Statement re Major New South African Coal Minin...

JOINT ANNOUNCEMENT

AFRICAN RAINBOW MINERALS LIMITED XSTRATA PLC

(Incorporated in the Republic of South Africa) (Incorporated in Switzerland)

(Registration number 1933/004580/06 (Registration number 4345939)

JSE Share code: ARI ZSE Share code: XTA.S

LSE Share code: AGM LSE Share code: XTA.L

ISIN: 000054045 ('Xstarta')

('ARM' or the 'Company')

ARM AND XSTRATA ESTABLISH A NEW MAJOR SOUTH AFRICAN COAL MINING COMPANY -
DETAILED TERMS ANNOUNCEMENT

 1. INTRODUCTION
   
ARM and Xstrata are pleased to announce that agreement has been reached to
establish a major black controlled coal mining company ('ARM Coal'), in a
transaction valued at approximately R2.4 billion, which will have significant
operating assets and growth projects in South Africa and a substantial
participation in the export and domestic thermal coal markets.

In terms of the agreement, ARM will pay R400 million and Xstrata will pay R384
million to subscribe for 51% and 49%, respectively, of the issued share capital
of ARM Coal. ARM Coal will hold a 20% equity based participation interest in
the existing coal operations of Xstrata South Africa (Proprietary) Limited
('XSA') and a 51% interest in an unincorporated joint venture to be
established, in respect of the Goedgevonden project (collectively, 'the
transaction'). This will provide ARM Coal with an effective interest in XSA's
coal business of approximately 29%.

To enhance ARM's participation in the South African coal industry, XSA has
agreed to grant ARM an option to acquire a direct equity based participation
interest in XSA's coal business of 10%, which may result in Historically
Disadvantaged South African ('HDSA') control of 36% of XSA's coal business. The
option is described in more detail in paragraph 6 below.

ARM and Xstrata intend to strengthen their business relationship further
through the pursuit of opportunities in a range of other commodities in Africa.

ARM is a niche-diversified South African mining company of which 42.9% is owned
by African Rainbow Minerals & Exploration Investments (Proprietary) Limited
('ARMI'). Negotiations with numerous broad-based empowerment beneficiaries are
being finalised which will result in 56.9% of ARM being controlled by HDSAs.
ARM owns ferrous metals, nickel and platinum operations and a significant
interest in gold through its holding in Harmony Gold Mining Company Limited.
Furthermore, ARM holds an African exploration portfolio (copper, cobalt and
gold) through a company it controls and which is listed on the Toronto Stock
Exchange, TEAL Exploration and Mining Incorporated.

Xstrata is a major global diversified mining group, listed on the London and
Swiss stock exchanges with approximately 26,000 employees and contractors
world-wide. Xstrata maintains a meaningful position in six major international
commodity markets: copper, coking coal, thermal coal, ferrochrome, vanadium and
zinc, with additional exposures to gold, lead and silver with operations and
projects across four continents and seven countries: Australia, South Africa,
Spain, Germany, Argentina, Peru and the UK. Xstrata Coal is one of the world's
largest producers of export thermal coal and a significant producer of coking
coal. XSA's coal operations contribute around one third of Xstrata's total
annual coal production. In South Africa, XSA is the third largest exporter of
thermal coal and produces almost 20% of all thermal coal exported. Currently it
has interests in 13 mines, most of which are located within the two major
coalfields - Witbank and Ermelo, with consolidated annual production capacity
of in excess of 20 million tonnes of thermal coal, the majority of which is
exported.

 2. RATIONALE FOR THE TRANSACTION
   
The formation of ARM Coal will result in the creation of a significant coal
participant in South Africa with a balanced exposure to export and domestic
sales, a majority interest in the Goedgevonden project and access to capital to
pursue future growth opportunities.

The transaction enables ARM to further diversify its asset portfolio with the
addition of quality coal assets and to establish a strategic relationship with
an international mining house and leading coal producer. As the controlling
shareholder of ARM Coal, ARM will be instrumental in the formulation and
execution of strategic goals inclusive of the identification and pursuit of
growth opportunities. ARM will also contribute management expertise and
assistance to XSA's coal operations in growing its business and achieving its
targets in respect of the Mining Charter.

Xstrata is fully supportive of the principles outlined in the Mineral and
Petroleum Resources Development Act and the Mining Charter and is committed to
the empowerment of HDSAs through their participation in its South African
operations.

The transaction achieves meaningful and sustainable empowerment ownership and
involvement in its South African coal assets, and positions the parties to
jointly pursue future opportunities. Xstrata's commitment is further
demonstrated through the provision of vendor financing on preferential terms to
ARM Coal and the provision of management support as more fully described below.

 3. DESCRIPTION OF ASSETS
   
XSA is South Africa's third largest exporter of thermal coal. In 2004,
consolidated production of thermal coal was 19.2 million tonnes and, of the
consolidated sales of 17.5 million tonnes, approximately 74% was exported with
the majority of such going to the Atlantic market. XSA manages eleven operating
mines and has interests in a further two joint venture mines.

