JOHANNESBURG (miningweekly.com) - Diversified mining major Xstrata on Tuesday reported a big increase in coking coal production in Australia, but its thermal coal output fell, with production from South African mines falling by 16% in the first six months of the year.

Xstrata's consolidated coal production for the six months to June 30, 2010, at 38,6-million tons, was at a similar level to the corresponding period of 2009.

The lower production in South Africa, where it operates coal mines in Mpumalanga province, was mainly owing to the shutdown of its Southstock operation after the mine had reached the end of its reserves.

Further slumps in production were caused by industrial action at the company's Tavistock operation and by workers of State-owned logistics provider Transnet.

In addition, unusually high rainfall reduced volumes during the ramp up phase of the company's new Goedgevonden mine and at Atcom East.

Atcom East was transferred into Xstrata's operations in December 2009, following the restructuring of the Douglas Tavistock joint venture.

The world's biggest exporter of coal used in power plants said that it would continue the ramp-up of its recently completed Goedgevonden greenfield opencut operation to full capacity of 12-million run of mine tons a year.

The company produced 30,9-million tons of thermal coal in the reporting period, which was lower than the 34-million tons produced in the first half of 2009.

Australian thermal coal production, including semi-soft, was in line with the first half of 2009. Semi-soft production in New South Wales increased by 50% to 3,9-million tons to take advantage of higher prices.

However, this was offset by a loss of around two-million tons of thermal coal, owing to flooding at the company's joint venture Rolleston operation during the cyclone season.

At the company's coal operations in South America, thermal production from its Cerrejón joint venture in Colombia was at a similar level to the corresponding period in 2009. It produced 5,3-million tons of coal in the six months, compared with 5,4-million tons a year earlier.

The Prodeco operations in Colombia produced a total of 3,3-million tons in the period from January 1 to April 13, which was not included in the company's latest production results, owing to the option agreement signed with European commodity trader Glencore in May.

Xstrata was entitled to earnings from Prodeco up to mid-April 2010.

The miner's Australian coking coal production increased by 73% or 1,6-million tons, to 3,8-million tons, owing to the inclusion of longwall operations at Oaky number one, which had not been fully operational in the previous period and increased productivity at Oaky North in Central Queensland.

ALLOYS

Xstata's alloy business reported a 2% increase in platinum group metals volumes than the same period in 2009, mainly as a result of increased production at its 50:50 Mototolo joint venture with Anglo Platinum in South Africa's Mpumalanga province.

During the six-months ended June 30, 2010, Xstrata produced 63 937 oz of platinum, 32 882 oz of palladium and 10 759 oz of rhodium.

The miner reported that the development of Eland's western decline shaft was progressing according to plan and that the eastern decline development had started in the second quarter of the year.

Xstrata said that production from its underground operations was projected to double current production levels to reach some 250 000 t/m by 2013, with steady state capacity of 500 000 t/m being achieved during 2015.

Meanwhile, ferrochrome production also rebounded strongly to 608 000 t in the first half of 2010. Xstrata, which produces ferrochrome in a JV with JSE-listed Merafe, said output rose by 149% in response to rising demand.

The Xstrata-Merafe venture announced that ferrochrome output rose to 157 000 t for the six months ended June 30, 2010, compared with the 63 000 t produced in the six months ended June 2009.

After having slashed its ferrochrome capacity to only 20% late in 2008, the chrome venture had slowly increased its output throughout 2009 as demand and pricing strengthened.

Ferrochrome producers achieved a 35% increase in the benchmark price from $1,01/lb in the first quarter of the year to $1,36/lb in the second quarter, set against the continued strengthening of the rand against the dollar and electricity price increases in South Africa.

The third quarter benchmark price had been settled at a slightly reduced level of $1,30/lb.

Compared to the first six months of 2009, ferrovanadium production volumes increased by 66% to 2 186 000 kg in response to the improving demand.

BASE METALS

The ongoing transformation of the Xstrata Zinc business, through expansions and productivity improvements at the Australian operations contributed to a 6% increase in production of zinc in concentrate. Zinc metal and lead metal volumes increased with all smelters operating at full capacity.

The group reported total zinc production of 521 563 t for the first six-months of 2010, up from 493 808 t for the comparable period last year.

Total refined nickel increased by 8% to 45 458 t as the group's integrated nickel operations increased capacity through processing all of the Xstrata Nickel Australasia's feed.

In April, the company's Nickel Rim South mine in Canada started full mine operation and is on track to reach full capacity of 18 000 t of nickel in concentrate a year in 2011.

The miner reported a 3% slump in total mined copper production from 447 599 t in 2009 to 434 147 t for the comparable first half of the year in 2010.

Lower production was mainly due to reduced volumes in Australia at Mount Isa and Ernest Henry as a result of lower grades and at Antamina, where higher mill throughput and recoveries only partially compensated for lower copper ore grades.

However, Xstrata's share of its Collahuasi copper production in Chille increased by 8% to 117 363 t, due to improved mill throughput, ore grades and metallurgical recoveries.

The company also experienced higher copper grades at its Kidd Mine in Canada.

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