Annual Report: Xstrata PLC Bahnhofstrasse 2 PO Box 102 6301 Zug Switzerland

Xstrata plc Bahnhofstrasse 2 PO Box 102 6301 Zug Switzerland Xstrata Annual Review 2005 Annual Report 2005
Tel +41 41 726 6070 Fax +41 41 726 6089 www.xstrata.com

We will grow and manage a diversified portfolio of metals and mining businesses
with the single aim of delivering industry-leading returns for our shareholders.
We can achieve this only through genuine partnerships with employees,
customers, shareholders, local communities and other stakeholders, which are
based on integrity, co-operation, transparency and mutual value-creation.
01 Key Financial Results Operating and Financial Review 79 Group Information

02 Xstrata at a Glance 14 Business Overview & Strategy 82 Board of Directors
04 Chairman’s Statement 18 Key Performance Indicators 84 Executive Management
07 Chief Executive’s Report 20 Financial Review 85 Directors’ Report
36 Alloys 91 Corporate Governance Report
44 Coal 102 Remuneration Report
57 Copper
67 Zinc
77 Technology
Xstrata plc Annual Report 2005 | 01
Key Financial Results
Year ended Year ended %

US$m 31.12.05 31.12.04†† Change
Revenue 8,049.8 6,462.4 25

EBITDA† 3,092.8 2,066.6 50
EBIT† 2,509.2 1,499.0 67
Attributable profit 1,706.4 1,067.1 60
Earnings per share (basic) 279¢ 170¢ 64
Cash generated from operations 2,779.9 1,784.9 56

Net debt to equity 32.1% 20.1% 60
Net assets 8,137.2 7,325.2 11
Net assets per share $13.57 $11.74 16
Dividends per share:

– interim dividend (paid) 9.0¢ 8.0¢ 13
– final dividend (proposed) 25.0¢ 16.0¢ 56
Total 2005 dividends per share 34.0¢ 24.0¢ 42
†Excludes discontinued operations
††As restated for the effect of the transition to International Financial Reporting Standards (IFRS) with the exception of IAS 32 and IAS 39 whereby financial
instruments and hedges have continued to be accounted for under UK GAAP prior to 1 January 2005
Highlights
■ Attributable profit up by 60% to $1.7 billion

■ Operational cash flows of $2.8 billion and free cash flow of $1.9 billion after sustaining capital expenditure
■ Real unit cost savings of $19 million, despite spiralling prices for key industry inputs
■ $1.7 billion acquisition of one-third stake in Cerrejón thermal coal operation, a large scale, cost competitive asset with an
exceptional reserve base and access to the high growth US and European markets
■ Purchase of 19.9% of Falconbridge Limited for C$28 per share, with unrealised post-tax profit at year end of $316 million
■ Rolleston thermal coal mine commissioned on time and within budget, with first coal railed in October 2005
■ Phase One of Project Lion ferrochrome smelting complex on budget and on track to commission in the second half of 2006
■ Meaningful and sustainable empowerment ownership secured in Xstrata’s South African coal assets through the creation of
ARM Coal with African Rainbow Minerals
■ Final dividend increased by 56% to 25¢ per share to bring the full year dividend to 34¢ per share, reflecting increased
confidence in the medium term commodity price outlook
02 | Xstrata plc Annual Report 2005
Xstrata at a Glance
Xstrata is a major global diversified mining group, listed on the London and Swiss stock exchanges. The Group
is headquartered in Zug, Switzerland and has approximately 24,000 employees world-wide, including contractors.
Xstrata maintains a meaningful position in six major international commodity markets: copper, coking coal,
thermal coal, ferrochrome, vanadium and zinc, with additional exposures to gold, lead and silver. The Group's
operations and projects span four continents and eight countries: Australia, South Africa, Spain, Germany,
Argentina, Peru, Canada and the UK.
Alloys | the world’s largest Operates five operating Revenue US$m EBIT US$m
producer of ferrochrome and chromite mines and 1150 1,116 400

317
18 ferrochrome furnaces,
a leading producer of
through the Xstrata-Merafe 1000
953
200 171
primary vanadium. Chrome Venture and one
integrated vanadium plant 850 0
in South Africa 04* 05* 04* 05*
Coal | Xstrata Coal is the Interests in 32 coal mines, Revenue US$m EBIT US$m
world’s largest producer of 19 in Australia and 13 in 4000 3,400 400 1,079

South Africa, and an 2,693
export thermal coal and a 668
exploration project in 2000 200
significant producer Canada
of coking coal. 0 0
04* 05* 04* 05*
Copper | one of the world’s Copper mines, processing Revenue US$m EBIT US$m
top ten producers of copper. operations and port facilities 2500 1000 920
2,008
in Australia, mining and 1,598 644
processing operations and 1000 500
port facilities in Argentina
(50% owned) and an 0 0
exploration project in Peru 04* 05* 04* 05*
Zinc | one of the largest Zinc smelting operations Revenue US$m EBIT US$m
producers of zinc globally. in Spain and Germany, 1600 1,449 300

1,165 239
three zinc-lead mines and
a lead smelter in Australia 800 150
79
and one lead refining
plant in the UK. 0 0
04* 05* 04* 05*
Technology | Xstrata Based in Brisbane, Revenue US$m EBIT US$m
Technology’s ISASMELT Australia, Xstrata 90 77 18 16

Technology markets its
technology will be used for 52 10
products to metals and 45 9
over 10% of global copper mining companies
production in 2006. world-wide. 0 0
04*† 05* 04*† 05*
*2004 and 2005 data is reported under IFRS

†Technology includes Townsville port operations in 2004
Revenue Revenue EBIT EBIT

by origin by destination by commodity* by geography*
Africa 3% Australia 8%
Africa 24% Australia 51% Americas 9% Europe 37% Alloys 12% Copper 36% Africa 20% Australia 57%
Americas 11% Europe 15% Asia 42% Middle East 1% Coal 42% Zinc 9% Americas 17% Europe 6%
*Before non-trading items, continuing operations excluding Technology and unallocated
Alloys Coal Copper Zinc
Employees Employees Net assets Net assets

by commodity** by geography** by commodity† by geography†
Alloys 22%
Coal 45% Zinc Lead 14% Africa 48% Australia 37% Alloys 11% Copper 24% Africa 29% Australia 49%
Copper 18% Technology 1% Americas 6% Europe 8% Coal 53% Zinc Lead 12% Americas 13% Europe 9%
**Including contractors, excluding unallocated †Continuing operations excluding Technology and unallocated
Chairman’s Statement
Willy R Strothotte
Xstrata continued its growth trajectory in 2005, propelled by strong financial and operational performance. Since the year end,
Xstrata’s market value has risen to around $18 billion from around $12 billion a year ago and approximately $800 million at the
start of 2002.
Robust commodity markets continued to exert a significant positive influence on Xstrata’s profitability as prices continued to rise for
each of our commodities, fuelled by continued growth in demand from Asia and in particular, China and India, and less consistent,
but increasingly positive economic performance in Europe and the United States. Xstrata achieved record attributable profits of
$1.7 billion and earnings per share of $2.79, an increase of over 60% from the previous year.
Strong demand for energy and metals also led to increased competition for mining supplies, skilled labour, fuel and energy, as
producers accelerated growth projects to feed increasing demand and, inevitably, this led to higher prices for the key inputs into
our operations. Against this background, Xstrata’s commodity businesses successfully contained and reduced real unit costs,
ensuring ongoing improvements to margins, with the EBITDA margin rising to 38.5% in 2005. For the second consecutive year,
Xstrata was the only London-listed diversified mining company to cut costs in real terms, reducing our operating cost base by
$19 million in total.
Xstrata’s consistent record in reducing the size of its operating cost base in real terms each year since the IPO in 2002 indicates the
progress we have made in improving the quality of our entire portfolio. The introduction of new mining methods such as longwall
coal operations in Australia, on-going technology improvements, for example at the San Juan de Nieva zinc smelter in Spain,
greater capital efficiencies, in particular at the Mount Isa complex in Queensland, growth projects with significantly low-cost profiles
including the Lion ferrochrome smelting complex and Rolleston coal mine and other productivity improvements have significantly
improved the overall margins and cash generation ability of our businesses. Xstrata is thus better placed to secure benefits from the
current high commodity price environment and better positioned to maintain cash flow and profitability when prices return in due
course to more normalised levels.
Returns to shareholders also increased in line with this strong performance, through the repurchase of Xstrata shares through the
equity capital management programme, share price performance and increased dividend payments. As at 1 March 2006, Xstrata
had achieved total shareholder return since IPO of 278%, compared to 26% for the FTSE100 index over the same period. Due to
the Board’s increased confidence in the outlook for our key markets and in Xstrata’s ability to capitalise on a continuation of robust
commodity prices, an additional increase was approved to the final dividend, up by over 56% from the previous year.
Governance and corporate responsibility

Our commitment to achieving growth and value creation for shareholders in a manner which is sustainable, responsible and
contributes to lasting social and economic benefits remains at the heart of our strategy. Xstrata maintains a robust Board comprising
nine non-executive directors, six of whom are independent. During the year David Rough, as senior independent director and Deputy
Chairman, led a formal assessment of the Board’s performance, including individual assessments of Board members.
In February 2005 Xstrata’s Board formed a health, safety, environment and community (HSEC) committee to assess and guide
Xstrata’s strategies, leadership, systems and performance and to ensure the Board is fully informed about industry developments,
risks and opportunities in these critical areas of our business. A specialist health and safety adviser was appointed to the committee,
Professor Jim Joy, whose input has benefited both the Board committee and executive management, particularly with regard to the
comprehensive safety programmes implemented at our South African operations in 2005.
These programmes have been designed to bring about a step change in safety performance at every level of our South African
workforce and specifically to eliminate fatalities and critical incidents through enhanced leadership, behavioural change and hazard
management. The Board is closely monitoring the additional investment and focus being brought to bear on our South African
operations and both Xstrata Coal South Africa and Xstrata Alloys provide six-monthly progress reports to the Board HSEC committee.
Despite initial positive signs of progress from these businesses, it is with deep regret that I must report that in 2005, Xstrata’s
operations sustained seven fatal incidents, resulting in the loss of nine employees’ and contractors’ lives. Again, the majority
of these incidents occurred in Africa, while one incident occurred at a zinc plant in Spain and another in Peru at the Las Bambas
exploration site. Fatalities are simply unacceptable and the elimination of fatal incidents is the Group’s greatest challenge for 2006.
The extraordinary level of activity occurring to address safety in our South African operations aims to change attitudes and eliminate
at-risk behaviour and, as such, requires a longer-term approach. I am confident, however, that our programmes are already beginning
to bring about lasting improvements that will help us achieve our goal of zero harm at work for all our employees. Across the Group,
Xstrata’s injury prevention programmes continued to achieve substantial reductions in injury frequency rates and in 2005, the Group
total recordable injury frequency rate improved by 19% and lost time injuries were reduced by 18% to 4.3 per million hours worked.
Xstrata’s HSEC Assurance Programme is, I believe, at the forefront of best practice in the industry and is a vital management tool in
this area. The programme provides assurance to the Board that our operations and commodity businesses have the appropriate
management systems in place and are performing in line with the expectations we have set through the HSEC policy and
management standards. The programme was initiated in 2005 and has provided a comprehensive analysis of Xstrata’s HSEC systems
and performance across our sites. The results of the initial baseline audits, carried out at every managed operation in 2005, have
confirmed several areas of high performance, in addition to areas to which we are dedicating additional resources in 2006.
As part of our efforts to operate with the maximum transparency commercially possible and continually improve communications
with stakeholders, this year’s annual report includes a brief section outlining Xstrata’s strategy in greater detail, both as a Group and
at the commodity business level. We have also outlined performance against the key financial and non-financial indicators used by
the Board and executive committee to assess Xstrata’s progress against our strategic objectives. Further, comprehensive information
on our approach to sustainable development and environmental and social performance is provided in the Group 2005 Sustainability
Report, published separately and available from our website. Several Xstrata sites are also producing standalone sustainability reports
this year, with more planned for 2006. As ever, we welcome and actively seek feedback from the many stakeholders in our business
on any aspect of our performance and corporate reporting.
Chairman’s Statement
Outlook and prospects

The prospects for our business remain very strong. The world’s economies are in general showing positive signs of growth.
Asia is set to continue its economic development and demand for basic materials, driven by a revival of Japan’s economy, a major
consumer of commodities, and even more profoundly by continued demand growth from China and India. Demand for power
continues to grow in the United States and Europe and has improved the outlook for thermal coal into these markets, given coal’s
reliability and relative cost position.
Xstrata is well positioned to capitalise on the growth in these markets. Major organic greenfield and brownfield growth projects
are underway across Xstrata’s commodities to maintain and improve our competitive position, optimise the portfolio and secure
a growing share of continuing increased demand for our products. The company is also optimally placed to continue to play a
key role in the ongoing consolidation of our sector, a process in which we continue to seek opportunities, while maintaining
a disciplined focus on creating and safeguarding shareholder value.
The proposed acquisition of one-third of Cerrejón, subject to shareholder approval, is one such opportunity that will position
Xstrata to supply the growing US and European markets and cements our position as the global leader in export thermal coal.
The achievements of the last four years are owed most of all to the leadership of our executive team and to the skills and
commitment of all our people. My fellow Board members and I take great pride in the operational excellence of our employees
that has enabled Xstrata to achieve record profits and continued growth in 2005 and we are confident that 2006 will prove to
be another strong year for Xstrata.
Willy R Strothotte
Chief Executive’s Report
Mick Davis
Growth in earnings
As presaged in my report last year and further anticipated in my interim report, 2005 was a very good year for Xstrata. On the back
of higher commodity prices across all our businesses, Xstrata delivered record net earnings of $1.7 billion, an increase of 60% on
the strong financial performance in 2004. Overall the Group generated some $2.8 billion of cash from its operations.
In the four years since Xstrata’s listing in London in 2002, reported EBITDA has grown by a compound annual growth rate of
123%, cash generated from operations by a compound annual growth rate of 105% and earnings per share by a compound
annual growth rate of 87%. This is directly attributable to three factors:
■ The first is the influence of improved commodity prices, which, as expected, have exceeded their long-run averages for over
two years. This reflects the surge in demand for metals and energy products and the lack of the capacity, planning or
investment required to enable a rapid supply response. There is growing acceptance that the cycle is likely to extend further as
the same dynamics remain in place. Average prices in 2005 for the Group’s thermal coal and coking coal were, respectively,
25% and 71% higher than 2004, while average LME prices for copper and zinc were 29% and 32% higher than in 2004.
Xstrata conducted major reviews of the copper and zinc markets in 2005. These reviews have confirmed a positive outlook for
prices, borne out by the sharp upward trend in both zinc and copper pricing at the end of the year, which has continued into
2006. In the first two months of this year, the average LME zinc price of $2,146 per tonne was 55% higher than the average
LME price for 2005 of $1,382 per tonne and the average LME copper price of $4,846 to 28 February 2006 was 32% higher
than the average 2005 price.
■ The second factor behind Xstrata’s exceptional earnings growth reflects the prescient investments made in acquisitions and
projects over the past three years which have increased production volumes in our key commodities. The acquisitions of MIM
Holdings, Nordenham, Narama and Ravenswood, and expansion projects at San Juan, Mount Isa and across our coal businesses
have increased total thermal coal and zinc metal production by 55% and 41% respectively since 2002 and provided Xstrata
with significant production from the new commodities of copper and coking coal. As a consequence, Xstrata was optimally
positioned to benefit from the significant commodity price increases of the last two years.
Production volumes of thermal coal, zinc and lead increased again in 2005, against the previous year. This upward trend will
continue with the improved performance of our zinc and copper businesses at Mount Isa, the acquisition of a one-third stake in
the Cerrejón coal operation and the commencement of the Rolleston coal and Lion ferrochrome projects, all of which will make
a significant contribution to our 2006 results.
Production volumes declined in 2005 reducing EBIT by $9 million compared to 2004. In our ferrochrome, vanadium and coking
coal businesses, this was due to a combination of temporary ferrochrome furnace suspensions, the closure of two vanadium
operations in 2004 and a roof fall at the Oaky North underground coking coal mine. Production volumes in refined copper were
lower principally on the back of restricted gas off-take at Mount Isa, following unplanned closures of the third-party owned
acid plant. At Alumbrera, gold production was lower due to the anticipated decline in head grades, while copper sales
accelerated in the second half of the year, allowing Alumbrera to reap the full benefit of stronger copper prices. The
investments made to improve productivity across our businesses in 2005, together with production from new, lower-cost
growth projects will yield improved volumes and positively impact cost performance in 2006.
■ The third driver of Xstrata’s improved earnings has been the delivery of meaningful efficiency gains across each of our
businesses every year. For four years, Xstrata has successfully reduced costs in real terms across the Group and while the rate of
cost savings has slowed since 2002, in many respects the performance of our businesses in 2005 is even more creditable than
in previous years. Set against the robust demand environment, the entire mining sector has faced a growing headwind of rising
costs and supply delays for inputs such as energy, fuel, reductants, labour, explosives and other mining materials.
Against this highly challenging backdrop, Xstrata’s commodity businesses made excellent progress in containing operating costs
in 2005, with our zinc business succeeding in reducing costs in real terms by more than $48 million – considerably ahead of the
general inflation rate. As a result, and contrary to the industry trend, the Group operating cost base was reduced by a further
$19 million during the year, from efficiency programmes which delivered $106 million of savings in total. The full benefit of
these programmes was offset by higher prices for our key inputs, with particular increases in the price of fuel, energy and
mining materials. This performance brings the total reduction in the operating cost base in real terms to $124 million over
the last three years.
An underground miner operates the continuous miner at Arthur Taylor

The outstanding cost performance of the zinc business reflected benefits secured across both the Australian and European
operations. Operating costs were reduced by 18% at the Mount Isa zinc-lead mine and concentrator, on the back of record
improved efficiencies and increased production from the low-cost Black Star mine. The highly efficient San Juan de Nieva smelter in
Spain achieved production in excess of 8,000 tonnes over its previous nameplate capacity without any material increase in the cost
base, while the Northfleet lead operation in the UK further increased production in 2005, having reduced its unit cost base by over
15% since Xstrata’s acquisition of MIM Holdings in 2003.
In our copper business, particularly in north Queensland, where both the Ernest Henry and Mount Isa operations achieved record
copper in concentrate production in 2005, productivity gains totalling $20 million helped to offset the negative impact of cost
increases in fuel, energy and consumables. The north Queensland operations are now well on track to achieve their aim of
becoming a sustainable, integrated 300,000 tonnes per annum producer of copper cathode.
Our coal business also delivered another impressive cost performance in 2005, with efficiency gains of over $43 million from the
introduction of significantly lower cost production from Beltana and Ulan, which have cemented the position of Xstrata’s New
South Wales coal operations as among the most efficient coal mines in Australia. Beltana, which employs 152 people, set new
Australian productivity records in November 2005 producing 50,000 tonnes of coal in one day, 250,000 tonnes in one week and
one million tonnes in a month. Xstrata Coal’s ability to contain cost increases in real terms to only $7 million in 2005 is particularly
commendable in an industry where the weighted average FOB cash cost of thermal coal mines is estimated to have risen by over
27% from January 2004. The Xstrata-Merafe Chrome Venture continued to optimise its asset base and in particular achieved
significant cost improvements at the Boshoek operation.
These achievements are a credit to Xstrata’s operational management and, I believe, a strong endorsement of Xstrata’s devolved
management structure which fosters an entrepreneurial spirit throughout the Group and empowers local management to make the
right decisions for their projects and operations.
Future growth
Organic growth
Inflation specific to the mining industry and critical shortages of materials and skilled manpower have also impacted significantly
on major new capital projects. It is particularly pleasing, therefore, that as a result of a variety of initiatives from the respective
project teams, Xstrata’s suite of expansionary growth projects has remained within budget and on schedule. This is in spite of the
significant increased price of construction materials, in particular steel. First coal was railed from Rolleston thermal coal mine on
3 October 2005 and the operation is now ramping up to its Phase One annual capacity of 8 million tonnes, with some 3 million
tonnes expected to be produced in 2006. Commissioning remains on track and within budget for the new Project Lion ferrochrome
smelter to begin in the second half of the year.
The internal and external expansion projects in our coal, alloys and zinc businesses, set out in the interim report, represent
significant production growth that can be initiated in response to ongoing strength in demand over the next few years. Work
accomplished in 2005 on our two major copper growth projects – Las Bambas in Peru and Tampakan in the Philippines – has
provided further confidence in their significant potential and importance to our copper business.
The first year drilling programme at Las Bambas has shown promising results, confirming so far Indicated and Inferred Resources
across three mineralised systems of 300 million tonnes at 1.1% copper with supplementary molybdenum and gold values. Included
in these initial resources are 84 million tonnes of skarn mineralisation at 1.7% copper at the Ferrobamba deposit. The drilling
programme will be doubled in 2006 to establish the depth and lateral extensions to the known main zones, and exploration work
will commence in two additional mineralised zones in the Las Bambas district. The combination of higher grade skarn style
mineralisation, together with more extensive porphyry mineralisation, supports our view of Las Bambas’s potential as a significant
copper-gold-molybdenum operation.
At Tampakan, resource estimates were updated in November 2005 to 1.1 billion tonnes at 0.73% copper and 0.29 grams per
tonne gold, using a 0.4% copper cut-off grade. Tampakan is now in pre-feasibility stage and a decision whether to take up our
option and proceed into the full feasibility stage for this major copper project will be made in the second half of 2006.
Acquisition of One-Third of Cerrejón

Our proposed acquisition, for $1.7 billion, of Glencore International’s one-third share of the Cerrejón coal operation in Colombia
will be a major positive step for Xstrata Coal, providing a significant new source of high quality thermal coal, with access into
markets with strong growth potential and immediate earnings accretion. Cerrejón is the lowest cost Atlantic coal producer and the
world's largest export open pit coal mine, with an outstanding resource base that will allow incremental brownfield expansions
from current production levels of 26 million tonnes in 2005. An expansion is currently underway to 32 million tonnes of annual
production, with further expansions under review.
Cerrejón controls its own key rail and port infrastructure and is adjacent to the important and growing United States import
market. Its high quality thermal coal product has strong marketability into the United States, due to its low emissions profile and
the business is therefore excellently positioned to meet that market’s growing demand for thermal coal. In addition, the low-cost
nature of the operations and the freight differential between the delivery of Colombian, compared with South African coal into
Europe, will enhance Xstrata Coal’s highly competitive position in the major European market, and provide greater flexibility to
manage production across the three global thermal coal production bases of Latin America, South Africa and Asia/Australia.
The acquisition of a meaningful stake in this low cost proven asset will confirm Xstrata’s global leadership position in the export
thermal coal market and strengthens our portfolio by reducing the average export cost of thermal coal and extending the overall
asset life of our business. In addition to immediate cash and earnings accretion, Cerrejón’s exceptional expansion potential provides
important additional optionality, broadening the range of growth options open to Xstrata to access the Atlantic market and
enabling the Group to respond with enhanced flexibility to opportunities in the American, Indian and European markets.
This expansion to our thermal coal business comes at a time when there is growing recognition for coal’s role in meeting the
world’s future energy needs. According to the International Energy Agency, demand for energy is expected to increase by over 50%
by 2030, and coal is forecast to generate over one-fifth of this increase. The medium-term outlook for coal demand in the Atlantic
market appears particularly robust. The United States is a fast-growing major market for coal exports, and South American
producers are expected to be the main beneficiaries of this growth due to the capacity, infrastructure, quality and regulatory
constraints facing some domestic producers. The US Energy Information Administration predicts thermal coal demand from US coal-
fired plants will increase by 110 million tonnes over the next 10 years. In Europe, the high oil price environment and concerns over
continuity of gas supply have led to a positive re-assessment of coal’s importance in meeting medium-term energy needs for
consistent base-load generating capacity. This process has been accelerated by the industry’s ongoing investment in clean coal
technology and in other emission controls. As a consequence, planning is underway for the commissioning of new coal-fired
generating capacity in Europe, with between 11 and 13 new coal-fired power stations on the drawing board in Germany alone.
The proposed acquisition of Cerrejón, which will be funded from new credit facilities, will become effective on obtaining
shareholder approval, certain third-party consents and agreements and certain competition and regulatory clearances. An
extraordinary general meeting will be held in late March or early April. Glencore, as a related party to the transaction, will not vote
at the meeting and the three Xstrata directors nominated by Glencore have not taken part in the board’s consideration of the
proposed acquisition. Rothschild has independently reviewed the acquisition, and has confirmed in a letter to Xstrata’s Board that,
in its opinion, the acquisition is fair and reasonable as far as Xstrata shareholders are concerned.
Minera Alumbrera processing plant and facilities Oomeshni Naiker and SHE coordinator Wessel
Ebersohn examine relocated aloes at Project Lion
Further acquisition growth

On 15 August 2005, Xstrata announced the purchase of 19.9% of the common shares of Falconbridge Limited (“Falconbridge”),
a Canadian diversified mining company, from Brookfield Asset Management (formerly Brascan Corporation) for a total consideration
of $1.7 billion, or C$28 per share. Following an agreed cash and shares offer for Falconbridge from Inco Limited in October 2005,
Xstrata continues to assess the various options for further value creation that arise from its holding in Falconbridge. Closure of the
Inco offer has been delayed by the approval processes of the anti-trust authorities in the United States and European Union and we
will therefore continue to assess all of the various options open to us.
While we recognise that acquisitions undertaken in the current high commodity price environment carry obvious risks, we continue
to believe that opportunities exist in the prevailing robust commodity markets to create significant immediate and future value for
Xstrata. We remain focused on our rigorous requirements for any potential acquisition and confident of our inherent discipline in
assessing prospective targets.
Black Economic Empowerment in South Africa

Xstrata and African Rainbow Minerals Limited (“ARM”) have agreed to establish a major new black-controlled coal mining company
to be called ARM Coal, which will have significant operating assets and growth projects in South Africa and a substantial
participation in the export and domestic thermal coal markets. Under the agreement, ARM will pay R400 million to subscribe for
51% and Xstrata will pay R384 million (around $63 million) to subscribe for 49% of the issued share capital of ARM Coal, which
will hold a 20% interest in the existing coal operations of Xstrata Coal South Africa, and a direct 51% interest in the Goedgevonden
project. ARM Coal will therefore have an immediate effective interest of more than 26% in Xstrata’s South African coal operations.
Xstrata has agreed to provide vendor financing to ARM Coal and, to advance ARM’s participation in the South African coal industry,
has also agreed to grant ARM an option to increase its participation by up to a further 10%. This would result in historically
disadvantaged South African control of 36% of Xstrata’s South African coal business.
As the controlling shareholder of ARM Coal, ARM will be instrumental in the formulation and execution of strategic goals inclusive
of the identification and pursuit of growth opportunities. The transaction therefore introduces meaningful and sustainable
empowerment ownership and involvement in Xstrata’s coal assets in line with the South African government’s Mineral and
Petroleum Resources Development Act and the Mining Charter. As with the Xstrata-Merafe Chrome Venture in our ferrochrome
business, the partnership between ARM and Xstrata will provide further benefits to both parties, including the assessment and
pursuit of new opportunities in a range of commodities in Africa.
In a further transformation agreement, Xstrata Alloys has formed a black economic empowerment partnership with Kagiso Trust
Investments (“Kagiso”) in respect of Xstrata’s 50% interest in the Mototolo Joint Venture. Kagiso will acquire 26% of Xstrata’s 50%
interest, resulting in Kagiso owning a fully participative 13% interest in the earnings from the Mototolo JV, in return for funding its
proportionate share of the total capital expenditure required for the project. Xstrata will retain an effective 37% interest.
Both these developments underscore Xstrata’s commitment to genuine empowerment in the South African mining industry,
through sound business partnerships that build on each partner’s respective areas of expertise and establish a basis for mutual value
creation going forward.
Balance sheet, dividend and capital management

After increased sustaining capital expenditure of some $430 million, which will enable further cost savings and increased
productivity at our operations, free cash flow rose to over $1.9 billion, enabling Xstrata to return $522 million to shareholders
during 2005 through the repurchase of 4.1% of Xstrata’s issued share capital under the Equity Capital Management Programme.
This brings the total number of shares purchased under the programme to 29 million, or 4.7% of Xstrata’s ordinary share capital.
Xstrata’s robust financial position, with net debt to equity at the year end at 32%, strong cash flow generation and our increased
confidence in the medium-term outlook for commodity prices has led to our decision to increase the final dividend to 25¢ per
share, bringing the full year dividend to 34¢ per share. This represents an increase of 42% over the previous year and sets a higher
level from which the Group’s progressive dividend policy will continue.
Minera Alumbrera operators control levels of air in the

Logging drill core at the Las Bambas exploration project in southern Peru flotation cells
EBITDA Earnings per share*
US$m GR R US¢
CA CAG GR CAG
R
12,000 10,696 300 CA 271
6% +33
%
7% % 252
+9 +6 +42
9,000 7,221 225 174
143
6,000 4,502 4,821 150
3,103 88 85
3,000 2,075 75 58
37
414 699
0 0
02 03 04 05 02 03 04 05 02 03 04 05 02 03 04 05
Xstrata FTSE Diversifieds† Xstrata FTSE Diversifieds†
†FTSE Diversifieds shows the average for Rio Tinto, Anglo American *Before non-trading items; Xstrata 2002 EPS adjusted for
and BHP Billiton adjusted to December year end for comparison 3 for 2 rights issue
Outlook
In my report two years ago, I highlighted the improving fundamentals of the mining industry and the outlook for an extended
period of higher than average commodity prices. This view has underpinned the steps we have taken, internally and externally,
to position Xstrata over the past two years – and it remains unchanged. Continued growth in demand for metals and energy
products in the fast-growing economies of China and India, the resurgent performance of the Japanese economy and encouraging
indicators in respect of European growth are all supportive for the sector. At the same time, growth in supply – while inevitably
rising – remains constrained by input shortages, significant cost inflation and a dearth of projects ready to come into production.
While it may be reasonable to expect that prices will, in due course, ease from the exceptional levels of recent months, I have little
doubt that they will remain above their long-run averages for a number of years.
As a consequence, the outlook for 2006 is very encouraging.
The investments we have made to optimise our zinc-lead operations and to grow the business incrementally will enable Xstrata to
benefit from the particularly strong zinc prices expected in 2006 and into 2007. The outlook for our copper business is equally
positive, with the Las Bambas and Tampakan copper projects at the forefront of our plans to grow this business. The acquisition of
one-third of Cerrejón and our numerous organic growth projects in coal hold meaningful growth potential and have redefined the
quality, prospects and future contribution of the coal business.
Our strategy remains sound: Xstrata is well positioned to create further value by continuing to grow our business and manage our
operations ever more effectively. The last four years have reflected that embedded in Xstrata’s architecture are two key ingredients
for sustained value creation. Namely, an eye for the opportunity – be it internal or external – and an understanding of what is
required for successful execution. The Xstrata team has much still to contribute and our progress to date underscores both our
approach to value creation and the commitment of Xstrata’s Directors and employees. I extend my thanks and recognition for their
contribution in 2005.
M L Davis
Operating and Financial Review | Business Overview & Strategy
From its position at the start of 2002 as a small, Swiss-listed company capitalised at around $800 million,
with only two businesses (ferroalloys in South Africa and zinc in Spain), Xstrata has grown rapidly to become a
major, diversified metals and mining group with a market capitalisation of around $18 billion, a meaningful
position in six major commodity markets and operations and projects in eight countries.
Our strategy was put in place shortly before the inception of Xstrata plc, through its initial public offering on the London Stock
Exchange in March 2002, and continues to guide our corporate activity today. We aim to grow a diversified portfolio of metals and
mining businesses, creating shareholder value at each stage of our growth. Our Mission recognises that, to continue to grow and
create value over the long term, we must operate in an ethical and transparent way, through mutually beneficial partnerships with
our stakeholders.
We pursue growth and value creation through identifying opportunities for organic growth from our portfolio; through incremental,
bolt-on acquisitions; and through identifying and completing larger, company-transforming transactions.
Our growth is guided by the following strategic objectives:
■ to manage a portfolio of assets diversified by commodity and by geography, with a balanced spread between commodities where
prices are negotiated between customer and supplier, and commodities where prices are set by terminal markets such as the
London Metal Exchange;
■ to create further value and further optimisation of the portfolio by delivering capital and operational efficiencies and real
reductions in costs across our businesses;
■ to achieve the highest standards of health, safety and environmental performance at our operations, and to work in partnership
with local communities for mutual benefits, supporting the principles of sustainable development;
■ to foster a high performance and entrepreneurial culture across the Group through a highly devolved structure, to empower
management teams in our commodity businesses and to minimise the burden of overheads;
■ to uphold a rigorous and unwavering focus on value, internally and externally;
■ to conduct our business activities ethically and with the maximum transparency that is commercially possible; and
■ to maintain the capacity to act decisively, to support rational risk-taking and to identify and secure opportunities for value creation.
EBITDA: 2001 –2005
2001: US$126m 2002: US$482m 2005: US$3,103m
Alloys 11%
Alloys 17% Thermal Coal 34%
Alloys 53%
Thermal Coal 63% Zinc Lead 7%
Zinc Lead 47%
Zinc Lead 20% Copper 36%
Coking Coal 9%
Group structure and management philosophy

Xstrata’s activities are organised into four global commodity businesses: Xstrata Alloys; Xstrata Coal; Xstrata Copper; and Xstrata Zinc.
Each commodity business operates with a high degree of autonomy, within the structure of Xstrata’s global policies and standards.
Xstrata differentiates itself from its industry peers in our management philosophy that maximum responsibility and authority should be
devolved to our operating businesses. We believe this directly benefits our operations by creating a strong sense of local ownership,
where entrepreneurial managers are empowered and incentivised to address site-specific challenges and seize opportunities.
In addition to our four major commodity businesses, Xstrata also owns Xstrata Technology, a minerals processing technology business,
which successfully markets its products to metals and mining companies worldwide.
Xstrata’s global businesses are supported in certain key corporate functions by a head office of around 18 people based in Zug,
Switzerland, complemented by a further small corporate office in London, UK.
Each of Xstrata’s commodity businesses has the critical mass and scale within its respective commodity markets to compete on an
integrated, global basis. When we enter new commodity markets, we generally seek to gain a significant market position. However,
we remain open to smaller opportunities where these arise, as with our entry into the platinum market in 2005, through Project
Mototolo, a joint venture with Anglo Platinum, to build a platinum mine and concentrator in South Africa.
A balanced, diversified portfolio

