Mining: opportunities and challenges Mick Davis – CEO MCA Minerals Week June 2011 1 Disclaimer:

This presentation and its contents may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part for any purpose without the consent of Xstrata plc (“Xstrata”). The Directors of Xstrata accept responsibility for the information contained in this presentation. Having taken all reasonable care to ensure that such is the case, the information contained in this presentation is, to the best of the knowledge and belief of the Directors of Xstrata, in accordance with the facts and contains no omission likely to affect its import. This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities, or a proposal to make a takeover bid in any jurisdiction. Neither this document nor the fact of its distribution nor the making of the presentation constitutes a recommendation regarding any securities. This presentation is being provided to you for information purposes only.

Certain statements, beliefs and opinions contained in this presentation, particularly those regarding the possible or assumed future financial or other performance of Xstrata, industry growth or other trend projections are or may be forward looking statements. Forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “anticipates”, “expects”, “intends”, “plans”, “goal”, “target”, “aim”, “may”, “will”, “would”, “could” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond Xstrata’s ability to control or predict. Forward-looking statements are not guarantees of future performance. No representation is made that any of these statements or forecasts will come to pass or that any forecast result will be achieved.

Neither Xstrata, nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this presentation will actually occur. You are cautioned not to place undue reliance on these forward-looking statements.

Other than in accordance with its legal or regulatory obligations (including under the UK Listing Rules and the Disclosure and Transparency Rules of the Financial Services Authority), Xstrata is not under any obligation and Xstrata expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

This presentation contains references to “cost curves”. A cost curve is a graphic representation in which the total production volume of a given commodity across the relevant industry is arranged on the basis of average unit costs of production from lowest to highest to permit comparisons of the relative cost positions of particular production sites, individual producers or groups of producers across the world or within a given country or region. Generally, a producer’s position on a cost curve is described in terms of the particular percentile or quartile in which the production of a given plant or producer or group of producers appears. To construct cost curves, industry analysts compile information from a variety of sources, including reports made available by producers, site visits, personal contacts and trade publications. Although producers may participate to some extent in the process through which cost curves are constructed, they are typically unwilling to validate cost analyses directly because of commercial sensitivities. Inevitably, assumptions must be made by the analyst with respect to data that such analyst is unable to obtain and judgment must be brought to bear in the case of virtually all data, however obtained. Moreover, all cost curves embody a number of significant assumptions with respect to exchange rates and other variables. In summary, the manner in which cost curves are constructed means that they have a number of significant inherent limitations. Notwithstanding their shortcomings, independently produced cost curves are widely used in the industries in which Xstrata operate.

No statement in this presentation is intended as a profit forecast or a profit estimate and no statement in this presentation should be interpreted to mean that earnings per Xstrata share for the current or future financial years would necessarily match or exceed the historical published earnings per Xstrata share.

The distribution of this presentation or any information contained in it may be restricted by law in certain jurisdictions, and any person into whose possession any document containing this presentation or any part of it comes should inform themselves about, and observe, any such restrictions. Any failure to comply with such restrictions may constitute a violation of the laws of any such jurisdiction.

By attending the presentation and/or accepting or accessing this document you agree to be bound by the foregoing limitations and conditions and will be taken to have represented, warranted and undertaken that you have read and agree to comply with the contents of this notice.

2 Agenda

§ A secular trend § An industry transformed § Mining’s contribution to Australia § Challenges ahead § Conclusion

3 A secular trend 4 Multi-decade secular change…

Contribution to Global GDP Global urban migration GDP in 2010 PPP $US % urbanised 100% 100% Other 90% 25% 26% Developing Rural 80% Economies; 30% 80% 70% 60% 27% 60% China 44% 50% Developing 40% Asia; 49% India 40% 30% 48% 20% 30% Advanced 10% Economies; 20% 21% Urban 0% 2010 2030 2050 0% Developing Economies 52% 70% 79% as of total: 1950 1960 1970 1980 1990 2000 2010 2020 2030 Developing economies are expected to China will have 221 one million plus account for almost 80% of global GDP population cities by 2025 – compared to by 2050 Europe with 35 today

