Xstrata reinstates dividend as China supports metal prices

The mining giant Xstrata reinstated its dividend yesterday, adding that stimulus packages in developing economies were underpinning confidence in commodity markets.

The world's biggest exporter of thermal coal reported a 41 per cent fall in full-year profits, in line with last year's weaker metal prices. The figures beat a number of analysts' expectations, while the markets were buoyed by the 8 cents a share final dividend.

Chinese demand for commodities in particular has led to increased prices in recent months. Accordingly, the group's shares have put on more than 120 per cent in the last year.

Its finance director, Trevor Reid, said that while markets were still nervous, medium-term demand was still strong: "Stimulus packages, especially in China, have reinforced demand, but with the urbanisation process taking place, the medium-term outlook is stronger."

Xstrata has grown over the past seven years thanks largely to acquisitions. The group failed in a bid to merge with Anglo American last year, 12 months on from a failed tilt at the platinum producer Lonmin.

Mr Reid called the failed merger with Anglo American an "opportunity lost".

The group holds a 25 per cent stake in Lonmin, with Mr Reid yesterday refusing to rule out another bid for the company. "If you are looking for a platinum company, Lonmin is attractive. Our first objective is to create value, and we can re-evaluate our position."

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