The portfolio of commodities produced by the Group is split evenly between terminal-traded commodities such as copper, zinc and
lead, and commodities sold through negotiated customer-supplier contracts, such as ferrochrome and thermal and coking coal.
We believe that a portfolio diversified by commodity and by geography balances the risks associated with specific commodity price
cycles and operating locations, thus providing investors with more reliable and stable cash flows. Diversification also engenders a
healthy competition for capital between Xstrata’s commodity businesses; through which only the most attractive projects or
acquisitions are approved and allocated capital.
Leaders in operational excellence

We aim to hire and retain the best people at every level of our businesses and to provide them with the resources they require to
achieve and maintain our industry-leading operational excellence. We prefer to own a significant stake in our operations and joint
ventures and take management control of operations wherever possible. At the end of 2005, Xstrata operated every operation in
which it has an interest, with the exception of two thermal coal mines through the Douglas-Tavistock Joint Venture in South Africa.
We aim to operate a fatality, injury and illness-free business and believe that work-related incidents, illnesses and injuries are
preventable. Safety is an ongoing, major focus for the Group, as we strive to eliminate fatal and high potential incidents from every
aspect of our operations. We expect the leadership, intensive training and investment in this area over the last 18 months, particularly
in South Africa, to bring about sustainable improvements in fatality prevention and continue our reduction in injury rates.
Our businesses are mandated to reduce real costs on a continuous and sustainable basis. Cost reduction is an important driver of
value creation and a measure of the quality of our operational management and our stewardship of the assets of our owners. In each
of the last four years, Xstrata has outperformed its FTSE100 mining industry peers in reducing the operating cost base every year and,
in 2005, reduced costs by $19 million, despite steep rises in the prices of key inputs for the mining sector as a whole.
Focus on value creation and growth

Our imperative to grow the business is underpinned by an unwavering focus on value creation. This rigorous assessment of value
Operating and Financial Review | Business Overview & Strategy
applies equally to growth initiatives from within our portfolio as it does to the acquisitions of projects or other assets. Since its
London listing, Xstrata has completed two company-transforming acquisitions and a number of incremental acquisitions, and has
initiated major growth projects in each of its commodity businesses. Two of these, the Black-Star zinc-lead mine at Mount Isa, and
the Rolleston thermal coal mine, also in Queensland, began production in 2005 and are already enhancing the production and cost
profile of our zinc and coal businesses respectively. A third, the Lion Project in South Africa, will come on stream in 2006, with
operating costs expected to be significantly lower than the industry average. Any future funding decisions will continue to be based,
as those to date have been, on a dispassionate view of each project’s potential to create value in its own right, irrespective of the
prevailing commodity price environment.
While value creation remains at the heart of our acquisition strategy, we do not limit our sights to ‘tier one’ long-life, low-cost
operations in low-risk geographies. These assets are undeniably attractive, although increasingly scarce; however our strategy
recognises that more challenging assets or more risky locations also offer the opportunity for value creation, through enhanced
operational management and judicious capital investment, provided that the price paid reflects the quality of the assets, the risks can
be identified and managed appropriately and that upside can be secured following acquisition.
Commodity business strategies
Xstrata Alloys Position the vanadium division optimally to Xstrata Coal

Maintain Xstrata Alloys’ market leadership benefit from price spikes, ensure resilience in Eliminate fatalities, illnesses and injuries from
position in the ferrochrome industry by the downturns and leverage the technical our business through demonstrated leadership
leveraging our unique scale, position in South flexibility of our Rhovan operation to develop and continuing exchange of knowledge and
Africa, access to a combination of raw high-value vanadium alloy products for best-practice across our New South Wales,
materials and expertise across a wide range of specific international markets Queensland and South African operations
mining and processing technologies
Eliminate fatalities and achieve a step-change Become the world’s leading export coal
Enhance our competitive cost position, in safety performance through an intensive company by seeking opportunities to
particularly through the application of our training and knowledge-sharing programme strengthen Xstrata’s market leader position in
proprietary Premus Technology and on-going export thermal coal and improve on Xstrata’s
initiatives to minimise dependency on high- top five position in coking coal
cost inputs, such as reductants, logistics and
Ensure sustainable results by basing
power
marketing and growth decisions on a well
Utilise Xstrata Alloys’ capabilities and researched analysis of long-term market
technologies as a springboard to building a fundamentals and by the diversification of
diversified production base and continued production and supply options across Pacific
quality growth and Atlantic export coal markets
Through these proprietary advantages, our Generate and progress incremental growth
entrepreneurial culture, tailored products and options to deliver low capital, high return
powerful market insights, continue to position growth from existing portfolio
Xstrata Alloys as the preferred supplier to the
most attractive global customers Maximise returns on invested capital through
operational excellence, mine optimisation and
Continue the progress made in the Xstrata capital efficiency, with a particular focus on
Merafe Chrome Venture towards full our leadership position in longwall technology
compliance with the spirit of the MPRDA
Maintain a high performance team by
across chrome and vanadium
becoming the employer of choice in the sector
Be recognised for Xstrata’s commitment to

sustainable development in general and clean
coal technology in particular
In addition to our focus on growth, we maintain a progressive dividend policy, in line with Xstrata’s profitability, and make
appropriate returns of capital to shareholders, where cash generated exceeds our requirements for investment or further
growth opportunities.
Exploring for further growth

Xstrata’s commodity businesses are responsible for undertaking near-mine exploration around existing operations or in nearby
regions, with the objective of adding resources to the Group’s resource base and extending the lives of our operations. This strategy
has been successful to date, particularly in Xstrata Copper, at Mount Isa, where an additional 16 million tonnes or a further two
years of underground ore reserves has been added and at Alumbrera, where near-mine exploration has yielded 120 million
additional tonnes of reserves added over the past two years, with further scope for additions to the reserve base in both cases.
For greenfield exploration in less familiar territories, Xstrata is pursuing a successful strategy of partnering with junior exploration
companies, allowing us to leverage each partner’s strengths for mutual benefit. This strategy is already bearing fruit at the
Tampakan project in the Philippines, where Xstrata is working with Indophil Resources to progress pre-feasibility studies and how
an option to take up a 62.5% interest in the project in September of this year. Additional opportunities are being assessed through
our partnership with Universal Resources in Australia and Erdene Gold in Mongolia.
Xstrata Copper Xstrata Zinc Xstrata Technology

Consolidate and build on the dramatic Further improve Xstrata Zinc’s concentrate/ Enhance Xstrata Technology’s market leading
improvements in safety performance in the smelting balance in large part by exploiting position across its select portfolio of core
business with the strategic objective of the significant potential organic growth processing technologies to improve the
achieving injury-free, safe work environments opportunities inherent in the long-life efficiency and environmental performance of
resources of our Australian operations and operations
Demonstrate continual improvements in complement this through opportunistic
the operations’ environmental performance acquisitions Develop new applications for existing
technologies, particularly in new industries such
Maximise the net present value of existing Continue to optimise and grow our highly as coal, nickel and platinum group metals
operations through ongoing capital and efficient zinc smelting capacities, through
operating efficiencies, ongoing grade profile application of our leading position in zinc Invest in research to develop new technologies,
optimisation and extensions to mine lives technology while optimising and improving our existing
suite of leading technology products
Create and consolidate regional leverage Further improve the utilisation of existing
through project development and business assets, in particular hoisting capacity at Work with both internal and external users to
joint ventures in regions where Xstrata George Fisher mine and upgrading of continually improve the technologies and
Copper already has an operating presence concentrating capacity at the Isa complex operating methods for the benefits of all users
and/or infrastructure
Develop opportunities to use Xstrata’s Albion
Scale up the significance of the project process technology to develop a low-cost
development pipeline by advancing activities refined zinc production from the extensive
and decision points on Xstrata Copper’s MRM resource providing the opportunity to
two major greenfield copper interests: realise its full economic potential, dependent
Las Bambas and Tampakan on Government approval
Implement disciplined cost management Leverage improved operational, capital and
programmes to ensure cost competitiveness safety performance by exchange of best
throughout the commodity cycles practice and knowledge across our global
Attract and retain quality people and, zinc business
through the implementation of a Continue to achieve significant improvements
comprehensive human resources strategy, in safety performance throughout the
realise the full potential of our people business unit
Develop and retain a strong reputation for
social responsibility in the broader community
Operating and Financial Review | Key Performance Indicators
Xstrata’s Executive Committee and Board monitor a range of financial and non-financial key performance
indicators reported on a monthly basis to measure the company’s performance over time. The principal
performance indicators are shown below, together with comparative figures for the previous year. A broader
range of non-financial indicators, targets and performance measures related to Xstrata’s health, safety,
environmental and community performance is provided in the Sustainability Report 2005, published in
April 2006 and available from our website.
Return on Capital | Return on capital is calculated Return on Capital % Alloys Coal Copper Zinc
by dividing earnings before interest and tax (EBIT) before 50 44
non-trading items† by capital employed and is an important 33 32
25 25 22
measure of how effectively Xstrata earns profit from the 19
15
money invested in its operations. 6
0
04 05 04 05 04 05 04 05
Real Cost Savings | Sustainable real cost savings are Real Cost Savings % of operating costs
an important driver of value and a measure of our 6 4.7 Xsatr FTSED
01 vi ifsre d
ie s*
operational excellence. Xstrata’s performance in achieving
real cost savings is shown against the average for 3
1.0 0.9 0.7
BHP Billiton, Anglo American and Rio Tinto (FTSE 0.4 0.3 –0.9 –19.
0
Diversifieds). Cost savings are shown as % of net operating
costs, based on contribution to EBIT variance. –3
02 03 04 05 02 03 04 05
EBITDA Margin | Xstrata’s EBITDA margin shows EBITDA margin %

earnings before interest, tax, depreciation and amortisation 50 Xstrata FTSE 100 Diversifieds*
39 36
(EBITDA) before non-trading items† as a percentage of 32
29 25 29
Group revenue. It is a measure of how efficiently revenue 25 23 20
is converted into EBITDA.
0
02 03 04 05 02 03 04 05
Total Shareholder Return | TSR calculates the total Total shareholder return since IPO GBP Xstrata FTSE100
return from an investment in Xstrata, calculated from the 300
growth in share price together with the dividend income
200
from the shares, with dividend income assumed to be
reinvested. The graph shows the total return for a £100 100
investment in Xstrata plc from initial public offering, 0
benchmarked against the FTSE100 index of the largest
20 Mar 02 31 Dec 02 31 Dec 03 31 Dec 04 31 Dec 05
UK companies.
Employees | We aim to attract and retain the very best Employee turnover % Alloys Coal Copper Zinc
people and provide them with the resources they require to 30 Group Commodity business
achieve operational excellence. Employee turnover is a 20.8
14.5 15.7
measure of our success in retaining our people. 15 10.3 11.4
10.1
6.7 7.0 7.7 8.6
0
04 05 04 05 04 05 04 05 04 05
*FTSE Diversifieds shows the average for Rio Tinto, Anglo American and BHP Billiton adjusted to December year end for comparison
†Non-trading items are material items of income and expense which, due to their nature or expected infrequency, are presented separately
Health | Xstrata’s operations aim to identify, assess and Occupational health Alloys Coal Copper Zinc
control occupational health hazards and, where practicable, 50 Group 2004 2005
to eliminate work-related diseases. Every new case of
36 37
occupational diseases is reported. This bar chart shows 25%
number of new diseases recorded by commodity business 47%
20 43% 57%
over the last two years.
28%
0
04 05
Safety | We believe that every work-related incident, Total Recordable Injury Frequency Rate Lost Time Injury Frequency Rate
illness and injury is preventable. Total recordable injuries
25.6
30 20
24.5
24.1
Group Group
13.5
include lost time injuries, medical treatment injuries and
18.5
16.8
16.4
16.4
10.1
15.0
12.9
restricted work injuries, providing a more complete measure
11.5
15 10
5.4
5.3
4.9
of safety performance. We also report the lost time injury
4.3
4.3
3.9
3.0
2.5
frequency rate, to provide a basis for comparison with our
0 0
industry peers. Both frequency rates are reported per million 04 05 04 05 04 05 04 05 04 05 04 05 04 05 04 05 04 05 04 05
hours worked. Alloys Coal Copper Zinc
Environment | Xstrata’s operations report every Environmental incidents by category Category 1 Category 2 Category 3
environmental incident according to defined categories to 1000
indicate the scale of the incident. Category 1 represents a 825
35
very minor incident with negligible environmental impact 210
that is reversible; category 5 represents a major or critical 619
20
incident which requires major remediation. We aim to limit 580 158
500 401
the environmental impact of our operations, and, in 441
particular, operate without any category 3, 4 or 5 incidents. 224
273
220
123
Environmental fines and penalties | In 2005, Xstrata’s 49 52
102
operations incurred no environmental fines or penalties, 0

compared to one fine for AUD1,500 in 2004, relating to
04 05 04 05 04 05 04 05 04 05
the non-capture of two blasts at Ravensworth East coal Group Alloys Coal Copper Zinc
mine, New South Wales.
No Category 4 or 5 incidents occurred in 2004 or 2005
Community and social | Xstrata sets aside 1% of Corporate Social Involvement by region
annual Group profit before tax to fund initiatives that benefit 30 Group ($m) 2004 2005
communities associated with our operations and employees. 25
2% 5%
This chart shows the amount set aside for initiatives in each
32%
geographic region in which Xstrata operates. Each operation, 36%
15 51%
10 57%
together with local communities, develops a social
involvement plan to identify and support initiatives in the 5% 12%
areas of health, education, environment, job creation and 0
enterprise, community development and arts and culture. 04 05 Europe Southern Africa South America Australia
Operating and Financial Review | Financial Review
Basis of presentation of financial information

Financial information is presented in accordance with International Financial Reporting Standards (IFRS). The reporting currency of
Xstrata plc is US dollars. Financial statements of subsidiaries are maintained in their functional currencies and converted to US
dollars on consolidation of Group results.
For details of the significant impacts of the introduction of IFRS refer to the note ‘IFRS reconciliation to UK GAAP’.
Unless indicated to the contrary, revenue, earnings before interest, taxation, depreciation and amortisation (EBITDA) and earnings
before interest and taxation (EBIT) are reported in the Chief Executive’s Report and the Operating and Financial Review before non-
trading items (BNI). Non-trading items are material items of income and expense which, due to their nature or expected
infrequency, are presented separately in the income statement.
Unless indicated to the contrary, all data and commentary in the Chief Executive’s Report and the Operating and Financial Review
exclude the discontinued Forestry operation and all dollar and cent figures provided refer to US dollars and cents.
Consolidated operational results

Group revenue increased by 25% in 2005, exceeding $8 billion as robust demand supported price increases across all of Xstrata’s
commodities. The strong price increases in the thermal and coking coal and ferroalloys markets seen in the first half of the year
eased in the second half, but improved demand in LME-traded commodities boosted prices of copper, zinc and lead, significantly
increasing earnings.
Higher revenues drove profits and cash flow to record levels. Despite a weaker US dollar against all of Xstrata’s local currencies,
EBITDA for the year ended 31 December 2005 increased by 50% to $3,103 million and EBIT improved by 68% to $2,520 million.
Minera Alumbrera open pit at night

Consolidated Results (includes minority interests) Year ended Year ended

$m 31.12.05 31.12.04
Alloys 1,115.5 953.0

Coal 3,400.4 2,693.4
Copper 2,007.8 1,598.3
Zinc 1,448.9 1,165.3
Technology 77.2 52.4
Total Group Revenue 8,049.8 6,462.4
Attributable Total Group Revenue 7,228.3 5,980.2
Alloys 349.9 203.0
Coal 1,346.5 916.0
Copper* 1,131.1 856.7
Zinc 303.1 145.5
Technology 13.5 19.2
Share of earnings from Falconbridge 21.0 –
Corporate and unallocated (62.0) (75.0)
Total Group EBITDA 3,103.1 2,065.4
Attributable Total Group EBITDA 2,715.3 1,769.0
Alloys (29.9) (25.0)
Coal (267.2) (248.2)
Copper (209.7) (212.4)
Zinc (64.4) (66.4)
Technology (3.4) (3.7)
Depreciation & Amortisation (578.5) (560.8)
Attributable Total Group Depreciation & Amortisation (510.2) (490.6)
Alloys (2.9) (6.8)
Copper (1.9) –
Technology (0.3) –
Impairment of assets (5.1) (6.8)
Attributable Total Group impairments (5.1) (6.8)
Alloys 317.1 171.2
Coal 1,079.3 667.8
Copper* 919.5 644.3
Zinc 238.7 79.1
Technology 9.8 15.5
Share of earnings from Falconbridge 21.0 –
Total Group EBIT 2,519.5 1,497.8
Attributable Total Group EBIT 2,200.0 1,271.6
*Excludes share of results from associates
EBIT Variances $m
EBIT 31.12.04 1,497.8

Sales price* 1,422.5
Volumes (8.6)
Unit cost – real 18.6
Unit cost – inflation (131.0)
Unit cost – foreign exchange (91.2)
Foreign currency hedging (173.0)
Other income and expenses (1.7)
Corporate social involvement (14.2)
Depreciation and amortisation (excluding foreign exchange) 0.3
EBIT 31.12.05 2,519.5
*Net of commodity price linked costs, treatment and refining charges
Higher received coal prices and copper prices contributed over half of the increase in Group EBIT in 2005, adding $623 million
and $444 million respectively. Ferrochrome and vanadium price increases contributed $221 million and higher zinc and lead prices
$134 million to EBIT.
Lower volumes in a number of commodities compared to the previous year reduced EBIT by $9 million. The greatest impact was
from lower gold production at the Alumbrera copper-gold mine, down by 9% due to lower gold grades, and from lower vanadium
sales due to the closure of two operations in 2004. Chrome volumes also reduced due to a number of furnaces being temporarily
suspended for routine maintenance during the winter period when energy prices are high.
The north Queensland copper operations produced record copper-in-concentrate volumes but smelter production fell by 7%
following maintenance work and limitations to furnace production due to gas off-take restrictions. Hard coking coal production
also fell by 7%, impacted by a roof fall at Oaky Creek, which resulted in 130,000 tonnes of lost production, and planned lower
production from the higher cost Oaky Creek open cut mine. Despite this, coking coal sales remained at a similar level to the
previous year. Production of semi-soft coking coal declined from increased levels of production in 2004 in response to steel
producers’ preference for hard coking coal in order to maximise output. Lower volumes were partially offset by higher thermal coal
volumes and improved zinc and lead production at Mount Isa following the commissioning of the new Black Star zinc-lead mine
and higher production from George Fisher.
Despite the substantial, ongoing increases in costs being experienced across the mining industry, Xstrata achieved a reduction
in unit costs in real terms of $19 million during the period. The combined impact of efficiency programmes, which delivered
$106 million of savings, was offset by specific cost increases that are being experienced across the mining industry, including
freight, consumables, fuel and energy price increases. In particular, Xstrata Zinc achieved significant cost savings through improved
capacity utilisation from the combined impact of the start-up of the Black Star mine and higher volumes from the George Fisher
mine at Mount Isa.
Efficiency improvements in the ferrochrome business produced benefits in 2005, by focussing on initiatives to improve the quality of
feed to the smelters and minimise metallurgical coke requirements. Significant progress was also made in reducing operating costs
at the Xstrata-Merafe Chrome Venture’s Boshoek operation during the year.
Productivity improvements at Xstrata Coal’s New South Wales operations, particularly at the Beltana mine, largely mitigated
increased cost inflation. Productivity improvements at the Oaky North underground operation in Queensland were more than offset
by an unexpected roof fall at the same underground operation, port congestion at the Dalrymple Bay Coal Terminal and higher
prices for key inputs. The benefit of ongoing efficiency programmes and improved ore grades in Xstrata Copper in North
Queensland more than offset higher fuel, power and reagent costs. The Alumbrera copper operation in Argentina benefited from
record processing volumes as the benefits of the flotation expansion were realised, but overall costs were impacted by higher
smelting, refining and freight rates, and the impact of lower gold head grades.
Other income and expenses include Windimurra closure costs, the impact of one-off gains in 2004 which were not repeated in the
period under review and a higher Group share-based payments charge under IFRS. These are more than offset by equity-accounted
income of $21 million from Xstrata’s 19.9% stake in Falconbridge Limited.
The weaker US dollar during 2005 gave rise to an unfavourable foreign exchange variance of $264 million. This was mainly due to
a 3% strengthening of the Australian dollar and lower currency hedging gains compared to the previous year.
Average commodity prices Average Average %

Unit price 2005 price 2004 change
Australian FOB export coking* $/t 111.5 65.3 71

Australian FOB export semi-soft coking* $/t 70.3 47.2 49
Australian FOB export thermal coal* $/t 51.2 40.9 25
South African export thermal coal* $/t 48.5 39.0 24
Copper (LME average) $/t 3,684 2,866 29
Lead (LME average) $/t 976 886 10
Zinc (LME average) $/t 1,382 1,048 32
Ferrochrome (Metal Bulletin) ¢/lb 73.0 68.0 7
Ferrovanadium (Metal Bulletin) $/kg 70.5 27.2 159
*Average received price
Currency Table to $ (USD) Average Average % change At At

2005 2004 (+/–) 31.12.05 31.12.04
USD:ARS 2.92 2.94 +1 3.03 2.97

AUD:USD 0.76 0.74 +3 0.73 0.78
USD:CHF 1.25 1.24 +1 1.31 1.14
EUR:USD 1.24 1.24 – 1.18 1.36
GBP:USD 1.82 1.83 +1 1.72 1.92
USD:ZAR 6.37 6.43 +1 6.33 5.67
Earnings Summary Year ended Year ended

$m 31.12.05 31.12.04
EBIT 2,519.5 1,497.8

Net interest (excluding loan issue costs written-off and realised net foreign currency translation gains) (91.9) (91.4)
Income tax expense (551.0) (218.9)
Discontinued operations – (2.1)
Minority interests (216.5) (158.2)
Attributable profit 1,660.1 1,027.2
Earnings per share (BNI)* 271¢ 164¢
Profit on sale of investments – 10.2
Restructuring costs – (9.0)
WMC offer costs (10.3) –
Loan issue costs written-off (17.3) (35.1)
Net recycled gains from foreign currency translation reserve 61.9 68.6
Income tax on non-trading items 8.3 5.2
Profit on sale of discontinued forestry operation 3.7 –
46.3 39.9
Attributable profit 1,706.4 1,067.1
Earnings per share* 2.79¢ 1.70¢
*Computed using same weighted average number of shares used to compute the statutory basic earnings per share
The effective tax rate for 2005 was 22%. Increased taxable earnings in 2005 led to a higher weighted average statutory tax rate
of 24.2% from 22.4% in 2004. The effective tax rate benefited from a decrease in corporate tax rates in South Africa and the
recognition of research and development allowances in Australia.
Non-recurring items totalled $46 million. In total $27.6 million was written off in relation to the unsuccessful offer for WMC.
The net foreign currency translation gain of $62 million represents the effect, mainly in the first half, of the release of cumulative
foreign currency translation gains and losses on repayment of inter-company loans that are considered equity in nature. In
accordance with IFRS, these gains and losses are recorded in the foreign currency translation reserve until the loans are repaid,
at which point they are recycled through the income statement.
Xstrata’s forestry division was sold in January 2005, giving rise to a $4 million profit on disposal.
John Ayres skimming lead at Northfleet Chair lift to and from the surface at Kroondal Mine
EBIT sensitivities Impact on Indicative full

$m 2006 EBIT* year EBIT**
1¢/lb movement in ferrochrome price 10.6 12.5

$1/kg movement in ferrovanadium price 3.3 3.9
$1/tonne movement in Australian thermal export FOB coal price 20.1 32.9
$1/tonne movement in Australian coking export FOB coal price 2.9 5.7
$1/tonne movement in South African export thermal FOB coal price 3.1 13.8
1¢/lb movement in copper price 6.9 9.1
$10/oz movement in gold price 4.3 6.6
1¢/lb movement in zinc price 9.5 10.0
$10/tonne movement in zinc treatment charge price 1.1 3.7
1¢/lb movement in lead price 2.6 4.0
10% movement ARS 6.5 6.5

10% movement AUD 179.9 245.1
10% movement EUR 24.5 24.5
10% movement GBP 1.0 1.0
10% movement ZAR 129.2 129.2
*After impact of currency and commodity hedging, and contracted, priced sales as at 31 December 2005
**Assuming current annualised production and sales profiles, no currency or commodity hedging and no contracted, priced sales and purchases at 31 December 2005
Xstrata’s sensitivity to Australian export thermal coal prices is reduced by the sales already priced for 2006. Xstrata Zinc has secured
a substantial amount of its concentrate requirements for the remainder of 2006 into the San Juan de Nieva and Nordenham zinc
smelters in Spain and Germany respectively. Forward sales have been entered into for a minor proportion of 2006 copper zinc, lead
and gold production, as shown in the hedging summary below.
Cash Flow, Net Debt and Financing Summary

Xstrata’s operations generated $1,924 million of free cash flow during 2005 after funding sustaining capital expenditure of
$412 million. Despite tax paid increasing by $323 million versus the prior period, cash flow before capital expenditure increased
by 42% to $2,325 million compared to 2004.
Net debt increased by $1,139 million as strong cash generation was offset by the cash portion of the acquisition of 19.9% of
Falconbridge Limited and returned $522 million to shareholders through the repurchase of 4.1% of Xstrata’s issued share capital
under the Equity Capital Management Programme. In addition, in 2005 Xstrata invested $517 million of capital at operations to
enhance production capacities (including expenditure funded via finance leases), acquired African Carbon Group for $60 million
and distributed dividend payments to shareholders of $154 million.
Cash flow summary Year ended Year ended

$m 31.12.05 31.12.04
Cash generated from operations 2,779.9 1,784.9

Net interest paid (91.5) (90.7)
Dividends received 16.7 1.6
Tax paid (380.2) (57.6)
Cash flow before capital expenditure 2,324.9 1,638.2
Sustaining capital expenditure (411.6) (262.7)
Disposals of fixed assets 10.8 15.2
Free cash flow 1,924.1 1,390.7
Expansionary capital expenditure (455.3) (167.5)
Cash flow before acquisitions 1,468.8 1,223.2
Investments (1,472.0) (3.3)
Purchase of subsidiaries net of cash acquired (60.3) –
Payments to Chrome Venture partner (7.3) –
Purchase of Las Bambas – (91.0)
Disposal of Ravenswood gold operation – 34.5
Disposal of Queensland coal assets – 38.9
Disposal of investments – 12.1
Repayments from Chrome Venture partner 7.3 –
Sale of Forestry operation, net of cash disposed 25.2 –
Net cash flow before financing (38.3) 1,121.4
Purchase of own shares (521.6) (51.3)
Sale of own shares 24.9 0.4
Equity dividends paid (154.2) (133.8)
Dividends paid to minority interests (148.2) (43.1)
Foreign exchange adjustment 4.6 (1.8)
Debt acquired with operations (6.4) –
Debt disposed of with operations 13.2 –
Issue of convertible debenture (375.0) –
Convertible bond IAS 32/39 movements 119.5 –
Borrowing costs written off (17.3) (35.1)
New finance leases (62.5) (111.6)
Redemption of Alumbrera capital to minority interests – (81.0)
Other non-cash movements 22.2 (7.6)
Movement in net debt (1,139.1) 749.5
Net debt at the start of the year (1,472.0) (2,221.5)
Net debt at the end of the period* (2,611.1) (1,472.0)
*Includes 100% of Alumbrera cash and third party shareholder loans
The financial instruments accounting standards IAS 32 and IAS 39 were adopted effective 1 January 2005, resulting in a portion of
the convertible bond net proceeds being reallocated to equity. Borrowing costs written off relate to the payment of debt
arrangement fees in connection with the bid for WMC Resources.
Reconciliation of EBITDA to cash generated from operations Year ended Year ended
$m 31.12.05 31.12.04
EBITDA 3,103.1 2,065.4

Discontinued operations EBITDA – 0.1
Share of results from associates (23.4) (2.3)
Non-trading items (10.3) 1.2
Net profit on disposal of property, plant & equipment (15.9) (4.2)
Net profit on disposal of investments – (10.2)
Increase in inventories (125.4) (36.6)
Increase in trade and other receivables (333.8) (258.0)
Increase in deferred stripping and other assets (80.3) (24.6)
Increase in trade and other payables 236.2 64.8
Movement in provisions and other non-cash items 29.7 (10.7)
Cash generated from operations 2,779.9 1,784.9
The increase in receivables was primarily due to higher sales prices across all of Xstrata’s commodity businesses, a reduction in the
use of debtor financing in South Africa and the timing of copper sales which accelerated in the last quarter of the year, reaping the
benefit of very strong prices. The value of concentrate stocks increased at the European zinc smelters due to higher metals prices.
This increase in inventories was partially offset by a drawdown of thermal coal stockpiles in South Africa. Underlying trade creditors
increased as a result of higher payables as a consequence of the higher prices inherent in concentrate stocks for the European zinc
smelters, in addition to timing of payments around the year end.
As a consequence of the ongoing development of Australian operations, stripping ratios increased, with overburden removal at
both the Black Star zinc lead open pit at Mount Isa and at the Ernest Henry copper operation, resulting in increased deferred
stripping costs.
Net debt summary As at As at

$m 31.12.05 31.12.04
Cash 524.1 459.6

External borrowings (2,917.6) (1,760.1)
Arrangement fees 11.2 13.5
Finance leases (228.8) (185.0)
Net debt* (2,611.1) (1,472.0)
Net debt to equity 32.1% 20.1%
By currency:
AUD 35.0 (51.1)
EUR 8.3 –
GBP 10.2 8.5
USD (2,663.6) (1,441.8)
ZAR (3.8) 10.1
Other 2.8 2.3
Net debt by currency (2,611.1) (1,472.0)
*Includes 100% of Alumbrera cash
Finance leases included in debt increased primarily in respect of rail infrastructure associated with the Rolleston thermal coal project
in Queensland, Australia.
Working Capital
The differences between the working capital balances below and the movements shown in the EBITDA cash flow reconciliation
reflect non-cash items such as movements in exchange rates and non-current assets, such as deferred stripping.
Working Capital As at As at
$m 31.12.05 31.12.04
Inventories 890.7 825.9

Trade and other receivables 1,138.3 794.0
Prepayments 98.8 103.9
Trade and other payables (945.8) (788.8)
Net working capital 1,182.0 935.0
Treasury Management and Financial Instruments

Group Treasury has responsibility for the strategic planning of the Group’s financing activities. Its responsibilities include:
management of the Group’s cash resources and debt funding programmes, funding acquisitions and investments, management of
interest rate and foreign exchange exposures, and co-ordinating relationships with banks, rating agencies and other financial
institutions.
The Group is generally exposed to US dollars through its revenue stream. The Group will seek to source debt capital in US dollars
directly or by borrowing in other currencies and swapping them into US dollars, thus matching the negative exposure of our debt
service obligations against the positive exposure of our revenue.
Currency Hedging
Currency hedging may be used to reduce the Group’s short-term exposure to fluctuations in the local currency exchange rates to
the US dollar, Sterling and Euro. The currency hedging gains reflected in the income statement for the period ended 31 December
2005 amounted to $45 million compared to $218 million for the corresponding period in 2004. The unrealised mark-to-market loss
on currency hedging in place at 31 December 2005 was $14 million. The majority of Australian dollar hedging relates to contracted
US dollar priced sales.
Foreign currency forward contracts Forward sale Weighted Fair value

$m average $m
$m Currencies 31.12.05 exchange rate 31.12.04
Maturing 2006
Coal NSW $ to AUD 437.8 0.7474 (9.6)
Coal Qld $ to AUD 214.3 0.7449 (3.9)
Copper $ to AUD 8.9 0.7596 (0.3)
$ to AUD 661.0 0.7468 (13.8)
Coal NSW AUD to GBP 5.2 0.3927 (0.4)

Total 666.2 (14.2)
Commodity Hedging
The Group is exposed to fluctuations in commodity prices, with the commodity mix spread relatively evenly between those which
are priced by reference to prevailing market prices on terminal markets and those that are set on a contract basis with customers,
generally on an annual basis. Commodity hedging is in the form of forward and option contracts covering a portion of planned
attributable gold, copper, zinc, silver, lead and coal production.
Hedges relating to sales in 2006 are classified as cash flow hedges and shown in the table below. The fair value of these hedges is
deferred within equity on the balance sheet until the sale is recorded. The unrealised mark-to-market loss on commodity hedging
maturing in 2006 and in place at 31 December 2005 was $85 million.
Commodity forward and option contracts maturing in 2006 Average Fair value
price $m
Commodity Volume $* 31.12.05
Thermal coal (tonnes) $ Coal 4,625,000 51.28 13.4

Gold (ounces) AUD Gold 58,843 500.40 (1.9)
Gold (ounces) $ Gold 102,668 373.06 (15.9)
Gold (ounces) $ Gold 51,000 500–590 0.2
Copper (tonnes) $ Copper 49,750 2,746.62 (63.0)
Zinc (tonnes) $ Zinc 12,104 1,412.05 (6.0)
Lead (tonnes) $ Lead 58,375 956.68 (5.7)
Silver (ounces) $ Silver 4,900,000 7.68 (6.3)
Total (85.2)
*The average price is stated in US dollars and where necessary has been converted from foreign currencies at period end exchange rates
Cash flow hedging

