Independent Assurance Statement

URS Verification Ltd (URSVL) was commissioned by Xstrata to provide independent assurance of its 2005 Sustainability Report. The scope of work performed on which our opinion is based was:

Interviews with 22 managers responsible for sustainability issues at Xstrata Coal and Xstrata Copper and at the divisional level at Xstrata Coal South Africa, Xstrata Coal Queensland and Xstrata Copper North Queensland;
Assessing seven sites: San Juan De Nieva zinc smelter (Spain), Mount Owen coal mine, Newlands coal mine and Abbot Point Coal Terminal (Australia), Minera Alumbrera (Argentina), Rustenburg chrome plant and Boshoek chrome smelter (South Africa);
Review of Xstrata's new internal health, safety, environment and community Assurance Programme including witnessing of one assurance audit (Alumbrera site);
Review of stakeholder engagement processes in place for social responsibility investors at group level and with local communities at the sites visited;
Review of data management and reporting systems in place for the collation and aggregation of site level data.

Data we verified during the above tasks included:

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.

URSVL has performed this assurance process following the three principles of the AA1000 Assurance Standard1 – materiality, completeness and responsiveness. URSVL auditors also apply the general principles of auditing and audit procedures as contained within International Standard ISO 190112. We also reviewed the report against the Global Reporting Initiative guidelines and mining and metals supplement3.

Responsibilities of Directors and Verifiers

The information contained in this report is the sole responsibility of the Directors of Xstrata. Our independence to provide our robust views is important. In 2005, Xstrata accounted for approximately 10% of URS Verification Ltd's revenue. URS Corporation, our parent company, undertook some consulting work for Xstrata during the period of this report. Prior to commencing this year's assurance work, we reviewed the independence of our team and our assessors have not been involved in the development of this report nor any 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 requested by URSVL from Xstrata. Accordingly, URSVL has not checked or reviewed all of Xstrata's information and documents. The assurance 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

Xstrata has a distinctive business model, which devolves responsibility to autonomous commodity businesses, enabling management teams to manage their business units effectively. Although the level of integration is not uniform across the commodity businesses or their divisions, management of health, safety, environment and community (HSEC) issues is increasingly being integrated into core business processes.

We commend Xstrata for its new HSEC Assurance Programme, which was implemented across all 64 sites under management control during 2005. In its first year, this programme has focused on assessing conformance with Xstrata's 17 group HSEC Management Standards. Implementing these standards and the Assurance Programme should continue to reduce risk and improve performance.

Materiality and Responsiveness

Risk assessment forms part of business planning from site level through to group executive management. These processes consider non-financial risks alongside financial risks, with issues such as safety being identified and recognised as a core business risk.

This report improves on previous disclosure on Xstrata's engagement with stakeholders. Xstrata has actively engaged with social responsibility investment analysts and responded to the issues they raise on an ongoing basis, increasingly integrating stakeholder engagement into business processes.

All sites have some form of engagement with local communities. However, there is a wide variation in style from those that are limited to specific community investment projects to proactive two-way consultation between sites and communities.

Las Bambas provides an example of best practice, where Xstrata sought external advice from investors and peer companies on community engagement for new project developments, and has established an independent advisory group which meets regularly and comprises representatives from a range of stakeholder groups.

Completeness

This is Xstrata's second full scope sustainability report which presents information on Xstrata's business across the commodity markets and geographies in which it operates, its management processes and performance across a wide range of relevant issues. The balance of reporting achievements and challenges has improved compared to last year and Xstrata clearly reports performance against targets at group and commodity business level.

The report covers the significant issues and challenges that the company has faced during 2005. With increasing disclosure on stakeholder relationships and social issues, Xstrata is now reporting in accordance with the Global Reporting Initiative guidelines.

Xstrata recognises that its standards and systems to monitor human rights, bribery and corruption will become increasingly important, particularly as it enters new markets. We look forward to seeing how the group further develops these and how they are implemented by commodities, divisions and sites concerned.

For the key performance indicators verified, data in this report is accurate and representative of overall group performance. Health and safety data management processes are well established. Although some inconsistencies in applying definitions related to working hours were noted, these did not result in material errors where identified. No systemic errors were identified for the environmental metrics, and the overall level of accuracy has improved and is now satisfactory. The new internal web-based portal developed to facilitate collection and collation of data for this report will, when fully implemented, reduce potential for data transfer errors.

Recommendations

To assist with further development of sustainability management and performance Xstrata should:

Continue implementation of the group HSEC Standards and Assurance Programme to further reduce risk and improve performance;
Build up the consistency of management implementation and performance improvement across commodities and divisions;
Further develop, implement and monitor standards and systems to address human rights, bribery and corruption risks, for operations in higher risk areas;
Improve the level of community engagement at certain sites where this is currently limited. Xstrata has identified this and has begun to implement changes required.

Dr Belinda Howell
URS Verification Ltd
London
April 2006

¹ Institute of Social and Ethical Accountability. Assurance Standard AA1000, March 2003, London, UK
² ISO 19011:2002
³ Global Reporting Initiative 2002 Guidelines; Mining and Metals Sector Supplement 2005.