MAC: Mines and Communities

Expanding Xstrata

Published by MAC on 2007-03-30

Expanding Xstrata

30th March 2007

Already the world's fifth biggest mining company, UK-Swiss Xstrata is advancing its hold on nickel with a marketing deal sealed with the world's largest private trader, Glencore (which already owns 40% of Xstrata along with investment bank, Credit Suisse; and the pending acquistion of LionOre.

It's also pounding ahead with expansions in both Argentina and Peru.

Glencore signs deal to market Xstrata's nickel Trader has bigger customer base


29th March 2007

Xstrata Nickel is shuttering its own sales and marketing operations after striking a deal with Glencore International AG, the powerful metals trader that owns more than a third of the nickel miner's parent company Xstrata PLC.

Glencore will pay Xstrata's Toronto-based subsidiary a one-time fee of approximately $500-million (U.S.) for the pipeline of inventory.

Under the deal reached Tuesday evening, Glencore will offer Xstrata Nickel a guaranteed floor price for the 110,000 tonnes of nickel the company produces each year as well as "some upside participation above that level," Xstrata Nickel spokesman Ian Hamilton said.

Fifteen employees at offices in Tokyo, Brussels and Pittsburgh will lose their jobs. The Belgian office will stay open and the others will be closed.

Xstrata jumped into the nickel business last summer, becoming the world's fourth-largest producer with the $18-billion (Canadian) hostile takeover of Canada's Falconbridge Ltd.

It offered a number of guarantees to win approval for the takeover from the Canadian government, including a pledge to headquarter its nickel division in Toronto and not to eliminate any Canadian workers' jobs for three years.

None of the nickel sales and marketing layoffs are in Canada, Mr. Hamilton said.

Glencore, which is based in Zug, Switzerland, has a reputation as an aggressive contract negotiator and made of a profit of $5.3-billion (U.S.) last year.

Xstrata is also headquartered in Zug and Glencore already handles some of its coal and ferroalloys sales.

"It provides access to Glencore's customer base. They've got more than 50 offices, compared to our three. That greatly increases our expansion from a marketing perspective," Mr. Hamilton said.

Under its previous owner, Falconbridge, the sales and marketing division was an essential part of the business, giving it critical insight into the nickel market and securing crucial feed stock for its smelters and refinery, according to the former head of the company.

"It was a very vibrant and integral part of Falconbridge that allowed us to be one of the market leaders. It allowed us to be one of the leaders, not just in sales, but in where we invested and how we ran the company," said former Falconbridge CEO Derek Pannell.

He said the sales and marketing division was able to secure key supply agreements with producers in Africa and Russia, and offered Falconbridge an informed perspective on customers' operations and future plans. In turn, the company was able to decide whether to expand its operations or cut back.

"In my mind, it gave Falconbridge and it gave Canada a much broader view of the world," Mr. Pannell said.

Xstrata launched a friendly $4.6-billion takeover bid for LionOre Mining International Ltd. this week that will provide the miner an additional 30,000 tonnes of nickel a year if it succeeds.

Xstrata plans 2007 Pachón prefeasibility, advances other projects - Argentina, Peru


29th March 2007

A prefeasibility study is on track for completion by year-end at the El Pachón gold-copper project in Argentina's San Juan province, project operator, Xstrata Copper's CEO Charlie Sartain, said Thursday.

A drilling program is due to wrap up "in the coming days," Sartain said during a presentation at the CRU 6th World Copper Conference in Santiago, Chile.

Conceptual studies completed in 2005 estimated capital costs of US$1.2bn to build a 100,000t/d open pit mine at El Pachón with conventional milling and flotation processing, according to earlier reports.

Also in Argentina, Xstrata Copper has embarked on construction of a 2,000t/y molybdenum plant at its 50%-owned Alumbrera copper-gold mine in Catamarca province, Sartain said.

The project is in line for commissioning in July this year and comes on the heels of an expansion completed in November 2006 that doubled throughput to 40Mt/y. Alumbrera churned out 641,158oz of gold and 180,144t of copper in concentrate last year.


The company's focus at its Tintaya copper mine in southern Peru is on expanding ore reserves with a view to extending the mine life, said Sartain.

"The expansion possibility has been given real encouragement by the publication earlier this month of a significant mineral resource for the Antapaccay deposit," he said.

Based on historical exploration work, Xstrata Copper confirmed a 472Mt resource grading 0.74% copper and has launched 40,000m of drilling at Antapaccay, some 9km from the Tintaya facilities.

"Prefeasibility into the development of this resource will be undertaken by the Tintaya development team in conjunction with other initiatives they are working on during the course of this year," said the CEO.

Tintaya produced 78,318t of copper in concentrate, 40,093oz of gold in concentrate and 36,729t of copper cathode in 2006.

In Peru, Xstrata Copper also has a 37.5% stake in the Antamina mine where a concentrator expansion is due for completion in early 2008, as well as the Las Bambas copper district. The company also has assets in Chile. Xstrata Copper is the copper arm of Swiss resources giant Xstrata (LSE: XTA).

By Laura Superneau

Business News Americas


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