |              |   | 418    |      
|                                                   |                                                                                           |               |        |            |              |  
|Common shareholders equity                        |                                                                                           |               |        |            |              |   |        |      
|                                                   | Common shares issued and outstanding 189,485,940
    (2004  188,133,439 shares) (Note 8) |               |        | 2,933      |              |   |        | 2,891 | 
|                                                   | Warrants (Note 11)                                                                        |               |        | 62         |              |   |        | 62    | 
|                                                   | Contributed surplus (Note 15)                                                             |               |        | 578        |              |   |        | 571   | 
|                                                   | Retained earnings                                                                         |               |        | 920        |              |   |        | 390   | 
|                                                   |                                                                                           |               |        |            |              |  
|                                                   |                                                                                           |               | 4,493  |            |              |   | 3,914  |      
|                                                   |                                                                                           |               |        |            |              |  
|Total shareholders equity                         |                                                                                           |               | 4,891  |            |              |   | 4,332  |      
|                                                   |                                                                                           |               |        |            |              |  
|Total liabilities and shareholders equity         |                                                                                           | $             | 11,403 |            |              | $ | 10,737 |      
|                                                   |                                                                                           |               |        |            |              |  



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INCO LIMITED AND SUBSIDIARIES





Consolidated Statement of Cash Flows


(Unaudited)


|                                                     |                                                                           |                                          |       |            |                   |   |     |      |            |   |       |      |      |   |     |       |      |  
|---------------------------------------------------- | ------------------------------------------------------------------------- | ---------------------------------------- | ----- | ---------- | ----------------- | - | --- | ---- | ---------- | - | ----- | ---- | ---- | - | --- | ----- | ---- | -
|                                                     |                                                                           | Three Months Ended                       |       |            | Nine Months Ended |  
|                                                     |                                                                           | September 30,                            |       |            | September 30,     |  
|                                                     |                                                                           |                                          |       |            |                   |  
|                                                     |                                                                           | 2005                                     |       |            | 2004              |   |     | 2005 |            |   | 2004  |     
|                                                     |                                                                           |                                          |       |            |                   |   |     |      |            |   |       |     
|                                                     |                                                                           |                                          |       | (Restated) |                   |   |     |      | (Restated) |  
|(in millions of United States dollars)               |                                                                           |                                          |       |            |                   |   |     |      |            |   |       |      |      |   |     |      
|                                                    
|Operating activities                                 |                                                                           |                                          |       |            |                   |   |     |      |            |   |       |      |      |   |     |      
|                                                     | Earnings before minority interest                                         |                                          | $     | 92         |                   |   | $   | 176  |            |   | $     | 659  |      |   | $   | 472   |     
|                                                     | Items not affecting cash                                                  |                                          |       |            |                   |   |     |      |            |   |       |      |      |   |     |       |     
|                                                     |                                                                           | Depreciation and depletion               |       |            | 62                |   |     |      | 59         |   |       |      | 187  |   |     |       | 178  |  
|                                                     |                                                                           | Deferred income and mining taxes         |       |            | 26                |   |     |      | 6          |   |       |      | 31   |   |     |       | 43   |  
|                                                     |                                                                           | Asset impairment charge                  |       |            |                  |   |     |      |           |   |       |      | 25   |   |     |       | 201  |  
|                                                     |                                                                           | Other                                    |       |            | 91                |   |     |      | 56         |   |       |      | 117  |   |     |       | 70   |  
|                                                     | Contributions greater than post-retirement benefits expense               |                                          |       | (13        | )                 |   |     | (14  | )          |   |       | (32  | )    |   |     | (24   | )   
|                                                     | Decrease (increase) in non-cash working capital related to
    operations |                                          |       |            |                   |   |     |      |            |   |       |      |      |   |     |       |     
|                                                     |                                                                           | Accounts receivable                      |       |            | (24               | ) |     |      | (61        | ) |       |      | 21   |   |     |       | (115 | )
|                                                     |                                                                           | Inventories                              |       |            | 32                |   |     |      | 27         |   |       |      | (35  | ) |     |       | (66  | )
|                                                     |                                                                           | Accounts payable and accrued liabilities |       |            | (52               | ) |     |      | 29         |   |       |      | (38  | ) |     |       | 47   |  
|                                                     |                                                                           | Income and mining taxes payable          |       |            | (26               | ) |     |      | 79         |   |       |      | (183 | ) |     |       | 313  |  
|                                                     |                                                                           | Other                                    |       |            | (1                | ) |     |      | 23         |   |       |      | (52  | ) |     |       | (20  | )
|                                                     |                                                                           |                                          |       |            |                   |   |     |      |            |   |       |     
|                                                     | Net cash provided by operating activities                                 |                                          |       | 187        |                   |   |     | 380  |            |   |       | 700  |      |   |     | 1,099 |     
|                                                     |                                                                           |                                          |       |            |                   |   |     |      |            |   |       |     
|Investing activities                                 |                                                                           |                                          |       |            |                   |   |     |      |            |   |       |      |      |   |     |      
|                                                     | Capital expenditures                                                      |                                          |       | (315       | )                 |   |     | (248 | )          |   |       | (820 | )    |   |     | (543  | )   
|                                                     | Partial sale of interest in Goro Nickel S.A.S                             |                                          |       |           |                   |   |     |     |            |   |       | 150  |      |   |     |      |     
|                                                     | Other                                                                     |                                          |       | (3         | )                 |   |     | 1    |            |   |       | (6   | )    |   |     | (19   | )   
|                                                     |                                                                           |                                          |       |            |                   |   |     |      |            |   |       |     
|                                                     | Net cash used for investing activities                                    |                                          |       | (318       | )                 |   |     | (247 | )          |   |       | (676 | )    |   |     | (562  | )   
|                                                     |                                                                           |                                          |       |            |                   |   |     |      |            |   |       |     
|Financing activities                                 |                                                                           |                                          |       |            |                   |   |     |      |            |   |       |      |      |   |     |      
|                                                     | Repayments of long-term debt                                              |                                          |       | (54        | )                 |   |     | (42  | )          |   |       | (102 | )    |   |     | (90   | )   
|                                                     | Long-term borrowings                                                      |                                          |       |           |                   |   |     |     |            |   |       | 3    |      |   |     |      |     
|                                                     | Cash settlement of LYON Notes tendered for conversion                     |                                          |       | (65        | )                 |   |     |     |            |   |       | (65  | )    |   |     |      |     
|                                                     | Common shares issued                                                      |                                          |       | 11         |                   |   |     | 4    |            |   |       | 34   |      |   |     | 18    |     
|                                                     | Common dividends paid                                                     |                                          |       | (19        | )                 |   |     |     |            |   |       | (38  | )    |   |     |      |     
|                                                     | Dividends paid to minority interest                                       |                                          |       |           |                   |   |     |     |            |   |       | (39  | )    |   |     | (15   | )   
|                                                     | Other                                                                     |                                          |       | 1          |                   |   |     |     |            |   |       | 23   |      |   |     | 1     |     
|                                                     |                                                                           |                                          |       |            |                   |   |     |      |            |   |       |     
|                                                     | Net cash used for financing activities                                    |                                          |       | (126       | )                 |   |     | (38  | )          |   |       | (184 | )    |   |     | (86   | )   
|                                                     |                                                                           |                                          |       |            |                   |   |     |      |            |   |       |     
|Net increase (decrease) in cash and cash equivalents |                                                                           |                                          | (257  | )          |                   |   | 95  |      |            |   | (160  | )    |      |   | 451 |      
|Cash and cash equivalents at beginning of period     |                                                                           |                                          | 1,173 |            |                   |   | 774 |      |            |   | 1,076 |      |      |   | 418 |      
|                                                     |                                                                           |                                          |       |            |                   |   |     |      |            |   |       |     
|Cash and cash equivalents at end of period           |                                                                           | $                                        | 916   |            |                   | $ | 869 |      |            | $ | 916   |      |      | $ | 869 |      
|                                                     |                                                                           |                                          |       |            |                   |   |     |      |            |   |       |     



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INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial Statements


(Unaudited)


(Tabular amounts in millions of United States dollars except
number of shares and per share amounts)




|        |                      
|------- | ---------------------
|Note 1. | Basis of Presentation





|        |                               
|------- | ------------------------------
|Note 2. | Changes in Accounting Policies



| |                       
| | ----------------------
| | Convertible Debentures

Financial
Instruments  Disclosure and Presentation. 1 2 Financial Instruments that may be
Settled at the Issuers Option in Cash or its own Equity
Instruments.


