Xstrata reports mixed first quarter

Switzerland-headquartered mining giant Xstrata gave a mixed first-quarter production report on Tuesday morning but assured that all of its major projects continue to make good progress and remain on schedule.

The firm saw volumes of thermal coal, mined nickel, ferronickel and lead all increase year-on-year in the first three months of 2012.

However, Xstrata saw an 18% drop in copper output with this year being a "transition period" for that division as new expansion projects ramp up and older projects are run down. Adverse weather conditions, such as record rainfall from the Tintaya mine, restricted mining rates during the quarter. Zinc and alloy production also fell in the first quarter.

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The Lady Loretty zinc-lead-silver miner in Australia is to commence one year earlier than planned in late 2012, and annual ore production is expected to increased from 1m to 1.2m tonnes from 2015.

In a separate announcement, the group said that it accelerating production from the Lady Loretta underground mine and further extending the life of the Handlebar Hill open cut operation in Queensland, Australia, generating a net increase in annual zinc production of 5% (or 25,000 tonnes).

"We are accelerating the delivery of ore from Lady Loretta to Mount Isa by developing the upper ore bodies independently to the deeper underground resources," said Xstrata Zinc Australia's Chief Operating Officer Brian Hearne. "At the same time, we are investing in a further expansion of the Handlebar Hill operation following improvements in mining methods and metallurgical performance since the mine was designed in 2007," he said.

In today's statement, the firm gave no further update on its all-share merger with FTSE 100 peer Glencore to create a major $90bn natural resources giant.

BC