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									Xstrata Nickel

2006 Sustainability Report
About This Report

This Sustainability Report outlines the social, environmental and economic performance of all operations and projects
managed and operated by Xstrata Nickel, over the period of January 1, 2006 to December 31, 2006. Xstrata plc assumed
full control of Falconbridge Limited on August 21, 2006 and devolved the former Falconbridge assets into global
commodity businesses. Xstrata Nickel, a new commodity business, was created and comprises the former Falconbridge’s
nickel assets in Canada, the Dominican Republic and Norway, and a range of growth projects. While we have worked
extensively to provide all relevant information, the change in corporate structure and the adoption of new reporting
systems and measurement criteria have affected our ability to provide comparative, year-over-year data for Xstrata
Nickel. As a result, 2006 acts as a baseline year in which we have transitioned to the Global Reporting Initiative (GRI)
G3 guidelines, allowing us to report comparative data in all material sustainability measures in future years.

                               ABOUT XSTRATA                                                       1

                               APPROACH TO SUSTAINABILITY                                          2

                               LETTER TO STAKEHOLDERS                                              4

                               OPERATIONS AND PROJECTS AT A GLANCE                                 6

                               CARE AND CONCERN FOR PEOPLE                                         8
                               2007 Health and Safety Targets and Objectives                      14
                               2007 Employee and Community Targets and Objectives                 20

                               ENDURING ENVIRONMENTAL COMMITMENT                                  22
                               2007 Environmental Objectives and Targets                          30

                               STRONG ECONOMIC PERFORMANCE                                        32
About Xstrata


Xstrata is a global diversified mining group, listed on the London and Swiss Stock Exchanges,
with its headquarters in Zug, Switzerland. Xstrata’s businesses maintain a meaningful
position in seven major international commodity markets: copper, coking coal, thermal coal,
ferrochrome, nickel, vanadium and zinc, with recycling facilities, additional exposures to
gold, cobalt, lead and silver and a suite of global technology products, many of which are
industry leaders. The Group’s operations and projects span 18 countries: Argentina,
Australia, Brazil, Canada, Chile, Colombia, the Dominican Republic, Germany, New
Caledonia, Norway, Papua New Guinea, Peru, the Philippines, South Africa, Spain, Tanzania,
the U.S. and the U.K. Xstrata employs approximately 43,000 people, including contractors.
Xstrata plc contributes at least 1% of its annual pre-tax profit to fund corporate social
involvement initiatives. The Company supports initiatives in enterprise and job creation,
education, environment, health, social and community development and arts and culture.                                  1

Xstrata Nickel, headquartered in Toronto, Canada,         XSTRATA NICKEL VISION
is one of Xstrata Group’s global commodity                We will consistently deliver superior returns for
businesses, comprising five mines and processing          shareholders by successfully creating, managing and
facilities in Ontario and Quebec, Canada; a ferronickel   growing an industry-leading portfolio of nickel assets.
mine and processing facility in Bonao, Dominican
Republic; and a refinery in Kristiansand, Norway.         We will achieve this in a safe, transparent,
Xstrata Nickel has a significant portfolio of growth      environmentally and socially responsible way
projects, including Nickel Rim South in Canada,           together with fellow employees, communities,
Kabanga in Tanzania, and Koniambo in New                  governments and other stakeholders.
Caledonia. Xstrata Nickel is the world’s fourth largest
nickel producer, with annual managed production           XSTRATA NICKEL VALUES
of more than 110,000 tonnes of refined nickel.            Health and safety above all
Xstrata Nickel employs approximately 5,000 people,        Honesty and integrity in our dealings
including contractors.                                    Accountable for our actions
                                                          Entrepreneurial in identifying and pursuing value
                                                          Passion to change for the better and courage to
                                                          pursue that change
                                                          Engage with our fellow employees, communities,
                                                          governments and other stakeholders in building
                                                          and sustaining mutually beneficial relationships

                                                                                                           Xstrata Nickel
    Approach to Sustainability

2                                    Xstrata Nickel’s approach to                 community, and are available at
                                     sustainability is rooted in Xstrata plc’s    www.xstrata.com/sustainability/
                                     Business Principles to operate ethically,    standards/hsec. All operations are
                                     responsibly and openly by working with       independently audited against these
                                     others. We will only achieve sustainable     management standards at least every
                                     growth through safe, environmentally         three years.
                                     and socially responsible practices.          HSEC risk assessments were undertaken
                                     Throughout all stages of our business        at each Xstrata Nickel operation as part
                                     activities, we aim to foster genuine         of Xstrata’s 100-day integration process
                                     partnerships with employees, customers,      and were completed by the end of 2006.
                                     shareholders, local communities and          Detailed plans, with actions prioritized
                                     other stakeholders, which are based on       based on risk, have been put in place
                                     integrity, cooperation, transparency         to address the recommendations from
                                     and mutual value-creation.                   these operational reviews. HSEC roles
                                     Upon the creation of Xstrata Nickel in       and responsibilities throughout the
                                     August 2006, we rapidly undertook            organization have been realigned to
                                     integration of the Xstrata sustainability    ensure effective resources are assigned
                                     framework, including Xstrata’s Business      where required. Xstrata Nickel has
                                     Principles; Health, Safety, Environment      established an executive HSEC committee,
                                     and Community (HSEC) Policy;                 thereby ensuring the highest level of
                                     Corporate Social Involvement Policy;         responsibility for HSEC performance sits
The Sudbury Soils Study ecological   Risk Management Policy; and HSEC             at the most senior level in our commodity
risk assessment included a           Management Standards, which are              business. Xstrata plc also has a Board
comprehensive plant study.
                                     based on international leading practice.     HSEC Committee, to which each
                                     This included implementing rigorous          commodity business’ Chief Executive
                                     sustainability reporting requirements to     Officer presents the business’
                                     ensure compliance with the new GRI G3        HSEC strategy, objectives, challenges
                                     guidelines. Xstrata’s HSEC Management        and performance on a rotational basis.
                                     Standards itemize the intent and             Throughout 2007, we will continue
                                     performance requirements of core             to develop and strengthen our strategic
                                     sustainability aspects such as leadership,   objectives, programs and targets in
                                     biodiversity conservation, operational       order to gauge and improve our
                                     integrity, product stewardship and           sustainability performance.

2006 Sustainability Report
                                 Xstrata Nickel’s approach to sustainability is rooted in Xstrata plc’s
                                 Business Principles to operate ethically, responsibly and openly by
                                 working with others. We will only achieve sustainable growth through
                                 safe, environmentally and socially responsible practices. Throughout
                                 all stages of our business activities, we aim to foster genuine
                                 partnerships with employees, customers, shareholders, local
                                 communities and other stakeholders.

2006 PERFORMANCE HIGHLIGHTS                                                                                                                    3
Zero fatalities; achieved a total recordable injury frequency rate of 24.3 and
a lost-time injury frequency rate of 4.3, a 29% improvement over 2005

Falcondo, our ferronickel operation in the Dominican Republic, achieved a lost-time injury frequency
rate of 2.3, the lowest in the operation’s history

Presented a cheque for C$9.3 million to the Makivik Corporation, honouring our commitment to
the communities near Raglan in Canada

Committed C$5 million to the Centre for Excellence in Mining Innovation at Sudbury’s
Laurentian University in Canada

Provided donations of $2 million to charitable and community causes

Began construction of a $25.9 million end-of-life metal bearing products recycling plant
at the Sudbury smelter

Increased revenue to $3,364 million, a 56% increase over the prior year

Reported earnings before interest and taxes (EBIT) of $931 million, a 180% increase over 2005 results

Initiated a pre-feasibility study at the Kabanga project in Tanzania and completed the first renewal
phase at the Koniambo project in New Caledonia

Note: All funds in this report are in U.S. dollars and all measurements are metric, unless otherwise noted.
                                                                                                              CRAIG MINE
                                                                                                              Craig mine is Xstrata Nickel’s
                                                                                                              largest operating mine in
                                                                                                              Sudbury, Ontario.

                                                                                                                                 Xstrata Nickel
Letter to Stakeholders

4                            Dear Stakeholder,                              members where we operate, partners,
                             Xstrata Nickel came into existence on          suppliers, customers and shareholders.
                             August 21, 2006, as Xstrata plc assumed        We have also developed this report
                             full control of Falconbridge Limited. On       mindful of the limitations of our current
                             that day, a period of rapid change and         reporting capabilities. As we have
                             transformation began, as operations            changed reporting systems and
                             found their place in Xstrata’s existing        measurement criteria, and indeed the
                             commodity businesses, Xstrata Copper           structure of our commodity business,
                             and Xstrata Zinc, or as a new commodity        this has affected our ability to provide
                             business, Xstrata Nickel.                      complete comparative, year-over-year
                             Less obvious, but equally significant, were    data for Xstrata Nickel. As a result, 2006
                             changes that occurred behind the scenes.       acts as a baseline year in which we have
                             As the newly formed Xstrata Nickel, we         transitioned to the new G3 version of the
                             adopted and improved systems for               Global Reporting Initiative, allowing us to
                             reporting financial, health and safety,        report comparative data for all material
                             environmental and community                    sustainability challenges in future years.
                             performance. We adopted new                    Though 2006 was a year of major
                             management standards, risk management          change, it was also a year of significant
                             and governance systems, policies and           achievement. Our focus on safety did not
                             procedures. We re-organized ourselves          waver in 2006. While we will not be
                             to function smoothly within this new           satisfied with our safety performance
IAN PEARCE                   context. As a result, the first eight months   until we reach our goal of Zero Harm,
Chief Executive Officer,     in our new business unit have been both        there were notable accomplishments.
Xstrata Nickel
                             challenging and highly rewarding.              Nickel Rim South, our flagship
                             This is Xstrata Nickel’s first annual          development project in Sudbury, Canada,
                             Sustainability Report. It is one of our        passed a milestone of two years and
                             core values to engage actively with our        more than 2 million hours without a lost-
                             stakeholders, and to work with them            time injury. Kabanga, our development
                             transparently, openly and honestly. We         project in Tanzania, passed 1 million
                             have developed this report for 2006 with       hours without a lost-time injury. And
                             this value in mind. Our stakeholders           Falcondo, our ferronickel operation in
                             include, but are not limited to, our           the Dominican Republic, achieved the
                             employees and contractors, community           lowest lost-time injury frequency rate in

2006 Sustainability Report
                           Xstrata Nickel came into existence on August 21, 2006, as Xstrata plc
                           assumed full control of Falconbridge Limited. On that day, a period
                           of rapid change and re-organization began, as operations found their
                           place in Xstrata’s existing commodity businesses, Xstrata Copper
                           and Xstrata Zinc, or as a new commodity businesses, Xstrata Nickel.

its operating history, as did Nikkelverk,   work experience to university students in                                      5
our nickel refinery located in Norway.      Norway and strengthens ties between
We also made a number of notable            Xstrata Nickel communities.
achievements in the communities where       Perhaps most importantly, 2006 was the
we operate. Early in 2006, our Raglan       year we gained a newfound ability to
mine in Nunavik, Quebec, presented a        focus clearly on the future. After several
cheque for C$9.3 million to the Makivik     years of corporate uncertainty, our
Corporation, representing the first         future is now settled and our direction
significant profit sharing payment          has been established. We are focused on
between the mine and the Inuit people       sustainable, value-creating growth and
of this remote northern region. Later in    we have the means – in terms of financial
the year, we committed C$5 million to       strength, promising development projects
the Centre for Excellence in Mining         within our control and the expertise of
Innovation at Sudbury’s Laurentian          our people – to pursue this growth. As
University in Canada. These funds will      part of the larger Xstrata Group,
be used to help establish a centre for      Xstrata Nickel has an equally strong
world-leading mining technology and         commitment to Zero Harm, environmental
expertise. We also initiated an exchange    stewardship and respect for stakeholders
program late in 2006 between Nikkelverk,    and communities. As we grow and
our Norwegian refinery, and Falcondo,       strengthen as a business, we will
our ferronickel operation in the            continuously strive to improve all aspects
Dominican Republic. Norwegian               of our performance in order to create        MONTCALM
university students will spend work-terms   mutual benefit for Xstrata Nickel and        GROUNDHOG RIVER
in the Dominican Republic, working in       its stakeholders.                            The Montcalm mine environmental
                                                                                         management system and programs
communities that partner with the                                                        are successful in protecting
Falcondo Foundation to build community                                                   the Groundhog River, near
                                                                                         Timmins, Ontario.
capacity, help foster micro-economic
activities, and contribute to
environmental and educational
initiatives. I am very encouraged by
this program, as it provides direct         Ian Pearce
support to Dominican communities            Chief Executive Officer, Xstrata Nickel
in need, increases awareness, provides      July 2007

