Xstrata Copper To Review New Australian Projects

Xstrata Copper says it is now reviewing all of its operations in northern Queensland in Australia after the Australian government's proposed tax on the mining sector. Last week the government announced it will tax mining company’s profits by 40 per cent from 2012.

Xstrats will now suspend its exploration programme in the Mount Isa and Cloncurry districts. Chief operating officer Steve de Kruijff says its exploration programs in the region were all going ahead until the Government announced the new tax.

"We started to think about well are new exploration sustainable under a tax regime that overlays on our current tax system of that size," he said.

"I guess until we can find out more certainty over what the different requirements of this tax are we're not prepared to continue to spend money on exploration projects on the North West regional area."

"Exploration activities are high risk and, while the targets we had identified are prospective, the proposed tax has introduced great uncertainty about the potential impact on the economics of developing resources into viable operations in Australia," he added.

The company says that current operations will continue. Xstrata produces about 200,000 tonnes a year of copper from its Australian operations.

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Xstrata To Get More For Its Australian Coal

Prices up by up to 114 per cent

Coal miner Xstrata says it has settled most of its annual Asian thermal coal contracts in at a price level some 38 per cent higher than it achieved last year.

Quarterly semi-soft coking coal prices have risen 114 per cent and the company says its production of coking coal in Australia has risen 83 per cent.

Xstrata Approaches Macarthur Shareholder

Approach Suggests Bidding War Likely

Macarthur Coal, currently the subject of a takeover battle, involving America’s Peabody Energy Group and Australia’s New Hope – amongst others – has said that global miner Xstrata has approached a “substantial” shareholder in Macarthur. The ove suggests that Xstrata may be about to join the fray.

``Macarthur advises that it has become aware that an investment bank representing Xstrata has approached one of the major shareholders in Macarthur,'' Macarthur said in a statement. The discussion was ``preliminary and highly conceptual,'' the company said, adding it had no further details.

The Australian Financial Review suggested on Friday that Xstrata had approached two of Macarthur’s biggest shareholders, POSCO and ArcelorMittal, about a joint bid for Macarthur. Macarthur has already rejected two bids from Peabody as well as a $3.4 billion bid from New Hope.

Also on Friday Macarthur announced that a shareholder’s meeting on Monday to vote on its takeover of Noble Group’s Gloucester Coal had been postponed for a week to allow shareholders more time to digest information on the deal. Peabody had previously asked Australia’s Takeover Panel to have the meeting postponed.

With this latest development it is thought that Xstrata in a bidding war. Macarthur is Australia’s biggest exporter of pulverised coal used by steelmakers.

Macarthur shares closed the week at $15.51 a share – some 6% more than the highest bid, New Hope’s $14.58 a share.

Macarthur Rejects New Hope Bid

Xstrata "Mulling Own Bid" - Report

Australia’s Macarthur Coal has rejected a $3.4 billion bid from rival Australian miner, New Hope.

New Hope has made an all-share offer worth $14.58 a share, a 58c premium over the rival bid from the US’s Peabody Energy.

Macarthur’s shares closed at $15.50 – a rise of 8.2% on the day.

Macarthur has announced that a meeting on Monday to discuss a deal with Hong Kong’s Noble Group will take place as planned on Monday. Peabody has tried to get Australia’s Takeover Panel to stop the meeting from taking place.

Meanwhile, the Australian Financial Review reported on Friday that international mining company Xstrata has approached two of Macarthur’s shareholder, POSCO and ArcelorMittal, about a bid to rival the offer from America’s Peabody Energy.

The newspaper did not disclose its source for the information.

Xstrata Submits Study For Philippines Copper-Gold Project

Project Will Cost $5.2 Billion

Xstrata Plc has submitted the results of a feasibility study to the government of the Philippines for its $5.2-billion Tampakan copper and gold project in the Southern Mindanao region of the country.

“This is the most expensive and the most exhaustive feasibility study in any mining project here in the Philippines," Edwin G. Domingo, director of the Environment department’s Mines and Geosciences Bureau, told reporters on Wednesday.

Tampakan – in which Xstrata has a 62.5% stake - is believed to be one of the largest undeveloped copper and gold deposits in Southeast Asia, with an estimated 12.8 million tonnes of copper and 15.2 million ounces of gold. Annual production is projected to average 340,000 tonnes of copper and 350,000 ounces of gold per year over the mine’s 20-year lifespan.

Once clearance has been given by the Environment department Xstrata expects to begin work on the project on 2012 or 2013 with production slated to begin in 2016.

Xstrats To Spend $7 Billion To Boost Copper Production

Output To Rise By 60 Per Cent Over Four Years

The Chief Executive of Xstrata Copper has announced that his company is to spend $7 billion over the next four years to increase its copper production by 60 per cent.

