Sustainability website / Environment / Energy

Policy and approach

Policy and approach / Energy efficiency

Xstrata’s Sustainable Development Policy sets out our commitment to continually improve the efficiency with which we use raw materials, energy and natural resources. Access to a secure and cost-effective supply of energy represents a principal risk to the continued operation and growth of our business (see 2007 Annual Report). In an environment of rising energy costs globally and supply shortages in some regions, the ability to achieve sustainable improvements in the energy efficiency of our operations provides Xstrata with an important competitive advantage.

Programmes are in place across Xstrata’s operations to reduce energy intensity (particularly at high-intensity metallurgical operations) and achieve cost savings. Energy efficiency audits are routinely carried out at our operations and our capital expenditure approval processes require energy efficiency to be considered for all major new investment and projects.

Performance and goals

In 2007, Xstrata’s operations and projects used 112.7 petajoules of energy, 82% higher than in 2006. Energy consumption in 2006 has been restated from 63.2 petajoules to 61.9 petajoules due to the identification of additional sources and revised conversion factors referred to in the greenhouse gas emissions section on page 72. The former Falconbridge operations contributed approximately 38% of total energy use in 2007 (excluded from 2006 data).

Direct energy consumption of 50.7 petajoules was primarily from fossil fuel. Xstrata’s direct energy use increased by 109% in 2007 due to increases in fossil fuel use from operational changes and production increases, together with the impact of the Falconbridge acquisition. On a like-for-like basis (excluding Falconbridge) energy consumption rose by 6%.

Of the total energy consumed, 55% (61.9 petajoules) is indirect, derived from purchased electricity. The majority of purchased electricity is derived from fossil fuels, with 27% from renewable sources and 11% from nuclear.

The inclusion of energy intensive operations including the Nikkelverk refinery and the oil-fuelled Falcondo operation and the restart of several ferrochrome furnaces during 2007 led energy intensity per tonne of product to increase marginally by 2% over 2006 levels.

Our target is to reduce energy intensity per tonne of product by 3% (weighted average) over 2007 levels by 2012. This target has been compiled from targets set at the commodity business level. Xstrata Alloys, Xstrata Copper and Xstrata Coal are targeting intensity improvements of 5% over this time period, while Xstrata Nickel and Xstrata Zinc are targeting a 1% improvement.

Energy efficiency

Policy and approach / Energy efficiency

Improvements in energy efficiency offer the potential to reduce operating costs and enhance the net present value of our business, as well as reducing our direct and indirect greenhouse gas emissions. Energy costs accounted for 17% of total Group operating costs in 2007, split between electricity (9%) and fuel (8%). Energy efficiency is given a high priority by Xstrata management across the Group.

Xstrata Alloys’ ferrochrome smelters, located in South Africa, are some of the most energy intensive operations in the Group, accounting for 35% of Xstrata’s total energy use in 2007. During 2007, a number of ferrochrome furnaces were brought back into production, contributing to an increase of 27% in production over 2006. Energy supply in South Africa is currently constrained and in early 2008, energy shortages led to emergency power cuts, load shedding and outages. In response, South Africa’s energy company Eskom has implemented a mandatory 10% cut in the supply of electricity to the mining and beneficiation industry.

Xstrata Alloys has developed the proprietary Premus technology to reduce substantially the energy intensity of ferrochrome production. The Premus technology has been implemented at Xstrata’s Lydenburg and Lion operations and reduces electricity consumption per tonne of ferrochrome by over 20% compared to other industry processes. This provides Xstrata with a unique competitive advantage. As the Lion operation ramps up to full production in 2008, we expect the Premus technology to deliver further improvements in the energy intensity of our ferrochrome smelters.

In addition, in July 2007, Xstrata Alloys commissioned the Bokamoso pelletising plant, which will reduce electricity consumption by up to 20% per annum at our Wonderkop ferrochrome operations (see case study).

Xstrata Copper, Xstrata Zinc and Xstrata Coal have participated in the Australian Government’s Energy Efficiency Opportunities programme and have identified a number of initiatives, many of which benefit from one or two-year payback periods, that are being rolled out across the commodity businesses. The findings from the trials undertaken in 2006 and 2007 at Xstrata Coal operations have been incorporated into guidance produced by the Australian government on achieving energy savings for industry.

Other key energy efficiency initiatives undertaken in 2007 include:

• The development of site Energy Savings Action Plans across Xstrata Coal sites with more than A$300,000 of energy savings being implemented through 40 projects;
• Amending procurement policies to use the replacement of equipment and plants as an opportunity to achieve a step change in efficiency;
• Amending the mining process, e.g. reconfiguring blast patterns or amending the swing method of draglines;
• Integrating improved energy planning into the design of new mines and projects;
• Engaging with suppliers to improve the energy efficiency of mining and metallurgical plant equipment, for example exploring the potential to use compressed natural gas (CNG) as a fuel source for plant machinery;
• Improving tyre management to reduce diesel consumption, prolong the life of tyres and reduce waste;
• Introducing filtering systems to recycle and reuse oil;
• Switching to lower carbon or more efficient power sources, for example a new and more efficient 30MW gas-fired power station at Mount Isa Mines has improved efficiency by around 1.0 GJ/MWh and saved approximately 50,400 GJ in 2007;
• Recycling waste including batteries, tailings, chrome fines (see Waste section);
• Introducing energy efficient lighting and diesel fuel monitoring systems; and
• Using waste heat to reduce electricity consumption, for example capturing heat from the roaster at Xstrata Zinc’s San Juan de Nieva plant to generate electricity, using heat from the power plant to heat accommodation at the Raglan arctic operation, and Brunswick Mine’s heat recovery project (see case study).

Further site-level initiatives are outlined in site and divisional and commodity business Sustainability Reports, available from Xstrata’s website.

Alternative energy sources

Xstrata Copper is currently preparing a revised environmental impact study into the 600MW Rio Cuervo project, a potential new hydro electricity project in southern Chile. In early 2007, the regional environmental authorities advised that the initial EIS did not meet its criteria. We believe that Energía Austral could provide a responsible contribution to the country’s energy needs, given the growth in energy demand forecast by the authorities for the coming years.

Xstrata Nickel is contributing $2 million over five years to the Cambrian College Sustainable Energy Centre in Canada to develop innovative new alternative energy products.