                                                                                                         Xstrata Nickel
Operations and Projects at a Glance

      Operations                     About the Business/2006 Production Rates

      RAGLAN MINE – NUNAVIK          Located in the far north region of Quebec, Xstrata Nickel’s Raglan property consists of
      TERRITORY, QUEBEC, CANADA      a series of high-grade ore deposits, with nickel and copper as the primary metals. The
                                     operation consists of open pit and underground mines, a concentrator, a power plant,
                                     accommodation and administration buildings, fresh water supply and fuel storage tanks.
                                     The mine site is linked by all-weather roads to an airstrip at Donaldson and to the
                                     concentrate, storage and deep-water ship-loading facilities at Deception Bay. The Raglan
                                     operation was the first base metals mine in Canada to be registered to the ISO 14001
                                     environmental management standard.
                                     The Raglan operation employs approximately 700 people.

                                     23,704 tonnes nickel-in-concentrate, 6,281 tonnes copper-in-concentrate,
                                     486 tonnes cobalt-in-concentrate

      SUDBURY OPERATIONS – SUDBURY   Xstrata Nickel’s Sudbury operations consist of underground mines, a mill and a smelter.
      AND TIMMINS, ONTARIO, CANADA   The operations have been mining nickel-copper ores in the Sudbury area of northern
                                     Ontario, Canada, since 1929. The facilities are spread across a 60 kilometre long, oval-
                                     shaped geological formation known as the Sudbury Basin. Nickel and copper are the
                                     primary metals. Cobalt and precious metals, such as platinum and palladium, are also
                                     produced. The Sudbury smelter processes custom feed materials and recyclables, and
6                                    includes a sulphuric acid plant. The Montcalm mine is located in Timmins, north of
                                     Sudbury. Sudbury mines and mill and the Sudbury smelter are registered to the
                                     ISO 14001 environmental management standard.
                                     The Sudbury operations employ approximately 1,450 people. The Montcalm mine is
                                     operated by a small team of Xstrata Nickel employees and close to 200 contract workers.

                                     Sudbury mines and mill: 20,932 tonnes nickel-in-concentrate,
                                     22,714 tonnes copper-in-concentrate, 697 tonnes cobalt-in-concentrate
                                     Montcalm mine: 10,900 tonnes nickel-in-concentrate, 5,680 tonnes copper-in-concentrate
                                     Sudbury smelter: 61,066 tonnes nickel-in-matte, 20,964 tonnes copper-in-matte,
                                     2,367 tonnes cobalt-in-matte

      FALCONDO – BONAO,              Falcondo is a surface mining operation that has the capacity to produce 29,000 tonnes
      DOMINICAN REPUBLIC             of nickel contained in ferronickel annually. Ferronickel is a combination of iron and
                                     nickel used almost exclusively by the stainless steel industry.
                                     The property is situated in the Dominican Republic, near the town of Bonao,
                                     80 kilometres north of Santo Domingo. The facilities include a metallurgical treatment
                                     plant, a crude oil refinery and a 200 megawatt thermal power plant. Falcondo is registered
                                     to the ISO 9001 quality and the ISO 14001 environmental management standards. Xstrata
                                     owns 85.26% of the outstanding shares of Falcondo.
                                     The Falcondo facility employs approximately 2,000 people.

                                     29,675 tonnes of nickel in ferronickel

      NIKKELVERK –                   Nikkelverk is a refinery and sulphuric acid plant in Kristiansand, Norway. The primary
      KRISTIANSAND, NORWAY           metals refined at Nikkelverk are nickel, copper, cobalt and precious metals. The plant,
                                     in operation since 1910, ranks among the lowest-cost nickel refineries in the Western
                                     world and is registered to the ISO 9001 quality and the ISO 14001 environmental
                                     management standards.
                                     The plant employs approximately 500 people.

                                     81,974 tonnes refined nickel, 39,657 tonnes copper cathodes, 4,927 tonnes refined cobalt

2006 Sustainability Report
Projects                   About the Business/2006 Production Rates

KONIAMBO – NEW CALEDONIA   Xstrata Nickel is a 49% joint venture partner in the development of the massive
                           Koniambo orebody in New Caledonia, and is the operator of the project. Société
                           Minière du Sud Pacifique, the development arm of the North Province of New
                           Caledonia, is the 51% partner.
                           Koniambo is a world-class resource. Nickel is contained in both saprolite and limonite
                           with grades that compare favourably with other laterite deposits in the world. As at
                           December 31, 2006, the mineral reserve is 62.5 million tonnes grading 2.4% nickel, and
                           the estimated inferred resource is 156 million tonnes grading 2.2% nickel.

                           In September, we announced that due to resource and cost pressures in the global
                           construction market, the project would enter a renewal phase with an emphasis on cost
                           containment and execution planning.
                           In February 2007, the Koniambo project announced the commencement of early
                           construction activity on site, including site access, construction facilities (offices and
                           the starter camp), construction services and utilities.

KABANGA – TANZANIA         Xstrata Nickel holds a 50% interest in the Kabanga nickel project in Tanzania. Barrick
                           Gold Corporation holds the remainder. Xstrata Nickel is the operator of this joint
                           venture project. The project is located in northwestern Tanzania, south of Lake Victoria
                           and near the Burundi and Rwanda borders.                                                            7
                           As at December 31, 2006, the mineral resource is estimated at 9.7 million tonnes
                           grading 2.37% nickel (indicated) and 36.3 million tonnes grading 2.8% nickel (inferred).

                           A pre-feasibility study was initiated in December 2006 and will include continued
                           exploration work, delineation of the current resources to upgrade the mineral resource
                           classification to the indicated and measured categories, geotechnical, hydrological and
                           project engineering to support final design criteria, a comprehensive Social and
                           Environmental Impact Assessment study, and further definition of the capital and
                           operating costs for development of the project.

NICKEL RIM SOUTH –         Discovered in 2001, Nickel Rim South promises to be one of the lowest-cost, highest
SUDBURY, CANADA            grade mines in the history of Xstrata Nickel’s Sudbury operations. The project is located
                           nine kilometres north of the Sudbury smelter.
                           Nickel Rim South is a high-grade mineral resource located at depth between 1,100
                           and 1,800 metres with 13.8 million tonnes inferred resource grading 1.7% nickel,
                           3.3% copper, 0.04% cobalt, 1.7 grams per tonne platinum, 2.0 grams per tonne
                           palladium, 14.4 grams per tonne silver and 0.8 grams per tonne gold.

                           The project is currently in development and entails the construction of surface and
                           underground works to facilitate an extensive underground definition drilling program
                           and rapid ramp-up to the ultimate 1.25 million tonne-per-year production rate,
                           anticipated to commence in 2009.

ARAGUAIA – BRAZIL          The Araguaia project is a promising greenfield nickel discovery located in the Para state
                           of Brazil where we are currently pursuing an extensive exploration program.
                           The inferred mineral resource base stands at 61.8 million tonnes, 1.63% nickel at a 1.0%
                           nickel cut-off grade, including 43.9 million tonnes at 1.62% nickel in Serro do Tapa, and
                           17.9 million tonnes at 1.64% nickel in Vale dos Sonhos.

                           In 2006, 26,000 metres of diamond drilling were completed and focused on the
                           two known zones of nickel laterite mineralization at Serra do Tapa and Vale dos Sonhos.

                                                                                                                  Xstrata Nickel
    Care and Concern for People

8                                    OUR GOAL IS ZERO HARM                       occupational incidents and illnesses,
                                     Our goal is zero work-related injuries or   providing a comprehensive picture of
                                     occupational illnesses among employees      injuries sustained in our business. While
                                     and contractors at Xstrata Nickel           we do not have comparative data for
                                     exploration sites, growth projects and      2005, our TRIFR is notably higher than
                                     operations. We believe that all             the Xstrata Group average, which ended
                                     workplace injuries and illnesses are        2006 with a TRIFR of 13.0. Reducing our
                                     preventable, and we work to eliminate       TRIFR is a focus area for 2007. In 2006,
                                     them by identifying, assessing and          we achieved a 29% reduction in our
                                     removing or controlling hazards.            lost-time injury frequency rate (LTIFR)
                                                                                 compared to 2005, with 4.3 injuries per
                                     In 2006, no fatalities occurred at          million hours worked. The LTIFR is a
                                     Xstrata Nickel operations. Regrettably,     measure of the number of lost-time
                                     however, a contractor driving an ore        injuries resulting in absence from work.
                                     truck at Montcalm suffered a serious
                                     permanent disabling injury in a single      Improved safety performance is a
                                     vehicle accident in winter conditions.      priority area for Xstrata Nickel in 2007.
                                     An improved road safety plan has been       We have set a 20% improvement target
                                     initiated to reduce and eliminate further   for our key 2007 health and safety
                                     incidents. In 2006, Xstrata Nickel          performance indicators – TRIFR, LTIFR
                                     recorded a total recordable injury          and the disabling injury severity rate
                                     frequency rate (TRIFR) of 24.3 injuries     (DISR), a measure of the number of days
    A ceremonial exchange of gifts   per million hours worked. The TRIFR is      lost resulting from lost-time injuries and
    with Kanak representatives for                                               restricted work injuries per million hours
    the Koniambo project.            a key safety measure that includes the
                                     number of injuries resulting from lost-     worked. Xstrata Nickel sites are also
                                     time injuries, restricted work injuries     required to identify and communicate
                                     and medical treatment injuries from         high-potential risk incidents.

2006 Sustainability Report
                          At Xstrata Nickel, we value Health and Safety above all.
                          This commitment extends to the regions that host our operations,
                          employees, contractors and local communities. We are actively
                          involved in, and support, a wide variety of initiatives that contribute
                          to the health and well-being of the communities associated with
                          our operations.

Our 2006 health and safety                    and enforcement. Guidelines are in place                                    9
initiatives included:                         to close the road when critical weather
At Sudbury, a First Shift Back initiative     and road conditions prevail. Driving speed
was launched at the mine sites. The           limits were introduced and a new bridge
program ensures lessons learned from          will be installed to improve road
safety incidents are discussed at the start   alignment, in partnership with a forestry
of each shift. In addition, a new personal    company operating in the area.
protective equipment selection committee      Compliance monitoring of seatbelt use
was established to identify the most          has been integrated into the contractor
suitable equipment to guard against heat      performance monitoring matrix.
stress in underground mines, where in         At Raglan, our working in confined
some instances ambient air temperatures       spaces program was further developed
can reach 40°C. At the smelter, we            to include automated characterization
continued to implement initiatives to         and entry permits for confined
reduce musculoskeletal disorders through      spaces and training of program trainers.
worker involvement and the development        Work continued with a lock-out/tag-out
of an integrated program using job            program, which included identifying
analysis and design techniques. The           those elements requiring use of this
confined space program was revised to         preventive safety measure. In addition,
conform to newly legislated requirements      a respirator program was developed that
at all Ontario operations.                    saw more than 90% implementation
At Montcalm, road safety initiatives were     among workers at the Deception Bay           Underground contractors at
                                              port. Program implementation across          the Nickel Rim South project
launched to respond to the increasing                                                      in Sudbury, Ontario.
number and severity of road incidents         the site will be completed in 2007.
among contractors travelling to and from      The management team met with all
the mine. This included issuing a road        contractors to communicate the vision
safety plan addressing vehicle operation      of Zero Harm. All contractors are
procedures, training, signage, road           required to deploy strategies to improve
maintenance, monitoring, communication        their health and safety performance.