Source: Citi Investment Research and Analysis, IMF , UN Department of Economic & Social Affairs , McKinsey Global Institute 5 ...driving a structural shift in commodity demand

Growing populous nations have a multiplier effect on commodity demand

Commodity Intensity1 Energy consumption per capita (kWh/capita)

India GDP: China GDP: US GDP: 15'000 ~$3.2k/capita ~$7.3k/capita ~$42k/capita USA: 3,873bn kWh 100

10'000 75 Japan

Europe China: ~7,000bn kWh 50 by 2020 Late cycle commodities 5'000 e.g. platinum, nickel China: 3,438bn kWh 25 Mid-cycle commodities e.g. copper, lead, zinc Indonesia Early cycle commodities India e.g. steel, iron ore 0 0 0 5 10 15 20 25 30 35 40 45 50 0 2'000 4'000 GDP per capita (real, 2005 $US) Population (cumulative bn) Increasing intensities driven by a China’s per capita energy consumption demand shift for commodities in is expected to double by 2020 emerging markets

Source: IMF, USGS, CIA Factbook Note: 1 Stylised intensity curves based on developed countries, Indexed to 100 at maximum 6 Commodity supply continues to be constrained

Geographic origin of new copper supply 2020 Copper supply/demand forecasts

Cumulative probable Australia North Mt Cu Despite sustained high prices, mine project supply 9% America 31 closing the 2020 supply/demand 2011 to 2020 and 29 gap remains challenging Europe 9% 27 CIS 25 4%

23 Supply South Demand America Africa 21 16% 39% 19 Asia 2007 2008 2009 2010 2011 23% Date of 2020 forecast Copper industry grade decline Zinc/lead industry grade decline 1.5 Per cent Per cent Per cent 10 1.4 5 1.3 9 4 1.2 8 1.1 7 Zinc 3 Lead 1.0 6 2 0.9 1980 1985 1990 1995 2000 2005 2010 2015 2020 1990 1995 2000 2005 2010 2015 2020 More than 80% of new copper supply is from emerging markets with more complex and challenging environments suffering from a lack of infrastructure to sovereign risk issues

Source: BrookHunt, MEG, Xstrata estimates 7 5.OVERVIEW INDUSTRY LANDSCAPE A decade ago, the industry was fragmented with no clear winning business model

Global mining and metals industry - 2001

GLOBAL Global INTEGRATED DIVERSIFIEDS Player MONOLITHS Alcoa Rio Tinto $30bn

Alcan Teck Cominco

3+ regions 3+ BHP Noranda $26bn Anglo FOCUSED American LOCALS Billiton $29bn Falconbridge $12bn Xstrata WMC $1bn Inco Phelps Dodge MIM LOCAL HEROES

3 regions 3 Freeport

– $7bn 1 Antofagasta NUMBER OF KEY GEOGRAPHIES KEY OF NUMBER $2bn CVRD (Vale) Regional Implats Lonmin $12bn Player $3bn $2bn Single 1–3 commodities 3+ commodities 8+ commodities Multi COMMODITY FOCUS Source: Bubble sizes represent market capitalisation as 1 January 2001 8 OVERVIEW Today mining is consolidated, with the Diversified Model proving best positioned to compete into the future

Global mining and metals industry – 2011*

Global INTEGRATED BHP GLOBAL DIVERSIFIEDS Player MONOLITHS Billiton $245bn Xstrata $70bn

Vale Rio Tinto 3+ regions $158bn $139bn 6 Anglo FOCUSED LOCALS American $66bn Xstrata at IPO 3 regions –

1 LOCAL HEROES NUMBER OF KEY GEOGRAPHIES 2

Regional Player Single 1–3 commodities 3+ commodities 8+ commodities Multi COMMODITY FOCUS

