Tampakan Project SD Report

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Tampakan ProjectSustainability Report 2009


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b TAMPAKAN PROJECT

Contents

Aot Xstrata plc

Xstrata is a global diversifed mining group, listed on the London and Swiss Stock Exchanges, with its headquarters in Zug, Switzerland.

Xstratas businesses maintain a meaningul position in seven major international commodity markets: copper, coking coal, thermal coal,

errochrome, nickel, vanadium and zinc, with a growing platinum group metals business, additional exposures to gold, cobalt, lead and

silver, recycling acilities and a suite o global technology products, many o which are industry leaders. The Groups operations and

projects span 19 countries.

Aot Xstrata CopperHeadquartered in Brisbane, Australia, Xstrata Copper is one o the commodity business units within Xstrata plc. Its operations and

projects span eight countries: Australia, Argentina, Chile, Peru, Canada, the USA, the Philippines and Papua New Guinea. Its operations

are administered by fve separate divisions, based close to the mining operations, namely the North Queensland, Minera Alumbrera, North

Chile, Southern Peru and Canada divisions. It also has a recycling business (Xstrata Recycling) with plants in the United States and ofces

in Canada and Asia.

Xstrata Coppers world-class portolio o copper development projects includes Tampakan in the Philippines, Frieda River in Papua

New Guinea, Las Bambas and Antapaccay in Peru and El Pachn in Argentina. Xstrata Copper is also developing the Energa Austral

hydropower plant project in southern Chile.

Xstrata Copper is the ourth largest global copper producer with attributable mined production in 2009 o 907,000 metric tons o copper

in cathodes and concentrates. The company is also one o the worlds largest producers o smelter and refned copper, including rom

third party materials. It employs approximately 19,500 people, including contractors.

1 Xstrata Copper TampakanProject

2 Executive General Managersmessage

4 General Managers message

6 2009 SD Scorecard and 2010Targets

12 Our approach to sustainabledevelopment

Xstrata Coppers Denition oPrpose

Or strategic ojectives

Or vales

Precationar approach

13 SMI Sstainale Development Polic

Ke sstainailit challenges

Awards or sstainale development

16 Governance and managementsystems

Governance strctre

Hman rights

Child and orced laor

b TAMPAKAN PROJECT

brier and corrption

Plic polic participation &political contritions

20 Our operations andeconomic contributions

Local sppliers

Local siness

Local inrastrctre

25 Case StudyProgress inBarangay Kimlawis

26 The workplace and our people

Saet perormance

Occpational health

Home saet and asic rst aid

behavioral based Saet (bbS)

Risk management

Treatment or serios diseases

Preparation or crisis andemergenc

Emploees

Emploing locall

Emploee training

Emploee perormance evalation

Diversit and eqal opportnit

Non-discrimination polic

29 Case Study5,000,000+ manhours with no LTI: The cltre

o saet in the work place andthe commnit

31 Case StudyCultural induction:Ke to cltrall sensitive commnitengagements

32 Sustainable communitiesCommnit grievances

Indigenos rights

36 Case StudyThe SMI public

consultation process

37 Case StudyHeritage Surveys:The cltrall sensitive engagementapproach

38 The environmentEnvironment Polic

Environmental incidents

Water management

biodiversit

Air emissions

Solid waste management

Environmental managementinitiatives

41 Case StudyForest Inventory:Ensring environmental estpractices eore andater operations

42 Case StudyLake Buluan Study:A critical milestone

43 Summary o key sustainabilitydata

44 Global Reporting Initiative

45 Glossary

Ke to cltrall sensitivecommnit engagements

o saet in the work place andthe commnit

The cltrall sensitiveengagement approach


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SuSTAINAbILITy REPORT 2009 1

Xstrata Copper Tampakan Project

Map o OperationsManila

Catanduanes

Masbate

Palawan

Samar

Mindoro

Negros

MINDANAO

Cebu

Zamboanga

Leyte

Tampakan

Gen.

Davao

Santos

Tampakan

The Tampakan Copper-Gold Project is located on the sothern Philippine island o Mindanao, approximatel

65 kilometers north o General Santos Cit. The Project is sitated on the ondaries o or provinces:

Soth Cotaato, Sarangani, Sltan Kdarat and Davao del Sr, and represents one o the largestndeveloped copper-gold deposits in the Sotheast Asia-Western Pacic region.

In 2009, the Tampakan Project entered into the nal easiilit phase and commenced plic consltations as

part o its Environmental and Social Impact Assessment (ESIA).

The Tampakan Project is a 2.4 illion metric ton deposit, containing 13.5 million metric tons o copper and

15.8 million onces o gold at a 0.3% ct-o grade. It is operated Philippine-ased aliate Sagittaris

Mines, Incorporated (SMI), whose 40% controlling eqit is a joint ventre among Xstrata Copper (62.5%)

and Indophil Resorces NL (37.5%). The 60% non-controlling eqit shareholders o SMI are the Tampakan

Mining Corporation and Sothcot Mining Corporation (known as the Tampakan Grop o Companies). In

Decemer 2009, the Project emploed approximatel 252 emploees and 1,065 contractors, inclding a

weekl average o 202 local commnit residents, to spport the Projects explorator drilling and other

operational needs.


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2 TAMPAKAN PROJECT

Exective General Managers message

The dramatic all in commodit prices andthe gloal economic slow down in late2008 contined to aect the mining sectorin 2009. Xstrata Copper responded qickl

and decisivel to the deteriorating economicenvironment to ensre the sstainailit oor operations and projects. As a reslt,we emerged rom the downtrn in astrong position when rising copper demandand prices egan to ease the challengingeconomic conditions in the second hal othe ear.

Despite the diclt siness environment,Xstrata Copper made signicant progress inadvancing its portolio o greeneld projectsinclding the Tampakan Project in thePhilippines, Frieda River in Papa New Ginea(PNG), El Pachn in Argentina and the Energa

Astral hdropower project in sothern Chile.

We had a positive start to 2009 with theFrieda River project progressing into thepre-easiilit stage in Janar, refecting theencoraging reslts o or extensive drillingprogram in 2008. Evalation continedthroghot the ear and in Janar 2010,we annonced a revised Mineral Resorceestimate or the Horse-Ivaal-Trkai depositwhich represented a sstantial tonnageincrease over the previosl plishedestimate. The pre-easiilit std is schedledor completion in the third qarter o 2010.

The Tampakan Copper-Gold Projectlocated on the sothern Philippine islando Mindanao emarked on a uS$74million easiilit std in Jne 2009 andcommenced a comprehensive Environmentaland Social Impact Assessment (ESIA) andstakeholder engagement process. In Octoer2009, the Projects Mineral Resorce estimatewas also pdated. The easiilit std isschedled or completion in the secondqarter o 2010.

We contined to ndertake engineeringstdies and environmental impactassessments or the Energa Astralhdropower project in sothern Chiles AsnRegion which comprises three power plantacilities and a dedicated transmission line.The ESIA std or the Rio Cervo power

plant acilit was smitted to the Chileangovernment in Agst 2009, marking asignicant milestone or the Project.

The El Pachn project contined to pdateits previos easiilit std and ndertookexpanded environmental aseline stdies.Following an analsis o the reslts rom theprevios ears drilling program, a sstantialincrease in the Projects Mineral Resorceestimate was annonced in late 2009.

I elieve or ailit to deliver these extensivework programs sccessll while operatingin sch remote and demanding locations istestament to or commitment to workingsael, sstainal and in genine partnershipwith or stakeholders. These SstainaleDevelopment principles are ndamental

to or siness model and gide or daildecision-making.

Or projects also set SstainaleDevelopment improvement targets andcontinall assess their perormance againstthose ojectives throghot the ear. Orpriorit is zero harm and we aim to achievethis throgh a sstematic approach toidentiing, analzing and managing thecatastrophic hazards present in or workenvironment and the high hazard activitieswe ndertake across or siness on a dailasis.

In 2009 or projects achieved some

improvements in saet perormance as areslt o strong management ocs in thisarea and the implementation o initiativessch as the positive attitde saet sstem(PASS). For the ll ear, or total recordaleinjr reqenc rate (TRIFR) was 2.3 recordedinjries per million hors o work, down rom4.2 in 2008. Or projects also recorded alost time injr reqenc rate (LTIFR) o 1.5in 2009 down rom 1.7 in the previos ear.The Tampakan Project remained LTI ree orthe entire ear, achieving over 5 million horsLTI ree in earl Janar 2010.

Tragicall, despite these saet improvements,

a atal incident occrred at Energa Astralwhen an infatale oat carring personnelrom a contractor compan capsized on the

Cervo River in soth Chile casing the losso three workers, Moiss Aros, Mario Mndez

and Edgardo Rogel. Having reviewed orsstems and processes in relation to thisincident, or most pressing challenge or2010 is to achieve or strategic ojectiveo an injr-ree, sae work environment toensre that all or people go home sael atthe end o each da.

Dring the ear or projects contined toocs on environmental aseline monitoringin ke areas sch as grond and sracewater, soil and land se, iodiversit,meteorolog and geotechnical stdies. TheFrieda River project maintained its aqaticiodiversit monitoring program or the Sepik

River catchment area and commenced aterrestrial iodiversit srve, the rst std oits kind to e condcted in the area in almosta centr.

