Announcement in full - note that the planned life for EHM has...

Announcement in full - note that the planned life for EHM has been stated to now end in 2019 from 2024, and halve planned mine production from 2012.


-Media release distributed by AAP Medianet------------

Suspension of Expenditure on AUD6BN Wandoan Coal and AUD600M Ernest
Henry Underground Copper Projects in Queensland

Brisbane, 3 June 2010

Xstrata has suspended AUD586 million of expenditure to develop
both the AUD6 billion Wandoan thermal coal project and a AUD600
million project to extend the life of the Ernest Henry copper mine,
with immediate effect. Together these two projects in Queensland
would have created 3,250 new jobs which are now at risk. The
decisions represent the initial findings from Xstrata's ongoing
review of planned investment into its Australian operations and
growth projects as a result of the Australian Government's proposed
Resource Super Profits Tax ("RSPT"). The review includes growth
projects comprising total investment of AUD22 billion and the
potential to create 14,725 new jobs.

Key Queensland growth initiatives to be suspended are:

* AUD400 million Ernest Henry Mining (EHM) shaft underground mine
project, already approved by Xstrata for development near Cloncurry
in north-west Queensland ;
* AUD91 million early works and detailed design for the first stage
of the 30 million tonnes per annum, AUD6 billion Wandoan Coal
Project and related infrastructure;
* AUD82 million of additional exploration and sampling for Wandoan
and the Surat basin; and
* AUD13 million of drilling on additional coal expansion projects
in Queensland including Rolleston West and Sarum.

Mick Davis, Xstrata plc Chief Executive commented:
"The RSPT has created significant uncertainty for the future of
mining investment into Australia and would impair the value of
previously approved projects and exploration to the point that
continued investment can no longer be justified.

"Our Australian management teams' analysis demonstrates that the
RSPT would significantly impact the value and cashflows of both of
these projects. The impact of the tax eliminates the net present
value of the Wandoan coal project almost entirely and substantially
reduces the value of the Ernest Henry underground shaft project.
The two projects involve significant risks and total capital
investment of over AUD6.4 billion. Neither will be viable if the
RSPT is imposed.

"In addition, the Government's decision to change the rules for
existing investments has introduced the significant risk that any
new investment in Australia may again be subject to tax regime
changes without consultation. Any potential Australian mining
investment now needs to show a higher rate of return to compensate
for the impact of the world's highest mining taxation on cashflows.
Investors will also expect higher project returns to justify the
increased risk of investing in Australia.

"The suspension of investment into these key projects for the
future of our business in Queensland makes them less likely to
proceed and ultimately compromises Australia's ability to continue
to benefit from future commodity price rises.

"We will continue to seek meaningful consultation with the
Federal Government to engage on the industry's key concerns in
respect of the RSPT. In the meantime, we have an obligation to make
business decisions in response to changing circumstances and we
continue to develop business opportunities and develop growth
projects in countries which promote competitive and predictable
fiscal regimes."

Ernest Henry copper mine, Cloncurry
The Ernest Henry underground mine project was approved by the
Xstrata plc Board in December 2009 and would have extended the life
of the EHM operations from 2013 to at least 2024, with a total
capital investment of AUD589 million (US$542 million). EHM's
current open pit mining operations would have been progressively
transformed into a major shaft underground mine through this
investment.

The announcement involves the loss of approximately 60 contractor
jobs with immediate effect and a further 190 positions that would
have been created over the next 18 months.

Although the development of the smaller decline underground mine
is currently planned to continue, the suspension of the majority of
the underground development project will halve the mine's planned
annual production rate from 2012 and reduce the planned life of the
operations by at least five years, from 2024 to 2019.

Xstrata Copper Chief Executive Charlie Sartain said, "The
shelving of the capital investment for the EHM underground mine
development so soon after the corporate approvals were obtained is
extremely disappointing and threatens the longer term viability of
our operations in north Queensland.

"This has been a very difficult decision, particularly with its
immediate impact on our workforce and the local communities, and
given our strong collaboration with the Queensland Government last
year to obtain internal approvals for the project. This project
clearly would have benefited the region and Queensland as a whole."


Wandoan coal project, Surat Basin
Xstrata Coal has spent approximately AUD200 million over three
years progressing the Wandoan Coal Project through feasibility
studies. Early works scheduled to commence from July 2010 will be
suspended immediately, including drilling, the construction of
workers' accommodation, communications and road upgrades.

The Wandoan Coal Project and associated infrastructure and
exploration initiatives were to provide over 3,000 jobs throughout
construction and operation over the next five years and open up the
Surat Basin as the next major new export region for Queensland.

"The RSPT puts the future of this globally significant AUD6
billion project at risk, together with the development of the Surat
Basin as an internationally competitive export coal region,"
Xstrata Coal Chief Executive Peter Freyberg said.

"We are deeply disappointed to put these important activities on
hold and regret the significant impact their suspension will have
on jobs, our project partners and surrounding regional communities.

"Our priority is to discuss the implications of this suspension
with affected communities and other stakeholders. We will honour
all obligations and agreements entered into with landowners and key
stakeholders to date."


Xstrata contacts

Xstrata Coal
James Rickards
Telephone +61 2 9253 6789
Mobile+61 419 731371
[email protected]

Xstrata Copper
Sue Sara
Telephone +61 7 3295 7535
Mobile+61 411 206 090
[email protected]

Xstrata
Claire Divver
Telephone +44 20 7968 2871
Mobile+44 7785 964340
[email protected]


SOURCE: Xstrata