The Group has undertaken short dated commodity hedging in respect of a minor portion of production during the course of the
year. Gold and silver are principally produced as by-products from our major operating assets, hedging these commodities
effectively locks in a portion of the operating costs associated with these assets. Xstrata Coal has an ongoing hedging programme
for thermal coal, principally from South Africa, and hedges a portion of forecast production when pricing opportunities exist in the
forward market.
As indicated in the 2005 Interim Report, the Ernest Henry copper gold operation is scheduled in 2006 to enter a period of
abnormally low ore grades for several months. As a consequence, unit costs are expected to increase temporarily. A decision was
made during the first half of 2005 to lock in the profitability of the operation through the forward sale of copper for this period. As
a result of the more favourable outlook for copper prices into 2006, relating to 27,800 tonnes of copper have been redesignated as
hedges against 2005 copper sales with the full earnings impact of $35 million recognised in the profit and loss statement at the
balance sheet date. Zinc hedges maturing in 2006 relate to a specific shipment of zinc which was delayed from the final quarter of
2005 into 2006.
Copper and zinc are often sold under terms whereby sales are priced according to future quotational periods. These terms are
negotiated by concentrate purchasers to match the pricing period with the expected timing of cathode sales. In certain
circumstances, forward contracts have been undertaken to lock in the final price at the time at which the sale is recognised. Hedges
that relate to 2005 sales for which the quotational period is still open are shown in the table below and have been recognised in
the income statement at the balance date. As a result, these hedges will have no further earnings impact.
Commodity forward contracts Average Fair value

price $m
Commodity Volume $* 31.12.05
Maturing in 2006
Gold (ounces) AUD Gold 28,252 479.48 (1.5)
Gold (ounces) $ Gold 36,332 378.08 (5.1)
Copper (tonnes) $ Copper 56,050 3,056.54 (75.9)
Zinc (tonnes) $ Zinc 41,321 1,412.05 (20.4)
Total (102.9)
*The average price is stated in US dollars and where necessary has been converted from foreign currencies at period end exchange rates
Interest Rate Hedging

The Group normally borrows and invests at floating rates of interest and will generally swap any fixed rate exposure into floating
interest rates. A limited amount of fixed rate hedging may be undertaken during periods where the Group’s exposure to
movements in short-term interest rates is more significant. The unrealised mark-to-market loss on interest rate hedging in place at
31 December 2005 was $9.7 million.
Interest rate swaps Average Fair value

Principal rate $m
$m % 31.12.05
Maturing in 2010
Interest rate swapped from fixed rates 600 4.5 (9.7)
Total (9.7)
Consolidated Capital Expenditure

Capital expenditure increased in 2005 as a number of Xstrata’s major projects were initiated during the year to take advantage
of the strong commodity price environment. Total capital expenditure across the Group increased by $398 million or 72% to
$947 million.
Sustaining capital expenditure of $430 million in 2005 included:
■ $188 million at Xstrata Coal, including the $52 million (AUD68 million) longwall system at the Ulan underground mine and
$12 million (AUD16 million) underground drift conveyor system at the same operation, both completed within budget; and
■ $115 million at Xstrata Copper including $21 million for continued mobile equipment replacements to assist in mining at
greater depth at Ernest Henry and a total of $50 million for mine development, infrastructure maintenance and ore handling
projects at Mount Isa which resulted in increased concentrate output during 2005.
While this capital expenditure is sustaining in nature, these projects will have a material positive impact on costs and efficiencies at
Xstrata’s operations.
Sustaining capital expenditure in 2006 is anticipated to decrease slightly from 2005 levels, to around $400 million, as Xstrata’s
businesses continue to upgrade and invest in operations to increase efficiencies and production capacity. In particular, increased
capital will be directed to the Mount Isa Mines copper and zinc operations to upgrade smelters and the zinc concentrator,
undertake work on the shafts and improve paste filling capabilities in 2006.
Total expansionary capital expenditure increased to $517 million in 2005. Despite significant cost pressures due to rising input
prices, particularly raw materials and labour, Xstrata’s businesses delivered a number of capital growth projects during the year on
time and within budget.
Significant progress was achieved in 2005 in delivering two of the Group’s major growth projects: the Rolleston coal development
in Queensland, Australia, and the Project Lion ferrochrome smelter and related mine development in South Africa.
At Rolleston, first production began as scheduled in September 2005, with total expenditure in 2005 of $135 million. Phase one
of Project Lion has also progressed well, incurring $132 million in 2005 – the largest part of the project’s total cost. Again, despite
escalating input prices, in particular steel, the project remains both on budget and schedule for commissioning in the second
half of 2006.
Capital expenditure summary Year ended Year ended

$m 31.12.05 31.12.04
Alloys 34.8 10.1

Coal 187.7 132.3
Copper 115.3 94.6
Zinc 88.8 65.7
Technology 0.7 0.5
Unallocated 2.6 3.0
Total Sustaining 429.9 306.2
Attributable Sustaining 415.8 286.6
Alloys 168.8 36.9
Coal 280.9 172.1
Copper* 35.3 4.7
Zinc 32.2 29.6
Total Expansionary 517.2 243.3
Attributable Expansionary 512.3 241.9
Alloys 203.6 47.0
Coal 468.6 304.4
Copper* 150.6 99.3
Zinc 121.0 95.3
Technology 0.7 0.5
Unallocated 2.6 3.0
Total 947.1 549.5
Attributable total 928.1 528.5
*Excludes Las Bambas project acquisition in August 2004
Other major items of expansionary capital expenditure in 2005 included:

■ the commencement of construction of a UG2 mine and concentrator under the Mototolo joint venture with Anglo Platinum in
South Africa;
■ the continued development of the Black Star zinc lead mine which led to substantial improvements in operating performance
from the Australian zinc lead operations in 2005;
■ $24 million to upgrade the coal flotation plant at Newlands to coincide with operations beginning at the Northern
underground mine in the first quarter of 2006; and
■ the initiation of the drilling programme at Xstrata Copper’s Las Bambas exploration project at a cost of $10 million.
Expansionary capital expenditure is also anticipated to remain at a similar level to 2005 expenditure of around $500 million,
as large-scale expansion projects are completed, new projects initiated and additional investment is made in a number of low
capital cost, high return incremental expansion projects from the portfolio. Feasibility studies have confirmed the potential
attraction of the development of the Goedgevonden coal mine and number 5 coal seam at South Witbank and Tavistock mines in
South Africa. These projects are contingent on infrastructure and market considerations and, if approved, would result in additional
capital expenditure in 2006.
Expenditure will continue on the Rolleston thermal coal mine as it moves towards full production in 2008, although at a lower rate
than in 2005. Phase one of Project Lion will be completed during 2006, with commissioning expected in the second half. In total,
capital expenditure of around $130 million is anticipated in 2006 for these two major growth projects. In addition, Xstrata Coal is
planning a number of incremental expansions in its highly-efficient New South Wales operations. Other major expansionary capital
projects include the following:
■ construction of Project Bokamoso, a pelletising and sintering plant with a production capacity of 1.2 million tonnes per annum
in South Africa, at an approximate cost of $75 million during the year;
■ investment in a second rotary holding furnace at the Mount Isa copper smelter, which together with a copper slag cleaning
furnace and associated smelter expansion projects, is expected to increase throughput to 300,000 tonnes per annum, to match
the future copper-in-concentrate output from the North Queensland operations and improve efficiency at a total cost of
approximately $56 million;
■ construction will continue on the UG2 mine and concentrator for the Mototolo joint venture with Anglo Platinum, with
Xstrata’s share estimated at approximately $68 million for 2006;
■ the Stage 2 East cutback will be developed at the Black Star mine at Mount Isa at a cost of some $20 million;
■ a further expansion to the concentrator at Minera Alumbrera in Argentina will increase capacity to 40 million tonnes per annum
and will be completed in 2006 incurring expenditure of approximately $12 million during the year;
■ Xstrata Copper’s drilling programme at Las Bambas will accelerate, with total expenditure of around $24 million in 2006;
■ dependent on final approval being granted by the Northern Territory Mines Minister, estimated capital expenditure in 2006 to
commence the conversion of McArthur River Mine to an open cut operation would be around $35 million; and
■ approximately $15 million will be incurred to complete the development of the Northern 3500 underground copper orebody at
Mount Isa’s Enterprise copper mine, enabling improved utilisation of the existing hoisting and concentrating facilities and
achieving rated capacity of 3.5 million tonnes per annum.
Acquisitions
The total cost of acquisitions completed in 2005 (including acquired debt) was $1,918 million, including the acquisition of 19.9%
of Falconbridge Limited, compared to $94 million in 2004.
In January 2005, Xstrata Alloys acquired a controlling stake in the African Carbon Group (“ACG”), a char producer situated in the
Mpumalanga province, South Africa. The acquisition extends Xstrata Alloys’ strategy to secure its own supply of reductants.
In March 2005, Xstrata Copper acquired 13.2% of Universal Resources Limited, a listed Australian exploration company, for a cost
of $5 million.
In May 2005, Xstrata Alloys and Merafe Resources Limited (“Merafe”) signed an agreement with Samancor to acquire chrome ore
reserves and resources associated with the Kroondal and Marikana mining areas for a total consideration of $16 million and
$29 million respectively. Xstrata’s share of the total consideration is $29.5 million.
In August 2005, Xstrata acquired a 19.9% stake in Falconbridge Limited for a total consideration of $1.7 billion, of which
$375 million was settled by means of a guaranteed convertible debenture, convertible into ordinary Xstrata shares with the
remainder in cash. The acquisition provided Xstrata with a meaningful stake in a major diversified mining company, with exposure
to world class integrated businesses in copper and nickel, as well as to Falconbridge’s zinc and aluminium businesses. Subsequently,
on 11 October, Inco Limited made a bid to acquire Falconbridge Limited for 0.6713 of an Inco common share plus C$0.05 in cash
for each Falconbridge common share, or C$34 in cash, subject to pro rata application should certain thresholds be met. Inco’s offer
has recently been extended and is currently due to close on 30 June 2006. The offer remains subject to approval from anti-trust
authorities in the European Union and United States.
In September 2005, Xstrata Zinc increased its ownership of McArthur River Mine to 100%, through the purchase of the 25% stake
formerly owned by ANT Minerals Pty Limited. The acquisition completed in December 2005.
Since the year end, in February 2006, Xstrata has entered into an alliance agreement with Erdene Gold Inc. (“Erdene”) and has
purchased 9.8% of Erdene’s shares. The agreement allows Xstrata Coal the first option to enter into a joint venture and earn a
75% interest in coal opportunities identified by Erdene in Mongolia. Erdene is a diversified mineral exploration company with a
significant profile and a large number of exploration projects in Mongolia, which include both coal and base metals. While this
agreement is focused on the joint development of metallurgical and thermal coal projects, Xstrata will also have the right to
participate in other mineral development opportunities with Erdene.
On 1 March 2006, Xstrata announced the proposed acquisition of Glencore International’s one-third stake in the Cerrejón thermal
coal operation in Colombia for a total consideration of $1.7 billion in cash, funded from new bank debt facilities. The acquisition is
subject to shareholder approval and certain regulatory approvals.
Disposals and discontinued operations

In January 2005, Xstrata sold its wholly-owned forestry operation in Chile, Forestal Los Lagos SA (“FLL”) realising a $4 million gain
on the disposal.
In April 2005, Xstrata Alloys reached agreement with Precious Metals Australia Limited (“PMA”) regarding the disposal of the
Windimurra vanadium project. The sale was finalised in August 2005 and as a consequence, Xstrata is now released from all
obligations associated with the Windimurra project.
Other changes to Group companies

In August 2005, Anglo Platinum and Xstrata Alloys announced the formation of the Mototolo Joint Venture to develop a platinum
group metals (PGM) mine and concentrator on the Eastern Limb of the Bushveld Complex in Mpumalanga, South Africa. On 28
February 2006, Xstrata announced its partnership with Kagiso Investment Trust (“Kagiso”), through which Kagiso will acquire 26%
of Xstrata’s 50% interest in the joint venture, in return for funding its proportionate share of the capital expenditure required.
Xstrata Alloys and Kagiso will jointly manage and vote the combined 50% share in the joint venture.
In December 2005, Xstrata Coal and its partners in the Xstrata Donkin Mine Development Alliance won the exclusive right to
pursue exploration of the Donkin coal resource in Nova Scotia, Canada. Evaluation of the thermal and metallurgical coal resource
will begin in early 2006, with feasibility studies expected to continue for approximately two years.
In February 2006, Erdene reached agreement with Kaoclay Resources Inc. (“Kaoclay”) to acquire all of the outstanding shares of
Kaoclay in exchange for shares and warrants of Erdene. Kaoclay is a Nova Scotia-based private company involved in energy and
industrial mineral projects in North America, including a 20% interest in the exploration and development of the Donkin coal
project in Nova Scotia through the Xstrata Donkin Mine Development Alliance.
On 28 February 2006, Xstrata and African Rainbow Minerals Limited (“ARM”) announced the formation of a new black-owned and
controlled company, ARM Coal. ARM Coal will have a total participation interest of 26% of Xstrata’s South African coal business.
Dividends
A 2005 interim dividend of 9¢ per share amounting to $55 million was paid on 14 October 2005. The proposed final 2004
dividend of 16¢ per share amounting to $100 million was paid on 20 May 2005. The directors propose a final 2005 dividend of
25¢ per share amounting to $150 million to be paid on 19 May 2006.
Dividend dates 2006
Ex-dividend date 26 April

Deadline for return of currency election forms 28 April
Record date 28 April
Applicable exchange rate date 12 May
Payment date 19 May
As Xstrata plc is a Swiss tax resident company, the dividend payment will be taxed at source in Switzerland at the rate of 35%.
A full or partial refund of this tax may be available in certain circumstances.
The final dividend is declared and will be paid in US dollars. Shareholders may elect to receive this dividend in Sterling, Euros or
Swiss francs. The Sterling, Euro or Swiss francs amount payable will be determined by reference to the exchange rates applicable to
the US dollar seven days prior to the dividend payment date. Dividends can be paid directly into a UK bank or building society
account to shareholders who elect for their dividend to be paid in Sterling.
Further details regarding tax refunds on dividend payment, together with currency election and dividend mandate forms,
are available from Xstrata’s website (www.xstrata.com) or from the Company’s Registrars.
Share Data
Under IFRS, own shares (treasury stock) are deducted from the total issued share capital when calculating earnings per share.
During the period, 1.5 million shares were sold in the market and 1 million shares were issued relating to the disposal of Xstrata
equity allotted to an Employee Share Ownership Trust, (an employees’ share scheme as that term is defined for the purposes of the
Companies Act 1985 and within the provisions), to service the exercise of employee share options.
Share price XTA LSE XTA SWX

(GBP) (CHF)
Closing price 31.12.04 9.31 20.50

Closing price 31.12.05 13.60 30.75
Year high 14.90 33.95
Year low 8.70 19.20
Year average 11.52 26.14
Shares in issue for EPS calculations Number of shares

(000s)
2005
Weighted average for year ended 31.12.05 used for 2005 statutory eps calculation 612,421
2004
Weighted average for year ended 31.12.04 used for 2004 statutory eps calculation 626,351
Total issued share capital 632,502
Equity Capital Management Programme

Under the equity capital management programme (ECMP), up to 10% of the issued capital of Xstrata plc can be purchased in the
market by Batiss Investments (Batiss), a Guernsey-registered entity owned by a trust and independent of the Xstrata Group. During
2005, 26.1 million shares were purchased under the ECMP for $522 million. This brings the total purchases to 31 December 2005
to 29 million shares (4.7% of ordinary share capital) at an average cost of GBP 10.72 per share. No shares were sold under the
ECMP during the period.
Future Application of Xstrata Shares Held by Batiss

Xstrata Capital intends that the shares held by Batiss will either be used by the Group as a source of financing for future
acquisitions, in keeping with the Group’s growth strategy, or placed in the market.
The decision when to place the shares in the market, use the shares to assist the Group in facilitating future transactions, or to
repurchase shares for cancellation, will be considered in light of the Group’s funding requirements and capital structure at the time.
Accounting Treatment
For so long as the shares continue to be held by Batiss they are disregarded for the purposes of calculating the earnings per share
of Xstrata plc. Batiss will be consolidated by Xstrata as a special purpose entity, and the shares held by it will be accounted for as a
deduction from shareholders’ funds in the consolidated balance sheet of the Group.
If Xstrata shares held by Batiss are subsequently disposed of by way of a placing or as consideration for an acquisition by the
Group, any gain or loss will be taken directly to the Group’s reserves.
Publicly disclosed major shareholders Number of % of Ordinary

Ordinary shares issued share
Name of shareholder of $0.50 each capital
Credit Suisse First Boston Equities Nominees Limited 152,659,367 24.13*

Glencore International AG 101,040,400 15.97*
Batiss Investments Limited 29,450,976 4.66
*Pursuant to a capital management programme, as announced on 29 May 2003, entered into by Credit Suisse First Boston Equities Limited (CSFB Equities) and Credit
Suisse Securities (Europe) Limited (CSFB Europe), and Glencore International AG (Glencore), in connection with the Group’s acquisition of the MIM Group and the
associated rights issue, Glencore, CSFB Equities and CSFB Europe are jointly interested in 253,699,767 ordinary shares representing 40.11% of the issued share capital
of the Company. In addition to the interests arising as a result of CSFB Equities and CSFB (Europe) entering into the capital management programme, the company has
been informed by CSFB Equities that the Credit Suisse Group has an interest in a further 1,330,165 Ordinary Shares, representing approximately 0.21% of the issued
outstanding ordinary shares of Xstrata.
18.15
Alloys | Boshoek | South Africa
Abinaar Magodielo,
Production Engineer,
leaves the plant after
handing over to the
afternoon shift
Chrome | Markets As the correction in stainless melt management, technological diversity

The first half of 2005 was characterised production translated into lower and sharing of operational expertise.
by strong growth in stainless steel melt, ferrochrome demand in the second half From 1 July 2005, Merafe’s participation
which accounts for approximately 80% of 2005, ferrochrome prices came interest in the venture increased from
of global ferrochrome consumption, and under pressure, with the base price 11% to 14%. Following the Chrome
consequently in ferrochrome demand. reducing by 5¢ in each quarter to end Venture’s acquisition of Samancor’s
As a result, ferrochrome prices rose to the year at 68¢ per pound. The average 50% stake in the Wonderkop furnaces
78¢ per pound in the second quarter of quoted price for 2005 was 73¢ per and Kroondal reserves (the “Gemini
2005. In the second half, stainless steel pound, 7.3% higher than the published JV”) in addition to the acquisition of the
stocks began to build, particularly in 2004 average of 68¢ per pound. contiguous Marikana reserves,
China, as high nickel prices impacted completed in November 2005, Merafe’s
demand for stainless steel, leading to Relatively weak stainless steel melt share in the Chrome Venture increased
a slow-down in stainless melt production. production has continued into the first further to 17%. Merafe’s interest will
While globally, stainless steel melt quarter of 2006, resulting in further increase again to 20.5% on 1 July
production in 2005 continued at a downward pressure on prices; in the 2006, in line with the Pooling and
similar level to the previous year, in first quarter the base price reduced by Sharing agreement with Xstrata Alloys.
Europe, stainless steel melt production a further 5¢ to 63¢ per pound. Accordingly, Merafe’s participation in
declined by an estimated 4.8% to 8.3 However, a recovery in the second half Project Lion will also increase to 20.5%.
million tonnes. Production of stainless of 2006 is expected as both stainless
melt also fell in the United States, down steel melt production and ferrochrome Operating conditions benefited during
by 7%, in Taiwan, down by 4%, and in demand gain momentum, with China the year from improved performance at
Japan, where production declined by again anticipated to drive this growth. the Rustenburg pelletising plant, the
around 2.5% year-on-year. China increased availability of Outokumpu
was the exception, experiencing Operations pellets from the Boshoek plant and
significant growth of 33% to around Revenue for 2005 was 2.6% lower than reduced overall raw material
3.7 million tonnes. the previous year, predominantly due requirements through better efficiencies
to lower volumes and the agreed from higher pellet availabilities. In June
Demand for ferrochrome has continued reduction in Xstrata’s participation 2005, suspensions were announced at
to grow year-on-year, albeit at a slower interest in the Xstrata-Merafe Chrome seven of the Chrome Venture furnaces
rate than in the first half of the year, by Venture (the “Chrome Venture”). EBIT to perform planned maintenance during
around 3.6%. This growth brings global decreased by 4.9% to $141.5 million. the winter months when energy costs
demand to 5.7 million tonnes, up from are elevated. The temporary closures
5.5 million tonnes in 2004, primarily due The Chrome Venture continues to had no material impact on 2005
to increased production of ferritic grade mature and is gradually realising the financial performance and all seven
stainless steel. anticipated synergies from furnaces were brought back into
Operating and Financial Review | Alloys
Financial and Operating Data: Chrome Year ended Year ended

$m 31.12.05 31.12.04
Revenue 797.5 819.3

EBITDA 168.8 168.9
Depreciation & amortisation (24.4) (20.0)
Impairment of assets (2.9) –
EBIT 141.5 148.9
Net assets 726.0 483.1
Capital employed 851.0 618.7
Share of Group EBIT 5.6% 9.9%
Share of Group net assets 8.9% 6.6%
Return on capital employed* 16.7% 27.3%
Capital expenditure 187.3 42.5
Sustaining 25.9 8.8
Expansionary 161.4 33.7
Attributable saleable production (kt) 1,121.7 1,225.4
Indicative average published price (US¢/lb) (Metal Bulletin) 73.0 68.0
Total recordable injury frequency rate 11.8 16.6
Lost time injury frequency rate 4.3 5.2
Employee turnover (%) 6.9 6.6
*ROCE % based on average exchange rates for the period
operation during the third quarter. great stability, production volumes have Mining operations improved during
Following routine maintenance work, increased and operating costs have 2005. Higher underground production
the two Gemini JV furnaces at significantly reduced. volumes from the Kroondal mine,
Wonderkop have remained suspended especially after the acquisition of the
in light of prevailing market conditions Operating costs were contained in Marikana reserves announced in July
and to improve the distribution of 2005 despite lower production 2005, displaced production from the
agglomerated ores across the chrome volumes. Excluding standing charges lower quality opencast operations at
operations. In addition, a further five of $10 million incurred by idled Kroondal and Boshoek.
furnaces are being temporarily capacity, unit costs fell by ZAR48 per
suspended, comprising two furnaces tonne in real terms compared to 2004, Operations at the Horizon mine were
at Wonderkop, two furnaces at due to lower coke prices, mechanical temporarily suspended from 1 July to
Rustenburg and one furnace at Boshoek, improvements at the Boshoek furnaces December 2005 to refurbish the mine,
and will be returned to production and improved furnace efficiencies with the objective of improving yields
according to market conditions. resulting from higher pellet availabilities. and production costs from January
These cost savings also reflect lower 2006. The Thorncliffe mine in the East
During 2005, modifications were made power costs than in the previous year, remained the best performing and
to the Boshoek furnaces during the primarily due to the suspension of the lowest cost chrome ore mine in the
winter shutdown. Using the combined Wonderkop JV furnaces, which had group in 2005. The Thorncliffe mining
expertise within Xstrata and Merafe, operated at escalated commodity-linked complex is being expanded with the
the modifications have produced electricity prices in 2004. The continued development of the Helena mine
excellent results. The two Boshoek strength of the South African rand to supply ore to the new Lion
furnaces are currently operating with during the year negatively impacted ferrochrome smelter.
South African rand costs in US dollar
terms by $4.6 million.
EBIT variances: Chrome $m
EBIT 31.12.04 148.9

Sales price* 46.7
Volumes (10.7)
Unit cost – real (10.5)
Unit cost – foreign exchange 1.0
Depreciation and amortisation (excluding foreign exchange) (2.0)
EBIT 31.12.05 141.5
*Net of commodity price linked costs
Developments Project Lion was awarded a substantial

The first stage of Project Lion, to grant by the South African Department
construct a 360,000 tonnes per annum of Trade and Industry in 2005 in
smelting complex in the Mpumalanga recognition of the project’s contribution
province, is currently under construction to the sustainable development of the
following ground clearing which surrounding area. This is a result of the
commenced during December 2004. project’s beneficial impact on local
The smelter is situated close to existing communities in the form of direct and
Xstrata chrome reserves at the indirect employment, training schemes,
Thorncliffe mining complex. The project and specific social development
utilizes Xstrata Alloys’ proprietary programmes initiated by Xstrata Alloys,
Premus technology, which will deliver as well as the associated improved
significant production cost savings infrastructure that will benefit local Marifaan Primary School, outside Lydenburg is
compared to prevailing ferrochrome communities and surrounding sponsored by Xstrata
production technologies. industries. Simulated training at Kroondal Mine

The project has encountered some acquire Samancor’s 50% stake in the Project Mototolo, a 50-50 joint venture
external difficulties, in particular the Gemini Joint Venture and associated with Anglo Platinum, was initiated in the
quality of the kiln riding rings and roller chrome reserves, as well as facilitating latter part of 2005, heralding Xstrata’s
support castings and difficult ground Merafe’s 20.5% participation in the entry into platinum group metals; an
conditions. Despite these challenges, Project Lion. attractive new commodity. The project
the project is on track to commission on will commence commissioning in the
time and within budget during the third Project Bokamoso was approved towards final quarter of 2006, reaching full
quarter of 2006. The related Helena the end of 2005 at a capital cost of production by the end of 2007. Xstrata’s
mine development also remains within ZAR800m. The project consists of the share of the total capital expenditure is
the project timing schedule and budget, construction and commissioning of a estimated to be approximately ZAR675
with chrome ore already being brought pelletising and sintering plant with a million. The project is expected to
to surface. production capacity of 1.2 million tonnes produce approximately 132,000 ounces
per annum. The additional of platinum and 82,000 ounces of
The acquisition of the African Carbon agglomeration capacity will restore the palladium per annum.
Group was completed during January ore balance between the mines and
2005. The purchase has been an smelters in Xstrata’s Western operations, On 28 February 2006, Xstrata
important step in enabling Xstrata reducing operating costs for the smelting announced the formation of a
Alloys to secure its supply of reductants operations and enhancing mining and partnership with Kagiso Investment Trust
and to gain greater control over key operational efficiencies. The project will (“Kagiso”), through which Kagiso will
inputs into the ferrochrome also result in improved environmental acquire 26% of Xstrata’s 50% interest in
manufacturing process. Other reductant performance and operational flexibility. the joint venture, in return for funding
supply alternatives continue to be Construction will commence in the first its proportionate share of the capital
actively pursued by the carbon division. quarter of 2006, with commissioning expenditure required. Xstrata Alloys and
expected in the second quarter of 2007. Kagiso will jointly manage and vote the
In November 2005, Merafe successfully The plant is anticipated to reach full combined 50% share in the joint
raised equity and debt funding to capacity by the end of 2007. venture.
Project Lion construction of ferrochrome plant,

phase 1
Vanadium | Markets moderate as a consequence, but are capacity of the overland conveyor and
Carbon steel, which dominates the likely to remain above historical levels introducing a primary stockpile split to
usage of vanadium, continued to show in 2006. increase the efficiency of the fully-
solid global growth of approximately autogenous mill.
6% during 2005. The primary driver of Operations
demand was China, where carbon steel Revenue increased by almost 138% to During 2005, Xstrata Alloys took
production increased by approximately $318 million compared with the advantage of the vanadium division’s
25%. Consequently the vanadium previous period, while operating profit strong financial performance to
market remained strong, particularly in increased by 688% to $176 million. redesign the Rhovan mining operation
the first half of the year when rapid Increased profitability was principally to improve efficiencies and access
increases in demand from all sectors led driven by higher sales prices, despite the previously uneconomic reserves. As a
to ferrovanadium prices rising to over effects of US dollar weakness and slight result, additional costs of approximately
$128 per kilogram. increases in real unit costs during the $2.4 million were incurred, but the life
period. Vanadium pentoxide volumes of mine was extended by more than six
Vanadium supply increased in response, were lower than the previous period, months, while enhancing operational
particularly from magnetite steel due to the closure of the Vantech efficiencies.
producers in China, while high prices operation announced in November
led to some substitution of vanadium by 2004. Production of vanadium Developments
ferroniobium in certain applications, pentoxide at Rhovan was maximised in Xstrata’s efficient Rhovan operation has
bringing supply and demand towards 2005 at the expense of efficiency in the potential to increase vanadium
equilibrium. Consequently, order to capitalise on favourable market pentoxide production capacity by a
ferrovanadium prices retreated from the conditions and maximise contribution further 8.5 million pounds per annum
peaks seen in the first half of the year margins. As a result, overall production through low cost brownfield expansion
to around $38 per kilogram by year volumes at Rhovan increased by 1.2% to take advantage of expected
end, bringing the average price for year-on-year to record levels, comprising increased future demand. The planned
2005 to around $70 per kilogram, higher vanadium pentoxide production increase in capacity will have a
compared to $27 per kilogram in 2004. and slightly lower ferrovanadium substantial positive impact on unit costs
production. Unit costs increased slightly, due to economies of scale. The
With further growth anticipated in principally due to an increased Environmental Management
carbon steel production, demand for overburden removal programme. Programme Report (EMPR) for the
vanadium units should remain firm proposed expansion project is being
during 2006 despite expected further Rhovan reaped the benefits throughout prepared and will be completed in the
increases in vanadium production in the year of several projects launched first half of 2006.
China and additional ferroniobium during 2004. This included installing the
substitution. Prices are expected to crusher in the pit, maximising the
Final settlement was reached with PMA improvements in injury frequency rates ■ the implementation of a new set of
on the closure of the Windimurra plant were achieved. Xstrata Alloys is striving working instructions for the interim
during August 2005 and, as a to become a fatality-free business and in order to minimise risks; and
consequence, PMA has assumed all invested significant resources in a range ■ enhancing the use of ground-
responsibilities and obligations related of safety improvement programmes penetrating radar equipment,
to the final rehabilitation of the which began in 2005, including specific including software development.
Windimurra project. Rehabilitation of fatality prevention programmes,
the Vantech site is also progressing well, behavioural safety training for all Xstrata Alloys has actively drawn on
with full closure expected to take employees and contractors and specific HSEC resources and best practices from
approximately four-to-five years in order training for supervisors and mine Xstrata’s global operations to identify
to allow for groundwater remediation. managers. Two of the fatal incidents in and manage major risks and to enhance
2005 involved falls of ground. Special safety at its operations during 2005.
Xstrata Alloys Health, focus being applied to this area includes: A revised HSEC strategy has been
Safety, Environment and ■ securing the assistance of various developed under the leadership of a
Community (HSEC) experts in this field, including leading newly appointed Executive Director of
Three critical incidents in which five academic institutions from South Sustainable Development, which has
employees (including contractors) lost Africa and Australia; helped to focus efforts on key risks and
their lives overshadow a year where ■ visits to other mines in South Africa to invest resources more effectively.
intensive safety programmes were and abroad to investigate alternative
implemented and substantial roof support mechanisms; The lost time injury frequency rate
Financial and Operating Data: Vanadium Year ended Year ended

$m 31.12.05 31.12.04
Revenue 318.0 133.7

EBITDA 181.1 34.1
Impairment of assets – (6.8)
EBIT 175.6 22.3
– Sustaining 8.9 1.3
– Expansionary 7.4 3.2
Attributable saleable production
– V2O5 (k lbs) 20,166 21,067
– Ferrovanadium (k kg) 4,936 5,791
Indicative average published prices
– V2O5 ($/lb) (Metal Bulletin) 16.3 6.0
– Ferrovanadium ($/kg V) (Metal Bulletin) 70.5 27.2
Tapping of furnace at Boshoek smelter
(LTIFR) and total recordable injury previous year. No fines or penalties were has been recognised by the then Minister
frequency rate (TRIFR) for Xstrata Alloys issued. A group air pollution specialist of Minerals and Energy, Mrs Phumzile
improved by 21% and 32% respectively was appointed during 2005 to ensure a Mlambo Ngcuka (currently Deputy
compared to 2004 to 4.3 and 11.5, the holistic approach to the control and President) and the Director General of the
lowest ever frequency rates for the management of air emissions arising Department of Minerals and Energy, as a
business unit. from Xstrata’s operations and to work partnership that embodies the spirit of
closely with the local municipalities to the Minerals and Petroleum Development
Every Xstrata Alloys operation was ensure optimal emissions monitoring. Act. The venture is on track to satisfy the
independently audited against Xstrata’s Individual specialists have been assigned 26% participation required by the
HSEC policy and 17 HSEC management to drive Xstrata Alloys’ occupational Charter before the stipulated deadline.
standards in 2005. Significant resource health and community initiatives. In
was dedicated to the implementation of particular, Rhovan, Xstrata’s vanadium Negotiations are currently being
the 17 Xstrata corporate HSEC operation, has implemented a number advanced to secure broad-based
standards and substantial improvements of wide-ranging initiatives to improve participation by historically disadvantaged
were achieved over the past six audits air quality and prevent respiratory South Africans (HDSAs) in Xstrata’s
as a result. problems in the workplace. In 2006, vanadium operation. Procurement from
Xstrata Alloys is implementing a HDSA suppliers increased significantly in
No serious or critical environmental comprehensive voluntary counselling, 2005 to 40% of total discretionary
incidents (category 4 or 5) and one testing and treatment programme for procurement expenditure compared to
category 3 (significant) incident HIV/AIDS for all employees and 23% in 2004 and the proportion of
occurred at Xstrata Alloys operations contractors at every operation. management positions held by HDSAs
during 2005. Overall, environmental increased to 21%, up from 17.5% in the
incidents decreased by 32% from the The Xstrata-Merafe Chrome Venture previous year.
EBIT variances: Vanadium $m
EBIT 31.12.04 22.3

Sales price* 174.7
Volumes (24.1)
Unit cost – currency 1.8
Other income and expenses 7.9
EBIT 31.12.05 175.6
06.30
Coal | United | Australia
Troy Guthrie, Mineworker –

