Mick Davis is considering buying a Toronto-listed mining company as the former Xstrata Plc chief executive officer eyes fresh targets for his $5.6 billion war chest, according to two people familiar with his plans.
A deal in Canada could be a prelude to the bigger acquisition he’s been seeking for some time, the people said, who asked not to be identified because the deliberations are private. Davis’s X2 Resources is weighing an eventual bid for South32 Ltd., the miner being spun off next month by BHP Billiton Ltd. that’s been the subject of takeover speculation, they said.
In the meantime, X2 is looking at Canadian companies with copper, coal or nickel mines and is pursuing assets with a value of $500 million to $2.5 billion, said the people. Davis may conclude a deal within six months, the people said.
Hudbay Minerals Inc., Capstone Mining Corp. and Imperial Metals Corp. are among companies that X2 is studying as takeover candidates, according to the people. All three stocks advance in Toronto trading, Hudbay climbing 0.7 percent, Capstone 4.7 percent and Imperial Metals 0.9 percent.
X2, based in London, declined to comment.
The switch to smaller mining companies and assets signals a change of tack from X2. The fund has been hunting for assets from the world’s largest miners such as BHP, Anglo American Plc and Vale SA, but has been unable to reach a deal, 18 months after the fund was started.
Davis’s investment vehicle has raised cash from equity investors including Asia’s largest raw-materials trader Noble Group Ltd., private-equity fund TPG Capital and sovereign-wealth and pension funds to create a mid-tier mining company. X2 is backed by three of Canada’s biggest pension funds, which makes a deal in the North American country more attractive, the people said.
Davis considered making a bid for Vale’s nickel business and studied BHP’s thermal coal and nickel mines. He’s also bid for some of Anglo’s copper assets. None of those deals got off the ground.
X2 is also open to a joint venture with Toronto-based Barrick Gold Corp. to run its copper assets, another person said.
Barrick CEO John Thornton told the Financial Times last week that the company could join forces with a “world-class CEO” like Davis to build its copper business.
South African-born Davis, 57, is looking to repeat his success at Xstrata, where he led the management team that took the coal producer from a company with a $500 million market capitalization to one valued at $50 billion through a decade of mergers, acquisitions and expansion.
At Xstrata, Davis created a diversified mining company after completing deals with a total value of $33.6 billion. The biggest takeover was his $18 billion acquisition of Falconbridge Ltd. in Canada, the largest successful hostile bid in mining, according to data compiled by Bloomberg.
Davis began raising funds for X2 in September 2013 after Xstrata agreed to be acquired in 2012 by its largest shareholder Glencore International Plc in a $30 billion deal.