Xstrata Plcs copper production increased in 2013, but at
least two sell recommendations were still issued following the
release of the companys overall production results Feb.
Xstratas own-sourced copper production increased 25.8
percent to nearly 1.5 million tonnes in 2013, driven by strong
growth at its African operations, Collahuasi Mine in Chile,
Antapaccay Mine in Peru and Mount Margaret (Ernest Henry) Mine
Analysts at New
York-based Citigroup Inc. issued a buy recommendation for the
stock, saying the results were broadly in line with their
forecasts, while New York-based Investec Asset Management Ltd.
put the company under review with a sell rating.
London-based Liberum Capital Ltd. also issued a sell rating,
with a target price of £2.50
($4.10), significantly below Citigroups target
of £3.70 ($6.09).
Explaining their sell
recommendation, the Liberum analysts said they believe Glencore
Xstrata will "always operate a stretched balance sheet,"
although they expect some deleveraging within its industrial
assets. "As such, we do not believe Glencore can offer superior
additional shareholder returns vs. the other majors."
London-based Numis Securities Ltd. focused on the increases in
copper production at the companys Katanga and Mutanda
mines in the Democratic Republic of Congo, which both reached a
capacity of 200,000 tonnes per year at year-end.
However, the Citigroup
analysts noted risks at the company, including highly cyclical
patterns driven by coal, zinc and copper.
desire to grow via acquisition also brings acquisition risk and
project delivery risk. If the impact on the company from any of
these factors proves to be more negative than we anticipate,
the stock is likely to have difficulty achieving our target
price," they said.
noted a fall in zinc output as the companys Brunswick and
Perseverance operations in Canada reached the end of their
useful mine life. They also pointed to a slight drop in nickel
output, and said they believe the company might be preparing
for the sale of its Las Bambas copper project in Peru to
A version of this
article was first published in AMM sister publication Metal