                                                                                                            Xstrata Nickel
 Care and Concern for People

                                       At Falcondo, we achieved record safety                         At Nikkelverk, all workers participated in
                                       performance, reducing the LTIFR by                             a program that enforced and promoted
                                       28% from 2005 to 2.3 and reducing the                          safe working behaviours and the
                                       TRIFR by 25% to 13.4 – both figures                            consequences of unsafe behaviours. The
                                       being the lowest among Xstrata Nickel                          Think Safety First campaign promoted
                                       operations. These results were achieved                        the best practice of ensuring an
                                       through a number of initiatives                                immediate safe working space before
                                       including a strong emphasis on risk                            proceeding with a job task. Fire
                                       analysis before starting a job task,                           prevention and suppression training
                                       seven-minute safety meetings at the                            was launched across the operation,
                                       beginning of a shift, stretching                               and there was a focused effort on
                                       exercises for slag floor operators and                         assessing risks of hazardous equipment
                                       development of a sleep program for                             and operations.
                                       shift workers. Active health and safety
                                       promotions included manager-led
                                       safety inspections, improvements to
                                       safety training and induction methods,
                                       recognition programs for best
                                       performance and delivery of a health
                                       and safety promotion week.

                                       HEALTH AND SAFETY PERFORMANCE
                                       Xstrata Nickel                                                               2006 Result              2007 Target
                                       Number of fatalities                                                                       0                            0

                                       Total recordable injury frequency rate (TRIFR)                                          24.3                     19.4

                                       Lost-time injury frequency rate (LTIFR)                                                  4.3                      3.4

 XSTRATA NICKEL LOST-TIME              Disabling injury severity rate (DISR)                                                    425                      340
                                       New occupational illnesses                                                                 9                            0

                                       Safety fines and prosecutions                                                              0                            0

     6                                 Critical incident (CI) – an event that has caused: single or multiple fatalities, a life-threatening injury requiring
                                       immediate and aggressive action and admittance to an intensive care facility, damage to assets or property or
                                       loss of operations to a value greater than $0.5 million, a Category 4 (Serious) or Category 5 (Disastrous)
                                       environmental incident, or media attention/public exposure of a serious, negative consequence.
                                       High-potential risk incident (HPRI) – an event, or near miss, that could have: killed or permanently disabled a
                                       person(s), caused a life-threatening injury, caused damage to assets or property or loss of operations to the value
                                       of greater than $0.5 million, or caused a major environmental incident.
     2                                 Total recordable injury frequency rate (TRIFR) – a measure of the number of lost-time injuries (including
                                       fatalities), restricted work injuries and medical treatment injuries per 1 million hours worked.
                                       Lost-time injury frequency rate (LTIFR) – a measure of the number of lost-time injuries (occupational injuries
     0                                 and diseases that result in days away from work on any rostered shift subsequent to that on which the injury
         03   04   05   06   07        occurred, including fatalities) per 1 million hours worked.
                                       Disabling injury severity rate (DISR) – a measure of the number of days not worked due to lost-time injuries
 Note: Performance data for            (including fatalities), restricted work injuries, and occupational illnesses per 1 million hours worked.
 years 2003 to 2005 is according
 to former Falconbridge health
 and safety reporting methods.
 Exploration and corporate
 office performance, and new
 occupational illnesses are excluded
 for years 2003 to 2005. Contractor
 performance is excluded for years
 2003 and 2004.

 2006 Sustainability Report
SAFETY AT EVERY STAGE OF ACTIVITY             recordable injury frequency rate of
Since work began in 2004 at the               19.1 were achieved in 2006. In early
Nickel Rim South deposit definition           2007, the project passed a milestone of
project, the project team has achieved        2.5 years, or more than 2 million hours,
an exceptional health and safety record,      without a lost-time injury.
exceeding industry benchmarks with            Among the safety practices that have
zero critical or significant health, safety   become a way of life at Nickel Rim
and environmental incidents. Notably,         South are thorough orientation sessions
more than 2,955 workers from over             for visitors and incoming contractors,
300 contracting companies have worked         daily safety huddles, weekly and monthly
on the project since it began. The shaft      safety meetings and the reporting and
sinking contractor celebrated over            investigation of all incidents including
1,000 days without a lost-time injury.        near misses, which are essential leading
Zero lost-time injuries and a total           indicators of safety performance.


Aligning Best Practices
The devolved Xstrata management
philosophy permits each commodity
business to operate with a high degree
of autonomy within the framework of
the Xstrata global HSEC Policy and
Management Standards.

Each Xstrata Nickel operation is required to engage in       In the event of an HSEC high-potential risk incident
analyses to identify gaps between current programs           or HSEC critical incident, senior management is
and processes and the requirements of Xstrata’s              immediately apprised of the occurrence and advised
policies and 17 HSEC Management Standards. Work              of investigation results according to Xstrata’s global
has begun to incorporate priority findings into their        requirements. Root cause analyses are done on all
HSEC management systems. All sites will be formally          high-potential risk incidents, enabling businesses to
audited against these standards in 2008.                     learn from near-miss incidents and further improving
In late 2006, Xstrata Nickel began to align with, and        the identification, management and, wherever
adopt, Xstrata’s stringent HSEC statistic and risk           possible, elimination of major hazards.
reporting measures. For example, our health and
safety performance metrics will now include
occupational illnesses and total recordable injuries.
Training to utilize Xstrata’s risk management system
and registry is well advanced.

                                                                                                         Xstrata Nickel
 Care and Concern for People

                                   LEARNING FROM INCIDENTS                    overall goal is to provide a safe and
                                   In 2006, a contract truck driver at the    secure work environment while
                                   Montcalm mine suffered a permanently       sustaining peaceful interactions with
                                   disabling injury when the ore truck        neighbouring communities. Objectives
                                   went off the road in winter conditions.    for 2007 include the development of a
                                   Following this tragic incident,            Kabanga project policy statement and
                                   management undertook a thorough            checklist compliant to the Voluntary
                                   investigation and implemented              Principles on Security and Human Rights.
                                   significant measures to prevent future     Bi-annual compliance audits will also
                                   road incidents. A comprehensive road       commence in 2007.
                                   safety plan was issued including revised   With the open Burundi border nearby
                                   operating procedures and structural        and the presence of social imbalances,
                                   improvements to the mine road. Intensive   security at the Kabanga project is a
                                   discussions were held between the mine     significant priority. The measures taken
                                   manager and the contractor to confirm      in 2006 to enhance personnel security
                                   safety commitments and expectations.       included the construction of a fence
                                   In a separate incident at the Montcalm     around the site, construction of a
                                   mine, which did not result in any          security control room with monitoring
                                   injuries, two vehicles collided on a       equipment, completion of a strategic
                                   ramp. The mine contractor shut down        security review to identify deficiencies
12                                                                            in the security system and an increase in
                                   operations, held team and individual
                                   safety meetings with all crew members,     the number of security personnel. We
                                   conducted a thorough inspection of the     also reduced the amount of cash on site
                                   workplace, and had each contractor sign    by upgrading casual workers who were
                                   a commitment to working safely. In the     previously paid in cash to semi-permanent
                                   spirit of partnership, the cost of the     contractors paid by cheque. Because
                                   shutdown was shared between the            many contractors did not have bank
                                   contractor and Xstrata Nickel.             accounts, this involved transporting
                                                                              them to the local bank to open an
                                                                              account for the first time.
                                   SECURITY AND HUMAN RIGHTS
                                                                              At Araguaia, an exploration project in
                                   Ensuring a secure working environment      northern Brazil, we will implement a site
                                   protects our physical assets and, most     security program in 2007, and provide
                                   importantly, our people. Our Falcondo      associated training, including human
                                   operation, in the Dominican Republic,      rights, through a contract security firm.
                                   and the majority of our growth projects
                                   are based in developing regions where      At Falcondo, we are constructing a
                                   social and economic prosperity remain      perimeter wall around the operation
                                   a challenge. Appropriate security          to prevent intruders from harm, while
                                   programs, including security personnel     protecting our assets. An improved
                                   training, are being developed to provide   security personnel and supervisor
 Safety achievements at the        optimum working conditions for all. All    training program is also under
 Kabanga project were celebrated                                              development, which will cover
 with community members.           security personnel training programs
                                   include a human rights component.          leading practice security techniques
                                                                              and human rights.
                                   Our contracted security provider at the
                                   Kabanga project in Tanzania is a leading
                                   international firm that trains personnel
                                   in various capacities including conflict
                                   resolution, communications, human
                                   rights and cultural awareness. The

 2006 Sustainability Report
SIGNIFICANT SAFETY MILESTONE                 The malaria prevention program
AT KABANGA                                   includes bug repellent spraying, the
On January 4, 2007, the Kabanga project      use of insecticide-treated bed nets and
in Tanzania achieved the safety              building coverings, education and the
milestone of 1 million hours worked          regular screening of employees at our
without an injury. In a region where         medical clinic.
many households are without electricity      While the program has been successful
and workers do not immediately               in controlling the risk of malaria
recognize safety hazards, this milestone     infection of individuals on site, the
is a highly visible demonstration of the     extension of preventive measures
operation’s strong safety management         becomes more difficult to manage
system and practices. To promote good        outside the project. Initial efforts to
safety practices, the site pursued a one-    address this issue include the distribution
year Zero Harm safety campaign that          of more than 500 bed nets to employees
addressed a different topic every month.     and contractors, and instruction on the
In addition, supervisors work individually   proper use of nets to protect families at
with employees, teaching them to             home. We have also hired a community
recognize safety hazards and conducting      relations officer who is leading the
detailed reviews of job procedures and       development of a community action
safety measures.                             plan. The plan includes malaria
                                             education at local medical clinics, the                                             13
A HOLISTIC APPROACH TO                       distribution of bed nets in nearby
MALARIA, TUBERCULOSIS AND HIV                villages, and the implementation of
AND AIDS PREVENTION                          other control and educational measures
                                             in the near future.
As we strengthen our presence at the
Kabanga nickel project, we are stepping      As part of an emerging strategy on
up our commitment to tackling malaria,       HIV and AIDS for this project, we are
tuberculosis and HIV and AIDS – the          exploring a partnership with an
most serious health issues facing our        established non-governmental
Tanzanian operations. Xstrata’s              organization (NGO) in the area to
approach to these issues is to address the   address education, testing, treatment
needs of employees, contractors and the      and training of workers and their
communities around the project site.         families. We also aim to address some
                                             of the local implications and causes of
                                             the HIV and AIDS pandemic through
                                             community initiatives. In addition,
                                             we will consult with other Xstrata
                                             commodity businesses that have
                                             received international awards in
                                             recognition of achieving measurable
                                             successes in the areas of HIV and AIDS
                                                                                           The Falcondo Foundation supports
                                             awareness, prevention and voluntary           numerous community health
                                             testing and counselling, notably in           programs in the Dominican Republic
                                                                                           in areas such as basic health and
                                             South Africa.                                 hygiene, breast and uterine cancer
                                                                                           prevention and sexually transmitted
                                                                                           disease prevention.

