Transformation through Organic Growth and Operational Excellence

Steve de Kruijff, COO Xstrata Copper North Queensland Analyst Visit Ernest Henry Mining – April 2011 1 Xstrata Copper is a fundamental pillar of Xstrata’s diversified model

§ Headquartered in Brisbane, employing over 17,000 people in eight countries § Top five global mined and refined copper producer – Mined copper production of 913,500 tonnes in 2010 § Revenue of US$14bn and operating profit of US$3.8bn in 2010 § Industry-leading approved project pipeline to further transform business and increase production by more than 50% over next four years

Xstrata Copper profit* by country Contribution to Xstrata profit*

Argentina Coal 16% 29% Zinc Australia 13% 22% Peru 22% Nickel 9% Alloys 4% Canada 7% Chile Copper 33% 45%

*Based on earnings before interest, depreciation, tax and amortisation 2 Continued transformation and growth has created a leading global copper producer...

Industry Ranking - 2005 Industry Ranking - 2010

Mined Production Codelco Codelco BHP Billiton Freeport Phelps Dodge Mount Isa Ernest Henry BHP Billiton Freeport Alumbrera Xstrata Copper #4 Rio Tinto + Anglo American Top five share: 36% Xstrata Copper #9 Top five share: 36% Tintaya, Antamina, Kidd, Collahuasi, Lomas Bayas 0 500 1000 1500 2000 0 500 1000 1500 2000

Smelter Production Codelco Codelco Nippon Jiangxi Copper KGHM Mount Isa Xstrata Copper #3 Grupo Mexico + Aurubis Mitsubishi Altonorte Xstrata Copper #19 Top five share: 25% Horne Nippon Mining Top five share: 27%

0 200 400 600 800 1000 1200 1400 0 200 400 600 800 1000 1200

Refined Production Codelco Codelco Phelps Dodge Aurubis Townsville Grupo Mexico + Freeport Nippon Tintaya SxEw Jiangxi Copper KGHM Top five share: 26% Lomas Bayas SxEw Xstrata Copper #5 Top five share: 29% Collahuasi SxEw CCR 0 500 1000 1500 2000 0 500 1000 1500 2000

Source: Brook Hunt, The Long-Term Outlook for Copper, 2nd Quarter Data Volume 2009, 4th Quarter Data Volume 2005. 3 ...with a strong portfolio of geographically diverse assets and projects

4 Further resource growth over last 12 months...

§ Continual extensions of existing mine lives and growth of project resources § Over 400% increase in resource base since 2005 to almost 90Mt copper in 2010 § Generation of new projects: West Wall § Updates to Frieda River and Antamina in 2011 not included

Growth of Xstrata Copper resource base 100 Mt equity contained 90 Cu in mineral resources

80 Greenfield Projects Canada 70 North Chile 60 Southern Peru Minera Alumbrera 50 North Queensland 40 30 20 10 0 2005 2006 2007 2008 2009 2010

Source: Xstrata Copper Ore Reserves and Mineral Resources 2005, 2006, 2007, 2008, 2009 and 2010 5 ...and operational excellence underpins the on-going transformation of assets § Approved projects to provide ›50% increase in production by the end of 2014 – Five brownfield project expansions: Lomas Bayas II, Ernest Henry underground, Antamina expansion, Collahuasi expansion and Tintaya/Antapaccay expansion – One major greenfield expansion: Las Bambas § Further 20% improvement to C1 cash costs over next four years § Further development projects provide option to deliver >1Mtpa additional copper production

Continuous cost improvement Production growth profile*

kt mined copper C1 cash cost 1800 Feasibility / Scoping 1600 Approved / Implementation Xstrata Xstrata Existing Production Copper 1400 Copper 2010 2015 1200

1000

800

600

400 Xstrata Copper 200 2006 Percentile 0 0 10 20 30 40 50 60 70 80 90 100 2009 2010 2011 2012 2013 2014 2015 2016

Source: Brook Hunt Note: * Life extensions included in existing production 6 Further growth optionality

§ Collahuasi progressing concept studies into brownfield expansion to >1 million tonnes per annum (100%) copper production § Potential for >1 million tonnes per annum (100%) initial copper production from three major greenfield projects in final feasibility studies § Evaluation of potential new projects to add to Xstrata Copper’s development portfolio – West Wall, Agua Rica

