Performance against KPIs

Xstrata’s Executive Committee and Board monitor a range of financial and non-financial KPIs on a regular basis to measure the Group’ performance. The performance indicators provided in this report are not comprehensive and a number of additional KPIs are used at the Group and commodity business level.

Financial KPIs

Xstrata’s financial performance is described in detail in the Financial Review.

Non-financial KPIs

Employees

The retention of skilled and key personnel is a high strategic priority for management and is identified as a principal risk facing the Group. Employee turnover increased to 12% in 2008 (2007: 7%). Voluntary turnover (excluding compulsory redundancies or performance-related terminations) of 7% in 2008 remained at a similar level to the previous year (2007: 6.5%). This reflected strong competition for skilled labour for the majority of the year and consequently, voluntary turnover was particularly high in core mining regions such as South Africa, Australia and Canada. Compulsory redundancies also increased in 2008, primarily due to the suspension of the Falcondo ferronickel operation in the Dominican Republic during the year, due to continued low nickel prices and high costs.

In 2008, women represented 10.7% of Xstrata’s total workforce (2007: 9.4%) and 14.6% of all managers (2007: 13.4%). In South Africa, the Mining Act sets out a target of 40% participation in the workforce by historically disadvantaged South Africans (HDSAs) by 2009 and our South African operations are on track to achieve these targets.

In 2008, expenditure on training for all employees (including long-term contractors) rose to $1,849 per employee, 14% higher than in 2007, while training hours per employee rose by 16% to 38 hours per employee. The increase in each case reflects our continued commitment to investing in our people’ skills and in particular significant investment in risk management, behavioural and other safety training.

Health

Occupational illnesses are a measure of the number of new cases reported by our workforce during the year. In a number of instances, illnesses reported during the year are attributable to historical operational practices (for example, noise-induced hearing loss or musculo-skeletal illnesses, where the time lag between exposure and reporting the illness may be considerable), incidents may also be attributable to more recent exposure, for example, respiratory illnesses relating to occupational asthma or dust exposure. In each case, Xstrata aims to identify, assess and control occupational exposure to hazards with an overall aim of eliminating occupational illnesses. In 2008, 60 new occupational illnesses were reported (2007: 35). The increase was due to increased reported illnesses at operations acquired in 2008 and at Mount Isa, as a result of a comprehensive health screening and information programme, through which 12 additional cases were identified, comprising noise-induced hearing loss and musculo-skeletal illnesses.

Noise-induced hearing loss accounted for the majority of new cases in 2008, while the number of new musculo-skeletal illnesses reported increased significantly, reflecting the impact of historical practices and the ageing profile of our workforce in a number of regions.

Safety

Tragically, six people lost their lives at Xstrata’s managed operations in 2008 (2007: nine fatalities) in five separate incidents, in South Africa, Peru and Argentina. Xstrata is investing significantly in behavioural safety training and major hazard management training, with a particular focus on addressing cultural issues that contribute to safety risks in developing countries. Safety is a particular concern during times of change and uncertainty. Xstrata’s operational and executive management are responding to increased risks posed by the prevailing uncertain economic environment, including through increasing employee communications and awareness programmes and by continuing to invest in safety training and operational integrity as a priority.

The Group achieved a seventh consecutive year of significant reductions in the frequency of total recordable and lost-time injuries. The total recordable injury frequency rate reduced by 24% on a like-for-like basis compared to 2007, or by 18% including the performance of operations acquired in 2008 to 10.1 per million hours worked. The frequency of lost-time injuries sustained reduced by 20% like-for-like or by 11% including acquired operations to 2.7 per million hours worked.

Corporate social involvement

Xstrata sets aside a minimum of 1% of Group profit before tax each year to fund corporate social involvement initiatives. This investment is primarily directed to initiatives to benefit the communities associated with our operations. In addition to cash donations and funding for partnerships with a wide range of development, community, governmental and industry partners, Xstrata’s businesses also make non-cash, in-kind donations, for example, providing equipment or personnel time. In total, $84.1 million in cash was set aside for CSI in 2008, equivalent to 1.6% of Group profit before tax for the year. In-kind donations contributed a further $20.8 million of benefits to communities and charities in the regions in which we operate.

