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The Caisse de depot et placement du Quebec (CDP) building is seen in Montreal, February 26, 2014.CHRISTINNE MUSCHI/Reuters

The Caisse de dépôt et placement du Québec has slashed its investment in X2 Resources Partners LP Inc., a potentially troubling sign for mining magnate Mick Davis's fund.

The Caisse reduced its position in X2 to between zero and $5-million at the end of 2015 from as much as $30-million in the previous year, according to the Quebec pension fund's documents released in April.

Mr. Davis, the former Xstrata chief executive officer with a sterling reputation, easily raised $1-billion (U.S.) in 2013 to start his own mining venture. He has since raised up to $5.6-billion from investors when most of the mining industry has been begging for cash. Of that amount, $4-billion is committed capital, which can be spent immediately, and the remaining $1.6-billion can be spent under certain conditions.

But X2 has yet to deploy any of its capital even as mines are increasingly put on the auction block amid a prolonged commodities downturn.

The problem for Mr. Davis is that his investors must sign off on any deal before he can pull the trigger, sources said. The other difficulty is that the investors expect a higher rate of return on their investment, making it harder for X2 to compete with mining companies for the same asset.

Some investors have privately expressed frustration with what seems to be a lack of progress, sources said.

A spokesman for the Caisse would not comment on why the fund reduced its position a year after providing Mr. Davis with capital. "We never comment on discussions privately held with companies or partners," Maxime Chagnon said. A spokesman for X2 declined comment.

X2 has been invited to bid on pretty much every major asset that has been put up for sale. But so far, Mr. Davis has been unable to clinch a deal because his bids have either come in too low or his investors have vetoed the proposal, sources said.

Mr. Davis was quickly shut out of the process for Barrick Gold Corp.'s top copper mine. He was turned down for BHP Billiton Ltd.'s unwanted assets. He considered taking some of the smaller base metal Canadian miners private but that has gone nowhere, sources said.

Mr. Davis built Xstrata into a mining powerhouse before it was taken over by Glencore PLC in 2013. As Xstrata chief, Mr. Davis gobbled up Canadian nickel giant Falconbridge when nickel prices were soaring.

Today, there are dozens of mines for sale as heavily indebted miners Vale SA, Anglo American PLC, Glencore and Freeport-McMoRan Inc. race to sell assets.

Two of X2's largest investors are Hong Kong-based commodities trader Noble Group and U.S. investment firm TPG Capital. X2 has not publicly disclosed its other investors.

Other former mining executives, such as ex-Barrick chief executive Aaron Regent, have also launched their own private mining firms. Most recently, Shaun Usmar, Barrick's former chief financial officer and a former Xstrata executive, left Barrick to start his own mining venture backed by U.S. hedge fund Elliott Management.

Mr. Regent has already bought a mine for half a billion dollars. Mr. Regent and Mr. Davis want to establish their own private mining companies. Mr. Usmar's long-term plans for his mining firm are unknown.

The Caisse and other Canadian pension funds have been trying to take advantage of the metals slump and snap up assets that are now considerably cheaper compared with the lofty values seen during the commodities boom.

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