Xstrata sees takeover opportunities

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March 23, 2009

XSTRATA chief executive officer Mick Davis says takeover opportunities are starting to appear after a rout in commodity prices sent shares of mining companies plunging.

Xstrata, the world's biggest exporter of power station coal, will continue to "identify and execute" potential purchases, Mr Davis says in the company's annual report.

"A number of opportunities are beginning to emerge as a result of the dislocation of market values from underlying company valuations and the distressed or forced sale of attractive" assets, he says.

His annual pay slid by 40 per cent last year as executive bonuses fell to reflect the industry-wide slump, the report shows.

After spending more than $US27 billion ($39.3 billion) on acquisitions in six years before commodity prices plunged, Xstrata unveiled plans in January to cut costs and pare net debt to $US12.6 billion.

The company scrapped a pound stg. 5 billion ($10.5 billion) offer for platinum producer Lonmin after the credit crisis dried up bid funding and this month sold pound stg. 4.1 billion of shares.

Mr Davis received $US5.51 million in total compensation last year, down from $US9.15 million in 2007, according to the annual report.

Executives' bonuses were cut substantially from the amounts that would have been paid normally, based on the company's performance, and payouts are to be made in stock rather than cash, the report says.

Xstrata's shares plunged 82 per cent last year as the global economic slump hurt commodities demand.

The company had to suspend operations at coal and zinc mines and scrapped its dividend in January this year.

"Bonus levels normally awarded based on the 2008 pool would not be appropriate given the current economic situation," Xstrata says, even though its performance under the criteria for participating in the bonus plan was "highly creditable".

Bonuses are to be deferred for a year and paid in stock.

Xstrata, also the fourth-biggest producer of copper and nickel, has expanded since going public in 2002 by acquiring Canadian nickel producer Falconbridge for $US18.1 billion and a third of the Cerrejon coal mine in Colombia for $US1.71 billion in 2006.

The company agreed in January to buy Colombian coal assets from Glencore International, its largest investor, for $US2 billion so that Glencore could participate in this month's stock sale.

A fifth of shareholder votes cast at a meeting this month opposed the transaction.

Mr Davis was paid a $US2.32 million salary last year and will get a $US2.7 million bonus.

He also received housing allowances, insurance and other benefits worth almost $US500,000.

Chief financial officer Trevor Reid's total pay dropped 38 per cent to $US2.67 million, the report shows. Executive director Santiago Zaldumbide received $US3.17 million, a 39 per cent slide.

Xstrata converted the figures from British pounds, the currency in which the CEO was paid.

Bloomberg