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This report covers the economic, environmental and social performance of Xstrata’s managed operations for the 12 month period from 1 January to 31 December 2007. Xstrata publishes a group-level Sustainability Report annually in tandem with the Annual Report. Various commodity business, regional, divisional and/or site-specific Sustainability Reports are also published annually and are available from www.xstrata.com. The previous Group Sustainability Report was published in April 2007 and covered the calendar year to 31 December 2006. This is Xstrata’s fourth full annual Group Sustainability Report and the sixth report published on the Group’s health, safety, environmental and community performance.

Target audience

Target audience / Presentation of data / Acquisitions and disposals / Defining report content / GRI compliance / Independent assurance / Feedback

Xstrata’s Sustainability Reports provide a broad range of stakeholders with information about Xstrata’s sustainable development policies, practices and performance. The primary stakeholder audience is the investment community, including existing and prospective shareholders and socially responsible investment analysts and investors. Other target audience groups include governments, intergovernmental bodies, employees and their families, communities associated with our operations, development organisations and non-governmental organisations, business partners including suppliers, customers and joint venture partners, media, employee unions and industry participants.

Target audience / Presentation of data / Acquisitions and disposals / Defining report content / GRI compliance / Independent assurance / Feedback

Managed operations are defined as sites where Xstrata has the responsibility to set sustainable development policy and standards and directly manage and enforce their application. Sustainability data is reported from all managed sites within Xstrata.

Xstrata also owns an interest in a number of non-managed operations (assets over which Xstrata exerts ‘significant influence’ under GRI definitions). Monitored or non-managed sites are defined as sites where Xstrata has the responsibility to influence sustainable development policy and standards but does not directly manage and enforce their application. A representative of Xstrata senior management sits on the technical, operating or executive committees and Boards of non-managed operations and is responsible for ensuring that joint ventures and operations in which Xstrata has an interest are operating in line with Xstrata’s sustainable development governance framework. Limited incident data (e.g. critical HSEC incidents) are reported from non-managed operations and are presented separately from consolidated Group data. Non-managed or monitored operations are also referred to from time to time in the narrative. A full list of managed and non-managed operations is provided on pages 93 to 97 of the 2007 Annual Report and is available from www.xstrata.com

All managed operations are required to comply with Xstrata’s Sustainable Development Reporting Guidelines, which ensure compliance with GRI (Global Reporting Initiative) G3 2006 Sustainability Reporting Guidelines and associated technical and other protocols. During 2007, a new version of Xstrata’s Sustainability Database was launched incorporating a number of changes to align fully with the GRI G3 guidelines. All managed operations are required to enter data into Xstrata’s Sustainability Database and information entered into the Database is validated at commodity business and Group level.

A comprehensive performance data sheet is provided at www.xstrata.com/sustainability and a summary of key sustainability data is available on page 98 of this report.

Greenhouse gas emissions and energy data have been restated from the previous year following further research into Xstrata’s carbon footprint including revised regional greenhouse and energy conversion factors, additional sources such as waste to landfill, additional fluorocarbons and fuel sources. The conversion factors and sources have again been subject to third-party verification by Energetics. Training spend per employee and the percentage of women in the workforce for 2006 have also been restated due to revised total employee numbers from the acquired nickel operations.

Hazardous waste to landfill for 2006 has been restated from 649,214 tonnes to 86,564 tonnes following the reclassification of jarosite waste at San Juan de Nieva smelter to non-hazardous waste in the form of jarofix.

Xstrata previously reported one fatality at a managed operation in 2006. Sadly this number rose to two fatalities when, in August 2007, a Montcalm contractor injured in a single vehicle truck incident in December 2006 died from complications arising from the injuries he sustained in the incident.

Acquisitions and disposals

Target audience / Presentation of data / Acquisitions and disposals / Defining report content / GRI compliance / Independent assurance / Feedback

Xstrata plc has grown rapidly since its inception in 2002, largely through acquisition. Year-on-year comparisons of absolute data are therefore often distorted by the impact of major acquisitions compared to the previous year. Intensity measures have been introduced to normalise carbon emissions, energy use and water consumption per tonne of product and provide a more accurate basis for year-on-year comparisons, excluding the impact of acquisitions or disposals. Absolute data is reported in addition to intensity measures for these performance indicators.

All data is presented on the basis of continuing operations, excluding the businesses disposed of during the year. Acquired operations are included from the date of acquisition unless otherwise stated. A number of indicators for 2006 are shown excluding the former Falconbridge operations. Xstrata assumed management control of Falconbridge in September 2006 and all reporting systems were aligned by 1 January 2007. Sites acquired in 2007 have been aligned with Xstrata’s reporting guidelines.

