Mick Davis’ X2poised for launch after US$5.6B raise

VANCOUVER — A dearth in the availability of traditional equity financing has led to the rise of specialist, mining-related investment funds, and another major player is taking the field. In early March, new private mining venture X2 Resources announced an initial capital raise worth US$5.6 billion, which it hopes will finance mid-tier diversified mining and metals group.

X2 is the comeback vehicle for South African mining magnate Mick Davis, who served as CEO of Xstrata for over a decade before the Anglo-Swiss multinational was taken out by Glencore (LSE: GLEN) in early 2012 for US$41 billion, which stands as the largest mining deal in history.

Davis orchestrated Xstrata’s growth from a company with 2,500 employees and a US$500-million market capitalization to one with 70,000 staff across 20 countries and a US$58-billion value. Before the deal, the company was the world’s fourth-largest copper producer and biggest zinc miner. Xstrata’s net income in 2011 was pegged at US$5.8 billion.

Davis and former Xstrata CFO Trevor Reid announced the new venture in late 2013, when it was operating under the X2 Partners banner. The company established an alliance with tycoon Richard Elman’s trading colossus Noble Group, and scored significant investment commitments from leading U.S. private-equity outfit TPG Capital.

This year, the company has US$4 billion in “committed capital,” which it can immediately deploy for deals. The remaining US$1.6 billion is “conditional equity capital,” pursuant to undisclosed requirements by the firm’s investors.

“The blue-chip nature of our investors and the scale of their commitments to date are clear endorsements of the [X2] team’s strategy and our track record of creating value,” Davis noted in the release. “We continue to carefully review a number of opportunities in the sector in detail. Whilst value creating opportunities are increasingly evident, the long-term nature of our strategy provides us with the flexibility to target those opportunities where we see the greatest potential for value creation.”

There have already been numerous rumours that X2 has been engaged in some serious big-game hunting. The firm has been linked to asset sales amongst some of the world’s largest miners, including: BHP Billiton (NYSE: BHP; LSE: BLT), Rio Tinto (NYSE: RIO; LSE: RIO), Vale (NYSE: VALE) and Anglo American (LSE: AAL; US-OTC: AAUKY).

Davis says it’s a ripe time for buying, with major companies rejigging portfolios in light of slumping commodity prices and billion-dollar write-downs.

For example, Bloomberg News reported in January that X2 was considering a bid for Vale’s nickel business, which is highlighted by Inco’s Sudbury Basin portfolio that the Brazilian company picked up in 2006 for US$20 billion.

Meanwhile, the Wall Street Journal cited sources that indicated X2 has held discussions with Rio, BHP and Anglo. The report stated that the company is “looking at mid-tier miners in financial distress and junior mining outfits near production.”

“We believe the timing for this venture remains very opportune,” Davis added. “We have attracted a prestigious, core group of large-scale, high-quality investors who share our vision of building a new mining group, with the potential to generate attractive returns through the cycle.”