Xstrata Copper (XTA.L: Quote), one of the world's top copper miners, is to focus on cost cutting, debt reduction and cash generation as it weathers the global economic crisis, CEO Charlie Sartain said on Wednesday.
Our principal priority is in cash generation and debt reduction and management, Sartain said in an interview at his offices in the capital Santiago during the CRU/CESCO copper conference in Chile.
He said the company's debt gearing was currently just under 30 percent.
The company completed a $5.9 billion rights issue last month to pay down debt.
Sartain said the company had no immediate plans for acquisitions, but that that could change a year or so down the road.
The short term, in terms of priorities for this year, is managing our way through the crisis, but the mid-term objectives and the strategy that we have in copper continues around profitable growth, like value-enhancing growth, he said.
While equity valuations of potential targets have fallen with the crisis, company valuations have not fully followed suit, he added, predicting riper pickings further out.
In the mid-term there are opportunities for us to grow through the ways we have historically done, that is through acquisitions, through project development, he said.
In the interim, Sartain pointed at opportunities to expand Xstrata's existing mines and deposits in northern Chile and southern Peru, where he said feasibility studies were being conducted on a potential merger of the Tintaya mine and neighboring Antapaccay deposit.
He said investment decisions for brownfield expansions would be subject to market conditions, adding that it was too early, and there was not enough data, to indicate when the global economy will start to recover.
In its efforts to weather the global financial crisis, Xstrata cut its copper cash costs to 90 cents a pound since January, from over $1/lb previously. At its highest-cost mines, it cut costs to $1.20 per pound from as much as $1.80 a pound.
Copper for three-month delivery traded at around $1.86 per pound on the London Metal Exchange on Wednesday, down from more than $4 a pound in July last year.
Sartain said markets in Europe, Japan and the United States remained weak, although Asian demand, and that of China in particular, were compensating for a lot of the shortfall and limiting inventory build-up.
He said the company was redirecting some of its shipments from depressed markets to Asia.
As U.S. demand has really fallen away we've had to redirect some of that (copper), and where there has been a pick-up in China, we've been able to divert some of our product into there, Sartain said.
Sartain projected Xstrata Copper output of 950,0000 tonnes of copper in 2009.
(Reporting By Pav Jordan; Editing by Simon Gardner and Christian Wiessner)
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