Indicative Annual Project Country Development Stage Mineral Resource Production (100%)¹ El Pachón Argentina Final Feasibility 1.8Bt @ 0.51% Cu ~400kt Tampakan Philippines Final Feasibility 2.4Bt @ 0.60% Cu ~450kt Frieda River PNG Final Feasibility 1.9Bt @ 0.45% Cu ~260kt Collahuasi exp Chile Concept studies 7.1Bt @ 0.82% Cu ~500kt Energia Austral Chile Feasibility n/a ~1,100 MW West Wall Chile Advanced Exploration 750Mt @ 0.54% Cu ¹ Average production over first five years

7 North Queensland Division Production capacity

§ Regional office −Mount Isa § Mount Isa Underground mines −170,000tpa Cu in concentrate § Mount Isa smelter −280,000tpa copper anodes § Ernest Henry open cut mine −90,000tpa Cu in concentrate −110,000ozpa Au in concentrate § Townsville Refinery & Port −300,000tpa of copper cathodes

8 North Queensland Division 2010 Highlights

§ 2010 production of 232kt copper in concentrate from Mount Isa underground mines and Ernest Henry − equivalent to 25% of Xstrata Copper’s total annual copper production § Contributed 22% of Xstrata Copper’s EBITDA of $3.8bn § Recorded Real Unit Costs savings of US$96 million in 2010 § Townsville Refinery & Port produced a record 287kt of copper cathode

9 Mount Isa copper operations

§ U/G Ore reserves (Proved /Probable): 64mt @ 2.5% cu § U/G Mineral resources (Measured/Indicated/Inferred): 200mt @ 2.0% cu § Open Cut Mineral resources (Indicated/Inferred) : 283mt @ 1.1% cu § Underground drilling exploration programme focused on mineralisation associated with existing orebodies. § Concept study underway into a large scale zinc and copper open pit as an extension to the current Black Star open pit mine § Feasibility study underway into potential of inert grinding and or leaching of residual copper and cobalt from the Mount Isa concentrator tailing − Pilot plant trial § Mount Isa Mines received 2010 Australian Export Award – Minerals & Energy Category § Continuing improvement in safety performance – 2010 LTIFR of 0.7 (Qld Mining Industry LTIFR , 3.5)

10 Copper market update

11 Multi-decade structural price trends are not unprecedented

Copper Price (real terms)

US$/t 14000 Industrialisation of the USA 12000 Rebuilding of Europe, the growth of Japan and the Oil shock 10000

Industrialisation of China 8000 and other BRICs

6000

4000

2000

0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

The industrialisation of China and other BRICs represents a demand shift similar to that seen in USA, Europe and Japan 12 Developing world growth is reshaping the global economy...

Contribution to Global GDP Global urban migration

% urbanised 100%

80% Rural

60% China

40% India

20% Urban

0% 1950 1960 1970 1980 1990 2000 2010 2020 2030

China will have 221 one million plus Emerging markets are expected to account population cities by 2025 – compared to for more than 50% of global GDP by 2030 Europe with 35 today

Source: BofA Merrill Lynch, IMF , UN Department of Economic & Social Affairs , McKinsey Global Institute 13 ... generating a structural shift in commodity demand

Populous nations have a multiplier effect on commodity demand

Commodity intensity¹ Energy consumption per capita (kWh/capita) Mid-cycle commodities (Indexed to 100 at maximum) e.g. Copper, lead and zinc 15'000 100 USA: 3,873bn kWh Late cycle commodities e.g. Platinum, nickel 75

10'000

Japan 50

Early cycle commodities Europe China: ~7,000bn kWh by 2020 e.g. Steel, iron ore

5'000 20 China: 3,438bn kWh

Chinese GDP: ~$2.5k/capita US GDP: ~$50k/capita Indonesia

0 India 0 5 10 15 20 25 30 35 40 45 $50k Indian GDP: ~$1k/capita 0 0 2'000 4'000 GDP per capita (real, 2005 USD) Population (cumulative bn) Increasing intensities generate a demand China’s per capita energy consumption is shift for commodities in emerging markets expected to double by 2020 • As a percentage of US intensity peak, China today is: • Demand is also expected to grow strongly in India, 12% Copper, 1% nickel and 30% iron ore Indonesia and Brazil

Source: IMF, USGS, CIA Factbook Note: 1 Stylised intensity curves based on developed countries 14 Existing copper production continues to underperform

§ Maintaining current production Primary copper head grades, % rates is increasingly challenging as the industry faces: 1.5 1.4 – Falling head grades and 1.3 deeper mines 1.2 – Labour disputes and technical 1.1 issues 1 § Mine supply underperformed again 0.9 in 2010 – actual vs plan shortfall 1980 1985 1990 1995 2000 2005 2010 2015 2020 totalled 700kt. § Lower grades, technical issues, Mine production actual vs plan

labour disputes, sovereign risk and 2005 2006 2007 2008 2009 2010 project ramp up difficulties 0 -100 continue to generate high rates of -200 disruption. -300 -400 § Underperformance has continued -500 -600 -700 in 2011, with production guidance -700 -800 revised lower at a number of -800 -917 -900 -952 -987 -966 major mines. -1000

