Mick Davis won't waste any time tucking Falconbridge Ltd. into his global mining empire.
The burly, blunt-talking chief of Xstrata PLC was in Toronto last week huddling with Falconbridge executives to ready the 78-year-old company for what is expected to be the most significant transformation in its history.
Xstrata is set to seize control of Falconbridge and its stable of global base mineral operations Monday night when its $18-billion takeover offer expires. When the deal closes, the company that drew its name from a Falconbridge Township nickel discovery near Sudbury will be little more than a memory.
According to people familiar with the strategy, Xstrata plans to realign its international nickel assets with Falconbridge's Ontario, Quebec and New Caledonia operations under the umbrella of a slimmed-down Toronto head office called Xstrata Nickel. Most of Falconbridge's three dozen senior executives are expected to vacate offices in the next few weeks as Xstrata imposes its famously lean management structure on the company.
Mick Davis, CEO of Xstrata, photgraphed at his home.
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Xstrata has promised to preserve for three years Falconbridge's Canadian nickel, copper and zinc mining, exploration, research and processing operations, which account for the majority of its 14,500 jobs.
What won't be preserved are Falconbridge's international nickel, copper, zinc and aluminum mining operations in 17 countries, including the United States, Chile, Peru and Australia. It is understood that Xstrata is preparing to sell a number of Falconbridge's foreign mining assets it has identified as non-core. Many other foreign operations will be folded into Xstrata's sprawling global empire.
These moves are designed to help Xstrata raise money and cut costs as it continues with its quest to surpass BHP Billiton Ltd. as the world's largest mining company.
"There's no doubt Mick is building another BHP," said one source familiar with Xstrata's strategy.
Indeed, some competitors are speculating that Falconbridge is merely the appetizer as Xstrata prepares for a bigger course and targets the world's third-largest miner, London-headquartered Anglo American PLC.
Xstrata spokesman Marc Gonsalves declined to comment on takeover speculation.
In response to questions about the company's Canadian plans, he said: "We've thought a lot about integration. We're delighted to be working with the people at Falconbridge together because that makes it quicker and less stressful for everyone."
A chance to work for the rapidly expanding Xstrata will be alluring for some Falconbridge executives, but most of the senior guard are expected to depart for other opportunities.
CEO Derek Pannell intends to resign and president Aaron Regent, a rising executive star, is understood to have turned down an offer from Mr. Davis to steer Xstrata Nickel. Instead, it is believed that Mr. Regent is weighing offers at other firms, including former employer Brookfield Asset Management.
"Does he really want to stick around and be the not-so-public face of a not-so-Canadian company?" asked one person close to Falconbridge.
Other candidates for the top job at Xstrata Nickel are Joe Laezza, Falconbridge's current nickel president, and Ian Pearce, its recently appointed chief operating officer.
According to sources, Falconbridge's chief financial officer Steve Douglas, a youthful and respected executive, may also return to the fold at Brookfield Asset Management, which previously was a major Falconbridge shareholder.
The first asset to go on the selling block will likely be Falconbridge's aluminum holdings. Observers estimate the company's aluminum mining and processing operations, which operate in the U.S. and Jamaica under the name Noranda Aluminum, could attract bids of as much as $1.3-billion (U.S.). Century Aluminum Co., a partner in two of the operations has been touted as a possible buyer or merger candidate with the unit. Metals trader Glencore International is the largest shareholder of both Xstrata and Century.
Several of Falconbridge's zinc and nickel development projects could also be put on the block.
"There are a lot of development projects and they can't do them all. Something's going to give," a source said.
Falconbridge's smaller zinc projects in Canada and Australia are possible castoffs, according to sources.
As well, Xstrata may look to unload Falconbridge's 49-per-cent stake in the $2.2-billion Koniambo nickel project in New Caledonia. Failed suitor Inco Ltd., which lost the battle for Falconbridge last month, has suffered local political resistance and costly delays with its own Goro development in the region. Inco has spent billions of dollars more than it planned on the costly process of mining and refining the region's nickel laterite deposits and the huge bill may be too much for Xstrata to shoulder at a time when it is spending heavily on acquisitions.
