What Mick [Davis] wants – by David McKay (Miningmx.com – June 30, 2014)


[miningmx.com] – ONE OF THE best quotes about Mick Davis, the founder CEO of Xstrata, comes from former JP Morgan banker Ian Hannam who assisted with a number of transactions for Davis.

He said: “There are four people who claim they brought Billiton to London: [Brian] Gilbertson, myself, Adrian Coates [a well-known banker in London, then at HSBC] and Davis. The answer is – it was Davis. He saw the opportunity and managed to persuade Gilbertson that it would create a platform to build a new company to rival Rio [Tinto]”.

Since the listing of Billiton in 1997, Davis has been the primum mobile of some of the highest profile mining deals in London, including Billiton’s merger with BHP, a string of transactions during the decade or so during which Xstrata was built into the fourth largest diversified miner, Xstrata’s ultimately frustrated ‘merger of equals’ with Anglo American, and finally, the marriage of Xstrata to Glencore in 2013, the largest transaction in the City that year.

The Glencore-Xstrata combination was also described in terms of ‘a merger of equals’ when first unveiled in 2012. The fact that the final arrangement ended with the departure of Davis, and nearly all of his senior management team, suggests that in global mining finance, mergers are illusory, created to save the actors from over-paying for those acted upon.

That’s why it’s so tempting to style Davis’s swift return to the UK’s corporate scene as head of X2 Resources as an act of ‘unfinished business’, although, Davis was off stage so briefly, it’s hard to describe X2 Resources as a return so much as a continuum.

In March, four months after shareholders in Xstrata vetoed retention packages for key management, there were rumours Davis was planning a private equity firm. A month later, he told Glencore CEO, Ivan Glasenberg, that he wouldn’t see out the six-month handover period at Glencore Xstrata that had been previously agreed. By September, Davis had raised a billion dollars in private money. The show was on the road, and in double quick time.

“No doubt some people have the view that X2 is unfinished business for Mick. I doubt it,” said Eugene King, an analyst for Goldman Sachs. Other analysts agree. “I think Mick’s probably a bit too smart for that,” said Des Kilalea, an analyst for RBC Capital Markets.

Both believe X2 Resources is driven by the opportunity Davis recognises in a mining market that is in temporary abeyance. It is eerily similar to 2002, the year Davis founded Xstrata: commodity prices are depressed, just as they were 12 years ago, debt is high especially among the corporates, and share prices are low. Pressure is everywhere.

Thras Moraitis, who at X2 Resources reprises his Xstrata role as head of strategy and corporate affairs, said the decision to form a new company was simply a matter of deciding whether playing golf was a satisfactory alternative to building another mining company. “In the end, there was no option,” said Moraitis.

“Mick certainly has nothing to prove,” he said, scotching tittle-tattle that X2 is Davis’s revenge on Glasenberg who, after agreeing to pay a premium for Xstrata, had Davis eased off the pedestal he was at first forthright in providing at Glencore Xstrata.

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