Vale, Xstrata profits slip

Earnings for both of the major mining companies operating in Greater Sudbury are slipping due to a dip in commodity prices.

A year ago, nickel prices stood at roughly $10 a pound, and now they're sitting at around $7 a pound.

Vale reported July 25 that it earned $2.662 billion in the second quarter of 2012, down 58.7 per cent from a year earlier. Net income at Vale has hit its lowest level in more than two years, according to a July 25 Reuters article.

The article attributes the earnings drop to slowing growth in China, which in turn is weighing on commodity prices.

Xstrata reported Aug. 7 that its first-half net income fell to $1.94 billion from $2.92 billion in the year-earlier period.

But this drop in income was mitigated by cuts Xstrata made to cushion the company from weaker markets.

“Our businesses cut unit costs in real terms by a net $105 million in the first six months of the year, led by the nickel and zinc business units, which together accounted for $87 million of savings,” Xstrata CEO Mick Davis said in a press release.

“Just as in the previous cyclical downturn of late 2008 and early 2009, we are once again taking pre-emptive action to ensure our business remains competitive and to defend margins.”

Davis said the company has also deferred $1 billion in capital spending it had originally planned for 2012.