Falcondo is a ferronickel surface mining operation located in the Dominican Republic, in the town of Bonao, 80 kilometers north of Santo Domingo. Ferronickel is a combination of iron and nickel used by the stainless steel industry. Facilities at the mine include a metallurgical treatment plant, a crude oil refinery and a 200 megawatt thermal power plant. Xstrata owns 85.26% of the outstanding shares of Falcondo. Mined ore is transported to the metallurgical where it is dried, briquetted and fed to shaft furnaces where it is calcined and the nickel and iron oxides are partially reduced in the solid state to metallics. The ore is then transported and smelted in two electric furnaces. After refining, the metal is cast into ferrocones, which contain roughly 40% nickel and 60% iron and trucked to the Port of Haina near Santo Domingo where they are shipped to market. Falcondo’s power plant currently supplies the metallurgical complex with all its power. Crude oil is piped 80 kilometers from Santo Domingo where it is converted into naphtha for the reduction furnaces, diesel for mobile equipment and fuel oil for the power plant. Excess power and diesel is sold to third parties. In July 2011, Falcondo will connect to the national grid and will begin to purchase all of the energy required for its operations from a local low cost natural gas energy producer.

Falcondo restarted its operations in March 2011 with 50% of its installed capacity. This followed the decision in August 2008 to temporarily shutdown operations to conserve value due to a combination of low nickel prices and record high oil prices.

Falcondo’s restart took advantage of improved market conditions, optimization of mining and production plant processes, and the signing of a commercial agreement with a local power company for the supply of electricity, which enabled Falcondo to operate with reduced costs. The project to convert the long-term energy source for Falcondo’s process plant from oil to natural gas to enable the operation to reach 100% production continues in conjunction with the resumption of operations.

Production began in 1971. In July 1999, Falcondo became the first ferronickel facility in the world to be ISO 14001 certified. Falcondo has recorded year over year improvement in employee safety in the job reducing lost time and reportable incidents records in the 2007-2009 period.