Xstrata Copper

Driving the
Organic Growth
Strategy
APRIMIN
Santiago, 1 July 2010

Xstrata today:
A global diversified mining powerhouse
Global diversified miner with market capitalisation of $53bn*
Headquartered in Switzerland and employs c.65,000** people in 19 countries
Top 5 global producer of export thermal coal, export coking coal, copper,
ferrochrome, nickel and zinc, as well as a growing platinum business
Dow Jones Sustainability Index (DJSI) award as Mining Sector Leader for the
third consecutive year

Global
Player

INTEGRATED
MONOLITHS

BHP
Billiton
$206bn

GLOBAL
DIVERSIFIEDS

3+ regions

Xstrata
$53bn
Vale
$153bn

Rio Tinto
$129bn

Anglo
American
$54bn

FOCUSED LOCALS

13 regions

NUMBER OF KEY GEOGRAPHIES

Global mining and metals industry 2009*

Xstrata
2001

LOCAL HEROES

Regional
Player
Note:

Single

As at 14 March 2010 based on market capitalisation

** Including

contractors

13 commodities

3+ commodities

COMMODITY FOCUS

8+ commodities

Multi

Strong portfolio of geographically diverse

copper assets and projects

diverse assets and projects

Xstrata Coppers Business Strategy

Generation and evaluation of new
projects to replenish the pipeline
700ktpa of further
copper production under
evaluation

$7bn growth capex for

approvals 2009/10 for 550ktpa new
copper

New quality growth through project

development/construction

Maximise NPV of existing operations

including capitalising on regional
leverage opportunities

Continual mine
expansions/extensions;
continuous improvement

Growth through acquisitions and

optimisation of asset portfolio
2006 Falconbridge
2006 Tintaya
2003 MIM
4

Underpinned by Sustainability

Injury-free, safe work

environments
Demonstrated leadership in
environmental performance
Reputation for social
responsibility
Realisation of the full potential
of our people

Xstrata plc Sector Leader of

Dow Jones Sustainability
Index for third consecutive
year 2009/10

Xstrata Copper safety performance

(per million hours worked)

16

Total recordable injury

frequency rate (TRIFR)

Strategic Objectives
sustainability focus

15.0

14

12.7

12

10.8

10
8

7.3

4.7

4
2
0

2005

2006

2007

2008

2009

Xstrata Copper - 23 awards

in 2009 for sustainability best
practices at regional and local
levels

Continued transformation and growth to

create a major global copper producer
M & A drove first stage of growth to become worlds 4th largest copper
producer (acquisitions of MIM, Falconbridge and Tintaya)
Organic growth to drive second stage of growth to 1.5mtpy by end 2014
Expansions support 15% improvement in real unit cash costs

Ongoing portfolio management to optimise asset portfolio

Industry Ranking - 2005

Industry Ranking - 2010

Mined Production

Codelco

Codelco

BHP Billiton

Freeport

Phelps Dodge

BHP Billiton

Freeport

#4

Xstrata Copper

Rio Tinto

#9

Xstrata Copper
0

500

Rio Tinto

Top five share: 36%

1000

1500

2000

Mining operations:
Mount Isa, Ernest Henry, Alumbrera

Top five share: 37%

0

500

1000

1500

2000

Mining operations:
Mount Isa, Ernest Henry, Alumbrera
Tintaya, Antamina, Kidd,
Collahuasi, Lomas Bayas

Source: Brook Hunt, The Long-Term Outlook for Copper, 2nd Quarter Data Volume 2009, 4th Quarter Data Volume 2005.

Major mineral resource expansions support

significant brownfield and greenfield growth
Projects successfully advanced through financial crisis
Business plan for c.60% growth by end 2014 to 1.5mtpa mined copper production:
Four brownfield project expansions now approved and under construction
Two further projects expected to be approved in 2010: Antapaccay, Las Bambas
Further greenfield projects potentially add further 700,000tpa mined copper
production

Standard concentrator design and strategic alliances facilitating

efficient project development for major projects
Production growth profile

Mineral Resources growth

kt mined copper
2,000

Mt
80
70
60
50

Greenfield Projects
Canada
North Chile
+
Southern Peru
Minera Alumbrera
North Queensland

Confirmed projects:
Lomas Bayas II
Ernest Henry u/g
Antamina expansion
Collahuasi expansion
Antapaccay
Las Bambas

Exisiting Operations (Base)

Confirmed Projects

452%

1,500

Potential Greenfield

Potential greenfield
Tampakan

1,000

40

(Feasibility)

30

(Prefeasibility)

500

20

Frieda River

El Pachon
(Updated feasibility)

10
0
2005

2006

2009

0
2009

2010

2011

2012

2013

2014

2015

2016

Alliances and
Standard Concentrator Project

Why have an Alliance ?