Xstrata Copper contined to advance its portolio o world-class copper projects in 2009 and

completed the ear with solid improvements across all areas o sstainale development.


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Peter Forrestal

Executive General Manager

Project Evaluation

At the El Pachn project, environmentalaseline stdies were spported the

installation o ctting-edge meteorologicaland water monitoring stations. With thisadvanced technolog now in place, we lookorward to gaining rther insight into theclimate, landscape and water resorces o thisremote part o Argentina.

For or more advanced projects, thepreparation o ESIA stdies was also a prioritthroghot the ear. In the second halo 2009, the Tampakan Project team metwith 94 stakeholder grops as part o itsESIA process and held or plic meetingsattended over 2,863 people. Throghthese orms we have received valaleeedack that will e incorporated into the

Tampakan Projects design and planningalong with the reslts o or specialiststdies.

The ESIA std or the Rio Cervohdroelectric power plant was also smittedin 2009 the Energa Astral projectollowing a two ear commnit consltation

process. This is the rst o or sch stdiesto e ndertaken the Project which hasthe potential to serve as a new sorce oclean energ or Chile.

While Xstrata Coppers projects are crrentllow energ consmers, we recognize theneed to address climate change and weactivel work to redce greenhose emissionsand energ consmption, as well as reshwater se, wherever possile. We alsorecognize that at a project level, the keto eective greenhose gas managementis throgh the appropriate design o orproposed operations and, as sch, the

optimization o or projects greenhose gasootprint is an important consideration in ordevelopment process.

In 2009, or projects intensied theircommnit and stakeholder engagementactivities to ensre that local commnitiesconcerns and interests are eing addressedin or project planning and design. XstrataCopper is committed to advancing orprojects in line with international estpractices. Throghot the ear we continedto work with or stakeholders to address keisses inclding land ownership, resettlement,ree prior and inormed consent, hman

rights, the provision o government servicesin remote areas and social and economicdevelopment.

We also invested over uSD2.65 millionon commnit initiatives in the areas ohealth, edcation, enterprise development,arts and cltre and social development.Together with local stakeholders and partnerorganizations, we spported a wide rangeo activities specicall tailored to localcommnit needs sch as pgrading the onloarding school in the Calingasta mnicipalitnear the El Pachn project, delivering HIV/AIDS awareness programs to commnities

in the PNG highlands, installing potalewater inrastrctre in villages within theTampakan Project area and spporting skillstraining programs to increase emploment

opportnities or commnities near EnergaAstral.

As we move into 2010, we anticipate

that contined improvement in Westerneconomies will drive a recover in copperconsmption, providing a more positiveeconomic environment or or siness. Wewill contine to progress or portolio ogreeneld projects and we look orward tocompleting the Tampakan Project easiilitstd in the rst hal o 2010 ollowed theFrieda River project pre-easiilit std the end o the ear. In 2010 we also expectto nalize the ESIA or the Tampakan Projectand Energa Astrals Rio blanco and LagoCondor hdroelectric plants.

Ater a comprehensive review, we will also

e implementing in the second qarter othe ear a new Sstainale DevelopmentPolic and Management Framework that willreplace and incorporate or crrent Saet &Health, Environment and Commnit policies.Training and revised indction procedres atall o or sites will orm a crcial part o theimplementation plan.

Each ear or projects plish individalSstainailit Reports that seek to addressthe material isses that have een raised local stakeholders as well as thosewhich Xstrata Copper considers essential toachieve or high standards in SstainaleDevelopment. These reports also detail orperormance against or targets and otlinenew ojectives or the coming ear.

I hope that o nd this report a valalesorce o inormation not onl aot theTampakan Project, t also aot theSstainale Development principles andojectives that gide all o Xstrata Copperssiness activities.


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4 TAMPAKAN PROJECT

General Managers messageXstrata Copper is committed to developing a nanciall sccessl project that improves the social andeconomic prosperit o the region or tre generations.

I am pleased to present the Tampakan

Projects third Sstainailit Report. Thisreport smits in detail SMIs Sstainale

Development (SD) perormance as well as the

challenges aced and milestones achieved the Tampakan Project or the ear 2009.

2009 shered in new challenges or theTampakan Project. Ater having completed

a 21-month extended pre-easiilit stdin Decemer 2008, we egan preparator

work or the Projects easiilit std dring

the rst hal o 2009. In Jne, we ormallemarked on the uSD74 million easiilit

std, de or completion the second

qarter o 2010.

Together with sstained improvements in

or governance and management sstems

and contined adherence to or SstainaleDevelopment Polic, we progressedthe Environmental and Social Impact

Assessment (ESIA) in collaoration with the

Projects stakeholders rom the commnit,government and private sectors.

As mandated law, specicall the 1995Philippine Mining Act and the Indigenos

Peoples Rights Act (IPRA), we commenced

the process o secring Free and PriorInormed Consent (FPIC) rom or host

commnities. Pre-scoping and plic scopingmeetings, consltations, and assemlies were

condcted or oth the ESIA and the FPIC.

A total o 94 stakeholder grops,

approximatel 1,500 individals, were

engaged in a series o 43 small, privateconsltation meetings rom Septemer

to Decemer 2009. For plic scoping

meetings were held rom 17 to 20 Novemer2009. This was a ke milestone or the

Tampakan Project ESIA approvals process,reaching a cross-section o sectors composed

o 415 leaders in Tampakan, Soth Cotaato;

375 in Kilawan, Davao del Sr; 367 inMalngon, Sarangani; and 430 in Colmio,

Sltan Kdarat.

We are honored that or commitmentto ilding sstainale commnities wasrecognized or partners and stakeholders

in 2009. The Regional Minerals Development

Concil (RMDC) and Regional Development

Concil (RDC) o Region XII named theTampakan Project as Flagship Project and,

together with RMDC XI, recommended to the

Mindanao Economic and Development Concilits adoption as Mindanaos Flagship Project

in Minerals Development. The title not onlgives distinction to the Projects crrent and

potential contritions to the region, it also

gives credence to the compans vision o theTampakan Project as a model or responsile

and sstainale minerals development in the

Philippines.

Conseqentl, the Tampakan Project was

proposed or inclsion in the Regional MedimTerm Development Plan (RTMDP) since the

promotion o minerals development as a majorindstr and economic catalst was soght

the concerned RMDCs and RDC.

Or commitment to the principles o

sstainale development was again recognized

in 2009. SMI received the Presidential Mineral

Indstr Environment Award (PMIEA) inNovemer 2009 rom the Philippine Mine

Saet and Environment Association. ThePMIEA is the highest award given to a mining

compan in the Philippines or otstandingenvironmental practices.

In 2009, the ollowing technical stdies were

completed as part o the ESIA:

Soils mapping and land se assessment

within the Project area

Flora and ana srves

Noise assessment and modeling

Visal amenit srves, and

Coastal marine srves

A detailed srace water model is also eing

developed as part o the easiilit std.This work contined in 2009 as part o the

easiilit and ESIA program.


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Mark Williams

General Manager

Tampakan Project

SMIs saet perormance has continosl

improved registering no Lost Time Injr (LTI)

throghot 2009. An LTI was last recorded inMa 2008.

We attrite this perormance to or strongcommitment to the goal o zero harm

and to or Saet and Health Polic andProcedres, the ltimate ojective o which

is to create and sstain injr-ree, health

work environments or all in or workplaces.We contine to invest in health and saet

capacit-ilding training programs within

the compan and in the commnit.

While we contine the exploration o a vital

natral resorce expected to enet oththe nation and its people, we contine to

invest in skills, edcation, health, social andenterprise development that lead to economic

enets and sstainale commnities eondthe lie o or proposed operations.

In 2009, SMI paid local sppliers a total o

PhP328 million (uSD7 million) or goods and

services: PhP136 million (uSD3 million) orgoods and PhP192 million (uSD4 million) or

services.

We emploed 252 people (more than 98%

o whom are rom the Philippines, with more

than 80% coming rom the Project area andenvirons) and 1,065 contractors in 2009.

SMI spent PhP79 million (uSD1.67 million) on

a range o Corporate Social Involvement (CSI)

programs that covered edcation, livelihoodand capacit-ilding ventres, providing real

and long-term enets or local commnities.

Over PhP18.56 million (uSD391,808) was

spent on environmental projects inclding

eld trial research to enhance localiodiversit; prodction o seedlings or oth

reorestation programs and the propagationo endemic species; vermicltre, ee cltre,

stick insect cltre, and technical assistance;

and training or partners and volnteers.Rehailitation is also a ke activit across the

Project to ensre that areas distred thedrilling program are retrned to a stale land

orm.

While all these were accomplished in 2009

at the height o the gloal nancial crisis

rom which no contr or indstr wasthoroghl inslated, there remains or 2010

the challenge o completing the Tampakan

Project easiilit std and secring FPICrom or host commnities.

We will once again rel heavil on the

trst and condence o or partners and

stakeholders that have een the mostimportant driving orce ehind or sccesses

in 2009. We will contine to e motivated the vision o ilding sstainalecommnities, and or strongest commitment

to health and saet, environmental

management, respect or cltre, socialresponsiilit, and sstainale development.