Preparing to go underground
on dayshift
Markets winter prompted some Japanese spot 2005, but parts of China became net
Far East and Australian thermal purchases and pushed prices higher importers. India faces a similar shortfall
coal markets once again. The FOB Newcastle spot of domestic thermal coal. Both India and
Demand for imported seaborne thermal price was at just over $40 per tonne at Southern China are expected to become
coal in the Pacific Basin remained strong the close of 2005. increasingly important destinations for
during 2005, and import tonnages seaborne export thermal coal.
grew by 8% for the second consecutive Major utilities in Japan, Korea and
year. For annual contracts with the Taiwan entered 2005 with comfortable Thermal coal supplies from Australia,
majority of Japanese utilities, Xstrata stock levels as a buffer against any China and Indonesia continue to
Coal secured a price of around $53.75 repeat of the pricing shocks seen in dominate the Asia-Pacific region. Overall
per tonne free on board (FOB), effective 2004. In contrast to previous years, thermal coal exports from Australia grew
for the year commencing 1 April 2005. there were no major disruptions to by approximately 4% in 2005, driven by
This represented a 19% price increase Pacific supply during 2005. As a result, strong growth in New South Wales
on the average contract price of $45 prices remained stable before easing as thermal coal exports as new capacity
per tonne achieved in 2004. Annual supply increased from Australia and became available and ongoing
supply to the Korean generating Indonesia. Thermal coal demand into improvements were made to the coal
companies was priced later in the year the major markets of Japan, Korea and supply chain. The Hunter Valley coal
at approximately $51 per tonne. Taiwan increased by an estimated 2% chain’s “capacity balancing scheme”,
Term/annual contracts made up 60% of on average over 2004 levels, as new approved by the Australian Competition
Xstrata Coal‘s Australian managed coal-fired power stations were and Consumer Commission (ACCC),
export thermal sales in 2005, with the commissioned. Encouragingly, the allows increases in coal chain capacity to
balance sold on the spot market. majority of 2005 demand growth was occur at a steady pace while maintaining
fuelled by the emerging economies of the Newcastle port queue at a
Spot prices for seaborne thermal coal China, India and Latin America. This reasonable level and reducing
were stable through the first part of the growth has more than compensated for unnecessary demurrage payments.
year, remaining in the range between a decline in overall Pacific exports to the
$51-53 per tonne between January and European market in 2005. Despite the progress made in improving
July. In the second half, a slight the Hunter Valley coal chain, Australia’s
oversupply in the Pacific caused spot Growth in Chinese demand for thermal export growth continued to be impacted
prices to slide to around $38 per tonne coal continued to outpace increases in by ongoing infrastructure constraints.
in late November. At these prices, domestic production; this pushed Higher prices for coking coal led
increased Indian and Chinese buying domestic Chinese coal prices above Australian producers to give preference
interest appeared to put a floor under import prices by the year end. As a on the rail and port system to coking
the market before problems with some result, not only did Chinese thermal coal exports wherever possible. This was
nuclear power stations and a cold coal exports decline by around 15% in most clearly seen in Queensland where
Operating and Financial Review | Coal
Financial and Operating Data: Coal Year ended Year ended

$m 31.12.05 31.12.04
Revenue: own production 3,208.4 2,510.1

Coking Australia 536.7 358.3
Thermal Australia 1,935.4 1,587.8
Thermal South Africa 736.3 564.0
Revenue: third party purchased coal 192.0 183.3
Thermal Australia 138.1 76.3
Total revenue 3,400.4 2,693.4
Thermal Australia 2,073.5 1,664.1
EBITDA 1,346.5 916.0
Coking Australia (34.5) (32.5)
Thermal Australia (154.7) (143.6)
Thermal South Africa (78.0) (72.1)
EBIT 1,079.3 667.8
Net assets 4,458.5 4,550.6
Australia 2,991.1 2,868.5
South Africa 1,467.4 1,682.1
Capital employed 4,692.5 4,751.1
Australia 3,217.4 3,053.5
South Africa 1,475.1 1,697.6
Australia 35.7% 37.8%
South Africa 7.1% 6.8%
Australia 403.6 239.6
South Africa 65.0 64.8
Sustaining 187.7 132.3

2005 thermal coal exports were below thermal coal sales from Australia in European and South African thermal
2004 levels, despite robust demand. 2005. Korean and Taiwanese customers coal markets
have joined Japanese buyers in Atlantic export coal prices continued to
With Chinese cut-backs and Australian increasing purchases from stable strengthen during 2005 as the
constraints, Indonesian thermal coal Australian term suppliers to protect European and Mediterranean market
producers have once again been able to against Chinese volatility and to grew by around 4%. Continued strong
claim the majority of the growth in the maintain stocks of high quality prices largely reflected the robust but
Pacific thermal coal market. Indonesian Australian coal to blend with lower volatile energy market in Europe during
exports grew by approximately 18% in quality Indonesian material. The the year as oil, gas and electricity prices
2005 and, on a tonnage basis, Indonesia remainder of Xstrata’s Australian thermal reached record levels. Average prices
became the largest exporter of thermal coal export sales are directed into Europe increased by 24% to $48.50 per tonne
coal in the world in 2005. In addition, and the Americas, in particular into from $39 per tonne in 2004, albeit with
Indonesia has been the only major Pacific Mexico, where Xstrata maintained some volatility in pricing throughout the
producer to maintain sales to the significant contract sales in 2005. year. Spot prices in 2005 varied from
European and Atlantic market, as high $45 per tonne in the first quarter to
freight rates and high Asian FOB prices Xstrata Coal continues to maintain a $53 per tonne in the third quarter and
substantially reduced the competitiveness stable and balanced domestic portfolio settled at just below $40 per tonne at
of Australian and Chinese material into to provide geographic and currency year end.
that market. Russian thermal exports to diversification. Domestic thermal coal
the Pacific market remain port- sales remain predominantly long-term Although South African export
constrained, with higher-value coking contracts with power utilities in both tonnages were constrained during the
coal exports taking precedence. New South Wales and Queensland and first half of the year by continuing rail
represent about 16% of total managed bottlenecks, sustained performance
The Asian market accounted for around thermal coal sales from Xstrata Coal’s improvement from the rail network
80% of Xstrata’s managed export Australian operations. during the second half of the year
Newlands stockpile at dusk

Production Data: Coal Year ended Year ended

(million tonnes) 31.12.05 31.12.04
Total consolidated production 61.8 60.0

Queensland coking 4.8 5.2
NSW semi-soft coking 4.8 6.7
Australian thermal 33.6 28.9
South African thermal 18.6 19.2
Consolidated Australian sales total† 42.7 41.5
Queensland coking export 4.8 4.9
NSW semi-soft coking export 4.8 6.7
Thermal export 28.1 25.6
Domestic 5.0 4.3
Consolidated South African sales total† 20.4 17.5
Thermal domestic 6.9 4.6
Attributable Australian sales total† 40.1 39.1
Queensland coking export 4.8 4.9
NSW semi-soft coking export 4.4 6.3
Domestic 4.8 4.1
Attributable South African sales total† 20.4 17.5
Thermal domestic 6.9 4.6
Average received export FOB coal price ($/t)
Queensland coking 111.5 65.3
NSW semi-soft coking 70.3 47.2
Australian thermal 51.2 40.9
South African thermal 48.5 39.0
†All sales data is ex-mine i.e. does not include sale of third-party purchased coal
resulted in export volumes of around Europe did increase, these increases

69 million tonnes compared to 66 were more than offset by lower
million tonnes in 2004. Xstrata Coal’s volumes from both Australia and China.
South African operations increased
export volumes by some 5% in 2005, Export volumes from Colombia
which accounted for two-thirds of the increased overall, despite some
Group’s South African sales tonnage. production shortfalls due to poor
weather and limited equipment
High freight differentials and a robust availability, but were absorbed by strong
pricing environment in Asia continued demand in North and South America,
to constrain coal supplies to the reducing the amount of Colombian coal
European market from Pacific producers exported to Europe in 2005. Demand
in 2005. While Indonesian exports to for export thermal coal from the North
and South American markets is expected a trading range of €20 – €25 per tonne Children play on the facilities at Middelburg
to show strong growth going forward, during the last quarter of 2005. care village
underlining the importance of these Nonetheless, coal remained the least Front end loader loads coal at Rolleston open
markets for Atlantic export coal. Polish expensive fossil fuel for electricity cut mine
exports increased marginally from 2004, generation and in both the UK and
whilst Russian exports into Europe Germany the coal generating margin
continued to escalate, particularly during (“dark spread”) was higher than the
periods of tight South African and gas generating margin (“spark spread”)
Colombian availability. Increasing free on on both a carbon adjusted (“clean”)
board (FOB) cost pressures in Russia are and unadjusted (“dirty”) basis. compared to 2004, predominantly from
likely to curtail any further growth from Colombia. Argentina and Chile both
this region and possibly lead to export As a result, demand in Europe was continued to import coal to overcome
reductions in 2006. particularly strong from the UK, due to continued regional shortages in the
continuing cutbacks in domestic coal supply of natural gas. Total import
The advent of the EU emissions trading production and the relatively attractive demand from India almost doubled
scheme (ETS) to trade carbon dioxide cost of coal for power generation, from compared to 2004, reaching
allowances between industrial Germany where attractive generating approximately 23 million tonnes.
installations began in early 2005 and margins and high electricity prices
initially created some uncertainty supported coal burn and in the Iberian The South African domestic market,
amongst European buyers. Markets Peninsula, where very dry conditions which accounted for around a third of
quickly adjusted to accommodate the limited the availability of hydropower, Xstrata Coal’s South African sales
increased cost of carbon credits and supporting robust coal demand. volumes, also remained robust during
seaborne coal exports to Europe are Increased demand from these regions 2005, with further tightness in the
estimated to have increased by was somewhat offset by a reduction in supply of higher-grade products and
approximately 4% from 2004. Trading imported coal into Scandinavia due to increasing demand for lower-grade
commenced at approximately €8 per abundant hydropower reserves. coals, driven by continued Eskom
tonne of carbon dioxide in January demand. Both new and extended spot
2005, peaking at over €30 per tonne Imports into North and South America and annual contracts for the supply of
during the year, and eventually finding increased significantly, by over 16% low quality coal to Eskom contributed
to an overall increase in Xstrata’s sales output and demand for steel-making

to Eskom of 70% over 2004 levels. This raw materials, particularly high quality
was achieved despite the 11% coking coal, remains undiminished.
reduction in long-term Eskom contract Although increased availability and
sales volumes from the Douglas lower prices of Chinese coke slowed
Tavistock Joint Venture (DTJV) due to growth in demand for imported coking
production difficulties at the coal to the Indian coke makers, demand
Middelburg mine. Xstrata’s average for hard coking coal continued to grow
Eskom pricing fell 10% in 2005 due to strongly as steel demand boomed in the
lower inflation-related adjustments strengthening Indian economy.
coupled with a change in quality mix
and delivery basis year-on-year. Compared to 2004, when exports from
both Canada and Australia were
Non-Eskom domestic sales volumes constrained by infrastructure supply
increased 22% in 2005, driven by problems, hard coking coal production
marginal demand from both industrial and exports increased significantly from
users and local traders. The majority of both countries, in particular from
non-Eskom domestic contracts from Australia. This additional supply was
Xstrata South African coal operations eagerly consumed in the marketplace
achieved above-inflation increases, but and there are no signs of oversupply
this was coupled with a change in developing in the near term. The United
actual quality mix resulting in an States maintained its high level of hard
average increase of 3% year-on-year. coking coal exports in 2005 as a swing
producer to Asian markets, reflecting
Coking Coal Markets the strong global demand for coking
Demand for export coking coal again coal, despite the relatively high cost of
remained strong in 2005 as global blast US suppliers.
furnace output grew by 9%, making
this the third consecutive year of annual For the 2005 – 2006 contract period,
growth in excess of 8%. This growth Xstrata Coal settled its hard coking coal
was once again concentrated in China contracts into the Asian and European
where domestic output of iron and steel markets at varying prices up to $135
Vineyards coexist with mining at Beltana grew by approximately 30% in 2005. per tonne, a similar level to the previous
Production in the rest of Asia grew by contract year. Unlike in the previous
approximately 1%, whilst blast furnace period, these prices were not required
output declined in the rest of the world. to be averaged with carryover tonnage
at lower prices, as was the case due to
Global steel prices softened in most production constraints at Oaky Creek in
regions during 2005 from the peaks of late 2003. Contract prices of around
2004 but remain at relatively high $120 per tonne were achieved for
levels. Although some, mostly Collinsville semi-hard coking coal into
European, steel-makers indicated a the Asian steel market. These contract
slight production slowdown in order to prices reflect the ongoing positive
prevent oversupply and allow some outlook in the medium to longer term
inventory drawdown, most steel-makers for premium quality hard coking coals,
across Asia continued to maximise such as the coals from Xstrata Coal’s
EBIT variances: Coal $m
EBIT 31.12.04 667.8

Sales price* 622.9
Volumes 46.1
EBIT 31.12.05 1,079.3
Oaky Creek and Collinsville operations, semi-soft sales are exported to Asian substantially due to shortage of supply.
on the back of continuing growth in markets. Japanese steel mills were once Despite these significant cost pressures,
demand from markets such as China, again the dominant buyers of this overall costs increased by just $7 million
India and South America. material in 2005, accounting for over in 2005.
75% of total sales. Most semi-soft
The growth in global demand for hard coking coal was also sold under long- The inflationary environment is
coking coal along with the escalating term contracts with spot market sales expected to continue for the
steel price during last year’s comprising less than 10% of total sales foreseeable future. Xstrata Coal will
negotiations had a positive effect on of this product. continue to mitigate these increases as
New South Wales semi-soft coking coal far as possible through initiatives to
prices. Semi-soft coking coal prices for Operations achieve increased productivities and
the 2005 - 2006 contract year were Across Xstrata Coal’s operations operational synergies.
agreed with long-term Asian customers globally, there has been significant cost
at an average level of $79.50 per inflation for various inputs. Despite this, Australian thermal coal
tonne, approximately 80% higher than Xstrata Coal’s thermal coal business was Higher coal prices and increased sales
the previous year’s price. Semi-soft able to demonstrate real cost savings in volumes from Xstrata’s Australian
coking coal prices rose with hard coking 2005. The coking coal business was thermal coal operations, together with
coal prices and were helped by the negatively impacted by labour supply continued strong cost control, increased
strong global thermal coal market shortages, increased equipment and EBIT by 45% to $657.7 million in 2005.
which has, in the past, set a floor price input prices and a roof fall at the Oaky
for this type of coking coal. North underground mine. Increased production from Beltana
underground, the Ulan Complex and
During 2005, the vast majority of The Australian Bureau of Statistics has the commencement of production from
Xstrata Coal’s hard coking coal was sold indicated that price inflation on mining Rolleston, partially offset by the impact
under long-term contracts, with 56% materials on an annualised basis (for of the closure of the Newlands
output going to Asian markets, 27% period ending December 2005) was Southern underground mine in the
to Europe, and the balance to the around 9.3% for open cut and 9.6% second half of 2005, led to an 8%
Americas, Africa, Australia and the for underground mines. These increases increase in consolidated saleable
Middle East. Xstrata Coal’s semi-soft take into account fuel costs, which production, which reached 38.4 million
coking coal production comes from its increased significantly worldwide, and tonnes in 2005. Production from
New South Wales operations; almost all the cost of explosives, which rose Newlands Southern underground will
Breyten HIV/AIDS Clinic
Reconstruction and realignment of Maryland

creek at New Wallsend
be replaced by the newly-developed Rolleston, Xstrata’s new open cut impacted production by approximately
Northern underground, which will begin thermal coal mine, began production in 130,000 tonnes and by planned
longwall operations in the first quarter September 2005 on time and on reduced production at the Oaky Creek
of 2006. budget. The Rolleston operation open cut.
produced 932,000 tonnes in 2005 and
Real unit costs in local currency will produce six million tonnes per Real local unit cash costs rose by 18%,
increased by 2% from 2004. Excluding annum for export and two million primarily as a result of demurrage
the impact of “revenue related” costs – tonnes per annum for domestic associated with the congestion at
primarily the government ad valorem consumption when it reaches full Dalrymple Bay Coal Terminal (DBCT) in
royalty, which rose in line with strong production in 2008. the first half of 2005, a real increase in
coal prices – real unit costs for Australian the cost of mining inputs (including
thermal coal were reduced by 1% year- Export sales from Australia increased by fuel, steel and explosives) and increased
on-year, on top of a strong cost 2% to 33 million tonnes. In addition to royalty payments as a result of higher
performance in 2004. Xstrata’s thermal taking advantage of improved coal prices. The congestion at DBCT
coal operations largely mitigated the performance at the Port of Newcastle, resulted in a significant increase in
impact of increased cost inflation across Xstrata Coal increased sales from its Baal demurrage charges ($3.54 per tonne in
the industry through improved Bone operation to capitalise on available 2005 compared to $1.47 per tonne in
productivities, increased production from capacity from Port Kembla. Domestic 2004). These items combined with the
lower cost operations and benefits sales increased by 0.7 million tonnes as a continued strengthening of the
derived from capital expenditures aimed result of higher demand from local Australian dollar, resulted in a 25%
at operational improvements. As a result power generators. increase in US dollar cash costs period-
of the continued strength of the on-period. Costs were also impacted by
Australian dollar, US dollar unit cash Australian coking coal the labour shortage in central
costs increased by 9% from 2004. Significantly higher prices for coking coal Queensland with increased costs for
in 2005 boosted EBIT by 118% to contract labour.
Xstrata Coal’s thermal coal mines include $243.5 million. Export sales of coking
some of the lowest cost operations in coal were slightly lower than 2004 South Africa
Australia. Continued productivity levels at 4.8 million tonnes down from Xstrata’s Boschmans, WitCons,
improvements at Beltana culminated in 4.9 million tonnes in 2004, while total South Witbank, Tavistock and Tselentis
the longwall achieving what is production declined by 7% compared to operations achieved production records
considered to be an Australian, if not the prior year. Significant productivity in 2005. Overall saleable production
global, production record in November improvements at Oaky North was 3% lower than in 2004, at 18.6
2005 of 50,000 tonnes in one day, underground of 175,000 tonnes or an million tonnes, mainly due to planned
250,000 tonnes in one week and one increase of 11% on 2004 were offset by output reductions at Waterpan
million tonnes in a month. a roof fall at Oaky North, which following the closure of the
underground mine and at Phoenix due Resources (Canada), which holds a 20% of six-year supply contract with
to changes in coal grades required by interest, and Atlantic Green Energy Macquarie Generation, a domestic
Eskom. Development (USA) with the remaining generator. Mining operations
14% interest. commenced in early 2006; and
Increased sales volumes – in excess of ■ continuing development of the
20 million tonnes for the first time – Australia Northern underground at Newlands
coupled with higher export coal prices Capital expenditure for Xstrata Coal’s to replace the Southern
increased EBIT by 74% to $178.1 Australian operations totalled underground.
million, despite the continued strength $403.6 million for 2005, with the
of the South African rand. Export sales majority of the expenditure in Capital expenditure for Australia in
increased by 5% to 13.5 million tonnes. Queensland. Key capital expenditure 2006 is expected to be lower than
Domestic non-Eskom sales increased projects in 2005 include: 2005, as some of the major projects
to 2.3 million tonnes, up 21% and ■ completion of Rolleston Coal mine, which accounted for significant capital
sales to Eskom increased by 70% to on time and on budget, which expenditures in 2005 become
4.5 million tonnes. began production in September operational. Expenditures will continue
2005; to be made at Rolleston, Newlands
After adjusting for one-off items, local ■ commencement of the replacement Northern underground, Ulan
currency cash unit costs in real terms of the existing Newlands coal underground, and for the coal handling
were 1.2% higher than 2004 levels, handling and preparation plant with and preparation plant upgrade at
primarily as a result of higher costs a new dense-medium cyclone plant. Newlands, although at reduced levels
incurred at the two Douglas Tavistock This replacement will enable the from 2005.
Joint Venture operations (Douglas and production of additional coking coal
Middelburg mines), neither of which are product from the existing reserves
managed by Xstrata, offsetting as well as providing additional
productivity improvements, mainly at capacity and will continue in 2006;
Boschmans and Tavistock, and a higher ■ installation of a second longwall at
proportion of domestic coal sales Oaky Creek to allow for recovery of
(from 26% in 2004 to 34% in 2005). previously unplanned resources and
The South African rand was marginally replacement of higher cost open cut
stronger during the year, increasing operations;
US dollar unit cash costs by 6% ■ construction within capital budget
compared to the previous year. of the Mount Owen dump hopper; Longwall surface mini build at
■ purchase of a $52 million (A$68 Ulan underground mine
Developments million) state-of-the-art longwall
In December 2005, Xstrata Coal and its system and $12 million (A$16
partners in the Xstrata Donkin Mine million) underground drift conveyor
Development Alliance won the exclusive system for the Ulan underground
right to pursue exploration of the mine, which will be operational in
Donkin coal resource in Nova Scotia, 2006;
Canada. Evaluation of the thermal and ■ upgrading the coal preparation
metallurgical coal resource will begin in plant at the Bulga complex for
early 2006, with feasibility studies $11 million (A$14 million) which
expected to continue for approximately increased yield and lowered
two years. Xstrata Coal holds a 66% operating costs;
participating interest in the Alliance. ■ development of the Ravensworth
Other partners include Kaoclay West operation following settlement
South Africa located at Boschmans. This plant ■ the development of the number
Capital expenditure for Xstrata Coal’s will process coal from Boschmans, 5 coal seam at South Witbank and
South African operations totalled Waterpan and WitCons and will Tavistock mines; and
$65 million (ZAR416 million), provide significant improvements in ■ feasibility study for a new high
the majority of which was spent on yield and operating cost; capacity coal processing plant for
sustaining projects. An amount of ■ full feasibility study for the South the Tweefontein operation.
$5 million (ZAR34 million) was spent on Witbank/Tavistock 5 Seam
initial pre-feasibility and feasibility work operations to detail the mining and On 28 February 2006, Xstrata and
on the following projects: beneficiation of the high-value 5- African Rainbow Minerals (ARM)
■ the finalisation of the seam coal to service the domestic established a new black-owned and
Goedgevonden feasibility study. metallurgical market and the export controlled coal company, ARM Coal.
The mine will produce around 3 market; and The newly established ARM Coal will
million additional export tonnes per ■ pre-feasibility study on the Douglas own a 20% participation share in
annum in addition to 3 to 4 million Middelburg Optimisation Project Xstrata’s South African coal business,
tonnes of Eskom supply; (managed by BHP Billiton) designed comprising interests in 13 coal
■ further studies following the pre- to extend the economic life of the operations, providing a significant stake
feasibility work for a new processing complex to 2033. in the thermal coal export and domestic
plant and export load out system markets, with exposure to some
Xstrata is planning the following 20 million tonnes of annual production
expansionary projects to commence and immediate access to cash flows. In
in 2006: addition, ARM Coal will hold a majority
■ the development of the 51% interest in the Goedgevonden
Rolleston dragline Goedgevonden Mine; Project, through a joint venture with
Xstrata. As the majority shareholder of empowerment (BEE) exporters, which is lead to fatalities at the South African
the Goedgevonden Project, ARM Coal consistent with the current Quattro operations. Best practice and expertise is
will apply for additional export capacity arrangements. South Dunes Coal being shared with Xstrata’s high-
for the project in the revised Phase V Terminal, which will be two-thirds performing Australian operations, which
expansion of Richards Bay Coal controlled by historically disadvantaged have not sustained a fatality in over four
Terminal. In total, ARM Coal will have South Africans (HDSAs), will take up a years. In particular, the supervisor safety
an effective participation interest further 6 million tonnes per annum of leadership training programme and
in 26% of Xstrata’s South African the expansion. The remaining 10 million structured safety communication and
coal business. tonnes per annum of the expansion engagement between management,
capacity will be opened up for supervisors and workers are generating
Richards Bay Coal Terminal (RBCT) subscription to all with an emphasis on positive results. Xstrata Coal continues
announced an expansion from its empowerment to facilitate the to believe that operating a fatality-free
existing 72 million tonnes per annum to transformation of RBCT, in line with the business is achievable and is a key
92 million tonnes per annum. This continuing transformation of South objective for 2006. The total recordable
includes the original Phase 5 expansion, Africa’s coal industry under the injury frequency rate (TRIFR) remained
which has been under discussion for Mining Charter. stable at 16.4 while the lost time injury
some time. The total cost will be frequency rate improved to 3.9 from 4.9
approximately $167 million (ZAR1 Health, Safety, Environment and in 2004. Xstrata Coal will continue to
billion) and the expansion is expected to Community (HSEC) strive for an annual 20% reduction in
be completed by July 2008. The precise In 2005 all Xstrata Coal sites were injury frequency rates in 2006.
phasing of the incremental export independently audited against Xstrata’s
tonnage is subject to colliery and rail Health, Safety, Environment, and Xstrata Coal’s 30 managed operations
infrastructure developments and will be Community (HSEC) Policy and Standards. achieved its target of zero category 3,
determined once the projects that will Action plans are being implemented to 4 or 5 environmental incidents during
utilise the increase in terminal capacity address outcomes of the audits. 2005 and no fines or penalties were
have been identified. Initial estimates, issued. A number of Xstrata Coal’s
however, indicate that the full rail and Xstrata Coal’s primary objective is to be operations are situated in ecologically
mine capacity will only be available a zero-fatality business. Regrettably, this important areas. In March 2005, Xstrata
after 2009. target was not met and two employees Coal launched its Biodiversity Strategy to
lost their lives at South African undertake progressive rehabilitation of
Special provision will be made to operations in 2005. An extensive safety land disturbed by mining, to provide
encourage a new generation of coal programme was developed and sustainable lands post-mine closure and
exporters by earmarking up to 4 million implemented during late 2004 and early to facilitate biodiversity conservation.
tonnes per annum by April 2006 for 2005 to address fatal risks, hazards and, Mount Owen mine was recognised
emerging black economic importantly, behavioural reasons that for excellence in environmental
management and won the 2005 Hunter- for reduction of greenhouse gas 10%, which would result in HDSA
Central Rivers Coal Industry emissions from Xstrata Coal’s Australian control of 36% of Xstrata Coal
Environmental Award in November 2005 operations. South Africa.
for its industry-leading Biodiversity
Management Programme. Xstrata Coal in South Africa continued In 2005 Xstrata Coal has set aside
to make good progress with aligning $9.2 million to support a range of
Xstrata Coal is committed to working the business with the requirements of initiatives to support communities
with government and industry to the South African Mineral and associated with its South African and
research, develop and commercialise Petroleum Resources Development Act. Australian operations in the areas of
clean coal, methane utilisation and The business is well positioned in terms enterprise and job creation,
carbon sequestration projects. The of the principal transformational environment, education, social and
importance of continuing and expanding elements of the Mining Charter and community development, health,
such collaborative efforts in advancing Scorecard including human resource culture and art. In South Africa, Xstrata
near zero emissions technologies was a development and the representation of Coal has particularly focused on the
key focus of the Asia-Pacific Partnership historically disadvantaged South provision of HIV/AIDS testing,
for Clean Development and Climate Africans (HDSAs) in management, counselling and treatment programmes
Ministerial meetings held in January housing and accommodation, for employees and, more recently, for
2006. Xstrata Coal was a participant in procurement, as well as social and local communities, working in
the industry dialogue as part of this community development. partnership with service providers,
inaugural meeting of Ministers from NGOs and government.
Australia, China, India, Japan, the On 1 March 2006, Xstrata Coal and
Republic of Korea and the United States African Rainbow Minerals (ARM), In early 2005, Xstrata Coal in Australia
on addressing the challenges of announced the formation of a new launched a $964,000 (AU$1.3 million)
climate change. black-controlled coal company, ARM corporate social involvement
Coal. As a result of the transaction, programme to support a range of
In addition to its collaborative efforts, ARM Coal will have an immediate community initiatives in New South
Xstrata Coal has also lodged its effective interest in 26% of Xstrata’s Wales and Queensland, working with
cooperative agreement for the Australian South African coal operations. Xstrata NGOs, local and state government,
Government’s Greenhouse Challenge Coal has also agreed to grant ARM an universities and volunteer organisations.
Plus programme, which outlines plans option to increase its participation by
Underground miners at Arthur Taylor

13.00
Copper | Alumbrera | Argentina
Sonia Morales takes a lunch

break from driving her truck
in the Minera Alumbrera
open pit copper-gold mine
Operating and Financial Review | Copper
Markets and 17.5¢ per pound in April to $150 EBITDA increased by 61% from
In 2005, a number of supply disruptions per dry metric tonne and 15¢ per pound $369 million in 2004 to $594.4 million
coupled with continued strong Chinese by year end. in 2005. The main contributor to this
demand and critically low exchange result was the strong copper price,
stocks drove copper prices to record This decline was also reflected in the which added over $259 million to EBIT.
nominal highs. The LME copper price contract market, where terms eased This was partially offset by the negative
averaged 167¢ per pound over the year, from $113 per dry metric tonne and impact of currency movements which
an increase of 29% over the 11.3¢ per pound in the mid-year reduced earnings by $22 million and
corresponding period in 2004. contract talks, to $95 per dry metric by higher inflationary costs of
tonne and 9.5¢ per pound for 2006 $32 million. Revenue increased by 33%
Despite weak copper demand from the calendar year shipments. to $1,158.4 million.
major Western consuming regions,
strong Chinese consumption curtailed Production of refined copper is At the Ernest Henry operation, copper
growth in exchange inventories. From anticipated to increase in 2006 as head grade improved to 1.21% from
125,000 tonnes in January 2005, global increased smelting capacity in India and 1.14% in 2004. Further efficiency gains
exchange stocks finished the year at China addresses the surplus concentrate in the concentrator resulted in a mill
156,000 tonnes, representing 3.4 days inventory built up in 2005. The expected throughput increase of almost 6%.
of global consumption. increase in smelter demand is forecast to The combination of higher head grades,
exceed available concentrate, and pull increased throughputs and improved
In 2005, disruptions to global mine the concentrate market back into deficit metallurgical performance resulted in a
supply were coupled with unexpected over 2006. An expected recovery in 13% increase in copper-in-concentrate
shortfalls in smelter and refined Western demand and continuing strong production compared to 2004. Gold
production. While the concentrate demand from China suggest that production was 17% higher for similar
market remained in oversupply during exchange stocks are likely to remain well reasons. Material mined at Ernest Henry
the year, mine disruptions resulted in a below historical levels and that the was 19% higher compared to the prior
lower than anticipated concentrate market will remain sensitive to further year, as stripping ratios increased in
surplus. Global concentrate production supply-side disruptions. LME prices the mine.
increased by just 1.8% in 2005. Refined reached new record levels during the
cathode production increased by 5% in first months of 2006. In the Mount Isa copper operations,
2005 as refined copper supply remained ore production from the underground
in deficit throughout 2005. Operations mines increased by 4% on 2004, which
Australia resulted in a corresponding increase in
Spot mine/smelter treatment and The North Queensland division achieved contained metal produced of just over
refining charges (TC/RCs) declined from a strong increase in EBIT to $487.7 4%. Overall the North Queensland
a peak of $175 per dry metric tonne million in 2005, up by 77% on 2004. division achieved record copper-in-
Consolidated Financial and Operating Data: Copper Year ended Year ended
$m 31.12.05 31.12.04
Revenue 2,007.8 1,598.3

Australia 1,158.4 874.2
South America† 849.4 724.1
EBITDA 1,131.1 856.7
Australia (106.7) (93.5)
South America† (103.0) (118.9)
Australia – –
South America† (1.9) –
EBIT 919.5 644.3
Net assets 1,985.5 2,006.6
Australia 977.6 1,098.3
South America† 1,007.9 908.3
Australia 977.6 1,098.3
South America† 1,089.0 989.3
South America† 17.1% 24.6%
South America†§ 34.7 26.2
Expansionary§ 35.3 4.7
†100% consolidated figures
§Excludes Las Bambas project acquisition in August 2004
concentrate production in 2005 from million and EBITDA improved to

the Mount Isa and Ernest Henry $537 million, 10% higher than the
operations of 306,492 tonnes, an previous year. Concentrate sales
increase of 8% over 2004 production. increased by 3% over last year. Gold
production was lower compared to
Copper smelter production was almost 2004, due to lower gold grade ores.
7% lower than 2004, primarily as a
result of maintenance and improvement The operating performance at
activities undertaken in the converter Alumbrera was characterised by record
section of the smelter during the first full year mill throughputs and further
quarter, and limitations to furnace efficiency initiatives. Mill throughput
production resulting from gas off-take was 4% higher and concentrate
restrictions as a result of reduced production was 6% higher than the
availability from the Southern Cross acid corresponding period last year, as the
plant and maintenance requirements in benefits from the flotation expansion
the final quarter. These activities completed in 2004 were fully realised.
negatively offset the excellent outputs Total material mined was 3% higher
Walnut grafting at Pozo de Piedra in the achieved in the second and third than last year as a result of pit
province of Catamarca in Argentina quarters of 2005 as the benefits of the optimisation initiatives.
Underground miners attaching their self rescuers improvement initiatives were realised.
and cap lamps on the R62 platform at Mount Isa Consequentially, the Townsville copper Cash operating costs (C1) averaged
refinery produced 219,198 tonnes of 35.1¢ per pound of copper produced
saleable cathode, 8% lower than in (net of gold credits). The increase in C1
2004, due to the lower anode supply. cash costs compared to 2004 was
primarily due to lower gold head grades
North Queensland unit costs on a C1 and therefore gold production, higher
basis were 71.4¢ per pound compared smelting and refining charges, and
to 59.4¢ per pound in 2004. The unit higher sea freight costs. The Alumbrera
costs were impacted by increased business has also been subjected to
mining volumes at Ernest Henry, lower higher than inflation cost rises in diesel,
cathode production, higher treatment energy and consumables.
and refining costs and a stronger
Australian dollar. In common with other Developments
Australian producers, the Australian Australia
division has been subjected to higher During 2004 capital expenditure of
than inflation costs in diesel, energy and $25 million was approved to develop
consumables. the Northern 3500 underground copper
ore body at Mount Isa’s Enterprise
South America copper mine. The project will provide an
Alumbrera’s financial performance in additional high-grade mining zone in
2005 was positively influenced by the Enterprise, enabling the mine to
buoyant price environment and strong maintain its rated capacity of 3.5 million
copper production performance. tonnes per annum and improve the
Revenue increased by 17% from $724.1 utilisation of the existing hoisting and
million to $849.4 million. EBIT increased concentrator capacity. Capital work is
by 17% from $369 million to $432 progressing according to schedule and
on budget with capital expenditure of yielded 16 million tonnes or a further

AUD16 million to the end of 2005. Initial two years of underground ore reserves,
production is expected to commence in management has established a
late 2006. dedicated project team to evaluate the
potential to exploit the significant
Also in 2004, Xstrata Copper announced known resources contained within the
the approval of an AUD7.2 million 500 orebody and “halo” mineralisation
($5 million) leaching plant to recover surrounding the 1100 orebody. Pre-
around 2,500 tonnes per annum of feasibility work will be undertaken on
additional copper from the electrostatic both of these projects during 2006.
dust precipitator in the Mount Isa copper
smelter. The plant is scheduled for Exploration activity in north-west
commissioning in the first half of 2006. Queensland is continuing to focus on
leveraging value from Xstrata Copper’s
In November 2004, capital expenditure strong regional asset and infrastructure Environmental sampler Graham Milligan at
of AUD41 million ($29.3 million) was base in north Queensland, targeting Mount Isa environmental monitoring station
approved to expand the capacity of the mineralisation in the Mount