In 2007, was a Sellers market for engineering services
Lead times for engineered mining equipment extending to
over 3 years
Top engineering companies were turning away work and not
bidding when requested by Owners
Did XCu really want each of the six main projects in the
project pipeline with different engineering companies and
therefore designed and managed differently ?
Would there be benefits by consolidating the projects into an
Alliance and working with one engineering company ?
What benefits could then be realized by doing many things
in a standard way ?
Consider other Alliances than just engineering, possibly
major engineered mining equipment as well
9

How Did Xstrata Pick Bechtel ?

In Sept/07 issued an RFP to Bechtel, Fluor and SNCL (focus
was on people, project teams, experience & commercial terms)
By mid-Oct/07 shortlisted to just Bechtel and Fluor

By late November finalized commercial and legal negotiations

with Bechtel
Copper Exco and in turn Copper Board approved the award,
signed the Strategic Alliance late Nov/07 for a 10 year period

10

Why Did Xstrata Pick Bechtel ?

Proven capability & experience to execute major copper
concentrator projects in logistically challenging locations
Designed & built most major copper concentrators in Latin
America (Antamina, Escondida Phase IV, Collahuasi, La
Candelaria, Los Pelambres, Los Bronces)
Extensive experience with large SAG & ball mill installations
EPCM and EPC capability in all countries where our projects are
located
Excellent safety record worldwide
Clearly understood concept behind standardization and
replication benefits
Key people and depth of people resource in company
Procurement and logistics experience
Senior Bechtel corporate support

11

Standard Concentrator
Objectives
Use of standard concentrator in multiple copper
concentrator projects will have significant benefits
for Xstrata including:

engineering efficiencies through replication

procurement efficiencies by doing things once
vendor submittal efficiencies by doing things once
cost savings in multiple areas
schedule duration reductions
spare parts inventory cost savings due to commonality
construction efficiencies through repetition
start-up efficiencies through learning
reduced operating costs through progressive fine-tuning

12

Long Lead Items

&
Other Alliances

Long Lead Items

Mills and Gyratory Crushers
SAG and ball mills & gyratory crushers:
FL Smidth and Metso requested to bid
Both companies really wanted Xstratas business today and for the
future
Both companies offered production slots that knocked 10 months off
then current lead times and provide priority access to future
production slots
Pricing for first set of mills and crusher very competitive
Pricing for future mills and crushers tied to initial supply and to preagreed cost plus formula
Awarded 7 year Strategic Alliance to FL Smidth
Placed orders for two identical sets of mills and crushers under
Alliance

14

Long Lead Items

Mills and Gyratory Crushers
Standardized on 40ft. SAGs and 26ft. Balls and 60x113
gyratory crushers
First set of mills and crusher available ex-works Q3 2010
with second identical set ex-works Q3 2011
First set for Antapaccay, second was for El Morro, now reallocated to Las Bambas (as the Standard used)

15

Long Lead Items

Gearless Motor Drives
Gearless motor drives:
Siemens and ABB requested to bid
As per mills, both companies really wanted Xstratas business today
and for future
Both companies offered priority access to production slots that
knocked 8 months off then current lead times and provide priority
access to future production slots
Pricing for first set of gearless motor drives very competitive
Pricing for future gearless motor drives tied to published indices for
copper, steel and labour in the countries of manufacture (Germany
and Czech Rep.)
Awarded 7 year Strategic Alliance to Siemens
Placed orders for two identical sets of drives under Alliance

16

Long Lead Items

Gearless Motor Drives (GMDs)
Standardized on 24 MW SAG drives and 16.4 MW Ball mill
drives
First set of drives available ex-works Q3 2010 with second
identical set ex-works Q3 2011
First set for Antapaccay, second was for El Morro, also now
re-allocated to Las Bambas (as the Standard used)

17

Long Lead Items - Antapaccay

GMDs and Ball mills

SAG mill stator coils

SAG mill rotor segment

Ball mill head segments

Ball mill shell cans

18

Long Lead Items

What is next on the procurement list ?
Expanding FLS and Siemens Master Purchase Agreements where it
makes sense as part of SC Project (Pebble Crushers ?, Thickeners ?,
Flotation cells ?, Cyclones ?, Pumps ?, In-Plant and Overland
Conveyors ?, Power and Distribution Transformers ?, Gas Insulated
Switchgear ?, etc)
Going outside of FLS and Siemens where we get better benefits
(prices, deliveries or product fits)
Awarded Pebble Crushers & Apron Feeders to Metso, Main Power
Transformers to Compton Greaves, Gas Insulated Switchgear to
Siemens, Overland Conveyors to Thyssen Krupp Robins, Vibrating
Screens to Have & Boecker, Distribution Transformers to Jiangsu
Huapeng Transformer, Flotation Cells to FLS, etc.
More equipment under evaluation today
19