In the spirit o the Philippine governments

polic declaration that mining is a ke driver

o or econom and an important sector thatis ringing in signicant levels o investment,

creating jos or the people and sprring

exports, we contine to view the TampakanProjects milestones oth as essential steps

towards its evental operation, and also proo

that responsile minerals development canand will ring aot genine and sstainale

development or Mindanao and the contr.

The Tampakan Project shall contine to e a

genine partnership etween the companand or government and commnit

stakeholders. We thank o or or

contined spport.


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6 TAMPAKAN PROJECT

Targets and Scorecard

2009 Targets Stats

SAFETy

Zero Fatalities 0

Fll year TRIFR < 3.4 0

Fll year LTIFR < 0.9 0

Fll year DISR < 2.5 0

Fll year DIFR < 1.3 0

Complete the training o ke SMI personnel on project response and recover Ongoing

Achieve ll compliance to the reqirements o the Mines and Geosciences brea (MGb) and

Department o Laor and Emploment -brea o Working Conditions (DOLE-bWC):

Attained

Zero saet nes or penalties Attained

All Departments achieve a Saet Qarterl Adit score o >65% in Q4 Attained; Average Department Qarterl Adit

or Q4 o 2009 is 70%

Two emergenc drills per site (internal onl) Done

One emergenc drill with external services Done

Complete 90% o corrective actions raised in 2009 and 95% o all preceding actions 80% accomplished

CSHEC (Committee on Saet, Health, Environment and Commnities) meeting attendance o

>85%Attained

An average o 50 behavioral based Saet (bbS) oservations per month or drivers and a total

o 100 per month or other work gropsOngoing

Contine monitoring and implementation o 17 SD Standards. Attained

Condct SD Adit Q2 2009 Done

Develop Emergenc Response Team to all Camps Q3 2009 Done

Sstain Sae or Work program implementation to achieve a drg and alcohol ree workplace Attained

Maintain zero incidents related to drg and alcohol Attained

2010 SAFETy Targets

Zero Fatalities

Fll year TRIFR < 3.4

Fll year LTIFR < 0.9

Fll year DISR < 2.5

Fll year HPRI and CI 1.0

Hazard Reports o 30 per month

200 behavior-based Workplace Oservations (bbWOs) per month

Train contractors on SMI Sstainale Development Standards

All Departments achieve a Saet Qarterl Adit score o >70% in Q4

Condct contractor inormation workshop to explain the SMI Occpational Saet and Health Management Sstem (OSHMS) and coach contractors in

saet management

Develop training matrix and improve present training packages

Develop a joint plan with CCSD on a commnit saet training program


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2009 HEALTH Targets Stats

Zero occpational illnesses Attained

Develop nctional capacit gidelines identiing all emploment positions and nctional

capacities linked to those positions and ormlate a dataase that will aid the doctors to decide

retrn to work condition end o Q4

Jo Famil Task Analsis not completed. Carried

over to 2010

Identi workplace health hazards, assess conseqence proailit, estalish control measres

and develop exposre limits end o Q4

Workplace health hazards identied and captred

in SMI health risk register

Estalish control measres on health hazards in the work place Mitigating/control measres or health

hazards have een designed and validated or

eectiveness the health consltant

2010 HEALTH Targets

Zero occpational illnessesZero new Hepatitis b cases

Administer vaccine to eld workers ased on the risk exposre to the ollowing iologicals: Tetans, Tphoid, Hepatitis A, Hepatitis b, f, and malarial

prophlaxis.

HIV-AIDS test in pre-emploment medical reqirement and annal phsical examination (APE) or existing emploees

Contine internal/external health awareness campaign

2009 ENVIRONMENT Targets Stats

Develop and implement the Environmental Management Sstem (EMS) so that it is compliant

with ISO14001

Targeted or 2008, ongoing as o Decemer

2009

Progress the Environmental & Social Impact Assessment (ESIA) process inclding the Plic

Consltation Process

Attained; contrited to the completion o the

plic scoping activities or the mine ootprint onNovemer 2009

Achieve a cmlat ive average site EMS qarterl adit perormance score o 75% Attained; registered cmlat ive average o

83.3% with each qarterl perormance score

higher than 75%

Develop and implement across the Project an eective environmental incident and complaints

management sstem

25% achieved; or completion in 2010

Complete the limnological std o Lake blan 75% complete; completion set or Q2 2010

No Categor 3, 4 or 5 Environmental Incidents Attained

Prepare a biodiversit and Land Management Plan or the Project area Ongoing

2010 ENVIRONMENT Targetsundertake caron cost impact assessment or project easiilit analsis

No Categor 3, 4 or 5 environmental incidents or nes, penalties or prosections

Develop a Waste Management Plan

Complete the mine site Environmental & Social Impact Assessment (ESIA) process inclding the Plic Consltation Process

Identi and integrate ke HSEC sstems (incident management, Adits and Risk)

Commence phase 2 o the limnological std o Lake blan social perception and edcation program

Plan and commence rehailitation cover and er zone planting trials

Constrct Commnit Inormation Center and expand the existing Field Trial Research Station


attained ongoing not attained n/a = not applicale


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8 TAMPAKAN PROJECT

2009 COMMuNITy Targets Accomplishments

Spport the achievement o ke siness perormance indicators

Eectivel implement the ESIA stakeholder consltation process Condcted 43 Inormation, Edcation and Commnication (IEC) Pre-

Scoping meetings and 4 Plic Scoping meetings extending to 2,863

national, provincial and local stakeholders.

Facilitated the estalishment o 21 inormation and eedack ooths

within the project area.

Eective deliver o rights-ased approach in the condct o the FPICprocess

On-going nalization o the Cltral Sstainailit / Free & PriorInormed Consent (FPIC) Exection Strateg and Operational Plan

Facilitated the Annal Planning o blaan Fondations and Trial

Concils

E ective implementation o involntar resettlement plan On-going nalization o the Sstainale Reset tlement Action Plan

On-going censs o aected persons or resettlement

On-going nalization o resettlement operations manals

Eective deploment o resorces to address ke isses related to access

to drill or exploration sites

Facilitated access to 89 drill sites

Develop and spport commnit-ased enterprises Developed six new enterprises on vegetale prodction, aacaprodction and handicrats enterprises eneting 204 armers, 50hoseholds, and 40 trial women

Eective deliver o rights-ased approach in the condct o the FPICprocess

On-going nalization o the Cltral Sstainailit / Free & PriorInormed Consent (FPIC) Exection Strateg and Operational Plan

Facilitated the Annal Planning o blaan Fondations and Trial

Concils

Spport skills development and instittional capacit ilding ocommnit ased organizations and trial ondations

Provided technical assistance on organizational development to vecommnit-ased organizations, 13 aranga local government nitsand 22 trial concils.

Improve the deliver o asic social services Approved 20 commnit inrastrctres (inclding nine alreadcompleted) eneting 2,722 hoseholds and 517 stdents.

Invest in health

Provide spport to improve commnit-ased health programs and

access to qalit health services

Constrcted 1 maternal irthing center

Provide PhilHealth insrance or indigent memers o the trialcommnities

Enrolled 3,011 commnit memers to PhilHealth (health insrance)

Spport the improvement o health acilities Constrcted 3 potale water sstems to help eradicate incidence o

water orne diseases, eneting 815 hoseholds

Help improve health indicators o children and women o reprodctive

age

Provided asic health services to 12, 236 commnit memers

Invest in the development o cltrall sensitive and sstainale

traditional health program

Postponed, to e taken p in 2010

Spport the campaign o the government to ght the ve neglected

tropical diseases

Provided lariasis elimination and deworming services to 259

commnit memers

Generate social acceptailit throgh eective stakeholder engagement

Develop strategic and eective Social Marketing Implementation Plan Organized 4 Commnit Moilization & Partnership Das reaching 4host mnicipalities covering 3 arangas and 2 trial commnities

Condcted 10 project and mine visits participated in trial andnon-trial commnities and representatives rom local governmentagencies

Develop and estalish air and eqitale processes or engagement withindigenos peoples and local commnities

Signed eight pdated principal agreements, which estalished termso engagement etween the compan and 6 local government nitsand 2 trial commnities.

