LONDON With Glencore's $34 billion takeover bid set to collapse on Friday, Xstrata boss Mick Davis will have to woo back disgruntled shareholders in the miner and push ahead alone with ambitious growth plans.
Chief Executive Davis aims to steer the fourth-largest diversified miner from its acquisition-fuelled first decade into a phase of organic, or self-generated, growth, which the miner hopes will boost volumes by 50 percent by the end of 2014 and cut average operating costs by a fifth.
The broad, bespectacled South African who has led Xstrata for the past decade has major hurdles ahead - unhappy minority shareholders demanding changes at the top and an even unhappier situation in Xstrata's platinum investment Lonmin, the South African miner hit by a strike and soaring costs.
Davis will also have to find new working relationships with 34-percent shareholder Glencore - increasingly a competitor as the commodity trader's mining presence grows - and with Qatar.
Typically a discreet investor, Qatar has shattered its "dumb money" reputation by threatening to sink the latest effort to merge Xstrata with its top shareholder with a decision to vote against the bid at a meeting on Friday. It has a 12 percent stake it is expected to increase over time.
Certainly, Xstrata's position has advantages.
It is the only one of the five large diversified mining companies without exposure to steelmaking ingredient iron ore, where prices have slumped. It also has the biggest proportional exposure to copper - a metal expected to benefit from scarce supply and where the value of undeveloped resources is rising, not falling, as for some commodities.
"Companies with big copper resources, with copper growth are somewhat unique - at one point, Xstrata had 20 percent of probable global production growth for the next 10 years," analyst Chris LaFemina at Jefferies said.
"The asset quality is mixed, but they have substantial growth, and diversified peers do not."
Xstrata - which began its current incarnation in a JP Morgan basement, with the $2.5 billion acquisition of Glencore coal assets - was dreamt up as a new-style, nimble miner that would scoop up unwanted deposits from majors and turn them into lean, profitable enterprises.
Now, at a time when major projects are fraught with delays, cost overruns and trouble with local communities, Xstrata will have no room for error as it delivers some 20 projects by 2014. That encompasses four major greenfield sites set to start production by 2014, including the $5.2 billion Las Bambas copper mine in Peru, and Koniambo nickel mine in New Caledonia.
The performance of these will be crucial if Xstrata is to face another Glencore bid, say in year, and demand better terms.
It will also be key for Davis' future.
TROUBLE AT THE TOP
Glencore's all-share bid for Xstrata, a deal that would have tied up the miner with its largest shareholder to create a mining and trading powerhouse, is only the latest of a number of attempts over a decade. But with Glencore listed since last year, it is also the most public.
It has put Glencore in the spotlight, but even more so Xstrata, Davis and his non-executive directors - running a miner with a longer track record as a public company.
Sources involved in the deal, analysts and shareholders are divided on their views on what the future holds for Davis.
The former accountant is expected to seek to revive his reputation with shareholders as a steady operator who led the transformation of a collection of zinc and ferrochrome assets worth some $500 million into what is now Xstrata.
An intense, softly-spoken man, Davis will have to win back investors bruised by the board's decision to back a deal on terms many saw as unfavorable, and by retention packages for its top managers seen to be excessive. His own package was for $46 million over three years.
Xstrata shares traded at a premium to the sector after the planned merger was announced in February, but that premium has eroded as its prospects faded. The shares are currently trading around 947 pence, down over 26 percent from February highs.
"If the deal doesn't happen, you could see the...price drop by 10 percent or more on the day, because of the uncertainty about Mick Davis. He's clearly been the main driver behind a deal that has alienated the majority of his investors," one mid-size Xstrata investor predicted.
Others, arguing Davis has been supported by Qatar, point instead to the axe swinging for Xstrata's non-executives and its chairman, City veteran John Bond, for agreeing to the bid.
"This is a high-profile deal that has got very emotional at times - people need to calm down," said one source involved in negotiations. "It is a tough market out there."
Davis is known as a dealmaker - an "M&A monster", in the words of one source - who has built Xstrata through deals like miner Falconbridge in 2006.
But Lonmin, which could ask shareholders including Xstrata to contribute $1.25 billion or more to pull back from the brink, is a reminder of less successful efforts.
It could also be the test of how Qatar, and indeed Glencore, will behave. Glencore backed the original bid for Lonmin in 2008, and the decision to take a stake with the aim of returning later - but it has since made no secret of its lack of appetite for metals like platinum.
"It will be the first test of the new order of things," said one industry banker. "It's a tough one. In the end it might not be a lot of money, so Glencore might not care."
Most analysts expect Xstrata, which took a writedown on its stake last month, to pay up to help Lonmin put itself back on track. But it will also, they say, accelerate its exit strategy.