Xstrata has faith in metal prices after $2.5bn profit

Global miner Xstrata yesterday reiterated its faith in a strong commodity demand outlook, as metal prices fall on the back of global stock market jitters.

While the Swiss-based miner expects the pace of average metal prices increases to slow, it said the outlook remained positive.

"There is no sign that commodity prices are rapidly returning to long-run averages, and the price environment remains very favourable," Xstrata's chief executive Mick Davis said after the company posted a 14 per cent rise in full-year profit to a record $US1.95 billion ($2.52 billion).

"This positive outlook often appears to need reiteration in the face of the increased volatility that is now such a feature of the equity and commodity markets.

"The rapidly industrialising economies of China and India and the satisfactorily performing economies of the old 'Asian Tigers' and Europe will continue to drive demand growth for metals and energy, despite an underperforming US economy."

Mr Davis has been one of the most aggressive mining bosses in capitalising on the commodity boom starting with the takeover of Brisbane based MIM in 2003.

He ramped up the pace last year, spending $US19.5 billion to acquire Canadian nickel giant Falconbridge, one-third of Colombia's Cerrejon Coal and BHP's copper mine in Peru.

Accounting for these three acquisitions as if they had been part of the company for all of the year, Xstrata's profit last year would have been up 119 per cent at $US4.89 billion, ahead of market forecasts.

Mr Davis signalled that he remained acquisitive, especially at a time when metal prices are dipping. "This (volatile price) environment also creates opportunities for those companies that are well positioned and that have the global intelligence, management momentum and shareholder support than enable them to capitalise from the two major trends that continue to characterise our industry – a robust price environment and on-going consolidation," he said.

Separately, Xstrata has approved a $US37 million expansion of its McArthur River lead and zinc mine in the Northern Territory that will raise production to 430,000 tonnes a year of lead/zinc concentrate, from 320,000 a year currently.

McArthur River is migrating from an underground mine into an open pit, controversially approved by the government despite objections from environmentalists and traditional owners. The project involves having to divert a 5km stretch of the McArthur River.

Xstrata also said it would decide whether to sell the aluminium assets it inherited from Falconbridge in the first half of this year. Xstrata is 36 per cent owned by Swiss commodity trading giant Glencore.