Speaking at a copper conference in Santiago, Charlie Sartain said that the company intends to boost output to 1.5 million tonnes from 920,000 tonnes last year.

This year’s output should be marginally ahead of that in 2009, however the company is looking to spend $1.5 billion investment at its Tintaya mine in Peru, which will raise output by about 60 percent, and a $1.3 billion expansion at the Antamina mine, also in Peru, will boost production capacity by 38 percent, Mr Sartain said. The company also expects to develop its Las Bambas mine in Peru, for which it was awarded an exploration licence in 2004.

Xstrata’s Lomas Bayas mine in northern Chile will receive a $293 million expansion to reach full production by 2013.

Xstrata is the world’s fourth largest copper producer behind Codelco of Chile, Freeport-McMoRan of the US and Australia’s BHP Billiton.

See also: Xstrata submits study for $5.2 Billion Philippies Gold-Copper Project

Xstrata CEO Calls For JSE To Relax Entry Requirements

South Africa Could Become Centre for Mining Finance

Xstrata Chief Executive Mick Davis has called on the Johannesburg Stock Exchange to relax its entry requirements to new companies if South Africa is to become a centre of mining finance for Africa.

Speaking to an audience at the Wits Business School in Johannesburg, Mr Davis recalled that when a small South African company called Gencor listed as Billiton on the London Stock Exchange, it was at a time when the international mining sector on the LSE was quite small with only Rio Tinto as a major player. However, with the advent of Billiton, Anglo American and as other companies from around the world listed on the exchange, the LSE became a major generator of mining finance, both in the equity and debt markets.

"That happened because there was little regulation that we had to fulfill as Gencor to list on the LSE. There were very few barriers to entry. Essentially, they created an environment where any credible company with an appropriate track record could actually list, and they have continued to maintain that situation," Mr Davis said.

South Africa could become a centre of African mining finance as the continent becomes the world's next major copper-and-cobalt producer, however restrictions prevented foreign companies from enjoying a full listing on the Johannesburg Stock Exchange and this, coupled with South Africa’s exchange controls, made a vision of South Africa as an international finance centre impossible to achieve.

"Amendments to these regulations could open up the JSE to the world's major mining companies and aspirant regional players, attracting additional investment flows and encouraging the re-establishment of a centre of mining finance excellence," Mr Davis said.

He suggested that the JSE create a separate indexation for foreign companies that want a separate listing in South Africa as without indexation shares had no liquidity and could not be traded. Without liquidity, South Africa cannot be a finance centre and would not be in a position to generate capital. He added that companies only listed on stock exchanges to access the public finance market.

"If the stock exchange cannot deliver capital to you, it's a waste of time and money to list on it. It's a simple issue that the JSE will have to attend to.

"But the other restriction is exchange control. You have to allow the free flow of funds, both in and out of this country. This country has matured over many years, but no government has had the courage to remove exchange control and ultimately that step has to be taken before South Africa can become a normalised environment.

"If that does happen, I am convinced that, with developments in Africa, you will see the JSE generate significant finance for resource companies," Mr Davis said.

POSCO Agreed Soft Coking Coal Price

POSCO To Pay $167 A Tonne for Soft Coking Coal

South Korea's POSCO, the world's fourth-largest steelmaker, is to pay Xstrata $167 per tonne for its April-June soft coking coal imports, according to a report by Reuters. The news agency quoted a source with knowledge of the deal.

The price compares with last year’s price of $80 per tonne last year.

Hard coking coal and pulverised coal injection (PCI) would be likely imported at $200 and $170 respectively, the same as Japanese and Chinese mills were paying.

Xstrata Looking At Irish Zinc Project

The chief executive of global miner, Xstrata, has said that his company is interested in buying some of Anglo American’s zinc assets, which were put up for sale last year with a reported price tag of $US800 million.

"We are interested in Anglo's zinc business, and are looking at probably all assets," Santiago Zaldumbide said. "We're particularly interested in Anglo's Lisheen mine [in Ireland], which is close to one of our interests." Xstrata has a majority stake in the Pallas mine.

Glencore Buys Back Prodeco Coal Operation

Mining firm Xstrata has confirmed reports from earlier in the week that Glencore International will exercise its option to buy back its Prodeco coal operations in Colombia.

Under the option agreement, Glencore will pay Xstrata $2.25 billion in cash upon completion of the sale.

The Prodeco business comprises the Calenturitas and La Jagua open pit thermal coal operations, export port facilities and a 39.8% share in a railway in Colombia.

Glencore sold the mines to Xstrata in 2009 as its share of Xstrata’s rights issue.

Glencore Looking To Buy Back Prodeco Coal Mines

Commodity trader Glencore is expected to buy back its Prodeco coal mines in Colombia from Xstrata for about $2.5 billion. Glencore was forced to give up the operations last year for $2 billion when it was short of cash, but it got an option to buy them back that expires later today.