                                                                                                             Xstrata Nickel
 Care and Concern for People

                                    UPDATE ON SUDBURY SOILS STUDY                          The Sudbury Soils Study was initiated in
                                    Xstrata Nickel is an active partner and                2001, when the Ontario Ministry of the
                                    supporter of the Sudbury Soils Study,                  Environment identified elevated levels
                                    one of the largest human health and                    of nickel, cobalt, copper, lead and
                                    ecological risk assessment studies ever                arsenic in Sudbury soils. The Ministry
                                    conducted in Canada.                                   recommended that a more detailed soil
                                                                                           study be undertaken to fill data gaps,
                                    With data collection completed in 2005,                and that human health and ecological
                                    a draft of the Human Health Risk                       risk assessments be undertaken. Along
                                    Assessment (HHRA) was prepared and                     with Xstrata Nickel and CVRD Inco, the
                                    reviewed by the study partners in 2006.                Ministry of the Environment, the
                                    The draft HHRA report underwent review                 Sudbury and District Health Unit, the
                                    by an independent panel of scientific                  City of Greater Sudbury, and Health
                                    experts and is being finalized by study                Canada’s First Nations and Inuit Health
                                    partners. A draft of the Ecological Risk               Branch are partners in the study.
                                    Assessment (ERA) has also been completed
                                    and is undergoing a similar independent                The Sudbury District Medical Officer of
                                    scientific review process. Final study results         Health believes that there is no expected
                                    are expected to be shared with the public              immediate risk to human health due to
                                    in 2007. The communities are kept aware                metal levels in Sudbury soils. More
                                    of the study process and outcomes                      information is available at
14                                                                                         www.sudburysoilsstudy.com.
                                    through public open house events
                                    and engagement with the Public
                                    Advisory Committee, comprising
                                    citizen members.

                                    2007 HEALTH AND SAFETY TARGETS AND OBJECTIVES
                                    As a new business, we have renewed our commitment and developed a strong vision
                                    for health and safety performance. Employees and contractors across Xstrata Nickel
                                    are actively engaged in meeting these commitments. The following lists operation-
                                    specific health and safety targets and objectives focused on achieving our goal of
                                    Zero Harm.

                                    Site               2007 Target/Objective
                                    Xstrata Nickel     No fatalities
                                                       No new occupational illnesses
                                                       No fines or penalties
                                                       Major hazard management plans in place at all sites
                                                       Implement HIV and AIDS voluntary counselling and testing programs at all
 Thousands of soil samples were                        higher risk sites
 collected for the Sudbury Soils
 Study, one of the largest health                      20% overall reduction in TRIFR, LTIFR and DISR
 and ecological risk assessments                       Develop Xstrata Nickel HSEC strategic objectives and management
 of its kind.
                                                       framework compliant with Xstrata’s sustainability framework
                                                       Complete a gap analysis against Xstrata’s 17 HSEC Management Standards
                                                       and develop an action plan to address findings
                                                       Assess operation-specific issues identified in the 2006 post-acquisition
                                                       HSEC reviews, and develop corrective action plans prioritized by risk
                                                       Complete HSEC assessments at Araguaia, Kabanga, Koniambo and
                                                       Nickel Rim South projects

 2006 Sustainability Report
Site               2007 Target/Objective
Falcondo           20% reduction in LTIFR, TRIFR and DISR and HPRI occurrences
                   Develop respiration, vision protection and hearing conservation programs
                   and related training
                   Implement prevention programs for drug and alcohol abuse, and continue
                   with HIV and AIDS and family violence prevention programs
                   Complete perimeter wall construction and develop an improved
                   security training program
Montcalm           68% reduction in LTIFR, 43% reduction in TRIFR, and 50% reduction in DISR
                   (for injuries occurring in 2007)
                   Improve road safety plan
                   Develop a visitor induction health and safety program
Nikkelverk         45% reduction in TRIFR and 80% reduction in DISR
                   Identify wellness initiatives to reduce absenteeism
Raglan             70% reduction in LTIFR and TRIFR and 30% reduction in DISR
                   Implement targeted initiatives to improve contractor safety performance
Sudbury            20% reduction in LTIFR, TRIFR and DISR
Araguaia           Zero lost-time injuries, target a TRIFR of 5 and a DISR of 75
                   Implement a site security program and provide security awareness training
                   to all employees and contractors
                   Review and update employee health training and education program, which
                   includes HIV and AIDS, hearing protection, first aid, alcohol and tobacco,
                   emergency response plan and security protocols
Kabanga            20% reduction in LTIFR, TRIFR and DISR
                   Develop Kabanga policy statement on HIV and AIDS, develop and
                   implement awareness action plan and introduce a voluntary testing and
                   counselling program
                   Align with the Voluntary Principles on Security and Human Rights
                   Develop criteria and compliance checklist and audit against requirements,
                   targeting 100% compliance by year-end
Koniambo           LTIFR of 0, TRIFR of 5 and DISR of 75
                   Prepare an introductory occupational health and safety training program,
                   with local government officials, to develop skills of local contractors
                   Implement a formal health and safety training program for employees
                   and contractors during site engineering, procurement, construction
                   management (EPCM) phase
                   Complete and implement an asbestos characterization and management plan
                   and procedures (asbestos is found in some rock and soil types in the region)
Nickel Rim South   Achieve a TRIFR of less than 13 and an LTIFR of 0

                                                                                                  The Sudbury Soils Study has
                                                                                                  included numerous opportunities
                                                                                                  for the public to engage in
                                                                                                  the study process, including
                                                                                                  open houses.

                                                                                                                   Xstrata Nickel
  Care and Concern for People

  2006 COMMUNITY                         BUSINESS IN THE COMMUNITY                      In 1995, the Makivik Corporation, the
  INVESTMENTS                                                                           nearby communities of Salluit and
  ($2 million)                           We recognize that our operations have
                                         a unique relationship with their local         Kangiqsujuaq, and the Raglan mine,
                                         communities, and are committed to              signed the historic Raglan Agreement.
                                         respecting local interests, cultures and       In addition to profit sharing, the
                                         customs and the rights of indigenous           agreement addresses environmental
                                         people, and working together with local        protection and mitigation, dispute
                                         authorities, community representatives,        resolution and procurement priority
                                         non-governmental organizations and             given to competitive Inuit businesses.
                                         other interested parties to support            It also gives employment priority to Inuits
         1% 7%
                                         projects that address local needs.             in the area, and contains commitments to
      Arts and Culture                   Positive and engaging relationships            create training programs for Inuit
                                         with our employees and contractors             workers. In 2006, approximately 18%
      Enterprise and Job Creation
      Environment                        are equally critical to our success.           of the workforce consisted of members
      Health                                                                            from the local community; our standing
      Social and Community Development   In 2006, Xstrata Nickel contributed            target is to increase this to 20%.
                                         $2 million in donations to community
                                         initiatives. We also began to develop          The profit sharing arrangement includes
                                         site-specific corporate social involvement     a commitment to provide 4.5% of
                                         and community engagement plans, in             operating profit to the community
                                         partnership with local communities.            partners in the agreement once the
16                                                                                      mine has recouped its initial capital
                                         The goal is to enhance the sustainable
                                         development of our communities                 investment. The 2006 payment is the
                                         throughout the life cycle of our activities,   second such payment. In 2005,
                                         while identifying and managing key             C$300,000 was presented to the
                                         community risks and opportunities.             partners. The money is placed in a trust,
                                                                                        and then distributed for purposes such
                                         At Falcondo, $6.8 million in dividend          as repaying community loans and
                                         payments were provided to the                  building community facilities. The overall
                                         Dominican government and destined              goal is to improve the quality of life
                                         for community development initiatives          based on priorities determined by the
                                         in three provinces. Each province has          communities themselves.
                                         begun the process to establish a
                                         committee responsible for requesting           The Raglan Agreement is governed
                                         and administering the funds.                   by the six-member Raglan Committee,
                                                                                        with representatives from Salluit,
                                                                                        Kangiqsujuaq, the Makivik Corporation
                                         BUILDING COMMUNITY CAPACITY                    and Xstrata Nickel. The committee meets
                                         In April 2006, Xstrata Nickel presented        several times per year and addresses
                                         a cheque in the amount of C$9.3 million        issues that may arise between the
                                         to the Makivik Corporation, a non-profit       operation and the local communities,
                                         organization owned by the Inuit of             including environmental matters.
                                         Nunavik, representing a share of the           Since its development, the Raglan
  A profit share cheque of
  C$9.3 million was presented to         profits generated by our Raglan                Agreement has been used as a
  the Makivik Corporation in 2006.       operations in northern Quebec, Canada.         benchmark and reference point for
                                                                                        other First Nations agreements in
                                                                                        the mining industry and other
                                                                                        industrial sectors.

  2006 Sustainability Report
INVESTING IN COMMUNITY                         The Foundation’s cancer prevention
DEVELOPMENT                                    program is providing valuable medical
In 2006, the Falcondo Foundation               aid to women living in rural areas. Under
continued to make a positive impact on         this program, the Foundation brings
the quality of life of residents living near   oncologists to remote mountainous
our operation in the Dominican Republic.       regions to screen women for cancer. The
                                               Foundation then ensures that women
One of the Foundation’s many successes         who test positive receive the necessary
is an in vitro plant propagation program       treatment and pays their medical
that has transformed farmers’ lives while      expenses. The service is complemented
restoring the forest in the Yaque River        by the training of community members
watershed. Thanks to the support of            to become health promoters who
the Falcondo Foundation over the past          provide critical health information and
eight years, local farmers are growing         services where direct access to medical
strawberries instead of the unsustainable      professionals is not available.
practice of traditionally clearing vast
tracts of forest to grow beans, squash         Over the past 16 years, the Foundation
and other crops. While at one time             has invested approximately $12 million
strawberries were imported into the            in community programs and reforested
Dominican Republic, this area now              more than 500 hectares of land.
produces enough strawberries to supply                                                                                  17
the whole region. In the process, family
incomes have increased one hundredfold,
and the forest and the Yaque River
have come back to life. Additional
funds have also been invested in the
revegetation of land historically used
for unsustainable agriculture.
In addition, the Foundation has supported
local public elementary schools for more
than a decade, providing resources to
121 schools, 78,000 students and
1,946 teachers. Recently, the United States
Agency for International Development
(USAID)/Dominican Republic documented
the Falcondo Foundation program as a
model private sector effort in supporting
traditional public education. From this
study, guidelines were established for
replicating the model elsewhere in the
Dominican Republic and in other Latin
American countries. Findings were                                                          The Falcondo Foundation
shared with corporations and ministries                                                    supports local economic
                                                                                           development programs, such
of education among a number of Latin                                                       as strawberry farming.
American countries.