Develop commnit grievance mechanism Estalished a grievance resoltion mechanism

Received 16 commnit grievances, 53% less than the 2008 tall o32

Resolved 15 commnit grievances. The 1 remaining grievancerelated to site rehailitation is eing processed

Mainstream and poplarize the practice o Volntar Principles onSecrit and Hman Rights (VPSHR)

Condcted a Trainers Training on VPSHR participated in 34individals composed o 21 emploees and 13 stakeholders romlocal NGOs, local government agencies and the militar. The training

was acilitated the uS-ased bsiness or Social Responsiilit(bSR) which is a co-secretariat or the gloal eorts o VPSHR

Oriented 187 secrit gards on the compans policies andgidelines that promote the protection o hman rights


Spread the Projects enets o growth in directl aected commnities and srronding areas as part o the compans vale chain


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Invest in edcation

Contrite to the provision o qalit edcation throgh mlti-stakeholder governance in local edcation sstem, teacher training andimprovement o school acilities

Implemented Snergeia Program (a commnit-ased edcationmanagement initiative) in 15 elementar schools

Trained 40 teachers on IP Crriclm integration

Ssidized salaries o 18 teachers

Provide spport to increase access to primar edcation Provided scholarships or 14,332 elementar, high school andcollege stdents

Forge partnership with credile organizations Forged partnership with:

The Philippine bsiness or Social Progress (PbSP), a leadingsiness collective in the contr, or the implementation o SMIsinitiative on the Volntar Principles on Secrit and Hman Rights

Partnership with uN Program or Hman Settlements (uNHS) orsstainale resettlement

Cor Jes Fondation, a leading academe ased NGO in Davao delSr or the prodction o pschosocial preparation n modles or

the FPIC process

Ateneo School o Environmental Governance in the condct o astakeholder governance training in mining provinces

Asian Institte o Management (AIM)s Ramon V. del RosarioCenter or Corporate Social Responsiilit (CSR) or the prodctiono a case std on CSR in the Mining Sector eatring SMI

Mitigate iodiversit loss and improve the qalit o the environment progressivel rehailitating the Project site throgh the estalishment oer zones

Prodced, distrited and planted more than 126,000 seedlings incooperation with varios local grops

Reported illegal mining and arming practices to concernedagencies

Strengthen components o the Field Trials & Research Stations (FTRS):diversied arming technolog, organic arming, sloping agricltral landtechnolog

Maintained two FTRS centers in Tampakan (Liert Farm) and inKilawan

Recommended rther FTRS site options or development

Develop Commnit-based Disaster Preparedness program Postponed, to e taken p in 2010

Estalish a mlti-stakeholder mechanism to monitor the Projects

environmental perormance

On-going development o a program plan or developing mlti-

stakeholder monitoring teams, which will cover the compansenvironmental, socio-economic and cltral sstainailit

perormance

Promote the concept and practice o sstainale development in the commnities in the Project site

Free and Prior Inormed Consent (FPIC)

Gain consent rom the indigenos peoples (IP) commnities or resettlement and mining operations

Enable IP traditional institutions to develop their Strategic Plans based on the Ancestral Domain Sustainable Development and Protection Plan (ADSDPP) and IP Development Plans (IPDP)

Sstainale Resettlement

Roll-ot the Sstainale Resettlement Action Plan to LGus and aected persons and implement the plan as schedled

Commnit Environmental Sstainailit

Implement a reforestation program in partnership with LGus and commnity-based organizations that complements socio-economic and cltral sstainability

Sstainailit Management Sstem

Instittionalize commnity engagement management system across the bsiness to ensre the continos improvement of policies and procedres throghot

the different phases of mining operations

Monitor stakeholder perception and lead in the development of strategic initiatives to poplarize the leading edge practices in corporate-commnity sstainability

across the bsiness

Commnit Socio-Economic Sstainailit

Address ke commnit isses related to access to drilling to complete the technical and geological stdies or constrction.

Spport the enhancement o management sstems o local government nits and government agencies to improve the deliver o edcation and

health services and spport the achievement o the millennim development goals

Complement the governments initiatives to enale the commnit to develop and implement jo-creating commnit-ased enterprises

2010 COMMuNITy Targets

Stakeholders Engagement

Gain acceptailit o the Project among stakeholders throgh meaningl and open engagements within the onsite and osite mining development

areas as well as indirectl aected commnities


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10 TAMPAKAN PROJECT

Scope o this report

This report details the economic, health,saet, environment and social perormanceo Sagittaris Mines, Inc.s (SMI) Tampakan

Project rom 01 Janar 2009 to 31Decemer 2009. We plish or reportsannall and this is the third report prodced the Tampakan Project.

A general description o oth XstrataCoppers and SMIs SD policies and standardshas een provided in this report. The ll texto these policies are plished on the Xstratawesite:

http://www.xstrata.com/corporate/commodities/copper/plications

All monetar vales are expressed inPhilippine pesos and uS dollars at a

conversion rate o uSD1 = PhP47.37 nlessotherwise stated.

The Tampakan Project report is one o 11sstainailit reports plished XstrataCopper in 2010 that will report on 2009sstainailit perormance. As part o XstrataCoppers commitment to transparenc andstakeholder engagement, all its operatingdivisions and major development projectsare reqired to plish their sstainailitperormance annall. An overview o XstrataCoppers sstainailit perormance is alsoprovided in the Xstrata plc SstainailitReport. All these reports are availale on

the Xstrata sstainailit wesite: www.xstrata.com/sstainailit. The Xstrata plcSstainailit Report will e availale rommid-April 2010.

Defning report content

Sstainale development topics or issesthat are material to the Tampakan Project orhave the potential to ecome material to the

long-term sccess o or siness have eenprioritized in this report. We have aimed toprovide a complete and alanced view oor sstainailit perormance tailored to theexpectations and interest o or stakeholders.In determining which isses or topics arematerial to the Tampakan Project, we haveconsidered:

Feedack on or sstainailitperormance and reporting rom kestakeholders;

Compan-specic isses raised eitherdirectl or indirectl externalstakeholders inclding NGOs,

governments, commnities andinvestors;

Indstr challenges raised in indstrassociations and orms;

Or bsiness Principles; SstainaleDevelopment (SD) ramework, policiesand standards; and Indicators and topicsotlined in the GRI G3 Gidelines,International Concil o Mining andMetals (ICMM) principles, and otherest practice gidelines and initiatives.

The Global ReportingInitiative (GRI)

This report has een prepared in accordancewith the Gloal Reporting Initiatives (GRI)Sstainailit Reporting G3 Gidelines,the worlds most widel sed sstainailitreporting ramework. These gidelinesenale readers o or sstainailit reportsto enchmark or SD perormance withrespect to laws, norms, codes, perormancestandards and volntar initiatives; and tocompare or SD perormance over time.

A GRI index detailing how Xstrata Copperhas addressed the G3 Gidelines withinthis report can e ond at page 44 o thisreport.

Report assuranceThe data management and reportingsstems in place or the collation andaggregation o sstainailit data andinormation are sject to Xstratas internalverication processes, and inormation inthis report draws on the same data andreporting sstems as the Xstrata plc GropSstainailit Report 2009. Independent,external assrance o Xstratas sstainailitdata, reporting sstems and the Xstrata plcGrop Sstainailit Report is provided Ernst & yong. A rie description o theassrance process, its ndings, the signedassrance statement and Ernst & yongsrecommendations are provided in the Gropreport, availale rom www.xstrata.comrom April 2010.



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14/48

12 TAMPAKAN PROJECT

Or approach to sstainale developmentWe continall invest to improve or SD perormance, ensre the ecient se o resorces andmaintain a sae and health workplace, creating vale or or stakeholders and contriting to a

sstainale environment.

Xstrata Copper is committed to alancingsocial, environmental and economic

considerations in how we manage orsiness. Althogh the liespan o or

activities is nite, we aim to invest in skills,

edcation, health, social and enterprisedevelopment that lead to economic enets

and sstainale commnities that otlive or

operations.

We strive to preserve the long-term

health, nction and viailit o the natral

environments aected or operationsand to maintain sae and health workplaces

ased on mtal respect, airness andintegrit.

Xstrata Copper takes a sstematic approachto setting targets, monitoring perormance

and reporting (oth internall and plicl)

against or targets in each o the kesstainailit areas, as demonstrated in this

report.

The Xstrata Copper SD Strateg andManagement Framework is plished in ll

on Xstratas wesite nder:

www.xstrata.com/corporate/commodities/

copper/plications

The SD ramework interprets and spports

the Xstrata plcs SD polic and 17 SD

Standards, which were revised in 2008 and isconsistent with or Denition o Prpose.


15/48


Our strategic objectives

Injury-free,safeworkenvironments

Recognizedleadershipinenvironmental

perormance

Reputationforsocialresponsibility

Realizationofthefullpotentialoforipeople

Achievementofthefullcapacityofouroriphsical assets

Costcompetitivenessthroughthecycles

Valuecreationthroughdynamicgrowthoriand continos improvement

Effectiveimplementationofcommonkeyorisstems and strategies

Or approach to sstainale development

Precautionary approach

Xstrata Copper takes a precationar

approach to the environmental

management o its gloal activities. We

se a comprehensive risk-ased approach

to manage the potential detrimental

impacts o or activities. This approach

means that even in the asence o

evidence that environmental degradation

is occrring or will occr, we take action

to mitigate the possiilit that it will.

SMI Sstainale Development Polic

Sstainale Development descries SMIs approach to ensring the long term viailit and contined sccess o

or siness activities.

We invest in the long-term or the Tampakan Project, which provides a asis or social and economic developmentin the region. Althogh the liespan o or activities is nite, we aim to invest in skills, social development, andeconomic enets that otlive these activities.

We aspire or the highest condct in siness as set ot in or bsiness Principles, to protect and enhance orcorporate reptation and ensre or ongoing access to mineral resorces.

We aim to create vale or or stakeholders contriting to a sstainale environment throgh investments inor siness to improve perormance ecienc, to ensre the ecient se o resorces sch as water and energ,and to maintain sae and health workplaces.

To ensre a harmonios relationship with or stakeholders, minimize risk and secre an ongoing license tooperate, we aim to create mtal enets or stakeholders, working in partnership with the varios parties who

have an interest in or are aected or siness.

We work ethicall.

We work responsil.

We work openl.

We work together and with others.

Xstrata Coppers Defnition o

PurposeWe will maximize vale or shareholders sccessll growing and managing an indstr-

leading portolio o copper assets that deliver

sperior retrns.

