Xstrata Posts Record Coal Production; Copper Falls (Update3)

Feb. 1 (Bloomberg) -- Xstrata Plc, the largest exporter of coal used by power stations, said output of the fuel rose to a record in 2009 after buying two Colombian mines in March.

The company's production of lead, nickel and zinc in concentrate also reached all-time highs, Zug, Switzerland-based Xstrata said today in a statement.

China, which relies on coal for about 80 percent of its power output, said on Jan. 25 it faces a possible shortage until the end of March because of winter consumption. Demand from Asian electricity producers is growing, while supply is being restricted by rail and port bottlenecks in Australia and South Africa, Citigroup Inc. said in a report the same day.

"Xstrata is a major beneficiary of exceptionally strong conditions in coal markets," Liberum Capital Ltd. in London wrote in a research note today. Liberum said Xstrata will agree to annual price contracts in the first quarter, "which should help offset downside price risk in more volatile base metal markets."

Xstrata rose 28.5 pence, or 2.8 percent, to 1,060 pence at the close in London trading.

The company's output of thermal coal gained 13 percent to 82.6 million metric tons in 2009. Total production, including coking coal, advanced 11 percent to 95.2 million tons.

Xstrata purchased the Prodeco coal assets in Colombia in March from Glencore International AG, its largest shareholder, for $2 billion. Glencore has an option to buy back the assets, which contributed 10.5 million tons of Xstrata's 2009 output. Liberum said it expects Glencore to purchase Prodeco on March 4.

Queensland Coal

Xstrata plans to develop an A$6 billion ($5.3 billion) mining, port and rail facility in Queensland to benefit from coal demand, spokesman James Rickards said today by phone. The Wandoan project, which may initially produce 30 million tons a year, aims to start exporting the fuel by 2014, Rickards said.

Mined copper output at Xstrata, the fourth-largest producer of the metal, fell 5 percent to 906,898 tons on lower shipments from the Mt. Henry, Alumbrera and Antamina mines.

Nickel gained 5 percent to 57,052 tons on higher volumes from Raglan and Xstrata Nickel Australasia mines, according to the statement. Zinc in concentrate, an intermediate product shipped to smelters, rose 20 percent to 1.03 million tons.

Chrome fell 30 percent to 786,000 tons after Xstrata's venture with Merafe Resources Ltd. suspended 17 of 20 furnaces in the first half on weak demand. The venture raised capacity usage to 60 percent in July and 85 percent at the year-end.