Davis to get £4.6m pay­out as Xs­trata deal ap­proved

Business Day - - FRONT PAGE - AL­LAN SEC­COMBE Re­sources Ed­i­tor

MIN­ING mag­nate Mick Davis will re­tain the use of Xs­trata’s com­pany jet and re­ceive £4.6m to leave the merged en­tity cre­ated from the com­pany he has helped mas­ter­mind since 2001 and the world’s largest com­mod­ity trader, Glen­core.

Port Elizabeth-born Mr Davis opted to step down once the takeover is ef­fec­tive on May 2 rather than serve as in­terim CEO of the merged group for six months as had been agreed. He hands over to fel­low South African and Glen­core CEO Ivan Glasen­berg.

Mr Davis will be joined in his de­par­ture by six of his core lieu­tenants, in­clud­ing long-time as­so­ciate and Xs­trata chief fi­nan­cial of­fi­cer Trevor Reid. Oth­ers in­clude Xs­trata cop­per head Char­lie Sar­tain, nickel head Ian Pearce, and al­loys di­vi­sion head Loutjie Smit.

Xs­trata strat­egy head Thras Mo­raitis is also leav­ing.

“With the ma­jor­ity of the Xs­trata ex­ec­u­tive com­mit­tee now de­part­ing, it leaves the new com­pany with a po­ten­tially dif­fi­cult task of man­ag­ing a num­ber of com­plex projects and op­er­a­tions with­out the ex­ist­ing di­vi­sional heads,” said BMO Cap­i­tal Mar­kets’ Tony Rob­son.

Mr Davis may start a min­ing fund to­gether with Mr Reid. There is spec­u­la­tion in the mar­ket that Mr Davis will keep his tried and trusted team with him.

Mr Davis will re­main as an un­paid con­sul­tant to the com­bined group un­til end-June to as­sist in the han­dover. In ex­change for not tak­ing up the six-month CEO role, he will re­ceive a £4.6m pay­ment.

“He will be en­ti­tled to up to 30 hours of pri­vate use of an Xs­trata air­craft, which has been pre­vi­ously ap­proved by the re­mu­ner­a­tion com­mit­tee of Xs­trata and pro­vided to him in con­nec­tion with his cur­rent role as CEO of Xs­trata,” Glen­core said.

Mr Davis will sub­let Xs­trata’s Lon­don of­fice, Al­mack House, up to March 2017. Glen­core stip­u­lated that he pay book value for the fur­ni­ture and com­put­ers at the of­fices in a pres­ti­gious part of Lon­don.

Mr Davis stressed the val­ues, ap­proach to sus­tain­abil­ity and qual­ity of the port­fo­lio he and his team were leav­ing be­hind at Xs­trata.

“I look to my col­leagues to keep this legacy alive within the new Glen­core Xs­trata for many years

to come,” he said yes­ter­day.

The merger cleared a ma­jor hur­dle yes­ter­day when China’s com­merce min­istry gave its con­di­tional ap­proval to the deal, worth up to $35bn.

The merged en­tity must sell the $5.2bn Las Bam­bas cop­per mine be­ing built in Peru by Xs­trata by July 2015, and it has also agreed to eight-year sup­ply agree­ments for cop­per, zinc and lead with Chi­nese cus­tomers.

“Glen­core’s will­ing­ness to sell Xs­trata’s most high-pro­file cop­per project, Las Bam­bas, demon­strates to us that there are no sa­cred cows for Glen­core’s man­age­ment and in our view re­flects their dif­fer­en­ti­ated man­age­ment style ver­sus tra­di­tional min­ing com­pa­nies,” said the Mac­quarie Group.

An­a­lysts value Las Bam­bas, which comes into pro­duc­tion in 2015, at up to $6.5bn and the sale would be a wel­come cash in­jec­tion for the merged en­tity.

“The con­di­tions at­tached to the com­merce min­istry’s merger ap­proval are clearly in­tended to re­duce Glen­core Xs­trata’s mar­ket po­si­tion in cop­per by re­quir­ing the sale of a cop­per as­set and en­sur­ing an un­in­ter­rupted 900,000-tona-year sup­ply of cop­per con­cen­trates into the Chi­nese mar­ket,” Mac­quarie said.

If the 400,000-tons-a-year Las Bam­bas is not sold to a buyer ap­proved by China’s com­merce min­istry, then Glen­core must sell ei­ther Xs­trata’s 62%owned cop­per and gold Tam­pakan project in the Philip­pines, or the 82%-held Frieda River cop­per and gold project in Pa­pua New Guinea.

Oth­er­wise, the com­pany would have to sell the wholly owned El Pa­chon project in Ar­gentina or Xs­trata’s 50%held Alum­br­era mine in Ar­gentina.

Glen­core and Xs­trata com­bined ac­count for roughly 7% of the global cop­per sup­ply, and an­a­lysts and traders have es­ti­mated that Glen­core con­trols be­tween 10% and 14% of Chi­nese cop­per con­cen­trate im­ports, Reuters re­ported.

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