To replicate previous successes as Xstrata Plc’s ex-CEO, Mick Davis has raised $3.75 billion to transform his X2 Resources into a mid-tier miner. Top Asian materials trader Noble Group and private equity firm TPG Capital are helping X2 secure new assets alongside unnamed sovereign-wealth and pension-funds; all have committed $2.5 billion and $1.25 billion equally in conditional funding.
Davis earned his stripes amid a management team that transformed Xstrata plc from a $500 million coal producer into a $50 billion giant through 10 years of mergers, acquisitions and expansion. Last year, after the South African-born Davis left, Glencore International Plc completed its $29 billion full-share takeover of the company.
Davis has worked with Xstrata’s former Chief Financial Officer Trevor Reid, who also left Xstrata following the takeover, to found the London-headquartered X2. Glencore Chief Ivan Glasenberg became CEO of the combined Swiss-based entity worth more than $70 billion, remaining the industry’s biggest such merger.
Analysts said the new financing would allow X2 to acquire medium-sized copper mines or zinc assets along with thermal and coking coal. “The timing for this remains very opportune,” said Davis in a statement quoted by Bloomberg News, “and we will now focus increased attention on starting the investment process.”
The news comes at a time when challenges facing the mining sector are far from over, according to analysts. Moreover, mines have large up-front costs and can take years to return profits — often warding off private-equity investors. Mining companies, for their part, are slowing down amid falling demands; industry’s cyclical nature, meanwhile, means high-debt projects are more prone to going bust.