Xstrata to lift new mine spending by 50 percent in 2011
LONDON | Tue Dec 7, 2010 10:54am GMT
(Reuters) - Xstrata (XTA.L) plans to increase spending on new mines by about 50 percent next year to $6.8 billion (£4.3 billion) as the mining group keeps its main focus on organic growth rather than acquisitions.
Total spending on new mining operations is due to reach $23 billion over the next six years, the London-listed group said on Tuesday ahead of an investor presentation.
"The large capex number may concern some investors, however, we see it as easily funded by the group," said analyst Liam Fitzpatrick of Credit Suisse in a note.
Xstrata had cut it net debt to $8.4 billion by the end of June from $13.1 billion at the end of last year.
"We believe Xstrata's more nimble and aggressive approach to growth will deliver greater volumes than peers over the next five years," Fitzpatrick added.
Its shares gained 2.7 percent to 1476 pence by 1003 GMT, outperforming a 2.0 percent increase in the British mining index .FTNMX1770.
Most mining groups slashed spending during the downturn to conserve cash, but they are ramping it up again after a rebound in metals prices.
Rio Tinto (RIO.L) (RIO.AX) said last month it planned to nearly triple capital spending next year as it expanded its lucrative iron ore mines in Australia.
Xstrata in its early years grew quickly through a series of takeovers, but last year switched its focus to expanding existing operations and building new projects.
"Together with opportunistic M&A where we can extract value, our focus on organic growth means that Xstrata's path to value is clear and is in the hands of our management teams," Chief Executive Mick Davis said.
TARGETS ON TRACK
The Anglo-Swiss group said it was on track to meet its targets set last year to boost volumes by 50 percent and cut costs by 20 percent by 2014.
Xstrata -- the world's biggest exporter of thermal coal for power plants -- said it now aimed to add a further 30 percent volume growth by 2016.
Next year's planned spending for new mines of $6.8 billion will be mainly for coal, copper and nickel projects. It compares with $4.6 billion estimated in August for 2010.
Xstrata added one more expansion project on Tuesday to the 20 it is already building, earmarking $1.3 billion for the Ravensworth North coal mine in Australia.