The repurchase price is higher than the amount Glencore sold the mines for, reflecting the deal Glencore reached with Xstrata, however analysts noted the value of the mines could be higher still because of a rise in the price of thermal coal used in power stations.

Analysts expect a decision to be announced on Friday.

Glencore may seek a partner to help buy back Prodeco and was last month was reported to be holding talks with four possible parties. Brazilian miner, Vale, US coal miner, Alpha Natural Resources, Singapore sovereign wealth fund GIC and US private equity fund, First Reserve Corp. were all touted as possible partners.
The Prodeco operations include two opencast mines, port facilities and part ownership of a railway in Colombia.

Glencore agreed to sell the mines last year to pay for its share of a $5.9 billion rights issue by Xstrata as it did not have enough cash at the time. Glencore is Xstrata’s largest shareholder with a 35 per cent stake. The two parties struck an option for Glencore to buy back the mines for a price of $2.25 billion plus capital spent on the mines by Xstrata plus earnings from the business during the option period.

Xstrata Puts USD100 a Tonne Tag On Thermal Coal

Reuters has reported that Xstrata Plc has offered Japan's Chubu Electric annual thermal coal contracts starting in April at $100 a tonne, up by 43 percent from the settled price last year, sources said on Wednesday.

"The Xstrata guys are in town at the moment and they have tabled an offer at $100 a tonne," said a source from Chubu with knowledge of the negotiations. Chubu are said to be holding out for $85-90 a tonne.

Last year’s contract prices were between $70 and $72 a tonne and represented a 44 per cent fall on the 2008-09 price. Sources suggest that Chubu will adopt a ‘wait and see’ stance and weigh up demand from other Asian customers such as China or India.

Xstrata was successful in achieving an $85 a tonne price for contracts that began in January.

Xstrata Delays Closure Of New Brunswick Lead-Zinc Mine

Xstrata is expected to defer closure of its lead-zinc mine near Bathurst in northern New Brunswick. The mine was to close this month but Xstrata Zinc now says that it will stay open until 2011.

The mine has an annual capacity of 3.6 million tonnes of ore containing zinc, lead, copper, and silver.

Xstrata In Lockout At Tahmoor Coal Mine

Xstrata Plc is to lock out its workers out and cease operations at its Tahmoor coal mine in New South Wales between 8th and 14th February 8 in response to a series of strikes and union wage demands, the firm announced on Monday.

The mine, which has an annual production of 2 million tonnes of hard coking coal, has been hit by over 320 hours of industrial action and despite meetings to resolve the dispute over a period of 15 months no agreement has been reached. Over 370 staff and contractors work at the mine.

Xstrata says its proposed wage offer would increase workers' base salary by 25 percent over four years and, together with other changes, total salary packages would rise by 37 percent.

Xstrata, Minco To Spend $10million In Irish Zinc JV

Xstrata has joined forces with Irish company Minco to spend €7 million this year on a zinc exploration project in Ireland.
Minco has announced that it has agreed to spend €7 million to extend the existing exploration programme at the companies’ zinc and lead project at Tobermalug, Pallas Green, Co Limerick. The project has already been established as holding over 11 million tonnes of zinc and lead will be aimed at increasing proved reserves in the deposit to 15 million tonnes. The partners spent over €2 million on the project last year in what is one of the biggest onshore exploration programmes undertaken in Ireland in the last 50 years.

“This planned 2010 programme will include about 70,000 tonnes of diamond drilling in about 150 drill holes allocated within and adjacent to the Tobermalug zinc-lead deposit, and on further exploration drilling in the general Caherconlish area within a 3.5km radius of Tobermalug,” the company said in a statement.

The drilling programme is aimed at increasing the tonnage and grade of the existing deposit, to explore for lateral extensions of the deposit and to explore additional ore deposits in the Caherconlish area. In the latter regard zinc and lead deposits have already been identified at nearby Caherconlish South and Srahane west and Minco says that the three deposits could potentially contain more and higher grades of zinc and lead.

Xstrata estimates that only around 30 per cent of the potential resource has been explored.

Minco holds 23.6 per cent of the licence while Xstrata owns 76.4 per cent. The entire deposit covers an 11sq km area spanning northeast Limerick and southwest Tipperary.

Ferrochrome Output Down 30 Per Cent At Xstrata-Merafe JV

Merafe Resources said on Monday that ferrochrome production at the Xstrata-Merafe Chrome joint venture for the year ended December 2009 fell by 30 percent compared to the previous year.

Output was 203,000 metric tonnes in the year ended December 31 2009, compared with 290,000 metric tonnes in 2008.

The company said in a statement to shareholders that the fall was a result of the suspension of up to 80 percent of production capacity in late 2008 and early 2009 in response to the rapid decline in market conditions.

