![]() FRUITS OF SUCCESSĪfter walking away with a 14 million pound payout and millions more in cashed-in options when Glencore swallowed Xstrata last year, Davis, now 56, could easily have retired.ĭavis had originally agreed to stay at the merged group subject to a three-year retention deal for himself and his top executives, worth a total of $220 million, that was eventually opposed by shareholders. Private equity firms would expect an annual rate of return at least in the high teens but generally much higher, while mining companies have lower returns, the second banker said.Īnglo American, one of the largest London-listed mining companies, for example, posted a return on capital employed of 11 percent last year and is aiming to boost it to above 15 percent by 2016. ![]() I am not swayed by the magic dust being sprinkled on this at the moment. “You can create value, but whether you can create value that PE (private equity) investors would expect, I think that is an open question. “I question whether the same value creation is possible this time around,” said a second investment banker involved in mining. Others are not so sure, citing slowing growth in China and its likely impact on commodity prices. He has done it once and wants to do it again,” said a London-based investment banker who has worked on various deals with Xstrata. “I think he’s got very good chances of success. It is a tactic that some people with close knowledge of the business believe can work, despite the challenges. “If he was to acquire coal assets at this point he’d be doing what he’s got a history of doing: buying assets at the bottom of the cycle and therefore benefiting extremely when the cycle turns. “With coal he is totally within his comfort zone,” said Investec analyst Hunter Hillcoat. The PR company representing X2 Resources declined to comment on the newspaper report or on other details and opinions contained in this article.ĭavis knows the shunned assets better than any other potential bidder, as most of them went into Australian miner BHP when it merged with Billiton in 2001, a deal he helped to engineer as finance director of the London-listed mining firm. ![]() Yet armed with $3.75 billion and rising, and planning to raise three times as much in debt, Davis was reported this week to be lining up a bid for BHP’s thermal coal assets, along with aluminium, manganese and nickel assets that BHP wants to jettison. Unlike then, when miners rode a boom powered by double-digit growth in China, coal prices now languish near four-and-a-half-year lows and the outlook for coal demand growth is uncertain. Now he has set up a fund, X2 Resources, which is looking to buy up mines again and is reportedly targeting some of the very assets he traded more than a decade ago.
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