Former Xstrata Boss Plans Second Success, His Motivations and Story
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.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.