Coal

Developments

Xstrata Coal continued to progress the development of its world-class portfolio of low-cost expansion and development options.

Australia

Xstrata Coal achieved majority ownership of the Ravensworth underground coal mine in the first quarter of 2008. Since assuming management control, the operation has been fully integrated, with longwall production recommencing in the third quarter.

In March, Xstrata commenced operations at its New South Wales Glendell operation, having received government approval to increase the maximum rate of run of mine coal production of Glendell from 3.6 million tonnes per year to 4.5 million tonnes per annum. The coal from Glendell is being processed through the expanded Mount Owen Coal Handling and Processing Plant, which was commissioned in January ahead of time and within budget.

The Liddell operation in New South Wales was also successfully expanded from 4.5 million tonnes per year to 7 million tonnes per annum ROM on a managed basis, with the completion of the new Liddell Coal Processing Plant on time and within budget in the fourth quarter of 2008.

Development of the Blakefield South underground operation, within the Bulga Coal Complex, continues. Blakefield South will replace the high productivity Beltana underground mine and first longwall coal is expected in 2010.

Planned expansions of the Ulan mine and the Ravensworth complex were advanced through pre-feasibility studies into the feasibility phase, both of which will continue through 2009.

Xstrata Coal completed feasibility studies and received the mining lease for its proposed $1 billion Mangoola Coal Project in New South Wales. The Mangoola mine will produce up to 10.5 ROM million tonnes of both export and domestic quality thermal coal annually and has an expected mine life of 18 years. In August, the Xstrata Board approved the development of the open cut thermal coal mine.

The large Wandoan coal project completed pre-feasibility in late 2008 and released the Environmental Impact Statement for public review in December. A large scale sample pit development in the middle of the year generated washed coal for market testing and trial burns, with favourable results. The Wandoan project, located in the Surat basin in Queensland, is expected to deliver over 20 million tonnes of thermal coal annually and feasibility studies will continue throughout 2009. There was also a significant increase in the project’s coal resources to 2,530 million tonnes and a maiden marketable reserve of 395 million tonnes.

South Africa

In March 2008, Xstrata announced the restructure of its Douglas Tavistock Joint Venture (DTJV) with BHP Billiton Energy Coal South Africa (BECSA) in March 2008. Under the terms of the restructuring, Xstrata acquired and now manages the mining of reserves approximately equivalent to its original 16% share in the DTJV, in an area contiguous to its 100% owned Arthur Taylor Colliery Open-Cast Mine (ATCOM) operations. Xstrata will commence separate mining operations from 1 July 2009. The restructuring enables Xstrata to integrate the acquired discrete reserves from the former DTJV into Xstrata Coal’s 100% owned ATCOM complex, to leverage existing infrastructure and take direct management control of the operation, which will be renamed ATCOM East. The new operation has 157 million tonnes of coal reserves.

The new Goedgevonden open cut thermal mine is now well advanced and is expected to commence plant commissioning on schedule in the second quarter of 2009.

Americas

The ramp up of the Cerrejón open cut mine to 32 million tonnes per annum was completed in the second half of the year. The feasibility study for a subsequent increase to 40 million tonnes per annum is under way.

The Donkin Coal project in Canada completed the next stage of the pre-feasibility process, with Xstrata Coal committing to commence a detailed exploration project in the first quarter of 2009.

Transporting coal at Newlands in Queensland, Australia, where the underground operation achieved productivity improvements during 2008.