Our commodity businesses formulate medium- to long-term social involvement plans to facilitate our support for local community initiatives, often underpinned by extensive consultation with and participation by local communities, to ensure that support is provided in line with the community's needs. We aim to build economic and social capacity and infrastructure for local communities, creating and maintaining sustainable communities near to our operations where families can live together and, where practical, favour this approach to fly-in, fly-out arrangements. However, we recognise that in some remote locations fly-in fly-out arrangements are often favoured by employees themselves as a means of establishing an appropriate quality of family life. We seek to employ local people for our operations wherever possible and have a number of training programmes in place to build capacity to enable increased local employment, particularly in regions with a high concentration of unskilled workers.

key challenges

The key community challenges we face are in achieving the sustainable improvement of the quality of life for residents of communities close to our mine sites without creating dependency on our operations, in particular in impoverished regions such as the area surrounding the Las Bambas project in Southern Peru, and in South Africa. At all our operations, we endeavour to maintain open and transparent communication with local communities, ensuring we listen to their concerns and respond to these effectively, to build relationships of trust.

Donald Makwakwa at Xstrata Coal's Adult Basic Education and Training Centre, South Africa

The Mining Charter in South Africa

The blueprint for the transformation of the mining industry in South Africa is set out in the Mining Charter, published by the South African Government in 2002. The charter's stated goal is "to create an industry that will proudly reflect its promise of a non-racial South Africa". Transformation describes the ongoing process to develop a sustainable, equitable society and economy in South Africa and, as one of the nation's major sectors, the mining industry has a leading role to play in this transformation.

In 2003, we laid the foundation for our transformation programme, through:

• the establishment of a Transformation Committee in Xstrata chaired by CEO Mick Davis, which focuses its efforts and resources on providing skills, infrastructure, resources and opportunities that can ultimately be used outside the mining industry;
• the appointment of Executive Director for Corporate Development Eric Ratshikhopha to drive the transformation strategy; and
• the establishment of structures and forums to ensure effective implementation of transformation at an operational level.

"We are complying with the Mining Charter's requirements - and in many instances going beyond them - not only because we are obliged to do so, but because we genuinely believe that driving sustainable transformation across our organisation, our industry and our nation is the right thing to do. Ultimately, Xstrata's future in South Africa depends on our ability to achieve meaningful transformation and fulfil the charter's demands. It is a business imperative. However, our focus is not on adhering to the letter of the law, but on embracing the spirit of the legislation. We want to create a new and sustainable business model that will be the benchmark for our industry and benefit all its stakeholders."
Mick Davis, Xstrata Chief Executive Officer

Abraham Ndluvu and Samuel Mahlangu, participants in Xstrata's community commercial farming project

Xstrata has developed and implemented comprehensive guidelines to ensure that we comply with the spirit and intention of the Mining Charter. We have been working closely with our stakeholders - including local, provincial and national governments; industry bodies; mining companies; our employees; and community representatives - to address eight key Mining Charter categories:

• human resource management;
• employment equity;
• migrant labour;
• consultation, monitoring, evaluation and reporting;
• mine community and rural development;
• housing and living conditions;
• procurement; and
• ownership and joint ventures.

Mining Charter: Human resource development

Through our employee evaluation system, we have developed career paths for 116 talented employees to prepare them for more senior roles within the company. Candidates meet twice a year with the heads of their business career development panels to discuss their progress and aspirations. Some of these employees receive international exposure through technical visits to Xstrata's overseas operations.

In 2005, we will implement skills development plans across our operations. We have conducted career development interviews with 2,545 of our 4,000 Xstrata Coal employees with 790 employees having indicated a desire to participate in our development programme. In 2004, we assessed 680 employees and identified 265 employees with development potential.

We are also helping our employees to reach their full potential by providing Adult Basic Education and Training (ABET) tuition on site and within our communities (see Mine community and rural development section).

Mining Charter: Employment equity

Employment equity plans have been developed for all our operations in South Africa and they have been submitted to the Department of Labour. We have established a full-time mentoring and coaching programme for historically disadvantaged South Africans (HDSAs) and we have two plant superintendents and two plant foremen participating in this programme.

We also have a gender-specific recruitment programme for women and 50% of our bursaries are targeted at women. We sponsor five female pre-university students and one female university student, as well as nine females in mining and engineering courses. In addition, 10 women from the community are currently undertaking computer training at our ABET Centre.

Xstrata Coal has also entered into a joint venture with Zingisa to supply coal to Eskom from its WitCons Colliery. Zingisa is a female-owned and managed Black Economic Empowerment (BEE) company.

We are on track to meet the charter's employment targets, to have 40% of our management positions filled by HDSAs and women accounting for 10% of our South African workforce by 2007. Managerial positions include senior supervisor, head of department, specialist manager, senior specialist, director and general manager. At the end of 2004, we had an HDSA participation rate of 24% and a workforce comprising 5.5% women. Fourteen women are participating in our fast-track programme.

Mining Charter: Migrant labour

Only a small percentage of our South African workforce - 14% - comes from outside South Africa, predominantly from Mozambique and Lesotho.