                                                                                                           Xstrata Nickel
 Care and Concern for People

                                     IN TOUCH WITH THE COMMUNITY                   STRENGTHENING TIES WITH
                                     At our Nikkelverk refinery in Norway,         LOCAL POPULATIONS
                                     production waste is safely stored in          As the Nickel Rim South project in
                                     nearby large caverns some 30 metres           Sudbury, Canada, progresses, we are
                                     underground. This approach meets the          also strengthening ties with the local
                                     needs of local neighbours who opposed         Wahnapitae First Nation.
                                     a proposed landfill site, while avoiding      Since early in the project, a committee
                                     potential impacts associated with             of Xstrata Nickel and Wahnapitae
                                     transporting the material to an alternative   representatives has met regularly to
                                     landfill site located 250 kilometres from     share information about the community,
                                     the refinery. Utilizing these underground     Xstrata Nickel and the status of the
                                     caverns enables Nikkelverk to safely          project, focusing on areas such as cultural
                                     manage the waste material and minimize        heritage and environmental protection.
                                     environmental risks.                          Our relationship is formalized through
                                     As storage requirements have grown,           a Memorandum of Understanding and
                                     we have created new caverns roughly           Terms of Reference signed by both
                                     every five years. To do this, we use          parties, and work has begun on a more
                                     technology designed to minimize               detailed participation agreement.
                                     disruption (such as vibration and noise)      In 2006, when it came time to update
18                                   to the land and the community.                closure plans for the Sudbury smelter,
                                     In 2005 and 2006, before new blasting         which is located in proximity to the
                                     activity was scheduled to occur, we           community, we reviewed the plans
                                     conducted community meetings to               with the committee and supported
                                     inform neighbours of our plans, answer        a community engagement process to
                                     questions and address any concerns.           eliminate the potential for impacts
                                     Over the years, this community                on areas of traditional value.
                                     engagement process has enabled                In 2007, we will help the Wahnapitae
                                     Nikkelverk to maintain good relations         First Nation retain a business development
                                     as well as prompting corrective action as     consultant to identify and create
                                     needed. Recently, we modified the pre-        opportunities to further support
                                     blast warning system and reduced the          economic participation in Xstrata
                                     size of each blast in response to             Nickel’s operations.
                                     community feedback. Although these
                                     actions add cost and time required to
                                     complete the project, Nikkelverk
                                     recognized the need to align its actions
                                     with the priorities and values of its
                                     neighbours, and responded accordingly.

 Community engagement has
 helped Nikkelverk maintain
 positive relationships with local
 stakeholders in the community
 of Kristiansand, Norway.

 2006 Sustainability Report
COMMUNITY SUPPORT                           Xstrata Nickel announced the
The Montcalm mine provides financial        contribution of C$100,000 to Sudbury’s
support to projects that promote            Laurentian University in 2006 in order to
environmental awareness and protection,     permanently endow the Xstrata Nickel
health and wellness, education and          Memorial Lecture Series. In turn, the
literacy, arts and culture, and community   University matched that amount with
leadership in northeastern Ontario where    funds from the Falconbridge Lecture
the operation is located. In 2006,          trust account.
Montcalm turned to its longstanding         By formally creating an endowment for
Environmental Liaison Group for help in     the lecture series, the Greater Sudbury
assessing applications for support. While   community will continue to benefit from
this stakeholder committee has typically    these free lectures in perpetuity. The
met to discuss mine operating and           Falconbridge Lectures were established
environmental performance, its input        in 1978 with donations made by
into the outreach program ensures that      Falconbridge Limited, employees, families
donations are directed to the areas         and friends in memory of five employees
where they are most needed. Members         who died in an aircraft accident.
of the liaison group include
representatives from aboriginal and         The purpose of the lectures is to bring
local communities, private citizens and     eminent figures from academic circles,                                           19
the Montcalm mine.                          the business community, public life,
                                            various professions and the arts to
                                            Sudbury. Over the years, 69 speakers
INVESTMENT IN INNOVATION                    have participated, including notables
Xstrata Nickel committed C$5 million        such as John Kenneth Galbraith,
to the Centre for Excellence in Mining      Margaret Atwood, Benjamin Spock,
Innovation (CEMI) at Sudbury’s              Jesse Jackson, Jane Goodall, Boutros
Laurentian University in Canada, in         Boutros-Ghali, and more recently
2006. Our contribution will be directed     Beverley McLachlin, Romeo Dallaire
towards exploration, deep mining,           and Roberta Bondar.
integrated mine process engineering,
and environment and reclamation.
We will also participate on CEMI’s
advisory board.
CEMI is focused on developing new
research, education, training and
technology transfer capacity that add
value to mining operations in northern
Ontario and beyond. It also aims to
strengthen Sudbury’s capability to
undertake world-class, collaborative                                                    Xstrata Nickel’s C$5 million
                                                                                        contribution to Laurentian
and industry-driven research; add new                                                   University will help establish the
research skills to networks of expertise                                                Centre for Excellence in Mining
                                                                                        Innovation in Sudbury, Ontario.
that exist locally, nationally and
internationally; and develop highly
qualified people for the mineral sector
in emerging fields of study.

                                                                                                           Xstrata Nickel
 Care and Concern for People

                                EMPLOYEE ENGAGEMENT                                RESPECT AND COOPERATION
                                As we set out to build our new business            Xstrata Nickel’s relationship with its
                                in the second half of 2006, more                   employees is based on honesty and
                                than 600 Xstrata Nickel employees                  integrity. We believe in treating everyone
                                provided input into the development                fairly and without bias, while recognizing
                                of the Company’s vision, values and                the importance of achievement, career
                                organizational structure through a series          opportunities, training and development,
                                of workshops. Through these discussions,           responsibility and accountability. We
                                we developed a shared understanding                recognize the right of labour to collective
                                of our corporate direction and how we              bargaining and work to resolve disputes
                                would work together to achieve our                 quickly and responsibly.
                                goals. These and future sessions will              In 2006 and early 2007, labour
                                shape the culture and kind of employer             agreements were reached without
                                that Xstrata Nickel strives to be.                 work disruption at Sudbury, Nikkelverk,
                                Xstrata Nickel will initiate an employee           Falcondo and Raglan.
                                survey in 2007 to provide a formal
                                employee feedback mechanism and
                                to measure and monitor employee
                                satisfaction and engagement.
                                2007 EMPLOYEE AND COMMUNITY TARGETS AND OBJECTIVES
                                Xstrata Nickel sites have set rigorous targets and objectives to promote and improve
                                performance in the areas of community engagement and involvement, community
                                development, community health, human rights, relationships with indigenous peoples
                                and employee relations. Our 2007 targets and objectives are outlined below.

                                Site             2007 Target/Objective
                                Xstrata Nickel   Develop Xstrata Nickel stakeholder engagement and social involvement framework
                                                 Develop Xstrata Nickel site stakeholder engagement plans
                                                 Develop Xstrata Nickel site social involvement plans
                                                 Identify and implement priority community involvement initiatives
                                                 at each site
                                                 Implement an Xstrata Nickel employee satisfaction survey
                                                 Develop targets and action plans based on feedback
                                                 Develop work plans to address the inclusion of under-represented
                                                 populations in our workplace
                                                 No human rights violations

 Community programs near                         100% internal resolution of harassment complaints
 the Raglan operation support
 education, health and
 skills training.

 2006 Sustainability Report
Site               2007 Target/Objective
Falcondo           Develop an action plan and consult with members of the community
                   occupying the right-of-way in Cabon
                   Initiate resettlement consultation with the Manaclita community
                   for the Miranda project
                   Fully align to World Bank resettlement guidelines
                   Continue initiatives of the Falcondo Foundation including development of
                   a commercial bamboo and fruit tree production, provision of 40 training
                   programs to 1,500 students, support of 70% of local community sports and
                   cultural activities, and investment of $200,000 in medicine and equipment
                   Implement training and education program for HIV and AIDS in
                   local communities
Montcalm           Develop and implement a site community engagement plan
Nikkelverk         Complete community perception survey
                   Identify initiatives to further enhance community relations
                   Gain feedback from employees on how to further enhance productivity
Raglan             Improve training and retention programs of Inuit employees to meet target
                   of 20% of the total workforce
Sudbury            Implement community engagement plan and related programs
                   Complete peer reviews of the Sudbury Soils Study health and environmental
                   risk assessments and support the release of study findings to the public                                            21
Araguaia           Develop an external affairs program
                   Provide $48,000 in sponsorships to maintain school computers, support local
                   community services and provide transportation for school teachers
Kabanga            Complete indigenous peoples baseline survey to identify cultural and
                   religious sites of significance in the operations area
                   Conduct staff cultural awareness training to prevent infractions related
                   to these sites
                   Register the project with the Government of Tanzania, required for the
                   development of the Kabanga socio-environmental impact assessment, which
                   will be ongoing to the end of the project feasibility phase
                   Audit plan implementation against guidelines
                   Complete construction of Bugarama Police Post
                   (a community partnership project)
Koniambo           Establish a local intermediary company to maximize local employment
                   Develop a formal governance strategy for a social development program
                   for local communities
                   Develop social funding guidelines and objectives to assess and approve
                   social funding
                   Maintain heritage initiatives with indigenous peoples, including support for
                   the protection of artifacts obtained during site archaeological studies
Nickel Rim South   Active engagement with Wahnapitae First Nation, including cultural
                   awareness initiatives                                                          The Falcondo Foundation has
                                                                                                  supported local elementary schools
                                                                                                  in the regions near the Falcondo
                                                                                                  operation for more than a decade.
                                                                                                  Over 121 schools, 78,000 students
                                                                                                  and 1,946 teachers have benefited.

                                                                                                                    Xstrata Nickel
     Enduring Environmental Commitment

22                                  CONTINUOUSLY IMPROVING                    FULFILLING OUR ENVIRONMENTAL
                                    PERFORMANCE                               RESPONSIBILITY
                                    Upon establishing Xstrata Nickel, a       The final effluent water treatment
                                    100-day review was undertaken to          facility operated by Xstrata Nickel in the
                                    assess health, safety, environmental      Onaping area of the Sudbury Basin has
                                    and community risks and performance,      achieved 100% compliance in all toxicity
                                    and to guide the development of           testing and water quality parameters
                                    objectives and action plans. Results      associated with both provincial and
                                    have been prioritized based on risk.      federal legislation for more than
                                    All sites also continue to review their   17 years. Although compliance with
                                    performance, processes and                all regulations is a core performance
                                    management systems against the            requirement, continuous conformity
                                    Xstrata sustainability framework. Each    to these stringent parameters, which
                                    site will be independently audited        are in some cases more rigorous than
                                    through Xstrata’s HSEC Assurance          applicable drinking water parameters,
                                    Program in 2008.                          is a significant accomplishment.
                                                                              The facility treats water from the local
                                                                              mines and the tailings management
                                                                              facility of Xstrata Nickel’s Sudbury mines
                                                                              and mill, CVRD Inco and FNX Mining
                                                                              Company, based on partnership
 Environmental studies are                                                    agreements. The treated water is
 continuing to support the
 Koniambo project environmental                                               regularly tested and results are
 and social impact assessment,                                                consistently below the minimum
 such as revegetation techniques.
                                                                              threshold limits for compliance. This
                                                                              success has been recognized by
                                                                              government officials who have invited
                                                                              international visitors to the treatment
                                                                              facility on numerous occasions.

 2006 Sustainability Report
                           Xstrata Nickel is committed to the highest standards of environmental
                           management and performance. We believe that superior environmental
                           performance results in increased efficiency, lower risk and higher overall
                           performance of our operations. It is also critical to maintaining our
                           social licence to operate, and we fully respect the need to align our
                           actions with the priorities and values of the countries and regions in
                           which we operate.

LEADING PRACTICES IN EXPLORATION               ENVIRONMENTAL STEWARDSHIP                                                        23
The Araguaia exploration team in Brazil        AT FALCONDO
has distinguished itself for the measures      Controlling air emissions is a priority
it takes to limit the environmental            of the Falcondo metallurgical treatment
impacts of its work. At drill pad sites, our   plant. In 2006, we installed a new
geologists strive to minimize the area         scrubber system on a dryer used at the
needed for work to be carried out safely.      initial stage of ore processing. The
They also clear trees and bushes by hand,      emissions from this dryer are well below
so that the vegetation can be returned to      limits of both Dominican Republic
take root in the same area once drilling       environmental standards and the more
is completed. Using this approach, 97%         stringent World Bank standards.
of all sites were completely rehabilitated     Through 2007, we plan to finish the
by the end of 2006.                            engineering phase and initiate the
Waste materials generated at the               construction phase to install scrubbers
drill sites are carefully organized for        on the two remaining dryers, and will
recycling or final disposal. In order to       continue to pursue emission reductions
instill a recycling culture in the area, the   and productivity improvements.
team also teaches local villagers how to
separate garbage, and collects recyclable
materials from the village at the site.
At other locations, the Nickel Rim South
                                                                                          Preliminary fauna and flora studies
deposit definition project achieved                                                       were conducted to prepare for
more than 4,500 metres of drilling                                                        detailed environmental baseline
                                                                                          studies in 2007.
activity without incurring any
environmental incidents in 2006.
At the Kabanga project, more than
100,000 metres were drilled with only
one minor environmental incident,
resulting in minor water flooding with
no significant impacts.

