NEW YORK The majority of
Xstrata Plcs acquisitions were successful, but there are
a few that its outgoing chief executive officer wishes it had
not got involved with.
Mick Davis told AMM
that out of the 40 transactions Xstrata did during his time at
the helm, "90 percent were great successes; 10 percent were
"There are transactions I wish I
hadnt done," he said. "I wish I hadnt bought the
stake in (South African platinum producer) Lonminit
hasnt played out very well. I still believe in the
business strategy underpinning the concept, but the timing was
bad, and while we pulled back from the full takeover, we should
not have acquired the blocking stake at that time."
Xstrata took a 24.9-percent
non-management stake in Lonmin in October 2008, paying $1.8
billion and launching a failed takeover bid for the platinum
Lonmin has struggled with
operational and labor issues, culminating last August with a
strike at its Marikana Mine in which 34 miners were killed and
dozens injured after being shot by South African police (
amm.com, Aug. 17).
Xstratas efforts in
November to protect its Lonmin investment through a reverse
takeover also were rebuffed by management.
"I wish I hadnt bought the
nickel assets in Australia," Davis said, referring to Cosmos
and Sinclair, which it inherited as part of its 2008 Jubilee
Cosmos was placed in care and
maintenance in September in response to adverse market
conditions, while development of Sinclairs underground
mine was deferred in April 2009, also due to market conditions.
Sinclair has been repositioned as a swing producer and acts as
a satellite operation, leveraging the infrastructure and
capacity available from Cosmos to limit overheads.
"But in terms of the dynamic of
continuing to do transactions, Im happy with the
transactions that we did," he said.
A couple of deals got away. "I
regret the fact that we couldnt have sealed the Vale deal
because I think that it would have been outstanding value
creation for our shareholders," he said. Brazils Vale
approached Xstrata in late 2007 but a proposed deal fell apart
in March 2008 (
amm.com. March 26, 2008).
Davis said he also regrets the
fact that Xstratas approaches to London-listed Anglo
American were rejected (
amm.com, June 22, 2009). "It is a pity that the
Anglo deal wasnt done, but more for the reasons why it
wasnt done than the net economic effect of it not having
been done," he told AMM.