After losing out in the Glencore takeover last year, former Xstrata chief executive Mick Davis has been staging a comeback and, according to sources quoted by Bloomberg, looks to raise about $3 billion from investors in order to buy assets for his new endeavour: X2 Resources.
In September last year trading house Noble Group and American private equity firm TPG Capital helped Davis secure $1 billion, while Australian private equity fund IFM Investors is said to be close to announcing a $500 million investment. And while the mining veteran needs a bit more than that, Bloomberg sources said he may initially limit the number of investors in X2 to six or seven, with each providing $500 million.
It doesn’t seem a coincidence that the new company’s name is X2, as the venture is a clear effort to replicate Davis’s success at Xstrata.
The team behind X2, which also involves former Xstrata finance director Trevor Reid, believes the firm could profit from picking up assets other mining companies, under financial strain of getting funds for ongoing projects, are forced to sell at very low price.
Davis built his career on this “stronger-for-longer” theory that was centred on he belief that urbanization in China, India and some parts of sub-Saharan African would send the prices soaring for the copper used in everything from plumbing to the coal burned in electricity plants.
Backed by Glencore, which owned 34% of Xstrata before the companies merged in the spring, Xstrata went from a $500 million business in the early part of the last decade to an operation so big that it, at one point, made a takeover offer for Anglo American (LON:AAL).
Since Davis unveiled X2 Resources last year, he has been reportedly looking mainly for copper and zinc assets.
Noble, based in Hong Kong and listed on the Singapore exchange, is one of the world’s largest commodities trading, transportation and infrastructure companies and competes with Switzerland’s Glencore, Xstrata’s new owner. Noble will market the commodities produced by X2 and provide supply management.
TPG is a US private investment firm with almost $56 billion of assets under management. Its portfolio includes hundreds of businesses, ranging from biotechnology to energy.
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