core sector communique

Xstrata plc announces agreed amendments to Management Incentive Arrangements in all-share merger with Glencore International plc

Zug, 27 June 2012

· Retention awards for all recipients will be paid entirely in shares in the Combined Group, further aligning management’s interests with shareholders

· 100% of retention awards for Xstrata Executive Directors and the other Executive Committee members will be subject to performance criteria based on realising additional cost savings as a result of the Merger in the two years following the Effective Date

Following publication of the circular on 31 May 2012 (the “Circular”) which set out the terms of the Merger, including details of the proposed Management Incentive Arrangements, the Independent Xstrata Directors have engaged extensively with non-Glencore Group Xstrata shareholders. In response to shareholder feedback received, Xstrata’s executive management and Independent Non-Executive Directors have consulted with major shareholders and advisers in the past few days to determine amendments to the structure of the retention arrangements in place for 73 key Xstrata managers.

Retention awards for all recipients described in the Circular will now be paid entirely in shares, further aligning management’s interests with shareholders. For Xstrata’s senior management, excluding the Executive Directors and six other Executive Committee members, awards will be paid in equal tranches at the first and second anniversaries of the closing of the transaction. The number of shares in the Combined Group to be awarded under the amended retention arrangements will be determined by reference to the average of the closing prices of Xstrata Shares over the seven dealing days immediately before the shareholder meetings Full terms of the amended retention awards will be provided in the supplementary circular to be sent to Xstrata shareholders.

All of the retention awards for the members of Xstrata’s Executive Committee, including the three Executive Directors, (“Xstrata’s Management”) will now be subject to the realisation of additional cost savings arising from the Merger.

The previously announced EBITDA synergy estimate of at least US$500 million per annum includes approximately US$50 million of cost synergies. Vesting of retention awards for Xstrata’s Management will now only occur if additional cost savings are achieved over and above the US$50 million cost savings already identified in the synergy estimate. No additional cost savings have already been identified. Full vesting of the retention award will only occur if a minimum of an additional US$300 million of incremental cost savings arising from the Merger are achieved over the two years post completion None of the above cost savings targets are intended as a profit forecast or profit estimate and no statement in relation to them should be interpreted to mean that earnings per share for Scheme Shareholders will necessarily be greater than those for the year ended 31 December 2011. . Merger-related cost savings will be realised from initiatives including reorganising the Combined Group’s assets, the reduction of any duplicated costs not already identified in our synergy estimate, financial synergies and other cost savings. Additional sustainable cost savings will create further value for shareholders from the Merger on an ongoing basis. Performance in achieving merger-related cost savings will be independently verified.

For the members of Xstrata’s Management other than Mick Davis, Xstrata plc CEO, up to 50% of the total award will be available to vest at the first anniversary of the Effective Date. Vesting will be on a straight line basis for additional cost savings achieved, with full vesting of the awards occurring on the first anniversary of the Effective Date if a total of US$150 million of incremental cost savings are realised in that year. The percentage of the total award remaining unvested after the first anniversary of the Effective Date will be available to vest at the second anniversary of the Effective Date, subject to achieving incremental cost savings with full vesting only occurring if at least US$300 million of additional cost savings are achieved in aggregate.

For Mick Davis, one third of the total award will be available to vest on the first anniversary of the Effective Date, subject to the same performance criteria outlined above. The remaining two-thirds of the total award will be dependent upon cost savings performance tested at the second anniversary of the Effective Date as above, with any award being paid in two equal instalments at the second and third anniversaries of the Effective Date.

All of the other aspects of the Management Incentive Arrangements will remain as described in the Circular and all of them (including the amended retention arrangements) will remain subject to shareholder approval and conditional upon completion of the Merger.

A supplementary circular is expected to be sent to Xstrata shareholders in due course convening a new Extraordinary General Meeting of Xstrata to consider the revised Management Incentive Arrangements and the other resolution originally contained in the Circular to implement the Merger, if approved at the Court Meeting which shall be held on that date.

Sir John Bond, Xstrata plc Chairman, said:

“The Independent Non-Executive Xstrata Directors are convinced that the merger with Glencore is in the interests of all Xstrata shareholders and will provide the best platform for value creation in the future. The merger has always consisted of three inseparable and interdependent elements – the Merger ratio, the governance and management structure and the management retention arrangements. The Independent Non-Executive Xstrata Directors strongly believe that retaining Xstrata’s proven management team is essential for the success of the Merger. Xstrata management will be responsible for over 80% Based on the 2011 financial results of Xstrata and Glencore of the Combined Group’s earnings, 150 mining and metallurgical assets and 20 major growth projects. We would not have recommended the Merger on its current terms without arrangements to secure Xstrata’s management team in the critical initial years of the Combined Group’s life. Consequently, the passing of the resolutions to approve the Merger and the Management Incentive Arrangements are inter-conditional.

“During our extensive consultation with major shareholders, our owners have recognised the importance of retaining key Xstrata managers in the Combined Group. A number of shareholders have, however, raised concerns about the proposed structure of the retention arrangements. In particular they have asked us to consider awarding shares instead of cash and to include a performance condition at the executive level.

“The retention awards originally agreed by Glencore and the Independent Non-Executive Xstrata Directors and contained in Glencore’s proposal to Xstrata offered the most secure means of retaining managers in a highly competitive global mining labour market. Additionally, over 80% of total annual remuneration at the executive level is already subject to performance criteria. However, Xstrata’s executive management and Independent Non-Executive Directors are sensitive to the perspective and concerns of our shareholders in the current environment and we have listened to the feedback we have received since publishing the merger documents. These amendments now allow shareholders to focus on the strategic rationale for the Merger, which the Independent Non-Executive Directors continue to support.

“We have great confidence in the ability of Xstrata’s management team to achieve superior returns for our shareholders as part of a larger, more diversified, entrepreneurial natural resources group integrated from operation to customer. The value of all retention awards will be linked to the performance of the combined group’s shares. The achievement of US$300 million of incremental cost savings over two years to enable Xstrata’s Management retention awards to vest in full represents a stretching performance measure which, if achieved, will exceed the cost of the retention awards and improve the ongoing cost competitiveness and value of the combined group.”

The Merger has received anti-trust clearances from a number of jurisdictions, including from Canada, Turkey and Japan. Glencore and Xstrata continue to engage in constructive discussions with the European Commission and are expecting formal notification of the transaction to take place in mid- to late August. Consequently, we now anticipate completion of the Merger in early October, subject to the necessary approvals being in place.

Glencore has agreed to the proposed amendments to the retention award element of the Management Incentive Arrangements, as described in this announcement. Defined terms used in this announcement have the same meanings given to them in the Circular.