Consolidated Capital Expenditure

In 2008, total capital expenditure rose to $5 billion. Expansionary capital expenditure of $3.4 billion fell below previous guidance for 2008 of $3.7 billion, as a number of discretionary expenditure items were deferred or foregone in the latter part of the year, reflecting the Group’s focus on cash optimisation following the sharp reversal in economic conditions. Sustaining capital expenditure remained in line with full-year guidance at $1.7 billion.

Major items of expansionary capital expenditure during the year included further spending at a number of the Group’s major brownfield and greenfield growth projects. Capital expenditure at Xstrata Nickel rose to $1.6 billion in 2008. Over $866 million was spent at Koniambo (on a 100% basis) to make significant progress in the construction of this major greenfield project, which at full capacity will produce 60,000 tonnes of nickel with first quartile costs. Xstrata Nickel’s partner SMSP contributed $173 million during the year. Expenditure of $205 million was invested at Xstrata Nickel Australasia to develop the Cosmos and Sinclair operations and continue exploration drilling. The Nickel Rim South project incurred $234 million of capital expenditure for deposit definition and to progress the operation’s ramp up as it approaches commissioning. Together with the accelerated closure of end-of-life operations, the Nickel Rim South project will transform Xstrata Nickel’s Sudbury operations and significantly reduce the overall cost profile of the complex when it commences production this year. Capital spending at Xstrata Coal included the Goedgevonden thermal coal operation in South Africa which is on track to commence production in the second quarter, the expansion of Glendell and expenditure to progress the large-scale Wandoan project. New operations commenced during 2008 at Xstrata Zinc’s Perseverance mine in Canada, Xstrata Nickel’s Sinclair mine in Western Australia and the Elandsfontein PGM mine and concentrator in South Africa. Expansion projects were completed at Lomas Bayas and Altonorte copper operations during the second half and pre-feasibility and feasibility studies were progressed or completed at a number of copper growth projects including Tampakan, Las Bambas, Antapaccay, El Pachóun, El Morro, Energía Austral and in respect of expansions to the Collahuasi and Antamina operations.

Xstrata’s businesses are undertaking ongoing reviews of both sustaining and expansionary capital expenditure and have already identified significant reductions in 2009 expenditure, through the deferral or suspension of capital spending during a period of depressed commodity prices, lower cash flows and poor visibility into the near-term outlook. Capital expenditure deferrals have been structured to retain maximum optionality from Xstrata’s significant organic growth pipeline, positioning the Group to rapidly bring on lower cost organic growth in key commodities when market conditions allow.