Mount Isa copper smelter and improve Isa/Cloncurry district.
its efficiency. The project comprises the
installation of a second rotary holding In March 2005, Xstrata Copper agreed
furnace, a copper slag cleaning furnace to invest AUD$6.6 million ($5 million)
and associated plant and equipment. in Australian-listed exploration company,
These initiatives are all designed to Universal Resources Limited. This
increase the smelter’s capacity from investment provides Xstrata Copper with
240,000 tonnes per annum to 280,000 the right to explore and options to
tonnes per annum and to obviate the acquire 51% of the Roseby copper
current need for slag re-treatment deposits in the Mount Isa Inlier in north-
through the smelter. This project is west Queensland. Of Xstrata Copper’s
progressing in the tender and investment in Universal, AUD4.4 million
construction phases and is scheduled for is being used to part-fund the Roseby
completion in mid-2006. In addition, Feasibility Project now scheduled for
in late 2005 a decision was made to completion in April 2006. The remaining
increase the copper smelter and refinery AUD2.2 million is funding an exploration
capacities to 300,000 tonnes per year to project undertaken by Xstrata Copper for
match the future copper-in-concentrate additional copper sulphide mineralisation
production from the Ernest Henry and within the Roseby tenement area during
Mount Isa copper mines. Additional 2005 and 2006. Known as the Sulphide
capital expenditure of approximately Extension Exploration Project (SEEP),
AUD32 million (US$23.7 million) in 2006 principal exploration targets are expected
will see anode production at the new to be beneath and adjacent to the native
rate before the end of 2006 with copper deposits within the Roseby
refinery production matching this from Feasibility Project. Exploration activities,
early 2007. largely comprising geophysics and
drilling, commenced during the second
In addition to the ore definition half of 2005 and are planned to continue
programme at Mount Isa that last year throughout 2006.
Operating Data: Copper Year ended Year ended

31.12.05 31.12.04
Australia – Ernest Henry

Material mined (t) 69,014,027 58,140,940
Ore mined (t) 11,500,928 11,166,159
Copper head grade (%) 1.21 1.14
Gold head grade (g/t) 0.60 0.56
Ore treated (t) 11,425,284 10,799,276
Concentrate produced (t) 442,407 392,045
Copper in concentrate (t) 129,010 114,007
Gold in concentrate (oz) 167,224 142,616
Australia – Mount Isa
Ore mined (t) 5,602,711 5,402,648
Ore treated (t)†† 5,638,312 5,481,698
Concentrate produced from ore (t) 693,948 654,102
Copper in concentrate from ore (t) 177,482 170,197
Anode copper (t) 220,263 236,252
Refined copper (t) 219,198 237,621
North Queensland cash cost (C1) post by-product credits (US¢/lb) 71.4 59.4
South America – Alumbrera†
Material mined (t) 114,925,223 111,641,485
Ore mined (t) 33,372,003 32,182,529
Gold head grade (%) 0.63 0.72
Ore treated (t) 36,607,985 35,353,521
Concentrate produced (t) 693,873 654,366
Copper in concentrate (t) 187,317 176,439
Gold in concentrate (oz) 517,776 583,568
Gold in doré (oz) 59,521 49,598
Total gold (oz) 577,298 633,166
Cash cost (C1) – post by-product credits (US¢/lb) 35.1 6.0
Total copper in concentrate produced from ore (t) 493,809 460,643
Total gold in concentrate produced from ore (t) 685,001 726,184
†100% consolidated figures

††Includes mined ore only and excludes impact of reprocessed slag
Sales volumes: Copper Year ended Year ended

31.12.05 31.12.04
Australia – North Queensland

Refined copper (t) 221,317 241,790
Copper in concentrate (t) (payable metal) 61,886 43,245
Other products (t) (payable metal) 8,528 –
Third party sourced (t) (payable metal) – 181
Total copper (t) (payable metal) 291,731 285,216
Gold in concentrate and slimes (oz) (payable metal) 159,097 148,659
South America – Alumbrera†
Copper in concentrate (t) (payable metal) 184,001 179,361
Gold in concentrate (oz) (payable metal) 507,742 597,262
Gold in doré (oz) (payable metal) 57,298 45,270
Total gold (oz) (payable metal) 565,040 642,532
Total copper sales (t) 475,732 464,577

Total gold sales (t) 724,137 791,191
Average LME copper price ($/t) 3,684 2,866
Average LBM gold price ($/oz) 445 409
South America continued its Alumbrera district Sulfobamba. By year end, logging,
A further incremental expansion to the exploration programme independently sampling and assaying were complete
Alumbrera concentrator was approved of the Alumbrera Joint Venture work. with geological modelling and mineral
in June 2005 and is expected to Exploration drilling at the Filo Colorado resource estimation work well advanced.
increase mill throughputs by 8%, from prospect in Catamarca is expected to This work has enabled the publication of
37 million tonnes per annum to 40 commence in the first half of 2006, on an initial Mineral Resources Statement for
million tonnes per annum. The project, completion of access road construction. Las Bambas, which shows combined
which will cost $15.5 million, is Indicated and Inferred Resources across
scheduled for commissioning in Following the successful outcome in three mineralised systems of 300 million
December 2006. The expansion will August 2004 of the competitive tender tonnes at 1.1% copper with
further improve mill productivities and for the highly prospective Las Bambas supplementary molybdenum and gold
fully utilise the downstream capacity of exploration district in southern Peru, values. Included in these initial resources
the pipeline and filter plant and is a vigorous start was made in 2005 to are 84 million tonnes of skarn
progressing on time and on budget. the exploration programme required to mineralisation at 1.7% copper in Indicated
advance the project work. A substantial Resources at the Ferrobamba deposit.
Following the recent successes of camp was constructed at site, a
continual additions to the ore reserve workforce of around 300 employees These encouraging results have given
base at Alumbrera, with 120 million and contractors hired and drilling and sufficient confidence to double the size of
tonnes of reserves added over the past other contractors mobilised. last year’s programme for the current
two years, management has continued year, with 100,000 metres of drilling
with the in-pit resource definition During the year, 56,000 metres of planned to establish the depth and lateral
programme into 2006, with the diamond drilling was completed at extensions to the known main zones and
objective of further extending the ore Las Bambas, focused on three major to commence exploration work in
reserve base at the mine during the known zones of copper mineralisation, additional mineralised zones in the Las
year. In addition, Xstrata Copper has at Ferrobamba, Chalcobamba and Bambas district.
Philippines standards of health, safety, demonstrated significant improvements

Xstrata holds an option to acquire environmental and community across its operations during the year.
62.5% of the Tampakan copper-gold performance. Xstrata Copper is a
deposit in the Philippines. In April 2005, signatory to the Minerals Council of Tragically, a fatality occurred at the Las
agreement was reached with the Australia’s ‘Enduring Value’ framework Bambas exploration project in Peru early
current project owner, Indophil for sustainable development and in line in 2005 with the death of Mr. Elmer
Resources, to accelerate the with this commitment, both the north Cordoba, caused by a fall.
development and completion of a Queensland and Alumbrera divisions
project pre-feasibility study by produced a 2004 Sustainability Report. Looking ahead, further safety
September 2006. Pre-feasibility study During 2006, every Xstrata Copper site performance improvements are expected
activities continue according to the will produce a 2005 site-specific in 2006 following the implementation of
agreed programme, with the sustainability report. recommendations from the Xstrata plc
publication in November 2005 of a new HSEC Assurance Audits conducted at the
Mineral Resource estimate totalling In relation to safety performance across copper operations during 2005. The
1,100 million tonnes at 0.73% copper the businesses, a strong leadership and ongoing implementation of behavioural
and 0.29 grams per tonne gold at a organisational focus has helped Xstrata safety systems will also facilitate further
cut-off grade of 0.4% copper. During Copper to continue its dramatic improvements in safety awareness and
2006 the focus of Xstrata’s activities will improvement in safety performance. performances.
be to support Indophil’s work The total recordable injury frequency
programme and to evaluate the project rate (TRIFR) was almost halved during A strong culture of environmental
in sufficient detail to enable a decision the course of the year from 24 in 2004 compliance within Xstrata Copper was
regarding the exercise of the option in to 12.9 in 2005. The lost time injury evidenced by the fact that no fines or
the second half of the year. frequency rate (LTIFR) also continued to environmental penalties were recorded
improve from 3.0 in 2004 to 2.5 in during the year and the number of
Health, Safety, Environment and 2005. Minera Alumbrera continued to environmental incidents decreased by
Community (HSEC) set the benchmark for safety 19% in total.
Xstrata Copper has in place policies and performance across the operating
procedures to ensure the highest divisions, although North Queensland
Ramón Chile, overlooking Minera Alumbrera’s

open pit
Ernest Henry mine concentrator at dusk Sally Kapernick with student Madison Smith at Cloncurry
State School. The Xstrata Community Partnership Program
in north Queensland provided support to enable computer
cabling to reach all classrooms
At Alumbrera, during 2005 ISO 14001 Federal Government’s Greenhouse operating in Queensland (copper, zinc
accreditation was attained at the port, Challenge Plus programme, with the and coal).
filter plant and concentrate pipeline associated formal commitments to
facilities. Further work was also regular auditing of greenhouse gas In Argentina, Minera Alumbrera
progressed on biodiversity and emissions and the identification and continued to support local communities
tailings/waste rock capping studies. implementation of greenhouse gas with an annual commitment of
reduction initiatives. $1 million across an extensive set
Xstrata Copper is targeting an increase of programmes focusing on health,
from 80% to 95% capture of sulphur In the area of community relations, education and sustainable development.
dioxide emissions from the Mount Isa Xstrata Copper continued its strong These programmes aim to improve the
copper smelter. Commencing in 2006, commitment to engagement and co- quality of life in local communities
the programme includes installing operation with its host communities through improved literacy skills,
copper smelter converter hoods to and key stakeholders. Following provision of educational materials for
capture fugitive emissions, using extensive community consultation, over 200 primary and secondary
software to identify air entry points into Xstrata Copper developed and launched schools, provision of improved health
the copper smelter, resulting in greater an AUD4 million Xstrata Community services to 90 regional medical posts
process control, improved acid plant Partnership Programme in North and health centres and the promotion
efficiency and improving co-ordination Queensland. Commencing in 2005, of sustainable development through
between copper smelter and acid plant the programme consists of 34 18 diverse agricultural programmes
operations. partnerships with government and with local farmers. During the year,
community organisations, focusing on the Alumbrera social initiatives were
The Townsville copper refinery was health and education. The programme significantly extended to include a
successfully nominated as one of the has been further extended in 2006 to $3 million commitment over four years
sites to trial the implementation of the include additional initiatives in North to specified health and education
Australian Federal Government’s Energy Queensland. It will also comprise a infrastructure works in Catamarca, and
Efficiency Opportunity programme. commitment of AUD2.5 million over $3 million over three years for identified
three years to social welfare, health health infrastructure in Tucuman, in
In 2006, Xstrata Copper will also and education initiatives on behalf of both cases through partnerships with
become a signatory to the Australian Xstrata’s three commodity businesses the respective provincial governments.
A range of social initiatives were As part of Xstrata Copper’s acquisition

implemented at the Las Bambas project of the Las Bambas project in August
in southern Peru during 2005, as 2004, $45.5 million was paid into a
exploration activities commenced. community trust or fideicomiso social to
Priority areas for Xstrata Copper’s be used for social development projects
community relations team during the in the Grau and Cotabambas provinces.
year included relationship building and The trust is managed independently of
awareness workshops with local Xstrata by local Mayors and
communities, commencement of Proinversion, the Peruvian Government’s
capacity building programmes to agency for the promotion of inward
improve the local skills base for project- investment, with Xstrata retaining one
related work, and partnering with local seat on the managing committee.
communities, NGOs, service providers
and government organisations to During the year, Xstrata formed an
commence sustainable, specific local Independent Advisory Group (IAG) to
projects targeted to improve nutrition help ensure that the Las Bambas project
levels within the communities. These manages the complex social and
projects include guinea pig breeding, environmental issues associated with
trout farming, hydroponics and mining operations in a socially
improved irrigation. acceptable way. The IAG comprises
people widely experienced in managing
The Las Bambas corporate social these issues in developing countries and
involvement programme currently under will meet at least twice a year to
development will commit $1 million per provide recommendations and advice
annum over the next three years to Xstrata.
towards sustainable agribusiness and
tourism projects in the area. It will also
include a skills training programme for
members of the local communities.
EBIT variances: Copper $m
EBIT 31.12.04 644.3

Sales price* 444.3
Volumes (31.4)
EBIT 31.12.05 919.5
11.00
Zinc | Northfleet | England
Ian Ramsey taps the furnace

in the silver plant at Northfleet
Operating and Financial Review | Zinc
Markets Strong market fundamentals drove As a result, zinc stocks are expected
Zinc prices up, particularly in the second half to continue to be drawn down,
The refined zinc market was again in of the year, rising by 51% to finish the supporting strengthened prices.
supply deficit in 2005 by around year at $1,915 per tonne. The average
500,000 tonnes, as strong growth in LME zinc price increased by 32% in Lead
China drove a 3.6% increase in global 2005 to $1,382 per tonne, up from Global consumption of refined lead rose
demand for refined zinc to 10.7 million $1,048 per tonne in the previous year. by over 4% to 7.4 million tonnes in
tonnes. This was reflected in a 2005. China remains a significant and
drawdown of 235,000 tonnes of LME Global zinc mine production in 2005 growing influence in the global lead
stocks and 265,000 tonnes of stocks increased by 3% to 9.9 million tonnes. market, where lead usage has risen
held elsewhere during the year. LME Mine output increased mainly in China, strongly in recent years, driven by
stocks fell by 37% to 394,125 tonnes India, Morocco, Sweden and Australia surging battery production due to
at the end of the year, the lowest level while it fell in Canada and Mexico. The the country’s rapidly expanding
recorded since mid 2001. concentrates market remained tight automobile sector.
during the year, resulting in a further
Domestic consumption in China drop in average negotiated treatment Global production of refined lead
continued to grow strongly, reflecting charges, which fell from $141 per increased by 5% to 7.2 million tonnes
strong economic growth and a surge in tonne in 2004 to $126 per tonne in in 2005; around half of this amount
new galvanizing capacity due to 2005. This tightness in the supply of came from secondary production,
booming demand from the automotive zinc concentrate is anticipated to mainly from battery recycling. In China,
and home appliance sectors, as well as continue throughout 2006 and possibly primary lead production increased by
from construction and infrastructure into 2007. 16% while secondary production
investment. increased by 9%.
Zinc supply is expected to remain in
While demand continued to grow, deficit throughout 2006 and potentially As a result, the refined lead market was
global zinc metal production remained into 2007 as commissioning of new in supply deficit in 2005 with lead
relatively flat at 10.2 million tonnes in mines is not expected to have a stocks at LME warehouses remaining at
2005, as increases in output in China, significant effect before 2008. Refined very low levels during the period. At the
India and Kazakhstan were largely zinc production should remain end of 2005, LME stocks were at
balanced by lower production in constrained by the acute tightness in 43,625 tonnes, representing less than
Canada, Peru, Belgium, Norway and the concentrate market while one week of global consumption.
Russia, smelting capacity reduction in expansions in Asian galvanising
France and plant closures in Italy, Spain, production capacity should underpin
and Germany. strong and steady demand growth.
Financial and Operating Data: Zinc Year ended Year ended

$m 31.12.05 31.12.04
Revenue 1,448.9 1,165.3

Zinc lead Australia 240.3 250.8
Zinc Europe 950.9 759.0
Lead Europe 257.7 155.5
EBITDA 303.1 145.5
Zinc lead Australia (28.5) (32.1)
Zinc Europe (31.8) (30.0)
Lead Europe (4.1) (4.3)
EBIT 238.7 79.1
Net assets 1,183.0 1,379.4
Europe 957.8 1,031.5
Europe 961.5 1,034.9
Australia 3.8% 0.8%
Europe 5.7% 4.5%
Australia 2.8% 4.7%
Europe 11.7% 14.1%
Europe 14.0% 7.0%
Australia 79.3 60.6
Europe 41.7 34.7

During the year the cash price for lead be a dominant force in consumption increase in production both in George
traded between $824 and a high of and production. Exports of refined lead Fisher Mine and in Mount Isa Lead
$1,156 per tonne to finish the year at from China remained at similar levels to Mine, resulted in a reduction of 18% in
$1,100 per tonne. The average price in the year before but in the future are Mount Isa Mines and Concentrator unit
2005 was $976 per tonne, 10% higher expected to show a declining trend as operating costs compared with 2004.
than $886 per tonne the year before. domestic demand continues to grow.
Backwardation was again a key feature Lead stocks should continue to remain Ore throughput at the Mount Isa zinc
of trading throughout the year, at very low levels and consequently the operations increased to 4.4 million
reflecting the tight physical market. market is expected to remain fairly tonnes, up by 37% compared to 2004.
tight throughout 2006, supporting George Fisher produced 2.6 million
The lead market is expected to be lead prices. tonnes of ore for the full year, 7%
largely balanced in 2006 with global higher than 2004. In particular, the
lead consumption anticipated to Operations second half of the year saw significant
continue to grow, but at a lower rate Zinc Lead Australia production increases as a result of
than in 2005. Battery demand is The transformation programme put in better mine planning, renewal of
anticipated to continue to increase place at Xstrata Zinc’s operations at mining equipment and improved
while non-battery uses for lead are Mount Isa in 2004 resulted in improved geotechnical control of stoping. A new
expected to follow the current performance and strong growth from pastefill plant was commissioned in
downward trend. China will continue to these operations during 2005. EBIT June 2005, achieving an increase in the
from the Australian zinc-lead operations regional ground stability and allowing
increased sharply to $97 million in better ore recoveries. Ore production is
2005, up from $12 million the previous expected to increase further in 2006
year, driven by higher sales prices for following improvements in the ore
both zinc and lead and improved hoisting capacity.
production, which more than offset the
negative impact of a stronger Australian The Mount Isa Lead Mine produced
Black Star open cut mine at Mount Isa:
dollar. In 2005 several actions were 0.8 million tonnes in 2005, 9% higher
Environmental advisor Anne Moore checks levels carried out in order to reduce the than 2004. Operations at the Mount Isa
of chemicals added to water to suppress dust operating costs in the Mount Isa Lead Mine ceased on 31 December
and decrease water usage operations. These, together with the 2005 due to depletion of reserves, after
Finished zinc product at Nordenham start up of Black Star Open Cut and the operating for more than 80 years.
Production Data: Zinc Year ended Year ended

31.12.05 31.12.04
Europe – San Juan de Nieva

Zinc metal (t) 501,413 491,720
Europe – Nordenham
Zinc metal (t) 147,494 154,446
Europe – Northfleet
Mount Isa sourced lead (t) 161,350 115,910
Other lead (t) – 10,028
Total lead (t) 161,350 125,938
Mount Isa refined silver (koz) 11,859 8,752
Other silver (koz) – 224
Total silver (koz) 11,859 8,976
Ore mined (t) 4,775,967 3,147,971
Zinc head grade (%) 7.0 7.5
Lead head grade (%) 4.7 4.7
Silver head grade (g/t) 111.9 108.9
Ore treated (t) 4,355,765 3,181,527
Zinc in concentrate (t) 231,167 191,433
Lead in lead/silver bullion (t) 159,557 139,538
Lead in purchased concentrate (t) 26,596 37,281
Silver in crude lead (koz) 11,362 10,581
Silver in purchased concentrate (koz) 4,034 5,442
Australia – McArthur River *
Ore mined (t) 1,828,373 1,142,432
Zinc head grade (%) 11.9 12.7
Lead head grade (%) 4.9 5.5
Ore treated (t) 1,676,535 1,184,822
Zinc in concentrate (t) 153,644 120,465
Lead in concentrate (t) 34,483 26,212
Silver in concentrate (koz) 1,390 1,077
Average LME zinc price ($/t) 1,382 1,048
Average LME lead price ($/t) 976 886
Average LBM silver price ($/oz) 7.31 6.69

*From 1 July 2005, MRM results are included at 100%, due to Xstrata’s acquisition of the remaining 25% of McArthur River in the second half of 2005.
Jesus Angel Barros Abarno at the melting and

casting plant at San Juan de Nieva
Cell house at San Juan de Nieva
Improved ore production from both Crude lead production of 160,117 the McArthur River Joint Venture from
George Fisher and the Mount Isa Lead tonnes represents an increase of 14% its joint venture partner, ANT Minerals
Mine during the year, together with over 2004. Anticipated further Pty Ltd. As a result of the transaction,
additional ore produced from the new production increases in the second half MRM is 100% owned by Xstrata.
Black Star zinc-lead open cut mine, of 2005 were hampered by a delay to
resulted in significant improvements in the blast furnace cooling water system Zinc Europe
throughput in both the zinc concentrator upgrade. The upgrade is due to be The profitability of the European zinc
and the lead smelter in 2005. completed in the first half of 2006 and operations also improved strongly during
will increase smelter production to 2005, with EBIT rising by 115% to
The new Black Star mine produced a 170,000 tonnes per annum. $124 million, again driven by higher
total of 1.4 million tonnes of ore during sales prices for zinc and a strong cost
the year, following its commissioning on McArthur River Mine (MRM) performance, particularly at San Juan de
time and on budget in February 2005. underground mining operations were Nieva smelter in Spain, the largest and
Ore production is anticipated to increase scaled down significantly at the most efficient electrolytic zinc plant in
substantially from this low cost operation beginning of October as open pit mining the world.
in 2006. commenced at the test pit. Production
from the mine increased by 20% over In 2005, production at San Juan smelter
Improvements in operational and the previous year, although the head exceeded half a million tonnes of melted
maintenance practices, together with grade declined from 12.7% in 2004 zinc for the first time. The smelter
increased ore feed, resulted in a 23% to 11.9% zinc in 2005, due to the produced 482,052 tonnes of saleable
rise in zinc concentrate production to depletion of the number 2 orebody, zinc, 9,608 tonnes more than the
457,122 tonnes, while lead concentrate the mining of bulk stopes and open pit previous year and 692,408 tonnes of
production improved by 29% over 2004 tonnes with lower head grades during saleable sulphuric acid.
production to 277,753 tonnes. the last quarter. As a result, zinc in bulk
concentrate decreased by 4% compared The Arnao plant produced 16,142 tonnes
Lead smelter production increased in line to the previous year to 153,644 tonnes. of zinc oxide and the Hinojedo roaster
with additional feed available and an produced 29,577 tonnes of liquid sulphur
increase in sinter plant utilisation due to During the second half of 2005, Xstrata dioxide. As a result of improvements in
a number of reliability improvements. acquired the remaining 25% interest in the operational efficiency of the roasting
plants, a record of 896,335 tonnes of Single streaming was maintained The Stage 2 North and the Stage 2 East
calcine has been achieved. throughout the year and cycle times Black Star cutbacks commenced in June
have continued to reduce, contributing and are at an advanced stage of
Production at the Nordenham plant in to improved efficiency at Northfleet. development. Stage 2 East will continue
Germany was slightly lower than in 2004 Recent monthly performance indicates a to be developed throughout 2006.
mainly as a result of a transformer failure plant capacity in excess of 180,000 Mining Stage 3 has commenced during
during the first half of the year. tonnes of lead per annum. 2005 and will deliver mainly overburden
waste during 2006 with ore production
Lead Europe Developments scheduled for early 2007. Relocation of
In 2005, lead production at Northfleet in Zinc Lead Australia the underground portal was completed
the United Kingdom increased by 28% An upgrade of the hoist is planned for in October 2005 and the next
to 161,350 tonnes due to higher George Fisher mine in 2006 to increase scheduled move is November 2006.
production from Mount Isa. Similarly, the annualised hoisting rate to 3.5
silver production rose by 32% to million tonnes per annum. The upgrade An independent ore feed system for the
11,859,000 ounces. As a result of is expected to be completed by July concentrator plant is due to be
improved production and higher sales 2006 with expenditure of around $3.6 completed in February 2006. This feed
prices, revenue improved by just over million, thereby removing the most system will replace the existing crushing
$100 million to $258 million in 2005 significant factor in restricting mine system to provide evenly blended ore
and EBIT rose by 84% to $18 million. production during 2005. feed, a significant reduction of
Sales volumes: Zinc Year ended Year ended

31.12.05 31.12.04
Europe – San Juan de Nieva

Refined zinc (t) 454,593 456,560
Toll-treated zinc (t) 23,889 24,612
Total zinc (t) 478,482 481,172
Europe – Nordenham
Refined zinc (t) 149,290 147,802
Europe – Northfleet
Refined lead (t) 148,912 193,619
Refined silver (koz) 12,089 10,799
Zinc in concentrate (t) third party sales (payable metal) 129,507 145,192
Zinc in concentrate (t) inter-company sales (payable metal) 65,649 8,199
Total zinc (t) (payable metal) 195,156 153,391
Lead in concentrate (t) third party sales (payable metal) 7,876 251
Lead in bullion (t) inter-company sales (payable metal) 159,907 146,531
Total lead (t) (payable metal) 167,783 146,782
Silver in concentrate (koz) third party sales (payable metal) 799 8,136
Silver in bullion (koz) inter-company sales (payable metal) 11,295 5,051
Total silver (koz) (payable metal) 12,094 13,187
Australia – McArthur River*
Zinc in concentrate (t) third party sales (payable metal) 122,317 103,851
Lead in concentrate (t) third party sales (payable metal) 23,552 17,365
Silver in concentrate (koz) third party sales (payable metal) 320 277
*From 1 July 2005, MRM results are included at 100%, due to Xstrata’s acquisition of the remaining 25% interest in the operation in the second half of 2005
New respirator helmet used at Northfleet maintenance costs, increased plant feed recommend that Xstrata’s proposal
Stockpile from the McArthur River open cut reliability and better labour utilization. should be approved. Following a review
A new zinc filter plant is due for by the Federal Government, the
completion in the first quarter of 2006 Northern Territory Mines Minister will
and is expected to reduce costs by make the final decision, expected in
minimising the loss of concentrate and April 2006.
will remove a potential throughput
bottleneck. McArthur River Mine’s current Mine
Management Plan, which has been
In August 2005, Xstrata Zinc approved by the Northern Territory
announced its intention to convert the Government’s Department of Business,
McArthur River zinc-lead mine (MRM) in Industry and Resource Development,
the Northern Territory, Australia, includes approval for a test pit on site
from an underground to an open cut to contribute ore for sampling and for
operation to enable production to processing. Approval has also been
continue at the mine. The switch of received to deepen the test pit to
mining method entails an investment of provide additional ore in the near term.
AUD66 million over two years and
requires government approval. Xstrata The McArthur River ore body remains
has lodged a full Environmental Impact one of the largest known deposits of
Statement (EIS) with the Northern zinc and lead in the world. The
Territory government which has been development of an open cut mine at
available for public review. Xstrata Zinc McArthur River would enable Xstrata to
subsequently submitted a continue operations at the site and
supplementary EIS in December 2005, retain the option to develop MRM as a
in response to submissions received source of zinc feed for a future zinc
as part of the consultation process. refinery using the Group’s Albion
In February 2006, the Northern Territory process technology. This would
Environment Minister declined to significantly improve the profitability of
EBIT variances: Zinc $m
EBIT 31.12.04 79.1

Sales price* 134.1
Volumes 11.5
Unit cost – real 48.3
Other income and expenses 3.2
Corporate social involvement 0.8
EBIT 31.12.05 238.7
mining operations at MRM. Given the 52%. This was achieved through quarry controlled by local authorities
power requirements associated with continuous improvement efficiency gains in Spain, using jarofix to return the
zinc refineries, the MRM site has been and with virtually no capital expenditure. land to its original landscape;
ruled out as a possible location for an ■ reduction of raw water
Albion plant. Other sites continue to be Development projects have started in consumption in Nordenham,
assessed. the Northfleet silver refinery to reduce Germany;
costs and increase efficiency. These will ■ completion of the environmental
Zinc Lead Europe continue throughout 2006 and will be impact assessment and
The San Juan de Nieva smelter has the main focus of development work enhancement of the biodiversity
focused on process improvements to along with a programme which will conservation plan at McArthur River
improve recoveries from lower grade concentrate on reducing boundary lead mine in Australia;
zinc concentrates. Construction of a emissions, developing a strategy to ■ development of the George Fisher
flotation plant at the San Juan de Nieva move towards total site water treatment ultra-filtration plant at Mount Isa;
operation to recover silver concentrate and meeting all ongoing commitments and
is on schedule, with first silver under EU IPPC legislation. ■ upgrading of the stack dust
concentrate production expected in the continuous monitoring system at
second half of 2006. Health, Safety, Environment and Northfleet in the UK.
Community (HSEC)
Despite continuing high energy prices in All Xstrata Zinc operations were No category 4 or 5 environmental
Germany, the Nordenham plant has independently audited against Xstrata’s incidents occurred at Xstrata
secured a competitive offer for electric HSEC policy and 17 HSEC management Zinc operations in 2005 and no
power which, together with a reduction standards during 2005 and audit environmental fines or penalties
in grid charges due to new German recommendations are being integrated were issued.
energy legislation, will contain the cost into 2006 business plans.
of electricity in 2006. Xstrata Zinc is committed to remaining
Key environmental initiatives in 2005 a fatality-free business and, until 2005,
In Northfleet, single streaming cycle included: had not sustained a fatality since the
times reduced to 11.3 hours average for ■ commencement of phase two of inception of Xstrata plc in 2002. This
a month a year on year reduction of the operation and rehabilitation of a was not the case in 2005, when one
contractor was fatally injured during operations. Currently three out of seven Territory Government to provide training
demolition work at the Hinojedo sites are certified. McArthur River mine subsidies and youth programmes for
operation in Spain. Findings from the is implementing an Environmental indigenous people, sponsorship of a
investigation into this deeply regrettable Management System that is expected to range of community cultural and
incident have been integrated into the be certified during 2007, dependent on educational events and infrastructure
business and all operations are working approval being received for operations development. In addition, consultation
to ensure that no further critical to continue at the mine. Xstrata Zinc continued with local communities
incidents occur. operations continue to upgrade regarding the proposed change of
knowledge of eco-systems in and mining method and MRM continued to
Safety initiatives significantly improved around all operations and in-depth work closely with the local Aboriginal
other safety performance measures, biodiversity studies are being Association.
with the lost time injury frequency rate undertaken at every Xstrata Zinc site.
and total recordable injury frequency In Europe, Xstrata’s Spanish operations
rate improving by 25% and 5% Community activities constituted a wide undertook a health awareness
respectively in 2005. These variety of contributions to social welfare campaign, focusing on the effects of
improvements are a result of intensive such as education, health and alcohol in collaboration with the local
training programmes that have been enterprise and job creation. Xstrata’s municipal authorities, the regional
implemented at all levels across all of zinc-lead operations at Mount Isa, in government health service and the
Xstrata Zinc’s operations. conjunction with the coal and copper NGO “Alcoholics Anonymous”. The
North Queensland operations, support Nordenham plant provided support for
Minimising atmospheric emissions at local communities through the Xstrata health initiatives and programmes to
Mount Isa is a key focus for 2006, in Community Partnership programme, support the long-term unemployed and
line with Xstrata’s ongoing commitment providing AUD4 million for community socially deprived, in addition to
to minimise the environmental impact initiatives over three years. At Mount educational initiatives at local schools.
of our operations. Isa, 122 new jobs were created in 2005. At Northfleet, support focused on the
GRAND project to develop young
During 2006 work will continue to McArthur River mine (MRM) undertook people’s education and opportunities
achieve Xstrata Zinc’s target of a wide range of community activities in and collaboration with a range of local
achieving ISO14001 certification for all 2005 including working with the organisations on development plans for
the region.
Jean-Baptiste Bertin, plant engineer at the
control room at Nordenham For 2006, Xstrata Zinc’s operations will
focus in particular on community
initiatives in the areas of education,
public health and young people’s needs.
18.15
Technology | Mount Isa | Australia
Kenward Chansa, ISASMELT trainee,

Maintenance Controller at Mopani
Copper Mines Plc Mufulira Smelter,
learns to operate plasma cutter
Xstrata Technology continued its strong The Centerra mill is the first application Project delivery during 2005 included the
performance in 2005, achieving EBIT of of ceramic media, co-developed with BHP Billiton Spence operation in Chile
$10 million on revenue of $77 million. Maggoteaux, a development which and Sumitomo Toyo in Japan. Both Toyo
Revenue in 2005 was 43% higher than enables the coarse grinding applications and First Quantum Minerals’ Kansanshi
standalone revenue of $44 million in 2004, of the IsaMill. The new Anglo Platinum operation in Zambia were successfully
driven by strong demand for Xstrata application is expected to demonstrate commissioned during the year. These
Technology products as high commodity a significant improvement in energy major projects were accompanied by a
prices stimulated greater project efficiency compared with conventional strengthening stream of smaller
development. Both revenue and earnings grinding. replacement plate orders worldwide.
accelerated in the second half of the year Increased research and development
as a number of large orders were placed ISAPROCESS™ at Copper Refineries in Townsville (with
for delivery in 2006. Demand for Xstrata The proven operational benefits of several key customers) is expected to
Technology’s products is anticipated to Xstrata’s ISA PROCESS refining bring new innovations to the market
remain strong throughout 2006. technology were recognised by a during 2007.
number of major producers, resulting in
ISAMILL™ a rush of orders in the second half of ISAPROCESS continues to provide a high
IsaMill is rapidly emerging as a new, the year, including the Saganoseki and quality, reliable and low overall cost
highly efficient, grinding technology. Tamano projects in Japan, Nkana Cobalt tankhouse solution, due to its
The potential was confirmed in 2005 in Africa, Pasar in the Philippines and combination of long life and high energy
with the commissioning of an M10,000 Piedras Verdes in Mexico. These orders efficiency and the vast tankhouse
mill for Centerra Gold at Kumtor, and will be completed in 2006. Orders for expertise available to clients.
sales of M10,000 mills to Phelps Dodge 2007 are also building quickly.
Corporation and Anglo Platinum.
Operating and Financial Review | Technology
Financial and Operating Data: Technology Year ended Year ended

$m 31.12.05 31.12.04
Revenue 77.2 52.4

EBITDA 13.5 19.2
EBIT 9.8 15.5
Employee turnover 6.0% 3.7%
*Includes Townsville port operations. From 1 January 2005, Townsville port operations are reported as part of Xstrata Copper
ISASMELT™ The Mopani Copper Mines smelter in JAMESON CELL™