Acquisitions

In 2007, Xstrata acquired a number of operations and businesses as follows:

• January 2007: Xstrata Copper exercised an option to obtain a 73.7% interest in the Frieda River project, Papua New Guinea;
• March 2007: Xstrata Copper assumed management control of Sagittarius Mines Inc, the operator of the Tampakan copper-gold project in the Philippines;
• August 2007: Xstrata Coal acquired the remaining 50% interest in the Narama thermal coal mine in Australia from Iluka Resources Limited for $52 million;
• September 2007: Xstrata Coal acquired the remaining 14% of Cumnock Coal Limited which it did not previously own for $22 million;
• October 2007: Xstrata Coal acquired the Anvil Hill thermal coal project from Centennial Coal Company for $468 million;
• October 2007: Xstrata Coal acquired the Tahmoor underground coking coal operation in New South Wales, Australia through the acquisition of Austral Coal Ltd for $542 million; and
• November 2007: Xstrata Alloys acquired Eland Platinum Holdings Limited for $1.1 billion, including the Elandsfontein platinum operation.
  

Disposals

• March 2007: Xstrata Copper sold three end-of-life electronics recycling facilities in Roseville, California, La Vergne, Tennessee and Brampton, Ontario to Sims Recycling Solutions;
• May 2007: Xstrata completed the disposal of Noranda Aluminum, comprising the aluminium assets acquired through the Falconbridge transaction for a cash consideration of $1,020 million to Apollo Management LP; and
• Non-core exploration properties acquired through the Falconbridge transaction were divested during the year, retaining ‘back-in’ rights for the most prospective and realising proceeds of $90 million.

Defining report content

Target audience / Presentation of data / Acquisitions and disposals / Defining report content / GRI compliance / Independent assurance / Feedback

Our approach to sustainability reporting is aligned with the principles of materiality, completeness and responsiveness as defined by the AccountAbility 1000 Assurance Standard (AA1000 AS). Topics or issues that are material to the Group as a whole or have the potential to become material to the long-term success of our business (as outlined on pages 14 and 15) have been prioritised in the report. We have aimed to provide a complete and balanced view of our sustainability performance for our target audience (outlined on page 10), including challenges as well as successes. Our responsiveness to stakeholders is outlined in the Governance, Ethics and Engagement section. In determining which issues or topics are material to Xstrata for inclusion in this report, we have considered:

• Xstrata’s Business Principles, Sustainable Development Framework, policies and procedures;
• Xstrata management’s assessment of the principal risks and critical factors in successfully fulfilling the Group’s strategy and the strategic objectives of each of its businesses;
• Feedback on Xstrata’s sustainability performance and reporting from employees, contractors, customers, suppliers, business partners and investors;
• A review of industry or company-specific issues raised either directly or indirectly by external stakeholders including NGOs, communities, investors;
• A review of the key topics and industry challenges reported by peer companies and/or raised in industry associations and forums;
• A review of the indicators and topics raised in the GRI G3 guidelines, Mining and Metals sector supplement, ICMM principles, UN Global Compact, Millennium Development Goals, Dow Jones Sustainability Index questionnaire and other best practice guidelines and initiatives.

GRI compliance

Target audience / Presentation of data / Acquisitions and disposals / Defining report content / GRI compliance / Independent assurance / Feedback

Xstrata is again reporting in accordance with GRI G3 guidelines. For the second consecutive year, the application level for Xstrata’s Sustainability Report is A+ including application of the Mining and Metals supplement. A GRI navigator is provided on pages 100 to 102 of this report and on our website at www.xstrata.com/sustainability.

Independent assurance

Target audience / Presentation of data / Acquisitions and disposals / Defining report content / GRI compliance / Independent assurance / Feedback

Xstrata’s Group Sustainability Reports are subject to annual third-party, independent assurance. Deloitte & Touche LLP has independently assured the 2007 Sustainability Report against the AA1000AS. A brief description of the assurance process and the signed assurance statement are provided on page 103 of this report.

Feedback

Target audience / Presentation of data / Acquisitions and disposals / Defining report content / GRI compliance / Independent assurance / Feedback

We welcome feedback on any aspect of Xstrata’s performance or reporting. Feedback gained from a broad range of stakeholders in 2007 has been incorporated into this report. A feedback form is available from www.xstrata.com or send an email to sustainability@xstrata.com. Contact details for relevant Xstrata personnel are provided on the inside back cover of this report.