Scope of the Report
This is Xstrata's fourth Group report on non-financial performance and our second Sustainability Report. It covers the operations managed and owned by Xstrata for the period 1 January 2005 to 31 December 2005.
In 2004 we moved away from reporting our HSEC performance on an individual commodity business basis to an integrated report that outlines our environmental, social and economic performance as a Group. Over the past year we have consulted with our key stakeholders who are also our target audiences for this report, including our employees, governments, the communities in which we operate, NGOs and the investment community, including socially responsible investment (SRI) analysts. Feedback from these stakeholders, together with the continued evolution in our own thinking, is reflected in the further modifications we have made to the 2005 Sustainability Report.
Les Daisley and Norman Finch skimming lead slabs at Northfleet
The structure of this year's report provides a more complete, aggregated view of the Group, focussing on those issues which are material to our performance in sustainable development. We have included a chapter that outlines our approach to sustainability, our key challenges, and our overall performance against our health, safety, environment, socio-economic and community development targets. We have expanded the chapter on our economic contribution to encompass a broader focus on socio-economic performance. This better reflects the partnerships we have developed with government, NGOs and local communities to foster sustainable small and medium enterprises, in addition to our considerable economic contribution through wages, direct and indirect job creation, royalties and taxes, purchase of goods and services, and foreign investment.
The report provides a series of case studies which illustrate sustainable development initiatives across the Group. In February 2005, Xstrata's Australian businesses signed up to the Minerals Council of Australia's 'Enduring Value' programme, which commits all Xstrata's operations in New South Wales, Queensland, Northern Territory, South America and South Africa to excellence in sustainable development performance through the implementation of the ICMM's 10 principles of sustainable development. In line with these commitments, every Xstrata Copper site is producing a sustainability report for the 2005 calendar year. Xstrata Coal operations will produce individual sustainability reports for the 2006 calendar year. A full list of operations is provided on our website.
The data in this report is provided on a Group basis unless otherwise indicated. We have also included information by commodity business where appropriate. All data is provided in absolute terms and not normalised to production unless otherwise stated. Production data is provided separately. All employee figures include contractors unless otherwise stated. To manage the sustainability performance data we collect more effectively, a custom-built database was developed during the year to improve accuracy and enable us to interrogate our data across a greater range of criteria.
All operational information is presented on a 100% basis of the operation and all dollar amounts refer to US dollars, unless otherwise stated. The performance of operations in which Xstrata has an interest but does not have operational control is excluded from this report. This encompasses the two coal operations in South Africa held through the Douglas Tavistock Joint Venture, managed by BHP Billiton (Ingwe) and our investment in Falconbridge Limited, in which we have a 19.9% shareholding. Specific data from Xstrata Technology and corporate functions are not reported separately but are included in Group level performance data. Xstrata plc was incorporated in 2002, therefore no data prior to this date is available.
Total carbon dioxide equivalent emissions (greenhouse gases or CO2-e) for 2004 have been restated from 18.6 million tonnes to 16.2 million tonnes due to a re-evaluation of methane emissions from three underground coal mines in Australia, where emissions from stockpiled coal had been included twice.
Gustavo Villanueva tests equipment on the fire rescue truck at Minera Alumbrera
The 2005 Xstrata Sustainability Report has been prepared in accordance with Global Reporting Initiative (GRI) 2002 Sustainability Reporting Guidelines. A GRI navigator detailing how Xstrata has addressed GRI requirements is available from our website www.xstrata.com. Xstrata's HSEC guidelines and definitions incorporate the GRI 2002 Guidelines and the following technical protocols: Water Protocol, Energy Protocol, H&S Protocol (draft) and the Mining and Metals Sector Supplement. The HIV/AIDS Protocol and Child Labour Protocol have been referenced to assist with our reporting in these areas. The refinement of our reporting systems adopted over the past four years and changes to the delivery style of content have led to further improvements in reporting in accordance with the GRI. Where specific GRI indicators are not included in this report, the GRI navigator sets out where they are reported or the reason for the omission or partial reporting of the indicator.
The report has been independently verified to AA1000 Assurance Standard by URS Verification Limited. An assurance statement is included. We welcome your comments on this sustainability report; simply complete the electronic feedback form at www.xstrata.com/sustainability/feedback or email us at . Further contact details are provided on the inside back cover of this report.
