Xstrata Bumps Up Iron Ore Output, Buys Sphere Minerals

In a move to make itself a major player in iron ore mining, Xstrata has purchased Sphere Minerals for $381 million. Sphere Minerals holds magnetite iron ore deposits in Mauritania. This was first reported in a Reuters report. The acquisition was done to capitalize on the booming demand for iron ore, particularly from emerging markets such as India and China. "This will give Xstrata a footprint in a reasonably established iron ore province, with a lot of development potential and resource upside," said RBC Capital Markets analyst Chris Drew. Peter Freyberg, chief executive of Xstrata's coal division said, "Xstrata's acquisition of Sphere will add a range of organic growth projects in iron ore to our portfolio." Xstrata is positioning itself to compete on a larger scale with the likes of such iron ore heavyweights as Fortescue Metals, Rio Tinto RTP and Vale VALE. While the costs are minimal compared to other iron ore projects around the world, it gives Xstrata access to 2 million tons per year until 2015, when the project is expected to produce 6 million tons. The initial costs are around $220 million and stage two of the project would be $320 million. With Xstrata's financial and technological backing, this could be a boom for the Sphere projects Xstrata's Freyberg said.