[miningmx.com] – THERE’S A MOMENT when X2 Resources founder, Mick Davis, can’t contain a smile. Asked whether there was any mischief in the naming of his new company, he replied: “Maybe just a bit of fun.”
The psychology of naming, however, runs deep. It’s no coincidence, for instance, that a year after completing the ‘merger’ of Glencore Xstrata, the combined company should resolve at its recent annual general meeting to rename the company Glencore plc. The merger of equals was long dead, but the name change sealed it.
Said Hanré Rossouw, who is head of commodities for frontier and emerging markets at Investec Asset Management of the decision to call Davis’s new venture ‘X2’: “I think the name says it. It’s the Xstrata model rebooted”.
Yet is the market similarly positioned for another Xstrata?
“I think Mick has got a good track record,” said Rossouw. “He brought change to the industry by introducing a more financial focus. Before that you still had mining engineers running companies.
“The only disadvantage is that because Mick has had success, so it may become more difficult to get the same kind of deals. In the past, he seemed to come out of nowhere”. Rossouw was a CFO of Xstrata Alloys before joining Investec in Cape Town.
Davis is of the view that the continued urbanisation in China, India and eventually Africa will continue to underpin the resources market.
“My position is actually quite simply that on the demand side of this industry, the secular change that took place in the early 2000s remains in place.
“You can’t actually urbanise without industrialisation.That means that demand for commodities will generally outstrip rises in GDP. The question is whether that demand is easily satisfied or not?
“Now for almost 10 years in the first part of this century, demand was not easily satisfied. Even with the blip of 2008, when we had the global financial crisis, you had demand falling away very dramatically as people cut their order books.
“But straight after those pipelines were absorbed, in 2009, you saw demand not easily being satisfied.
“The reasons for that is because there’d been a dearth of investment. When companies finally realised they responded, that response took 10 to 12 years to come through. So it’s really only now in 2013 to 2014 that we’re in a position where we’re seeing either balanced or slightly excess supplies as a result of those projects,” said Davis.
“Now we’re back into this situation of this retrenched capacity build. So again a story is being written about the next shortage because as the demand continues, supply will lag” he said.
The mining industry is also structured differently to 15 or 20 years ago. Finding new mining provinces is more difficult, mining grades are lower and collateral investment – infrastructure for instance – is higher.
For the rest of this article, click here: http://www.miningmx.com/page/special_reports/mining-yearbook/mining-yearbook-2014/1643716-X2-boss-Davis-calls-next-supply-deficit#.U7Mww_ldVzs