Hot Stocks
Thehead of the acquisitive company also told Reuters he had not discusseda possible merger with its biggest shareholder, commodities traderGlencore GLEN.UL, but said such a tie-up could create value.
Analystssaid the decision to restart dividends after suspending them during thedownturn to save cash was a surprise and helped push the shares higher.
"Thegroup's decision to reinstate the dividend is evidence of the board'sincreasing confidence of the business outlook," Liberium Capital saidin a note, repeating a "buy" rating.
"Wecontinue to think Xstrata looks cheap at 10.6 times (forecast earningsfor 2010) even on a bearish copper price assumption of $2.50/lb in2010."
Xstrata shares gained 1.4percent to 963 pence by 1335 GMT (8:35 a.m. EST), outpacing a 0.2percent increase in the UK mining index .FTNMX1770. They have shed 23percent since hitting a peak on January 8.
The shares were the fourth-biggest gainer in the blue chip FTSE 100 index .FTSE last year, rising 209 percent, and outperformed the UK mining index by 50 percent.
Xstrata,the world's biggest exporter of thermal coal used in power plants, willpay a final dividend of 8 cents per share and planned to resume aprogressive dividend policy, Chief Financial Officer Trevor Reid toldReuters.
"With this large capitalcommitment coming down the pipe we didn't want to be slaves to anoverly high level of dividends, so we started it an appropriate leveland we'll seek to grow it from here," he said.
Xstrata,the first major diversified miner to post earnings this season, saidAsia would be the main driver of metals demand as the pace of recoveryin rich nations was uncertain.
"Robusteconomic growth and demand for commodities from industrializing nationsis likely to continue," Chief Executive Mick Davis said in a statement."The medium-term outlook for commodity demand remains very promising."
Analysts will eye the outlooks of rivals BHP Billiton (BLT.L) (BHP.AX) and Rio Tinto (RIO.L) (RIO.AX) when they report on Wednesday and Thursday respectively.
"Thecompany's outlook is more positive than we have seen from a miningcompany in the last 18 months," said analyst Rebecca O'Dwyer atInvestec Securities.
GLENCORE TIE UP?
Attributableprofit, excluding exceptional items and discontinued operations, fellto $2.77 billion last year from $4.70 billion in 2008, mainly due toweaker metals prices on 16 percent lower revenue of $23.5 billion.
This compared to a consensus profit forecast of $2.76 billion, according to 11 analysts on Thomson Reuters I/B/E/S.
Glencore,which owns 35 percent of Xstrata, said in December when it raised $2.2billion there was potential for a listing and possible combination withanother group.
Davis told Reutershe did not know what group Glencore was referring to since there hadbeen no discussion about a possible merger. "Clearly, when one putstogether a great trading house and a great mining house, you have thepotential for value creation," he said in an interview.
"Butthere is a wealth of other issues that one would have to think about inlooking at that sort of combination. But to start speculating aboutthese type of things when there is nothing on the table doesn't makemuch sense."
Anglo-Swiss Xstrata has not decided whether to buy the rest of platinum producer Lonmin (LMI.L) or sell its 25 percent stake, Davis added.
Xstratasaid it delivered real cost savings of $501 million, representing a 5percent fall in the operating cost base. The group, which last Octoberdropped a merger plan with Anglo American (AAL.L), has said it is shifting its focus to organic growth from major takeovers.
Xstratasaid it had over $8 billion in projects under construction and afurther 10 worth $9 billion due to be approved in 2010. The mineexpansions will cost $14 billion over the next three years, including$4.9 billion in 2010.
(Editing by Julie Crust and David Holmes)
https://www.reuters.com/article/idUSTRE6170Z420100208?feedType=nl&feedName=usbusinessearly