Xstrata is different from most other major mining companies. Rather than being a long established group with strong links to a particular country, such as Australia for Rio and BHP, South Africa for Anglo American, or Brazil for Vale, it is a relative upstart with few ties to any particular territory, aside from its tax inspired domicile, Switzerland.
The group’s culture might seem innocuous but it is important, particularly when Xstrata has this week proposed a “merger of equals” with South African stalwart Anglo American. Unlike many of its rivals, Xstrata’s raison d’etre is doing deals, led by raucous chief executive Mick Davis.
The company floated in March 2002 with an initial value of £2 billion. Since then, a number of transformational acquisitions such as the $19 billion purchase of Falconbridge, and the recovery in global commodity prices, has meant the group is now valued at £20 billion. At its record high last year, when it tried to buy platinum producer Lonmin, it was worth £67 billion.
Xstrata’s strength is that it has always been much closer to its customers than other, perhaps more parochial groups keener on looking after their employees. The presence of trading entity Glencore on its shareholder register, with a third of Xstrata’s stock, is testament to this.
Davis’s true loyalty showed earlier this year when he effectively enabled Glencore to retain this stake, by funding its participation in January’s £4.1 billion rights issue, via a side deal selling certain Glencore coal assets in Colombia to the group for $2 billion.