Accounting for Convertible Debt
Instruments.


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INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




| |                   
| | ------------------
| | Earnings per share

The Effects of Contingently Convertible
Instruments on the Computation of Diluted Earnings per
Share.




| |                                 
| | --------------------------------
| | Recent Accounting Pronouncements





|    |                                                                      
|--- | ---------------------------------------------------------------------
|(a) | Financial Instruments  Recognition and
    Measurement, Section 3855





|    |                     
|--- | --------------------
|(b) | Hedges, Section 3865


Hedging Relationships, Foreign Currency Translation,




|    |                                   
|--- | ----------------------------------
|(c) | Comprehensive Income, Section 1530





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INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|        |                         
|------- | ------------------------
|Note 3. | Other Income (Loss), net



|                                                                                                     |  |               |     |   |               |   |    |      |  |   |      |   |  |   |    |  
|---------------------------------------------------------------------------------------------------- |  | ------------- | --- | - | ------------- | - | -- | ---- |  | - | ---- | - |  | - | -- | -
|                                                                                                     |  | Three Months  |     |   | Nine Months   |  
|                                                                                                     |  | Ended         |     |   | Ended         |  
|                                                                                                     |  | September 30, |     |   | September 30, |  
|                                                                                                     |  |               |     |   |               |  
|                                                                                                     |  | 2005          |     |   | 2004          |   |    | 2005 |  |   | 2004 |  
|                                                                                                     |  |               |     |   |               |   |    |      |  |   |      |  
|Interest and dividend income                                                                         |  | $             | 6   |   |               | $ | 4  |      |  | $ | 21   |   |  | $ | 9  |  
|Earnings from affiliates accounted for using the equity method                                       |  |               | 1   |   |               |   |   |      |  |   | 1    |   |  |   | 4  |  
|Loss from derivative positions in metals                                                             |  |               | (5  | ) |               |   |   |      |  |   | (11  | ) |  |   | (4 | )
|Loss from cash settlement of LYON Notes tendered for conversion
    (Note 10)                        |  |               | (8  | ) |               |   |   |      |  |   | (8   | ) |  |   |   |  
|Gains from forward currency contracts covering anticipated
    expenditures relating to Goro project |  |               |    |   |               |   | 8  |      |  |   |     |   |  |   | 8  |  
|Gains from sales of securities and other assets                                                      |  |               |    |   |               |   |   |      |  |   |     |   |  |   | 3  |  
|Other                                                                                                |  |               | (5  | ) |               |   | 5  |      |  |   | (11  | ) |  |   | 12 |  
|                                                                                                     |  |               |     |   |               |   |    |      |  |   |      |  
|Other income (loss), net                                                                             |  | $             | (11 | ) |               | $ | 17 |      |  | $ | (8   | ) |  | $ | 32 |  
|                                                                                                     |  |               |     |   |               |   |    |      |  |   |      |  



|        |                        
|------- | -----------------------
|Note 4. | Asset Impairment Charge





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INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|        |                        
|------- | -----------------------
|Note 5. | Income and Mining Taxes



|                                                                                |  |                    |     |            |                   |   |     |      |            |   |      |   |  |   |     |  
|------------------------------------------------------------------------------- |  | ------------------ | --- | ---------- | ----------------- | - | --- | ---- | ---------- | - | ---- | - |  | - | --- | -
|                                                                                |  | Three Months Ended |     |            | Nine Months Ended |  
|                                                                                |  | September 30,      |     |            | September 30,     |  
|                                                                                |  |                    |     |            |                   |  
|                                                                                |  | 2005               |     |            | 2004              |   |     | 2005 |            |   | 2004 |  
|                                                                                |  |                    |     |            |                   |   |     |      |            |   |      |  
|                                                                                |  |                    |     | (Restated) |                   |   |     |      | (Restated) |  
|Provision at combined Canadian federal-provincial statutory
    income tax rate |  | $                  | 70  |            |                   | $ | 111 |      |            | $ | 386  |   |  | $ | 333 |  
|Resource and depletion allowances                                               |  |                    | (7  | )          |                   |   | (19 | )    |            |   | (45  | ) |  |   | (57 | )
|                                                                                |  |                    |     |            |                   |   |     |      |            |   |      |  
|Adjusted income taxes                                                           |  |                    | 63  |            |                   |   | 92  |      |            |   | 341  |   |  |   | 276 |  
|Mining taxes                                                                    |  |                    | 6   |            |                   |   | 9   |      |            |   | 49   |   |  |   | 48  |  
|                                                                                |  |                    |     |            |                   |   |     |      |            |   |      |  
|                                                                                |  |                    | 69  |            |                   |   | 101 |      |            |   | 390  |   |  |   | 324 |  
|Currency translation adjustments                                                |  |                    | 4   |            |                   |   | 8   |      |            |   | 8    |   |  |   | 1   |  
|Currency translation adjustments on long-term debt                              |  |                    | 22  |            |                   |   | 21  |      |            |   | 15   |   |  |   | 9   |  
|Non-taxable (gains) losses                                                      |  |                    | (3  | )          |                   |   | (4  | )    |            |   | (14  | ) |  |   | 62  |  
|Tax rate changes                                                                |  |                    |    |            |                   |   |    |      |            |   |     |   |  |   | 9   |  
|Foreign tax rate differences                                                    |  |                    | (11 | )          |                   |   | (14 | )    |            |   | (37  | ) |  |   | (36 | )
|Prior year adjustments                                                          |  |                    | 12  |            |                   |   | (7  | )    |            |   | (15  | ) |  |   | (9  | )
|Other                                                                           |  |                    | (3  | )          |                   |   | (2  | )    |            |   | (9   | ) |  |   | 4   |  
|                                                                                |  |                    |     |            |                   |   |     |      |            |   |      |  
|Effective income and mining taxes                                               |  | $                  | 90  |            |                   | $ | 103 |      |            | $ | 338  |   |  | $ | 364 |  
|                                                                                |  |                    |     |            |                   |   |     |      |            |   |      |  



|        |                         
|------- | ------------------------
|Note 6. | Post-retirement Benefits





