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Xstrata profits drop

Xstrata “’ still
seeks Anglo merger
London, England — MININGREVIEW.COM — 04 August 2009 – Swiss-based Xstrata – the fifth largest diversified metals and mining company in the world – says its profits for the first half of 2009 fell 77%, following the international slump in metal prices.

Bloomberg News reports from London that Xstrata’s net income slipped to US$643 million (R5 billion) from US$2.77 billion (R22 billion) a year earlier. This missed the US$773 million (R6 billion) median of six analyst estimates compiled by Bloomberg. Sales dropped 39%to US$9.9 billion (R79 billion).

CEO Mick Davis “’ who last month proposed a “merger of equals” with Anglo American Plc “’ has cut spending and production of some metals after commodity prices slumped in the second half of last year amid a global economic slowdown. Xstrata is still seeking talks with London-based Anglo, which rejected the bid.

“I continue to believe that it is in the best interests of Xstrata and Anglo American shareholders to examine the potential to create the value we have identified,” Davis said, but did not unveil any new initiatives regarding the proposal.

Davis “’ who wants to combine his mines in Canada, Australia and South Africa with nearby sites operated by Anglo “’ says the merger would cut costs by US$1 billion (R8 billion) a year. The plan would also give Xstrata access to platinum, diamond and iron ore through Anglo’s stakes in Anglo Platinum Limited, De Beers and Kumba Iron Ore Limited.
Anglo CEO Cynthia Carroll last week said the approach was “a distraction” and reiterated her pledge to boost job cuts to 19 000 this year to help save US$2 billion (R16 billion) of costs by 2011.

Xstrata last week reported that first-half production of coal had risen 11% on increased output from the Newlands Northern mine in Australia and as the inclusion of its Prodeco unit’s Colombian mines added 5 Mt of output.

The Xstrata statement also revealed that mined copper and nickel production had also increased, while chrome output had slumped 60% as Xstrata’s venture with Merafe Resources Limited suspended 17 of its 20 furnaces in response to weak demand.