Logo: URS verification

Independent Assurance Statement

URS Verification Ltd (URSVL) was commissioned by Xstrata plc to provide independent assurance of its 2006 Sustainability Report. This is the fourth successive year that URS has provided assurance of Xstrata’s Sustainability/HSEC reporting. The scope of work performed on which our opinion is based was:

  • Interview with two senior Xstrata group managers responsible for management of sustainability issues and corporate affairs within Xstrata;
  • Assessing six sites West Wallsend Coal Mine, Mount Isa Lead/Zinc Mines and Lead Smelter and McArthur River Lead/Zinc Mine (Australia), Tweefontein Coal Complex, Kroondal Chrome Mine and Thorncliffe Chrome Mine (South Africa);
  • Review of Xstrata’s internal health, safety, environment and community (HSEC) assurance process;
  • Review of stakeholder engagement processes in place for socially responsible investors at a group level and with local communities at the sites visited;
  • Interview with Xstrata personnel responsible for implementing and managing the web-based Xstrata Sustainability Database, including 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, HIV management in South Africa;
  • Environment: Air emissions (NOX, SO2, total particulates); water use (potable, raw, recycled, discharged); land use, rehabilitation and biodiversity; and environmental incidents, fines and penalties.
  • Community: Number and type of community complaints and complaint management process, stakeholder interactions and community investments.

URSVL has performed this assurance process following the three principles of the AA1000 Assurance Standard (AA1000AS)1 – 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 (GRI) G3 Sustainability Reporting Guidelines and the additional requirements of the GRI Mining and Metals Sector 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 robust views on this information is important. 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 present a conflict of interest.

URSVL has carried out its services by checking samples of information and documents that have been made available to 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

The management of health, safety, environment and community (HSEC) issues is increasingly being integrated into Xstrata’s core business processes, although the level of integration continues to vary, across the commodity businesses and their divisions. Significant examples of integration for 2006 are:

  • HSEC risk reviews of the Falconbridge business, which were completed as an integrated part of business due diligence within 100 days of the acquisition.
  • Responsibility for the implementation and management of the HSEC Assurance programme was transferred from a Group level to commodity businesses.

The improved outcomes observed from the HSEC assurance process during 2006 are an encouraging indicator of improving sustainability management and performance across the sites concerned.

Materiality and Responsiveness

Based on our knowledge of Xstrata built over the past four years and broad understanding of the international mining industry, it is our opinion that the key sustainability challenges raised by Xstrata in the report reflect the main material issues for the industry given Xstrata’s geographic presence. 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 areas such as safety being identified and recognised as a core business risk.

Xstrata has continued to actively engage with a range of stakeholders and respond to issues raised, increasingly integrating stakeholder engagement into business processes. In 2006, Xstrata has also developed sustainability reports at a commodity business, divisional and site level across most of its business with content targeted towards addressing material issues relevant to stakeholders at the various business levels.

Xstrata is moving towards a more uniform approach to stakeholder interaction at a divisional and site level and monitoring the benefits of community investments. All sites have some form of engagement with local communities and other stakeholders, and the increased focus and structure in this area has started to reduce the wide variation in style identified in previous years.

Completeness

In our opinion the report provides a clear account of the management processes and systems and the high performance expectations set by the Group. The sites and commodity businesses have continued to integrate these expectations into their operations to move further towards meeting all of these requirements. Setting and reporting against specific performance targets for greenhouse gas, water, emissions, health, safety and community, will increase the transparency of Xstrata’s performance reporting in the future.

The report covers the significant issues and challenges that the company has faced during 2006 in a balanced manner, and also presents information on safety performance challenges experienced in the early part of 2007. Xstrata has continued to increase its disclosure on stakeholder relationships, business ethics and social issues. Xstrata has declared an A+ level of application of the GRI G3 Guidelines3, and this has been reviewed and agreed by URSVL.

The internal web-based Sustainability Database, partially implemented in 2005, facilitates collection and collation of data for this report. Improvements in both the database and the process for data entry and validation have been made in 2006 with the aim of improving data quality. In 2006, Xstrata continued to enhance its sustainability definitions guidelines across the group and provided in-house training to facilitate uniform interpretation of definitions by personnel.

For the key performance indicators verified, data in this report is considered to be generally accurate and representative of overall group performance. However, URSVL has identified occurrences where there appear to be minor systematic data quality and definition interpretation issues at a site level, although where identified these did not result in material errors when aggregated to a commodity business or group level.

Recommendations

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

  • Ensure implementation of the group HSEC Standards and Assurance programme within the recently acquired operations to reduce risk and improve performance;
  • Build upon improved major hazard management and behavioural safety issues in order to eliminate injuries, illnesses and fatalities from its business;
  • Continue to improve the process and systems of collection, collation and reporting of sustainability data at a site level to ensure continuous improvement in data quality;
  • Review some sustainability definitions to encourage uniform interpretation and application of these across the Group; and
  • Continue to improve the level of stakeholder engagement and also monitor the benefits of community investments at a site level.
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Sally Vivian
URS Verification Ltd
London
May 2007

1 AccountAbility Institute of Social and Ethical Accountability. Assurance Standard AA1000, March 2003, London, UK
2 ISO 19011:2002. Guidelines for Quality and Environmental Management Systems Auditing.
3 Global Reporting Initiative G3 Sustainability Reporting Guidelines; Mining and Metals Sector Supplement Pilot Version 1.0, February 2005.