DBRS Confirms Xstrata on Jubilee Mines Offer

DBRS has today confirmed the Issuer Rating of Xstrata plc (Xstrata or the Company) at A (low) as the Company announced a $2.9 billion friendly offer for Jubilee Mines NL (Jubilee). The purchase of Jubilee will be financed through Xstrata's existing credit facilities and cash on hand (approximately $1.5 billion at June 30, 2007). DBRS has confirmed the Company’s ratings as Xstrata’s credit metrics would remain acceptable after the acquisition. The offer is subject to relevant regulatory approvals (including Australia’s Foreign Investment Review Board), 90% minimum acceptance and other normal bid conditions (including a 1% break-up fee).

Jubilee is an Australian mining and exploration company focused on high-grade nickel sulphides in the Eastern Goldfields of Western Australia, a world-class nickel sulphide district. Jubilee was founded in 1987 and discovered the Cosmos Nickel Project in 1997. First production was in 2000 and Jubilee has produced 77,500 tonnes of nickel in concentrate since that time (production for the last 12 months ending June 30, 2007 was approximately 8,600 tonnes of nickel in concentrate). Jubilee projects the production of 30,000 tonnes on nickel in concentrate per annum by 2012. DBRS notes that Jubilee has no debt, and cash on hand was over $200 million at June 30, 2007.

In addition to the Jubilee acquisition, Xstrata has made two other large acquisitions in the last two months. In September 2007, the Company announced that it was acquiring Australian coal assets for approximately $900 million from Centennial Coal Limited. In early October 2007, the Company announced an offer of $1.1 billion for Eland Platinum Holdings Limited -- the owner of the Elandsfontein platinum mine in South Africa. Thus, acquisitions announced since June 30, 2007, total approximately $5.0 billion, which the Company can easily finance with existing credit facilities and cash on hand.

Xstrata’s financial profile remains acceptable with this $5.0 billion of acquisitions. Pro forma total debt for the Company would be approximately $16.5 billion (net debt of approximately $15.0 billion), as at June 30, 2007. At June 30, 2007, Xstrata’s pro forma per cent gross debt-to-capital would be 41.7% (net of 39.5%), up from 33.3% (net of 30.4% pre-acquisitions), which is at the high end of the ratings range. Xstrata’s pro forma cash flow-to-total debt would be over 0.5 times (down from 0.7 times pre-acquisitions), as at June 30, 2007. Pro forma total debt to EBITDA would be less than 1.4 times -- an acceptable level for the Company’s ratings (up from 1.0 times pre-acquisitions), as at June 30, 2007. Pro forma EBITDA/interest coverage would remain strong at over 7.0 times (down from 9.0 times pre-acquisitions), as at June 30, 2007. DBRS notes that Xstrata -- in the current strong metal pricing environment -- is producing close to $1.0 billion of cash flow from operations per month.

With these acquisitions, Xstrata continues to strengthen its business profile as a world-class diversified mining group (enterprise value of over $75 billion) with top-ranking positions in copper (number four globally), nickel (number four globally), thermal export coal (number one globally) and metallurgical coal (number four globally), zinc (number one globally) and alloys (number one chrome producer globally).

Going forward, DBRS expects the Company to reduce its leverage as strong commodity prices support high free cash flow levels.

Notes:
All figures are in U.S. dollars unless otherwise noted.
For the definition of Issuer Rating, please refer to “Rating Definitions” under “Rating Policy” on www.dbrs.com.

DBRS’s rating report on Xstrata, published on October 12, 2007, is available by clicking on the link below or by contacting us at info@dbrs.com.