Energy use

Mining and smelting are energy intensive. Our priority is to ensure all Xstrata operations have access to a secure and cost-effective supply of energy, crucial for the continued operation and growth of our business. We aim to improve our operations' energy efficiency, to reduce our GHG emissions, cut costs and conserve natural resources.

Around half the energy we use comes from purchased electricity, predominantly required to run our metallurgical operations, of which 26% is from renewable energy sources. At our mines, our primary source of energy is diesel for the mining fleet and other mobile equipment.

The reliability and affordability of energy supply can be affected by factors beyond our control, including increased demand by other users, problems with local generation and transmission of power, and political, regulatory and economic uncertainties. In some regions we depend on one major or national power generation company, for example, Eskom in South Africa. In others, for example, in parts of South America, our security of supply depends on the provision of energy by other countries. We manage these risks by improving the energy efficiency of operations, negotiating longterm contracts with energy providers, and diversifying our power sources where possible.

We measure efficiency as energy intensity - the amount of energy required to make one tonne of product. In 2009, we met our goal for all Xstrata managed operations to implement energy intensity reduction targets. Our most energy intensive business is Xstrata Nickel, due to the requirements of its smelting and refining processes, which accounted for 15% of our total energy use in 2009.

All our commodity businesses have energy efficiency plans in place and we carry out regular energy audits at operations. We engage with suppliers to develop more efficient equipment, and replace worn machinery and vehicles with efficient alternatives. When starting a new operation or exploration project, we endeavour to make it as efficient as possible from the beginning.

Energy use and efficiency

We used just over 100 petajoules of energy in 2009, 20% less than in 2008 because of reduced production at a number of energy-intensive sites. Over half of our energy supply comes from purchased electricity, and around a quarter (26%) is from the direct use of diesel at mines, to run the mining fleet and mobile equipment.

Overall, energy intensity improved in 2009 compared to the prior year. Xstrata Alloys, achieved a 12% improvement in its energy efficiency compared with last year. Combined with lower production, this resulted in a 34% reduction in its energy use. The efficiency improvement was due to:

• Maintenance during downtime associated with reduced output, which improved machinery performance;
• Our Bokamoso pelletising plant at Wonderkop, which produces chrome ore pellets that need less energy to be converted to ferrochrome; and
• Additional energy saving measures at many sites including more efficient lighting and switching off machinery when not in use.

Two other commodity businesses saw a sizeable improvement in energy efficiency in 2009. In 2007, Xstrata Nickel established an energy target of 1% reduction in energy intensity (per tonne of product) over 2007 performance by 2012. This target was achieved primarily due to the recent closure of higher energy intensity mining operations at Sudbury and the extended care and maintenance of the Falcondo site. Each site has plans in place to become a more efficient energy user, with a focus on conservation and demand management. At Raglan in the Canadian arctic, for example, we have installed technology that remotely controls ventilation fans to switch off when people are absent from a particular area of the mine, occupancy detectors in office facilities that switch off lights when rooms are empty, and a system that automatically adjusts heating according to outside temperatures. In 2009, Raglan also conducted a study of the heat recovery network at the Katinniq mine, which revealed the potential for additional energy savings. Work to realise these efficiency improvements will begin in 2010.

Xstrata Zinc's 13% energy efficiency improvement resulted from initiatives including:

• At Matagami, Canada, installation of a new filter on the zinc concentrate circuit and improved underground heating system, which are anticipated to result in 10% and 30% efficiency improvements respectively on existing performance;
• Upgrades to the zinc-lead concentrator and other equipment, including a laundry room boiler and water pumps, at Mount Isa mine in Queensland following a year-long study to identify inefficient equipment; and
• The replacement of pneumatic pumps and other parts at San Juan de Nieva, Spain, as well as the development of specifications for the acquisition of more efficient equipment.