Xstrata to Invest $7 Billion to Boost Copper Output (Update2)

April 7 (Bloomberg) -- Xstrata Plc, the world's fourth- largest copper producer, plans to spend about $7 billion in the next four years to increase production, betting on South American deposits to boost earnings.

Zug, Switzerland-based Xstrata aims to lift annual output by about 60 percent to 1.5 million metric tons by 2014, Xstrata Copper Chief Executive Officer Charlie Sartain said today at a copper conference in Santiago. This year's output should rise slightly from last year's to surpass 920,000 tons, he said.

"Our South American assets are the motor of our profitability and growth potential," Sartain said. Current projects being developed "will provide 550,000 tons above the current production of copper,' he said.

Copper, used in wiring and plumbing, is trading near a 20- month high on evidence that demand is reviving as the global economy recovers. Usage is rising more than the world's biggest producer Codelco expected this year as Chinese consumption remains "vigorous," Chief Executive Officer Jose Pablo Arellano said at the same conference today.

"We see fundamentals remaining strong in copper prices," Sartain said at a press conference after his presentation. "We see a tight market in the next couple of years. Although it's hard to predict prices in the short term, they will remain strong in the medium term."

Sliding Prices

Copper futures for May delivery slid 2.3 cents, or 0.6 percent, to $3.594 a pound at 11:26 a.m. on the Comex in New York. The metal declined 0.4 percent yesterday as the dollar gained 0.4 percent.

In Peru, Xstrata's planned $1.5 billion investment at its Tintaya mine will raise the project's output by about 60 percent and a $1.3 billion expansion at the Antamina mine will boost production capacity 38 percent, Sartain said.

Xstrata's Lomas Bayas mine in northern Chile is scheduled to reach full production by 2013 after a $293 million expansion, he said.

Sartain said that the company expects to exercise an option to develop its Las Bambas mine in Peru. The company was originally awarded an exploration license in 2004.

Xstrata on Feb. 8 posted 2009 earnings, above analysts' estimates, of $7.05 billion before interest, tax, depreciation and amortization.

Freeport-McMoRan Copper & Gold Inc. of the U.S. and Australia's BHP Billiton Ltd. are the world's second- and third- largest copper producers