Zug, 6 May 2008
Following a year of record production and profitability in 2007, in the period from 1 January 2008 Xstrata’s operating and financial performance continues to be strong and the company’s financial position remains robust.
- First quarter copper, semi-soft coking coal, platinum, ferrochrome, mined zinc and lead production increased compared to the same period last year
- Solid production performances at the majority of operations were partially offset by adverse weather conditions in Queensland, Australia and South Africa which impacted all open pit coal producers and ongoing restrictions to electricity supply to the mining industry in South Africa. Lower grades, severe weather and maintenance shutdowns reduced mined production at our nickel operations
- Electricity supply to our South African operations continues to be restricted to approximately 90% of total demand, impacting ferrochrome and vanadium production and, to a lesser extent, South African thermal coal production. Xstrata continues to work closely with Eskom (South Africa’s power utility) and is examining a number of alternative options to secure a cost effective supply of electricity to our operations over the medium term
- Constraints to industry supply growth and strong demand for commodities led to higher prices for most of Xstrata’s key commodities compared to the first quarter of 2007, including substantial increases in copper, platinum, ferrochrome, thermal and coking coal prices
- The European benchmark ferrochrome price was settled at a record level of $1.92 per pound for the second quarter
- Thermal coal contracts have been settled with long-term customers in Japan for the 2008/09 Japanese contract year at prices up to $125 per tonne, an increase of 125% over the prior year
- Xstrata’s hard coking coal contracts are yet to be settled, however spot prices for premium coking coal continue to trade at record levels. We are confident that contract prices in 2008 will significantly exceed prices achieved in 2007
- Average LME copper prices rose by 31% and platinum prices increased by 59% compared to the first quarter of 2007
- Nickel and zinc prices have softened from elevated levels in the early part of 2007, but prices remain well in excess of historical levels
- Following an approach by Vale in late 2007, Xstrata announced on 25 March that discussions with Vale regarding a potential combination of the two companies had been terminated by mutual agreement
- The Jubilee Mines nickel and Resource Pacific coal acquisitions announced in late 2007 completed on 22 February and 10 March respectively
- Xstrata Alloys’ acquisition of the De Wildt property from Nkwe Platinum Limited was announced on 22 February and is expected to become unconditional during the second quarter of 2008
- In January, Xstrata Copper announced a 28% increase in the total estimated Mineral Resource at the Collahuasi copper mine in Chile. In March, a tonnage increase of 31% in total Mineral Resources was announced at the southern Peru division to over 1.6 billion tonnes of copper mineralisation
- On 3 March, Xstrata Coal announced the restructuring of its Douglas Tavistock Joint Venture (DTJV) with BHP Billiton Energy Coal South Africa (BECSA), resulting in Xstrata acquiring and managing the mining of reserves approximately equivalent to its 16% share of Douglas Tavistock, in an area contiguous to the 100% owned Arthur Taylor Colliery Open-Cast Mine (ATCOM) operations
- On 11 March, Xstrata Coal announced it had received the necessary approvals to commence mining operations at the 4.5 million tonnes per year Glendell open cut operation.
- Half-yearly results for the six-month period to 30 June 2008 will be announced on 6 August 2008. The outlook for Xstrata’s financial and operating performance in 2008 remains very positive.