Source: Bloomberg, market capitalisation as at 6 May 2011 9 The Virtuous Circle

Scale and Diversification - Geographic, commodity, customer and currency diversification - Scale to take necessary risks - High-quality operations

Embedded Optionality Higher quality earnings Superior Capabilities - Proprietary control of - Strong and stable cash flow timing, sequencing and - Financial acumen through commodity cycle size of options - Operating excellence - Higher returns - Asymmetrical M&A options - Marketing capability - Lower cost of capital - Operational options - Governments and NGOs - Improved funding capacity - Geographic options - ‘Licence to operate’

Access to External Growth Options - Ability to shoulder risk - Licence to operate - Multiple regional synergy opportunities 10 Mining majors manage the majority of large, low cost assets

Copper Iron Ore Thermal Coal Mined Cu production (2010) Production (2010) Thermal Coal exports (2010)

18.7Mt 8.3Mt 1,162Mt 588Mt 639Mt 175Mt 100% 100% 100%

90% 90% 90% Anglo 80% 80% 80% Others Others Others 70% 70% Vale 70%

60% 60% 60%

50% 50% 50% Anglo Vale 40% Codelco 40% 40% Rio Rio 30% 30% 30% Freeport BHPB Anglo 20% 20% Vale 20% Rio 10% 10% BHPB 10% Xstrata BHPB 0% Xstrata 0% 0% Global Tier 1 Global Tier 1 Global Tier 1*

Asset managed by the Note: Tier 1 is defined as being in first half of global cost ranked by C1 cost, and upper quartile of the world’s mines ranked by output *Tier 1 is as production >1.5Mtpa and margin of >USD30 in 2010 major mining companies Source: Wood Mackenzie (2010), Metalytics (2010), Xstrata estimates 11 Majors own most major growth options across diverse geographic regions

Five largest mine projects by output in 2015

1,264kt 500Mt 237kt 1,055koz 100% Escondida Casa de Pedra Exp Impala 90% 3rd Mill Koniambo #16 Carajas 80% Konkola Deep Barro-Alto Garatau 70% Pilbara RGP 5 & 6 BHPB, Esperanza Vale, Rio, 60% Anglo and Goro Pandora 50% Xstrata Toromocho Pilbara 40% 320 Onca Puma Styldrift 30%

20% Las Bambas Chichester, Ambatovy Eland 10% Solomon

0%

Copper Iron Ore Nickel PGMs Ownership by Majors: 53% 64% 73% 65%

Note: 5 largest projects (greenfield and brownfield) by output in 2015. Copper : “highly probable” or “probable” in Brook Hunt, including projects ramping up in last 6 months. Nickel; CRU Group Nickel Quarterly; Iron Ore: Metalytics; PGM: Xstrata Estimates. Internal project pipeline assessment made for all Xstrata projects. Source: Brook Hunt (2011 Q1); Wood Mackenzie; Metalytics; CRU Group; Xstrata estimates 12 Miners are amongst the world’s leading companies and a core holding for investors

Market cap of world’s largest 100 Mining as a % of UK equity markets companies

2002

Financials 30% 27% Oil & Gas Mining Pharma & Bio 17% 11% Telecom 12% 3% Other

Miners 2011 Financials 23% 34% Oil & Gas Mining Pharma & Bio 17% Xstrata Telecom 6% 7% Other 13% 0 100 200 300 400 Market Capitalisation ($US billion)

Source: Datastream- FTSE All Share, Bloomberg Global Titans-the largest 100 companies globally by market capitalisation 13 Mining makes a major (and growing) contribution to Australia’s prosperity

Mining sector contribution to Australian economy 9%

8% Contribution by Total Factor Income 7% Contribution by Gross 6%

wideTotal Value Added - 5%

4%

3%

2% Fraction of of Fraction Economy

1%

Charts from The Economic Contribution 0% of the Australian Mining Industry, Source: Australian Bureau of Statistics Deloitte for the MCA, 2010 • Average Weekly Earnings, Mining Sector and All Employment in Metal Ore and Coal Mining other industries and Mining’s Export Share $2,500 100 70%

