TEXT-Moody's revises Xstrata outlook to negative

(The following statement was released by the ratings agency)

Dec 22 - Moody's Investors Service has today revised to negative from
stable the outlook on the Baa2 senior unsecured ratings of Xstrata and its
guaranteed subsidiaries.

Moody's said that the outlook change to negative from stable reflects the
reduced flexibility enjoyed by Xstrata at its current level of ratings in view
of the level of indebtedness it is expected to report at year-end and the rapid
decline in commodity prices witnessed over the past few months, which is
expected to continue to impact the group's financial performance and credit
metrics going into 2009.

Moody's notes that the continuous external growth strategy pursued by
Xstrata in the aftermath of its acquisition of Falconbridge for USD22 billion
(including assumed debt) in late 2006, have left the group carrying a
substantial amount of debt going into the current severe commodity downcycle.
The string of bolt-on acquisitions and purchase of a 24.9% stake in Lonmin
completed over the past two years at an aggregate cost of approximately USD7.8
billion has prevented the group from using its strong free cash flow generation
to reduce net debt, which is expected to be largely unchanged at 2008 year-end
compared to the USD15.5 billion reported at the end of June.

Looking ahead, and despite the mitigating effect of a stronger US dollar
relative to the currencies of producing countries such as Australia, Canada and
South Africa, Xstrata's earnings and cash flow are expected to be significantly
affected by the sharp decline in metal prices, in particular copper which
accounted for nearly 50% of group operating profit in the last twelve months to
June 2008, and the cuts, albeit more contained, in coal prices (20% of group
operating profit) that are likely to be demanded by customers when new
contracts are negotiated for the Japanese fiscal year starting in April 2009.

The negative outlook therefore reflects the heightened uncertainty weighing
on the group's future profitability and cash flow generation, which may result
in reduced headroom under some of the financial covenants governing its bank
facilities (including maximum Total Debt to EBITDA of 3.0x and a minimum EBITDA
Gross Interest cover of 4.0x) at the 2009 year-end.

However, in this context, Moody's expects management to give priority to
conserving cash and shoring up the group's financial profile. It takes some
comfort from the actions already taken by Xstrata to close/mothball various
nickel, ferrochrome and coking coal operations in response to the severe
deterioration in operating environment while maintaining a strong focus on cost
efficiency. Possible additional corrective measures such as significant cuts in
expansionary capital spending and an adjustment to the company's shareholder
distribution policy, may allow the group to remain free cash flow positive and
trim down debt. This in turn could help rebuild some cushion under its
financial covenants and pave the way for a stabilisation of the rating
outlook.

Moody's previous rating action on Xstrata was the assignment of provisional
Baa2 senior unsecured ratings on 8 November 2006 to notes issued by Xstrata
Finance (Canada) Limited and Xstrata Finance (Dubai) Limited that are fully and
unconditionally guaranteed on a senior, unsecured and joint and several basis
by Xstrata plc and its main direct wholly-owned subsidiary, Xstrata (Schweiz)
AG. In addition, both Xstrata Finance (Canada) Limited and Xstrata Finance
(Dubai) Limited cross guarantee the notes issued by the other.

For the assignment of this rating, Moody's has used its methodology for the
Global Mining Industry, which can be found at www.moodys.com in the Credit
Policy & Methodologies directory, in the Ratings Methodologies subdirectory.
Other methodologies and factors that may have been considered in the process of
rating this issuer can also be found in the Credit Policy & Methodologies
directory.

Headquartered in Zug, Xstrata plc is a global mining house with major
operations in base metals, coal and alloys located in the Americas, Australia,
South Africa and Europe. In fiscal 2007, it reported consolidated revenues of
USD28.5 billion.
(New York Ratings Team)