Mick Davis tells investors to stay away from coal, Africa
Former Xstrata boss Mick Davis, a driving force in the deal making that transformed the mining sector during the commodities boom, suggested investors to stay away from Africa and be cautious when it comes to coal, until at least next year.
Speaking at the FT Commodities Global Summit in Switzerland, the mining veteran said he expected the coal market to remain depressed this year, but added it sees it picking up in 2016.
He also recommended being cautious when investing in Africa’s resources sector, given serious issues such as lack of infrastructure and energy supply in the continent, Reuters reported.
When asked about how much lower commodities prices will dive this year, Davis said he thought they were close to hitting rock bottom.
“Are we towards the bottom of the market? Yes. Whether we have reached the bottom of the market, I would not know,” he said, as quoted by FT.com.
Davis, whose $5.6 billion X2 Resources private equity vehicle is currently mulling acquisitions, added he could now hear “squeaks of stress if not the outright shouts of pain," from some miners, as plummeting commodities prices put a dent in their market value.
X2 is expected to use its war chest to buy brownfield assets over the next two years, with loud rumours of the company being in the final stage of talks with a Canadian miner.
Davis is also said to be preparing a bid for South32, the spin-off company BHP Billiton will officially launch next month.
Image: Screenshot from a FT video interview.