UPDATE 2-Xstrata 2009 coal output up, prices to hit profit

* 2009 coal output up 11 pct after Prodeco takeover

* Mined copper output down 5 pct to 906,898 tonnes

* Output in line or slightly higher than forecasts

* Weak prices to hit profits

(Adds analyst comment, shares, labour talks)

By Eric Onstad

LONDON, Feb 1 (BestGrowthStock) – Mining group Xstrata Plc (XTA.L: )
posted higher 2009 output on Monday of its most profitable
product, coal, but weaker prices and currency effects will crimp
profits when it releases financial results next week.

Analysts said the production results — which included a 5
percent drop in mined copper production — were in line or
slightly higher than forecasts.
Coal is expected to account for 40 percent of core earnings
this year while copper is due to make up 36 percent and zinc 10
percent, according to Morgan Stanley.

“Overall we believe these represent solid production numbers
from Xstrata with copper the only weak area of note and more
than offset by strong performances from the nickel, zinc and
coal divisions,” Cazenove said in a note.

Cazenove reiterated its “outperform” rating, saying Xstrata
was the second cheapest of the diversified mining groups.

Xstrata shares rose 0.3 percent to 1,035 pence by 1047 GMT,
in line with the UK mining index (.FTNMX1770: ).

They were the fourth biggest gainer in the blue chip FTSE
100 index (.FTSE: ) last year, rising 209 percent, and
outperformed the UK mining index by 50 percent.

Xstrata, along with peers, is due to post a sharp drop in
2009 annual profits due to weaker commodity prices as the global
economy struggled to emerge from recession last year.

Xstrata is due to issue financial results next Monday.

Underlying attributable profit for 2009 is expected to slide
41 percent to $2.76 billion, according to Thomson Reuters
I/B/E/S. Underlying profit excludes exceptional items and
discontinued operations.

WEAK PRICES, STRONG CURRENCIES

Average coal prices last year fell as much 38 percent,
copper slid 26 percent and zinc 11 percent.

Xstrata also cautioned when it released third quarter
production data last year that strong currencies in some of the
countries where it operates, such as South Africa, was putting
margins under pressure. [ID:nLJ123599]

Xstrata, the world’s biggest exporter of “thermal” coal used
in power plants, said total coal production in 2009 rose to 95.2
million tonnes compared to 85.5 million tonnes in 2008 following
the takeover of Prodeco in Colombia. [ID:nLDE60S1NK]

Mined copper output fell 5 percent to 906,898 tonnes due to
lower output at Ernest Henry in Australia, Alumbrera in
Argentina and Antmina in Peru.

Zinc production rose 20 percent to 1.03 million tonnes,
mainly due to expansions, such as its new Perseverance mine in
Canada

Xstrata, the world’s largest zinc producer, also said on
Monday labour talks at its main Canadian nickel operation
continued past a Sunday strike deadline. [ID:nLDE6100UA]

Last October, Xstrata gave up its pursuit of rival Anglo
American Plc (AAL.L: ), dropping a “merger of equals” proposal
after refusing demands from Anglo shareholders that it pay a
premium. [ID:nLF510655]

Stock Trading
(Reporting by Eric Onstad; Editing by Mike Nesbit)

UPDATE 2-Xstrata 2009 coal output up, prices to hit profit