Social involvement plans

Xstrata's engagement with communities and support for community projects is governed by social involvement plans (SIP). By the end of 2006 all sites will be covered by a SIP. Commodity business-level SIPs are presented to the Group Executive Committee as part of the annual budget and business planning process. The plan reports on engagement with local communities, detailing the range of initiatives and projects funded or undertaken directly by the business, together with the resources deployed in this area. The SIP also sets out the anticipated projects and budgeted expenditure for the following year. These budgets are then used by the Executive Committee as the basis for allocating the 1% of pre-tax profit set aside by the Group across the different regions.

In 2005, we strengthened regional partnerships with government agencies, NGOs, other companies operating in the region and local service providers to ensure that our projects are not reliant on Xstrata and are truly self-sustaining. We are also working to ensure better co-ordination of community projects, particularly for commodity businesses operating in the same region.

In 2005, a three year AUD4 million Xstrata Community Partnership Programme commenced in north Queensland, Australia, as part of the transformation of the copper and zinc business in the region. The programme was developed following an extensive community consultation and needs assessment process. In its first year, the programme has achieved many significant outcomes including more doctors in Cloncurry, a diabetes centre educator in Mount Isa, an indigenous employment training coordinator at Centacare in Mount Isa and multimedia centres at two of Mount Isa's schools. Also in Queensland, Australia, Xstrata's copper, zinc and coal businesses joined forces to provide a three-year, AUD2.48 million community partnership programme to support social welfare, health and education initiatives, launched in March 2006. This programme is profiled in the case study.

The key social involvement priorities in South Africa are around education and health, and in 2005, ZAR26.5 million was invested in these projects. Community development projects have also been more closely aligned with Xstrata's business objectives. For example, employment equity planning to comply with the Mining Charter has been supported by development schemes at universities and bursaries. We are also fostering the establishment of viable micro, small and medium enterprises and have aligned our procurement policy with our community strategy. Our major health initiatives are described in the health chapter. Overall, Xstrata Zinc's social involvement activities focus on education, health, sports, enterprise and job creation, and social and community, including capacity building for indigenous communities in Australia and support for regional development programmes in Europe. In 2005, $4.2 million was invested in these projects.

In Argentina, Xstrata, as the operator and largest shareholder in Minera Alumbrera, together with Northern Orion and Goldcorp Inc., continued to support local communities with an annual commitment of $1 million on an extensive set of programmes focussing on health, education and sustainable development. These programmes aim to improve the quality of life in local communities through improved literacy skills, provision of educational materials for more than 200 primary and secondary schools, provision of improved health services to 90 regional medical posts and health centres and the promotion of sustainable development through 18 diverse agricultural programmes with local farmers. During the year Alumbrera's social initiatives were significantly extended to include a $3 million commitment over four years to specified health and education infrastructure works in Catamarca and $3 million over three years for identified health infrastructure in Tucuman, in both cases through partnerships with the respective provincial governments.

The Las Bambas CSI programme currently under development will commit $1 million per year over the next three years towards sustainable agribusiness and tourism projects in the area. It will also include a skills training programme for members of the local communities. As part of Xstrata Copper's acquisition of the Las Bambas project in August 2004, and excluded from reported corporate social involvement expenditure, $45.5 million was paid into a community trust or fideicomiso social to be used for social development projects in the Grau and Cotabambas provinces. The trust is managed independently of Xstrata by local Mayors and Proinversión, the Peruvian Government's agency for the promotion of inward investment, with Xstrata retaining one seat on the managing committee.

Nordenham's School project on zinc and nutrition