"They are talking to lots of people, the only thing I'm sad about is they are not talking to us!" Speaking at diversified miner Xstrata's half-year results, chief executive Mick Davis rued the lack of engagement from the an Anglo American board that dismissed his proffered all-paper merger approach in late June.
"I don't understand what Anglo loses in investigating this proposition." Yet Mr Davis remains adamant there will be no change to his nil-premium stance: "Take it as read, this is a merger of equals," was his off-stage comment.
Xstrata's own interims beat consensus with cash earnings of $2.7bn, operating profit of $1.6bn, and pre-exceptional earnings per share of 38¢. Mr Davis argued persuasively that he does not need Anglo American, given Xstrata's roster of organic growth opportunities totalling some $40bn of notional investment across coal, nickel, copper and ferro-alloy developments. But he emphasised, that "the enlarged company could create more value than the sum of the parts." And there were some implicit rebuttals of the case for splendid isolation that Anglo American made at its own interims days earlier.
Anglo American emphasised its exposure to iron ore and copper as commodities enjoying strong demand from China, and its exposure to platinum and diamonds as commodities with scarce new supply availability, while coincidentally playing down nickel - a core Xstrata commodity - as offering limited upside.
In response, Xstrata emphasised its exposure to copper, thermal coal, nickel, zinc and lead as commodities displaying high demand leverage to the sort of infrastructure investment-led industrial production recovery arguably underway in emerging economies - in a graphic that coincidentally showed platinum and diamonds as relatively under-leveraged to such 'early cycle' development.
Anglo emphasised how its top-down, centralised control culture resulted in significant savings in procurement. Mr Davis emphasised how Xstrata's bottom-up, decentralised culture empowered managers to undertake net present value-enhancing initiatives "without head office second-guessing". And addressing presumptions that Anglo assets are intrinsically higher quality, Mr Davis brandished industry cost curves showing Xstrata just as competitive, or even better, across platinum, coal, copper, nickel and zinc.
