Xstrata trims spending by $1-billion; Town Seeks $100Million for 380 residents

Xstrata Plc, the Anglo-Swiss miner whose global operations include extensive interests in Canada, says it is deferring $1-billion (U.S.) in 2012 spending to deal with shrinking profits in a slowing economy.

The company, target of a $28-billion takeover bid by Glencore International Plc, reported Tuesday that its first-half net income fell to $1.94-billion from $2.92 billion in the year-earlier period.

Revenue in the six months ended June 30 fell 7 per cent to $15.55-billion from $16.78-billion as prices for nickel, copper and coal all fell.

“Our financial performance in the first half of the year reflected a cyclical downturn in commodity prices and the transition to our next generation of lower-cost mines,” Xstrata chief executive Mick Davis said in a statement accompanying the results.

“Against the background of lower prices and ongoing cost inflation, our operational performance remained robust,” he added. “Second-quarter volumes rose across the group, providing us with good momentum to achieve our expectations of higher volumes in the second half.”

A Queensland hamlet is asking Xstrata to pay it at least $100 million if the global mining giant decides to proceed with a multi-billion coal mine in the area.

Wandoan, home to just 380 people, is one of a growing number of small towns that risk being overwhelmed by Australia’s fast-paced mining boom. The hamlet is a five-hour drive from Brisbane and in the middle of farming and cattle-grazing country.

Mining firms often pay communities a token amount before commencing on projects, but industry experts said the amount Wandoan was requesting was unusual.

“Someone has to pay and, I’m sorry, it shouldn’t be my community and residents,” said Ray Brown, the mayor of the Western Downs Regional Council. “This is a starting point.”

Mr Brown said the $100 million would go towards paying for some of the infrastructure needed to host a mine, including an airport, roads and water and sewerage networks.

The fee, however, does not include the cost of housing for the 1300 workers the mine will employ.

“I know it does happen on a much smaller scale … what seems to be possibly unique about this is the size of the funding,” Gavin Wendt, an analyst with MineLife in Sydney said of the amount the Wandoan was asking for. “It does make a lot of sense from their perspective.”

Mr Brown said the council had been negotiating with Xstrata for about two years to reach an agreement on costs.

Asked when it planned to sign the agreement, Xstrata did not immediately respond and a spokesman said that once signed, the agreement would still depend on whether the company would go ahead with the mine project.

Small communities across Australia have struggled to house and provide services for the sudden influx of thousands of workers from the mining boom.

The flood of highly paid, mostly male mining workers has also meant that some towns are hit with price inflation and outbreaks of sexually transmitted diseases.

The Wandoan mine project, which would produce 22 million tonnes of coal per year, has yet to receive final approval from Xstrata, but the company expects to receive a mining lease for the development in the fourth quarter of this year.

Reuters

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Posted by WoodlawnPost on Aug 10 2012. Filed under Coal. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.