Cost cuts pay off for Xstrata
Anglo-Swiss miner Xstrata, in the throes of a $26-billion takeover bid, posted a smaller-than-expected 31% drop in first-half profit as cost cuts helped cushion the impact of weaker prices and reduced copper production.
The miner felt the pain of market turbulence, though, as it took a $514-million hit to write down the value of its almost 25% stake in platinum miner Lonmin - battered along with the rest of the South African-focused sector by rising costs, weak demand and stoppages.
Xstrata agreed earlier this year to be taken over by commodities trader Glencore, its largest shareholder.
The deal hit trouble in June after the miner's second-largest shareholder, Qatar Holdings, demanded a better offer. Xstrata's results had been anticipated for signs of worsening profitability or a deteriorating outlook that could strengthen Glencore's case for keeping the offer as it is - 2.8 new shares for every share.
Xstrata said yesterday it had lowered unit costs in real terms by $105-million, a drop led by its energy-consuming nickel and zinc arms. Over the year, it plans $390-million in cost savings.