|                                                                                     |  |                    |     |            |                                 |       |     |                  |  |                |               |            |  |      |    |  |      |   |      |      |  |   |      |   |  |   |    |  |  |   |    | 
|------------------------------------------------------------------------------------ |  | ------------------ | --- | ---------- | ------------------------------- | ----- | --- | ---------------- |  | -------------- | ------------- | ---------- |  | ---- | -- |  | ---- | - | ---- | ---- |  | - | ---- | - |  | - | -- |  |  | - | -- | 
|                                                                                     |  |                    |     |            |                                 | Post- |     |                  |  |                |               |            | 
|                                                                                     |  |                    |     | retirement |                                 |       |     |                  |  |                | Post-         |           
|                                                                                     |  | Pension            |     |            | Benefits Other                  |       |     |                  |  |                |               | retirement | 
|                                                                                     |  | Benefits           |     |            | than Pensions                   |       |     |                  |  | Benefits Other |              
|                                                                                     |  |                    |     |            |                                 |       |     | Pension Benefits |  |                | than Pensions |           
|                                                                                     |  |                    |     |            |                                 |       |     |                 
|                                                                                     |  | Three Months Ended |     |            |                                
|                                                                                     |  | September 30,      |     |            | Nine Months Ended September 30, |      
|                                                                                     |  |                    |     |            |                                 |      
|                                                                                     |  | 2005               |     |            | 2004                            |       |     | 2005             |  |                | 2004          |            |  | 2005 |    |  | 2004 |   |      | 2005 |  |   | 2004 |  
|                                                                                     |  |                    |     |            |                                 |       |     |                  |  |                |               |            |  |      |    |  |      |   |      |      |  |   |      |  
|Service cost                                                                         |  | $                  | 11  |            |                                 | $     | 9   |                  |  | $              | 3             |            |  | $    | 2  |  |      | $ | 31   |      |  | $ | 28   |   |  | $ | 9  |  |  | $ | 7  | 
|Interest cost                                                                        |  |                    | 42  |            |                                 |       | 40  |                  |  |                | 14            |            |  |      | 13 |  |      |   | 125  |      |  |   | 118  |   |  |   | 41 |  |  |   | 38 | 
|Expected return on plan assets                                                       |  |                    | (46 | )          |                                 |       | (42 | )                |  |                |              |            |  |      |   |  |      |   | (132 | )    |  |   | (124 | ) |  |   |   |  |  |   |   | 
|Amortization of actuarial and investment losses                                      |  |                    | 16  |            |                                 |       | 15  |                  |  |                | 3             |            |  |      | 2  |  |      |   | 48   |      |  |   | 46   |   |  |   | 10 |  |  |   | 9  | 
|Amortization of unrecognized prior service costs                                     |  |                    | 3   |            |                                 |       | 4   |                  |  |                |              |            |  |      |   |  |      |   | 9    |      |  |   | 11   |   |  |   |   |  |  |   |   | 
|                                                                                     |  |                    |     |            |                                 |       |     |                  |  |                |               |            |  |      |    |  |      |   |      |      |  |   |      |  
|Defined benefit pension and post-retirement benefits other than
    pensions expense |  |                    | 26  |            |                                 |       | 26  |                  |  |                | 20            |            |  |      | 17 |  |      |   | 81   |      |  |   | 79   |   |  |   | 60 |  |  |   | 54 | 
|Defined contribution pension expense                                                 |  |                    | 2   |            |                                 |       | 2   |                  |  |                |              |            |  |      |   |  |      |   | 4    |      |  |   | 4    |   |  |   |   |  |  |   |   | 
|                                                                                     |  |                    |     |            |                                 |       |     |                  |  |                |               |            |  |      |    |  |      |   |      |      |  |   |      |  
|Post-retirement benefits expense                                                     |  | $                  | 28  |            |                                 | $     | 28  |                  |  | $              | 20            |            |  | $    | 17 |  |      | $ | 85   |      |  | $ | 83   |   |  | $ | 60 |  |  | $ | 54 | 
|                                                                                     |  |                    |     |            |                                 |       |     |                  |  |                |               |            |  |      |    |  |      |   |      |      |  |   |      |  

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INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|        |                            
|------- | ---------------------------
|Note 7. | Asset Retirement Obligation



|                                  |  |        |     |  
|--------------------------------- |  | ------ | --- | -
|                                  |  | Amount |    
|                                  |  |        |    
|December 31, 2004                 |  | $      | 171 |  
|Accretion expense                 |  |        | 7   |  
|Revisions in estimated cash flows |  |        | 10  |  
|Transfer to current               |  |        | (2  | )
|                                  |  |        |    
|September 30, 2005                |  | $      | 186 |  
|                                  |  |        |    



|        |                                            
|------- | -------------------------------------------
|Note 8. | Common Shares and Earnings per Common Share



|                                                                                        |  |           |             |  |        |   |       | 
|--------------------------------------------------------------------------------------- |  | --------- | ----------- |  | ------ | - | ----- | 
|                                                                                        |  | Number of |             |  |       
|                                                                                        |  | Shares    |             |  | Amount |  
|                                                                                        |  |           |             |  |        |  
|December 31, 2004                                                                       |  |           | 188,133,439 |  |        | $ | 2,891 | 
|Options exercised                                                                       |  |           | 1,285,969   |  |        |   | 34    | 
|Warrants exercised                                                                      |  |           | 4,834       |  |        |   |      | 
|Shares issued under incentive plan                                                      |  |           | 61,698      |  |        |   | 2     | 
|Transfer from contributed surplus in respect of options exercised                       |  |           |            |  |        |   | 3     | 
|Transfer from accrued liabilities in respect of stock
    appreciation rights exercised |  |           |            |  |        |   | 3     | 
|                                                                                        |  |           |             |  |        |  
|September 30, 2005                                                                      |  |           | 189,485,940 |  |        | $ | 2,933 | 
|                                                                                        |  |           |             |  |        |  

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INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                       |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |         |        |   |      |         |        | 
|-------------------------------------- | -------------------------------------------------------------------------------- | ------------------ | ---- | ---------- | ----------------- | - | ---- | ------- | ---------- | - | ---- | ------- | ------ | - | ---- | ------- | ------ | 
|                                       |                                                                                  | Three Months Ended |      |            | Nine Months Ended |  
|                                       |                                                                                  | September 30,      |      |            | September 30,     |  
|                                       |                                                                                  |                    |      |            |                   |  
|                                       |                                                                                  | 2005               |      |            | 2004              |   |      | 2005    |            |   | 2004 |        
|                                       |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |        
|                                       |                                                                                  |                    |      | (Restated) |                   |   |      |         | (Restated) |  
|Basic earnings per share computation   |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |         |        |   |      |        
|Numerator:                             |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |         |        |   |      |        
|                                       | Net earnings applicable to common shares                                         |                    | $    | 62         |                   |   | $    | 142     |            |   | $    | 590     |        |   | $    | 382     |       
|                                       |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |        
|Denominator:                           |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |         |        |   |      |        
|                                       | Weighted-average common shares outstanding (in thousands)                        |                    |      | 189,255    |                   |   |      | 187,597 |            |   |      | 188,892 |        |   |      | 187,430 |       
|                                       |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |        
|Basic earnings per common share        |                                                                                  | $                  | 0.33 |            |                   | $ | 0.76 |         |            | $ | 3.12 |         |        | $ | 2.04 |        
|                                       |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |        
|Diluted earnings per share computation |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |         |        |   |      |        
|Numerator:                             |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |         |        |   |      |        
|                                       | Net earnings applicable to common shares                                         |                    | $    | 62         |                   |   | $    | 142     |            |   | $    | 590     |        |   | $    | 382     |       
|                                       | Dilutive effect of:                                                              |                    |      |            |                   |   |      |         |            |   |      |         |        |   |      |         |       
|                                       |                                                                                  | Convertible debt   |      |            | 4                 |   |      |         | 2          |   |      |         | 11     |   |      |         | 7      | 
|                                       |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |        
|                                       | Net earnings applicable to common shares, assuming dilution                      |                    | $    | 66         |                   |   | $    | 144     |            |   | $    | 601     |        |   | $    | 389     |       
|                                       |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |        
|Denominator:                           |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |         |        |   |      |        
|                                       | Weighted-average common shares outstanding (in thousands)                        |                    |      | 189,255    |                   |   |      | 187,597 |            |   |      | 188,892 |        |   |      | 187,430 |       
|                                       | Dilutive effect of:                                                              |                    |      |            |                   |   |      |         |            |   |      |         |        |   |      |         |       
|                                       |                                                                                  | Convertible debt   |      |            | 28,155            |   |      |         | 17,440     |   |      |         | 28,767 |   |      |         | 17,440 | 
|                                       |                                                                                  | Stock options      |      |            | 1,050             |   |      |         | 1,209      |   |      |         | 958    |   |      |         | 1,306  | 
|                                       |                                                                                  | Warrants           |      |            | 4,502             |   |      |         | 3,649      |   |      |         | 4,106  |   |      |         | 3,774  | 
|                                       |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |        
|                                       | Weighted-average common shares outstanding, assuming dilution
    (in thousands) |                    |      | 222,962    |                   |   |      | 209,895 |            |   |      | 222,723 |        |   |      | 209,950 |       
|                                       |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |        
|Diluted earnings per common share      |                                                                                  | $                  | 0.30 |            |                   | $ | 0.69 |         |            | $ | 2.70 |         |        | $ | 1.85 |        
|                                       |                                                                                  |                    |      |            |                   |   |      |         |            |   |      |        



|        |               
|------- | --------------
|Note 9. | Long-term debt

2 3


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INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)










|         |                 
|-------- | ----------------
|Note 10. | Convertible Debt