Two new ISASMELT™ smelters were Zambia is nearing completion and The Jameson Cell is a high intensity
commissioned, and engineering for two training of Mopani operators at Mount flotation device, which offers low cost,
further smelters was completed during Isa is complete – a key part of the highly efficient flotation capacity.
2005. The Vedanta copper ISASMELT™ successful technology transfer. The It completed its most successful year
in India has set new records since start- huge Southern Copper Ilo smelter in ever in 2005, with strong orders,
up in May, reaching design capacity Peru is under construction and is particularly from coal customers.
within two months of first feed and the expected to start operation in Further development of the product
CYMG lead smelter in China is August 2006. and new markets are expected to
approaching design capacity. The expand the range of applications of the
CYMG plant employs a new variation The outlook for future contracts cell.
of the technology, with lead metal remains good, with feasibility studies
production in the ISASMELT™ and lead carried out for plants in Australia, Albion Process
slag reduction in a blast furnace. South America, Asia and Europe during During 2005, Xstrata Technology,
2005. Development work continued, together with co-developer Highlands
with ongoing technical interchange Pacific, formed a partnership with Core
with existing users – a key feature of Resources to market the Albion Process
Hail Creek Jameson Cell the Xstrata Technology operating atmospheric leach technology
model. commercially. Xstrata and Highland
Pacific retain ownership of intellectual
ISASMELT™ is one of the fastest property. The first Albion Process
growing smelting technologies in the Technology licence was issued to
world – from its first copper installation EnviroGold Ltd in December 2005 to
in 1992, this technology will be used retreat tailings material at
for over 10% of global copper smelter the Las Lagunas project in the
production by the end of 2006. This Dominican Republic.
growth has been driven by the high
efficiency and low capital cost of the
technology, and in particular is due to
its record of successful technical
transfer, leading to rapid plant start ups
and ongoing improvements.
Group Information
Production data
Annual
production
Capacity 100% 100%
(Full plant/ Production Production Accounting
Name of Operation Ownership mine basis) 2005 2004 Status Location
Alloys
Wonderkop plant 79.5% 362kt 333kt 311kt Joint venture Marikana South Africa
Gemini plant 50% 191kt 4kt 173kt Joint venture Marikana South Africa
Rustenburg plant 79.5% 430kt 383kt 393kt Joint venture Rustenburg South Africa
Lydenburg plant 69.6% 396kt 374kt 393kt Joint venture Lydenburg South Africa
Boshoek plant 79.5% 240kt 196kt 218kt Joint venture Boshoek South Africa
Kroondal mine 79.5% 1,920kt 1,422kt 1,571kt Joint venture Rustenburg South Africa
Kroondal opencast mine 79.5% 540kt 441kt 563kt Joint venture Rustenburg South Africa
Waterval mine 79.5% 480kt 445kt 405kt Joint venture Rustenburg South Africa
Thorncliffe mine 79.5% 1,440kt 1,210kt 1,274kt Joint venture Steelpoort South Africa
Horizon mine 79.5% 180kt 52kt 131kt Joint venture Pilansberg South Africa
Chrome Eden mine 79.5% 96kt – 23kt Joint venture Pilansberg South Africa
Boshoek opencast mine 79.5% 360kt 34kt 253kt Joint venture Boshoek South Africa
Rhovan V2O5 100% 23,300k lbs 20,166k lbs 19,923k lbs Subsidiary Brits
FeV 7,800k kg 4,592k kg 5,910k kg Subsidiary South Africa
Swazi Vanadium FeV 100% 2,400k kg 345k kg 1,150k kg Subsidiary Maloma Swaziland
Maloma mine 75% 540kt 272kt 683kt Subsidiary Maloma Swaziland
Char Technologies 100% 116kt 97kt 112kt Subsidiary Witbank South Africa
African Carbon Manufacturers 100% 147kt 123kt – Subsidiary Witbank South Africa
African Carbon Producers 100% 188kt 174kt – Subsidiary Witbank South Africa
African Carbon Union 74% 117kt 102kt – Subsidiary Witbank South Africa
Coal Australia
Cumnock 84% 1,100kt 1,091kt 1,000kt Subsidiary Hunter Valley
Liddell 67.5% 2,800kt 2,742kt 2,502kt Joint venture Hunter Valley
Macquarie Coal JV
– West Wallsend 80% 2,400kt 2,313kt 2,621kt Joint venture Newcastle
– Westside 80% 700kt 666kt 666kt Joint venture Newcastle
Mt Owen 100% 6,500kt 5,955kt 5,837kt Subsidiary Hunter Valley
Narama 50% 2,000kt 2,465kt 2,092kt Joint venture Hunter Valley
Oakbridge Group
– Baal Bone 74.1% 2,500kt 2,680kt 2,161kt Subsidiary Western Coal Fields
– Beltana 68.3% 4,500kt 4,936kt 4,021kt Joint venture Hunter Valley
– Bulga 68.3% 4,900kt 5,100kt 4,794kt Joint venture Hunter Valley
– South Bulga 68.3% – – 213kt Joint venture Hunter Valley
Closed H2 2004
Ulan
– Ulan Underground 90% 3,500kt 2,963kt 2,149kt Joint venture Western Coal Fields
– Ulan Opencast 90% 1,700kt 2,511kt 2,362kt Joint venture Western Coal Fields
Group Information
Annual
production
Capacity 100% 100%
United 95% 2,400kt 2,672kt 2,846kt Joint venture Hunter Valley

Cook 95% 600kt 178kt 372kt Subsidiary Bowen Basin
Oaky Creek 55% 8,700kt 6.761kt 7,526kt Joint venture Bowen Basin
Newlands
–Thermal 55% 8,400kt 7,973kt 8,090kt Joint venture Bowen Basin
– Coking 55% 500kt 410kt 408kt Joint venture
Collinsville
– Thermal 55% 3,600kt 3,138kt 3,916kt Joint venture Bowen Basin
– Coking 55% 1,700kt 1,390kt 1,529kt Joint venture
Rolleston 75% 8,000kt 1,011kt – Joint venture Bowen Basin
Coal South Africa
iMpunzi Division
– Phoenix 100% 1,000kt 1,009kt 1,661kt Subsidiary Witbank
– Tavistock 100% 1,800kt 2,044kt 1,881kt Subsidiary Witbank
Mpumalanga Division
– Spitzkop 100% 1,400kt 733kt 920kt Subsidiary Ermelo
– Tselentis 100% 1,500kt 1,943kt 1,897kt Subsidiary Breyten
Tavistock TESA JV
– ATC 50% 1,700kt 1,448kt 1,796kt Joint venture Witbank
– ATCOM 50% 2,400kt 2,148kt 2,352kt Joint venture Witbank
Tweefontein Division
– Boschmans 100% 1,800kt 2,152kt 1,939kt Subsidiary Witbank
– Goedgevonden 100% 400kt 956kt 1,097kt Subsidiary Witbank
– South Witbank 100% 2,000kt 1,855kt 1,766kt Subsidiary Witbank
– Waterpan 100% 500kt 504kt 814kt Subsidiary Witbank
– WitCons 100% 1,800kt 1,826kt 1,292kt Subsidiary Witbank
Mines operated by JV partners Witbank /
– Douglas/Middelburg 16% 25,500kt 22,988kt 23,888kt Joint venture Middelburg
Annual
production
Capacity 100% 100%
Copper
Mount Isa 100% 6.2mt ore 5.6mt 5.5mt Subsidiary North West
180kt Cu 177kt Cu 170kt Cu Queensland
in conc 220kt Cu 236kt Cu Australia
240kt Cu
in anode
Ernest Henry 100% 10.8mt ore 11.4mt 10.8mt Subsidiary North West
115kt Cu 129kt Cu 114kt Cu Queensland
in conc 167koz Au 143koz Au Australia
120koz Au
in conc
Townsville refinery 100% 280kt cathode 219kt 238kt Subsidiary North
Queensland
Australia
Alumbrera 50% 37mt ore 36.6mt 35.4mt Subsidiary Catamarca
190kt Cu 187kt Cu 176kt Cu Argentina
in conc 518koz Au 584koz Au
550koz Au 59koz Au 50koz Au
in conc
50koz Au
in dore
Zinc
San Juan de Nieva 100% 492kt Zn 501kt Zn 492kt Zn Subsidiary Asturias Spain
474kt 482kt 472kt Zn
saleable Zn saleable Zn
Hinojedo 100% 44kt calcine 45kt calcine 45kt calcine Subsidiary Cantabria Spain
29kt SO2 30kt SO2 29kt SO2
Arnao 100% 24kt semis Zn 16kt Zn 17kt Zn Subsidiary Asturias Spain
Nordenham 100% 145kt Zn 148kt Zn 154kt Zn Subsidiary Nordenham Germany
140kt 141kt 145kt
saleable Zn saleable Zn saleable Zn
Northfleet 100% 180Kt 161kt Pb 126kt Pb Subsidiary Northfleet
Primary Pb UK
Mount Isa 100% 5.1mt ore 4.4mt 3.2mt Subsidiary North West
250kt Zn 231kt Zn 191kt Zn Queensland
in conc 160kt Pb 140kt Pb Australia
170kt Pb 353t Ag 329t Ag
in bullion
300t Ag
in bullion
McArthur River 100% 1.7mt ore 1.7mt ore 1.5mt Subsidiary Northern Territory
175kt Zn 154kt Zn 160kt Zn Australia
in conc
Board of Directors
01 | Willy Strothotte, aged 61, is Chairman 05 | Paul Hazen, aged 64, joined the Board of framework for regulation of the UK financial
of Glencore International. From 1961 to 1978 Xstrata AG in May 2000, and was appointed a services industry, public private partnerships,
Mr. Strothotte held various positions with Director of Xstrata in February 2002. Mr. Hazen is procurement policy including the private finance
responsibility for international trading in metals a former Chairman and CEO of Wells Fargo and initiative and the Treasury's enterprises and
and minerals in Germany, Belgium and the USA. Company. Mr. Hazen retired in April 2001 as growth unit. Sir Steve is a Director of JPMorgan
In 1978, Mr. Strothotte joined Glencore Chairman after a 30-year career with the bank. Cazenove Holdings, Partnerships UK plc and The
International, taking up the position of Head of Mr. Hazen is currently Chairman of Accel-KKR Royal Bank of Scotland Group plc. Sir Steve was
Metals and Minerals in 1984. Mr. Strothotte was and of KKR Financial Corp. He also serves as appointed to the Board of Xstrata in February
appointed Chief Executive Officer of Glencore in Deputy Chairman and Lead Independent Director 2002 and is Chairman of the Audit Committee.
1993 and held the combined positions of of Vodafone Group Plc, Lead Independent
Chairman and Chief Executive Officer from 1994 Director of Safeway, Inc., and a Director of Willis 10 | Dr. Frederik Roux, aged 58, joined
until 2001, when the roles of Chairman and Group Holdings Ltd. Johannesburg Consolidated Investment Company
Chief Executive were split. Mr. Strothotte has been Limited in 1976, where he held positions in the
Chairman of Xstrata AG since 1994, and 06 | David Issroff, aged 40, joined the Board Finance, Base Metals, Gold and Platinum
Chairman of Xstrata since February 2002, and is of Xstrata AG in May 2000, and was appointed divisions. In 1990, he joined Gencor Limited
currently a director of Century Aluminium to the Board of Xstrata in February 2002. Mr. where he became Chairman of Alusaf and
Corporation and Minara Resources Limited. Issroff joined Glencore South Africa in 1989. In Executive Director responsible for Gencor Base
1992, he transferred to Glencore’s head office in Metals and Heavy Minerals. Since 1997, he has
02 | Mick Davis, aged 48, is the Chief Executive Switzerland with responsibility for the marketing pursued private business interests in game
of Xstrata. Mr Davis was appointed as Chief of ferroalloys. In 1997, he was appointed Head of ranching and safaris in South Africa. Dr Roux is
Executive of Xstrata AG in October 2001, and was the Ferroalloys Division at Glencore International. also Chairman of Impala Platinum Holdings
appointed to the Board of Xstrata in February Limited. Dr Roux was appointed to the Board of
2002. Previously, Mr. Davis was Chief Financial 07 | Robert MacDonnell, aged 68, joined Xstrata in February 2002.
Officer and an Executive Director of Billiton Plc, the Board of Xstrata AG in May 1997, and was
appointed in July 1997, and served as Executive appointed to the Board of Xstrata in February 11 | Ian Strachan, aged 62, is also a Director
Chairman of Ingwe Coal Corporation Limited from 2002. Prior to joining Kohlberg Kravis Roberts & of Reuters Group plc, Johnson Matthey plc, Rolls
1995. He joined Gencor Limited in early 1994 Co. in 1976, Mr. MacDonnell was a Management Royce plc and Transocean Inc. Mr. Strachan was
from Eskom, the South African electricity utility, Consultant at Arthur Andersen & Co. He Chairman of Instinet Group from 2003 to 2005,
where he was an Executive Director. subsequently formed his own firm, which Deputy Chairman of Invensys plc from 1999 to
specialised in small management buyouts. 2000, and he was Chief Executive of BTR plc
03 | David Rough, aged 55, was a Director of Mr. MacDonnell became the first non-founding from 1996 to 1999. Mr. Strachan joined Rio Tinto
Legal & General Group Plc before retiring from partner of KKR in 1982 and participated in plc (formerly RTZ plc) as CFO in 1987, and was
Legal & General in June 2002. As Group Director virtually all investment decisions until the firm Deputy Chief Executive from 1991 to 1995.
(Investments), Mr. Rough headed all aspects of expanded in the late 1980s. Mr. MacDonnell is Mr. Strachan was appointed to the Board of
fund management within Legal & General also currently a Director of Safeway, Inc. and US Xstrata at the Annual General Meeting held in
Investments. Mr. Rough is currently a director of Natural Resources, Inc. May 2003 and is the Chairman of the Health,
BBA Group plc, Emap plc, Land Securities plc, Safety, Environment and Community Committee.
Brown, Shipley & Co Ltd and Mithras Investment 08 | Trevor Reid, aged 45, is the Chief
Trust plc. Mr. Rough was appointed to the Board Financial Officer of Xstrata. Mr Reid joined 12 | Santiago Zaldumbide, aged 63, is an
of Xstrata in April 2002, is Deputy Chairman, Xstrata AG in January 2002, and was appointed Executive Director of Xstrata, Chief Executive of
the Senior Independent Director and Chairman of to the Board of Xstrata in February 2002. Prior to Xstrata Zinc and Executive Chairman of Asturiana
the Nominations Committee. joining Xstrata, he was Global Head of Resource de Zinc. Mr Zaldumbide was appointed to the
Banking at the Standard Bank Group. He joined Board of Xstrata in February 2002. He is a
04 | Ivan Glasenberg, aged 49, is Chief the Standard Bank Group in 1997 from Warrior previous Chief Executive Officer and Director of
Executive Officer of Glencore International, which International Limited, a corporate finance Union Explosivos Rio Tinto and of Petroleos del
he joined in 1984. Mr. Glasenberg was appointed boutique specialising in the minerals sector. Norte. In 1990, Petroleos del Norte became part
to the Board of Xstrata in February 2002. He of the Repsol Oil Group where Mr. Zaldumbide
worked in the coal department of Glencore in 09 | Sir Steve Robson CB, aged 62, retired was responsible for establishing the international
South Africa for three years and in Australia for as Second Permanent Secretary at HM Treasury in structure of the enlarged Repsol Oil Group.
two years. From 1989 to 1990, he managed January 2001. He had joined HM Treasury after In 1994 he was appointed Chief Executive Officer
Glencore International’s Hong Kong and Beijing leaving university. His early career included a of the Corporación Industrial de Banesto and in
offices. In 1991 he became Head of the Coal period as Private Secretary to the Chancellor of December 1997 Chairman and Chief Executive
Department and in 2002 Chief Executive Officer of the Exchequer and a two-year secondment to Officer of Asturiana de Zinc. Mr. Zaldumbide is
Glencore International. He is also currently a Investors in Industry plc (3i). From 1997 until his also a Director of Carburos Metálicos SA, and
Director of Minara Resources Limited. retirement, his responsibilities included the legal ThyssenKrupp SA.
01 02 03
04 05
06
07 08
10 11
09
12
Executive Management
Executive Committee Executive Management Xstrata Zinc

Mick Davis Xstrata Alloys Iñigo Abarca
Bill Barrett Chief Legal Counsel
Chief Executive
Managing Director, Vanadium Manuel Alvarez
Trevor Reid
Deon Dreyer General Manager Assistant to the Chief Executive
Chief Financial Officer Managing Director, Chrome Jaime Arias
Santiago Zaldumbide Deon du Preez General Manager Spanish Operations
Chief Executive Xstrata Zinc Executive Director, Sustainable Development Brian Hearne
Eric Ratshikhopha General Manager McArthur River Mining
Executive Director, Corporate Development Kevin Hendry
Shaun Usmar General Manager Mount Isa Zinc Lead Operations
Chief Financial Officer Juan León
Chief Financial Officer
Xstrata Coal Rainer Menge
General Manager German Operations
Garry Beck
General Manager Marketing, Pacific Emilio Tamargo
General Manager Business Development &
Mick Buffier
Peter Coates Research
Chief Operating Officer, New South Wales
Chief Executive Xstrata Coal Neil Wardle
Ian Cribb
General Manager Britannia Refined Metals
Chief Operating Officer, Queensland
Fred White
Mark Eames
General Manager Metallurgic Processing Mount Isa
General Manager, Commercial
Zinc Lead Operations
Peter Freyberg
Chief Operating Officer, South Africa
Jeff Gerard
Corporate
General Manager Business Strategy Brian Azzopardi
Group Controller
Murray Houston
General Manager Marketing, Atlantic Richard Elliston
Marc Gonsalves Company Secretary
Phil Jones
Executive General Manager Glenn Field
General Manager Human Resources
Corporate Affairs Head of Internal Audit and Risk
Peter McKenna
General Manager Engineering and Development Paul Jones
General Manager Health, Safety and Environment
Earl Melamed
Chief Financial Officer Andrew Latham
General Manager Corporate Development
Reinhold Schmidt
New Business Benny Levene
Chief Legal Counsel
Colin Whyte
General Manager Sustainable Development Thras Moraitis
General Manager Group Strategy and Development
Ian Wall
Peet Nienaber Xstrata Copper Group Treasurer
Chief Executive Xstrata Alloys Jon Evans
Jason Wilkins
General Manager Minera Alumbrera
Head of IT
Peter Forrestal
General Manager Project Development
Barry Grant
Chief Operating Officer North Queensland
Copper
Louis Irvine
Chief Financial Officer
Neal O’Connor
Charlie Sartain General Counsel
Chief Executive Xstrata Copper Alberto Olivero
General Manager Human Resources
Directors’ Report
Results and dividends

The Group profit for the year ended 31 December 2005 on ordinary activities after taxation and minority interests was US$1,706.4
million compared to US$1,052.9 million in the previous year. The Group consolidated income statement and other Group financial
information is produced on pages 4 to 120 of the Financial Statements 2005.
The Board recommends a final dividend of 25 US¢ per share amounting to US$149.9 million. The total 2005 dividend is
US$204.1 million or 34 US¢ per share (2004 US$150 million or 24 US¢ per share). The shareholders will be asked to approve
the dividend at the Annual General Meeting on 9 May 2006, for payment on 19 May 2006 to ordinary shareholders whose
names were on the register on 28 April 2006.
Principal activities
Xstrata plc is an international metals and mining company. The Group’s activities are managed through four major global Business
Units: Xstrata Alloys, Xstrata Coal, Xstrata Copper, and Xstrata Zinc, together with Xstrata Technology. Additional information on
the Group’s operations is provided on pages 36 to 78 of this report.
Review of the business, future developments and post balance sheet events
A review of the business and the future developments of the Group is presented in the Chairman’s Statement, Chief Executive’s
Report and the Operating and Financial Reviews on pages 4 to 78.
A full description of disposals, acquisitions and changes to Group companies undertaken during the year, including post-balance
sheet events, is included in the Financial Review on pages 32 to 34.
Exploration and research, development

The Group business units carry out exploration and research and development activities that are necessary to support and expand
their operations.
Financial instruments
The Group’s financial risk management objectives and policies are discussed on pages 28 to 30 of the Operating and Financial
Review and Note 39 to the financial statements.
Health, safety, environment and community (HSEC)

Xstrata is committed to the principles of sustainable development and to achieving the highest standards of health, safety and
environmental performance. The Group’s Business Principles set out an ethical framework for Xstrata’s global activities which are
supported by the Group’s HSEC, Risk Management and Corporate Social Involvement policies and HSEC management standards.
A comprehensive HSEC assurance and verification programme has been implemented across the global business in 2005. The Board
HSEC Committee was established in February 2005 to assist the Board to fulfil its HSEC role and obligations. Details of the HSEC
Committee are given on pages 100 and 101.
The General Manager, Health Safety and Environment reports to the Chief Executive and oversees the global implementation,
review and assurance of the relevant HSEC policies and standards and, along with the Executive General Manager Corporate
Affairs, manages the Group’s interface with stakeholders on health, safety, environmental and community issues. The 2005
Sustainability Report, which provides details of the Group’s economic, environmental and social performance as well as its
sustainability initiatives, will be available from Xstrata’s website (or as a hard copy on request) in April 2006. Further details of
Xstrata’s sustainability initiatives, including case studies and previous reports, are available from our website: www.xstrata.com.
Directors’ Report
Political and charitable donations

In accordance with Xstrata’s corporate social involvement (CSI) policy, no political donations were made in 2005. Xstrata’s corporate
social involvement expenditure supports initiatives that benefit the communities local to the Group’s operations in the areas of
health, education, sport and the arts, community development, job creation and enterprise. In 2005, Xstrata set aside $24.7 million
for CSI initiatives.
Employee policies and involvement

The Group’s policy is to communicate honestly with employees and encourage consultation between employees and management.
The Group’s Statement of Business Principles is available from our website and is published separately and distributed to every
employee and contractor in their native language. No form of workplace discrimination is tolerated.
Disabled employees
The Group gives full consideration to applications for employment from disabled persons, where the requirements of the job can
be adequately fulfilled by a handicapped or disabled person. Where existing employees become disabled, it is the Group’s policy
wherever practicable to provide continuing employment under normal terms and conditions and to provide training and career
development and promotion to disabled employees wherever appropriate.
Labour relations
The Group has approximately 24,000 employees worldwide including contractors. All employees are free to join a union of their
choice, but participation across the Group varies. In Australia, the predominant union membership for coal mining employees is
with the Construction, Forestry, Mining and Energy Union (CFMEU), the Colliery Officials Association (COA) and the Australian
Collieries Staff Association (ACSA); however, the collection of union membership statistics in this country is illegal. In South Africa,
about 58 percent of Xstrata Coal employees are represented by the National Union of Mineworkers and 65 percent of Xstrata
Alloys employees are union members. In Europe, around 50 percent of Xstrata Zinc employees are union members. Only 2%
of Xstrata Copper’s South American employees have union membership, although 44% are covered by collective agreements.
The Group strives to ensure and believes that all of the Group’s operations have, in general, good relations with their employees
and unions.
Employee share schemes

The Company has a policy of encouraging employees to acquire Xstrata plc shares and linking a significant element of employees’
variable reward to the performance of the Group. Executive directors and employees of the Company and its subsidiaries are
eligible to participate at the discretion of the Remuneration Committee in the Xstrata Long Term Incentive Plan (LTIP). The LTIP has
two elements i) a free contingent award of ordinary shares which vest in three years and ii) a share option to acquire ordinary
shares at the exercise price after three years. The vesting of awards and options depends upon the satisfaction of stipulated
performance conditions. Further details of the above and of other Company’s share schemes are set out in Note 37 to the Financial
Statements and in the Remuneration Report on pages 112 to 115.
Corporate governance
A report on corporate governance and compliance with the provisions of the Combined Code is set out on pages 91 to 101.
Going concern
The Directors believe, after making inquiries that they consider to be appropriate, that the Company has adequate resources to
continue in operational existence for the forseeable future. For this reason they continue to adopt the going concern basis in
preparing the financial statements.
Directors and their interests

The directors as at 31 December 2005 were:
Position
*denotes Retirement
independent First by rotation
Director director appointed Re-elected at AGM
Mick Davis Chief Executive 25 February 2002 6 May 2004

Ivan Glasenberg Non-Executive 25 February 2002 8 May 2003 Standing for
re-election
Paul Hazen Non-Executive* 25 February 2002 9 May 2005
David Issroff Non-Executive 25 February 2002 6 May 2004
Robert MacDonnell Non-Executive* 25 February 2002 8 May 2003 Standing for
re-election
Sir Steve Robson Non-Executive* 25 February 2002 6 May 2004
David Rough Deputy Chairman, 1 April 2002 6 May 2004
Senior Independent Director and
Non-Executive*
Trevor Reid Chief Financial Officer 25 February 2002 9 May 2005
Dr. Fred Roux Non-Executive* 25 February 2002 8 May 2003 Standing for
re-election
Ian Strachan Non-Executive* 8 May 2003 9 May 2005
Willy Strothotte Chairman and Non-Executive 25 February 2002 9 May 2005
Santiago Zaldumbide Executive 25 February 2002 8 May 2003 Standing for
re-election
In accordance with the Articles of Association, four directors will retire and offer themselves for re-election. Details of the
resolutions that will be put to the Annual General Meeting are given in the Notice to the Annual General Meeting. Further
details about the directors and their roles within the Group are given in the directors’ biographies on pages 82 and 83.
Directors’ Report
Details of interests in the share capital of the Company of those directors in office as at 31 December 2005 are given below. As of
the date of this report, there have been no changes. None of the shares were held non-beneficially. No director was interested in
the shares of any subsidiary company.
Ordinary Ordinary Ordinary Ordinary

shares held shares held shares held shares held
beneficially beneficially beneficially beneficially
as at as at as at as at
1 January 31 December 1 January 31 December
Name of Director 2005 2005 Name of Director 2005 2005
Executive Non-Executive
Mick Davis 146,380 146,380 Ivan Glasenberg – –
Trevor Reid 40,450 – Paul Hazen 357,320 357,320
Santiago Zaldumbide 60,705 15,706 David Issroff – –
Robert MacDonnell 595,920 595,920
Sir Steve Robson – –
David Rough 14,576 14,576
Dr. Fred Roux – –
Willy Strothotte – –
Ian Strachan 6,500 6,500
In addition to the above interests in shares, certain of the directors also have interests in the share capital of the Company in
the form of conditional rights to free shares and options to subscribe for shares. Details of these interests are disclosed in the
Remuneration Report on pages 112 to 115.
Share capital
Details of the authorised and issued share capital of the Company, including the rights pertaining to each share class, are set out
in Note 28 to the Financial Statements.
The ordinary issued share capital was increased on 23 March 2005 to 632,502,416 ordinary shares when the Directors issued and
allotted 1,000,000 new ordinary shares of US$0.50 shares each to K.B. (C.I.) Nominees Limited for the purposes of the Company’s
Employee Share Ownership Trust, an employees’ share scheme. The 1,000,000 new ordinary shares rank pari passu with the
existing ordinary shares, trade on the London Stock Exchange and were admitted to the Official List on 8 April 2005.
The ordinary issued share capital of the Company at the date of this report is 632,933,638 ordinary shares following the issue
of shares in connection with the Xstrata Capital Corporation A.V.V. US$600,000,000 3.95 per cent Guaranteed Convertible Bond
due 2010.
Under the Companies Act 1985 (the “Act”) the Board is not able to allot shares except with the general or specific authority of
the shareholders. An Ordinary Resolution will therefore be proposed at the forthcoming Annual General Meeting to authorise
the Directors of the Company in accordance with Section 80 of the Act to exercise all the powers of the Company to allot
relevant securities (within the meaning of Section 80(2) of the Act) of the Company up to an aggregate nominal amount of
US$105,488,939 (equivalent to 210,977,878 ordinary shares of US$0.50 each) (being the lesser of the Company’s authorised
but unissued share capital and one third of its issued capital).
This represents 33.33% of the issued ordinary share capital of the Company as of the date of this report. The authority extends
until the end of the next Annual General Meeting. The Board does not have any present intention of exercising this authority other
than for the purposes of the Company’s employee share schemes.
The Act provides that, when equity securities are being issued for cash, such securities must first be offered to existing shareholders
unless the Board is given a power to allot them without regard to that requirement. A Special Resolution will therefore be proposed
at the forthcoming Annual General Meeting to empower the Board to allot for cash, equity securities of a nominal amount not
exceeding US$15,823,340 (equivalent to 31,646,680 ordinary shares of US$0.50 each, representing 5% of the issued share capital)
without first offering such securities to existing ordinary shareholders. The authority extends until the end of the next Annual
General Meeting. Any issue of shares for cash will, however, still be subject to the requirements of the UK Listing Authority.
Major interests in shares

On 1 March 2006, the following major interests in the ordinary issued shares of US$0.50 each of the Company had been notified
to the Company in accordance with Sections 198 to 208 of the Act:
Name of shareholder Number of Ordinary shares of US$0.50 each % of Ordinary issued share capital
Credit Suisse First Boston Equities Nominees Limited 152,659,367 24.13*

Glencore International AG 101,040,400 15.97*
Batiss Investments Limited 29,450,976 4.66
*Pursuant to a capital management programme, as announced on 29 May 2003, entered into by Credit Suisse First Boston Equities Limited (CSFB Equities) and Credit
Suisse Securities (Europe) Limited (CSFB Europe), and Glencore International AG (Glencore), in connection with the Group’s acquisition of the MIM Group and the
associated rights issue, Glencore, CSFB Equities and CSFB Europe are jointly interested in 253,699,767 ordinary shares representing 40.10% of the issued share capital
of the Company. In addition to the interests arising as a result of CSFB Equities and CSFB (Europe) entering into the capital management programme, the company has
been informed by CSFB Equities that the Credit Suisse Group has an interest in a further 1,330,165 Ordinary Shares, representing approximately 0.21% of the issued
outstanding ordinary shares of Xstrata plc.
Details of transactions between the Group and the shareholders detailed above are given in Note 38 to the Financial Statements.
Directors’ liabilities
The Company has granted qualifying third party indemnities to each of its directors against for any liability which attaches to them
in defending proceedings brought against them, to the extent permitted by the Companies Acts. In addition, directors and officers
of the Company and its subsidiaries are covered by Directors & Officers liability insurance.
Creditor payment policy and practice

In view of the international nature of the Group’s operations there is no specific group-wide policy in respect of payments to
suppliers. Individual operating companies are responsible for agreeing terms and conditions for their business transactions and
ensuring that suppliers are aware of the terms of payment. It is the Group policy that payments are made in accordance with those
terms, provided that all trading terms and conditions have been met by the supplier.
Xstrata plc is a holding company with no business activity other than the holding of investments in the Group and therefore had no
trade creditors at 31 December 2005.
Annual general meeting

The Annual General Meeting of the Company will be held at 11.00 am (Central European Time) on Tuesday, 9 May 2006 at
Congress Center Metalli, Parkhotel Zug, 6300 Zug, Switzerland with a satellite meeting held concurrently at 10.00 am (BST) at the
Media & Business Complex, London Stock Exchange, 10 Paternoster Square, London EC4M 7LS.
Directors’ Report
The Notice convening the meeting is sent to shareholders separately with this Report. Resolutions will also be proposed for items of
special business, namely, authorisation to the directors to allot ordinary shares and the disapplication of pre-emption rights, as
explained in the paragraph above entitled Share Capital.
Electronic proxy voting

Registered shareholders have the opportunity to submit their votes (or abstain) on all resolutions proposed at the Annual General
Meeting by means of an electronic voting facility operated by the Company’s Registrar, Computershare Investor Services plc. This
facility can be accessed by visiting www.computershare.com. As usual, paper proxy cards will be distributed to all registered
shareholders with the Notice of Annual General Meeting.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by
using the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored member and those
CREST members who have appointed any voting service provider(s) should refer to their CREST sponsor or voting service provider(s)
who will be able to take the appropriate action on their behalf. The Company may treat as invalid a CREST proxy instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
Electronic copies of the Annual Review and Financial Statements 2005 and other publications
A copy of the 2005 Annual Report (which includes the Annual Review and Financial Statements, Directors’ Report, Corporate
Governance Report and Remuneration Report), the Notice of the Annual General Meeting, the 2005 Sustainability Report and other
corporate publications, reports, press releases and announcements are available on the Company’s website at www.xstrata.com.
Auditors
A resolution will be put to the members at the forthcoming Annual General Meeting to re-appoint Ernst & Young LLP as auditors
and to authorise the Board to determine the auditor’s remuneration.
By order of the Board