Previous reports are available from our website, together with a comprehensive sustainability datasheet and additional case studies on a range of sustainability issues.
Changes to Group businesses
In August 2005, Xstrata acquired a 19.9% stake in Falconbridge Limited for $1.7 billion. The acquisition provided Xstrata with a meaningful stake in a major diversified mining company, with exposure to world-class integrated businesses in copper and nickel, as well as zinc and aluminium businesses. In October 2005, Inco offered to acquire Falconbridge; this offer remains open and is subject to anti-trust approval in the US and Europe.
Xstrata Alloys
In January 2005 Xstrata Alloys acquired a controlling stake in the African Carbon Group (ACG), a char producer located in the Mpumalanga province of South Africa. The acquisition was part of Xstrata Alloys' strategy to secure its own supply of reductants, a key input cost into the ferrochrome manufacturing process, and added a further two sites to Xstrata's business, included in this report.
Xstrata Alloys reached agreement with Precious Metals Australia Limited (PMA) regarding the disposal of the Windimurra vanadium project in April 2005. The sale was finalised in August 2005 and Xstrata is now released from all obligations associated with the Windimurra project, which is not included in this report.
In August 2005, Anglo Platinum and Xstrata Alloys announced the formation of the Mototolo Joint Venture to develop a platinum group metals (PGM) mine and concentrator on the Eastern Limb of the Bushveld Complex in Mpumalanga, South Africa, currently under construction. As a result the project was not audited by the Assurance Programme in 2005. An audit will take place in 2006. On 28 February 2006, Xstrata announced its partnership with Kagiso Investment Trust (Kagiso), through which Kagiso will acquire 26% of Xstrata's 50% interest in the joint venture, in return for funding its proportionate share of the capital expenditure required. The agreement between Xstrata and Kagiso will introduce meaningful black ownership of, and management participation in, Xstrata's share of the Mototolo Joint Venture.
Xstrata Coal
In December 2005, Xstrata Coal and its partners in the Xstrata Donkin Mine Development Alliance won the exclusive right to pursue exploration of the estimated 200 million tonne Donkin coal resource in Nova Scotia, Canada. Evaluation of the resource and development of feasibility studies is expected to take around two years to complete.
In February 2006, Xstrata entered into an alliance agreement with Erdene Gold Inc. (Erdene) and purchased 9.8% of Erdene's shares. Erdene is a diversified mineral exploration company with a significant profile and a large number of exploration projects in Mongolia, including coal and base metals.
On 28 February 2006, Xstrata and African Rainbow Minerals (ARM) announced the creation of a new black-controlled company ARM Coal, to be 51% owned by ARM and 49% by Xstrata. ARM Coal will have an effective interest in over 26% of Xstrata's South African coal business.
On 1 March 2006, Xstrata announced the proposed acquisition of Glencore International's (Glencore) one-third stake in the Cerrejón thermal coal operation in Colombia for $1.7 billion. The stake will be managed through Xstrata Coal.
As Glencore is a related party according to the UK Listing Rules, the acquisition is subject to shareholder approval at an Extraordinary General Meeting to be held on 20 April 2006. The performance of the Cerrejón operation is not included in this report.
Xstrata Copper
In March 2005, Xstrata Copper acquired 13.2% of Universal Resources Limited, a listed Australian exploration company, for $5 million. The investment included part-funding of the Roseby Feasibility Project and also funded an exploration project for additional copper sulphide mineralisation within the Roseby tenement area during 2005 and 2006.
Xstrata Zinc
In September 2005, Xstrata Zinc increased its ownership of McArthur River Mine to 100%, through the purchase of the 25% stake formerly owned by ANT Minerals Pty Limited. In August 2005, Xstrata announced its intention to convert the McArthur River Mine from an underground to an open cut operation. The proposed change in mining method is dependent on Northern Territory Government approval. See the Environment chapter for further information.
Other businesses
In January 2005, Xstrata sold its wholly-owned forestry operation in Chile, Forestal Los Lagos SA. The majority (89%) of the operations was purchased by Forestal Valdivia SA, a subsidiary of Forestal Arauco, an integrated private Chilean forestry company. The remaining 11% was purchased by Forestal del Sur SA, a privately-held forestry trading company. Xstrata realised a $4 million gain on the disposal.