Striking impact on Xstrata business this year
August 8, 2012
Announcing the company’s half-yearly results for the first six months of 2012, CEO Mick Davis said that average mine lives would be substantially extended, projects would deliver robust returns on investment throughout the commodity cycle, and the company would gain another raft of low capital cost, brownfield expansion options embedded within the world class assets it had developed.
The company “’ currently in the midst of a US$26 billion takeover transaction by major shareholder Glencore “’ this week reported interim Ebitda earnings of US$4 billion. That compares with US$5.8 billion a year ago, and a consensus of analyst forecasts of US$3.87 billion.
“By the end of the year, a total of ten major projects will reach commissioning and accelerate our transition from certain legacy, end of life operations to new and expanded efficient operations. A further eleven projects will commence production in the next two years,” he said.
“Our financial performance in the first half of the year reflected a cyclical downturn in commodity prices and the transition to our next generation of lower cost mines. Against the background of lower prices and ongoing cost inflation, our operational performance remained robust. Second quarter volumes rose across the Group, providing us with good momentum to achieve our expectations of higher volumes in the second half,” Davis added.
“Despite these headwinds and the challenges of operations reaching the end of their lives, our businesses cut unit costs in real terms by a net US$105 million in the first six months of the year, led by the nickel and zinc business units which together accounted for US$87 million of savings. Just as in the previous cyclical downturn of late 2008 and early 2009, we are once again taking pre-emptive action to ensure our business remains competitive, and to defend margins.
“Following a review of our project pipeline, we have re-sequenced capital spending and deferred US$1 billion of expenditure originally planned for 2012. Our 2013 budgeted spending will increase by US$400 million, with US$600 million deferred beyond that, without affecting the commissioning schedule of any of our approved projects. Consequently, we expect capital spending in 2012 to reduce to US$7.2 billion,” he explained.
“We expect the volume growth we are bringing to fruition to be well timed for a cyclical recovery. Our pro-active response to the cyclical downturn will defend margins and ensure our business emerges in a stronger competitive position to capture the benefits of stronger global economic growth,” Davis concluded.
Source: Xstrata plc. For more information, click here.