Accounting for Convertible Debt
Instruments


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INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                          |  |       |     |  |             |              |     |             |  |   |       |  |  |   |     | 
|----------------------------------------- |  | ----- | --- |  | ----------- | ------------ | --- | ----------- |  | - | ----- |  |  | - | --- | 
|                                          |  |       |     |  |             | Subordinated |     |             | 
|                                          |  | LYON  |     |  | Convertible |              |     | Convertible |  |   |      
|                                          |  | Notes |     |  | Debentures  |              |     | Debentures  |  |   | Total | 
|                                          |  |       |     |  |             |              |     |             |  |   |       | 
|Long-term debt, including current portion |  | $     | 101 |  |             | $            | 111 |             |  | $ | 104   |  |  | $ | 316 | 
|Equity                                    |  |       | 128 |  |             |              | 148 |             |  |   | 122   |  |  |   | 398 | 
|                                          |  |       |     |  |             |              |     |             |  |   |       | 
|Total                                     |  | $     | 229 |  |             | $            | 259 |             |  | $ | 226   |  |  | $ | 714 | 
|                                          |  |       |     |  |             |              |     |             |  |   |       | 





|         |         
|-------- | --------
|Note 11. | Warrants



|                   |  |           |            |   |        |   |    | 
|------------------ |  | --------- | ---------- | - | ------ | - | -- | 
|                   |  | Number of |            |   |       
|                   |  | Warrants  |            |   | Amount |  
|                   |  |           |            |   |        |  
|December 31, 2004  |  |           | 11,022,758 |   |        | $ | 62 | 
|Warrants issued    |  |           | 111        |   |        |   |   | 
|Warrants exercised |  |           | (4,834     | ) |        |   |   | 
|                   |  |           |            |   |        |  
|September 30, 2005 |  |           | 11,018,035 |   |        | $ | 62 | 
|                   |  |           |            |   |        |  



|         |                              
|-------- | -----------------------------
|Note 12. | Commitments and Contingencies



|    |            
|--- | -----------
|(a) | Commitments



|                        |  |                 |     |  |      |   |     |      |  |   |      |  |  |      |     |  |            |   |    |  |  |   |     | 
|----------------------- |  | --------------- | --- |  | ---- | - | --- | ---- |  | - | ---- |  |  | ---- | --- |  | ---------- | - | -- |  |  | - | --- | 
|                        |  | Payments Due in |    
|                        |  |                 |    
|                        |  | 2005            |     |  | 2006 |   |     | 2007 |  |   | 2008 |  |  | 2009 |     |  | Thereafter |  
|                        |  |                 |     |  |      |   |     |      |  |   |      |  |  |      |     |  |            |  
|Purchase obligations(1) |  | $               | 470 |  |      | $ | 427 |      |  | $ | 161  |  |  | $    | 104 |  |            | $ | 81 |  |  | $ | 29  | 
|Operating leases        |  |                 | 10  |  |      |   | 30  |      |  |   | 21   |  |  |      | 10  |  |            |   | 4  |  |  |   | 7   | 
|Other                   |  |                 |    |  |      |   | 2   |      |  |   | 3    |  |  |      | 3   |  |            |   | 3  |  |  |   | 88  | 
|                        |  |                 |     |  |      |   |     |      |  |   |      |  |  |      |     |  |            |  
|Total                   |  | $               | 480 |  |      | $ | 459 |      |  | $ | 185  |  |  | $    | 117 |  |            | $ | 88 |  |  | $ | 124 | 
|                        |  |                 |     |  |      |   |     |      |  |   |      |  |  |      |     |  |            |  






|    |                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These purchase obligations largely relate to the Voiseys
    Bay and Goro projects with the balance comprising routine orders
    to purchase goods and services at current operating locations
    and currently estimated purchases of certain intermediate
    products.

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INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |              
|--- | -------------
|(b) | Contingencies







|         |                    
|-------- | -------------------
|Note 13. | Segment Information



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INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                                                                    |  |          |       |   |               |   |             |          |  |   |              |  |  |       |     |  |      |  |   |            |  |  |      |   |  |      |      |   |      |  |      |   |  |   |       |  |  |   |       | 
|----------------------------------------------------------------------------------- |  | -------- | ----- | - | ------------- | - | ----------- | -------- |  | - | ------------ |  |  | ----- | --- |  | ---- |  | - | ---------- |  |  | ---- | - |  | ---- | ---- | - | ---- |  | ---- | - |  | - | ----- |  |  | - | ----- | 
|                                                                                    |  | Finished |       |   |               |   | Development |          |  |   |              | 
|                                                                                    |  | Products |       |   | Intermediates |   |             | Projects |  |   | Eliminations |  |  | Total |    
|                                                                                    |  |          |       |   |               |   |             |          |  |   |              |  |  |       |    
|Nine Months Ended September 30,                                                     |  | 2005     |       |   | 2004          |   |             | 2005     |  |   | 2004         |  |  | 2005  |     |  | 2004 |  |   | 2005       |  |  | 2004 |   |  | 2005 |      |   | 2004 | 
|                                                                                    |  |          |       |   |               |   |             |          |  |   |              |  |  |       |     |  |      |  |   |            |  |  |      |   |  |      |      |   |      | 
|                                                                                    |  |          |       |   |               |   |             |          |  |   |              |  |  |       |     |  |      |  |   | (Restated) | 
|Net sales to customers                                                              |  | $        | 3,268 |   |               | $ | 3,005       |          |  | $ | 129          |  |  | $     | 112 |  |      |  |  |            |  |  |     |   |  |      |     |   |      |  |     |   |  | $ | 3,397 |  |  | $ | 3,117 | 
|Intersegment sales                                                                  |  |          |      |   |               |   |            |          |  |   | 524          |  |  |       | 490 |  |      |  |  |            |  |  |     |   |  |      | (524 | ) |      |  | (490 | ) |  |   |      |  |  |   |      | 
|                                                                                    |  |          |       |   |               |   |             |          |  |   |              |  |  |       |     |  |      |  |   |            |  |  |      |   |  |      |      |   |      | 
|Net sales                                                                           |  |          | 3,268 |   |               |   | 3,005       |          |  |   | 653          |  |  |       | 602 |  |      |  |  |            |  |  |     |   |  |      | (524 | ) |      |  | (490 | ) |  |   | 3,397 |  |  |   | 3,117 | 
|                                                                                    |  |          |       |   |               |   |             |          |  |   |              |  |  |       |     |  |      |  |   |            |  |  |      |   |  |      |      |   |      | 
|Earnings (loss) before income and mining taxes and minority
    interest by segment |  |          | 885   |   |               |   | 857         |          |  |   | 308          |  |  |       | 345 |  |      |  |  |            |  |  | (213 | ) |  |      | (8   | ) |      |  | (40  | ) |  |   | 1,185 |  |  |   | 949   | 
|                                                                                    |  |          |       |   |               |   |             |          |  |   |              |  |  |       |     |  |      |  |   |            |  |  |      |   |  |      |      |   |      | 
|Not specifically allocable to segments:                                             |  |          |       |   |               |   |             |          |  |   |              |  |  |       |     |  |      |  |   |            |  |  |      |   |  |      |      |   |      |  |      |   |  |   |       |  |  |   |       | 
|Corporate selling, general and
    administrative expenses                          |  |          | 116   |   |               |   | 87          |         
|Currency translation adjustments                                                    |  |          | 48    |   |               |   | 29          |         
|Interest expense                                                                    |  |          | 16    |   |               |   | 29          |         
|Other income (loss), net                                                            |  |          | (8    | ) |               |   | 32          |         
|                                                                                    |  |          |       |   |               |  
|Earnings before income and mining
    taxes and minority interest                   |  | $        | 997   |   |               | $ | 836         |         
|                                                                                    |  |          |       |   |               |  

