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.”
Meanwhile, Mr. Davis said that as with the previous cyclical downturn of late 2008 and early 2009, the company was taking pre-emptive action.
“Identified savings will not only offset in full our expectations of non-inflation increased unit costs of around $580 million for the full year … (but also) reduce our operating cost base and improve our competitive position,” he said.
Meanwhile, as a result of a review of the company’s project pipeline, “we have re-sequenced capital spending and deferred $1-billion of expenditure originally planned for 2012,” Mr. Davis said, without specifying which projects would be put off.
“Our 2013 budgeted spending will increase by $400-million, with $600-million deferred beyond that, without affecting the commissioning schedule of any of our approved projects.”
Xstrata agreed earlier this year to be taken over by commodities trader Glencore, its largest shareholder. However, the company’s second-largest shareholder, Qatar Holdings, has said it wants a better offer.
The company’s properties include major nickel mining and refining businesses in Canada, where subsidiary Xstrata Nickel owns the former Falconbridge nickel company in Sudbury, Ont.