We will achieve this in a sae, environmentalland sociall responsile wa, in open partnerships

etween or people and with commnities,

governments and other stakeholders.

Our values

Or decisions and actions willdemonstrate the ollowing vales:

Honesty

Dependability

Respect

Condence

Ingenuity

Courage

Passion


16/48

14 TAMPAKAN PROJECT

Key sustainabilitychallenges

SMI contines to ndertake extensive, openand transparent plic consltation withstakeholders regarding the developmento the Tampakan Project. Throgh theseengagements, we received valale eedackrom or stakeholders and identied several

ke challenges, inclding:

Open pit mining and the proposed SouthCotabato Environment Code

As part o the Projects extended pre-easiilit phase, SMI ndertook extensivetechnical stdies, led internationalspecialists in mining, environmentalmanagement and engineering, to assesspotential mining methods or the Tampakandeposit.

These stdies identied open pit mining asthe most appropriate, economic and saeextraction method given the location o thedeposit and the geolog o the region.

SMI is crrentl ndertaking rther specialiststdies in ke areas sch as soil and land se,grond and srace water, terrestrial andreshwater iolog, and site rehailitation aspart o the Tampakan Projects Environmentaland Social Impact Assessment (ESIA). Thereslts o these stdies will e sed to reneSMIs environmental management planto avoid, minimize and mitigate potentialimpacts o an proposed operation.

The Sanggniang Panlalawigan, the provinciallegislative concil o Soth Cotaato,

proposed an Environment Code that containsa provision anning the open pit miningmethod in the province.

Shold the Concil pass the Code, the matterwold ecome a legal isse etween theProvincial Government o Soth Cotaato andthe Philippine government. The Departmento Environment and National Resorces(DENR) and the Department o Jstice (DOJ)have conrmed that the proposed ancontravenes the National Polic and thePhilippine Mining Act o 1995.

Sarangani Province to be part o theProject ootprint

Sarangani Province has een identied as anarea that ma e aected the proposedmining operation. The addition o Saranganito the nal Project area ma case concernamong some stakeholders.

SMI is in discssion with local athoritiesand stakeholders aot hosting possiilities,and given the challenge o acing a iggerenvironmental ootprint and stakeholderpoplation, SMI has engaged with the newstakeholders according to or bsiness

Principles, presenting the enets thecompans presence can ring Sarangani.

We will contine to ndertake extensive,open and transparent plic consltationwith stakeholders regarding the developmento the Tampakan Project.

Illegal small-scale mining activities

SMI recognizes the potential environmentaland health impacts o illegal small-scalemining activities in the Project area. We willcontine to spport sstainale livelihoodprograms and capailit-ilding initiativesor local commnities to provide alternate

emploment and income-generatingopportnities or commnities.

Distribution o economic benefts

The distrition o economic enets andexcise taxes etween national, provincialand local government nits and how theseenets will e determined is a signicantconcern or regional stakeholders. SMI andits stakeholders are keen to ensre that theeconomic enets rom the proposed mineare invested into regional commnities and

are shared eqital among the provinceshosting the operations.

SMI will contine to conslt with national,regional and local governments, localcommnities and indigenos peoplesregarding the distrition o economicenets in accordance with the PhilippineMining Act and sstainale development estpractices.

The Tampakan Project crrentl deliverssignicant enets to the host mnicipalitiesand srronding commnities in terms oemploment, prchase o goods and services,taxes and other charges and commnitdevelopment projects.

In 2009, the Tampakan Project contritedPhP1.3 illion to the Mindanao and Philippineeconomies and created direct emploment ormore than 252 people and 1,065 contractors,inclding a weekl average o 202 localcommnit residents, to spport the projectsexplorator drilling and other operationalneeds.

SMI contines to spport commnit andsocial development programs in the areaso health, edcation, capacit ilding,livelihood and skills development, and

in 2009 invested PhP79 million on theseinitiatives.

For rther inormation see pages 20 and 33o the report.


17/48


We strive to preserve the

long-term health, nction

and viailit o the natral

environments aected or

operations and to maintain sae

and health workplaces ased

on mtal respect, airness and

integrit.

Resettlement

The Tampakan Project is one o the largestndeveloped copper-gold deposits in SothEast Asia and has the potential to signicantlimprove the qalit o lie o commnities inthe region.

SMIs polic is to avoid the need orresettlement wherever possile. However,where resettlement is reqired, we willadhere to national laws and internationalest practices inclding World bank andthe International Finance Corporation (IFC)gidelines.

SMI has identied some lands within theproposed mine development area that willneed to e acqired or the exclsive seo the mine which will aect arond 850hoseholds.

Resettlement will onl take place when SMIgains ree and prior inormed consent rom

aected land occpants, IPs and non-IPs.We will also partner with the appropriateprovincial governments throgh the ProvincialDevelopment Concils (PDCs) and in theplanning and implementation o SMIsresettlement program or the commnitiesliving within the Project area.

SMI will ndertake its consltation processesin accordance with the Philippine IndigenosPeoples Rights Act and in-line withinternational est practices.

For rther inormation see page 34 o thereport.

Security and human rights

Xstrata has dened secrit and hman rightsas high-risk isses in the Philippines de tohigh levels o violence arond the TampakanProject area. The sitation has exposed SMIto alse allegations that it is involved in thetraining o local people as paramilitaries,and the se o militarization to infencecommnities to spport mining activities.

Criminal grops and individals possessnlicensed rearms in the Project area thatpose a contining threat to commnitmemers. This challenge is eing addressed SMI throgh constant and reglardialoges with the local governments andathorities to explore the most appropriateand sstainale was to ensre the saet,secrit, health and environment o Projectstakeholders.

SMI has adopted and externall promotes theVolntar Principles on Secrit and HmanRights (VPSHR) and or major ndingshareholder, Xstrata, is a signator to theuN Gloal Compact. SMI does not engageplic secrit personnel to protect orworkorce or assets. We emplo a licensed,private secrit service provider and wework closel with them to ensre all secrit

personnel deploed to saegard or peopleand assets have received appropriate hmanrights training.

The saet and secrit o or emploeesand contractors is or priorit and wespport a mlti-stakeholder approach, wherecommnities and national, provincial andlocal government nits all pla importantroles, to improving secrit conditions in theTampakan Project area and promoting peaceand order in the region.

For rther inormation on SMIs approach tosecrit and hman rights, please see pages17, 27 and 34.

Food security

SMI is committed to advancing the TampakanProject in line with leading environmentaland indstr est practices and in partnershipwith or stakeholders.

However, SMI contines to spport localarmers in the region throgh or partnershipwith the Tampakan Farmers Federation,which represents over 3,000 armers, and

throgh or investment in commnit oodsecrit and livelihood programs.

We are crrentl ndertaking rtherspecialist stdies in ke areas sch as soil andland se, grond and srace water, terrestrialand reshwater iolog, and site rehailitationas part o the Tampakan Projects ESIA.

The reslts o these stdies will e sed torene SMIs site management plan to avoid,minimize and mitigate potential impacts oan proposed operation.

Water security

SMI nderstands that water qalit andsecrit are important isses or man oor stakeholders and or Project planningis ocsed on maintaining the long-termenecial and eqitale se o waterresorces in the Project area.

As part o the extended pre-easiilit phase,SMI has ndertaken extensive aselinemonitoring stdies to assess water qalit,srace and grondwater fow, aqaticiolog and rainall in the region.

We are crrentl ndertaking rtherspecialist stdies on water management aspart o the Projects ESIA.

The reslts o all these stdies will e sed torene SMIs engineering designs and watermanagement plan to ensre downstreamwater spplies will not e adversel aected the Tampakan Project. It is expected toemplo a closed water sstem to recclewater within the operation which willminimize emissions to the environment.

The water management plan is eingdeveloped ased on extensive riskassessments and in the context o othclimate change and water stress.

For rther inormation on SMIs watermanagement plan, see page 38.

Awards or sustainabledevelopment

The Tampakan Projects commitment tosstainale development contines to erecognized.

SMI was awarded the Presidential MineralIndstr Environment Award (PMIEA) inNovemer 2009 rom the Philippine MineSaet and Environment Association (PMSEA).The PMIEA is the highest award conerredto a mining compan in the Philippinesor otstanding sstainale developmentpractices. SMI received this same award in2004 and 2006.

SMI was also PMSEAs 2nd rnner-p inthe best Mining Forest Program (MFP) orexploration categor. SMI received the bestMFP award in 2006 and 2008.

In Decemer 2009, recognizing the socio-

economic enets that ma e derived romthe project and the manner with which SMIoperates, the Regional Mineral DevelopmentConcil (RMDC) XII and RegionalDevelopment Concil (RDC) XII named theTampakan Project as Flagship Project orRegion XII and, together with RMDC XI,recommended to the Mindanao Economicand Development Concil its adoption asMindanaos Flagship Project in MineralsDevelopment.

Governor Migel Rene A. Domingez, RMDCXII Chairperson, in the joint RMDC XII andRDC XII meeting in Decemer said: SMIs

track record over the past several ears andits commitment to sstainale development,not onl or Soth Cotaato t also orthe other two regions and or provincesin which it operates, demonstrate the areworth recipients o this prestigios title.