Richard Elliston
Company Secretary
10 March 2006
Corporate Governance Report
Introduction
The Board is committed to the principle of best practice in corporate governance. This report addresses the status of the Company’s
compliance with the principles and provisions of the Combined Code on Corporate Governance issued on 23 July 2003 (“the
Code”), details the key policies, processes and structures that apply within the Group to comply with the Code.
Statement by the Directors on corporate governance policies and compliance with the provisions of the
Combined Code
The Code establishes 14 main principles of good governance, 21 supporting principles and 48 provisions. The Listing Rules require
every listed company to report on how it applies the principles in the Code, and to confirm that it complies with the Code’s
provisions or, where it does not, to provide an explanation. During the year ended 31 December 2005, the Company complied with
the best practice governance provisions as set out in Section 1 of the Code, except, as explained below, with regard to membership
of the Remuneration Committee as the Chairman of the Committee is not considered independent and save that no individual
member of the Audit Committee has been identified as having recent and relevant financial experience.
A. Directors
A.1 The Board
The first main principle requires the Company to have an effective Board which is collectively responsible for its success. Supporting
principles describe the Board’s role to provide entrepreneurial leadership within a framework of controls that allow risk to be
assessed and managed. The Board should set strategic aims and the Company’s values, ensuring that obligations to shareholders
are met. Non-executive directors have a particular role in overseeing the development of strategy, scrutinising management
performance and ensuring the integrity of financial information and systems of risk management. The Board is satisfied that it has
met these requirements.
There were no changes to the membership of the Board during the year. The Board, chaired by Willy Strothotte, has twelve
directors, comprising three executive directors and nine non-executive directors. The three executive directors are Mick Davis, the
Chief Executive, Trevor Reid, Chief Financial officer, and Santiago Zaldumbide, Chief Executive of Xstrata Zinc. David Rough, an
independent, non-executive director is the Deputy Chairman. The non-executive directors possess a range of experience and are of
sufficiently high calibre to bring independent judgement to bear on issues of strategy, performance, and resources that are vital to
the success of the Group.
The Board is responsible for the governance of the Group on behalf of shareholders within a framework of policies and controls
which provide for effective risk assessment and management. The Board provides leadership and articulates the Company’s
objectives and strategy for achieving those objectives. The Board sets standards of conduct, as documented in an approved
Statement of Business Principles, which provide an ethical framework for all Xstrata businesses. While the Board focuses on
strategic issues, financial performance, risk management and critical business issues, it also has a formal schedule of matters
specifically reserved to it for decision. These reserved matters which are documented in a comprehensive regime of authorisation
levels and prior approval requirements for key corporate decisions and actions are reviewed and updated annually by the Board.
Such matters reserved to the Board include, but are not limited to, approval of budgets and business plans, major capital
expenditure, major acquisitions and disposals, and other key commitments. Certain powers are delegated by the Board to an
Executive Committee which is a Committee of the Board of Xstrata (Schweiz) AG, the main trading subsidiary of Xstrata plc.
This Committee and a description of its powers are described on page 101.
The Company has a policy based on the Model Code published in the Listing Rules, which covers dealings in securities and applies
to directors, persons discharging managerial responsibilities, and employee insiders.
Five scheduled Board meetings were held during the year and two additional meetings were held. Attendance by directors at
Board meetings and committee meetings is shown below. The Chairman held separate meetings with the non-executive directors
several times a year following the full Board meetings without the executive directors being present. All Board meetings are
held in Switzerland.
Attendance at Board meetings and Committees of the Board

There are four formally constituted committees of the Board, each of which has formal terms of reference. These can be seen on
the Company website.
Board (7) Health, Safety,

of which 5 Remuneration Environment & Nominations
Director were scheduled Audit (4) (3) Community (4) (3)
Mick Davis 6 4
Ivan Glasenberg 7 3
Paul Hazen 7 3
David Issroff 7
Robert MacDonnell 7 3
Sir Steve Robson 7 4
David Rough 5 4 3 4 3
Trevor Reid 7
Dr. Fred Roux 7 4 4
Ian Strachan 5 4 4
Willy Strothotte 7 3
Santiago Zaldumbide 6
A.2 Chairman and Chief Executive

Another main principle states that there should be a clear division of responsibilities between the running of the Board and
executive responsibility for running the business, so that no one person should have unfettered powers of decision.
A clear separation is maintained between the responsibilities of the Chairman and the Chief Executive. This is documented in a
statement approved by the Board. The Chairman is responsible for leadership of the Board and creating the conditions for overall
Board and individual director effectiveness while the Chief Executive is responsible for overall performance of the Group including
the responsibility for arranging the effective day to day management controls over the running of the Group.
A.3 Board balance and independence

The Company complies with the requirement of the Code that there should be a balance of executive and non-executive directors,
such that no individual or small group can dominate the Board’s decision taking.
Of the nine non-executive directors, six are considered by the Board to be independent of management and free from any business
or other relationship which could materially interfere with the exercise of their independent judgement and three, Willy Strothotte
and Ivan Glasenberg are directors of Glencore International AG (“Glencore”). Willy Strothotte is Chairman, Ivan Glasenberg is Chief
Executive Officer and David Issroff is Head of the Ferroalloys Division, of Glencore. The Board has considered these associations and
considers the industry expertise and experience of these directors beneficial to the Group.
David Rough is the Deputy Chairman and the Senior Independent Director. His role and responsibilities as the Senior Independent
Director are detailed in and formalised by Board resolution and, in summary, are that he should be available to shareholders to
discuss their concerns where the normal channels would not be appropriate for this purpose, to have contact with analysts and
major shareholders to obtain a balanced understanding of their issues and concerns, to chair the Nomination Committee and to
lead the Board and director appraisal process.
The non-executive directors have a particular responsibility to ensure that the strategies proposed by the executive directors are fully
considered. To enable the Board to discharge its duties, all directors receive appropriate and timely information and briefing papers
are distributed to all directors.
The Board reviews annually the composition and chairmanship of its standing committees, namely the Audit, Remuneration,
Nomination and the Health, Safety, Environment & Community Committee.
A. 4 Appointments to the Board

The Code requires there to be a formal, rigorous and transparent procedure for the appointment of new directors, which should
be made on merit and against objective criteria. The Nomination Committee fulfils these requirements and its report is set out on
page 100.
A. 5 Information and professional development

Another main principle requires that information of appropriate quality is supplied to the Board in a timely manner and that,
in addition to induction programmes on joining the Company, directors should regularly update their skills and knowledge.
All directors are made aware that they may take independent professional advice at the expense of the Company in the furtherance
of their duties. All directors had access to the advice and services of the Company Secretary, who is responsible to the Board for
ensuring that all governance matters are complied with and assists with professional development as required.
Arrangements have been approved by the Board to ensure that new directors should receive a full, formal and tailored induction
on joining the Board. In addition ongoing support and resources are provided to directors in order to enable them to extend and
refresh their skills, knowledge and familiarity with the Company. Professional development and training is provided in three
complementary ways: regular updating with information on changes and proposed changes in laws and regulations affecting
the Group or its businesses; arrangements, including site visits, to ensure directors are familiar with the Group’s operations; and,
opportunities for professional and skills training.
A. 6 Performance evaluation
In accordance with the Code requirement, the Board undertook a formal and rigorous evaluation of its own performance and that
of its Committees and of its individual directors including the Chairman. The process was led by the Senior Independent Director.
The evaluation of individual director performance was also employed to identify individual director training requirements.
A. 7 Re-election of directors
Under the Code, directors should offer themselves for re-election at regular intervals and there should be a planned and progressive
refreshing of the Board.
One third of all directors are required to retire by rotation at each annual general meeting and any director who, at the start of
an annual general meeting, has been in office for more than three years since his election must retire. Retiring directors may offer
themselves for re-election. A succession plan was approved by the Board during the year to ensure there was a balance of skills
and experience on the Board and to plan for an orderly refreshing of Board membership. It is proposed that Messrs Glasenberg,
MacDonnell, Roux and Zaldumbide will retire and will offer themselves for re-election at the Annual General Meeting on 9 May 2006.
Following an appraisal of the non-executive directors, the Board was satisfied that each director’s performance continues to be
effective and that each director continues to demonstrate commitment to the role, and recommended the re-election of the
four directors.
B. Remuneration
Remuneration is covered in the Remuneration Report on pages 102 to 115 and, with regard to the Remuneration Committee,
on pages 99 and 100.
C. Accountability and Audit

C. 1 Financial Reporting
The Board is required to present a balanced and understandable assessment of the Company’s position and prospects. This
responsibility extends to annual and interim reports and other price-sensitive reports and reports to regulators as well as to
information required to be presented by statutory requirements.
The Board is mindful of its responsibility to present a balanced and clear assessment of the Company’s position and prospects and
the Board is satisfied that it has met this obligation. This assessment is primarily provided in the Chairman’s Statement, the Chief
Executive’s Report, and the Operating and Financial Review contained in this Report. The Statement of Directors’ Responsibilities
in respect of the Financial Statements are set out on page 1 and 121 of the Financial Statements 2005 report.
C. 2 Internal Control
The Code requires the Company to maintain a sound system of internal control to safeguard shareholders’ investment and the
Company’s assets. The Board must review, at least annually, the effectiveness of the internal control system and report to
shareholders that they have done so. The review should cover all material controls, including financial, operational and compliance
controls and risk management systems.
Internal Control
The Board of Directors is responsible for the Group’s system of internal control. An ongoing process, in accordance with the
Guidance of the Turnbull Committee on Internal Control, has been established for identifying, evaluating and managing the
significant risks faced by the Group. This process has been in place throughout the year under review up to the date of approval
of the annual report and financial statements. The Board relies on reviews undertaken by the Audit Committee (supported by the
Business Unit Audit Committees) in relation to the Group’s compliance with the Turnbull Guidance throughout the year.
The Audit Committee reviews the process by which risks are identified and assessed and the effectiveness of the system of internal
control by considering the regular reports from management on key risks, mitigating actions and internal controls, management
representations and assertions and the reports on risk management and internal control from Internal Audit, the external auditors
and other assurance providers such as Health Safety and Environmental Management.
The principal aim of the system of internal control is the management of business risks that are significant to the fulfilment of the
Group’s business objectives with a view to enhancing over time the value of the shareholders’ investment and safeguarding the
assets. The internal control systems have been designed to manage rather than eliminate the risk of failure to achieve business
objectives and provide reasonable but not absolute assurance against material misstatement or loss. The directors confirm that
they have reviewed the effectiveness of the system of internal control.
Control environment
The key elements and procedures that have been established to provide an effective system of internal control are as follows:
(i) Organisational Structure

There is a well-defined organisational structure with clear operating procedures, lines of responsibility and delegated authority.
The way the Group conducts its business, expectations of management and key accountabilities are embodied in the Group’s
policies, its Statement of Business Principles and Board Level Authority Limits.
(ii) Risk Identification and Evaluation

The Board considers effective risk management as essential to the achievement of the Group’s objectives and has implemented
a structured and comprehensive system across the Group. The Group Risk Management Policy is published on the Xstrata website
at www.xstrata.com as part of the Governance section.
(iii) Information and Financial Reporting Systems

Financial reporting to the Executive Committee and the Board is continuously modified and enhanced to cater for changing
circumstances. The Group’s comprehensive planning and financial reporting procedures include detailed operational budgets for
the year ahead and a three-year rolling plan. The Board reviews and approves the annual budget and plan. Plans and budgets are
prepared on the basis of consistent economic assumptions determined by the Group Finance function. Performance is monitored
and relevant action taken throughout the year through the monthly reporting of key performance indicators, updated forecasts
for the year together with information on the key risk areas.
In addition, comprehensive monthly management reports on a divisional and consolidated basis, including updated forecasts for
the year, are prepared and presented to the Executive Committee by the Group Controller and form a cornerstone of the system
of internal control. Detailed consolidated management accounts, together with an executive summary from the Chief Executive,
are circulated to all Directors on a monthly basis.
(iv) Investment Appraisal

A budgetary process and authorisation levels regulate capital expenditure. For expenditure beyond specified levels, detailed written
proposals are submitted to the Executive Committee in accordance with Board delegated authority limits. There is a standardised
approval procedure for investment appraisal which includes a detailed calculation of return on equity. Economic assumptions are
consistent with those included in management reports and budgets and are agreed with Group Finance. Reviews are carried out
after the project is complete, and for some projects, during the construction period, to monitor progress against plan; major
overruns are investigated. Commercial, legal and financial due diligence work, using outside consultants, is undertaken in respect
of acquisitions as appropriate.
(v) Treasury Committee

A Treasury Committee operates as a sub-committee of the Executive Committee. Its membership consists of the Chief Executive,
the Chief Financial Officer, the Group Treasurer and Group Controller. All meetings are held outside the UK. The Committee
recommends group policy, which is agreed by the Board, relating to all aspects of funding, management of interest rate and foreign
exchange exposures and it co-ordinates relationships with banks, rating agencies and other financial institutions. The Committee
monitors all significant treasury activities undertaken by group companies and ensures compliance with group policy. A monthly
report details the Group cash/debt position, review of bank covenants, exposures and hedging and is circulated to the Executive
Committee.
(vi) Internal Audit

Internal Audit is an important element of the overall process by which the Executive Committee and the Board obtains the assurance
it requires that risks are being properly identified, managed and controlled. Risk-based internal audit plans, prepared on an annual
basis, are approved by the Audit Committee, and timely reports on achievement of the plans and findings are presented to the
Audit Committee.
Internal Audit completed a full programme of work in 2005, covering the Business Units and Head Office, focusing in particular
on the more significant risks and related internal controls identified in the risk self-assessment process. Findings and agreed actions
were reported to management and the Audit Committee.
The Group-wide internal audit function is supplemented by services provided as required by KPMG LLP as an outsourced
service provider.
(vii) Fraud Management

There is a formal Group policy relating to fraud management, including reporting and investigation arrangements and, in line with
best practice, this includes whistleblowing procedures. There are independently operated confidential hotlines in each country in
which the Group operates, through which employees or contractors can report any breach of Xstrata’s Business Principles, including
fraud. The contact details are published in the Statement of Business Principles which can be found on the Xstrata website.
All incidents reported are fully investigated and the results are reported to the Audit Committee.
C. 3 Audit Committee and Auditors

A principle of the Code is that the Board should establish formal and transparent arrangements for considering how it should apply
the financial reporting and internal control principles and for maintaining an appropriate relationship with the external auditors,
Ernst & Young LLP. These responsibilities are delegated to and are discharged by the Audit Committee whose work is described on
pages 97 to 99.
D. Relations with shareholders

D.1 Dialogue with shareholders
The Company is required to have a dialogue with shareholders, based on the mutual understanding of objectives, and it is the
responsibility of the Board as a whole to ensure that a satisfactory dialogue does take place. While the Code recognises that most
shareholder contact is with the Chief Executive and the Chief Financial Officer, the Chairman and the senior independent director,
and other directors as appropriate, should maintain contact with major shareholders in order to understand their issues and concerns.
The Board places considerable importance on effective communication with shareholders. The Chief Executive and Chief Financial
Officer, assisted by the Executive General Manager of Corporate Affairs, maintain regular dialogue with and give briefings
throughout the year to analysts and institutional investors and are involved in a structured programme of investor, analyst and
media site visits. Presentations are given by the Chief Executive and Chief Financial Officer after the Company’s preliminary
announcements of the year-end results and at the half year. Care is taken to ensure that any price-sensitive information is released
to all shareholders, institutional and private, at the same time in accordance with London and Swiss Stock Exchange requirements.
Members of the Remuneration Committee had meetings with major institutional investors to explain the background and purpose
of the decision to devise an Added Value Incentive Plan for the Chief Executive, before recommending adoption of the Plan at the
May 2005 Annual General Meeting. The Senior Independent Director was available to shareholders for any concern which contact
with the Group Chairman, Chief Executive or Chief Financial Officer failed to resolve or for which such contact was inappropriate.
All shareholders can obtain access to the annual report and accounts and other current information about the Company through
the Company’s website at www.xstrata.com. The Operating and Financial Review on pages 14 to 78 include a detailed report on
the business and future developments.
D. 2 Constructive use of the Annual General Meeting (AGM)

All directors normally attend the Company’s Annual General Meeting and shareholders are invited to ask questions during the
meeting and to meet directors after the formal proceedings have ended. Shareholders at the meeting are advised as to the level
of proxy votes received including percentages for and against and the abstentions in respect of each resolution following each
vote on a show of hands.
At the time of the listing in March 2002, shareholders in the old Xstrata AG were informed that the Company would offer
shareholders the opportunity to attend general meetings in Switzerland where the head office resides, even though the Company
was incorporated and has its registered office in England. Given this history and the number of shares still held in or through
Switzerland, the Board continues to consider it is appropriate for the Annual General Meeting, to be held in Zug, Switzerland
and for a satellite meeting to be held concurrently in London.
The Board uses the Annual General Meeting to communicate with institutional and private investors and welcomes their participation.
At the Annual General Meeting on 9 May 2005, the Chairman and the Chairmen of the Audit, Remuneration, Nomination and
HSEC Committees were present to answer questions. Details of the resolutions to be proposed at the Annual General Meeting
on 9 May 2006 can be found in the notice of the meeting.
Board Committees
The terms of reference of the Audit, Remuneration, Nominations and HSEC Committees are available on the Company website.
Audit Committee
The Audit Committee assists the Company’s board of directors in discharging its responsibilities with regard to financial reporting,
external and internal audits and controls, including reviewing the annual financial statements, considering the scope of the Company’s
annual external audit and the extent of non-audit work undertaken by external auditors, approving the internal audit programme,
advising on the appointment of external auditors and reviewing the effectiveness of the Company’s internal control systems.
The Combined Code recommends that all members of the Audit Committee should be non-executive directors, all of whom are
independent in character and judgement and free from relationships or circumstances which are likely to affect, or could appear to
affect, their judgement and that at least one member should have recent and relevant financial experience. The Audit Committee
comprises four independent non-executive directors. Sir Steve Robson (Chairman of the Committee), David Rough, Fred Roux and
Ian Strachan. The Board considered membership of the Committee during the year and declared its satisfaction that the members
of the Committee collectively have sufficient recent and relevant financial experience to discharge its role and responsibilities. The
Board therefore considers that it complies with Combined Code recommendations regarding the composition of the Audit Committee.
The Committee met four times in the year. Four meetings are scheduled for 2006.
The Chief Executive, the Chief Financial Officer, the Group Controller, a representative of the Company’s external auditors and
the Head of Internal Audit normally attend the meetings. Other directors of the Company and senior management may also, on
invitation by the Committee, attend and speak, but not vote at any meeting of the Committee. As an outcome of an evaluation
of the Audit Committee’s performance, the Committee decided it would be helpful to invite the Chairmen of the Business Unit
Audit Committees and the Chief Executives of the Business Units to attend the Audit Committee meetings on a rotational basis
in order to further enhance communication and best practice.
During the year, the Committee
reviewed for submission to the Board, the 2004 annual financial statements, the 2005 interim and, in February 2006, the 2005
annual financial statements and reviewed the external auditor’s detailed reports thereon. The 2005 interim and annual financial
statements have been prepared for the first time in accordance with the International Financial Reporting Standards;
reviewed the appropriateness of the Group’s accounting policies;
regularly reviewed the potential impact on the Group’s financial statements of a range of matters which involve significant
judgement, estimation or uncertainty, and the possible impairment of fixed asset values;
reviewed the external auditor’s plan and scope for the audit of the Group accounts, and approved their remuneration both for
audit and non-audit work, and their terms of engagement. The Committee carefully monitored the nature, range and cost of
non-audit services provided by the external auditors particularly in relation to the annual cost of audit fees. It also concluded
that the $100,000 limit for individual non-audit assignments above which prior approval of the Audit Committee was required,
is set at an appropriate level;
recommended to the Board the re-appointment of the external auditors following an evaluation of their effectiveness and
confirmation of auditor objectivity and independence;
undertook a review of related party transactions with particular focus on those transactions with Glencore. The Committee
found that transactions with Glencore are at competitive market rates and are deemed to be commercial arms length
transactions. The arrangements with Glencore are seen to be to the commercial advantage of Xstrata;
examined the effectiveness of the Company’s risk management system including its risk management process and profile and
the Company’s internal control systems and operations which were examined and tested by the internal auditors. It also
received a report on internal network security;
reviewed the structure and limits of Group insurance policies and these were considered to be appropriate;
reviewed and approved the Internal Audit plans for 2005, the effectiveness of the internal audit function and, at each meeting,
reviewed the reports on findings and on progress against recommendations;
monitored the controls which are in force to ensure the integrity of the information reported to the shareholders;
reviewed procurement policies and procedures to ensure they were based on common standards and applied across the
Business Units;
received quarterly reports on the status of its tax residency;
evaluated the performance of the Committee;
received a report on succession planning for senior financial and accounting personnel; and
reviewed the whistleblowing arrangements within the Group.
Following each Committee meeting, separate meetings were held by the Committee with the external auditors in the absence of
executive management, with executive management in the absence of the external auditors and with the internal auditor in the
absence of executive management and the external auditors.
The Group has a specific policy governing the conduct of non-audit work by the external auditors which ensures that the Company
is in compliance with the requirements of the Combined Code and the Ethical Standards for Auditors published by the Auditing
Practices Board. Under that policy the external auditors are prohibited from performing services which:
result in the auditing of their own work;

result in the auditors participating in activities normally undertaken by management;
puts the auditor in the role of advocate for the Group; or
create a mutuality of interest between the auditors and the Group.
The auditors are permitted to provide non-audit services that are not in conflict with auditor independence. Six-monthly reports are
made to the Audit Committee detailing non-audit fees paid to both the external and internal auditors. However, prior approval of
the Committee is required for each specific service provided by the external auditors. A range of non-audit services have been pre-
approved in principle by the Audit Committee, however, where the fee is likely to be in excess of $100,000 for such services,
specific re-approval is required, while prior approval of the Chief Financial Officer is required for those pre-approved services where
the fee is likely to be less than $100,000.
The Audit Committee is supported and assisted in its work by separate Audit Committees for each Commodity Business Unit in line
with the decentralised commodity business unit model. The Business Unit Audit Committees are independent of the executive
management of the Business Unit and are chaired by suitably qualified individuals independent of Xstrata. The terms of reference of
these Committees follow those of the Company’s Audit Committee. Meeting dates precede those of the Company’s Audit
Committee and minutes of their meetings are circulated to the Company’s Audit Committee.
Remuneration Committee
The Remuneration Committee is chaired by Willy Strothotte. As Chairman of the Company and Chairman of Glencore, he is not
considered to be an independent director. The Board regards Willy Strothotte’s membership as critical to the work of the
Committee due to his extensive knowledge and experience of the global mining resources sector. David Rough and Paul Hazen, the
other members of the Committee, are both non-executive directors and independent. The Committee met three times during the
year. The Chief Executive attends meetings by invitation but does not participate at a meeting of the Committee (or during the
relevant part) at which any part of his remuneration is being discussed or participate in any recommendation or decision concerning
his remuneration.
The principal roles of the Committee are (i) to consider and determine all elements of the remuneration of the Chief Executive,
and Chief Financial Officer and of the Heads of the major operating subsidiaries or business units of the Company (the “Executive
Group”) as defined by the Chief Executive and (ii) to determine targets for any performance-related remuneration schemes
operated by the Company.
During the year, the Committee:
devised an Added Value Incentive Plan in collaboration with the Hay Group, an independent remuneration consultancy, to
incentivise the Chief Executive by providing a share of the long term value created for shareholders and to create alignment
with shareholders by means of ownership. This plan was recommended by the Committee to, and subsequently approved by,
the Board and by the Shareholders;
agreed amendments to the Annual Bonus Plan for key executives which introduce a broader range of bonus performance
conditions including health and safety. The amendments also enable up to 300% of salary to be paid as a bonus for
outstanding performance but subject to the condition that the first 100% of salary is paid in cash, the next 100% is paid in
shares but restricted for one year and the next 100% is paid in shares but restricted for two years;
agreed amendments to the Deferred Bonus Plan to reflect that dividends will accrue on all deferred bonus shares, but will only
be paid on vesting;
determined the remuneration for the executive directors and reviewed the remuneration arrangements proposed for the
members of the Executive Committee;
determined the vesting percentage applicable to awards under the Long Term Incentive Plan 2002 which vested in May 2005
received independent advice on benchmarking and best practice.
The terms of reference of the Remuneration Committee conform precisely to the Code. The setting of non-executive directors’
remuneration was decided by the Board as a whole.
Details of the Company’s remuneration for executive directors, benefits, share options, pensions entitlements, service contracts and
compensation payments are given in the Remuneration Report on pages 102 to 115. A resolution to approve the Remuneration
Report will be proposed at the Annual General Meeting.
Nominations Committee
The Nominations Committee comprises three non-executive directors of which two are independent. It is chaired by David Rough.
The terms of reference provide for a formal and transparent procedure. The Committee has responsibility to identify, evaluate and
recommend candidates for Board vacancies and to make recommendations on Board composition and balance. Three meetings
were held in 2005.
During the year, the Committee:
reviewed the plan for the retirement by rotation and re-election of directors and the framework for board succession planning
to ensure continuity. This is designed to take in account matters such as the size of the Company, product diversity and
geographical spread, as well as maintaining a balance to the Board in relation to independent/non-independent members,
their skills and experience;
continued its search, initiated at the end of 2004, for a non-executive director based in Australia with a mining background.
Ultimately, and perhaps due to the nature of the market, the search for a non-conflicted mining candidate was unsuccessful;
subsequently initiated and continues a new search, in collaboration with an external search consultancy, for a non-executive
director with broad international experience;
approved arrangements for the annual appraisal of the Board and directors’ performance. This was carried out by means of
a questionnaire to all directors inviting comments on general and specific aspects of board and director performance and
commitment. Results were reported to the Board by the Senior Independent Director.
Health, Safety, Environment & Community Committee

The Board established the Board Health, Safety, Environment & Community (HSEC) Committee on 24 February 2005 to assist
the Board to fulfil its HSEC role and obligations across the global business and provide additional focus and guidance on key
HSEC issues.
The Committee comprises Ian Strachan , who chairs the Committee, Mick Davis, David Rough and Fred Roux. Paul Jones (General
Manager HSE) is Secretary to the Committee. The Committee met four times in the year and there was an informal meeting
of the members of the Committee in South Africa with operational site visits.
During the year the Committee:
appointed Professor Jim Joy as OH&S Adviser to the Committee;

monitored and evaluated reports on the implementation and effectiveness of HSEC Policy, HSEC Management Standards, HSEC
Strategy and HSEC Governance;
monitored and evaluated the implementation and effectiveness of the HSEC assurance and verification programme;
monitored and evaluated the implementation and effectiveness of the Coal, Alloys and Copper Commodity Businesses’ HSEC
strategies and plans;
monitored and evaluated reports on high potential HSEC incidents and the results of investigations into critical HSEC incidents;
reviewed a report from the independent verifiers, URS, on the 2004 Sustainability Report; and
monitored and evaluated new developments, issues and/or relevant legislation on HSEC matters.
Executive Committee
The Executive Committee is a Committee of the Board of Xstrata (Schweiz) AG, the main trading subsidiary of Xstrata plc. The
Executive Committee obtains its responsibility and authority from the Xstrata (Schweiz) AG Board and is directly accountable to the
Xstrata plc Board. It is chaired by Mick Davis and comprises executive directors, Trevor Reid and Santiago Zaldumbide (also Chief
Executive of Xstrata Zinc) together with the Chief Executives of the other Business Units, Peter Coates (Xstrata Coal), Peet Nienaber
(Xstrata Alloys), Charlie Sartain (Xstrata Copper) and Marc Gonsalves (Executive General Manager, Corporate Affairs). Other
members of senior management are invited to attend Executive Committee meetings as required. The Executive Committee is
responsible for implementing strategy, approval of matters consistent with its delegated levels of authority and overseeing the
various businesses which comprise the Group. It meets regularly during the year and no meetings are held in the United Kingdom.
Remuneration Report
Information not Subject to Audit

Remuneration Committee
The Remuneration Committee is chaired by Willy Strothotte and its other members are David Rough and Paul Hazen, all of whom
are non-executive directors. The Board recognises that Willy Strothotte is not an independent non-executive director as defined by
the Combined Code, but regards his membership as critical to the workings of the Committee due to his extensive knowledge and
experience of the global mining resources sector.
The Remuneration Committee reviews the structure of remuneration for executive directors on an ongoing basis and has
responsibility for the determination, within agreed terms of reference, of specific remuneration packages for executive directors
and other members of the Executive Committee, including salaries, pension rights, bonuses, long-term incentives, benefits in kind
and any compensation payments. The Committee is also aware of the level and structure of remuneration for senior management
and advises on any major changes in employee remuneration and benefit structures throughout the Group, including the
continuous review of incentive schemes to ensure that they remain appropriate for the Group. The Remuneration Committee
commits to bringing independent thought and scrutiny to the development and review process of the Group with regards
to remuneration.
The Committee met three times during 2005. The Chairman continues to ensure that the Group maintains contact, as necessary,
with its principal shareholders about remuneration. The purpose and function of the Committee in the future will not differ
materially from this year and its terms of reference can be found on the Group’s website (www.xstrata.com).
The remuneration of non-executive directors, other than the Chairman, is considered by the Chairman and the Chief Executive and
is not considered by the Remuneration Committee. The Chairman’s remuneration is determined by the Remuneration Committee
while the Chairman is absent.
The Chief Executive attends the Remuneration Committee meetings by invitation and assists the Remuneration Committee in its
considerations, except when issues relating to his own remuneration are discussed. The Remuneration Committee is provided with
national and international pay data collected from external survey providers.
During the year, the Hay Group provided independent advice to the Remuneration Committee on executive remuneration. The Hay
Group provided no other services to the Group during 2005.
Remuneration policy
Xstrata’s remuneration policy is designed to attract, retain and motivate the highly talented individuals needed to deliver the
business strategy and to maximise shareholder wealth creation.
The policy for 2005 and, so far as practicable, for subsequent years, will be framed around the following principles for the
Executive Committee:
Remuneration arrangements will be designed to support the business strategy and to align with the interests of Xstrata’s
shareholders;
Total reward levels will be set at appropriate levels to reflect the competitive global market in which Xstrata operates with the
intention of positioning within the top quartile for outstanding performance when measured against a peer group of global
mining companies and the FTSE100;
A high proportion of the remuneration should be “at risk” with performance related remuneration making up at least 50% of
the total potential remuneration for Executive Committee members; and
Performance-related payments will be subject to the satisfaction of demanding and stretching performance targets over
the short and long-term. These performance targets will be set in the context of the prospects of the Group, the prevailing
economic environment in which it operates, and the relative performance of comparator companies.
The Remuneration Committee considers that a successful remuneration policy needs to be sufficiently flexible to take account
of future changes in the business environment and in remuneration practices. Consequently, the remuneration policy and the
Remuneration Committee’s terms of reference for subsequent years will be reviewed annually in the light of matters such as
changes to corporate governance best practice or changes to accounting, legislation or business practices among peer group
mining companies. This will help to ensure that the policy continues to provide Xstrata with a competitive reward strategy.
In doing so the Committee will take into account the UK Listing Rules, the provisions of the Combined Code and associated
guidance attached to it, as well as the guidance provided by a number of institutional investor representative bodies on the
design of performance-related remuneration. Policies will be sensitive to pay and employment conditions elsewhere in the Group.
The Remuneration Committee is satisfied that Xstrata’s pay and employment conditions for non-Board employees around the world
are appropriate to the various markets in which it operates. The Remuneration Committee does not consider a ratio comparison
between executive directors and non-Board employees to be a useful way of assessing the fairness and equitability of Xstrata’s
remuneration practices. The vastly different costs of living in the countries where Xstrata has operations and fluctuations in
exchange rates mean any trend analysis or comparisons with competitors would be meaningless.
Elements of remuneration
The total remuneration package for executive directors comprises the following principal elements:
base salary;
annual bonus plan including deferred element;
participation in long-term incentive arrangements;
subsisting rights under the Xstrata AG shares schemes and individual arrangements (as detailed below);
pension; and
other benefits including housing allowance (where essential for the performance of the duties), permanent health, life and
private medical insurance.
Base salary
The base salary of the executive directors is subject to annual review by the Remuneration Committee. The Remuneration
Committee reviews external pay data to ensure that the levels of remuneration remain competitive and appropriate in the light of
the Group’s policy. The Remuneration Committee is also responsible for ensuring that the positioning of the Group’s remuneration
relative to its peers does not result in increases in remuneration without a corresponding increase in performance or responsibilities.
When setting base salaries, the Committee also considers the impact on pension contributions and associated costs. Base salary
increases for Mick Davis, Trevor Reid and Santiago Zaldumbide during 2005, were 5.5%, 7% and 5.5% respectively. Base salaries
effective 1st January 2006 will be £1,000,000, £470,693 and €829,450, representing increases of 5.3%, 6% and 6% respectively .
Santiago Zaldumbide has a professional services agreement with Asturiana (dated 29 January 1998) to act as Chairman and
Chief Executive of Asturiana. The agreement is in force until 28 February 2007 and continues thereafter indefinitely unless
terminated by Asturiana giving six months notice to that effect, provided that such notice may not be given to result in his
employment terminating before 28 February 2007. Up until 31 December 2002, Santiago Zaldumbide was entitled to a total fee
for the term of his agreement of €3,005,060 payable at a rate of €601,012 per annum less any fees received from certain
specified external directorships. This fixed contract predates the acquisition of Asturiana. With effect from January 2003, the
Remuneration Committee concluded and agreed with Santiago Zaldumbide that his annual fee should be subject to review in
line with the other executive directors. On termination of the agreement, other than on his voluntary termination or termination
Remuneration Report
for gross negligence, Santiago Zaldumbide is entitled to receive a sum from the redemption of an insurance policy (acquired by
Asturiana for a premium of €3,005,060), including any with profits bonus payable under the policy less the compensation received
by him during the term of the agreement. This part of the agreement is not affected by the review.
On termination of the agreement by expiry of the fixed term, Santiago Zaldumbide is entitled to receive the capital redemption
value of the policy, including the with profit bonus element, minus the aforementioned amount of EUR3,005,060 which he will
already have received. Santiago Zaldumbide’s entitlements under the insurance policy are in lieu of his receiving pension benefits.
Santiago Zaldumbide’s appointment as a director of Xstrata is on an indefinite basis subject to the existence of the agreement
between Santiago Zaldumbide and Asturiana. Santiago Zaldumbide will receive no additional remuneration for his position as
director of Xstrata Plc but is eligible to participate in the Bonus Plan and the Long Term Incentive Plan.
Bonus plan
Executive directors and the other members of the Executive Committee are eligible to participate in the Bonus Plan. The Bonus Plan
focuses on the achievement of annual objectives, which align the short-term financial performance of the Group with the creation
of shareholder value.
The bonus is based on Xstrata’s operational performance as measured by return on equity and net profit. Specific targets for
return on equity and the proportion of net profits that make up the bonus pool are determined each year by the Remuneration
Committee. Before the pool is finalised the Remuneration Committee actively considers whether the pool is appropriate in light
of the other key financial and non-financial drivers of future shareholder value. The Remuneration Committee retains the discretion
to vary the size of the bonus pool if warranted by special circumstances.
The payment of any bonus under the Bonus Plan is subject to a hurdle rate (for the financial years ending 31 December 2005 and
2006 it will be set such that the Group’s return on equity will be at least equal to the Group’s average cost of borrowing). If this
hurdle is not reached, the bonus pool will be zero. The Remuneration Committee has the discretion to vary the basis of calculation
and the performance targets for subsequent years.
The amount of the bonus pool that is distributed in any one year, and the relative proportions payable to each participant (or,
at the discretion of the Remuneration Committee, to a trust for his/her benefit) will be at the discretion of the Remuneration
Committee. Individual performance criteria have been agreed with each participant, which will be evaluated by the Committee
in determining individual allocations from the bonus pool.
The maximum bonus payable under the Bonus Plan for executive directors is 300% of salary. The highest level of bonus will only
be available for truly outstanding performance. Bonuses will be payable in up to three tranches, as follows:
the maximum bonus, which any one participant is eligible to receive in cash, will be limited to 100% of the individual’s
base salary;
any additional bonus up to a further 100% of base salary will be deferred for a period of one year;
any remaining bonus will be deferred for a period of two years.
The deferred elements will take the form of awards of Xstrata shares conditional on the participant remaining in employment
throughout the deferral period. The number of shares awarded will be determined by reference to the market value of the shares
at the date the bonus payment is determined.
There is no intention to use newly-issued ordinary shares for the Bonus Plan and any shares required for the satisfaction of deferred
bonuses will be acquired by market purchase.
Long-Term Incentive Arrangements

