Billiton shares hit by warning on base metal prices

Shares in Billiton, the mining group recently demerged from South Africa's Gencor, slumped to a new low yesterday as the company warned that the deepening financial crisis in Asia was squeezing base metal prices and could hit earnings.

The warning sent shares in Billiton, floated at 220p in July, down 6p to 153.5p. The company had gone straight into the FTSE 100 in the summer when it was valued at pounds 4.6bn.

Shares in Rio Tinto, the UK's largest listed mining group, also weakened, falling to a 730p low yesterday, before recovering to close 6p higher at 743p.

Announcing the company's first full-year results since the demerger yesterday, Brian Gilbertson, chairman, said the turmoil in Japan and South-east Asia, which are important markets for Billiton's base metals, could prove damaging.

He said although the aluminium market, more than half of the group's earnings, had held up well, the company had seen substantial declines in spot prices for coal, nickel and ferro-alloys. "If this proves of extended duration, our earnings will not escape the impact," said Mr Gilbertson.

However he added: "Our businesses are at the low end of the production cost spectrum and soundly financed. We should thus be able to endure a period of adversity better than most."

Commenting as the company announced a 3 per cent rise in underlying profits for the year to June to $335m, Mr Gilbertson said problems in Asia could lead to acquisition opportunities. Although around 70 per cent of the company's net assets are tied up in South Africa, Billiton is growing fast in emerging markets. The company has extensive exploration programmes in Latin America, Australasia and China.

Mr Gilbertson said the development of copper, nickel and zinc projects would be the priority and that he would like to buy an iron-ore deposit.