Output of metals falls at Xstrata, Glencore

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Reuters London

Commodities trader Glencore and mining house Xstrata, in the final stages of a $36 billion (R320bn) merger, posted a drop in combined output across key metals including copper, hit by power cuts in the Democratic Republic of Congo (DRC) and a push to replace ageing operations.

Coal, however, provided a brighter spot for the future mining and trading giant, with production rising by more than a quarter despite a three-month Colombian strike and engineering hiccups at Xstrata’s coking coal operation in Australia.

Analysts are keenly awaiting Glencore management’s plans for the combined group – specifically spending cuts, asset sales and the acquisitive Glencore team’s appetite for further deals. But neither side gave an indication yesterday, leaving investors to wait until March 5, when both sides publish full earnings for the year.

However, the companies’ combined production numbers released by Glencore yesterday showed a 9 percent drop in total copper production, while zinc, a key metal for the combined group, dipped 1 percent.

Xstrata said mined output of the red metal hit 747 000 tons in 2012. That was in line with market forecasts but down 16 percent on 2011 as the firm replaces ageing operations such as the Ernest Henry open pit in Australia and moves to new projects and expansions.

Xstrata has also struggled with poor performance, bad weather and operational trouble at the Collahuasi copper mine joint venture in Chile. It said annual production there would be restored to about 400 000 tons of copper in 2013.

Meanwhile, Glencore’s production at key DRC operations were hit by power cuts, which have hobbled the industry.

Glencore is still awaiting final regulatory approval from China for the merger.


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