Or approach to sstainale development


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16 TAMPAKAN PROJECT

Governance structure

Xstrata Copper operates within the strctre

o Xstratas rost standards o corporate

governance as set ot in Xstratas Statement

o bsiness Principles and SD management

standards. Frther inormation aot Xstratasgovernance mechanisms is provided in the

corporate governance sections o the grops

Annal Report and Sstainailit Report.

Governance and management sstemsThe highest standards o health, saet, environmental perormance and commnit engagement thats the Xstrata commitment.

This approach is spplemented Xstrata

Coppers own common sstems and

policies in the areas o saet and health,

environment, commnit, risk management,

hman resorces and sstainale

development.

Xstrata Coppers SD perormance is

monitored and evalated its SD

Committee (renamed rom Health, Saet,

Environment and Commnit Committee

to refect the contining evoltion and

roadening scope o SD isses), that meets

monthl. Throgh the Xstrata Copper

board, the bsiness units SD perormance

is reglarl reported to the Xstrata Exective

Committee.

At the Tampakan Project, SMIs SD

perormance and isses are monitored


19/48


the SD Committee (ormerl the HSECCommittee), in compliance with the Philippine

Mine Saet and Health Standards o the

Mines and Geosciences brea (MGb), and

the Occpational Saet and Health nit o

the Department o Laor and Emploment

(DOLE). SMIs Hman Resorces, Saet &

Health Manager chairs the SD Committee

that convenes department sperintendents

and ocers, other emploees, contractors

and service sppliers. Once a month, the SD

Committee explores local initiatives to ensre

that qalit assrance is achieved.

To enale the SD Committee to identi ke

areas and create a road map or rther

development, the Tampakan Project, throgh

an external third part adit, condcted a

gap analsis on the adherence to Xstratas 17

SD standards. The reslts are as ollows:

The development and perormance o

the overall SD management sstems

reqired improvement,

Social and Commnit Engagement

processes were assessed as strong, and

Commnication and Engagement were

also assessed as strong.

SMI respects oth Philippine laws and

the cltre o the commnities where it

operates. Or activities in 2009 are proo

o or commitment to working sael,

sstainal and in genine partnership with

or stakeholders. These SD principles are

ndamental to or siness model and

gide or dail decision-making.

In Jne 2009 we emarked on a uSD74

million easiilit std. As part o the

easiilit std the Tampakan Project team

met with over 90 stakeholder grops and

held or plic meetings attended over

2,863 people.

Human rights

Or bsiness Principles are consistent with

the principles set ot in the united Nations

universal Declaration o Hman Rights

and the International Laor Organization

Conventions.

For SMI, the main areas o ocs are

protecting the rights o emploees and

contractors to work or eqal pa, to

associate reel, and to work in a sae and

health work environment. We oserve non-

discrimination and air treatment and legal

rights, and spport the rights o emploees,

commnit memers and other stakeholdersto e treated with dignit in a manner that

respects cltral heritage, traditions and

norms.

In areas where SMI emplos secrit

personnel (either directl or as contractors) to

protect or people and assets, it ensres that

appropriate hman rights training has taken

place. We diligentl monitor compliance

with or bsiness Principles, SD polic and

standards, in line with SMIs management

standard or sppliers, contractor and

partners.

In April 2008, SMI ecame a memer obsiness or Social Responsiilit (bSR),

a leading provider o sociall-responsile

siness soltions headqartered in San

Francisco and engaged it to condct training

on the Volntar Principles on Secrit and

Hman Rights in General Santos Cit. SMI

secrit sta and representatives o SMIs

secrit contractors attended this training.

SMI also worked with the government, the

Chamer o Mines o the Philippines and a

non-governmental organization (NGO), the

Philippine bsiness or Social Progress (PbSP),

to train another 67 individals working in

government, siness, NGOs and othermining companies to raise awareness o the

Volntar Principles across the region.

In March 2009, a Trainors Training or

SMI ocers was condcted bSR to

instittionalize the Principles within SMIs

sstems and organization. In Decemer,

SMI commenced training or 182 niormed

secrit gards deploed within its oces

and acilities in Tampakan and Kilawan

areas. The roll-ot was assisted three

memers o the sta o PbSP.

Secrit services are provided Catena

Secrit, Inc. and Genric Holdings, Secritand Risk Consltants.

In addition, SMI emplos a Secrit Advisor

or Kilawan to assist the Corporate

Secrit Team in Davao del Sr, particlarl

in Kilawan area, and a Regional Secrit

Consltant to assist in the development and

implementation o secrit strategies.

In 2009, gidelines and sstems were

reinorced to garantee the sstematic

monitoring o all sppliers, contractors, and

partners to ensre that their operations

compl with or siness standards.

Child and orced laborOr bsiness Principles phold the elimination

o all orms o orced or complsor laor

and stiplate that no orm o child or orced

laor will e tolerated. All Xstrata operations

report the age o their ongest emploee or

contractor on an annal asis and are adited

throgh the internal adit risk management

program.

In adherence to the bsiness Principles, the

united Nations Declaration on Hman Rights,

and the Philippine Laor Code, the ongest

emploee o the Tampakan Project is 20,

while the ongest contractor is 18.

Bribery and corruption

SMIs bsiness Principles state that we

do not oer, solicit or accept an orm o

indcement or rie. The internal adit

nction, spported KPMG, takes into

accont identied rad and compliance

risks associated with or ke siness

activities, inclding the ethical perormance

expectations contained in or Statement o

bsiness Principles.

In addition, SMIs Frad Polic explicitl states

that the organization will not tolerate an

incidence o rad committed emploees

or others, either rom within or otside

the organization and will take immediate

and serios action against those persons

committing a rad, irrespective o length o

service or position. The Polic otlines the

channels availale or emploees or others to

sael and condentiall report rad or other

nethical ehavior that is contrar to SMIs

bsiness Principles. Each SMI emploee signs

an agreement that s/he will compl with the

Polic, and the agreement is renewed earl.

Inormation aot the SMI Ethics Lineis provided dring the indction o new

emploees or the Tampakan Project.

Sanctions or sppliers ond to e involved

in corrption incldes the cancellation or

revocation o accreditation with the compan.

In 2009, the Procrement team oriented

contractors and sppliers on SMI Procrement

Policies and Procedres, inclding SMI Frad

Polic. A Contractors & Sppliers Edcation

program was also oered to local sinesses

to improve management o acconts, cash

fow and the dgeting process.

There was no incidence o corrptionreported at the Tampakan Project in 2009.

Governance and management sstems


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18 TAMPAKAN PROJECT

Governance and management sstems

Public policy participationand political contributions

Or bsiness Principles prohiits politicalcontritions o an kind. Xstrata plas

an active role in a nmer o signicant

international and national indstr

organizations and mlti-stakeholder grops,

throgh memership, nding, provision o

expertise and participation in committees

and working grops. Xstrata Copper plas

a similar role in organizations that are

copper-specic and those that are niqe

to geographical areas where Xstrata Copper

is the onl Xstrata commodit siness in

operation.

Ke activities among Xstratas gloal plicpolic participation commitments are or

memership with the International Concil o

Mining and Metals (ICMM), and or spport

or and involvement with the Extractive

Indstries Transparenc Initiative (EITI).

In line with the polic, the Tampakan Project

did not provide an nancial or in-kind

contrition to political parties or individals

in 2009.

In the Philippines, virte o Exective Order

No. 469, the Mineral Development Concil

(MDC) nder the Oce o the President is

tasked to advance the government polic

o responsile and sstainale development

o the States mineral resorces. The same

presidential order provides or the activation

o Regional Minerals Development Concils

(RMDCs) in ke regions where priorit

minerals development projects exist. SMI

represents the Chamer o Mines in the

Regional Mineral Development Concil o

Region XII (RMDC XII). Its presence in the

RMDC is an extension o the inter-agencmlti-sectoral partnership at the national and

local levels o the Chamer o Mines.

We oserve non-discrimination

and air treatment and

legal rights, and spport

the rights o emploees,

commnit memers and other

stakeholders to e treated

with dignit in a manner that

respects cltral heritage,

traditions and norms.


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Principal memberships & associationsSMI makes an important contrition to the Mindanao and Philippine resorces and siness commnit, and the economicdevelopment o the region and contr. As sch, the Project activel participates in a range o indstr and siness associationsand advocac organizations, and contines to ild relationships with the ollowing:

Chamer o Mines o the Philippines

Philippine Mine Saet and Environment Association (PMSEA)

Philippine Minerals Exploration Association

Philippine Societ o Mining Engineers

Geological Societ o the Philippines

Societ o Metallrgical Engineers o the Philippines

Mindanao Association o Mining Indstries

Mindanao Association o Mining Engineers

Regional Minerals Development Concil o Region XII

Provincial Mining and Reglator board o Soth Cotaato

Provincial Mining and Reglator board o Davao del Sr

Philippine Chamer o Commerce and Indstr

Philippine-Astralia bsiness Concil

Philippine bsiness Leaders Form

Philippine bsiness or Social Progress

Mindanao bsiness Concil

Soth Cotaato Chamer o Commerce and Indstr Fondation, Inc.

General Santos Chamer o Commerce and Indstr, Inc.

