Strategy and objectives – integral to the business model? Xstrata o na l g m a ti sfor Tran rowth 2010 Annual Report Basic Materials United Kingdom Op lence l excel iona erat le value ainab Sust Annual Report 2010 26 | Business review: strategy www.xstrata.com | 27 Strategy Strategy to deliver superior shareholder value Our mission: We will grow and manage a diversified portfolio of metals and mining businesses with the single aim of delivering industry-leading returns for our shareholders. We can achieve this only through genuine partnerships with employees, customers, shareholders, local communities and other stakeholders, which are based on integrity, co-operation, transparency and mutual value-creation. p24 For more information on our business model Strategic priorities Develop our portfolio of significant organic growth projects to deliver new production on time and on budget Progress in 2010 ■ Key performance indicators ■ Overview Three major new mines successfully commissioned in 2010 10 projects approved and entered implementation with capital spend of $10 billion, 20 projects currently in construction $7.5 billion of project approvals due in 2011 Record real cost savings of $541 million from efficiency initiatives and new, lower cost production Increased copper mineral resources at Antapaccay, Collahuasi, El Pachón, Frieda River and Las Bambas Three fatalities at managed operations in 2010 20% reduction in total recordable injury frequency rate (including contractors) Corporate social involvement of $81.3 million (cash) and $2.5 million (in-kind) 7.1% voluntary turnover in 2010, 11% higher than 2009 Accelerated leadership development programme continued across Group Career development processes in place across the Group including annual performance reviews Extension of bank facilities through $4 billion syndicated loan with no financial covenants Increased headroom of $8.7 billion Cash generation from operations of $9.95 billion Net debt reduced to $7.6 billion Acquisition of Sphere Resources (iron ore projects in Mauritania); majority ownership secured, integration underway Completion of divestment of El Morro to New Gold Targeted 50% volume growth over 2009 levels by end 2014 20% reduction in operating costs by end 2014 ■ ■ How we achieve our strategy ■ Strategy Organic growth Achieve further improvements to the net present value of our business Delivering the next phase of transformation of Xstrata’s portfolio through our industryleading pipeline of organic growth projects. ■ ■ ■ Real cost savings (see page 37) Increase in average mine life: 50+ years in 2010 Increase in total mineral resources: up 60% on 2006 levels in 2010 Zero fatalities Governance Performance ■ ■ p28 Improve our health and safety, environmental and social performance and, in particular, to operate a fatality-free business ■ ■ ■ ■ Total recordable injury frequency rate (see page 38) Environmental incidents (see page 39) Corporate social involvement (see page 41) ■ ■ ■ Operational excellence Financials Continuously improving the quality of our assets through year-on-year operating cost reductions, mine life extensions and productivity improvements. Operating in line with leading practice social and environmental standards. Retain key personnel and offer our people a rewarding and non-discriminatory workplace with development opportunities ■ ■ ■ Voluntary turnover (see page 41) Training spend and hours per employee (see page 41) ■ ■ Mergers and acquisitions Growing our business through the opportunistic identification and execution of value-adding bolt-on or transformational acquisitions. Maintain a robust and appropriate capital structure ■ ■ ■ Gearing (net debt / net debt + equity) Cash generation from operations (see page 3) Net debt position ■ ■ ■ ■ Evolution of Xstrata’s strategy Initially, Xstrata’s strategy was focused on the execution of transformational and bolt-on acquisitions to rapidly add diversity and scale to the Group. A second stage focused on improving the operational, safety and environmental performance of acquired assets. While we continue to pursue value creation through M&A and operational excellence, our strategy is now focused on delivering the next stage of Xstrata’s growth from the range of organic growth projects within our portfolio. Each of these strategic thrusts relies on our ability to operate responsibly and to secure broad-based support for our operations from the communities in which we operate. Identify and execute opportunities to create value through acquisitions, divestments, mergers or strategic partnerships ■ ■ Successful integration of acquired assets, realisation of anticipated synergies (if applicable) ■ p36 For more information on key performance indicators pp 26-27 Xstrata has made a significant attempt to link their strategic objectives, priorities and KPIs in this spread. ‘Operational Excellence’ is the objective which incorporates the environmental and social issues as priorities and KPIs. Clear signposting is provided to lead the reader to further relevant information. 30 Integrated thinking in reporting