90 60% $2,000 80 Mining All Industries 70 50%

60 $1,500 40% 50 30% $1,000 40 Total Employment in Metal Ore Mining 30 and Coal Mining ('000s, LHS) 20%

$500 ('000s persons) of Employment 20 Mining Exports as a Fraction of Total Exports by Value (Per Cent, RHS) 10% Exports of Fraction Total (Per Cent) 10 Average Weekly Earnings: Total Earnigs Earnings: Weekly Total Average Australian Bureauof Statistics : $0 0 0% Source Source: Australian Bureau of Statistics, Feb 2010. ABARE, Australian 14 Qt Mineral Statistics Xstrata in Australia

In 2010 Xstrata contributed AUD$8.6bn to the Xstrata employs around Australian economy 14,000 people (including contractors) in Australia

In 2010, Xstrata’s Australian businesses contributed: – 39% of Group EBITDA – 29% of total assets – 29% of Group revenue – 41% of Group capex

AUD$10bn of Australian growth projects are in feasibility or implementation

15 More than ever, existing miners must “run hard to stand still”

Depleting reserves Recent capex 40000 Bridging the strategic gap announcements 35000 Export Tonnage 30000 Xstrata 25000

20000 • $21bn approved or soon- 15000 to-be-approved projects 10000 Shareholder Inland 5000 Tonnage Demands 0 Anglo American 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 • $16bn approved for next 3 Increasing costs years Opex US$/t material moved (real 2008) $80 BHP Billiton

60 Other Energy • $15bn in 2011 Value $m

40 Labour The Rio Tinto 20 Strategic Consumables • $12bn major capital project 0 Gap 2008 2011 approvals in 2010/11 Declining grades Primary copper head grade, % Historical Future 1.5

1.4

1.3 Today 1.2 Time

1.1

1.0

0.9 1980 1985 1990 1995 2000 2005 2010e 2015e

Source: Company data 16 Mining industry faces increasing complexity, competition and costs

Emerging Challenges Examples and Potential Impact Increasing complexity of • Windfall taxes, royalties, carried interest, allocation of licences, mining public policy licence reviews, etc. Potential for unintended, damaging consequences and loss of relative competitiveness. Constrained inputs • Key engineering and project management skills, fabrication capacity, (especially for project contractors, etc. – project delays and increased costs development) Higher input costs • Energy, fuel, steel, explosives, labour and contractors, strong producer currencies – higher long-term costs Water shortage • Potential competition with communities for water in arid areas, cost of providing alternatives (e.g. desalination) Social licence to operate • Rising community expectations, NGO activity - delayed mining expansion, cost of compliance, focus on community involvement Growing • Increased legislation across the board – UK Bribery Act, transparency legislation/regulation initiatives, anti-trust, etc., growing organisation complexity and cost of compliance Environmental/Climate • Growing complexity, legislation by country rather than global Change regulation impacts framework, increased costs, impact on competitiveness Competition for access to • New ‘strategic’ and commercial acquirers - higher price for control, new resources scarce resources

17 Climate change principles

• Industry has a valid and important role to play in: • Limiting greenhouse gas emissions • Investing in low emissions baseload technology • Participating as a valid and important interlocutor in policy development

• A consensus is emerging on sound principles for climate change policy: • Clear, predictable and long-term price on greenhouse gas emissions • Single objective to reduce emissions with revenues raised applied to initiatives to support the transition to a low-carbon economy • Protection of trade-exposed industries; avoid ‘carbon leakage’ • Gradual, predictable legislation introduced at an appropriate level

18 Conclusion

• A secular shift in demand for commodities is underway • Mining industry has consolidated giving rise to global, diversified miners with the ability to allocate capital across several jurisdictions • Significant challenges remain for the industry, including increasingly complex legislation • Industry has a legitimate and important role to play in policy development

19