The slump reflected the impact of previously depressed commodity prices and a weak US dollar.

 

The assets of the former MIM performed poorly, particularly the coking coal business in Queensland, where earnings before interest and tax fell US$108 million, or 81% year on year.

 

However, the group said steps taken by the Xstrata Coal management team since it took over the business in July have returned cutting speeds at the operation to prior levels, with safety and operational performance expected to be substantially better in 2004.

 

Measures taken include modifying equipment and mining sequences, and reducing methane levels via underground in-seam gas drainage, with implementation underway to address long-term stability through surface in-seam gas drainage.

 

In new project news, Xstrata announced this week the approval for the eight million tonne per annum Rolleston thermal coal mine, a former MIM-asset, for a capital cost of AUS$291 million.

 

Looking to the future, chief executive Mick Davis said, "The resurgence in the prices of all our commodities towards the end of 2003 has created a huge amount of interest and speculation in the outlook for the mining sector in 2004.

 

"While we see little evidence that the demand side of the equation will change for the worse – in fact there are encouraging signs that it is continuing to increase on the back of returning growth in the western economies and continuing strength of the Chinese economy."

 

In coking coal a shortage of physical supply and the absence of any new production has created an exceptionally tight market, so Xstrata expects current contract negotiations for 2004 to settle significantly above last year's levels.