|                                                                                    |  |          |        |   |               |   |             |          |  |   |              |            |  |       |       |  |      |   |       |      |            |   |       |   |  |      |      |   |      |   |      |   |  |   |        |  |  |   |       | 
|----------------------------------------------------------------------------------- |  | -------- | ------ | - | ------------- | - | ----------- | -------- |  | - | ------------ | ---------- |  | ----- | ----- |  | ---- | - | ----- | ---- | ---------- | - | ----- | - |  | ---- | ---- | - | ---- | - | ---- | - |  | - | ------ |  |  | - | ----- | 
|                                                                                    |  | Finished |        |   |               |   | Development |          |  |   |              |           
|                                                                                    |  | Products |        |   | Intermediates |   |             | Projects |  |   | Eliminations |            |  | Total |      
|                                                                                    |  |          |        |   |               |   |             |          |  |   |              |            |  |       |      
|Three Months Ended September 30,                                                    |  | 2005     |        |   | 2004          |   |             | 2005     |  |   | 2004         |            |  | 2005  |       |  | 2004 |   |       | 2005 |            |   | 2004  |   |  | 2005 |      |   | 2004 |  
|                                                                                    |  |          |        |   |               |   |             |          |  |   |              |            |  |       |       |  |      |   |       |      |            |   |       |   |  |      |      |   |      |  
|                                                                                    |  |          |        |   |               |   |             |          |  |   |              | (Restated) |  |       |       |  |      |   |       |      | (Restated) |  
|Net sales to customers                                                              |  | $        | 1,031  |   |               | $ | 993         |          |  | $ | 51           |            |  | $     | 38    |  |      |   |      |      |            |   |      |   |  |      |     |   |      |   |     |   |  | $ | 1,082  |  |  | $ | 1,031 | 
|Intersegment sales                                                                  |  |          |       |   |               |   |            |          |  |   | 168          |            |  |       | 195   |  |      |   |      |      |            |   |      |   |  |      | (168 | ) |      |   | (195 | ) |  |   |       |  |  |   |      | 
|                                                                                    |  |          |        |   |               |   |             |          |  |   |              |            |  |       |       |  |      |   |       |      |            |   |       |   |  |      |      |   |      |  
|Net sales                                                                           |  |          | 1,031  |   |               |   | 993         |          |  |   | 219          |            |  |       | 233   |  |      |   |      |      |            |   |      |   |  |      | (168 | ) |      |   | (195 | ) |  |   | 1,082  |  |  |   | 1,031 | 
|                                                                                    |  |          |        |   |               |   |             |          |  |   |              |            |  |       |       |  |      |   |       |      |            |   |       |   |  |      |      |   |      |  
|Earnings (loss) before income and mining taxes and minority
    interest by segment |  |          | 196    |   |               |   | 277         |          |  |   | 80           |            |  |       | 135   |  |      |   |      |      |            |   | (5    | ) |  |      | 22   |   |      |   | (35  | ) |  |   | 298    |  |  |   | 372   | 
|                                                                                    |  |          |        |   |               |   |             |          |  |   |              |            |  |       |       |  |      |   |       |      |            |   |       |   |  |      |      |   |      |  
|Not specifically allocable to segments:                                             |  |          |        |   |               |   |             |          |  |   |              |            |  |       |       |  |      |   |       |      |            |   |       |   |  |      |      |   |      |   |      |   |  |   |        |  |  |   |       | 
|Corporate selling, general and
    administrative expenses                          |  |          | 49     |   |               |   | 39          |         
|Currency translation
    adjustments                                                |  |          | 52     |   |               |   | 62          |         
|Interest expense                                                                    |  |          | 4      |   |               |   | 9           |         
|Other income (loss), net                                                            |  |          | (11    | ) |               |   | 17          |         
|                                                                                    |  |          |        |   |               |  
|Earnings before income and
    mining taxes and minority
    interest               |  |          | 182    |   |               |   | 279         |         
|                                                                                    |  |          |        |   |               |  
|Identifiable assets at September 30, 2005
    and December 31, 2004                 |  | $        | 2,897  |   |               | $ | 2,793       |          |  | $ | 1,545        |            |  | $     | 1,580 |  |      | $ | 6,006 |      |            | $ | 5,394 |   |  | $    | (62  | ) |      | $ | (54  | ) |  | $ | 10,386 |  |  | $ | 9,713 | 
|                                                                                    |  |          |        |   |               |   |             |          |  |   |              |            |  |       |       |  |      |   |       |      |            |   |       |   |  |      |      |   |      |  
|Other assets                                                                        |  |          | 1,017  |   |               |   | 1,024       |         
|                                                                                    |  |          |        |   |               |  
|Total assets at September 30,
    2005 and December 31, 2004                        |  | $        | 11,403 |   |               | $ | 10,737      |         
|                                                                                    |  |          |        |   |               |  

15



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INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|         |                         
|-------- | ------------------------
|Note 14. | Supplemental Information



|                          |  |               |     |  |              |   |       | 
|------------------------- |  | ------------- | --- |  | ------------ | - | ----- | 
|                          |  | September 30, |     |  | December 31, |  
|                          |  | 2005          |     |  | 2004         |  
|                          |  |               |     |  |              |  
|Cash                      |  | $             | 326 |  |              | $ | 240   | 
|Cash equivalents          |  |               | 590 |  |              |   | 836   | 
|                          |  |               |     |  |              |  
|Cash and cash equivalents |  | $             | 916 |  |              | $ | 1,076 | 
|                          |  |               |     |  |              |  
|Finished metals           |  | $             | 169 |  |              | $ | 228   | 
|In-process metals         |  |               | 607 |  |              |   | 511   | 
|Supplies                  |  |               | 93  |  |              |   | 95    | 
|                          |  |               |     |  |              |  
|Inventories               |  | $             | 869 |  |              | $ | 834   | 
|                          |  |               |     |  |              |  

|                                       |  |   |        |            |  |   |        | 
|-------------------------------------- |  | - | ------ | ---------- |  | - | ------ | 
|                                       |  |   |        | (Restated) | 
|                                       |  |   |        |            | 
|Property, plant and equipment, at cost |  | $ | 12,981 |            |  | $ | 12,227 | 
|Accumulated depreciation and depletion |  |   | 4,720  |            |  |   | 4,640  | 
|                                       |  |   |        |            |  |  
|Property, plant and equipment, net     |  | $ | 8,261  |            |  | $ | 7,587  | 
|                                       |  |   |        |            |  |  





|         |                         
|-------- | ------------------------
|Note 15. | Stock Compensation Plans



|                                                                 |  |      |       |   |      |   |       |  
|---------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | -
|                                                                 |  | 2005 |       |   | 2004 |  
|                                                                 |  |      |       |   |      |  
|Stock price at grant date                                        |  | $    | 39.67 |   |      | $ | 36.40 |  
|Exercise price                                                   |  | $    | 39.67 |   |      | $ | 36.40 |  
|Weighted-average fair value of options granted during the period |  | $    | 12.21 |   |      | $ | 10.37 |  
|Expected life of options (years)                                 |  |      | 3.6   |   |      |   | 3.4   |  
|Expected dividend yield                                          |  |      |      | % |      |   |      | %
|Expected stock price volatility                                  |  |      | 34.8  | % |      |   | 35.0  | %
|Risk-free interest rate                                          |  |      | 3.6   | % |      |   | 2.5   | %

16



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##### Table of Contents



INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|         |                                                            
|-------- | -----------------------------------------------------------
|Note 16. | Sale of Interests in Goro Nickel S.A.S. (Goro
    Nickel)







17



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INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)








|         |                                                
|-------- | -----------------------------------------------
|Note 17. | Financial Instruments and Commodities Contracts





|         |                                                                    
|-------- | -------------------------------------------------------------------
|Note 18. | Significant Differences Between Canadian and United States
    GAAP