Data: Brook Hunt Copper Mine Costs, Brook Hunt Long-Term Outlook for Copper – 1st Quarter Data Volume 2011, Xstrata Copper estimates 15 Supply recovery is impeded by project constraints

§ Although high copper prices have Probable copper mine project supply encouraged new mine supply, the 7000 kt copper response has lagged recovering demand, and constraints on growth remain. 6000 Although the mine project pipeline § Economic uncertainties and volatility has recovered from the economic of capital and operating costs remain crisis, forecast output from new 5000 mine projects over the next five impediments to the financing of years remains below 2009 levels. projects § Future supply growth is concentrated 4000 in regions with higher political and environmental risk as well as significant infrastructure 3000 requirements.

§ Access to engineering, labour and 2000 Jan-09 equipment are also re-emerging as Jan-11 key challenges facing new mine project development. 1000 § The majority of new mine projects cannot be accelerated. 0 2009 2010 2011 2012 2013 2014 2015 Data: Brook Hunt Long-Term Outlook for Copper – 1st Quarter Data Volume 2011, Xstrata Copper estimates 16 It takes time to build major mine projects

§ Disciplined approach to project development through pre-approval and execution phases § Project delivery de-risked prior to approval ‒ Early ordering of long-lead items, Bechtel Alliance, standard concentrator design, staffing, social licence to operate

Sample development timeframe: Las Bambas project

Acquisition of Board Commissioning Las Bambas Approval and ramp up

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Pre-approval Execution

§ Exploration and resource definition drilling – 330,000 § Social and Environmental Impact meters drilled Assessment § Community engagement § Major Earthworks § Initial evaluation § Plant construction § Feasibility Study and detailed engineering § Pre-stripping § Bechtel Alliance, standard concentrator design § Commissioning and ramp up § Procurement of long-lead items: grinding mills, gearless drives and primary crusher § Social licence to operate

17 Rising capital costs are extending project development timelines

Real 12000 Capital costs for the next generation of mine projects are 2008 almost double that of mines already in production 11208 $/t Cu • The annualised capital cost inflation rate for recently developed mines is equiv 11000 16%, rising to 44% and 83% for mines in construction and mines currently at the bankable feasibility stage respectively. 10000

8991 9000 8657

8000 7843

7000

6000 5413

5000 4287 4000

3000

2000 All 1985-2008 All 1985-2008 Greenfield - In Brownfield - Mills Probable Projects Possible Projects Greenfield Brownfield Construction (All) in Construction All All

Copyright: Brook Hunt 18 Copper’s fundamentals remain robust

§ A weaker spot market in China is not Chinese apparent consumption robust necessarily indicative of weak overall 2000 kt demand - higher domestic production 1800 net imports has largely offset the reduction in 1600 production cathode imports over the year to date. 1400 1200 § Chinese end-use and semi-fabricating 1000 800 data point to another robust year for 600 copper demand. 400 200 § Western markets are gaining strength 0 with PMIs at multi-year highs. Semi- Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011e fabricators are reporting strong Western PMIs point to strong demand demand, particularly from the power 65

sector. 60 Growth § Increases in scrap consumption have 55 displaced some cathode demand, but 50 availability is not unlimited and 45 fabricators must compete with 40 Contraction smelters for material. 35

30 2004 2005 2006 2007 2008 2009 2010 2011

Data: Chinese trade statistics, Analyst reports, Xstrata Copper estimates 19 Summary: Above trend copper pricing outlook remains intact

Demand § Demand growth remains driven by developing economies, which are investing heavily in copper-intensive sectors such as power infrastructure and construction § Demand in mature economies will see continued growth this year as the economic recovery broadens. § Although high prices may encourage some demand rationing; positive substitution is also ongoing.

Supply § High rates of disruption and underperformance among operating mines continue to constrain supply. § Although high prices have encouraged new projects, development hurdles mean the risk of delays remains high. § In the long term, the current pipeline of projects remains insufficient to meet demand requirements.

