Former Xstrata CEO poised for a comeback with X2 Resources

Share

Mick Davis, the mining boss who sold Xstrata to Glencore for $50-billion (U.S.), has reached $5.6-billion in investor capital to finance a mining investment campaign that will almost certainly turn his comeback vehicle, X2 Resources, into an operating company this year.

X2 announced the finish of its capital raising effort from a roster of international "blue chip" investors Wednesday night in London. If debt leverage is added to the figure the new company would have considerable firepower, making it capable of buying assets or operating companies valued at $15-billion to $20-billion.

The $5.6-billion includes $4-billion in committed equity capital that can be spent immediately, and US$1.6-billion that can be spent under certain conditions. A year ago, X2 announced that it had raised $3.75-billion in unconditional and conditional capital, none of which has been spent. The new figure includes the amount raised last year.

The capital comes from 20 investors, of which only two have been identified. They are Noble Group of Hong Kong, one of the world's largest commodities trading and infrastructure companies, and TPG Capital, the private American investment firm with $65-billion in capital under management. The others are sovereign wealth funds and pension funds, several of which are Canadian.

Mr. Davis, 57, built a formidable reputation in the last decade as a serial buyer with a keen eye for value and good timing. As CEO of Xstrata between 2001 and 2013, the company spent about $35-billion on 40 acquisitions, the biggest of which was Canadian nickel producer Falconbridge, won in 2006 for about $19-billion after a long, grinding takeover battle that saw Xstrata send off rival bidders Inco and Teck.

Two years later, at the height of the commodities boom, Mr. Davis was on the verge of selling Xstrata to Vale, the Brazilian company that had bought Inco, for more than $87-billion. But the deal was thwarted by Switzerland's Glencore, Xstrata's major shareholder, which wanted but failed to secure the trading rights to certain commodities, including nickel and aluminum, in the enlarged group. Glencore, the commodities trader led by Ivan Glasenberg, joined the stock market in 2011 and bought Xstrata in 2013.

In an interview in London earlier this week, Mr. Davis called 2015 the "sweet spot" for making investments as mining company valuations come down.

Big mining houses such as BHP Billiton, Rio Tinto, Anglo American and Vale scaled back their capital investment programs as commodity prices fell and said they intended to trim their global mining portfolios to concentrate on the high-income assets.

So far, the companies have been somewhat reluctant to sell, perhaps in the expectation that the mining cycle is about to swing up again. Mr. Davis confirmed that he had made some approaches but would not provide details. "One said no, others did not say yes or no," he said. "But I expect to do a deal this year."

He said that acquisitions in Canada would be considered.

Mr. Davis's goal is to build X2 into a diversified, mid-tier mining and metals company. At some point, X2 intends to list its shares on the stock market to give its investors the opportunity to sell their holdings.