Environment

We are committed to limiting the environmental impacts of our operations through efficient use of natural resources, reducing input materials and waste and contributing to the conservation of biodiversity. We aim to plan, design, operate, and close operations in a manner that enhances sustainable development. We proactively identify environmental risks and opportunities as an integral part of our risk management processes and business planning.

Our commitments and framework

We aim to continually improve our environmental performance by measuring and reviewing the effectiveness of our environmental management systems, and compliance to ISO14001. Each commodity business develops a sustainable development strategy to manage key challenges and identify opportunities, including specific strategies to manage material environmental issues such as climate change, water management, biodiversity conservation, sustainable closure and energy efficiency.

We apply the principles and expectations set out by our HSEC policy and management standards to all acquired operations. Through our HSEC Assurance Programme and integration process, we require operations to prepare detailed action plans to address areas of underperformance and achieve sustainable improvements in environmental management and performance. Environmental training and awareness at a site and commodity business level are monitored through the assurance programme.

Material environmental issues

• Climate change and greenhouse gas abatement;
• Biodiversity conservation and land management;
• Resource management, in particular water and energy;
• Emissions, waste and tailings management;
• Closure planning and closed site management.

Xstrata’s rapid acquisition-led growth in 2006 has also substantially increased our environmental footprint, introducing new material issues requiring responses at global, regional and local levels. Through the acquisition of Falconbridge, Xstrata has gained a significant number of closed sites, many of which require ongoing management, particularly in the area of water management and treatment. We have integrated the management of these sites into our commodity businesses, encouraging a more integrated approach to their economic, safety, environmental and social management.

We have also gained exposure to nickel and cobalt within our portfolio, adding to our product stewardship responsibilities, together with additional zinc, lead, copper and thermal coal exposure from the acquisitions completed in 2006. Recycling operations acquired from Falconbridge enable us to make a positive contribution to extending the life cycle of a range of metals, and we are expanding this recycling capacity with a recycled feed preparation plant at the Sudbury Smelter, Canada.

A number of the acquired sites operate in water-constrained regions, including Altonorte, Lomas Bayas and Collahuasi in northern Chile. The addition of several metallurgical operations has also increased energy use and air emissions, with historic underinvestment in some operations requiring additional capital to implement emissions reduction technology.

The potential environmental impacts of any new project or significant amendments to existing operations are identified through environmental impact assessments, covering social, economic and environmental risks and opportunities. In 2006, 12 impact assessments were initiated, submitted or approved, including operations acquired in 2006. The most material of these were for the McArthur River Mine conversion to an open cut zinc/lead operation and approval for the development of Goedgevonden, a major new open cut coal mine in South Africa.

Monitoring and assessment

All sites maintain an ‘aspects and impacts’ register identifying key environmental risks and the programmes and controls in place to manage these. Xstrata’s HSEC Assurance Programme independently audits every operation against our HSEC Management Standards at least once every three years, dependent on performance and risk profile. Specialist and legislative audits, together with external and internal environmental performance benchmarking, and self assessments are undertaken on a regular basis.

Environmental incidents and remedial actions are reported to the Executive Committee on a monthly basis. Any category 3 (significant) incidents and above are reviewed by the Board HSEC Committee every quarter. In 2007, Xstrata’s commodity businesses are developing intensity measures for material impacts, to provide a more effective tool to measure our efficiency in the use of natural resources and reductions in waste products and emissions.

Environmental incidents

The total number of environmental incidents increased from 619 in 2005 to 1,143 in 2006 including acquired operations from the date of acquisition. On a like-for-like basis, stripping out the sites acquired during 2006, incidents increased from 619 to 684. The largest increase came from negligible (category 1) incidents, in particular from Xstrata Copper’s Las Bambas exploration site in Peru, where exploration activities increased substantially in 2006. The drilling programme doubled compared to the previous year, drilling 100,000 metres at three resource areas and undertaking initial drill testing at two additional prospective sites. In addition, full implementation of Xstrata’s reporting standards and sustainability database in late 2005 resulted in enhanced reporting of incidents year on year at this project.

No category 4 (serious) or category 5 (disastrous) incidents have occurred at Xstrata’s operations in the five years since Xstrata plc was created. However, in 2006 we did not achieve our target of no category 3 (significant) incidents, with 24 incidents recorded, compared to 20 in the previous year. Half of all category 3 incidents related to storm water releases at Mount Isa during tropical storms.

Since 2001, considerable infrastructure improvements to storm water management have been made at Mount Isa Mines. During 2006, pumping capacity was upgraded to capture water for reuse on site and eliminate off site storm water discharge. Storage capacities have also been increased to eliminate uncontrolled releases where possible. Mount Isa is a long-standing, multi-use site in close proximity to the neighbouring community. As a result, water catchment areas are adjacent to existing infrastructure with short flow lengths, limiting opportunities for further upgrades to the water management system. We are examining other potential short-term and long-term solutions to eliminate storm water releases in the future, but recognise that this issue will require a longer timeframe to be resolved.

Environmental fines

In 2006, four managed operations received environmental fines for a total of US$8,100. Two of these fines (US$6,400 in total) related to an administrative error at Xstrata Alloys Rhovan and Wonderkop operations in South Africa, where environmental impact assessments had been lodged with and approved by the Department of Minerals and Energy, but not with the Department of Environmental Affairs and Tourism (DEAT). Activities were therefore commissioned without the relevant DEAT authorisation and this was declared, resulting in a fine of US$5,000 at Rhovan and US$1,400 at Wonderkop.

One fine (US$1,200) was received at Xstrata Coal’s Ravensworth operation, Australia, where a technical blast exceeded pressure limits of 120dBA. A further fine was received at the Townsville port in Australia from the Queensland Environment Protection Agency for US$500, following a diesel spill in the harbour from a valve malfunction on a diesel storage tank. A ‘root cause’ investigation was completed and improved maintenance and inspection procedures were implemented to prevent a re-occurrence of this spill.

Environmental awards

In Australia, Xstrata Coal was awarded the 2006 NSW Minerals Council’s Environmental Award in recognition of the rehabilitation of the New Wallsend site. This work has also been recognised by the NSW Minister for Minerals Resources as an outstanding example of mining rehabilitation.

Xstrata Nickel’s Koniambo project is located in New Caledonia. In 2006, an Environmental Charter was signed with the Northern Province to develop effective, efficient and equitable measures for the protection and preservation of the environment