“Daily Updated Mining & Exploration News”— Mining group Xstrata Plc said on Tuesday it is well placed with financing and posted solid third-quarter production results, except in mined copper, its most important metal.
Xstrata received a new $5 billion revolving facility to refinance existing debt and for general purposes on Oct. 1.
“As a result, Xstrata has no significant debt refinancing requirements until 2011,” a statement said.
Xstrata shares, which have tumbled 75 percent since touching a peak in May, jumped 13 percent after rumours circulated that Brazil’s Vale was interested in building up a near-30 percent stake. Xstrata declined to comment.
Vale, the world’s biggest iron ore producer, held takeover talks with Xstrata earlier this year, but the two parties called them off when they failed to agree on terms.
A source at Vale said on Tuesday that while Xstrata was still a possible takeover target, it would struggle to have an offer accepted by Xstrata shareholders given its Swiss rival’s sharply lower share price
Xstrata shares later gave up much of their gains to close 3.3 percent firmer at 1,071 pence, compared with a 1 percent increase in the UK mining index.
Analyst Simon Toyne at Numis Securities said the production numbers were in line with or marginally better than his forecasts, except in copper.
“Impacts from Q3 production data on 2008/9 profit forecasts will be negligible and substantially overwhelmed by commodity price assumptions. Currently our forecasts imply Xstrata trading on a 2009 P/E of 1.9x versus the large cap sector average of 3.9x,” he said in a research note.
The stock has underperformed the UK mining index by 30 percent since May 19 and Cazenove said in a research note this was mainly due to worries over refinancing of both Xstrata and its 34 percent shareholder Glencore.
Toyne said he believed the worries over privately held, Swiss-based Glencore have been overdone and Cazenove referred to a recent S&P report on the firm that said it had an adequate liquidity position.
PROFIT DRIVERS
Copper and coal were the two biggest profit drivers for Xstrata in the first half, accounting for 45 percent and 23 percent of earnings before interest, tax, depreciation and amortisation (EBITDA) respectively.
The Anglo-Swiss group, the world’s fifth biggest diversified mining group by market value, said mined copper production fell 8 percent to 234,615 tonnes in the three months to the end of September against the same period last year.
This was mainly due to lower volumes from its Collahuasi mine in Chile, a joint venture with Anglo American Plc. Although mined copper output fell, copper cathode production increased 17 percent to 212,635 tonnes.
Xstrata said consolidated coal production increased 12 percent to 23.5 million tonnes, with thermal coal output higher but coking coal operations in Australia showing a decline.
Output of nickel, which accounted for 12 percent of first-half EBITDA, rose 17 percent to 13,620 tonnes, mainly due to the takeover of Australia’s fifth largest nickel producer Jubilee Mines in January 2008.
Zinc in concentrate jumped 30 percent to 241,881 tonnes following the expansion of Australian operations and launch on July 1 of production at the new Perseverance mine in Canada.
Xstrata, one of the world’s two biggest ferrochrome producers, posted a 4 percent rise in attributable chrome output to 308,000 tonnes.
Consolidated platinum production soared 158 percent to 36,250 ounces due to the ramp up of the Elandsfontein mine and concentrator in South Africa.
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