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Rumour: Project Milo cancelled

UPDATE: MS, Lionhead respond.

UPDATE: Microsoft and Lionhead have responded to Eurogamer's enquiries with the standard: "Microsoft does not comment on rumour or speculation."

ORIGINAL STORY: Peter Molyneux's controversial Kinect game Project Milo has been cancelled, sources have claimed.

Development on Lionhead's motion-sensing relationship simulation was officially halted yesterday, with "19 contractors" let go, according to a source claiming to be close to the situation.

Two teams will now focus on the Fable franchise, Eurogamer was told. According to our source, the old Milo team will reuse the Milo tech for a "Fable themed Kinect game".

So far Microsoft and Lionhead have refused to comment on the claim, but we're working on that.

The news comes as some surprise. Only last month Molyneux told Eurogamer Project Milo was on.

"Of course!," he said when asked whether we'll be able to buy it in the shops at some point in the future. "I wouldn't be working on it if I didn't hope that to be true, yes."

In July Molyneux admitted he finds it "insanely hard" to convince others of the validity of his new game ideas before they're realised.