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Last Updated: Wednesday, 2 August 2006, 09:44 GMT 10:44 UK
Record metal prices boost Xstrata
Xstrata miner
Xstrata says Falconbridge would be a "natural partner"
Recent record prices for copper and zinc helped mining company Xstrata post a 42% rise in first-half profits.

Net profit rose to $1.1bn (600m) in the six months to 30 June, compared to the same period in 2005.

Booming demand has seen average prices for copper and zinc nearly double during the first half of 2006, from a year earlier.

Xstrata plans to boost output with the $21bn takeover of rival Falconbridge, a big producer of copper and nickel.

It hopes to complete its offer for the Canadian firm by 14 August.

Rising costs

Announcing its results, Xstrata warned that a resurgent mining industry meant rising costs as demand increased for workers, fuel, explosives, tyres, construction materials and transport.

Xstrata chief executive Mick Davis said that this would have an impact on the speed at which companies were able to bring new mining projects into production.

"Project commitments and timetables are likely to be affected negatively, further curbing the capacity of the industry to bring on significant additional supply and supporting elevated commodity prices for an extended period of time," he said.

Swiss-based Xstrata, which is listed on London and Zurich stock exchanges, is also the world's largest exporter of thermal coal, which is used in power stations.

Although prices for thermal coal have fallen back from levels seen in the first half of 2005, Xstrata said they were still much higher than "historical averages".

Xstrata closes in on Falconbridge
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