"The positive outlook incorporates our expectation that Xstrata Queensland will experience a very profitable year in 2004 under extremely favorable coal and base metal pricing scenarios, and that the integration of Xstrata Queensland into Xstrata will be completed satisfactorily," said Peter Stephens, credit analyst in Standard & Poor's Corporate & Infrastructure Ratings Group.

McCloskey’s Daily Coal News reported that the rating on Xstrata Queensland reflects the company's improved credit quality through the company's robust business and financial profile, coupled with the implicit support provided by its 100% parent, Xstrata.

The credit quality of Xstrata is supported by a strong market position in coal mining and ferroalloys, low-cost assets, average commodity diversification, and a moderate financial profile. The current rally in commodity prices bodes well for Xstrata in 2004.

However, these positive factors were offset by the group's exposure to cyclical mineral and metal price movements, foreign currency exchange fluctuations, emerging markets, a relatively short track record, and a sizeable debt-refinancing requirement over the next couple of years.