18



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##### Table of Contents



INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                                                                                                         |                                                                                   |      |     |            |      |   |     |      |  
|------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------- | ---- | --- | ---------- | ---- | - | --- | ---- | -
|Nine Months Ended September 30,                                                                                          |                                                                                   | 2005 |     |            | 2004 |  
|                                                                                                                         |                                                                                   |      |     |            |      |  
|                                                                                                                         |                                                                                   |      |     | (Restated) |     
|Net earnings  Canadian GAAP                                                                                             |                                                                                   | $    | 590 |            |      | $ | 382 |     
|Increased post-retirement benefits expense(a)                                                                            |                                                                                   |      | (34 | )          |      |   | (29 | )   
|Increased research and development expense(b)                                                                            |                                                                                   |      | (33 | )          |      |   | (12 | )   
|Increased exploration expense(c)                                                                                         |                                                                                   |      | (2  | )          |      |   | (1  | )   
|Increased interest expense(d)                                                                                            |                                                                                   |      | (19 | )          |      |   | (11 | )   
|Cash settlement of LYON notes tendered for conversion(d)                                                                 |                                                                                   |      | (22 | )          |      |   |    |     
|Unrealized net loss on derivative instruments(e)                                                                         |                                                                                   |      | (38 | )          |      |   |    |     
|Unrealized currency translation gains (losses) on Voiseys
    Bay project deferred income and mining tax liabilities(f) |                                                                                   |      | (42 | )          |      |   | (24 | )   
|Asset impairment charge(g)                                                                                               |                                                                                   |      |    |            |      |   | 11  |     
|Decreased (increased) minority interest expense                                                                          |                                                                                   |      | 8   |            |      |   | (8  | )   
|Taxes on United States GAAP differences                                                                                  |                                                                                   |      | 13  |            |      |   | 15  |     
|                                                                                                                         |                                                                                   |      |     |            |      |  
|Net earnings  United States GAAP                                                                                        |                                                                                   |      | 421 |            |      |   | 323 |     
|                                                                                                                         |                                                                                   |      |     |            |      |  
|Other comprehensive income (loss)(i):                                                                                    |                                                                                   |      |     |            |      |   |     |     
|                                                                                                                         | Reclassification of net gain on derivatives designated as cash
    flow hedges(e) |      |     | (13        | )    |   |     | (7   | )
|                                                                                                                         | Reclassification of net gain on derivatives due to
    ineffectiveness(e)         |      |     |           |      |   |     | (9   | )
|                                                                                                                         | Change in fair value of derivatives designated as cash flow
    hedges(e)         |      |     | (15        | )    |   |     | 4    |  
|Unrealized gain on long-term investments(h)                                                                              |                                                                                   |      | 40  |            |      |   | 1   |     
|Taxes on other comprehensive income (loss)                                                                               |                                                                                   |      | 1   |            |      |   | (1  | )   
|                                                                                                                         |                                                                                   |      |     |            |      |  
|Other comprehensive income (loss)(i)                                                                                     |                                                                                   |      | 13  |            |      |   | (12 | )   
|                                                                                                                         |                                                                                   |      |     |            |      |  
|Comprehensive earnings(i)                                                                                                |                                                                                   | $    | 434 |            |      | $ | 311 |     
|                                                                                                                         |                                                                                   |      |     |            |      |  
|                                                                                                                         | Net earnings per share  Basic                                                    |      | $   | 2.23       |      |   | $   | 1.72 |  
|                                                                                                                         |                                                                                   |      |     |            |      |  
|                                                                                                                         | Net earnings per share  Diluted                                                  |      | $   | 1.93       |      |   | $   | 1.57 |  
|                                                                                                                         |                                                                                   |      |     |            |      |  



|    |                         
|--- | ------------------------
|(a) | Post-retirement Benefits





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INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |                                 
|--- | --------------------------------
|(b) | Research and Development Expense





|    |                    
|--- | -------------------
|(c) | Exploration Expense





|    |                 
|--- | ----------------
|(d) | Convertible Debt





|    |                           
|--- | --------------------------
|(e) | Accounting for Derivatives





|    |                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------
|(f) | Unrealized Currency Translation Gains (Losses) on
    Voiseys Bay Project Deferred Income and Mining Tax
    Liabilities



20



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INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |                        
|--- | -----------------------
|(g) | Asset Impairment Charge





|    |            
|--- | -----------
|(h) | Investments





|    |                     
|--- | --------------------
|(i) | Comprehensive Income





|    |                         
|--- | ------------------------
|(j) | Supplemental Information



|                                                            |  |      |      |            |      |   |        |  
|----------------------------------------------------------- |  | ---- | ---- | ---------- | ---- | - | ------ | -
|Nine Months Ended September 30,                             |  | 2005 |      |            | 2004 |  
|                                                            |  |      |      |            |      |  
|                                                            |  |      |      | (Restated) |     
|Deficit at beginning of period                              |  | $    | (665 | )          |      | $ | (1,144 | )
|Net earnings                                                |  |      | 421  |            |      |   | 323    |  
|Common dividends paid                                       |  |      | (38  | )          |      |   |       |  
|                                                            |  |      |      |            |      |  
|Deficit at end of period                                    |  | $    | (282 | )          |      | $ | (821   | )
|                                                            |  |      |      |            |      |  
|Accumulated other comprehensive loss at beginning of period |  | $    | (589 | )          |      | $ | (516   | )
|Other comprehensive income (loss)                           |  |      | 13   |            |      |   | (12    | )
|                                                            |  |      |      |            |      |  
|Accumulated other comprehensive loss at end of period       |  | $    | (576 | )          |      | $ | (528   | )
|                                                            |  |      |      |            |      |  



|    |                                 
|--- | --------------------------------
|(k) | Recent Accounting Pronouncements

Share-Based Payment,


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INCO LIMITED AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


Accounting for Changes and Error Corrections.




|         |                 
|-------- | ----------------
|Note 19. | Subsequent Event

2 3 2 3


22



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

Overview






| |                       
| | ----------------------
| | Nature of Our Business





23



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##### Table of Contents





| |                                   
| | ----------------------------------
| | Key Factors Affecting Our Business







| |                                            
| | -------------------------------------------
| | Recent Nickel Market and Other Developments







24



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##### Table of Contents



2 3 2 3


Results of Operations




| |                 
| | ----------------
| | Earnings Summary



|                                      |           |                    |       |            |                   |   |       |      |            |   |       |      |  |   |       |      | 
|------------------------------------- | --------- | ------------------ | ----- | ---------- | ----------------- | - | ----- | ---- | ---------- | - | ----- | ---- |  | - | ----- | ---- | 
|                                      |           | Three Months Ended |       |            | Nine Months Ended |  
|                                      |           | September 30,      |       |            | September 30,     |  
|                                      |           |                    |       |            |                   |  
|                                      |           | 2005               |       |            | 2004              |   |       | 2005 |            |   | 2004  |     
|                                      |           |                    |       |            |                   |   |       |      |            |   |       |     
|                                      |           |                    |       | (Restated) |                   |   |       |      | (Restated) |  
|Net sales                             |           | $                  | 1,082 |            |                   | $ | 1,031 |      |            | $ | 3,397 |      |  | $ | 3,117 |     
|Net earnings                          |           |                    | 62    |            |                   |   | 142   |      |            |   | 590   |      |  |   | 382   |     
|Net earnings per common share         |           |                    |       |            |                   |   |       |      |            |   |       |      |  |   |       |     
|                                      |  basic   |                    |       | 0.33       |                   |   |       | 0.76 |            |   |       | 3.12 |  |   |       | 2.04 | 
|                                      |  diluted |                    |       | 0.30       |                   |   |       | 0.69 |            |   |       | 2.70 |  |   |       | 1.85 | 
|Cash provided by operating activities |           |                    | 187   |            |                   |   | 380   |      |            |   | 700   |      |  |   | 1,099 |     







