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Xstrata Reviewing Australia Coal Project Returns as Prices Fall

Nov. 20 (Bloomberg) -- Xstrata Plc, the world’s largest thermal-coal exporter, said it’s reassessing the viability of its coal projects in Australia because of declining prices.

“We’re reviewing all those projects,” Mick Buffier, group executive for corporate affairs and sustainable development at unit Xstrata Coal, said in an interview, while attending a conference in Sydney. “It’s part of a normal business. So much depends on the market, price level and individual projects that have different cost structures.”

Thermal coal prices, which fell to a near three-and-a-half year low this month, have forced job cuts and project deferrals in Australia as the industry battles lower prices and rising costs. BHP Billiton Ltd. and Xstrata cut almost 900 jobs at coal operations in September.

Xstrata, whose shareholders are expected to back this year’s biggest takeover later today, owns coal, copper, zinc and lead operations, as well as a suite of development projects in Australia. This includes the A$6 billion ($6.2 billion) Wandoan thermal coal project in Queensland, where the Zug, Switzerland-based company is awaiting a state government decision on granting a mining lease.

“It’s a matter of getting the right return on capital,” Buffier said. “As prices have come down, projects that would have been viable at very high levels tend to be put back. As prices move up, we’d look again.”

To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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