                                                                                                            Xstrata Nickel
 Enduring Environmental Commitment

                                           ENVIRONMENTAL PERFORMANCE
                                           All environmental performance values were generated using former Falconbridge data
                                           measurement and reporting methodology, with the exception of environmental
                                           incidents which align to Xstrata reporting methodology. Environmental performance
                                           metrics exclude exploration sites and growth projects with the exception of environmental
                                           incidents, fines and penalties. Environmental performance at operations is reflected in
                                           all metrics.

                                                                                                                     2004             2005             2006
                                           Raw water use (megalitres)                                                18,022           17,061          18,917

                                           Recycled water (megalitres)                                               60,761           63,007          68,371

                                           Metal emissions to air (tonnes)                                               78               78                  76

                                           Metal emissions to water (tonnes)                                             10               10                  9

                                           Sulphur dioxide emissions from process (kilotonnes)                           31               42                  41

                                           New land disturbed (hectares)                                                 74                0                  16

                                           Land rehabilitated (hectares)                                                 95               62                  91
                                           Environmental incidents Category 1 and 21                                       –                –              245
                                           Environmental incidents Category 3 to 5                                         –                –                 0

                                           Environmental fines and prosecutions                                           0                0                  0

                                           These are indicators introduced in 2006, post-Xstrata acquisition. The definitions of environmental incidents
                                           are as follows:
                                           Category 1 – an incident that has caused negligible, reversible environmental impact, requiring very minor or
                                           no remediation. For example, an event that includes a hydrocarbon or chemical spill that is less than 200 litres
                                           and is contained on site.
                                           Category 2 – an incident that has caused minor, reversible environmental impact requiring minor remediation. For
                                           example, an event that includes a hydrocarbon or chemical spill that exceeds 200 litres and is contained on site.
                                           Category 3 – an incident that has caused moderate, reversible environmental impact with short-term effect,
                                           requiring moderate remediation. For example, an event that impacts drinking water supplies on a short-term
                                           basis, aquatic and land habitats, between five and 10 hectares of land or requires $0.1 million to $1 million in
                                           remediation efforts. This includes events that attract prominent local, regional or provincial media exposure.
                                           Category 4 – an incident that has caused serious environmental impact, with medium-term effect, requiring
                                           significant remediation. For example, a serious event that impacts drinking water supplies, aquatic habitats and
                                           greater than 10 hectares of land or requires $1 million to $10 million in remediation efforts. This includes events
                                           that attract national media exposure.
                                           Category 5 – an incident that has caused disastrous environmental impact, with long-term effect, requiring
                                           major remediation. For example, a disastrous event that impacts public health, water sources or species
                                           extinction beyond one year from incident or requires more than $10 million in remediation efforts. This includes
                                           events that attract international media exposure.

 Biodiversity conservation is one of
 Xstrata’s 17 HSEC Management

 2006 Sustainability Report
NOTABLE PROGRESS AT                          climate, air quality, noise, surface and
GROWTH PROJECTS                              ground water quality, demographics,
We submitted a comprehensive                 employment, education levels,
environmental and social impact              population migration, poverty profiles,
assessment (ESIA) in 2005 for the            social services and other environmental
Koniambo nickel-laterite project in          and social criteria. Government and local
New Caledonia. The ESIA is a living          communities will be consulted for their
document, and baseline studies relating      input into the study, as well as to help set
to the impact of the project continued       environmental and social design criteria.
in 2006. By year-end, project permitting     The SEIA will ultimately identify, predict
was well advanced, with outstanding          and evaluate the environmental, social
requirements due to be completed by          and economic impacts associated with
the last quarter of 2007.                    proposed mining operations at the site,
In early 2007, we signed an                  and explain how the Company will
Environmental Charter with the               mitigate these impacts. It must be
Northern Province of New Caledonia.          submitted to and approved by the
The objective of the Charter is to enable    National Environmental Management
stakeholders to work together to             Council of the Tanzanian government
develop effective, efficient and             in order to receive a mining licence.
equitable measures for the protection        Project sustainability management is
                                             used as a guideline to build socio-                                               25
and preservation of the environment, in
response to the concerns of the involved     economic design criteria into the
communities. While it is not regulatory      engineering design criteria of the project
or contractual in nature, the Charter        and financial models. Baseline data
establishes formal lines of communication    collection is expected to take a minimum
between the project and the community.       of one year.
Representatives from governments,
non-governmental organizations, tribal       REHABILITATION IN ACTION
leaders and interest groups will convene     As part of the environmental program
regularly to discuss project progress,       at Falcondo, we are conducting a
environmental management systems             rehabilitation program in previously
and controls and technical                   constructed waste rock stockpiles and
environmental monitoring data.               several sediment control structures. In
The Charter’s 10 articles address topics     2005 and 2006, we re-assessed the
such as preserving human activities in       engineering of these areas to ensure
catchment areas (including farming,          their long-term stability. Specific
fishing and hunting), monitoring and         recommendations for high-priority areas
reporting on water and air quality,          are due in the second quarter of 2007,
limiting effects on biodiversity and         with implementation commencing in the
progressively rehabilitating mining sites.   third quarter. This work is expected to
In 2006, we began the intensive data         be completed by year-end 2008.                 The Falcondo operation in the
                                                                                            Dominican Republic progressively
collection process required for the          In 2006, Falcondo planted 23.5 hectares        rehabilitates areas that have
development of the socio-environmental       of tree seedlings, derived from the tree       been mined. Tree seedlings
                                                                                            are grown by a contractor, with
impact assessment (SEIA) for the Kabanga     nursery established on site. Revegetation      participation from employees
nickel project in Tanzania. The process      assists in water retention and the             and the community through the
                                                                                            Falcondo Foundation.
involves gathering baseline data on          prevention of soil erosion, with the
                                             objective of returning disturbed land
                                             to close to its natural state.

                                                                                                            Xstrata Nickel
 Enduring Environmental Commitment

                              CREATING VALUE FROM BY-PRODUCTS                In addition to assigning a full-time
                              Slag is a by-product of the smelting           manager to the project, Raglan retained
                              process that is traditionally stockpiled on    a team of scientists to identify the cause
                              site. Falcondo has made use of available       and develop a solution. Because treated
                              technology to recover the valuable             water at Raglan is discharged during
                              ferronickel still contained within             summer months only, the team’s work
                              previously discarded refinery slags.           took more than two years to complete.
                              Commissioned in 2006, a new plant at           During this time, Raglan managers met
                              the site has not only enabled Falcondo         regularly with environmental authorities
                              to reduce waste, it has also increased         to explain their work and report on
                              annual ferronickel output. In 2006,            progress. Environment Canada officials
                              the plant produced 1,297 tonnes of             also visited the site on several occasions,
                              ferronickel and is expected to deliver         and commended the team for their
                              similar results in 2007.                       open and transparent approach.
                                                                             In 2006, there was one non-compliant
                              TRANSPARENT ISSUES RESOLUTION                  toxicity test for rainbow trout. In 2007,
                                                                             we will implement new corrective
                              In 2006, Raglan personnel continued            measures to meet our objective of
                              to meet with Environment Canada                100% compliance.
                              officials to report on the status of our
26                            investigation into the testing toxicity of
                              mill effluent. Our aim is to operate to        CLIMATE CHANGE AND CANADA’S
                              the highest environmental standards            CLEAN AIR ACT
                              and seek additional knowledge to meet          Xstrata Nickel recognizes climate change
                              this objective.                                as a complex and challenging global
                              Regular monitoring has revealed                issue and strives to be part of the
                              exceedances of government criteria for         solution. In 2006, the Canadian federal
                              effluent toxicity, specifically as pertained   government introduced plans to amend
                              to the fish species rainbow trout.             the Clean Air Act, which seeks to reduce
                              Rainbow trout is not found in Raglan           industrial air pollutants and greenhouse
                              water streams; however, it is                  gases (GHGs). In 2007, we will continue
                              the regulated species to be referenced         to consult with our industry partners
                              in toxicity monitoring. In response,           and the federal government on the
                              Raglan adopted a highly scientific and         emerging legislation and our specific
                              collaborative approach to understanding        performance expectations. Our interest
                              the fundamental reasons for the toxicity       is to ensure that the Clean Air Act is
                              and is working with regulators to address      enacted fairly, so that it protects health,
                              the issue. Seasonal monitoring of other        the environment and the Canadian
                              aquatic species in Raglan water streams        economy. We will also continue to
                              has identified no adverse impacts.             address process improvements and
                                                                             energy efficiency measures as a means
 An Arctic fox on the                                                        of reducing air pollutants and
 Raglan property.                                                            greenhouse gases.

 2006 Sustainability Report
PLANNING AHEAD                                             We have begun working with permafrost
Tailings are the fine fraction of rock                     and climatic experts across Canada to
remaining after mining and processing                      assess the long-term performance of the
ore. They consist of finely ground                         tailings facility, under various climate
particles and traces of process reagents                   change scenarios, to ensure that the
and chemical residues. Tailings are                        tailings dam remains stable in perpetuity.
piped into engineered impoundments                         Among the studies, we are looking at
created with tailings dams, which are                      the impact of climate change on
developed, operated, monitored and                         permafrost in coastal regions versus a
maintained to prevent failure, seepage                     high-latitude location such as Raglan,
and contamination during and after                         where the impact may be muted.
mining operations.                                         In 2007, we will continue with the
At our Raglan mine in northern Quebec,                     scientific assessment with our team
permafrost is a critical element of the                    of experts and begin development of
tailings facility design and management                    long-term plans to modify tailings
plan. We recognize that climate change                     management at Raglan, if necessary.
could have a significant impact on
permafrost, centuries from now.

                                                                      2004            2005           2006
Energy consumption (gigajoules)                                 32,334,170      35,298,001       36,114,608

Energy intensity (gigajoules per refined metal produced)             229.00          224.46         231.16

Energy consumption at Canadian operations (gigajoules)            6,015,301       6,502,368       6,439,516

Energy intensity at Canadian operations
 (gigajoules per metals in matte)                                     82.59           75.33          76.30

Greenhouse gas emissions (CO2 equivalent tonnes)                  1,564,572       1,781,926       1,821,119

Carbon dioxide from direct and
 indirect sources (CO2 tonnes)                                    1,550,682       1,766,743       1,805,538

Methane (CO2 equivalent tonnes)                                         839               928          947

Nitrous oxide (CO2 equivalent tonnes)                                13,053          14,257         14,634

Greenhouse gas intensity (direct and indirect sources)                11.08           11.33          11.66

Greenhouse gas emissions at Canadian operations
 (CO2 equivalent tonnes)                                            451,681        491,407         486,512
                                                                                                              Annual sturgeon monitoring is
Greenhouse gas intensity at Canadian operations                                                               conducted in the Groundhog River,
 (direct and indirect sources)                                         6.20               5.69         5.76   adjacent to the Montcalm mine.

Note: Energy and GHG performance metrics exclude exploration sites and growth projects.