|                        |  |               |        |  |                              |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|----------------------- |  | ------------- | ------ |  | ---------------------------- |  | ------ | ---- |  |  | ------ |  |  | ---- | ------ |  |  |  | ------ | 
|                        |  | Nine Months   |        |  |                             
|                        |  | Ended         |        |  | Year Ended December 31, 2005 | 
|                        |  | September 30, |        |  |                              | 
|                        |  | 2005          |        |  | 2004                         |  |        | 2003 |  |  | 2002   |  |  | 2001 |       
|                        |  |               |        |  |                              |  |        |      |  |  |        |  |  |      |       
|High                    |  |               | 1.2704 |  |                              |  | 1.3968 |      |  |  | 1.5747 |  |  |      | 1.6132 |  |  |  | 1.6021 | 
|Low                     |  |               | 1.1611 |  |                              |  | 1.1774 |      |  |  | 1.2924 |  |  |      | 1.5110 |  |  |  | 1.4936 | 
|Rate at end of period   |  |               | 1.1611 |  |                              |  | 1.2036 |      |  |  | 1.2924 |  |  |      | 1.5796 |  |  |  | 1.5926 | 
|Average rate for period |  |               | 1.2240 |  |                              |  | 1.3015 |      |  |  | 1.4015 |  |  |      | 1.5704 |  |  |  | 1.5484 | 

25



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Principal factors affecting 2005 third quarter net earnings
in comparison with 2004 third quarter net earnings




| |                       
| | ----------------------
| | In millions of dollars




Principal factors affecting 2005 first nine months net
earnings in comparison with 2004 first nine months net
earnings




| |                       
| | ----------------------
| | In millions of dollars






| |          
| | ---------
| | Net Sales



26



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|                |  |               |       |  |               |   |       |      |  |   |       |  |  |   |       | 
|--------------- |  | ------------- | ----- |  | ------------- | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                |  | Three Months  |       |  | Nine Months   |  
|                |  | Ended         |       |  | Ended         |  
|                |  | September 30, |       |  | September 30, |  
|                |  |               |       |  |               |  
|                |  | 2005          |       |  | 2004          |   |       | 2005 |  |   | 2004  | 
|                |  |               |       |  |               |   |       |      |  |   |       | 
|Primary nickel  |  | $             | 907   |  |               | $ | 819   |      |  | $ | 2,818 |  |  | $ | 2,499 | 
|Copper          |  |               | 104   |  |               |   | 99    |      |  |   | 305   |  |  |   | 267   | 
|Precious metals |  |               | 42    |  |               |   | 69    |      |  |   | 186   |  |  |   | 195   | 
|Other           |  |               | 29    |  |               |   | 44    |      |  |   | 88    |  |  |   | 156   | 
|                |  |               |       |  |               |   |       |      |  |   |       | 
|                |  | $             | 1,082 |  |               | $ | 1,031 |      |  | $ | 3,397 |  |  | $ | 3,117 | 
|                |  |               |       |  |               |   |       |      |  |   |       | 



Average realized and LME cash prices for nickel and copper




| |                     
| | --------------------
| | In dollars per pound

Third Quarter





First Nine Months





27



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##### Table of Contents





Deliveries




| |                                        
| | ---------------------------------------
| | Nickel and copper in millions of pounds

| |                                 
| | --------------------------------
| | PGMs in thousands of troy ounces

Third Quarter





First Nine Months







| |                                 
| | --------------------------------
| | Cost of Sales and Other Expenses



|                                                         |             |                    |        |       |                   |  |        |       |  |  |         |       |  |  |         |       | 
|-------------------------------------------------------- | ----------- | ------------------ | ------ | ----- | ----------------- |  | ------ | ----- |  |  | ------- | ----- |  |  | ------- | ----- | 
|                                                         |             | Three Months Ended |        |       | Nine Months Ended | 
|                                                         |             | September 30,      |        |       | September 30,     | 
|                                                         |             |                    |        |       |                   | 
|                                                         |             | 2005               |        |       | 2004              |  |        | 2005  |  |  | 2004    |      
|                                                         |             |                    |        |       |                   |  |        |       |  |  |         |      
|Production  Nickel in all forms (tonnes)                |             |                    | 50,508 |       |                   |  | 53,365 |       |  |  | 156,368 |       |  |  | 170,622 |      
|Nickel unit cash cost of sales before by-product credits |             |                    |        |       |                   |  |        |       |  |  |         |       |  |  |         |      
|                                                         |  per tonne |                    | $      | 7,143 |                   |  | $      | 5,864 |  |  | $       | 6,790 |  |  | $       | 5,600 | 
|                                                         |  per pound |                    |        | 3.24  |                   |  |        | 2.66  |  |  |         | 3.08  |  |  |         | 2.54  | 
|Nickel unit cash cost of sales after by-product credits  |             |                    |        |       |                   |  |        |       |  |  |         |       |  |  |         |      
|                                                         |  per tonne |                    | $      | 6,680 |                   |  | $      | 5,071 |  |  | $       | 6,173 |  |  | $       | 4,894 | 
|                                                         |  per pound |                    |        | 3.03  |                   |  |        | 2.30  |  |  |         | 2.80  |  |  |         | 2.22  | 
|Finished nickel inventories at end of period (tonnes)    |             |                    | 17,997 |       |                   |  | 28,681 |       |  |  | 17,997  |       |  |  | 28,681  |      

28



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29



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##### Table of Contents



Factors Affecting Nickel Unit Cash Cost of Sales After
By-product Credits




Nickel Unit Cash Cost of Sales after by-product credits




| |                              
| | -----------------------------
| | In dollars or cents per pound

Third Quarter 2005 compared with Third Quarter 2004





First Nine Months 2005 compared with First Nine Months
2004







| |                                    
| | -----------------------------------
| | Selling, General and Administrative





| |                        
| | -----------------------
| | Asset Impairment Charge



30



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##### Table of Contents





| |                        
| | -----------------------
| | Income and Mining Taxes





| |                  
| | -----------------
| | Minority Interest





| |                      
| | ---------------------
| | Intermediates Segment



Cash Flows, Liquidity and Capital Resources






31



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32



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33



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##### Table of Contents







Off-Balance Sheet Arrangements and Aggregate Contractual
Obligations




| |                               
| | ------------------------------
| | Off-Balance Sheet Arrangements





| |                        
| | -----------------------
| | Contractual Obligations



34



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##### Table of Contents





| |                                
| | -------------------------------
| | Derivative Instrument Positions



|                         |                                         |      |  |             |      |  |  |             |   |  |       |             |   |  |  |             |  
|------------------------ | --------------------------------------- | ---- |  | ----------- | ---- |  |  | ----------- | - |  | ----- | ----------- | - |  |  | ----------- | -
|As at September 30, 2005 |                                         | 2006 |  |             | 2007 |  |  | 2008        |   |  | Total |            
|                         |                                         |      |  |             |      |  |  |             |   |  |       |            
|Copper                   |                                         |      |  |             |      |  |  |             |   |  |       |             |   |  |  |            
|                         | Range forward options (tonnes)          |      |  | 19,500      |      |  |  | 58,992      |   |  |       | 48,384      |   |  |  | 126,876     |  
|                         | Average (minimum-maximum) ($ per tonne) |      |  | 2,535-3,400 |      |  |  | 2,205-2,988 |   |  |       | 2,205-2,773 |   |  |  | 2,256-2,969 |  
|                         | Contract amount (in $ millions)         |      |  | 49-66       |      |  |  | 130-176     |   |  |       | 107-134     |   |  |  | 286-376     |  
|                         | Fair value (in $ millions)              |      |  | (7          | )    |  |  | (16         | ) |  |       | (13         | ) |  |  | (36         | )
|                         |                                         |      |  |             |      |  |  |             |   |  |       |            
|                        
|Copper                   |                                         |      |  |             |      |  |  |             |   |  |       |             |   |  |  |            
|                         | Put options (tonnes)                    |      |  | 15,000      |      |  |  |            |   |  |       | 3,600       |   |  |  | 18,600      |  
|                         | Average price ($ per tonne)             |      |  | 2,425       |      |  |  |            |   |  |       | 2,485       |   |  |  | 2,437       |  
|                         | Contract amount (in $ millions)         |      |  | 36          |      |  |  |            |   |  |       | 9           |   |  |  | 45          |  
|                         | Fair value (in $ millions)              |      |  |            |      |  |  |            |   |  |       | 1           |   |  |  | 1           |  
|                         |                                         |      |  |             |      |  |  |             |   |  |       |            

