Xstrata Nickel Announces Restructuring of Sudbury Operations (Company Press Release)

Toronto, 9 February 2009

Xstrata Nickel today announces plans to restructure its Sudbury operations in response to ongoing challenging market conditions.  The restructuring follows the announcement in November 2008 of the accelerated closure of the end-of-life Craig and Thayer-Lindsley operations at Sudbury, both of which will cease operations with immediate effect.

As a result of the restructuring, the Fraser Mine Complex will be placed on care and maintenance and associated support and administrative functions will be reorganized. The Strathcona Mill, with annual capacity of 2.7 million tonnes of ore, will be reduced to two work shifts from four as a result of reduced feed. In addition, the Fraser Morgan development project will be deferred. This project will be evaluated on an ongoing basis and may be re-initiated when economic conditions allow.

Today’s announcement does not impact the world-class Nickel Rim South project in the Sudbury basin.  The project remains on schedule to ramp up to 60% of its ultimate 1.25 million tonne per annum production capacity in 2009, equivalent to approximately 7,400 tonnes of nickel.  Nickel Rim South will become a low-cost, cornerstone operation in Sudbury, generating annual production of approximately 18,000 tonnes of recoverable nickel by early 2010.  Xstrata Nickel has invested C$627 million for the project’s first phase, which came in on time and on budget, and has approved the remaining project capital expenditure of C$300 million for the completion of mine development and infrastructure.  Nickel Rim South is a long-life operation that is expected to provide a high-value ore feed while significantly reducing Sudbury’s unit costs.

Total production from the Sudbury Smelter is expected to remain at a similar level compared to 2008 production as shortfalls arising from the cessation of Sudbury Mines will be offset by concentrates from Nickel Rim South and Xstrata Nickel Australasia. Concentrates will also continue to be processed from Xstrata Nickel’s Montcalm and Raglan operations, together with third-party feed.

Ian Pearce, Xstrata Nickel Chief Executive commented: “Our leadership team is taking proactive and decisive measures during challenging times. The continued decline of the economic environment and deteriorating commodity markets, coupled with high operating costs particularly at our older mines, are negatively impacting our Sudbury operations. The actions announced today aim to reposition our Sudbury complex into the bottom quartile of the cost curve, ensure our operations remain financially robust even during a potentially long period of depressed commodity prices and establish a strong foundation for further growth in the region.

“Our Sudbury complex is an important part of Xstrata Nickel and we remain fully committed to continuing to operate at Sudbury for many years to come. Nickel Rim South remains a top priority and development work on the project continues without interruption.”

As a result of the restructuring, 686 permanent employee positions will be made redundant, affecting both union and salaried employees in operational and non-operational roles.  A three-day stoppage of operations was initiated today to allow the restructuring to occur.

Marc Boissonneault, Vice-President of Xstrata Nickel Sudbury Operations said: “There are no decisions more difficult than those which directly impact our employees, particularly to this degree. We recognize that this restructuring of our operations will affect our employees, their families, our unions and other key stakeholders.  With this, our first priority is to ensure that displaced employees are treated fairly and with respect. This will include a three-day pause of the organization, professional outplacement services and expanded Employee Assistance Programs offering counselling and support over the coming months.

“We are making these tough decisions to sustain our business in the immediate and longer term. Ultimately these actions will result in more robust and viable operations at Sudbury that continue to create value and jobs for the local community over the medium and long term.”

Ends

Editors Notes

Xstrata Nickel

Xstrata Nickel, headquartered in Toronto, Canada, is one of Xstrata Group’s global commodity businesses, comprising five mines and processing facilities in Ontario and Quebec, Canada; a ferronickel mine and processing facility in Bonao, Dominican Republic; a high-grade sulphide mine and processing facility in Western Australia and a refinery in Kristiansand, Norway. Xstrata Nickel has a significant portfolio of growth projects, including Koniambo in New Caledonia, Nickel Rim South in Canada, Kabanga in Tanzania, Araguaia in Brazil and Sinclair in Australia. Xstrata Nickel is the world’s fourth largest nickel producer, with annual managed production of more than 107,500 tonnes of refined nickel.

Xstrata plc

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 a growing platinum group metals business, additional exposures to gold, cobalt, lead and silver, recycling facilities 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 USA and the UK.

Contacts:

Xstrata Nickel
 
Peter Fuchs
  
Telephone
 +1 416 775-1523
  
Mobile
 +1 416 305-9273
  
Email
 pfuchs@xstratanickel.ca
  
Xstrata
 
Claire Divver
   
Telephone
 +44 20 7968 2871
 
Mobile
 +44 7785 964340

Email
 cdivver@xstrata.com

 Investors and analysts

 Hanré Rossouw

 Telephone
 + 44 20 7968 2820

 Mobile
 + 44 7879 455885

 Email
 hrossouw@xstrata.com

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