Xstrata calms fears over draft Minerals Bill in South Africa

Xstrata, the mining group which floated on the London stock market in March, moved to soothe investor concerns over the future of the mining industry in South Africa yesterday as it reported its maiden results as a UK-listed company.

The Swiss-based company is facing a serious problem with the draft Minerals Bill in South Africa.

A leak of the draft bill last week caused a sharp fall in Xstrata shares as well as those of rivals such as Anglo-American and BHP Billiton. The proposals include putting 30 per cent of existing operations in the hands of black-owned mining businesses before being given a licence to expand. Others included giving control of all new mining projects to black businesses within 10 years.

Mick Davis, Xstrata's chief executive, said: "I remain confident that the industry is going to be able to address these issues with the government. There clearly are areas where we have concerns and they will have to be addressed."

Trevor Reid, the company's finance director, added: "Being South Africa, the process of debate is always very public and very vigorous." Mr Reid said he thought it unlikely that Xstrata would be forced to "hand over" various assets to black groups. "We don't believe that would happen."

Xstrata admitted that its weak share price would limit its ability to pursue the three major deals it referred to at the time of the flotation. The company's shares fell another 4p yesterday to 561p compared with a post-float high of 1,045p in April.

Xstrata reported profits of $112.9m (£72.1m) on a pro-forma basis for the six months to the end of June, up 20 per cent on a year ago.

Prices for Xstrata's main commodities, ferroalloys, zinc and thermal coal, were weaker in the first half, with zinc hit hard by the economic slowdown and prices at 30-year lows.

The company said the tough conditions had continued into the second half and were likely to remain for some time.