Xstrata's global policies and procedures comply with national treaties and agreements on migrant labour. Our policies and procedures target the fair and equitable treatment of all employees, regardless of their place of birth.

An Alexander Forbes audit in 2003 confirmed that there is no discrepancy between the rates of pay we offer local or migrant workers.

Mining Charter: Consultation, monitoring, evaluation and reporting

We report our progress against the Mining Charter's requirements in a variety of forums and publications, including:

• the monthly Xstrata Executive Committee meetings and the Xstrata Transformation Committee meetings, which are held at least every six weeks;
• Xstrata South Africa's Annual Report and the Xstrata Sustainability Report;
• regular national, provincial and local government department meetings; and
• the South African Chamber of Mines Committee on Transformation.

Mining Charter: Mine community and rural development

Our mine community and rural development programme has a strong focus on education and training initiatives. We are committed to playing a leadership role in making education available to the broader South African community, so we have developed a diverse education programme that encompasses every level of education.

Seventy one per cent of our employees are functionally literate and numerate. One of the most significant ways we are helping to improve their education is through adult basic education and training.

Xstrata Coal's Group Training Centre is used by the various divisions. A community ABET centre in Kwa-Guqa, Witbank, is being constructed to offer skills training to unemployed people as well as our employees. This learning and trade centre, developed in conjunction with the Emlalahleni Local Council, is expected to be operational in May 2005. As part of our education programme, 993 employees have completed Recognition of Prior Learning assessments, with 536 employees declared competent at a range of levels.

Our other South African education programmes are described in the case study on page 79 and under Education and Training on page 80.

Xstrata's community development programme in South Africa is focused on projects that have the potential to be self-sustaining. In 2004, we invested ZAR7.7 million. Some of the projects we supported included:

• a donation of ZAR635,000 to three schools surrounding the Maloma mine in Swaziland for the installation of a hydroponic garden scheme;
• a group of 430 women to tender for government contracts to provide nutritional meals to local schools, which resulted in them winning a two-year contract worth more than ZAR20 million (ZAR563,730);
• a training programme to enable community members to care for terminally ill patients at home (ZAR282,150);
• supplying seed and equipment (ZAR200,000) for the Botselo feeding scheme;
• establishment of the Care Village to care for destitute children and AIDS orphans in the Witbank/Middelburg area (ZAR2 million);
• development of the Commercial Farmer Settlement Project which is training four HDSAs on 175 hectares of suitable agricultural land adjacent to our Arthur Taylor Colliery, with the aim of encouraging these 'new farmers' to enter into long-term lease agreements with us to farm the land (ZAR204,288); and
• an internship programme aimed at helping HDSAs achieve permanent employment in a range of sectors, including finance and mining (ZAR1.8 million).

In addition, we have pledged ZAR2.25 million to create a skills and enterprise development fund to help establish new businesses in the Mpumalanga and North West provinces.

Children who have lost their parents to AIDS are often left destitute. Xstrata helps local communities manage this difficult issue by providing orphans with accommodation at three centres in South Africa - the Middelburg Care Village, the Ratanang Care Centre 1 and the Ratanang Care Centre 2 (see Health chapter).

Mining Charter: Housing and living conditions

In 2003, we introduced a funding programme to help our employees buy or rent a home near their place of work and enable families to live together. This approach has resulted in small communities being established near our operations. This also forms part of our strategy to tackle the spread of HIV/AIDS (see Health chapter).

Xstrata Coal employees are paid a minimum 'living out' allowance of ZAR1,600 per month and they are encouraged to participate in the Presidential Housing Development Project in Witbank. In 2004, 82 employees applied to participate in the project and 39 have already moved into their homes. Less than 5% of our employees live in company-provided accommodation. Xstrata Alloys subsidises interest rates for employees using house bonds. We have also undertaken a major education campaign to increase awareness of the potential for home ownership and the benefits that this may bring to families.

Mining Charter: Procurement

George Nemo and Josh Willetts (rear) are participants in Mount Isa Mines' indigenous training programme, a partnership with local training organisation MIGATE

In 2004, Xstrata completed a number of procurement initiatives, including:

• the implementation of BEE preferential policies;
• encouraging our existing suppliers to form partnerships with HDSAs;
• the implementation of our procurement development programme - by the end of October 2004, our total discretionary procurement spending with HDSA supply companies was ZAR681 million (23% of Xstrata's total spending in South Africa);
• the development of a comprehensive database to capture information on potential and existing BEE suppliers; and
• planning for workshops to equip possible suppliers with all the information they need on BEE.

Mining Charter: Ownership and joint ventures

On 1 July 2004, Xstrata Alloys established a Pooling and Sharing Venture with Merafe Resources Ltd (formerly SA Chrome & Alloys Limited), a black empowerment partner. Under the agreement, Xstrata Alloys and Merafe Resources Ltd (Merafe) retain legal ownership of their respective assets, mining rights and land, and share in the pooled earnings before interest, tax, depreciation and amortisation of the venture (more details of this agreement are provided in the scope of report chapter on page 7).