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Gold and silver bars are pictured at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna on Aug. 26, 2011.

Lisi Niesner

Eike Batista's dubious shine is luring a gold-hungry Qatar. The Brazilian billionaire has made a habit of late of trying to sell chunks of his diminishing empire. This time he's mesmerizing the Gulf state with his AUX mining unit. Qatar is hungry for commodities but the emirate should not fall for Mr. Batista's charms. Otherwise it risks learning the hard way that not all bling is gold.

In some respects it should be no surprise that Qatar is considering handing over some $2-billion (U.S.) for a 49 per cent stake in AUX – the unlisted gold-mining unit of Mr. Batista's sprawling EBX conglomerate. The Gulf state likes commodities – a lot. This year alone, Qatar has amassed stakes in Royal Dutch Shell, Total and Xstrata that combined could be worth around $17-billion. It might spend another $1-billion buying perhaps a fifth of Morgan Stanley's commodities unit.

Managing mining assets is not Qatar's forte, though. This is where Mr. Batista, pictured, comes in. Not only does he have the experience, but the recent rally in the price of gold must make the rights he holds in Colombia's La Bodega mining look even more enticing.

Story continues below advertisement

But Mr. Batista's track record for delivering value to his shareholders is not so good. His six publicly listed companies are bleeding cash, suffering delays on projects or both. Shares in his flagship oil company OGX have tumbled 54 per cent this year alone, mostly after the company revealed that oil output at a key offshore field was just a quarter of what was expected.

He tried to take advantage of this in August, offering to buy out minority shareholders in ports company LLX after the stock had fallen 80 per cent in two years – and even persuaded Ontario Teachers' Pension Plan to help fund it. He scrapped the deal only after Merrill Lynch determined he ought to double his offer.

His pricing shenanigans should give Qatar and adviser Credit Suisse some pause when analyzing Mr. Batista's AUX pitch. But the emirate is no pushover – it drove a hard bargain last year when buying a chunk in European Goldfields, and fought to improve terms in the Xstrata-Glencore merger. If ever there was a time for Qatar to display shrewd dealing again, this is it.

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