UPDATE: Xstrata Copper Output Drops But Coal Up On Mine Startup

Anglo-Swiss miner Xstrata PLC (XTA.LN) Wednesday reported a near 6% drop in first quarter mined copper output, partly due to adverse weather conditions in Chile, while consolidated coal output rose nearly 3% due to the startup of new operations in Australia.

Copper and coal are the main earnings drivers for Xstrata, accounting for 44% and 29%, respectively, of 2010 full year operating earnings before interest, taxes, depreciation and amortization, or Ebitda.

Xstrata's mined copper output dropped to 209,935 metric tons in the first three months of the year ending March 31 compared with 222,971 tons in the same quarter a year before, due to severe weather conditions at the Collahuasi mine in Chile and a geotechnical event at the Alumbrera mine in Argentina.

This compares to a 14% drop in copper output at Rio Tinto PLC (RIO) and Anglo American PLC (AAL.LN), with the latter owning a 44% stake in Collahuasi.

Xstrata's total consolidated coal production meanwhile rose 2.7% to 19.3 million metric tons largely due to the earlier-than-expected ramp up of production at the Mangoola operations in Australia. The consolidated figure excludes production from the Prodeco mine which was sold in March of last year.

The Mangoola mine started operations in February and contributed to a near 9% rise in thermal coal output to 16.1 million tons. The increased volume from Mangoola was offset by severe flooding in the state of Queensland, Australia which impacted Xstrata Coal's open cut operations. In New South Wales, Australia production was also hit by an underground fire at its Blakefield South mine and a significant amount of water at the Ulan longwall operations.

Xstrata's coking coal operations in Australia dropped nearly 23% to 1.7 million tons in the first quarter compared with the same period a year before due to the timing of longwall moves at the Oaky No. 1 mine in Queensland and Tahmoor in New South Wales.

BHP Billiton Ltd (BHP), Rio Tinto PLC and Anglo American PLC also reported lower year-on-year coking coal output due to the above-average rainfall in the Bowen Basin of Queensland, which accounts for about two thirds of the world's sea-borne coking coal trade.

Total zinc in concentrate production fell 6% to 240,749 tons in the first quarter mainly due to lower zinc ore grades at the Antamina mine while total refined nickel production fell 1.8% to 22,637 tons due to lower grades as well.

Attributable saleable production of ferrochrome was among the few bright spots, rising 3.6% on year in the first quarter to 316,000 tons as smelters operated at 91% of total capacity.

Zinc accounted for 13% of operating Ebitda in 2010, while nickel accounted for 9%. Alloys such as ferrochrome accounted for 5% of operating Ebitda in 2010.

Credit Suisse said the results were "weak across the board," with only ferrochrome beating the bank's forecasts out of five commodity products highlighted by the bank. It said that output weakness was in line with other majors where weather conditions impacted volumes.

"The company expects to make up production in the remainder of the year although coal is at risk and depends on outages at Blakefield and Ulan," it added.

At 0827 GMT, Xstrata's shares were down 5 pence or 0.3% at 1480 pence a share while London's FTSE-100 stock index was down 0.5%.

-By Alex MacDonald, Dow Jones Newswires; 44 20 7842 9328; [e-mail]