XTA

Shares in the diversified miner have fallen 20% since late July, dragged down by volatile markets and weaker metal prices. This is close to a six-month low and a firm buying opportunity. It recommenced share buybacks last week for the first time since the $18 billion purchase of rival Falconbridge in November 2006.

Stockbroker Numis says the buybacks are both ‘value and earnings accretive’. Xstrata is reducing debt and making gearing levels more comfortable. Although the mining sector faces higher operating costs, decent profits margins are still possible. The fundamentals haven’t changed – China, Russia, the Middle East and Europe are all hungry for commodities to support infrastructure development and energy needs. Xstrata’s wide spread of activities and operations give it stability in tough market conditions. FTSE 100 miners tend not to stay in negative direction for too long, as investors seek opportunities to top up their holdings. (DC)

Action: BUY Xstrata • Target £29.30 • Stop loss £24.80

TIME TARGET: 6 WEEKS