Southern Peru
Case Study
20

Peru: Strategic Relevance

Important global metals
player:
Largest silver producer
Second largest copper producer
Sixth largest gold producer
Promotes foreign mining
investment:*
US$19 billion invested 1994-09
US$35 billion in projected
investment
Attractive exploration
potential:
3rd largest destination for
exploration expenditure
worldwide**
Xstrata Coppers presence:
Tintaya-Antapaccay
Antamina JV
- Las Bambas Project
* Source: Sociedad Nacional de Minera, Petrleo y Metals (SNMPE) ** Source: Metal Economics Group
21

Building on regional leverage

August 2004
Acquisition of
Las Bambas

May 2006
Acquisition of Tintaya

2006

2004

Mar 2006
Publication of initial
Las Bambas
Mineral Resource
300Mt @ 1%
Cut-off 0.5%
October 2004
Stakeholder engagement
begins

Feasibility studies

Nov 2007
Formation of Southern Peru
Div

2007

Mar 2007
69% increase to Las Bambas
Mineral Resource:
508Mt @ 1.14%
Cut-off 0.5%

Mar 2007
Publication of initial
Antapaccay Mineral Resource
472Mt @ 0.74%
Cut-off 0.4%

2008

Mar 2008
Publication of initial
Coroccohuayco Mineral Resource
90Mt @ 3.10%
Cut-off 1.5%
Mar 2008
10% increase to Antapaccay MR
520Mt @ 0.72%
Cut off 0.3%

2009

2010

August 2009
32% increase to Antapaccay
MR
720Mt @ 0.56%
Cut-off 0.2
26% increase to Las Bambas
MR
1.13Bt @ 0.77%
Cut-off 0.3%

19% increase to Las Bambas MR

860Mt @ 0.93%
Cut-off 0.4%

22

Resources of over 2 billion tonnes

*
Mineral Resources
Name of Operation

Tintaya
Antapaccay
Coroccohuayco
Las Bambas

Total
Resources
(Mt)

Ore
% Cu
Ore
% Cu
Ore
% Cu
Ore
% Cu

Measured Indicated
(Mt)
(MT)
65
1.20%
180
0.68%
2
3.01%
228
0.59%
475
0.72%

51
1.10%
390
0.57%
30
3.20%
658
0.86%
1,129
0.83%

Total
Inferred resource
(Mt)
(Mt)
1
0.80%
150
0.30%
60
3.06%
246
0.68%
457
0.87%

117
1.15%
720
0.56%
92
3.10%
1,132
0.77%
2,061
0.81%

*Internally reported, not including by-product credits. Full R&R statement in Oct 09 release.

23

Estimated approvals in mid-2010

Tintaya-Antapaccay
Objective:
To extend the Tintaya mine life
by 20+ years and expand
production by 60% through the
development of the Antapaccay
deposit, 10km from Tintaya

Project details:
Indicative Capex US$1.5 billion
Concentrator throughput 70ktpd
Copper Production: 160ktpa Cu in
concentrate over 20+ years

24

Estimated approvals in mid-2010

Tintaya-Antapaccay
Major milestones:
Positive feasibility completed Oct
2009
EIS submitted December 2009
Public hearings for EIS successfully
completed March 2010

Final steps:
EIS approval expected 2Q10
Corporate approvals expected 2Q10
Construction 3Q10-3Q12
Commissioning in mid 2012
25

Antapaccay
Overall Concentrator View

26

Antapaccay
Standard Concentrator Plant View

27

Antapaccay
Crusher View

28

Antapaccay
Overall Site Layout

29

Xstrata Structure Project and Operations

30

Working with experienced

Bechtel Management Team

31

Estimated approvals 1Q11

Las Bambas
Major milestones:
Fuerabamba community officially
agrees to resettlement 1Q10
Feasibility peer reviewed in 1Q10

Final steps:
EIS submitted May 2010
Option exercise decision Sept 2010
EIS and final corporate approvals
expected 1Q11
Construction 4Q11-3Q14
Commissioning 4Q14
32

Estimated approvals 1Q11

Las Bambas
Objective:
To build a major new, long life
mining complex with initial copper
production of over 400ktpa

Project details
Capex US$4.2 billion
Concentrator throughput 140ktpd
Copper Production: an average of
400ktpa of Cu in concentrate for
the first 6 years, and over the
LOM 320ktpa
Molybdenum Production: 5ktpa
33

Southern Peru
Las Bambas Location

34

Infrastructure Challenge
Access Roads two required

35

Infrastructure Challenge

Concentrate pipeline route to Antapccay

36

Infrastructure Challenge

Transmission Lines in Southern Peru

37

Las Bambas Overall Site

38

Maximising synergies decreasing costs

Strategic alliances:
EPCM contracts with Bechtel
Large equipment items with FLSmidth
and Siemens
Standard Concentrator concept
Human Resources:
Training
Knowledge transfer for start up
Maintenance shutdowns
Infrastructure
Divisional offices
Port facilities
Transport of concentrates via road/train
Procurement and Services
Common spare parts
Shared storage
Increased negotiation capacity

Las Bambas-Tintaya pipeline 178 km

39

Muchas Gracias

40