Production has been progressively increased from 20 percent of annual capacity in early January to approximately 85 percent by year end as demand for ferrochrome from the world’s steelmakers improved.

Merafe stated that the strengthening of the Rand against the US Dollar exerted pressure on margins and together with improving demand, enabled ferrochrome producers to achieve a 30 percent increase in the ferrochrome price from $0.79 (R6) per pound in the first quarter of 2009 to $1.03 per pound in the fourth quarter of 2009. It attributed the loss to low ferrochrome prices and a strong rand.

Xstrata Coal Production Up 11 Per Cent In 2009

Mining group Xstrata Plc has reported an 11 percent rise in its annual production of coal, its most profitable product. Total coal production was 95.2 million tonnes, up from 85.5 million tonnes in 2008 following the takeover of Prodeco in Colombia. The average price of Australian thermal coal, which accounts for the bulk of production, fell to $80.30 per tonne from $95.60 in 2008, a statement from the company said.


However, mined copper production fell by 5 percent in 2009 with output at 906,898 tonnes. Zinc production rose 20 percent to 1.03 million tonnes.

According to Morgan Stanley coal is expected to account for 40 percent of core earnings this year with copper making up 36 percent and zinc 10 percent,

Bloomberg reports that Xstrata Plc, the world’s largest exporter of power-station coal, said its coal unit has asked suppliers to operations in Queensland, Australia, to cut prices by 20 percent if possible.

The majority of those contacted are long-term suppliers whose contracts will remain in place, Xstrata Coal spokesman James Rickards wrote in an e-mailed response to questions. The company aims to curb costs, he said.

The Brisbane-based Courier Mail reported earlier that Xstrata took the measure because coking coal revenue had lagged behind higher prices for materials such as explosives and fuel. It cited an unidentified Xstrata spokesman.

“This request relates only to Xstrata Coal Queensland,” Claire Divver, a spokeswoman for Xstrata in London, said in an e-mailed response to queries from Bloomberg.

Source: Bloomberg

Xstrata Coal Customers "Against Moving To Quaterly Contracts"

XSTRATA COAL says its coking coal customers are "uniformly" against moving to quarterly contract prices, setting the scene for a stoush between coal buyers and sellers over moves to abandon the one-year contract system.

BHP Billiton wants to ditch contracts, but Mark Eames, the head of Xstrata's Australian coal business, told investors the steel mills that buy coking coal were ''fundamentally opposed'' to the move.

A large proportion of coking coal is now sold on one-year contracts. Prices are set early in the year after lengthy negotiations.

But in recent months, miners including BHP, Anglo Coal and Macarthur Coal have indicated they plan to move towards pricing based on a changeable index.

Xstrata customers have told the Anglo-Swiss group that abandoning one-year contracts would disrupt the steel mills' ability to supply their customers.

''For them to effectively set a price for their customers without knowing the costs of their inputs exposes them to considerable additional risk,'' Mr Eames said at an investor briefing in London.

''It exposes the steel makers to considerable uncertainty.''

On the other hand, analysts say that miners advocating the changes stand to gain from index pricing, because it will allow prices to rise more quickly, in line with booming demand from China and India.

Xstrata, the world's biggest thermal coal producer, also said it was keeping a close eye on opportunities in the NSW coal industry, which has recently been swept up in a series of takeovers.

''There remains some potential for consolidation,'' said Peter Freyberg, the chief executive of Xstrata Coal. ''We already have a very significant presence, as do a lot of the other major players.''

However, in a possible reference to a $480 million purchase by the mining tycoon Nathan Tinkler, he said recent deals in the sector appeared to have been overpriced.

Mr Eames gave a bullish view on the outlook for coking coal and thermal coal prices - similar to the upbeat forecasts from other coal companies - as the world economy gathers pace.

Thanks to surging demand from China and dwindling global supply, he said this year's prices would be the second highest on record.

''We are still awaiting recovery in some of our key markets … When these come back in, it bodes very well for the future,'' he said.

In a sign of the potential in China, Mr Eames said the country was building the equivalent of all of Britain's power stations every 15 months, and most were coal-fired plants.

Source: Sydney Morning Herald

Xstrata To Invest R13bn In South Africa

Xstrata Plc, the world’s largest exporter of coal used to generate power, may spend about 13 billion rand ($1.6 billion) over five to six years to expand production of the fossil fuel in South Africa.

The company is studying investing in the Zonnebloem coal project, currently at the conceptual stage, Jeff Gerard, chief operating officer at Xstrata Coal South Africa, said today in an interview at the Goedgevonden mine, east of Johannesburg.

Zonnebloem may cost about 5 billion rand to 6 billion rand to develop and be similar in size to Goedgevonden, which will produce 12 million metric tons when completed, he said.

Source: Bloomberg