Xstrata May Seek Copper Acquisitions After 'Collapse' (Bloomberg) Updated: 2009-04-02 11:00 Counter:1190
Xstrata Plc, the world's fourth- largest copper miner, said it may buy other producers after a "collapse" in equities slashed the cost of potential targets.
A lack of financing for small- and mid-sized companies is creating opportunities for Xstrata that were previously "closed off" when equities were soaring, Xstrata Copper Chief Executive Officer Charlie Sartain said yesterday in an interview.
Acquisitions may help Xstrata double copper output and take advantage of stronger demand once the financial crisis ends. The Zug, Switzerland-based company raised 4.1 billion pounds ($5.9 billion) in a share sale last month and may use those funds to help finance purchases in copper or other commodities, he said.
"We'd certainly be looking at acquisitions as part of growth," he said. "We're looking at shifting our focus."Xstrata advanced 43.75 pence, or 9.4 percent, to 510.5 pence in London trading, taking this year's gain to 41 percent. The Bloomberg Europe Metals & Mining Index, which tracks 13 companies in the region, rose 1.8 percent today.
Xstrata's copper production will be little changed this year at about 950,000 tons, while the company wants to increase output to about 2 million tons. Unlike larger competitors such as BHP Billiton Ltd. and Freeport-McMoRan Copper & Gold Inc., Xstrata hasn't cut output of the metal this year after a 57 percent drop in copper prices from a May record.
The "long-term" outlook for copper hasn't fallen as much as the share prices of some companies, making assets "more attractive," Sartain said in Santiago.
U.S. Demand
There are "small- to mid-sized companies that will be substantially constrained in their capacity to grow," he said.
U.S. demand for copper may have hit bottom amid the global economic crisis, Jose Pablo Arellano, chief executive officer of Codelco, the world's biggest copper-mining company, also said yesterday in Santiago. There are signs that demand may stop falling in the U.S. as government spending helps to boost use of the metal. China, the world's largest consumer, is showing a "dynamism" in its demand for copper, he said.
Copper gained 31 percent in the first quarter, the second- best performer after gasoline among 19 raw materials tracked by the RJ/CRB commodity index. The metal, used in copper and wiring, has proved to be "resilient" compared with other metals during the global economic crisis, Sartain said.
Xstrata's output slid 3 percent to 952,426 tons of copper in 2008 from the year earlier, according to its Web site.
Copper futures for delivery in May rose 0.45 cents, or 0.2 percent, to $1.8490 a pound on the Comex division of the New York Mercantile Exchange.
While there has been a "significant" drop in copper supplies, there will be a surplus of the metal this year based on current estimates, Sartain said. Still, a surplus may be erased by further production cuts or supply disruptions that have been repeated in recent years, he said.
Recent price gains won't be enough to encourage companies to resume production that was cut as prices slumped, he said.
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