Xstrata still in Vale talks

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The world's fifth biggest mining group by market capitalisation, the Anglo-Swiss group said net profit for 2007 rose to $5.54 billion (2.8 billion pounds) from $4.89 billion in 2006.

This was slightly short of expectations of a 15 percent rise in profit to $5.63 billion, according to the average forecast of nine analysts polled by Reuters Estimates. Forecasts ranged between $4.96 billion and $5.99 billion.

Xstrata, with headquarters in Switzerland and listed in London, produced record amounts of coking and thermal coal, ferrochrome, nickel, zinc and platinum in 2007.

Revenue rose 12 percent to $28.54 billion while earnings per share before discontinued operations and exceptional items also rose 12 percent to $5.60.

Xstrata's suitor Vale said on Friday it had reached its limits in takeover talks and added any future deal depended on Xstrata's main shareholder Glencore and its stance over marketing rights.

A possible acquisition could be worth an estimated $90 billion, which would make it one of the world's biggest takeovers.

LOOKING AT OPPORTUNITIES

Xstrata made only a brief mention of the talks in its results statement, saying: "Discussions with Vale are ongoing and may or may not lead to an offer for Xstrata."

The company was still on the lookout for ways to boost value for shareholders, it added. "We continue to assess a range of opportunities to continue Xstrata's success to date in delivering superior value to shareholders."

Vale's Chief Executive Roger Agnelli had confirmed that the main obstacle to a deal was a dispute over marketing rights held by Swiss commodities trader Glencore, which holds a 35 percent stake in Xstrata.

A link-up would diversify Vale from its heavy dependence on iron ore, which generates 40 percent of its cash flow, and boost its presence in copper and nickel.

A takeover would create the world's biggest nickel producer, ahead of Russia's Norilsk Nickel.

Xstrata, the world's largest zinc producer, said it was optimistic about the outlook for metals prices, saying any downturn in the United States would have scant effect on China.

"I remain very confident in the outlook for all of Xstrata's commodities through the medium and long term," Chief Executive Mick Davis said.

Xstrata, which generates three-quarters of its operating profit from nickel and copper, said it had a pipeline of organic growth projects of $30 billion, which was expected to deliver compound annual volume growth of over 12 percent through 2013.

Xstrata shares, which closed on Friday 0.2 percent lower at 39.60 pounds, have gained around a quarter since Vale said on January 21 that it was in talks about possibly buying the firm.

(Reporting by Eric Onstad; editing by Rory Channing and Jason Neely)