The Sunday Times of London reported overnight that Mick Davis’ X2 Resources has made a bid for some of Anglo American’s Chilean copper mines, their Brazilian nickel assets, and some of their coal operations. If successful, this would represent Davis’ first acquisition since he left as head of Xstrata after the merger with Glencore in 2013, and could signal we are nearing a bottom in the commodities sector.
According to the report, Davis tabled a proposal for Anglo American’s assets, although some doubts have been cast on the exact state of the proposal after another source came out subsequently and said that an offer has not yet been made.
Both companies declined to comment.
Regardless of the state of the bid process, the fact that Davis continues to get closer to his first deal for X2 bodes well for the sector as there has been a wave of M&A activity recently, most notably with Davis’ schoolmate Ivan Glasenberg proposing a mega-merger between Glencore and Rio Tinto.
Consolidation waves are often seen near the bottoms of cycles.
Davis (also known as ‘Mick the Miner’ and ‘Big Mick’) just raised an additional US $1 billion for his private, X2 Resources, last month bringing his total deployable capital close to US $5 billion (US $4.8 billion to be exact).
The company’s website states: “X2 Resources aims to deliver superior returns to its investors by building a new mid-tier diversified mining and metals group.”
He founded X2 in September 2013 after he completed the $70 billion merger between Glencore and Xstrata. Davis grew Xstrata from $500 million when he took over in 2001 to over $30 billion 12 years later.
Mark Cutifani, Anglo American’s CEO, has publically stated that he intends to divest assets including some of the company’s Chilean copper mines by the end of the year.
Anglo American holds a number of Chilean copper assets including:
- 100% interest in the Mantos Blancos and Mantoverde mines,
- 50.1% interest in Anglo American Sur, which includes Los Bronces, El Soldado and Chagres smelter and
- 44% joint venture interest in Collahuasi, a development copper project.
They also hold 100% interests in both the Codemin and Barro Alto open pit nickel mines in Brazil.
If Davis is considering copper projects in Chile then one may assume he must have looked at the Candelaria mining complex in which Lundin Mining is acquiring an 80%-interest from Freeport-McMoRan for $1.8 billion.
Investors should sit up and take notice when the smartest takeover architects in the business start making big ticket acquisitions, as this may be the bottom of the ~4 year bear market in natural resources.