Sept. 17 (Bloomberg) -- Brian Gilbertson, the veteran dealmaker who helped build BHP Billiton Ltd. into the biggest mining company, said the world faces a metal shortage as banks curb funding for projects and demand recovers from a slump.

“Companies which had been depending on drawing in capital to explore and build their operations were not able to get it,” Gilbertson, 66, said in an interview last week at the Goodwood country house 60 miles south of London. “Banks are, even today, not great lenders. The whole supply cycle has been delayed.”

While he expects the worst is over for the commodity markets, Gilbertson said his current venture, Pallinghurst Resources Ltd., will seek to avoid debt and acquisitions. Johannesburg-traded Pallinghurst invests in emeralds, platinum, manganese and iron ore, as well as the Faberge jewelry brand, which Gilbertson was at Goodwood to promote.

“We’re coming off the bottom in most of our businesses,” Gilbertson said. “I’m not forecasting some great boom lying ahead. We’re very well-positioned in some fascinating commodities” for the next 10 years, he said.

A decade-long commodity bull market turned to bust in 2008 as demand for metals, energy and grains collapsed. Banks cut back their lending in the credit crunch, while collapsing stock markets starved mining companies of capital.

Gilbertson, a South African classical-music buff, started Pallinghurst after his 2003 departure as chief executive officer from BHP, assembling what he called “unloved, undervalued assets” in the natural-resource industry. In March, Pallinghurst posted a $46.4 million loss, marking down assets to reflect lower commodity prices. The shares are down 19 percent this year.

Managing Volatility, Debt

According to BHP, conditions in the metal market are improving. The company yesterday called China’s steel recovery “fast and robust,” and forecast global demand for the metal will double over the next 15 years. Making steel requires both iron ore and manganese.

“You can’t make steel without manganese and if you can’t make steel, the world stops,” Gilbertson said. “Manganese has been through a very tricky cycle. It’s really quite difficult managing the volatility.”

As for other minerals, Gilbertson said Pallinghurst’s assets produce a quarter of the world’s emeralds, adding that there are “some signs” the diamond market is recovering.

“At the moment we have no spare capacity to take on another project,” he said. “We’re perfectly happy developing the strategies that we set out for each of those businesses. Two, three of them are coming into production right now.”

Mick Davis

At the former Billiton Plc, Gilbertson worked with Mick Davis, now CEO of Xstrata Plc, the world’s biggest exporter of coal used by power plants.

Davis is trying to merge Xstrata with Anglo American Plc, which owns stakes in the world’s biggest diamond and platinum producers, to create a competitor to BHP Billiton. South African politicians have said they’re concerned about concentration of control of the nation’s resources.

“It’s a difficult challenge, and I think the South African government will be very interested in the outcome, so there’s a game to be played there,” Gilbertson said of Davis’s move. “Mick is a hugely competent, determined chief executive. I think he’ll give it his best shot.”

To contact the reporter on this story: Keith Campbell in London at k.campbell@bloomberg.net.

Last Updated: September 17, 2009 04:05 EDT