Verification statement

Verification Method

URS Verification Ltd (URSVL) has been commissioned by Xstrata plc (Xstrata) to provide independent assurance of elements of its 2004 Sustainability report (herein referred to as 'the report'). The scope of work performed on which our opinions are based is outlined below:

  • One executive management interview covering corporate level strategy and approach for management and control of Health, Safety, Environmental and Community (HSEC) issues for the ongoing businesses;
  • Assessment of seven sites (Nordenham zinc smelter (Germany), Ernest Henry copper mine, Oaky Creek coal mine, United colliery (Australia), Lydenburg chrome plant, Rhovan vanadium plant and Arthur Taylor colliery (South Africa) focusing on the processes in place for site level data management as well as generating an overview of some of the key HSEC issues at these sites and the processes for their management; and
  • A review of data management and reporting systems in place for the collation and aggregation of site level data.

The data aspects verified during the above tasks comprised:

  • Safety: Numbers of fatalities, total recordable injuries (LTI, MTI,RWI), fines and penalties.
  • Health: Number and type of occupational diseases.
  • Environment: Air emissions (NOX, SO2, total particulates); water use (potable, raw, recycled, discharged); land use, rehabilitation and biodiversity; environmental incidents, fines and penalties.
  • Community: Number and type of community complaints and complaint management process.

We did not review HSEC management processes and performance at the levels of commodity business and country management. We also did not review sustainability issues outside of the scope stated above, for example relating to Xstrata's code of business principles, workplace and marketplace issues. URSVL has performed this assurance process following two of three principles of the AA1000 Assurance Standard (AA1000AS) - materiality and completeness. Responsiveness to stakeholders did not form part of the scope of our assurance process this year. Our opinions are presented against the principles of AA1000AS within our scope: URSVL auditors also apply the general principles of auditing and audit procedures as contained within international standard ISO 19011.

Responsibilities of Directors and Verifiers

The information contained in the report is the sole responsibility of the Directors of Xstrata. This verification statement represents the independent opinion of URSVL in relation to the report. URS Corporation, the parent company of URSVL, undertook consulting work for Xstrata during the period of this report, although the financial value of the verification work undertaken was less than 6% of the total value to URS companies. Prior to commencing this years' verification work, URSVL reviewed the independence of our proposed team and the assessors involved in the work have not been involved in the development of this material or associated systems that would represent a conflict of interest.

URSVL has carried out its services by checking samples of information and documents that have been made available to URSVL by Xstrata. Accordingly, URSVL has not checked or reviewed all of Xstrata's information and documents. The verification statement provided herein by URSVL is not intended to be used as advice or as the basis for any decisions, including, without limitation, financial or investment decisions.

Opinion

URSVL welcomes this report, which is structured to provide a clear overall presentation of Xstrata's group strategy and commitments on sustainability. The change to this Group-wide presentation from a previous presentation of performance for each Commodity Business in response to stakeholder feedback has, in URSVL's opinion, improved the clarity of Xstrata's overall sustainability disclosure.

Materiality

URSVL observed that there is a clear commitment by Xstrata senior management to continuously improve sustainability performance across the Group. As these initiatives become increasingly embedded and integrated into business practices URSVL looks forward to seeing further sustainability performance improvements.

Xstrata has developed HSEC management standards and defined performance requirements against which each site will be assessed during 2005. URSVL anticipates that these standards, together with the assurance audits, will provide a strong mechanism to aid the identification of risks, opportunities and management performance. This process should also assist in more comprehensive reporting of HSEC performance throughout Xstrata including at Board level. We welcome the establishment of the new HSEC Board Committee and look forward to reviewing Xstrata's enhanced HSEC governance processes.

Based on the work performed URSVL believes that the report covers the significant heath, safety, environmental and community issues that the company has faced in 2004. We find that the balance of the report text and case studies focuses on positive rather than negative aspects of HSEC performance. Understanding of the report would be improved by putting performance figures in context of the overall whole. The glossary in the report provides clarification of a number of terms and URSVL understands that additional definitions will be available from Xstrata's website.

Completeness

We welcome the move that Xstrata has made to report more widely on the sustainability issues facing the group - in particular, towards reporting on a more complete range of environmental, social and economic performance indicators for 2004, which we understand is in response to engagement with identified stakeholder groups. URSVL also notes Xstrata's significant progress towards achieving compliance with the requirements of the Global Reporting Initiative.

In the opinion of the verification team, the overall level of data accuracy has improved compared to last year's verification process and the accuracy of health and safety data contained in this report is good. Health and safety data management processes are mature and well established, and URSVL did not identify any major errors at those sites visited.

For the environmental metrics reviewed, whilst no systemic errors have been identified, a number of minor calculation and data errors were identified during the site audits. These errors have been corrected in the data set contained within this report. They are considered unlikely to have resulted in a significant variance in the group aggregated data set. On this basis we consider that the environmental data reported is representative of overall Group performance. The community complaints assessment and management process is less mature than those for health, safety and environment. In URSVL's opinion, inconsistencies identified in the categorisation of complaints at a few of the sites visited, has potential to lead to an under-estimate in reported community issues.

Recommendations

Continued commitment from Xstrata's executive management to sustainable development especially through support of the implementation and embedding of new and existing initiatives is expected to enable further progress in sustainability management and performance. Review of and ensuring application of the corporate definition of community complaints should help provide increased confidence in the community data.

Belinda Howell, Director
For and on behalf of URS Verification Ltd London, April 2005