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Environmental incidents

Xstrata’s businesses record all environmental incidents on a scale according to environmental impact, with category one incidents representing very minor incidents with negligible impact and category four and five incidents representing major or disastrous incidents with medium- to long-term impacts respectively. Our target is to operate with zero category three incidents (moderate, reversible environmental impact requiring moderate remediation) or above. No category four or five incidents have ever occurred at Xstrata’s operations. In 2008, the number of category three incidents reduced to eight incidents (2007: 11 category three incidents). In previous years, stormwater discharges off-site have presented a particular challenge at Xstrata’s Mount Isa operations. Due to improved stormwater management systems at the site, no category three incidents were recorded at Mount Isa operations in 2008. However, in South Africa, severe storm weather and heavy rainfall in August resulted in three incidences of dam overflows or breaches at coal operations. The remainder of category three incidents related to procedural failures at operations. Remedial action plans have been implemented for all category three incidents and any environmental impacts have been fully remediated.

Greenhouse gas emissions

In 2008, Xstrata’s direct and indirect greenhouse gas emissions from its operations remained at a similar level to the previous year on a like-for-like basis, excluding operations acquired in 2008. Including the impact of operations acquired during 2008, total greenhouse gas emissions rose to 26.9 million tonnes, 7% higher than the previous year (2007: 25.2mt CO2-e). Acquired underground coal operations at Ravensworth underground and Tahmoor in Australia contributed an additional 1.5mt of CO2-e to the Group’ emissions, primarily due to methane emissions from these mines. Indirect emissions attributable to electricity usage remained at a similar level to the previous year. Data for 2007 was restated to include emissions attributable to ‘bunker C’ oil, a heavy fuel oil used in Canada, which had not previously been fully included in the Group’ reported data.

In addition to absolute tonnes of CO2-e generated directly at its operations and through electricity usage, Xstrata also measures the ‘carbon intensity’ of its operations. This measure normalises carbon emissions (in million tonnes) against production (in million tonnes) and provides a basis for comparison year-on-year notwithstanding changes to production levels across the Group. In 2008, the carbon intensity of the Group’ operations increased by approximately 8%, due to the inclusion of the acquired, relatively high-methane underground coal mines into the portfolio and due to increased use of diesel at a number of Xstrata’s open cut coal and copper mines as haulage distances increase.

Energy

Approximately 50% of Xstrata’s energy consumption is from electricity, predominantly used at metallurgical operations, where energy efficiency is an important component of financial performance and efficiency. At the Group’ mining operations, the primary source of energy is diesel, used to fuel the mining fleet and mobile equipment.

In 2008, energy use at Xstrata’s operations remained at a similar level to the previous year at 127.1 petajoules (PJ), including operations acquired in 2008 (2007: 127.4PJ). Consequently, the energy intensity of our operations remained at a similar level to the previous year. Stable electricity consumption and increased diesel usage, due to higher production and longer haulage distances at open cut mines, were offset by reduced energy from coke and other fossil fuels, as a result of lower production and improved efficiency at Xstrata Alloys’ operations. Energy consumption figures for 2007 were restated from 112.7PJ previously reported, due to the addition of energy from bunker C heavy fuel oil (see greenhouse gas emissions above).

Water

Effective fresh water management and conservation is critical to Xstrata’s operations, a number of which are located in arid regions. In addition, our operations seek to maximise the use of process and recycled fresh water, further reducing our impact on fresh water supplies. In 2008, Xstrata’s operations used a similar amount of fresh water to the prior year (<1% increase), despite the impact of a number of operations commissioning during the year, including the Elandsfontein platinum operations and Boshoek open cast chrome mine.

Fresh water intensity measures the volume of fresh water used, denominated by production volumes, to provide a basis for year-on-year comparison of our progress towards our aim of using less fresh water per tonne of product. In 2008, the fresh water intensity of our operations only marginally increased, in line with slightly higher water use.

Recycled water is typically used in place of fresh water for processes such as dust suppression. In 2008, water management plans at every managed operation, together with increased rainfall in South Africa, which allowed run-off rainwater to be recycled and reused, increased the volume of recycled water used at our operations. Volumes rose by 30% to 511,400ML (2007: 394,200ML), further boosted by the commencement of production at a number of mining operations and the impact of acquired operations, slightly offset by the suspension of operations at Falcondo in August.

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