May 17, 2020

Former Xstrata Boss Plans Second Success, His Motivations and Story

Xstrata
Mick Davis
Glencore
Glencore Xstrata
Admin
3 min
Mick Davis
Mick Davis is at it again. The former chief executive of Xstrata is seeking billions in loans in an attempt to acquire BHP Billiton, a global resources...

Mick Davis is at it again. The former chief executive of Xstrata is seeking billions in loans in an attempt to acquire BHP Billiton, a global resources company.

Davis has set up a fund, X2 Resources, and is looking to buy up mines. According to Reuters, Davis has raised $3.75 billion and is planning to raise three times as much in debt. The Digger, as Davis is known due to his mining expertise, was setting up a bid for BHP's thermal coal assets, along with aluminum, manganese, and nickel assets that BHP wants to discard. Davis was chief financial officer at Billiton in the late 1990s.

One of the driving forces behind Davis’ attempt to build another massive mining company is his well-known rivalry with Ivan Glasenberg, the CEO of Glencore Xstrata. Last year, Glencore acquired Xstrata with an all-share takeover for $29 billion. 

Davis had led Xstrata, an Anglo-Swiss multinational mining company, for more than a decade and took the coal producing company from a $500 million market value to a $50 billion behemoth by completing several mergers and acquisitions. After Glencore merged with Xstrata, Davis had agreed to stay at the new company with a three year deal for himself and executives, but that arrangement was refused by shareholders, according to reports.

Davis, 56, and South African born, was then given a $14 million buyout and thought to be retired. But colleagues didn’t believe the Digger would head out to pasture and play cricket. According to reports, he is as motivated as ever especially when Glasenberg was named CEO of Glencore Xstrata after the merger.

Former Xstrata Chief Financial Officer Trevor Reid, who also left after the merger with Glencore, joined Davis to found X2, which is run from London. According to reports, Noble Group, a raw-materials trader, TPG Capital, a private-equity fund, and the Abu Dhabi Investment Council, manager of the oil-rich sheikhdom’s cash, are investors in X2.

Diving back into the mining industry will be a challenge, even for someone with a track record of extreme success. China’s growth has been slowed and that is affecting the commodity prices.

Also, in the past year mining companies have reduced capital spending, temporarily shut down projects, and more than 13,000 jobs were lost in the industry. The major mining companies have cut spending on exploration and investments in new projects.

But some experts believe that this is a ripe time for companies to acquire assets. For instance, Rio Tinto Group is looking to unload their unwanted mines. It could be that X2 is in a good position to grab mining assets offered for sale by several global resources companies.

Davis was a senior manager with accountants Peat Marwick Mitchell & Co. from 1980-1986. He was an executive director of South African state-owned Eskom, one of the world’s largest electricity utilities, before joining Gencor Ltd. in 1994. He served as executive chairman of Ingwe Coal Corp. from 1995, until appointed in 1997 as CFO and executive director of Billiton.

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May 7, 2021

Lithium producers bullish as EV revolution ramps demand

Lithium
Electric Vehicles
Albemarle
SQM
3 min
Lithium producers are drawing optimism from rising prices for the electric vehicle battery metal

Rising demand for lithium is stoking prices for the electric vehicle battery metal, fueling long-delayed expansions that still may not produce adequate supplies that automakers need to meet aggressive production plans.

Lithium

Growing industry optimism from higher lithium prices is a change from last year when funding for mines and processing plants dried up during the pandemic.

Albemarle Corp, Livent Corp and other producers are scrambling to make more lithium, but some analysts worry the recent price jump will not spur a big enough expansion to meet a planned wave of new EV models by mid-decade.

Since January, General Motors Co, Ford Motor Co LG Energy Solution and SK Innovation Co, along with other automakers and battery parts manufacturers, have said they will spend billions of dollars on EV plants.

U.S. President Joe Biden has proposed spending $174bn to boost EV sales and infrastructure. The European Union has similar plans, part of a rush to catch up with global EV leader China.

Those moves have helped an index of lithium prices jump 59 percent since April 2020, according to data from Benchmark Mineral Intelligence, a commodity pricing provider.

The rising demand “reflects what feels like a real and fundamental turning point in our industry,” said Paul Graves, chief executive of Livent Corp, which supplies Tesla Inc. On Monday, it said it would more than double its annual lithium production to 115,000 tonnes.

Graves warned, though, that “it will be a challenge for the lithium industry to produce sufficient qualified material in the near and medium term.”

Albermarle

Albemarle, the world’s largest lithium producer, aims to double its production capacity to 175,000 tonnes by the end of the year when two construction projects are complete. Albemarle's Q1 profit beat expectations thanks to rising lithium prices. Chile’s SQM, the No. 2 producer, said its goal to expand production of lithium carbonate by 71 percent to 120,000 tonnes should be complete by December.

Australia’s Orocobre is paying $1.4 billion for smaller rival Galaxy Resources, a strategy designed to boost scale and help it grow faster in regions closer to customers.

“The next few years are going to be critical in terms of whether there’s enough available lithium supply, and that’s why you’re starting to see commodity prices start to ramp,” said Chris Berry, an independent lithium industry consultant.

The price gains helped Albemarle and other major producers, including China’s Ganfeng Lithium Co and SQM, post big gains in first-quarter profit and boost forecasts for the year.

Even China’s Tianqi Lithium Corp, saddled with debt due to years of low lithium prices, signaled that recovering demand should help it swing to a profit this year.

Electric Vehicles

Forecasts call for demand for the white metals to surge from about 320,000 tonnes annually last year to more than 1 million tonnes annually by 2025, when many automakers plan to launch new EV fleets, according to Benchmark.

Still, demand is expected to outstrip supply in 2025 by more than 200,000 tonnes, so lithium prices may need to rise to encourage producers to build more mines. That could boost the prices consumers pay for EVs. “Companies across the lithium-ion supply chain are in the best position they’ve been in for the last 5 years,” said Pedro Palandrani of the Global X Lithium & Battery Technology ETF , which has doubled in value in the past year.

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