xstrata's big plans

Charlie Sartain aims to turn Xstrata into the world's biggest copper miner

Matt Chambers
From:The Australian
September 10, 201112:00AM

Xstrata's Charlie Sartain has his eye on Africa, South America and Asia as expansion markets.

WHEN Xstrata took over Australia's MIM Holdings in 2003, it made the Anglo-Swiss giant the world's ninth-biggest copper miner.

Since then, under Xstrata copper chief Charlie Sartain -- a former Dalrymple Shire councillor who spent the first 17 years of his mining career in northern Queensland -- it has climbed to No 4.

And if Sartain's plans work out, it will be the world's biggest copper miner with a network of global mines all run from Brisbane.

"Brisbane is a logical place (to run a global copper business)," Sartain tells The Weekend Australian.

"You can base these large business units anywhere. We still have a strong copper division in Australia that will continue to play a meaningful part of the future of our operations and Brisbane is also a helpful base as we look at expanding into Southeast Asia."


Sartain has headed what is now Xstrata's most profitable business unit since just after the MIM takeover, when Xstrata chief executive Mick Davis promoted him from head of MIM's Latin American business.

Last year, the copper business made a $US3.82 billion operating profit -- 50 per cent of the mining giant's total operating profit.

Sartain keeps a much lower local public profile than his Sydney-based Xstrata Coal counterpart, Peter Freyberg, who, having most of his operations in Australia, has found himself deep in the middle of mining and carbon tax debates.

But that's not to say Sartain is any warmer towards recent government moves that he says make it harder for him to invest in the region he started mining in, compared with places such as South America.

"Australia, when it was ranked alongside other countries, used to have a very strong reputation for fiscal stability and certainty, and now that has been called into question," Sartain says.

"I think every international company looks at Australia now with a less confident set of eyes compared to other countries, and that, speaking as an Australian, is a difficult issue to come to grips with."

From the mining industry's recent noise against Labor's carbon and mining taxes, combined with royalty hikes over recent years from the mineral-rich states of Queensland, Western Australia and NSW, it is not hard to pinpoint the issues he is referring to.

When Xstrata bought MIM, Australia made up about half its copper production. It now makes up about 20 per cent of Xstrata's 1 million tonnes of annual copper production, but this is expected to drop to between 10 and 15 per cent as the mining giant ramps up production to 1.5 million tonnes a year from 2014 and, after that, potentially beyond 2 million tonnes.

The decline in proportion is not because of any uncertainty in Australia. It is just that the bigger projects are in countries such as Chile, Argentina, The Philippines and Papua New Guinea.

In Australia, copper production is expected to continue to sit at about 200,000 tonnes a year from the Ernest Henry underground mine, some satellite operations and a planned pit at Mt Isa that, if approved, will be dug where the current copper smelter is. Analysts say copper is the metal to be in right now, with forecasts generally supporting an extended high-price environment driven by Chinese demand and miners struggling to bring on new supply.

According to Sartain, Xstrata has the best potential of the big copper miners.

"We regard ourselves as having the leading project development pipeline in the copper industry," he says.

"With the projects we've got being constructed, that will take us up a notch. Beyond that we'll be certainly competing with the top two companies in the next four or five years."

He says Xstrata could become the world's biggest copper miner.

Chile's state-owned Codelco is the world's biggest miner, followed by Freeport McMoRan and then BHP Billiton.

The biggest project Sartain has in construction is the $US4.2bn Las Bambas project in Peru, which is designed to produce 400,000 tonnes a year of copper from 2014.

Xstrata also has three mines in final feasibility study stage: El Pachon in Argentina (400,000 tonnes a year), Tampakan in The Philippines (450,000 tonnes) and Frieda River in PNG (260,000 tonnes).

On top of this, it is studying adding 500,000 tonnes a year of copper production at the big Collahuasi mine in Chile.

Before the global financial crisis, Xstrata had been planning to hit 2 million tonnes of annual production next year but this has now been pushed back to about 2017.

Sartain says Xstrata still has plans to get into Africa, particularly in the Zambian copper belt that runs through the Democratic Republic of Congo.

"Our approach at the moment is to continue to monitor merger and acquisition activity that's going on in Africa and at the same time look at possible entry points at earlier stage projects," he says.

Sartain, 50, was born in Britain and moved to New Zealand as a child, before starting school in Sydney and finishing it in Melbourne.

After doing a degree in mining engineering, he started his career in Mt Isa, where he met his wife.

After nine years there, Sartain spent five years in Ravenswood (where he served three years on the local Dalrymple shire council) and three years in Cloncurry, before heading to South America in 2000 to run MIM's operations.

"The Queensland mining history that I've had has helped, I think, to set the strategy for Xstrata copper globally," he says.

The main area where this has played a part, Sartain says, is the Queensland mining industry's history of working well with communities in the region.

In May, Xstrata said it would close its Mt Isa copper smelting and Townsville refinery because increased costs meant it could no longer compete with big new refineries and smelters in Asia.

Sartain says a series of high-profile lawsuits alleging negligence over lead poisoning in Mt Isa had nothing to do with the smelter closure.

"You've got a community there that understands very well the environmental issues and the way in which the company is managing its environmental responsibilities," he says.

"We are a very large mining, processing and smelting operation that is close to a town of 25,000 people, so with that comes a requirement to make sure . . . we're meeting obligations to the community."
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