                                                                                                                               Xstrata Nickel
 Enduring Environmental Commitment

                                        ENERGY AND GREENHOUSE                       At Falcondo, a newly installed crude
                                        GAS PERFORMANCE                             furnace in the oil refinery is 23% more
                                        Our operations are major users of           efficient than its predecessor. This
                                        electricity and hydrocarbon fuels.          represents a savings of approximately
                                        Energy use and the resulting                1,200 barrels of oil, an equivalent of
                                        greenhouse gas (GHG) emissions are          approximately 550 tonnes of carbon
                                        therefore important business issues         dioxide emissions per annum. Falcondo
                                        from an environmental perspective,          performed various projects to improve
                                        in addition to operating costs.             the energy efficiency of the electric
                                                                                    furnaces related to an increase in the
                                        In 2006, GHG emissions increased by         calcine temperature and operating
                                        2% from 2005 due to increased energy        procedures. These projects decreased
                                        requirements across the majority of our     energy consumption by 1.1%, resulting
                                        operations. Energy intensity (a measure     in a savings of 4,730 megawatts, which
                                        of the total energy required to produce     is equivalent to 3,870 tonnes of carbon
                                        one tonne of refined metal) rose by         dioxide emissions per annum.
                                        3% to 231 gigajoules per tonne of
                                        refined metal from 2005, primarily as       At Montcalm, we developed an energy
                                        a result of a 2% increase in energy use     and GHG monitoring program for
                                        and a less than 1% reduction in total       propane, electricity and diesel in 2006.
                                        metal production. At our Canadian           Metrics gathered will be used to set
28                                                                                  energy and GHG reduction targets in
                                        operations, energy use and the resulting
                                        GHG emissions both decreased by 1%          2007 and 2008.
                                        from the previous year. Electricity         At the Sudbury smelter, we conducted
                                        consumed by the Canadian operations         a computational modelling study
                                        is primarily derived from hydroelectric,    of potential energy savings from
                                        nuclear and coal-fired generating           furnace off-gases, and improved the
                                        stations in Ontario.                        management of coke consumption.
                                        A challenge to setting and achieving        Energy consumption and GHG emissions
                                        energy reduction targets is balancing       were reduced by 5% from 2005 to 2006
                                        the need to reduce other air emissions,     as a result of improved operator attention
                                        such as sulphur dioxide and particulates,   to reducing furnace off-gas volumes.
                                        which will require additional energy use.   At the Sudbury mines and mill
                                        Options to reduce these emissions           operations, new auxiliary fan control
                                        are under assessment and will include       systems will be tested to enhance
                                        requirements to minimize energy             ventilation energy efficiencies. Projects
                                        use increase.                               in 2007 include power consumption
                                        All operations continue to identify         metering and shaft temperature
                                        opportunities for energy efficiency and     reduction at the underground mines.
                                        GHG reduction. Our partnerships with
                                        industry associations, particularly in
 Excess process heat from the           Canada, provide exposure to leading
 Nikkelverk refinery in Kristiansand,
 Norway, is used to heat the            energy-efficiency technologies. Examples
 operation’s buildings as well          of energy and GHG performance
 as provide heat to the local
 community at competitive rates.        improvements and objectives for 2007
                                        are outlined on pages 28 through 31.

 2006 Sustainability Report
At Nikkelverk, approximately 98% of            treatment process to deal with the                                             GREENHOUSE GAS
the energy consumption is from hydro-          arsenic. As a result of this collaborative                                     EMISSIONS
                                                                                                                              (CO2 EQUIVALENT)
generated electricity and therefore does       effort, arsenic levels at Nikkelverk                                           BY SOURCE
not result in indirect GHGs. However,          reached record lows by early 2007 and
process improvements continue to be            we are seeking further improvement.
sought to improve the overall energy                                                                                          58%
and GHG efficiencies at the operation.         CANADA’S TOWARDS SUSTAINABLE

Through membership with the                    MINING INITIATIVE

Norwegian Industry Association,
Nikkelverk will voluntarily participate        Towards Sustainable Mining (TSM) is an                                                                        12%

with other industry members to                 initiative designed to demonstrate the
collectively reduce GHGs by 20% from           Canadian mining industry’s commitment                                                              14%

1990 levels. Nikkelverk also continues         to sustainable development by improving
                                                                                                                                  Bunker C
to operate a heat exchange system in           its environmental and social performance.                                          Electricity

which process heat is captured by a local      Supported and advised by a Community                                               Diesel
energy company and utilized to heat            Of Interest advisory panel, which includes                                         Coke

homes in the local community.                  representatives from labour, aboriginal                                            Natural Gas
                                                                                                                                  Other Oil-Based
                                               organizations and communities,                                                     Products and Reductants
At Raglan, we reduced energy                   non-governmental organizations, mining
consumption by 5% from 2005 to 2006            communities, member companies and the
at the underground Katinniq mine as            investment sector, TSM has become a
a result of improved consumption                                                                                                                                        29
                                               condition of membership in the Mining
monitoring. Multiple projects have been        Association of Canada (MAC).
planned for 2007 including increased
monitoring across the operation,               As a member, Xstrata Nickel subscribes
reduction in ambient indoor heating            to the TSM guiding principles and has
and lighting requirements, and setting         committed to reporting on performance
of reduction targets throughout the            in the areas of tailings management,
operation. In addition, wind power will        energy use and GHG management,
be further investigated as an alternative      external outreach and crisis management
energy source.                                 planning, using the TSM ranking system
                                                                                                                              ENERGY PERFORMANCE
                                               and criteria. While we currently self-                                         AT XSTRATA NICKEL
                                               assess and submit annual performance
COLLABORATIVE PROBLEM SOLVING                  data to MAC, we will begin submitting
During regular monitoring of the               results for external verification of our                                     240                                         40

effluent from the Nikkelverk refinery, our     2007 performance year.
team noted the start of an upward trend

                                                                                                                                                                             Energy Consumption (petajoules)
                                               We are also involved in a TSM
                                                                                            Metal Production (kilotonnes)

                                                                                                                            180                                         30
in the level of arsenic in effluent in 2005.   initiative leaders’ group. One of the
Upon closer study in 2006, we learned          group’s priorities is the development
that the feed produced by the Sudbury          of frameworks for biodiversity                                               120                                         20
smelter contained higher amounts of            conservation and aboriginal relations.
arsenic than before, and the Nikkelverk        These frameworks include
                                                                                                                             60                                         10
refining process required adjustment.          commitments to which member
The Sudbury smelter and Nikkelverk             companies are expected to subscribe.
teams worked together to introduce             Although application of the TSM
                                                                                                                             0                                          0
                                                                                                                                  00    01   02   03    04    05   06
process improvements to remove                 elements pertains to our Canadian
arsenic at various stages. In addition         operations, Xstrata Nickel will                                                          Metal Production
to modifications at the refinery,              promote the initiative across its                                                        Energy Consumption
Nikkelverk adjusted its effluent               global operations.

                                                                                                                                                     Xstrata Nickel
 Enduring Environmental Commitment

                                      2007 ENVIRONMENTAL OBJECTIVES AND TARGETS
                                      All Xstrata sites are working to improve environmental performance with the purpose
                                      of reducing overall impact. Targets and objectives have been set for 2007 in areas such
                                      as air emissions, biodiversity conservation, energy and greenhouse gas management,
                                      land management, material and product stewardship, waste management and water
                                      use and conservation.

                                      Site                 2007 Target/Objective
                                      Xstrata Nickel       No Category 3, 4 or 5 environmental incidents1
                                                           No fines or penalties
                                                           Biodiversity conservation plans developed at all sites
                                                           Waste management plans in place at all sites
                                                           Review all closure plans annually
                                                           Develop Xstrata Nickel HSEC strategic objectives and management
                                                           framework compliant with Xstrata’s sustainability framework
                                                           Complete a gap analysis against Xstrata’s HSEC Policy and 17 HSEC
                                                           Management Standards and develop an action plan to address findings
                                                           Assess operation-specific issues identified in the 2006 post-acquisition HSEC
                                                           reviews, and develop corrective action plans prioritized by risk
30                                                         Complete HSEC assessments at Araguaia, Kabanga, Koniambo and
                                                           Nickel Rim South projects
                                      Falcondo             Initiate environmental baseline study for Loma Miranda project
                                                           Develop an emissions model to evaluate impacts on air quality in
                                                           surrounding areas
                                                           Evaluate process options to reduce stack emissions
                                                           Achieve 100% water recycling in the continuous tapping project
                                                           Complete environmental study and engineering of municipal waste
                                                           disposal area relocation
                                                           Revegetate 25 hectares of post-mining areas, including planting of
                                                           40,000 tree seedlings
                                                           Plant 30,000 tree seedlings off site in conjunction with the Dominican
                                                           Environment Ministry, and an additional 108,000 trees through the
                                                           Falcondo Foundation
                                      Montcalm             Develop an energy management program including metrics for setting
                                                           2008 energy reduction targets
                                                           Relocate 50,000 tonnes of potentially acid generating waste rock from
                                                           surface to underground by year-end
                                                           Zero discharge of mine water to the Groundhog River during
                                                           sturgeon spawning period
                                      Nikkelverk           Identify all relevant substances through the REACH2 initiative and prepare
 In 1999 Falcondo became the first                         plans to meet consortia deadlines for all substances
 ferronickel operation in the world
 to be ISO 14001 registered.                               Less than three Category 1 or 2 environmental incidents
                                                           Sponsor biodiversity and bioavailability studies of the local Kristiansand fjord
                                                           1.6% reduction in annual energy use

                                                           See page 24 for definitions.
                                                           REACH: a European Union regulation requiring all manufacturers and importers
                                                           of chemicals to register product information. Authorization will be based on risk
                                                           exposure assessments.

 2006 Sustainability Report
Site               2007 Target/Objective
Raglan             Complete review of the 10-year arctic char population study in the
                   Deception Bay watershed and develop action plan if required
                   Target energy reductions at the mines, camp complex and corridor lighting
                   of 18%, 5% and 43%, respectively, from 2006
                   20% reduction in spills of materials used on site
                   Develop programs to recycle 100% of tires, wooden wire spools and
                   identified scrap metals
                   Identify industry best practices to implement a “Green Buying”
                   procurement strategy
                   Ensure 100% recycle of concentrator process effluent
Sudbury            Prepare remaining components of the Pollution Prevention Plan as per
                   regulatory requirements, to reduce SO2 emissions to 25,000 tonnes per annum
                   by 2015 at the Sudbury smelter
                   Complete peer reviews of the Sudbury Soils Study health and environmental
                   risk assessments and support the release of study findings to the public
                   Reduce dioxin release from smelter to less than 0.5 grams per year by 2008
                   Recycle more than 95% of process water from tailings management area for
                   Strathcona concentrator and mine backfill plant
                   Reduce water consumption at Sudbury mines and mill by 10%
                   Reduce freshwater consumption at the Sudbury smelter by 5% by 2008,
                   from 2006 consumption
                   Improve energy intensity at smelter by 1% per year over five-year
                   rolling average
                   Utilize 120,000 tonnes of bio-remediated soils for land reclamation
                   Rehabilitate 50 hectares and plant 60,000 trees
                   Initiate a comprehensive environmental baseline study, including
                   biodiversity assessments
Kabanga            Complete biodiversity conservation plan
                   Complete energy supply trade-off studies, energy risk assessment and energy
                   management guidelines, and define energy metrics
Koniambo           Complete HSEC systems, organization and readiness review, and prepare and
                   implement an action plan based on the findings
                   Prepare a detailed reclamation plan for early construction and a progressive
                   reclamation strategic plan, including rehabilitation of legacy sites
Nickel Rim South   Implement energy management system
                   Evaluate water recycling opportunities for full mine operation
                   Evaluate use of tailings from the historic neighbouring Nickel Rim mine
                   as aggregate for underground backfill

                                                                                                  Original Nickel Rim site following
                                                                                                  completion of drainage improvements
                                                                                                  and other rehabilitation activities.
                                                                                                  A pumphouse and pipeline constructed
                                                                                                  at the site transports effluent to the
                                                                                                  Sudbury smelter wastewater treatment
                                                                                                  facility. Historical mining activities at
                                                                                                  the site occurred prior to ownership
                                                                                                  by Xstrata Nickel.