20 Xstrata Copper Case Study: Ernest Henry Myles Johnston, General Manager Ernest Henry Mining 21 Site location and history

§ Forms part of Xstrata Copper’s North Queensland Division § 38 kilometres north of Cloncurry in northwest Queensland § Deposit discovered in 1991 § Open pit mining from 1995 to 2011

22 Crushed Ore Stockpile Concentrator

New Magnetite North Plant

Hoisting Shaft

Portal Location 2.0 km 23 Ernest Henry open pit today

Current pit: § Mined more than 32 million tonnes § 450m deep, 1.5km x 1.3km of material in 2010 including 11 million tonnes of ore

Final pit: § Currently 22 trucks and three § 525m deep, 1.5km x 1.3km primary production digging units are in operation

24 EHM concentrator today

2009 throughput of 8.56Mt 2010 throughput of 9.84Mt

25 Underground mine setting

§ 72Mt based on a 1.15% CuEq cut-off grade § Ramp up to 3Mtpa from Q4 2011 to Q4 2012 § Q1 2013 Shaft commissioning and 5Mtpa production ramp up to 6Mtpa

26 Ernest Henry Mining Key points in time

§ 2002-04: Drilling to outline underground resources § 2003-2005: Scoping studies into various mining methods § 2006-07: Deeper drilling to 1200m below surface § Q107 – Q108: Pre- feasibility study § Feb 2008: First cut of decline § Q108 – Q409: Feasibility study § Dec 2009 – Shaft project approved

27 Sub level cave mining

28 Current status – Decline & underground development

Decline stages 1 and 2 completed: § Confirmed the nature of the ground for underground development, completed stress testing, established mining systems and maximised future scale and timing flexibility Shaft mine approval: § ~3.5 year development, 12 years production @6.0Mtpa § Current progress includes: − 17km of development, − Decline face now 580m below portal (830m below surface) − Dual emphasis on decline development and development of upper levels for early production § First stoping production due Q4 2011 § Cave production by truck to begin in Q4 2011 § Shaft fully operational 2013

29 Current status – shaft sink activities

§ Shaft to be 7m diameter, 940m deep, concrete lined, hoisting 6Mtpa § Current progress includes: − 3Mt of material mined to reach competent ground − 1000m3 of concrete poured in the collar − 32m of pre-sinking completed by hand sinking § Next in Sequence − Construct headframe and sinking headframe − Shaft sinking Q3 2011 to Q3 2012 − Winder installation

30 Shaft Sink progress

31 Current status – infrastructure

Infrastructure Progress: § Headframe collar constructed § Power feed and services installation underway § Escape ladder way and rising mains 50% complete § First main fan constructed underground § Refrigeration system and Bulk Air Cooler commissioned § Detailed Design and Procurement on main pump station, crusher and conveyors well underway

32 Magnetite plant progress

§ Overall project 85% complete § Good safety performance § Base plant and regrind civil construction complete § First production - 31st Dec 2010 § Commissioning and optimisation ongoing Q1 § Regrind construction to commence April 2011 Base Plant - Extraction Building (complete) Base Plant - Dewatering Building (complete) § First rail planned Q2 2011 § Costs on budget

Regrind – civil works (complete) Magnetite Filter in operation First Production – 31st Dec 2010 Mechanical works starting April 33 Magnetite logistics

§ Rail Contracts § Below track: – Negotiations concluded, contract drafted for execution – Rail paths scheduled for April start up § Above track: – Train configurations accredited by the regulator – Trial train for final sign off scheduled for early April. – 97 wagons and 5 locomotives in Townsville – Competition on the rail corridor § Port shed extension: – Development Application approved by regulating body – Commissioning end March 2011 § Marketing & Shipping: – First export shipment due in H1 2011

34 Business development opportunities

§ Milling operation has Mt Oxide

100km capacity of 3-5Mtpa from Mt Gordon Mt Watson 2012 Lady Annie 100km § Potential third party ore 50km Little Eva sources Roseby Barbara EHM § Exploration JV’s currently Mt Margaret Rocklands in place to provide Monakoff MICO strategic long term Mt Colin Great Australia

Eloise opportunity (e.g. Red

50km Greenmount Metals)

Kuridala § By-product options with

Mt Elliott tailings re-mining Mt Dore Starra

Osborne

35 SD Commitment Key Initiatives § Mine Transition to underground § Environmental initiatives/technology – IsaMillTM energy efficiency § Local Employment § Indigenous Traineeship § New XCPPNQ partnerships

36 Questions?

37 Xstrata plc Bloomberg: XTA LN Equity Reuters: XTA.L

Websites: www.xstrata.com www.xstratacopper.com

Xstrata Copper Head Office: Level 9, Riverside Centre 123 Eagle Street, GPO Box 1433 Brisbane, Queensland Australia [email protected]

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