Xstrata to increase mine spend

Xstrata plans to increase spending on new mines by about 50 per cent next year to $6.8bn as the mining group keeps its main focus on organic growth rather than acquisitions.

Total spending on new mining operations is due to reach $23bn over the next six years, the London-listed group said yesterday.

"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.

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Xstrata had cut it net debt to $8.4bn by the end of June from $13.1bn 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," Mr Fitzpatrick added.

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 said last month it planned to nearly triple capital spending next year as it expanded its lucrative iron ore mines in Australia.

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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.

The Anglo-Swiss group said it was on track to meet its targets set last year to boost volumes by 50 per cent and cut costs by 20 per cent by 2014. Xstrata – the world's biggest exporter of thermal coal for power plants – said it now aimed to add a further 30 per cent volume growth by 2016.

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