Get to the top, and keep digging
Profile: Leon Davis: Richard Phillips meets the new chief executive of RTZ CRA, a veteran of the mining business with big plans for the future
Sunday 05 January 1997
In the flesh, however, Leon Davis comes over as quite the reverse. There is toughness there, underneath a soft-spoken exterior, but he fails dismally to live up to any cultural stereotypes.
For a start, he finds the recent cold snap off-putting. "It's good to sit down to the traditional Christmas food in the right temperature, rather than sweltering heat, but I'm beginning to modify my views on how nice the British weather is," he says.
Through last year's merger of RTZ and CRA, the Australian mining group, Davis has been promoted to chief executive of the combined business. He started in the job on New Year's Day, although he has been ensconced in London since March.
He is now at the top at the world's top mining house - a progression that must have required some unusual abilities, as well as the inevitable sprinkling of luck. Chief executive meant a return to London, where he had already worked from 1991 to 1995 as RTZ's mining director, on secondment from CRA.
From there, he returned briefly to Australia, where he was appointed chief executive of CRA, pre-merger. "When the talks were going on, I really didn't think of promotion to chief executive [of the combined group], mainly because it would mean another move."
Davis has moved a lot in his career, although always within the same company.
He has been at the CRA end of the business man and boy: he joined the company in Port Pirie, south Australia - the country's mining capital - aged 16 on a mining scholarship, and fresh out of school. Mining and metals was in the family, his father was a smelter hand, but Davis has forsaken his roots in one way by renouncing his father's trade union beliefs.
The next 17 years were spent in Port Pirie, learning the ropes and imbibing the culture. An early hero was GK Williams, a famous metallurgist, the profession Davis trained in.
But greater things have come his way, and perhaps Williams no longer fills the same place in his heart.
His first big break came when another mining company offered him a job, but CRA "wanted me to stay, so I asked them what they had". Their offer was a posting to Papua New Guinea, and the Bougainville copper mines. Aged 38, he was soon appointed manager of the copper concentrator.
From here on, Davis's career seems to have been one of perpetual motion. In the process, his two daughters attended 12 schools, although they eventually put their feet down and insisted on completing their schooling in Australia. In the meantime, he has worked in Brisbane, Singapore and London.
The disruption suggests a price has been paid for the inexorable rise to the top. "We have moved 18 times now, each one just as difficult."
The big task ahead, refining the merger, will continue for many years yet. A sharper focus will be seen this year with the company's exploration budget slashed by $50m (pounds 29.5m), from a budget running at around $350m a year, to eliminate any overlap.
As chief executive, he has new tasks and duties to attend to. The goal is to push decision making out to the individual businesses, while setting a specific frame of reference at the centre. "We would like to see ourselves as a nimble giant, not bogged down by stifling bureaucracy."
Although he has been in London since March, Davis remains something of an unknown quantity in the City and among investors. His rise in Australia also took some commentators by surprise, and he has been called an enigma.
But he has already started to impress. "It's patently obvious he has no problems grasping the breadth of RTZ CRA's operations," says one analyst. "He seems to have a remarkable grasp of the detail, across all of its main products, gold, copper and coal."
The devil is so often in the detail, but there are other issues confronting the mining group. Historically, RTZ has always had a rough and tumble relationship with environmentalists. Its last AGM saw the top podium besieged by representatives of 30 tribal and environmental organisations from around the world. Fun for the newspapers, perhaps, but less so for the directors. CRA in Australia had developed a reputation for getting up the nostrils of environmentalists and Aborigines, while problems continue at its Papua New Guinea operations.
As its chief executive, the buck stops with Davis. Where does he stand on environmental dilemmas? He is not too phased by the ritual performance of the AGM. "I take a pragmatic view. Good debate based on facts is good for the shareholders and for the executive." It is a permanent tension, which Davis sees more as a challenge, or opportunity, than a threat.
He has a firm grasp of the issues. Returning to the weather, he notes that: "The cold over the last few weeks means people in the UK don't object to coal mining quite so much, when it is used to generate power. We have to be conscious of the dynamic these arguments follow."
He is also adamant on the duties and responsibilities of the company to society, and indigenous people. The influence seems to have been Papua New Guinea. "The great challenge there was that it was a developing country, and all the social issues flowed from that. It left a lasting impression. Social and environmental considerations are of equal importance to the ... needs of the company."
But it is in financial terms that the City will be looking to him. The next few years will be an exciting time for the company. The Lihir gold mine in Papua New Guinea, where RTZ has a 17 per cent stake, will come on stream in the second half of this year. Annual gold mine production is set to reach 600,000 ounces a year, at a total capital cost of $700m.
The Grasberg expansion in Irian Jaya, Indonesia, is the other big one. Gold and copper production will begin in 1998, and some 200,000 tonnes of copper ore will be milled a day.
It will join the mighty Escondida copper mine, in Chile, where RTZ CRA has a 30 per cent stake, producing 475,000 tonnes of copper a year - with a further 125,000 tonnes a year boost coming in mid-1998. Escondida, the world's largest copper mine, and the mammoth Kennecott Utah mine in the US, are rare beasts. Can there be more? Davis thinks so. "Why on earth are we spending $300m plus a year on exploration?" he retorts.
The company has also hustled its way into a major position in coal, and its plans must pose a threat to the British industry. It now produces 66 million tonnes a year, up from 51,000 tonnes in 1993, with 1.7 billion tonnes of reserves.
It complements the iron ore, talc, diamonds, titanium dioxide, bauxite, molybdenum, uranium, and tin, to name but some of the commodities RTZ CRA extracts from the earth.
Growth for the sake of growth, however, is not in the game plan. Too many mining companies have grown through acquisition at too high a price, he argues. While RTZ CRA is not averse to acquisitions, they will have to be at the right price. Meanwhile he sees plenty of opportunity from existing operations, while exploration, including for diamonds in Canada, looks promising, as does the Sepon region in Laos, and the Pipeline district in the US.
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