Added Value Plan
The Added Value Plan (the “AVP”) was approved at the Annual General Meeting in 2005. The AVP is designed to incentivise
the Chief Executive by providing a share of the long-term value he creates for shareholders over and above the value created by
Xstrata’s peer companies and to create alignment with shareholders by means of share ownership. The Remuneration Committee
believes that the Chief Executive has a unique role in delivering value to shareholders through the efficient utilisation of Xstrata’s
assets and by making value enhancing acquisitions and divestments. For this reason, it is intended that membership of the AVP will
be restricted to the current Chief Executive and any future successor in that role.
The Chief Executive’s participation in the AVP is contingent on his building up and maintaining a holding of at least 350,000
ordinary Xstrata shares. The holding may be met through shares held beneficially and, subject to the agreement of the
Remuneration Committee, fully vested share options that have not yet been exercised and which have exercise prices materially
below the market share price at the commencement of the relevant plan cycle.
The Chief Executive will no longer be eligible for awards under the Xstrata plc Long Term Incentive Plan (the “LTIP”) in any year
when an AVP cycle commences. The LTIP will continue in force for other Executive Directors and other employees at the discretion
of the Remuneration Committee.
Payments under the AVP will be based upon the growth in total shareholder return (“TSR”) over a three-year performance period
relative to an index of global mining companies, which will form the Xstrata TSR Index. At the end of each performance period an
Excess Return figure will be calculated, which will quantify the difference in TSR between the Xstrata TSR Index and Xstrata. Once
the Excess Return figure has been calculated it will be applied to the market capitalisation of Xstrata at the start of the performance
period to measure the “Added Value” added relative to the movement in the market. The Added Value will be limited to 50% of
the initial market capitalisation. If the Added value is negative (i.e. Xstrata has underperformed the index) there will be no
payments from the AVP. If this figure is positive, it will be multiplied by a Participation Percentage (which is 0.5% of the Added
Value for the first Plan Cycle) to calculate the “Base Reward”. The maximum aggregate Participation Percentage for Plan Cycles
commencing in any three-year period shall not exceed 1.1%.
The Remuneration Committee recognises that the absolute value received by shareholders is higher when outperforming a rising
market than outperforming a market which is static or falling. The Base Reward will be increased or decreased in line with the
Xstrata share price index. This will ensure that higher payments are delivered for higher levels of absolute performance, as is the
case with an orthodox share option or performance share plan. The adjustment is in line with index performance rather then
Xstrata’s to avoid double counting Xstrata’s outperformance of the index. A reduction will then be made for lower levels of
absolute performance, by applying a multiplier to the indexed Base Reward to calculate the Final Reward, as follows:
Xstrata absolute TSR over 3 years Multiplier
+25% or above 1x
0% 0.5 x
-25% or below 0.0 x
Straight-line interpolation will apply between these points for example, if absolute TSR over three years were minus 10%, a multiplier of 0.3 would be applied
Remuneration Report
Provided Xstrata’s TSR is at least equal to that of the Xstrata TSR Index, the Final Reward under each plan cycle will be at least
US$1,000,000.
The Xstrata TSR and Share Price Indices will be weighted by market capitalisation. The group will, initially, comprise of 19 global
mining firms consisting of Xstrata’s key competitors for both financial and human capital: Alcoa Inc, Alcan Inc, Anglo American plc,
Arch Coal Inc, BHP Billiton plc, Coal & Allied Industries Ltd. Elkem ASA, Eramet SA, Grupo Mexico SA de CV, Inco Ltd, Korea Zinc
Inc, Lonmin plc, Falconbridge Ltd (previously Noranda Inc), Norddeutsche Affinerie AG, Peabody Energy Corp, Phelps Dodge Corp,
Rio Tinto plc, Teck Cominco Ltd and Umicore SA.
In the event of one or more constituents undergoing a take-over, merger, dissolution, verification in capital or any other event that
will materially affect calculation of the index, the Remuneration Committee shall determine how this should be reflected in the
index calculation. The Remuneration Committee may add other relevant competitors to the index if required.
At the end of the three-year performance period, 50% of the Final Reward will vest immediately. The vesting of the remainder will
be deferred in equal tranches for a further one and two years. Payments under the Added Value Plan may be settled in cash or
shares as determined by the Remuneration Committee at the date of payment.
As at 31 December 2005, Xstrata’s TSR was just below that of the Xstrata TSR Index. If this is the outcome at the end of the three-
year performance period the award will not vest.
Long Term Incentive Plan

Executive directors are eligible to participate in the Long Term Incentive Plan, (The “LTIP”). The LTIP aims to focus management’s
attention on continuous and sustainable improvements in the underlying financial performance of the Group and on the delivery of
superior long-term returns to Xstrata’s shareholders by providing executives with the opportunity to earn superior levels of reward
for outstanding performance. In addition, the LTIP further aligns the interests of shareholders and management by encouraging
executives to build a shareholding in the Group.
The LTIP provides for the grant of both contingent awards of free shares (“Free Share Awards”) and share options on the same
occasion to the same individual. The two elements are complementary and ensure that the cyclical nature of the industry does not
have an excessively adverse effect on employee remuneration in circumstances where the performance of the Group has otherwise
been good, relative to that of competitors.
The Free Share Awards will ensure that where the Group has performed well over a specified performance period, participants will
be rewarded even if there is no substantial share price growth due to external factors, such as commodity prices or general
economic conditions. The option element will only allow participants to benefit provided shareholders also benefit from future
share price growth. The options will also be subject to stretching performance targets to ensure that windfall growth in the share
price as a result of external factors does not deliver rewards which are not justified by the performance of the Group relative to its
peer group. The policy regarding performance targets is discussed in more detail below.
The number of ordinary shares over which options will be granted will be calculated using a Black Scholes valuation of the option
(or a similar approach) which the Remuneration Committee considers represents both the cost to Xstrata of providing the benefit
and the value of the option itself as a component of the total remuneration package. The option value at grant will not be less
than 25% of the value of the underlying shares. In determining the value of Free Share Awards the value of the underlying shares
will be used.
Using the method above, the value ratio of Free Share Awards to share options for awards made during 2005 was in general 1:1, based
on the value at the time of grant. The Remuneration Committee may change the ratio for future awards if it is thought appropriate.
The Remuneration Committee has determined that annual awards will be made under the LTIP to minimise the impact of share
price volatility and to reflect existing best practice. The rules of the LTIP provide that the aggregate value of options and Free Share
Awards made to an individual in any one year may not exceed an amount equal to two times base salary in normal circumstances
(although in exceptional circumstances the limit may be up to, but not exceed, four times base salary).
Summary of performance conditions

2004 and 2005 LTIP awards
During 2004 and 2005, executive directors were granted market value options and Free Share Awards under the LTIP. The vesting
of both the options and Free Share Awards is subject to the satisfaction of stretching performance conditions over a three-year
performance period. Half of the options and Free Share Awards are conditional on Total Shareholder Return (“TSR”) relative to a
peer group and half are conditional on the Group’s real cost savings relative to targets set on a stretching scale over the three-year
period, as follows.
For the awards conditional on TSR, 25% of the combined award will vest if TSR growth is at the median of the specified peer
group, the full 50% of the combined award will vest for performance at or above the second decile with straight line vesting
between these points. No vesting will occur for TSR growth below median performance.
For the remaining award, vesting is conditional on the Group’s real cost savings relative to targets set on a stretching scale: 5% of
the combined award will vest for 1% cost savings, 35% for 2% cost savings and 50% for 3% or more cost savings, with straight
line vesting between these points. No vesting will occur for cost savings that are less than 1%. Real cost savings will be measured
in relation to operating costs after adjusting for the effects of inflation, excluding depreciation, commodity price linked costs,
effects of currencies on translation of local currency costs and planned life of mine adjustments.
Since the Group’s share price and that of its peers are significantly influenced by the cycle in commodity prices, the Remuneration
Committee considers TSR relative to a peer group to be an appropriate performance measure as it rewards relative success in
growing shareholder value through the development and execution of the corporate strategy. The Remuneration Committee is also
satisfied that TSR will be a genuine reflection of the Group’s underlying financial performance. The use of the second measure,
Group real cost savings relative to targets, reflects the Group’s strategic initiative to add shareholder value through productivity and
cost efficiencies. Furthermore, the use of a financial performance measure alongside a relative TSR measure is aligned with current
corporate governance best practice.
The performance targets are not capable of being retested at the end of the performance period, so that any proportion of a Free
Share Award or option which does not vest after three years will lapse, although vested options will remain exercisable for a
maximum of seven years or such shorter period as the Remuneration Committee may specify (after which they will lapse).
The peer group of global mining companies used to determine the vesting of the options and Free Share Awards that are conditional
on TSR in the 2004 and 2005 LTIPs comprises the same companies used to form the Xstrata Share Indices for the CEO’s Added
Value Plan detailed above, plus WMC Resources Ltd. It is envisaged that this peer group will be used to determine the vesting of
any options and Free Share Awards that are granted in 2006, although the Remuneration Committee may, at its absolute discretion,
vary, add, remove or alter the companies making up the peer group where events happen which cause the Remuneration
Committee to consider that such a change is appropriate to ensure that the performance condition continues to represent a fair
measure of performance. This is provided that the Remuneration Committee reasonably considers such a varied or amended
performance condition is not materially easier or more difficult to satisfy.
Remuneration Report
In calculating the TSR, the share price of a notional parcel of shares of the Group and the companies in the specified peer group
will be averaged over a period preceding both the start and end of the relevant performance period. The Remuneration Committee
has resolved that averaging over a three month period eliminates the volatility in spot share prices that could otherwise distort the
assessment of whether the target has been met.
The TSR of the Group and each member of the peer group over any performance period is calculated by taking the growth
between the closing value and the base value of 100 shares expressed as a percentage of the base value, on the assumption that
any net dividend per share paid by any company during the relevant performance period is reinvested in shares on the last day of
the month during which the relevant shares go ex-dividend. This calculation is subject to such adjustments to closing value and
base value as the Remuneration Committee considers appropriate to reflect any variation of share capital or any merger, take-over,
reconstruction, demerger or change in listing status by any member of the peer group or upon any other events which the
Remuneration Committee considers may materially distort the calculation.
At 31 December 2005, the Group was ranked 6th out of the peer group of 21 companies in terms of TSR for the 2004 award.
If this is the outcome at the end of the three-year performance period then 88% percent of each executive director’s 2004 award
linked to TSR will vest.
At 31 December 2005, the Group was ranked 11th out of the peer group of 21 companies in terms of TSR for the 2005 award.
If this is the outcome at the end of the three-year performance period then 50 percent of each executive director’s 2005 award
linked to TSR will vest.
It should be noted that these amounts are based on the Group’s results at this provisional stage and do not necessarily reflect the
eventual outcome.
2003 LTIP award vesting in 2006

Awards of market value options and Free Share Awards granted under the LTIP to executive directors in 2003 were subject to a TSR
performance condition only. Both the options and Free Share Awards vest in full at the expiry of a three-year performance period to
the extent that the Group’s TSR ranks at or above the second decile of the peer group specified above, and 50% will vest if it ranks
at the median of the peer group. In between these two points straight line vesting will apply. No options or Free Share Awards will
vest for below median performance.
At 10 February 2006, the Group was ranked 5th out of the peer group of 21 companies in terms of TSR. As a result, 95% of each
executive director’s 2003 award vested.
Subsisting rights under Xstrata AG share schemes

Subsisting options held by Mick Davis and Trevor Reid pursuant to terms on which they were recruited and the subsisting options of
Santiago Zaldumbide under certain share schemes previously operated by Xstrata AG were converted into equivalent options over
ordinary shares in the Group at the time of the listing of the Group’s shares on the London Stock Exchange (“the Listing”) but
otherwise continue to be subject to the terms and conditions of the relevant Xstrata AG share schemes. It is intended that the
replacement options will as far as possible be satisfied by the transfer of ordinary shares in the Group held by the trustees of the
Xstrata Employee Share Ownership Trust and the Xstrata Employee and Directors Share Ownership Trust. Whilst subsisting options
continue to vest under these schemes, no future grants will be made. Subsisting options are not subject to performance conditions
because they were originally granted under arrangements (which did not provide for awards to be subject to performance) which
related to Xstrata AG prior to the Group becoming a UK listed company.
Similarly, subsisting options, which had been previously granted to Mick Davis over shares in Xstrata AG owned by Glencore
International, were also converted into equivalent options over ordinary shares in the Group on the Listing but otherwise continued
to be subject to the same terms and conditions as applied originally. On 19th September 2005, the option over these Xstrata shares
was discharged in full and Mick Davis received from Glencore International a consideration equating to the current value of the
option (CHF26.3 million, representing 1.334 million shares at CHF19.70 per share, being the difference between Xstrata’s closing
price of CHF33.30 per share on Monday 19th September 2005 and the exercise price of CHF13.60 per share). As a consequence,
Mick Davis no longer has an option over these 1.334 million Xstrata shares.
Performance Graph
Total shareholder return since IPO GBP Xstrata FTSE100
300
200
100
0
20 Mar 02 31 Dec 02 31 Dec 03 31 Dec 04 31 Dec 05
The performance graph set out above shows the TSR for a holding of shares of the Group for the year ended 31 December 2005
compared with the TSR for a hypothetical holding of shares of the same kinds and number as those by reference to which the
FTSE100 index is calculated. The Board considers that the FTSE 100 currently represents the most appropriate of the published
indices for these purposes.
TSR has been calculated on a spot basis with effect from 20 March 2002, the date conditional dealings in the shares commenced
on the London Stock Exchange, assuming that an equivalent sum was invested on that day in shares of the Group and in the
FTSE 100 index.
Dividends are invested in additional shares and benefits receivable in the form of shares are also added to the relevant holding.
The TSR calculation also assumes that immediately before any liability to the Group in respect of the shares is due to be satisfied
sufficient shares are sold from the holding to raise funds to meet the liability; for example, in the case of a rights issue sufficient
rights are deemed to be sold to enable the proceeds to be invested in taking up as many rights as possible without injecting
fresh funds. In the case of Xstrata, the 2003 rights issue was recalculated as per the date of listing.
Pensions
Mick Davis and Trevor Reid have participated in money purchase retirement plans from their respective dates of joining the Group.
The plans are designed having regard to the taxation and employment status of each executive.
Group contributions are re-assessed at regular intervals and are based on actuarial advice with the objective of accumulating
sufficient funds over the working lifetime of each executive to provide an overall target pension which is currently intended to be
equivalent to approximately 60% of final salary at normal retirement age for executives who begin participating in the plans at the
age of 40. The actual benefits payable will, however, be based on the amount which has accumulated in that member’s money
purchase account.
Remuneration Report
Such contributions are inclusive of any contributions from the relevant individuals. No employee contributions are currently payable
for Mick Davis and Trevor Reid.
As noted above, Santiago Zaldumbide receives no pension benefits under the terms of his fixed cost remuneration arrangement.
Directors’ service contracts

It is the Group’s general policy that the period of notice required should not exceed 12 months. If it became necessary to offer a
longer notice period to a new director, such period would reduce after the initial period. Where specific terms apply to individual
executive directors, these are set out in the section of this report headed Entitlements under Service Contracts see below.
External appointments
Executive directors are not permitted to hold external directorships or offices without the approval of the Board. Santiago
Zaldumbide, having gained the approval of the Board, held directorships with the following companies during the year: Asturiana
de Zinc SA; Carburos Metalicos SA; Fertiberia SA and ThyssenKrupp SA. In total the remuneration received by Santiago Zaldumbide
amounted to €36,500.
Non-Executive Directors
The level of fees for non-executive directors will be set at the level considered necessary to obtain the services of individuals with
the relevant skills and experience to bring added depth and breadth to the composition of the Board.
Non-executive directors’ fees are reviewed annually by the Chairman and the Chief Executive in the light of fees payable to
non-executive directors of comparable companies and the importance attached to the retention and attraction of high calibre
individuals as non-executive directors.
Non-executive directors are eligible to forgo all or part of their directors’ fees to acquire shares in the Group, after deduction
of applicable income tax and social security contributions.
The non-executive directors do not, and will not in the future, participate in the Bonus Plan or LTIP or any other performance-
related incentive arrangements which may be introduced from time to time.
Entitlements under service contracts

Executive Directors
Mick Davis and Trevor Reid have employment agreements with Xstrata Services (UK) Limited (“XSL”) effective from 1 February 2002
which are for fixed terms of one year. However, their services as Chief Executive and Chief Financial Officer respectively are provided
to the Group under a secondment agreement entered into between the Group and XSL on 19 March 2002. Each of Mick Davis and
Trevor Reid is seconded to the Group for a fixed term of two years thereafter renewable by either party for further periods of
two years.
The employment of Mick Davis and Trevor Reid may be terminated by not less than 12 months’ notice by XSL or the director
concerned or by a payment in lieu of notice by XSL. Mr Davis and Mr Reid have agreed to alter their contracts so that on termination
of employment by XSL in breach, or if Mr Davis or Mr Reid resigns in circumstances where they cannot in good faith be expected
to continue in employment, each director is entitled to be paid a sum equal to 100% (instead of the original 150%) of his annual
salary and his previous year’s bonus (plus any accrued basic salary and expenses) and to have all entitlements under his retirement
benefit plans paid in accordance with the plan rules. As both Mr Davis and Mr Reid participate in defined contribution arrangements it
is not expected that any significant additional liability would arise in respect of retirement plan entitlements beyond that already
accrued in the accounts. For the purposes of calculating termination payments, annual bonus will be capped at 300% of annual salary.
In addition, each of the executive directors is eligible to participate in the Bonus Plan which provides that deferred amounts up to
an aggregate ceiling of 100% of salary remain payable notwithstanding cessation of employment after the date a bonus is
awarded other than in the event of dismissal for cause. In the case of termination by reason of death, injury, ill health or disability
before the date the bonus is awarded for a financial year, or if the Remuneration Committee in its discretion so resolves, a
proportion of the annual bonus pool may still be awarded subject to the normal discretion of the Remuneration Committee.
On termination of the agreement under which Santiago Zaldumbide receives a fixed fee for acting as Chairman of Asturiana, other
than on his voluntary termination or termination for gross negligence, Santiago Zaldumbide is entitled to receive a sum from the
redemption of an insurance policy acquired by Asturiana as described above. Santiago Zaldumbide is engaged as a director of
Xstrata Plc on the terms of a letter of appointment dated 18 March 2002. The appointment is on an indefinite basis subject to the
existence of the agreement between Santiago Zaldumbide and Asturiana, the terms and conditions of which are detailed above.
Santiago Zaldumbide will receive no additional remuneration for his position as director of Xstrata Plc and is not entitled to any
compensation in respect of the termination of his office as a director of Xstrata Plc.
Non-Executive Directors
Willy Strothotte is engaged by the Group as a non-executive director and Chairman on the terms of a letter of appointment. The
appointment is for an initial fixed term of 36 months commencing on 25 February 2002 and terminable thereafter by six months
notice by Willy Strothotte. The Group may terminate Willy Strothotte’s appointment at any time and on such termination Willy
Strothotte will not be entitled to any compensation for loss of office. The term may be renewed by the Board.
David Rough is engaged by the Group as the senior independent non-executive director and Deputy Chairman on the terms of a
letter of appointment. The appointment is for an initial fixed term of 36 months commencing on 1 April 2002 and terminable
thereafter by six months notice by David Rough. The Group may terminate David Rough’s appointment at any time and on such
termination David Rough will not be entitled to any compensation for loss of office. The term may be renewed by the Board.
David Issroff, Ivan Glasenberg, Paul Hazen, Robert MacDonnell, Frederik Roux, Sir Steve Robson and Ian Strachan are each engaged
by the Group as a non-executive director on the terms of a letter of appointment. Each appointment is for an initial fixed term of
36 months commencing on 25 February 2002 (or on 8 May 2003 in the case of Ian Strachan) and terminable thereafter by six
months notice by the non-executive director. The Group may terminate each non-executive director’s appointment at any time and
on such termination the non-executive director will not be entitled to any compensation for loss of office. Each term may be
renewed by the Board.
There is no arrangement under which a director has agreed to waive future emoluments nor have there been any such waivers
during the financial year.
There are no outstanding loans or guarantees granted or provided by any member of the Group to or for the benefit of any of
the Directors.
No significant awards have been made in the financial year to any past Directors.
Remuneration Report
Information Subject to Audit

Emoluments and compensation
The emoluments and compensation in respect of qualifying services of each person who served as director during the year were
as follows:
Health
life and Year ended
private 31 December
Salary Deferred Housing medical Other 2004
and fees1 Bonus Bonus allowances insurance benefits Total Total
Director US$ US$ US$ US$ US$ US$ US$ US$
Executives
Mick Davis 1,729,000 2 1,663,4505a 2,961,0845a* 183,0006a 141,6227 6,678,156 8,689,844
Trevor Reid 808,1712 777,5325a 990,776 5a* 141,6606b 72,0858 2,790,224 3,502,923
Santiago Zaldumbide 974,213 3 932,740 5b 1,174,685 5b* 12,6783 3,094,316 2,706,097
Non-executives
Willy Strothotte 327,600 4 327,600 330,012
Paul Hazen 118,300 4 118,300 119,171
David Issroff 100,100 4 100,100 100,837
Robert MacDonnell 118,300 4 118,300 119,171
Dr. Frederik Roux 136,500 4 136,500 119,171
Ivan Glasenberg 118,300 4 118,300 119,171
Sir Steve Robson CB 145,600 4 145,600 146,672
David Rough 227,500 4 227,500 192,507
Ian Strachan 145,600 4 145,600 119,171
4,949,184 3,373,722 5,126,545 324,660 226,385 0 14,000,496 16,264,747
Notes
1. Salary and fees includes non-executive directors’ fees which may be paid in shares.
2. In 2005, Mick Davis’ and Trevor Reid’s salaries were set and paid in UK pounds sterling. The salary figures above have been converted to US dollars based on the
average pound/dollar exchange rate for the year of 1.820 (2004: 1.833) and therefore reflect the impact of the exchange rate fluctuations during the year.
3. In 2005, Santiago Zaldumbide’s basic salary and benefits were set and paid in Euros. The figures above have been converted to US dollars based on the average
euro/dollar exchange rate for the year of 1.245 (2004: 1.244) and therefore reflect the impact of the exchange rate fluctuations during the year.
4. With the exception of Ian Strachan whose fees were set in pounds and paid in US dollars, all non-executive director fees were set and paid in UK pounds sterling.
The figures above have been converted to US dollars based on the average pound/dollar exchange rate for the year of 1.820 (2004: 1.833) and therefore reflect
the impact of the exchange rate fluctuations during the year.
5.a Bonuses were awarded and paid in UK pounds sterling and converted at a rate 1.751, the exchange rate prevailing on the date of the award.
5.b Bonuses were awarded and paid in Euros and converted at a rate of 1.192, the exchange rate prevailing on the date of the award.
6.a. In 2005, Mick Davis’ housing allowance was awarded and paid in US dollars.
6.b In 2005, Trevor Reid’s housing allowance was awarded in US dollars and paid in UK pounds sterling.
7. In 2005, Mick Davis’ benefits were set and paid in both UK pounds sterling and Swiss Francs. The benefits been converted to US dollars based on the average
pound/dollar exchange rate for the year of 1.820 (2004: 1.833) and the average Swiss franc/dollar exchange rate for the year of 0.802 (2004: 0.805) and therefore
reflects the impact of the exchange rate fluctuations during the year.
8. In 2005, Trevor Reid’s benefits were set and paid in UK pounds sterling. The benefits have been converted to US dollars based on the average pound/dollar
exchange rate for the year of 1.820 (2004: 1.833) and therefore reflects the impact of the exchange rate fluctuations during the year.
9. No consideration has been paid to or is receivable by third parties for making available the qualifying services of any directors during the year or in connection
with the management affairs of Xstrata.
*Deferred bonus payable in shares. The number of shares awarded will be determined by reference to the market value of the shares at the date the bonus
payment was determined. Amount also includes $50,046.58, $17,307.69 and $12,805.56 in respect of dividend equivalents awarded during the year in respect
of prior years’ deferred bonus awards which will vest on the date of the underlying award for Mick Davis, Trevor Reid and Santiago Zaldumbide respectively.
Share options
Details of share options of those directors who served during the year are as follows:
At 1 Jan Awarded Exercised/ Expired At 31 Dec Exercise Earliest date Expiry

Director 2005 Discharged unexercised 2005 price of exercise date
Mick Davis
Service Contract Arrangements 444,860 444,860 £4.29 1-Oct-05 1-Oct-12
Service Contract Arrangements 444,860 444,860 £4.72 1-Oct-06 1-Oct-13
Glencore Option 1,334,669 1,334,669 0 CHF 13.60 19-Sep-04 19-Sep-11
LTIP Options 352,872 352,872 £3.60 10-Feb-06 10-Feb-13
LTIP Options 689,655 689,655 £7.35 5-Mar-07 8-Mar-14
Trevor Reid
Service Contract Arrangements 444,860 444,860 0 CHF 12.53 31-Dec-04 31-Dec-11
Service Contract Arrangements 222,430 222,430 £4.12 15-Jan-06 15-Jan-13
Service Contract Arrangements 222,430 222,430 £6.35 15-Jan-07 15-Jan-14
Santiago Zaldumbide
Xstrata AG Management and
Employee Incentive Scheme 120,640 120,640 0 CHF 14.98 31-Jan-04 31-Jan-07
5,058,224 413,319 1,900,169 0 3,571,374
Notes
1. No options, other than the LTIP options, are subject to performance conditions as explained above. Details of the LTIP performance conditions are described above.
2. During the year, no options were subject to a variation of terms and conditions.
3. Mick Davis’ and Trevor Reid’s LTIP options may be settled in cash at the discretion of the Remuneration Committee.
4. The highest and lowest prices of the company's shares during the year were GBP14.90 and GBP8.69 respectively (2004 GBP9.50 and GBP6.22 respectively).
The price at the year end was GBP13.60 (2004 GBP9.31).
5. On 19th September 2005, Mick Davis exercised his option over 1,334,669 shares. The market value of an Xstrata share on the date of exercise was CHF33.30.
6. On 3rd March 2005, Trevor Reid exercised his option over 444,860 shares. The market value of an Xstrata share on the date of exercise was £10.44.
7. On 3rd March 2005, Santiago Zaldumbide exercised his option over 120,640 shares. The market value of an Xstrata share on the date of exercise was £10.44.
8. The aggregate gains on the exercise of the options during 2005 was US$25,810,548 (2004 US$16,636), having been converted in US dollars at the average
exchange rate for the year of 1.2463 (2004: 1.2421).
9. The gain on the exercise of the Glencore option does not represent an obligation of Xstrata plc, as they were awarded by Glencore AG, and were over shares
held by Glencore AG.
Remuneration Report
Shares
Details of the Company’s ordinary shares over which those directors who served during the year have rights under the deferred
bonus scheme, and conditional rights under the LTIP are as follows:
End of
the period
Scheme for qualifying
interest at conditions to At
Director 1 Jan 2005 Awarded be fulfilled Vested 31 Dec 2005
Mick Davis
LTIP 113,880 10-Feb-06 0 113,880
LTIP 206,897 5-Mar-07 0 206,897
Added Value Plan *
Deferred Bonus 169,811 23-Feb-07 0 169,811
Trevor Reid
LTIP 36,080 10-Feb-06 0 36,080
LTIP 87,931 5-Mar-07 0 87,931
LTIP 57,639 11-Mar-08 0 57,639
Santiago Zaldumbide
LTIP 34,560 10-Feb-06 0 34,560
LTIP 80,690 5-Mar-07 0 80,690
LTIP 66,357 11-Mar-08 0 66,357
560,038 395,983 0 956,021
Notes
1. No shares have become receivable in respect of a scheme interest.
2. Details of performance conditions are described above.
3. The market value of a share on the date of award under the LTIP and the Deferred Bonus was GBP10.60.
*During the year, Mick Davis was made an award under the Added Value Plan as described above. The participation percentage was 0.5% and the market
capitalisation at the date of award was £6,026,084,544.
No amount of shares awarded has been disclosed in the table above, as this award is not over a fixed number of shares, but is a plan which calculates a monetary
award at the end of the performance period, which may then be settled in cash or by the award of shares with a value equal to that of the award. No awards will
be made to Mr Davis under the LTIP in any year in which any award is made to him under the AVP.
Pensions
Mick Davis and Trevor Reid have participated in defined contribution retirement benefit plans. During the year pension related
payments were made as follows:
2005 2004 2005 2004 2005 2004

Mick Davis Mick Davis Trevor Reid Trevor Reid Total Total
US$ US$ US$ US$ US$ US$
Pension related payments 1,961,746 629,025 1,282,445 271,602 3,244,191 900,627

Notes
1. Further details of the pension arrangements are explained above.
2. Santiago Zaldumbide received no pension benefits under the terms of his fixed cost remuneration arrangement which is detailed above.
3. Based on the average UK pound/US dollar exchange rate for the year of 1.820 (2004: 1.833). Payments to Mick Davis and Trevor Reid in both years were made in
UK pounds sterling.
Approved by the Board and signed on its behalf by
Trevor Reid
Director and Chief Financial Officer
10 March 2006
Enquiries
If you would like further information on Xstrata please contact:
www.xstrata.com
Corporate
Claire Divver
+44 20 7968 2871
cdivver@xstrata.com
Brigitte Mattenberger
+41 41 726 6071
bmattenberger@xstrata.com
If you would like to register to receive copies of Company news releases or announcements, please contact us (details above)
or register directly on the website at www.xstrata.com/register
Design and production – Cre8with.com • Typesetting – Orb Solutions • Printing – St. Ives Westerham Press
We will grow and manage a diversified portfolio of metals and mining businesses
with the single aim of delivering industry-leading returns for our shareholders.
We can achieve this only through genuine partnerships with employees,
customers, shareholders, local communities and other stakeholders, which are
based on integrity, co-operation, transparency and mutual value-creation.
01 Key Financial Results Operating and Financial Review 79 Group Information

02 Xstrata at a Glance 14 Business Overview & Strategy 82 Board of Directors
04 Chairman’s Statement 18 Key Performance Indicators 84 Executive Management
07 Chief Executive’s Report 20 Financial Review 85 Directors’ Report
36 Alloys 91 Corporate Governance Report
44 Coal 102 Remuneration Report
57 Copper
67 Zinc
77 Technology
Xstrata plc Bahnhofstrasse 2 PO Box 102 6301 Zug Switzerland Xstrata Annual Review 2005 Annual Report 2005
Tel +41 41 726 6070 Fax +41 41 726 6089 www.xstrata.com

Annual Report: Xstrata PLC Bahnhofstrasse 2 PO Box 102 6301 Zug Switzerland

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Xstrata plc Bahnhofstrasse 2 PO Box 102 6301 Zug Switzerland Xstrata Annual Review 2005 Annual Report 2005

Tel +41 41 726 6070 Fax +41 41 726 6089 www.xstrata.com

01 Key Financial Results Operating and Financial Review 79 Group Information

Key Financial Results

Year ended Year ended %

Revenue 8,049.8 6,462.4 25

Earnings per share (basic) 279¢ 170¢ 64

Cash generated from operations 2,779.9 1,784.9 56

Dividends per share:

■ Attributable profit up by 60% to $1.7 billion

producer of ferrochrome and chromite mines and 1150 1,116 400

world’s largest producer of 19 in Australia and 13 in 4000 3,400 400 1,079

producers of zinc globally. in Spain and Germany, 1600 1,449 300

Technology | Xstrata Based in Brisbane, Revenue US$m EBIT US$m

Technology’s ISASMELT Australia, Xstrata 90 77 18 16

*2004 and 2005 data is reported under IFRS

Revenue Revenue EBIT EBIT

*Before non-trading items, continuing operations excluding Technology and unallocated

Alloys Coal Copper Zinc

Employees Employees Net assets Net assets

Governance and corporate responsibility

Outlook and prospects

Chief Executive’s Report

Chief Executive’s Report

An underground miner operates the continuous miner at Arthur Taylor

Chief Executive’s Report

Acquisition of One-Third of Cerrejón

Further acquisition growth

Black Economic Empowerment in South Africa

Chief Executive’s Report

Balance sheet, dividend and capital management

Minera Alumbrera operators control levels of air in the

EBITDA Earnings per share*

As a consequence, the outlook for 2006 is very encouraging.

Operating and Financial Review | Business Overview & Strategy

Our growth is guided by the following strategic objectives:

■ to uphold a rigorous and unwavering focus on value, internally and externally;

EBITDA: 2001 –2005

2001: US$126m 2002: US$482m 2005: US$3,103m

Group structure and management philosophy

A balanced, diversified portfolio

Leaders in operational excellence

Focus on value creation and growth

Operating and Financial Review | Business Overview & Strategy

Commodity business strategies

Xstrata Alloys Position the vanadium division optimally to Xstrata Coal

Be recognised for Xstrata’s commitment to

Exploring for further growth

Xstrata Copper Xstrata Zinc Xstrata Technology

Operating and Financial Review | Key Performance Indicators

EBITDA Margin | Xstrata’s EBITDA margin shows EBITDA margin %

hours worked. Alloys Coal Copper Zinc

operations incurred no environmental fines or penalties, 0

No Category 4 or 5 incidents occurred in 2004 or 2005

Operating and Financial Review | Financial Review

Basis of presentation of financial information

Consolidated operational results

Minera Alumbrera open pit at night

Consolidated Results (includes minority interests) Year ended Year ended

Alloys 1,115.5 953.0

Operating and Financial Review | Financial Review

EBIT 31.12.04 1,497.8