Bloomberg reported that Xstrata Plc, the Swiss mining company that announced a planned merger with Glencore International Plc reported 12% increase in full year profit after coal and metal prices gained.

Zug based Xstrata said that net income before exceptional items rose to USD 5.79 billion from USD 5.15 billion a year earlier. That beat the USD 5.63 billion average estimate of 12 analysts surveyed by Bloomberg.

Xstrata said that commodity prices began 2011 strongly, responding well to returning confidence in the US a positive outlook for continued Chinese growth and ongoing supply constraints. We achieved significant increases in contract prices for both thermal and coking coal.

The average price of power station coal at Australia’s Newcastle port, a benchmark for Asia rose to USD 120 per tonne from USD 99 per year earlier. Copper averaged USD 8,826 up by 17%. Xstrata, seeking to boost total mining output 50% through 2014 approved 7 projects with a combined investment of USD 2.6 billion last year. The company proposed a dividend of 27 cents bringing the full year dividend to 40 cents. Sales jumped 11% to USD 33.9 billion.

Glencore agreed to buy Xstrata for USD 62 billion in the biggest mining takeover. The commodities trader which already holds 34% of Xstrata offered 2.8 new shares for each Xstrata share in a merger of equals. Mr Mick Davis CEO of Xstrata will be CEO of the new group while Glencore chief Mr Ivan Glasenberg will be deputy CEO and president.

Mr Davis said that “A combination of Glencore and Xstrata represents an outstanding opportunity to create additional value for our shareholders. Increased scale will improve our risk profile, enhance access to capital markets and allow us to participate in industry consolidation.”

(Sourced from Bloomberg.net)