Xstrata set to spend $5bn on new mines

 
Steve Dinneen
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MINER Xstrata said yesterday it would pump over $5bn (£3.1bn) into new mines and keep targeting organic growth as a priority rather than acquisitions, after first-half profits surged on higher metals prices.

Net profit was $2.29bn for the six months to 30 June, compared with $690m a year earlier, when results were impacted by a $219m exceptional charge. Revenue rose 43 per cent to $13.61bn from $9.54bn.

The Anglo-Swiss group said it was cautious about the global economy in the near term, echoing the concerns of mining peers, but was optimistic about medium-term growth in metals demand, particularly from emerging economies such as China and Brazil.

Xstrata, the world’s biggest exporter of coal used in power plants, said it had approved $4.2bn to build the Las Bambas copper mine in Peru and $1.1bn for the Ulan West coal project in Australia.

The company, which built itself up as a formidable competitor to major mining groups through a series of acquisitions, has shifted focus recently and now has 15 major growth projects that will cost $14bn in total.

Chief executive Mick Davis said: “The short-term outlook for macroeconomic conditions remains mixed, with a ‘three-speed’ global economy likely to persist for the foreseeable future. We remain very confident in the buoyant outlook for Xstrata’s commodities in the medium term. The developing economies, led by China, Brazil and India, are set to continue to provide the main driver of demand growth for our products.”

Analysts welcomed the results and the approval of new projects, which came earlier than expected.