Xstrata copper production down, but Q1 financial performance solid

Anglo-Swiss Xstrata Plc. (LON:XTA) reported today mixed production results for its first quarter, with copper production declining 18%, but said operating and financial performance remains strong.

Total mined copper production dropped from 209,935 tonnes last year to 171,121 tonnes in the first three months of 2012. The company said the regression was as expected in a transition year, following the closure of Australia’s Ernest Henry open pit mine in December last year and with Tintaya pit, located in Cusco, southern Peru, entering its final year of production in 2012.

Mined coal saw consolidated production increase by 9% year-on-year to 21.1 million tonnes in the first quarter of last year, when the sector was affected by bad weather.

Xstrata Zinc Australia COO, Brian Hearne, announced the company is accelerating production from the Lady Loretta underground mine and further extending the life of the Handlebar Hill open cut operation in Queensland, generating a net increase in annual zinc production of 5% (or 25,000 tonnes).

Hearne added expansions of both mines through a total additional investment of nearly $90 million would realize significant value from its Australian zinc business, including an estimated 30 new direct jobs.

Glenxstrata

Xstrata is currently negotiating a $90 billion merger with Glencore International that would create a raw materials giant. The deal is expected to be finalized in the third quarter of 2012.

Xstrata is the world’s biggest exporter of thermal coal and the fourth-largest copper producer, accounting for 33% and 42% respectively of 2011 operating profits before interest, taxes, depreciation and amortization.

In the decade under CEO Mick Davis, Xstrata has gone from having fewer than 2,500 employees to a workforce exceeding 70,000 in 20 countries.

A combined Xstrata and Glencore would have revenues in excess of $100 billion with as much as 80% of sales earned from mining.

Even before building up Xstrata through a series of billion dollar transactions, Davis was a formidable dealmaker who with fellow South African Brian Gilbertson created Billiton. Davis left for Xstrata after Billiton was sold to BHP in 2001.

Glencore CEO Ivan Glasenberg and Davis both cut their teeth in their native South Africa’s coal industry in the 1980s.

Glasenberg is no slouch when it comes to buying up companies either. At the end of March Glencore snapped up Canada’s grain handler and agricultural retailer Viterra for $6 billion.

(Photo:  A truck hauls ore at Lomas Bayas open pit mine Chile. Reproduced by kind permission of Xstrata)