Araguaia

Description of Operation

The Araguaia project, located in the north-western Brazilian state of Para, approximately 2,200 km north of Sao Paulo, in the Municipality of Xinguara approximately 100 kilometers southeast of the Carajas mineral province – a centre for major iron ore production in Brazail.

The Araguara project is currently in a scoping stage, with pre-feasibility scheduled to commence in 2008.  Araguaia benefits from substantial existing resources, a highly prospective land position and a well developed infrastructure (rail, road, power generation and power transmission). The deposits occur on properties owned by or where Xstrata has the rights to earn 100% interest by completing a series of cash payments. Based on results to date, the project could potentially support 35,000 tonnes of nickel annually over a 25 year mine life.

Continued exploration success in 2007 led to substantial additional mineralisation being added to the Araguaia resource base. During the year, 46,292 metres of diamond drilling were completed resulting in revised mineral resource at Serra do Tapa, Vale dos Sonhos and Pau Preto.  The Inferred resource base now stands at 101.5 million tonnes at 1.45% nickel at a 1.0% nickel cut off grade.  The Inferred mineral resource at 1.2% Ni cut-off is 69.4 million tonnes at 1.61%. Encouraging results have been obtained from a new deposit at Escalada and the potential exists to increase the resources at both the nearby Pau Preto and Escalada deposits, which are also part of the Araguaia project.

Drilling has now been complete to delineate the Pau Preto and Escalada deposits and a revised mineral resource estimates incorporating the data from the drilling at all four deposit areas are expected to be complete by mid-2008.

The nickel-laterite deposits at Araguaia occur on properties owned by Xstrata Nickel or where Xstrata Nickel has the right to earn a 100% interest by completing a series of cash payments. On the basis of airborne surveys covering approximately 70,000 square kilometres in the region, Xstrata Nickel has consolidated its ground position over the key targets such that it now controls mineral rights (Permits Exploration Licenses) to 488,350 square kilometres. Xstrata Nickel has also submitted permits extensions for an additional 115,444 hectares in the same belt.

Brief History of the Operation

In September 2005 Falconbridge announced that it had discovered two new significant nickel deposits on its Araguaia nickel-laterite properties in the Para State of northern Brazil. Araguaia is a new grassroots discovery in an area where the first recorded frilling for base was completed by Falconbridge’s exploration team in October 2004. Falconbridge was acquired by Xstrata in 2006.