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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (45528)	10/20/2009 6:02:07 PM
From: LoneClone	Read Replies (1) \| Respond to of 193768

Xstrata's Q3 coal production rises but copper output and currency strength worry analysts Shares in the diversified miner fell on the news Author: Eric Onstad (Reuters) Posted: Tuesday , 20 Oct 2009 LONDON (Reuters) - mineweb.com Mining group Xstrata Plc (XTA.L) produced more coal in the third quarter thanks to acquisitions, but lower ore grades cut copper output, while investors worried that strong currencies in mining nations would crimp margins. Shares in Xstrata, for which coal and copper are the most profitable products, had fallen 1.9% to 1,007 pence by 0817 GMT, underperforming a 0.4% fall in the mining sector index .FTNMX1770. They have outperformed the index by 50% this year. Analyst Charles Kernot at Evolution Securities, who downgraded the shares to "sell", was wary about buoyant currencies in operating countries such as South Africa. "We believe that the market is failing to take account of the negative effects of operating currency strength which, as Xstrata itself points out, detracts from U.S. dollar commodity price strength," he said. Xstrata said in its production report that the South African rand ZAR= was at 14-month highs. "The strong rand has resulted in margins remaining under pressure," it said. The Anglo-Swiss group said its financial performance was strong in the third quarter. "Xstrata's operating and financial performance continues to be strong, and the company's financial position remains robust," the firm said in a statement. First-half earnings per share slid 77% on weak metals prices, hit by the global economic downturn. COAL OUTPUT UP 9% Xstrata, the world's biggest exporter of "thermal" coal used in power plants, said total coal production for the three months to end September rose 9% to 25.6 million tonnes but mined copper output fell 10% to 212,173 tonnes. Coal was responsible for the bulk of operating profit in the first half as nickel and alloys units posted losses, but analysts said a rebound in copper prices meant that both coal and copper would be strong contributors in the second half. Liberum Capital, which called the production report "solid", said copper was due to account for 45 percent of second half core earnings and thermal coal 35%. Copper prices MCU3 have doubled so far this year on strong demand from China after tumbling late last year, but the third quarter average price was still 24% down from last year. "We were surprised by the 3Q09 weakness on the copper division, usually when they start outperforming, but lower grades in Australia sounds like a deferral for a quarter or so," said analyst Tim Huff at RBS. The average selling prices for coal in the third quarter were largely lower, with prices for Australian thermal coal falling 31% to $73.8 per tonne. Australian thermal coal accounted for 43 percent of Xstrata's total coal output. Xstrata, the world's largest zinc producer, said mined zinc in concentrate production fell 10%. Mined nickel output was largely flat, and ferrochrome production fell 20%. Xstrata made no comment about its view of commodity markets in its production report, but in August when the firm released interim results it warned that hopes of a quick recovery could be premature. Last week, Xstrata gave up its pursuit of rival Anglo American Plc (AAL.L), dropping a "merger of equals" proposal after refusing demands from Anglo shareholders that it pay a premium. (Reporting by Eric Onstad; Editing by Jon Loades-Carter/Will Waterman)