Mining private equity: It’s Davis or bust? – by Frik Els ( – March 25, 2015)

The number of mergers and acquisitions in the mining and metals industry declined to the lowest in a decade last year. Big deals were few and far between and the 11 deals worth more than a billion were miners buying mines. Overall 80% of deals in terms of value were made by industry insiders.

After years of talk, the private equity billions destined for the sector remain mostly on the sidelines (or are seeking greener pastures). The deals that have been pushed through from outsiders (or ex-insiders to be more precise) have been small, highly targeted and often go unnoticed (it’s called private equity for a reason).

All eyes are on Mick Davis and his $5.6 billion X2 fund to open the floodgates (or at least set the ball rolling). But the ex-Billiton CFO has so far failed to pull the trigger despite the likes of Anglo-American, BHP Billiton and Vale putting assets up for sale.

With X2 Davis, who is a cricket fanatic, appears to be taking a five-day test approach (which often ends without a result), rather than going for a quick Twenty20 win.

Still, the caution seems somewhat uncharacteristic. Davis built Xstrata over less than a decade through a series of billion dollar transactions into a company with 70,000 employees in 20 countries. Xstrata’s market value peaked in 2008 at $85 billion.

But even before then Davis was a formidable dealmaker who with fellow South African Brian Gilbertson created Billiton. Davis left for Xstrata after Billiton was sold to BHP in 2001 (Gilberston moved into emeralds of all things). That whole saga has of course now come full circle.

A report from the Mines and Money meetup in Hong Kong by the usually restrained Australian Financial Review repeats the (of unknown provenance) $60 billion number “earmarked” for resources and salivates over the prospect of a “likely very large” deal from Davis which would be followed by “many more as a base would have been set”.

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