Xstrata announces higher-than-expected coal production numbers for 2009

But, the group says that weaker prices and currency effects will dampen profits from the division when it announces results next week

LONDON (Reuters)  - 

Mining group Xstrata Plc (XTA.L: Quote) 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 .

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: Quote), dropping a "merger of equals" proposal after refusing demands from Anglo shareholders that it pay a premium. [ID:nLF510655] (Reporting by Eric Onstad; Editing by Mike Nesbit)

© Thomson Reuters 2010 All rights reserved

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