Astralia-New Zealand Chamer o Commerce o the Philippines

british Chamer o Commerce o the Philippines

Eropean Chamer o Commerce o the Philippines

bsiness or Social Responsiilit

International Finance Corporation (Philippines)

Ateneo School o Government

Asian Institte o Management Center or CSR

Stdents in Free Enterprise Philippines

SMIs General Manager was accepted as a memer o the PMSEA board o Directors in Octoer 2009.


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20 TAMPAKAN PROJECT

In 2009, the Project contrited PhP1.3illion (uSD26.8 million) to the Mindanao andPhilippine econom throgh:

Employmentofmorethan252peopleand 1,065 contractors, inclding aweekl average o 202 local commnitresidents, to spport the Projectsexplorator drilling and other operationalneeds.

AnnualwagesinexcessofPhP189.4million (uSD4 million)

PhP207.2million(USD4.37million)paidto government in taxes and charges owhich PhP2.2 million (uSD46,500) waspaid in taxes to local government nits

PhP27million(USD608,000)inpower

and el charges

Or operations and economic contritionThe Tampakan Project provides opportnities or local sinesses and commnit projects, throgh governmenttaxes and charges reslting in considerale enets to Tampakan and its srronding commnities.

PhP328million(USD7million)forprchase o goods and services

Communitypartnerships,sponsorshipsand donations totaling more than PhP79million (uSD1.7 million)

I SMI receives the necessar permits,inclding FPIC or mining and resettlement,

the tre enets o the Tampakan Project


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Or operations and economic contrition

as o the Pre-Feasiilit Std inclde theollowing:

ThePhP260billion(USD5.2billion)ininitial capital investment or the Project

Theanticipatedtotalrevenuestreamtothe Philippine econom in excess o PhP2trillion (uSD40 illion) over the lie omine

Employmentopportunitiesforupto8,000 to 9,000 dring constrction

Employmentforover2,000duringoperations;

Othereconomicbenetsdirectlyemanating rom the developmento small and medim enterprises tospport the Project like transport,constrction, tilit services, increaseddemand or agricltral prodcts to

sstain the operation o the mine, and

jo opportnities that ma e generatedrom the irth o enterprises andsinesses as sprred the Project.

Local suppliers

A spplier or contractor located and

registered within the Project area (Tampakan,Kilawan, Colmio and Malngon) is givenpriorit i it has the capailit to providegoods and/or services according to the criteriaindicated in the procrement polic.

Prodct sppliers are assessed ased on theollowing criteria:

Prices and qalit o prodct

Proximit to the site where the sppliesare intended or

Availailit and completeness ospplies/stores

Capailit to deliver the spplies on time

Local spplier in the Project area

On the other hand, service sppliers areassessed on the ollowing:

Commercial (prices, nancial strength)

Technical (resorces availale, qalito prodct and services, previosexperience, ailit to deliver oncommitment, etc.)

Compliance with Health, Saet andEnvironment standards

Engagement and negotiation are condctedin the interest o the Compan. Prchases ogoods and services are made onl throghSMI accredited sppliers &/or contractors,who have ndergone SMIs accreditationprocess.


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22 TAMPAKAN PROJECT

Tampakan Conceptual Mine Layoutas o Octoer 2009

22 TAMPAKAN PROJECT


25/48

SuSTAINAbILITy REPORT 2009 23SuSTAINAbILITy REPORT 2009 23


26/48

24 TAMPAKAN PROJECT

Local business

The Tampakan Project has helped oostlocal livelihoods where its acilities arelocated. Local sinesses like constrction,manpower, transport, ood, and spplservices have grown in spport o the Project.It has generated emploment and a markedincrease in amil income, contriting toimproved literac and skills in the process.Locals now also have etter access toasic health services with the enrolmento commnit hoseholds with PhilHealthinsrance and throgh the nmeros medicaland dental missions condcted reglarlin the Project area and in SMI exploration

tenements.

In 2009, SMI paid local sppliers a total oPhP328 million (uSD7 million) or goods andservices:

Goods PhP136 million (uSD3 million)

Services PhP192 million (uSD4 million)

Local inrastructure

The Tampakan Project is committed todeveloping and maintaining inrastrctre inthe Project area and in expansion areas schas Malngon in Sarangani, Kilawan and

other Davao del Sr mnicipalities.

In 2009, SMI provided commnitinrastrctre spport. Projects inclded:constrction and rehailitation o potalewater sstems and a reservoir, constrction oone irthing and ntrition center, repair o atrial hall, road opening and repairs, drainageinstallation, and pgrading o school acilities.

Assessment and spport o local needs isplanned to contine throgh engagementswith local governments, trial concils andcommnities; compliance with the Free andPrior Inormed Consent (FPIC) reqirements

and technical stdies.

Or operations and economic contrition


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baranga Kimlawis is one o the TampakanProjects host commnities. It is in Kilawan,a orth-class mnicipalit in the province oDavao del Sr.

The center o Kimlawis stles with activities.Stores selling anthing rom wet prodctsto dr goods line the streets, crowds gatherjst a ew steps rom the aranga (village)hall, resh arm prodce is eing sorted at theplaza, and modern concrete hoses are eingilt one ater the other.

Szette, the sister o baranga CaptainCristitto Dazo, tells the stor o howcommnit memers now own vehicleswhere previosl there were no more thantwo in the whole area. A ke actor to thisincrease in the nmer o privatel-ownedvehicles has een SMIs investment inimproving the road connecting Kimlawis to

near areas, ths providing etter access ormovement o prodcts and services.

Compan activities in 2009 in barangaKimlawis contrited to the local econom

an eqivalent o PhP321 million or itsexploration and environmental stdactivities in the area. This amont incldesthe emploment o local laor, inrastrctreinvestment or exploration spport activities,rental o eqipment and machines, andother incidental expenses incrred within thecommnit.

The amont does not inclde additionalconsiderale commnit investment programsndertaken in partnership with or hostcommnit involving livelihood training andspport, instittional development, and othercommnit and environmental sstainailitprograms.

Progress in Barangay Kimlawis

The investments made SMI and the josgenerated Project activities are clearlhaving a mltiplier eect in Kimlawis. Thiscold not e taking place withot thedetermination to ring progress and withot

the cooperation among the local governmentnit, the trial concil, the memers o thecommnit, and SMI.

case study



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26 TAMPAKAN PROJECT

The workplace and or peopleWe strive to create and sstain injr-ree, sae work environments or everod in orworkplaces. Zero harm is or goal.

To achieve or goal o zero harm in theworkplace, ever emploee is accontale orsaet perormance, training them to improvetheir saet knowledge and skills and makethem aware that the have a responsiilit tothemselves, their amil and riends to workand ehave sael.

We also ensre that ever task ndertaken inor workplace has a sae sstem in place andthat or people have tools and eqipmentthat are t or specic prposes and well

maintained to complete tasks sael andprodctivel. Frthermore, or reglar health

screening programs monitor or emploeeshealth, well-eing and tness.

SMI ses a risk management sstem toidenti, assess and eliminate or controlsaet risk. When an nsae condition isidentied or when a saet incident occrs,it is investigated immediatel and action istaken to eliminate the risks involved. Saetaditing occrs reglarl across or sinessto improve saet standards and practices,and or saet perormance, saet initiatives

and isses are reglarl commnicated to orpeople.

Saety perormance

At the Tampakan Project, varios saetprograms have een implemented toprovide edcation and training, conseling,prevention or risk control, and treatmentor serios diseases. SMI also reorganizedits saet department and created acommnit saet training role to work withthe Corporate Commnit SstainailitDepartment (CCSD) to spport saetawareness in the commnit.


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The workplace and or people

SMI 2009 Saety Perormance

Monthly Moving Average

JAN

0

5

10

15

20

25

30

FEb MAR APR MAy JuN JuL AuG SEP OCT NOV DEC

TRIFR, DIFR & DISR(MMA)

Xstrata reqires all its sites to record andinvestigate all High Potential Risk Incidents(HPRI) as reporting and investigation o anincident, a hazard or near-miss incidentare vital to prevention. Wherever possile,hazards are identied eore these can resltin injr. HPRI reporting can help achieveinjr prevention identiing potentialhazards and soltions that can protect theworkorce.

Jo Saet Environment Assessment (JSEA)and hazard reporting orms were lanchedwithin the compan in 2009 in or eort to

achieve zero harm.

Since Ma o 2008, when an LTI waslast recorded, SMIs saet perormancecontinosl improved, registering no LTIsor the whole o 2009. In the 2009 calendarear, SMI logged a total o 3,210,614 manhors withot LTI.

Security challenges

Xstrata is a signator to the uN GloalCompact, and SMI has adopted the VolntarPrinciples on Secrit and Hman Rights(VPSHR). With saet and secrit o

emploees and contractors as a priorit, SMIis committed to work with local athoritiesand commnities to contine to ildconstrctive relationships with stakeholders,minimize risk, and secre an ongoing licenseto operate.

No incident perpetrated organizedgrops, e.g. New Peoples Arm (NPA), wasrecorded in the Tampakan Project in 2009.However, on 26 Jl 2009, a uPD drillerwas atall shot an nidentied assailantin Nakoltana, bongmal, baranga Kimlawis,Davao del Sr. Athorities have preparedlegal action to arrest and ring the sspect tocort. The incident was o a personal natreand not compan-related. The compan wassaddened the incident and the companoered spport to the amil.

