Bloomberg News

Xstrata’s Davis, Reid Said to Plan Mine Fund After Glencore Deal

March 08, 2013

Xstrata Plc Chief Executive Officer Mick Davis

Xstrata Plc Chief Executive Officer Mick Davis, scheduled to leave the company six months after the completion of the $35 billion takeover by Glencore, built the producer from a disparate collection of mostly South African coal-mining assets into one of the largest mining companies. Photographer: Gianluca Colla/Bloomberg

Xstrata (XTA) Plc Chief Executive Officer Mick Davis and Chief Financial Officer Trevor Reid are weighing plans to set up a privately backed mining fund after Glencore International Plc (GLEN) takes over their company, people familiar with the matter said.

The fund would probably buy the undeveloped resources that major mining companies are looking to sell, the people said, asking not to be identified before a public announcement. While the plans aren’t final, Davis and Reid would likely search for investors in emerging markets and the Middle East, they said.

The executives would join peers raking through the world’s unexploited mining assets. Bankers led by Lloyd Pengilly, formerly at JPMorgan Chase & Co., are also setting up a London- based fund with investors from countries including Poland and Qatar. That firm plans to invest mainly in African mining. An Xstrata official declined to comment on Davis and Reid’s plans.

The world’s largest mine operators are selling assets after a $1.1 trillion takeover binge in the past decade left producers including Anglo American Plc (AAL) and Rio Tinto Group writing down valuations. Rio, the second-largest mining company, is seeking a buyer for its Canadian iron-ore operations, a person close to the matter said last week. It has already raised about $12 billion from divesting more than 20 projects.

Davis, 55, scheduled to leave Xstrata six months after the completion of the $35 billion takeover by Glencore, built the producer from a disparate collection of mostly South African coal-mining assets into one of the largest mining companies.

Investor Revolt

He was slated to become CEO of the merged group until Ivan Glasenberg, head of Glencore, increased the bid for Xstrata on condition Davis give up the top job. That followed an investor revolt over bonus payments planned for managers including Davis.

Davis, who hands over to Glasenberg after the six months, will get his contractual termination fee of 9.6 million pounds ($14 million) without any retention bonus, according to Xstrata. In contrast, Glasenberg, 56, will get $173 million in dividend payments from Glencore’s 2012 earnings for his 16 percent stake.

Reid on Dec. 4 decided against remaining as CFO at the merged company after the shareholders rejected paying a total of 144 million pounds of bonuses to managers to spur them to stay.

To contact the reporters on this story: Matthew Campbell in London at mcampbell39@bloomberg.net; Jesse Riseborough in London at jriseborough@bloomberg.net

To contact the editors responsible for this story: John Viljoen at jviljoen@bloomberg.net; Jacqueline Simmons at jackiem@bloomberg.net


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