mine closure

Frank Cotton, Xstrata Alloys Project Lion HSEC manager inspects trees recovered from the site to be replanted following construction

Closure plans exist for all Xstrata mines including detailed closure cost estimates. These plans form the basis of financial planning for closure.

On 31 March 2003 Xstrata Zinc ceased its mining operations at Reocin in Spain. The closure process started immediately in close collaboration with national and regional authorities and all closure activities are being completed as planned.

In late 2004, Xstrata Alloys announced the permanent closure of its Vantech vanadium operation in Mpumalanga, South Africa. The mine was put into care and maintenance in early 2004, following the depletion of the Kennedy Vale ore deposit. The decision to close Vantech followed a thorough assessment of the operation's future prospects and of the financial viability of opening a new mining area at the site.

The assessment found that significant investment was required to develop the Steelpoortdrift deposit. In addition, the higher ongoing operating costs, the sustained strength of the South African rand and our view that the current spot price for vanadium is not sustainable in the long term meant that further investment to restart production at Vantech could not be justified.

We are now concentrating our efforts on completing a full rehabilitation programme in accordance with our mine closure plan.

Xstrata Coal is rehabilitating old mining operations in South Africa, including old discard dumps, which were 'inherited' along with operational mines as part of the company's acquisition programme. Over the past three years, we have rehabilitated around 92 hectares of historic mining areas, including the Ogies and Torbanite dumps as well as the Waterpan open-cut area, at a cost of around ZAR19 million. We are finalising the design for the Waterpan Discard Dump 2, which covers 20 hectares and has been in existence since the 1930s. This dump has been subject to low levels of spontaneous combustion due to the way it was formed. As a result, we have shaped and compacted the area, which will be covered and revegetated in 2005.

In February 2003, Xstrata suspended operations at Windimurra vanadium operation after three successive years of operating and cash losses, and announced the permanent closure of the operation in May 2004. The decision to close the plant was taken following a thorough assessment of the operation's ongoing financial viability, taking into account the estimated cost and timeframe of returning the plant to operation, the expected cost of production and Xstrata's assumptions regarding the long-term vanadium price and Australian dollar exchange rate.

Xstrata has recently upgraded its environmental rehabilitation and closure team to ensure a timely and fully compliant closure of the Windimurra asset. This is being done in close consultation with the relevant government departments and key stakeholders in Western Australia. Leases on the Windimurra resource will be relinquished to the Western Australian Government as soon as this process is complete, or earlier if the government wishes.