                                                                                                                     Xstrata Nickel
 Strong Economic Performance

32                                  RECORD FINANCIAL RESULTS
                                    Xstrata Nickel achieved record financial performance in 2006. Revenue rose by 56% to
                                    $3,364 million compared to the prior year, primarily due to very strong nickel prices.
                                    A 3% year-on-year reduction in refined nickel output was mostly offset by a 4% increase
                                    in ferronickel production at Falcondo. Earnings before interest and taxes (EBIT) rose by
                                    180% to $931 million, compared to $333 million in 2005. The full benefit of higher sales
                                    prices and higher volumes was tempered by a strong Canadian dollar, higher oil prices,
                                    rising labour costs and increased royalty payments linked to higher metal prices.

                                    XSTRATA NICKEL EBIT                      XSTRATA NICKEL REVENUE
                                    PRO FORMA                                PRO FORMA
                                    (US$ million)                            (US$ million)

                                    1,000                                    4,000

                                     750                                     3,000

                                     500                                     2,000

 In 2006 Nikkelverk produced         250                                     1,000
 82,000 tonnes of refined nickel.

                                       0                                        0
                                               05   06                                  05   06

                                    Note: All funds in this report are in U.S. dollars and all measurements are metric, unless otherwise noted.

 2006 Sustainability Report
                           Xstrata Nickel’s goal is to consistently deliver superior returns for
                           shareholders by successfully creating, managing and growing an
                           industry-leading portfolio of nickel assets. Our success enables us to
                           help create a prosperous future for the communities in which we
                           operate through job creation, training, the purchase of local goods and
                           services, sponsorships and donations, as well as government taxes.

INVESTING IN SUSTAINABLE                       operations, more than 84% of the                                             33
COMMUNITIES                                    total goods and services purchased
Xstrata Nickel contributes to local and        in 2006 were from locally based
regional economies where we operate            suppliers in the Greater Sudbury Area.
through direct job creation, payment           At Nikkelverk, 33% of the total
of wages, bonuses and taxes, support of        procurement expenditures were made
local businesses in the supply chain and       in the locale of Kristiansand, Norway.
community investment programs, among           And at Falcondo, 18% of the total
other indirect benefits. Wherever              procurement expenditures were made
possible, we procure goods and services        in the Dominican Republic.
from local suppliers and create preferred      At the Koniambo project in
supplier relationships with these suppliers.   New Caledonia, a commitment to
Through a qualification process, we            engage local resources will see the
engage with responsible suppliers that         establishment of a local intermediary
adhere to our procurement practices and        company in 2007 to serve as a broker
we evaluate their HSEC performance.            for these resources. The project’s
Investment in local and regional               economic benefits team will work with
economies where we operate is core             local organizations and community
to the long-term sustainability of our         representatives to structure the Company
communities. At Raglan, in the remote          and guide its early development. The
Canadian Arctic, we have a commitment          objective will be the creation of an
with local Inuit communities to engage         independent entity serving the local       Hundreds of suppliers and
                                               workforce and small contractors.           contractors – most local – have
Inuit enterprises where practicable.                                                      been involved in the Nickel Rim
In 2006, nearly 21% of Raglan’s total                                                     South project in Sudbury.

expenditure on goods and services was
directed to Inuit companies. Collectively
at Raglan, 29% of the procurement
expenditures were made to local
suppliers in the Abitibi-Temiscamingue
region of Quebec. At our Sudbury

                                                                                                           Xstrata Nickel
 Strong Economic Performance

                                POISED FOR GROWTH                           Raglan Mine Optimization, Canada
                                Xstrata Nickel is a company focused         A mine optimization project is focused
                                on sustainable, value-creating growth.      on maximizing mill capacity. The project
                                New projects not only provide the means     involves enhancing site infrastructure
                                to grow our business, they also provide     and ore production to allow for
                                for economic contributions and              mining, milling and processing of
                                employment in new regions and help          1.3 million tonnes of ore annually,
                                sustain communities where we already        resulting in 30,500 tonnes of annual
                                operate. We have the financial strength,    contained nickel production. This project
                                project pipeline and expertise to pursue    is scheduled for completion in 2008.
                                this growth boldly and rapidly. While
                                Xstrata Nickel is currently the world’s     GREENFIELD GROWTH PROJECTS
                                fourth largest nickel producer, with        Koniambo, New Caledonia
                                annual managed production of more           Koniambo is one of Xstrata Nickel’s
                                than 110,000 tonnes of refined nickel,      anchor growth projects, with the
                                our goal is to improve on this position.    potential to deliver significant long-term
                                Our growth strategy is focused on           value from a 60,000 tonne-per-year
                                brownfield expansion, greenfield            nickel-in-ferronickel mining and process
                                projects, and mergers and acquisitions.     complex. Production is targeted to begin
34                                                                          in 2009/2010.
                                BROWNFIELD GROWTH PROJECTS                  In 2006, Xstrata Nickel (49%) and its
                                Nickel Rim South, Canada                    partner SMSP (51%) announced that
                                Nickel Rim South is a high-grade mineral    the project would enter a renewal
                                resource located nine kilometres north      phase, during which fundamentals
                                of the Sudbury smelter. A five-year,        would be reviewed to ensure future
                                $538 million underground definition         success. During this period, the project
                                and development program at the site         has continued to advance at a good
                                was initiated in 2004. With production      pace, with early construction activity
                                scheduled to commence in 2009,              beginning in early 2007. To date, more
                                Nickel Rim South is expected to produce     than $400 million has been committed
                                at least 1 million tonnes per year of ore   to the project and an additional $100
                                and extend Xstrata Nickel’s presence in     of investment is planned during the
                                the Sudbury Basin for at least 20 years.    current renewal phase.

                                Fraser Morgan, Canada
                                Fraser Morgan is a nickel project
                                located two kilometres from the existing
                                Fraser mine in Sudbury. In late 2006, a
                                $16 million capital expenditure for
                                preliminary development was approved.
                                With subsequent development phases
 A geologist measures core at
 the Araguaia nickel laterite   approved in 2007, mine production
 project in Brazil.             could start as soon as 2009. When
                                brought into production, Fraser Morgan
                                will contribute an estimated 7,200 tonnes
                                of refined nickel per year over its
                                seven-year expected mine life.

 2006 Sustainability Report
Kabanga, Tanzania                             Araguaia, Brazil
The Kabanga nickel project is a               Araguaia is a promising nickel-laterite
50/50 joint venture with Barrick Gold         discovery in the Para state of Brazil.
Corporation in northwestern Tanzania.         In 2006, 26,000 metres of diamond
It is considered to be among the world’s      drilling were completed on the project.
most attractive undeveloped nickel            Encouraging results prompted us to
sulphide deposits, with potential nickel      increase the drilling program by 50%
production of 40,000 to 50,000 tonnes         to provide the necessarily geological
per year. In 2006, we completed a             information to begin a scoping study in
$50 million scoping study that resulted       2007. Additional exploration drilling is
in a substantial increase to the Kabanga      also planned on nearby targets with
mineral resource. We have since moved         known nickel mineralization.
the project to the pre-feasibility stage.


Preparing for REACH
In June 2007, a new European Union (EU)
regulation for the Registration, Evaluation
and Authorization of Chemicals (REACH)
will take effect.

REACH is intended to place the burden of work-               To prepare for REACH, there are consortia through
related materials health and environmental exposure          the Nickel Institute and the Cobalt Development
costs onto the shoulders of industry instead of              Institute. These consortia facilitate compliance with
authorities. It does so by mandating the registration        the EU legislation while managing the amount of
and authorization of chemicals excluding those from          research and associated costs. Xstrata Nickel has
the petrochemical, iron and steel industries. Such           hired a full-time material stewardship coordinator
registration will be required for all materials              at our Nikkelverk operations in Norway to help
imported and manufactured within Europe.                     facilitate the work and ensure compliance.
Authorization will be on a priority basis depending          The REACH regulation was formally adopted in
on the assessed risk of exposure and tonnage per             December 2006. From June 2007 to June 2008, the
annum. Implicit in the authorization for chemicals           agency will be established in Helsinki and responsibility
classed hazardous will be substitution.                      transferred from the European Chemicals Bureau.
                                                             Under REACH, all manufacturers and importers must
                                                             submit product information to a central database,
                                                             which will be accessible to the general public.

                                                                                                            Xstrata Nickel
 Strong Economic Performance

                                        STRENGTHENING OUR POSITION                    REFURBISHING DECEPTION BAY
                                        IN RECYCLING                                  In late 2006, capital expenditures of
                                        In 2006, we began construction of             $45 million were approved to refurbish
                                        a $25.9 million recycling plant at the        the existing, 35-year-old Deception Bay
                                        Sudbury smelter in Canada. The plant          wharf installations near our Raglan
                                        will use direct heat to process end-of-life   mine. The current wharfs are used nine
                                        (EOL) nickel metal hydride batteries          months of the year to bring supplies to
                                        from hybrid cars and EOL lithium              the Raglan site by ship and to send
                                        batteries from laptops and cell phones,       nickel-copper concentrate to Quebec
                                        along with other custom feeds, in order       City, where it is transported to our
                                        to extract nickel and cobalt. It will also    Sudbury smelter for treatment, and
                                        enable us to treat materials that have        then the upgraded matte product is sent
                                        been stored at the site for some time         to the Nikkelverk refinery in Norway.
                                        but were untreatable until now.               The project has entered the engineering,
                                        We received all necessary environmental       procurement and construction
                                        permits in 2006 following detailed            management stage, and will commence
                                        engineering and pilot-testing phases.         construction in mid-2007. Refurbishment
                                        Commissioning of the plant is scheduled       will increase ship docking efficiencies
                                        for mid-2007. Once in full production,        required to meet increased concentrate
                                        the plant will strengthen Xstrata Nickel’s    volumes, following the mine expansion.
                                        position as a market leader in nickel and
                                        cobalt recycling.

                                        PLANNING FOR CLOSURE
                                        All Xstrata Nickel operations maintain
                                        detailed closure plans that address the
                                        social, environmental and economic
                                        impacts of the closure of a site, including
                                        the cost of tailings dams and associated
                                        water treatment plants and workings.
                                        Our policy is to design for closure prior

                                                                                                                                 Concept and Design: THE WORKS www.worksdesign.com Printer: G.S. Systems Inc.
                                        to new project construction. Currently,
                                        the net present value of Xstrata Nickel’s
                                        asset retirement obligations and legal
                                        obligations associated with the
                                        retirement of certain assets is
                                        $79 million. All closure plans are
                                        reviewed annually.

 In November, an extended scoping
 study phase was concluded at the
 Kabanga nickel project in
 Tanzania, resulting in a substantial
 increase to the mineral resource.

 2006 Sustainability Report
General Inquiries
For further information about Xstrata Nickel, please contact:
Corporate Affairs
100 King Street West
Suite 6900, P.O. Box 403
Toronto, Ontario
M5X 1E3
+1 (416) 775 -1500

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Versión en español
Para obtener una versión en español de este informe, favor enviar us solicitud
al Departamento de Asuntos Corporativos, a la dirección antes indicada.
         Xstrata Nickel
100 King Street West, Suite 6900
          P.O. Box 403
       Toronto, Ontario
            M5X 1E3
    Tel: +1 (416) 775 -1500
    Fax: +1 (416) 775 -1744

          Xstrata plc
       Bahnhofstrasse 2
         PO Box 102
          6301 Zug
     Tel: + 41 41 726 60 70
     Fax: + 41 41 726 60 89


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