FALCONDO MINE & SMELTER

Xstrata Nickel announced that Falcondo ferronickel complex, nickel mining and processing operation in the Dominican Republic, is restarting operations to a planned 50% of installed capacity by March 2011.

Operations were temporarily suspended as a result of market conditions. This is due to a combination of extremely high oil prices, which represent the majority of the site's costs, and lower nickel prices. The shutdown is anticipated to last for four months, during which time furnace repairs and crucial maintenance activities will be conducted. The suspension will also enable the acceleration of feasibility studies into the energy conversion project, to switch the operation's power source from oil to coal, and the development of the Loma Miranda project, which will provide a new higher-grade mining area for Falcondo and extend the mine life.

Reported that the scoping study to examine the potential to convert Falcondo’s primary fuel source from oil to coal has been completed and further feasibility studies commenced in July 2008 with a targeted completion for early 2009. Early tests, piloting and studies have begun to advance the schedule for the implementation of the project. Resources in the Loma Miranda area, 25 kilometres from the Falcondo plant, have been acquired and secured and drilling is under way. Falcondo’s operating costs have increased to $7.96 per pound for the first half of 2008 from $5.13 per pound in the prior period, primarily due to rising oil prices. Falcondo consumes approximately four million barrels of oil per annum, with fuel constituting more than three quarters of total operating costs. Strategies to reduce its reliance on oil as the primary source of energy are being developed, including the potential to convert the facility to a coal-based source of energy and power