XSTRATA COAL'S NSW BAAL BONE COLLIERY TO REDUCE ANNUAL PRODUCTION

Zug, 18 July 2003

Xstrata plc announces that Baal Bone Colliery is to reduce annual production from two million to 1.2 million tonnes of coal. The combination of a rising Australian dollar, historically low coal prices and increasing workers compensation insurance premiums, has placed the long-term viability of the operation under threat. The planned production cut will also impact employee levels.

Mr Peter Coates, Chief Executive Xstrata Coal, said, "Thermal coal prices remain historically low. This has been further exacerbated by the strengthening of the Australian dollar, which has seen the price received in Australian dollar terms fall by 30% in the last eighteen months. NSW producers have the added burden of unsustainable increases in workers compensation insurance premiums, which continue to rise despite a sustained improvement in the industry's safety performance."

"All of our NSW operations face these challenges. However, Baal Bone is further disadvantaged by a medium-ash coal product and higher transportation costs than competing Hunter Valley producers, due to its distance from port. Baal Bone's workers compensation insurance premiums have increased by 37% in the last 12 months and now exceed the level of royalties paid on a per tonne basis. All of these factors together make it difficult for Baal Bone to remain viable in such a highly competitive export market."

Mick Buffier, Chief Operating Officer Xstrata Coal NSW, said, "In short, unless we cut production, Baal Bone will not be able to remain cash positive going forward. Today's announcement sadly has consequences for our workforce, with employee levels to fall in line with production from 150 to 92 people. We have an excellent team at Baal Bone, all of whom have worked extremely hard to keep the operation viable. However, they have been up against factors beyond their control, which makes this decision all the more disappointing."

"Following today's announcement, 80% of the mine's production will be sold to domestic outlets. It is therefore essential that we are able to maintain our existing level of domestic contracts."

ends

Xstrata contacts

Trevor Reid
Telephone +44 20 7968 2808
email treid@xstrata.com

Justine Winn
Telephone +61 2 9253 6748
Mobile +61 416 196 403
email jwinn@xstratacoal.com

Brigitte Mattenberger
Telephone +41 41 726 6071
Mobile +41 79 381 1823
email bmattenberger@xstrata.com

Michael Oke & Claire Bithell
Prospero Financial
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