Release: Fitch initiates coverage on PT Inco

(NEW YORK, Feb. 3, 2005) Fitch Ratings has initiated rating coverage on P.T. International Nickel Indonesia Tbk (PT Inco) by assigning a 'BB' long-term foreign currency rating to PT Inco's outstanding senior secured debt, maturing on March 31, 2006.

The rating recognizes PT Inco's substantial high-quality ore reserves, long track record of successful mining operations in Indonesia, limited currency risk exposure, strong off take contracts, and quality of management. The rating also recognizes PT Inco's exposure to nickel price volatility, the customary risks associated with mining, as well as the limitations associated with the Indonesian sovereign environment.

PT Inco's integrated production and processing facilities at Sorowako on the island of Sulawesi constitute one of the world's largest laterite nickel mining operations. At the end of 2003, PT Inco's proven reserves amounted to 62 million tonnes grading 1.81 percent nickel and 45 million tonnes of probable reserves grading 1.80 percent nickel. These reserves should be sufficient to feed the company's operations for over 20 years. PT Inco's final nickel in matte product contains about 77%-80% nickel, 1%-2% cobalt, 18-22% sulphur, and 0.7% iron. The company's deposits at Pomalaa and Bahodopi are known to contain additional significant mineral resources of comparable size to that of Sorowako.

The totality of PT Inco's final production is sold under long-term, 'must-take' contracts to its owners -- Inco Limited (80%) and Sumitomo Metal Mining Co., Ltd. (20%) -- until the expiration of the contract of work (COW) agreement between the company and the government of Indonesia as extended in 1996 through 2025. These sales contracts are subject to further extension if the COW is extended. While exposed to world nickel market price risk, the company is effectively shielded from volumetric risk. In addition, all sales are denominated in U.S. dollars and proceeds are received and maintained in offshore bank accounts. PT Inco's debt obligations are non recourse and repayable from essentially one surface mining operation, but Inco Ltd's strengths as off taker, in particular, provide significant support. Under existing trust agreements, debt obligations are paid directly from offshore accounts. This flow-of-funds structure significantly mitigates currency risk and other sovereign risks.

Recognizing Indonesia's reduced political risk since the presidential elections of September 2004, better policy initiation and coordination, anticipated reforms, stronger economic growth, and improvements in the nation's finances, Fitch upgraded Indonesia's long-term foreign and local currency ratings to 'BB-' from 'B+' on Jan. 27, 2005. The Rating Outlook on Indonesia remains Positive.

Under a COW dating from 1968, PT Inco has produced nickel in Indonesia since completion of the facilities in 1978. For the first nine months of 2004, the company achieved net sales of US $602 million and net earnings of approximately US$209 million. This strong performance generated increased free cash flow, resulting in part from the current strength of the global nickel market. PT Inco is owned 61% by Inco Limited (one of the world's leading nickel producers), 20% by Sumitomo Metal Mining Co., Ltd (rated 'BB-' by Fitch), and 19% by public shareholders (Indonesian Stock Exchange listings). (End of release)