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London - Miner Xstrata posted record thermal coal production in the third quarter and a more than 7% rise in overall coal output, due to the start of operations at its Mangoola mine in Australia and ongoing recovery from a flood-hit start to 2011.
Copper, however, left some investors disappointed with a 4% dip in output in the quarter, after production was dented by the impact of lower grades, repairs and blizzard conditions at its Collahuasi mine in Chile.
Shares in the Anglo-Swiss miner were down 3.9% at 912 pence in early morning trade, underperforming a 3% drop in the broader UK mining sector , battered on Tuesday by fresh worries over Chinese growth.
“It was a pretty solid coal performance and the coal prices are better than feared, but the copper business just continues too be weak,” analyst Tim Dudley at Collins Stewart in London said, adding the decline in grades and resulting impact should not be a surprise. “It was a reasonably solid quarter.”
Declining ores and interrupted supply - problems seen across the copper industry - also hit copper production at rival Rio Tinto , which downgraded guidance last week after missing output forecasts. Copper is the most profitable product for Xstrata, with coal ranking second.
Both commodities are key planks of Xstrata’s growth strategy, with supply issues expected to hold up copper prices, while Chinese and Indian demand for seaborne coal is expected to support thermal coal prices.
Xstrata said it settled annual thermal coal contracts with long-term Japanese customers at $126.5 per tonne, after major settlements for the year from April 1 at $129.85 a tonne. Both are above current prices and analyst expectations, given bearish markets. Coal prices have been stable at more than $100 a tonne for most of the past year, apart from brief spikes.
Xstrata said coking coal production increased by 26%, largely due to the impact of a strike at Tahmoor in New South Wales, Australia, in the third quarter of last year, and production continues to “recover strongly” from the Queensland floods.
At its Cerrejon mine in Colombia, where Xstrata and partners approved a $1.3bn expansion in August, output rose 21% after a rain-battered year-ago quarter. Xstrata has also boosted its coal presence through deals in the quarter, snapping up Canada’s First Coal in August and buying an adjacent deposit in October that provides coking coal exploration leases in the Peace River coalfield.
Ferrochrome hit
Production of ferrochrome - used in stainless steel, an industry dented by the downturn - dropped 18% after weaker market conditions prompted Xstrata to extend maintenance programmes during the high electricity tariff winter in South Africa, halving production capacity.
The third-quarter benchmark price for ferrochrome was settled at $1.20 per pound, 11% lower than the second quarter on weak demand. The fourth-quarter benchmark was $1.20.
Zinc in concentrate production slipped 2% after lower output at the Antamina mine in Peru, while nickel production increased 15% year on year to 26 738 tonnes, boosted by the ramp-up of Falcondo ferronickel operations in the Dominican Republic.
Xstrata, badly hit in the 2008 financial crisis due to high debt, said its operating and financial performance remained “strong”, with the its financial position robust and a $6.8bn debt facility undrawn. It added all major growth projects remain on timetable and within budget.
Copper, however, left some investors disappointed with a 4% dip in output in the quarter, after production was dented by the impact of lower grades, repairs and blizzard conditions at its Collahuasi mine in Chile.
Shares in the Anglo-Swiss miner were down 3.9% at 912 pence in early morning trade, underperforming a 3% drop in the broader UK mining sector , battered on Tuesday by fresh worries over Chinese growth.
“It was a pretty solid coal performance and the coal prices are better than feared, but the copper business just continues too be weak,” analyst Tim Dudley at Collins Stewart in London said, adding the decline in grades and resulting impact should not be a surprise. “It was a reasonably solid quarter.”
Declining ores and interrupted supply - problems seen across the copper industry - also hit copper production at rival Rio Tinto , which downgraded guidance last week after missing output forecasts. Copper is the most profitable product for Xstrata, with coal ranking second.
Both commodities are key planks of Xstrata’s growth strategy, with supply issues expected to hold up copper prices, while Chinese and Indian demand for seaborne coal is expected to support thermal coal prices.
Xstrata said it settled annual thermal coal contracts with long-term Japanese customers at $126.5 per tonne, after major settlements for the year from April 1 at $129.85 a tonne. Both are above current prices and analyst expectations, given bearish markets. Coal prices have been stable at more than $100 a tonne for most of the past year, apart from brief spikes.
Xstrata said coking coal production increased by 26%, largely due to the impact of a strike at Tahmoor in New South Wales, Australia, in the third quarter of last year, and production continues to “recover strongly” from the Queensland floods.
At its Cerrejon mine in Colombia, where Xstrata and partners approved a $1.3bn expansion in August, output rose 21% after a rain-battered year-ago quarter. Xstrata has also boosted its coal presence through deals in the quarter, snapping up Canada’s First Coal in August and buying an adjacent deposit in October that provides coking coal exploration leases in the Peace River coalfield.
Ferrochrome hit
Production of ferrochrome - used in stainless steel, an industry dented by the downturn - dropped 18% after weaker market conditions prompted Xstrata to extend maintenance programmes during the high electricity tariff winter in South Africa, halving production capacity.
The third-quarter benchmark price for ferrochrome was settled at $1.20 per pound, 11% lower than the second quarter on weak demand. The fourth-quarter benchmark was $1.20.
Zinc in concentrate production slipped 2% after lower output at the Antamina mine in Peru, while nickel production increased 15% year on year to 26 738 tonnes, boosted by the ramp-up of Falcondo ferronickel operations in the Dominican Republic.
Xstrata, badly hit in the 2008 financial crisis due to high debt, said its operating and financial performance remained “strong”, with the its financial position robust and a $6.8bn debt facility undrawn. It added all major growth projects remain on timetable and within budget.