Critical Accounting Policies and Estimates




Accounting Changes




| |                 
| | ----------------
| | Convertible Debt

Financial
Instruments  Disclosure and Presentation 1 2 Financial Instruments that
may be Settled at the Issuers Option in Cash or its own
Equity Instruments Accounting for Convertible Debt
Instruments


Non-GAAP Financial Measure




35



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Reconciliation of Nickel Unit Cash Cost of Sales Before and
After By-Product Credits to Canadian GAAP Cost of Sales


|                                                                           |  |                    |      |   |                   |   |      |      |  |   |       |   |  |   |       |  
|-------------------------------------------------------------------------- |  | ------------------ | ---- | - | ----------------- | - | ---- | ---- |  | - | ----- | - |  | - | ----- | -
|                                                                           |  | Three Months Ended |      |   | Nine Months Ended |  
|                                                                           |  | September 30,      |      |   | September 30,     |  
|                                                                           |  |                    |      |   |                   |  
|                                                                           |  | 2005               |      |   | 2004              |   |      | 2005 |  |   | 2004  |  
|(In millions of United States dollars except pound and per pound data)     |  |                    |      |   |                   |   |      |      |  |   |       |  
|Cost of sales and other expenses, excluding depreciation and
    depletion |  | $                  | 688  |   |                   | $ | 568  |      |  | $ | 1,907 |   |  | $ | 1,705 |  
|By-product costs                                                           |  |                    | (146 | ) |                   |   | (148 | )    |  |   | (461  | ) |  |   | (425  | )
|Purchased finished nickel                                                  |  |                    | (88  | ) |                   |   | (49  | )    |  |   | (244  | ) |  |   | (182  | )
|Delivery expense                                                           |  |                    | (9   | ) |                   |   | (9   | )    |  |   | (27   | ) |  |   | (25   | )
|Other businesses cost of sales                                             |  |                    | (10  | ) |                   |   | (9   | )    |  |   | (29   | ) |  |   | (29   | )
|Non-cash items(1)                                                          |  |                    | (7   | ) |                   |   | (7   | )    |  |   | (21   | ) |  |   | (25   | )
|Remediation, demolition and other related expenses                         |  |                    | (8   | ) |                   |   | (7   | )    |  |   | (24   | ) |  |   | (18   | )
|Adjustments associated with affiliate transactions                         |  |                    | 5    |   |                   |   | (23  | )    |  |   | 51    |   |  |   | (64   | )
|Asset write-offs and related charges(2)                                    |  |                    | (32  | ) |                   |   |     |      |  |   | (32   | ) |  |   |      |  
|Other                                                                      |  |                    | 2    |   |                   |   |     |      |  |   | 1     |   |  |   | 1     |  
|                                                                           |  |                    |      |   |                   |   |      |      |  |   |       |  
|Nickel cash cost of sales before by-product credits(3)                     |  |                    | 395  |   |                   |   | 316  |      |  |   | 1,121 |   |  |   | 938   |  
|By-product net sales                                                       |  |                    | (171 | ) |                   |   | (191 | )    |  |   | (564  | ) |  |   | (541  | )
|By-product costs                                                           |  |                    | 146  |   |                   |   | 148  |      |  |   | 461   |   |  |   | 425   |  
|                                                                           |  |                    |      |   |                   |   |      |      |  |   |       |  
|Nickel cash cost of sales after by-product credits(3)                      |  | $                  | 370  |   |                   | $ | 273  |      |  | $ | 1,018 |   |  | $ | 822   |  
|                                                                           |  |                    |      |   |                   |   |      |      |  |   |       |  
|Inco-source nickel deliveries (millions of pounds)                         |  |                    | 122  |   |                   |   | 119  |      |  |   | 364   |   |  |   | 370   |  
|                                                                           |  |                    |      |   |                   |   |      |      |  |   |       |  
|Nickel unit cash cost of sales before by-product credits per
    pound     |  | $                  | 3.24 |   |                   | $ | 2.66 |      |  | $ | 3.08  |   |  | $ | 2.54  |  
|                                                                           |  |                    |      |   |                   |   |      |      |  |   |       |  
|Nickel unit cash cost of sales after by-product credits per pound          |  | $                  | 3.03 |   |                   | $ | 2.30 |      |  | $ | 2.80  |   |  | $ | 2.22  |  
|                                                                           |  |                    |      |   |                   |   |      |      |  |   |       |  






|    |                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Representing principally post-retirement benefits other than
    pensions.                                                                                                                                                                                                                               
|   
|(2) | Relates to certain assets at PT Inco that management determined
    had no future value to PT Incos operations and the
    write-off of the book values of certain equipment assessed to be
    beyond economic repair and to PT Incos change in
    accounting for asset sales and other dispositions.
|   
|(3) | Nickel cash cost of sales before and after by-product credits
    includes costs for both Inco-source and external feed.                                                                                                                                                                                 






|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures About Market
    Risk



| |            
| | -----------
| | Other Risks



36



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##### Table of Contents
















|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures





| |                                                           
| | ----------------------------------------------------------
| | Cautionary Notice Regarding Forward-Looking
    Statements



37



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##### Table of Contents





38



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##### Table of Contents






PART II  OTHER INFORMATION







|        |         
|------- | --------
|Item 6. | Exhibits

| |      |  |  |                                                                                                                                                                                                                          
| | ---- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.1  |  |  | Support Agreement dated as of October 10, 2005 between Inco
    Limited and Falconbridge Limited (incorporated by reference to
    Exhibit 2.1 to the Companys Current Report on
    Form 8-K filed on October 13, 2005)
| | 31.1 |  |  | Certification of the Chief Executive Officer of the Registrant
    pursuant to Rule 13a-14(a) of the U.S. Securities
    Exchange Act of 1934, as amended                                                                
| | 31.2 |  |  | Certification of the Chief Financial Officer of the Registrant
    pursuant to Rule 13a-14(a) of the U.S. Securities
    Exchange Act of 1934, as amended                                                                
| | 32.1 |  |  | Certification of the Chief Executive Officer and Chief Financial
    Officer of the Registrant pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002          

39



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##### Table of Contents



SIGNATURES




|                       |  |                                                                                                    
|---------------------- |  | ---------------------------------------------------------------------------------------------------
|                      
|                       |  | Inco Limited                                                                                       
|                      
|Date: October 28, 2005 |  | By: /s/ S. F.
    FeinerS.
    F. FeinerExecutive Vice-President,
    General Counsel and Secretary
|                      
|Date: October 28, 2005 |  | By: /s/ R. A.
    LehtovaaraR.
    A. LehtovaaraVice-President and Comptroller                     

40



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##### Table of Contents



EXHIBIT INDEX


|         |    |    |  |                                                                                                                                                                                                                          
|-------- | -- | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibits |    |   
|         |    |   
|         | 2  | .1 |  | Support Agreement dated as of October 10, 2005 between Inco
    Limited and Falconbridge Limited (incorporated by reference to
    Exhibit 2.1 to the Companys Current Report on
    Form 8-K filed on October 13, 2005)
|         | 31 | .1 |  | Certification of the Chief Executive Officer of the Registrant
    pursuant to Rule 13a-14(a) of the U.S. Securities
    Exchange Act of 1934, as amended                                                                
|         | 31 | .2 |  | Certification of the Chief Financial Officer of the Registrant
    pursuant to Rule 13a-14(a) of the U.S. Securities
    Exchange Act of 1934, as amended                                                                
|         | 32 | .1 |  | Certification of the Chief Executive Officer and Chief Financial
    Officer of the Registrant pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002