There were or other shooting incidentswhere no serios injries were reported.Police investigations indicated the incidentswere o personal natre and not compan-related.

SMI spports a mlti-stakeholder approachto improving secrit conditions in the

Tampakan Project area in which thecommnits participation and spport, aswell as the national, local and provincialgovernments all pla important roles. We willcontine to work with the host commnities,or secrit service provider, and the localathorities to promote peace and order in theregion.

Occupational health

SMIs Health and Occpational Hgienestandard is sed to identi, assess andcontrol occpational health hazards throghpractical and reasonale measres that, when

DISR 2008

DIFR 2008TRIFR 2008

DIFR 2009

DISR 2009

TRIFR 2009


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28 TAMPAKAN PROJECT

SMI spports a mlti-

stakeholder approach to

improving secrit conditions

in the Tampakan Project area

in which the commnits

participation and spport, as

well as the national, local and

provincial governments all pla

important roles.

implemented, help eliminate work-relatedillness and injries.

Health monitoring programs were strictlimplemented at the Tampakan Project.Emploees were given their annal healthexamination while new emploees werereqired to ndergo a pre-emploment

health examination. SMI also introdceda Hepatitis b vaccination program or allemploees and the immnization program ispart o its emploment indction program.

There were no occpational diseases recordedin 2008 and 2009.

Home saety and basic frst

aid

Reglar emploees and contractors were

given special training on:

Snake bites First Aid and Emergenc

Response

basic First Aid Orientation

basic Emergenc Extrication Orientation

Deensive Driving, accredited theTESDA

Radio Land-ased Moile Seminar

Driver Saet Reresher Corse

Risk Management Training

behavioral based Sstem Program

Behavioral Based Saety(BBS)

SMI adopted a program called behavioralbased Saet (bbS) to give positivereinorcement o driving ehavior withde emphasis on conseling. In 2009, SMIexpanded the horizon in the implementationo the bbS.

A generic behavioral based WorkplaceOservation (bbWO) was ormlatedapplicale to an work activit. SevenbbS training sessions were condcted andattended 59 personnel. The programstimlated the emploees interest andcooperation in incident prevention recognizing Sae and At-Risk behavior.

OriginEmployees

Employees and

Contractors

Other areas in South Cotabato Province 29 11.5% 76 5.8%

General Santos City 32 12.7% 76 5.8%

Davao del Sur Province 2 0.8% 24 1.8%

Sultan Kudarat Province 1 0.4% 4 0.3%

TOTAL 252 100% 1,317 100%

Sarangani Province 1 0.4% 3 0.2%

Australia 4 1.6% 4 0.3%

Kiblawan 19 7.5% 426 32.3%

Columbio 7 2.8% 10 0.8%

Luzon Island Group 34 13.5% 37 2.8%

Visayas Island Group 10 4.0% 10 0.8%

Other areas in Mindanao 31 12.3% 44 3.3%

Tampakan 82 32.5% 603 45.8%

Headcount % Headcount %

Total workorce by employment type,

employment contract and region

Employees

Manpower Headcount Dec 2009

Regular 183

Probationary 24

Project Employees 41

Secondees 4

Contractors 1,065

Sub-Total 252

Total 1,317

Employee healthcare

Workorce memers and their amilies receivestattor healthcare ssidies throgh thePhilippine Health Insrance Corporation(PHIC), while premier private healthcareservices or all emploees and ve qalieddependants are provided IntelliCare,

a third part Healthcare MaintenanceOrganization (HMO).

Preparation or crises andemergencies

The implementation o Emergenc Crises andbsiness Continit, an SMI standard, ensresthat appropriate resorces and eectiveemergenc response, crisis managementand siness continit plans are in place tomanage emergenc and crisis sitations.

SMI pdated its crisis response procedresin late 2009 to spport the crrent and short-term tre state o the siness.

The workplace and or people


31/48


case study

Tre to its goal o zero harm in the

workplace, SMI recorded no incidents o

injr or illness that reslted in the non-

completion o a work shit in 2009. between

Ma 2008 and Janar 2010 SMI emploees

and contractors worked in excess o ve

million hors withot Lost Time Injr (LTI).

The record was achieved despite the

challenges o transporting and operating

eqipment within ran conditions and

across the rgged and montainos terrains

o sothern Mindanao, also considering

that SMI engages contractors rom drivers,

constrction personnel, laorers to short-

term administrative personnel that increase

potential saet concerns.

The culture of safety in the workplaceand the community

SMIs Hman Resorces, Saet and Health

Manager, Graham Almond, attrites the

accomplishment o the ve million hors LTI

ree to the acceptance SMI emploees

and contractors to emrace the goal o zero

harm.

The saet measres we have implemented

sch as holding reglar saet talks,

departmental adits and ehavior-ased

saet programs have een widel accepted

throghot the siness, Mr. Almond said.

These measres have een ke to reaching

this signicant health and saet milestone.

In 2009, SMI also sponsored training on a

Heav Eqipment Saet program in Kiamo,

Kimlawis designed to promote a Cltre o

Saet among its host commnities.

Rogelio bong Qito, SMI Saet

Sperintendent, elieves capacit ilding in

the eld o saet shold e the compans

legac to its host commnities.

When SMIs operations are complete, the

training we have condcted and its impact on

the commnit will e or most signicant

legac, Mr. Qito said.

5,000,000+ working hors with no LTI



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30 TAMPAKAN PROJECT

New Memoranda o Agreements (MOAs)signed with host commnities stiplate thatSMI will give priorit to the indigenoscltral commnities (ICC) / indigenospeoples (IP) in the host arangas aected its operation in an work capacitcommensrate to their qalications andtness. In no case shall an IP applicant e

considered or placement i s/he is not dlrecommended the concerned elder /leader o his trie.

Employee training

SMI sends its emploees to training onsstems and procedres, inclding estpractices that are to e applied in theTampakan Project. In 2009, SMI spentPhP4.3million (uSD90,097) and 5,309 horson training:

Employee perormanceevaluation

SMI has adopted Xstrata Coppers gloalperormance evalation sstem and in 2009,proper eedack on emploee perormance,evalation and career development reviews

were completed as schedled.

Workorce by role type

Position Level Headcount %

As o December 2009

Managers 7 3%

Superintendents 21 8%

Supervisors / Ofcers 89 35%

Rank and File 135 54%

Total Training Programs 252 100%

Labor relations

Laor relations are a ndamentalresponsiilit o operational management andwe seek to have a direct relationship etweenor emploees and line managementonded on qalit leadership, eectivecommnication, mtal respect and trst.

We conslt with emploees in advance onan signicant operational change.

SMI grants enets to ll-time emploeesthat are not provided to project emploees,sch as Annal Vacation Leave and Sick Leavecredits o 15 das each. Project emploeesare entitled to the stattor enet ove das Service Incentive Leave (SIL) atercompleting one ear o work.

SMIs standard entr wage rate or thelowest stratm is 9.2% higher than the localminimm wage.

Employing locally

The Principal Agreements with hostmnicipalities, arangas (villages) and trial

commnities have individal provisions statingthat SMI will give priorit o emploment(other than in secrit) in mining operationsto competent and qalied long-terminhaitants living in the commnit.

Employee Training Jan - Dec 2009Total Training Hours 5,309

Average Training Hours per Employee 21.07

Total Number o Participants 724

Total Training Cost USD90,097

Average Training Cost per Employee USD125

Total Training Programs 49

Position Hours

Senior Management 23

Management 1,135Supervisors, administration, technical 4,149

Operational production, maintenance 2

Total 5,309


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Diversity and equalopportunity

SMI emplos a diverse workorce, to enetrom a varied range o skills, ackgrondsand perspectives. It emplos people asedon the skills and experience reqired or each

particlar position, withot discriminationaccording to gender, race, age, sexalorientation, religion, nationalit or an otheractor. The Projects workorce is crrentl65% male and 35% emale.

As a polic, there is no dierence in the asicsalar o men and women. The salar scaleis applied in the same manner regardless ogender.

case study

Key to culturally sensitive community engagement

In 2009, SMI introdced a Cltral Indction

program to provide its emploees with a

etter nderstanding o the local cltre,

specicall that o the blaans.

The Cltral Indction program consists o

three modles that aim to provide sta and

contractors an insight on how to relate with

the blaans.

The rst modle is an introdction to

blaan cltre, throgh an extensive

Cltral Indction

discssion o the blaans histor, elie

sstems, worldviews, cstoms and

traditions

The second modle gives tips on

practices that shold e oserved when

in a blaan village, and dealing with

blaans in an oce setting

The third modle nderscores cltralcommonalities with other dominant

Philippine ethno-lingistic grops

encoraging the participants to

nderstand and respect cltral

dierences.

b the end o 2009, a total o 173

contractors and emploees rom the

compans varios departments nderwent

the Cltral Indction program, enhancing

their interaction with commnit memers

and overall cltral awareness.

To achieve or goal o zero

harm in the workplace, ever

emploee is accontale or

saet perormance.

Non-discrimination policy

As otlined in or bsiness Principles, wevale the contrition made emploees,and or policies and practices respect theirpersonal dignit and rights. We do nottolerate an orm o workplace discrimination,harassment or phsical assalt.

There has een no incidence o discriminationreported in 2009.

SuSTAINAbIL

Documents

Tampakan Project SD Report