The Goedgevonden project, which includes the prospecting rights in respect of
the Zaaiwater West property, is expected to produce approximately 3.2 million
additional tonnes for export and approximately 3.4 million tonnes per annum of
domestic thermal generation coal. The feasibility study for the Goedgevonden
project was completed in September 2005.

ARM Coal will benefit from XSA's entitlement to export coal through the
Richards Bay Coal Terminal ('RBCT'). ARM Coal will apply on behalf of the
Goedgevonden joint venture for additional export capacity in the Phase V
expansion of RBCT. Xstrata Coal Marketing AG, a subsidiary of Xstrata, will
continue to market all export coal produced by both the existing operations and
the Goedgevonden joint venture.

 4. STRUCTURE OF THE TRANSACTION
   
The final structure is depicted below: Please refer to the announcement which
has been posted on the Company's website, www.arm.co.za, or to the announcement
which will be published in the South African press on Thursday, 2 March 2006
for a diagrammatic representation of the structure.

ARM Coal will subscribe for participating preference shares ('Preference
Shares') in the capital of XSA for a cash consideration of R784 million, by
applying the subscription proceeds received from Xstrata and ARM for its
ordinary shares. The Preference Shares will entitle ARM Coal to participate in
20% of the free cash flow of XSA's existing coal operations. Dividends received
from the Preference Shares will flow directly to ARM Coal's shareholders.

For the purposes of this transaction, R4 billion of debt has been attributed to
XSA's existing coal operations. This debt will bear interest at the prime rate
and will be repaid over a ten year period following a five year vendor
facilitation period during which no interest will accrue and no principal will
be required to be repaid.

ARM Coal will furthermore acquire a 51% participation interest in an
unincorporated joint venture, the Goedgevonden project, to be established with
the objective of developing and optimally exploiting the Goedgevonden coal
reserves. XSA will provide debt funding of R765 million to ARM Coal in order to
fund its acquisition of its 51% interest in the Goedgevonden project. This debt
will bear interest at the prime rate and the repayment period will be linked to
the underlying cash flows of ARM Coal.

Furthermore, XSA will provide the project funding required to bring the
Goedgevonden project into commission. The project funding is expected to peak
at approximately R2.3 billion and will be repayable over ten years following an
eight year vendor facilitation period. During this eight year period, no
interest will accrue and no principal will be required to be repaid in respect
of XSA's portion of the project funding and ARM Coal will be entitled to share
in this benefit. The project funding will bear interest at the prime rate.

In order for ARM to gain immediate access to cash flows, a cash upstream
principle will be applied for the first five years following completion of the
transaction, whereby 20% of Goedgevonden's operating cash flow will be
distributed to the joint venture parties according to their respective
interests. The remaining 80% of the operating cash flow will be utilised
towards the servicing of the project funding debt. Furthermore, 80% of the
operating cash flow received from Goedgevonden by ARM Coal will be used to
service ARM Coal's debt of R765 million and the remaining 20% will be
distributed to the shareholders of ARM Coal.

 5. MANAGEMENT OF ARM COAL AND ITS OPERATIONS
   
ARM will be involved in the management of the business at three levels:

  * At ARM Coal - ARM will appoint four out of the seven directors of ARM Coal,
    in line with its controlling interest in ARM Coal.
   
  * At the existing operations - XSA's existing coal operations shall be
    governed by a supervisory committee, consisting of four representatives
    appointed by XSA and two representatives appointed by ARM through ARM Coal.
   
  * The Goedgevonden project - The project will be managed through a management
    committee, consisting of three representatives appointed by XSA and four
    representatives appointed by ARM Coal. XSA will manage the Goedgevonden
    project on behalf of the joint venture on a cost recovery basis.
   
 6. EXCLUSIVITY AND OPTION TO INCREASE ARM'S INTEREST IN XSA'S EXISTING COAL
    OPERATIONS
   
ARM and XSA undertake to offer all opportunities to participate in any
prospecting or mining for coal in South Africa to ARM Coal.

XSA has granted ARM an option, at no cost, to acquire a direct equity based
participation in XSA's coal business of 10%. The option period commences on the
day after the fulfillment of the conditions precedent and expires on 1
September 2006. The subscription price will be R400 million and the new
preference shares will carry the same rights and obligations as the Preference
Shares except that no facilitation will be provided by XSA .

 7. CONDITIONS PRECEDENT AND UNDERTAKINGS
   
The implementation of the transaction is subject to the fulfillment of certain
conditions precedent, including, inter alia, obtaining the necessary regulatory
approvals, including that required in terms of the Exchange Control Regulations
of South Africa and the Competition Act.

Johannesburg 28 February 2006

Financial adviser and sponsor to ARM Investment Bank to Xstrata

Deutsche Securities (SA) (Pty) Ltd Standard Bank

Attorneys to ARM Attorneys to Xstrata

Bowman Gilfillan Werksmans Inc.