Ex-Xstrata CEO Davis Raises $1 Billion From Noble, TPG
Noble, Asia’s largest raw-materials trader, and TPG agreed to each invest $500 million in the new company X2 Resources, according to a statement today from X2 Partners, founded by Davis and former Xstrata Chief Financial Officer Trevor Reid.
X2, also in talks with other potential investors, will use the funds to start a diversified mining and metals group. Davis, 55, and Reid, 52, were part of the team that set up Xstrata, a company that grew 100-fold to a market value of about $50 billion after 10 years of mergers, acquisitions and expansion.
“This is a great time to acquire assets in the mining sector,” said John Meyer, an analyst at London-based SP Angel Corporate Finance LLP. “The majors continue to offer sub-scale assets, including some better quality but smaller operations as they refocus on their larger cash generators.
‘‘Investors who follow Davis and other turnaround specialists in the sector could make a killing,’’ he said.
Barrick Gold Corp. (ABX) ex-CEO Aaron Regent and former JPMorgan Chase & Co. banker Lloyd Pengilly are among those raking through unexploited mining assets. BHP Billiton Ltd. (BHP) and Rio Tinto Group (RIO) are leading asset disposals and may sell businesses and stakes amounting to as much as $35 billion, Deutsche Bank AG says.
Glencore International Plc (GLEN), which in May completed the $29 billion all-share purchase of Xstrata, aims to sell Las Bambas, a Peruvian copper project it inherited from the takeover, to meet the terms of Chinese regulatory approval for the deal that created the world’s fourth-largest mining company.
X2 ‘‘will bid against the Chinese or maybe even with the Chinese for the Las Bambas copper mine in Peru,’’ Meyer said. ‘‘I wonder if they would also look to move into certain bulk commodities, e.g. iron ore and bauxite in Africa. There are opportunities for quick and large returns in this area for well-planned projects with relatively little outlay.’’
For Noble, the deal is an opportunity for the Singapore-listed company to mount a challenge to Glencore, according to Paul Gait, a mining analyst at Sanford C. Bernstein Ltd.
‘‘Noble sees a once relatively smaller-scale trader now becoming the fourth-biggest mining company as well and feels a strategic threat to its ability to secure tonnages going forward,’’ Gait said. ‘‘The need for flow of material seems to force traders to go upstream, and Noble in Mick certainly finds the track record and experience to deliver that.’’
Noble’s income from supply chains gained 12 percent in the second quarter as it continued to source more coal and added new hires to its oil and gas business, it said Aug. 8. The trader’s net income slid 68 percent to $62.8 million in the three months ended June 30, mainly from an agricultural-unit loss, it said.
Chinalco Mining Corp. International (3668), MMG Ltd. (1208) and Citic Resources Holdings Ltd. (1205) are among Chinese companies studying offers for Las Bambas, which may be valued at about $5 billion, according to people with knowledge of the process.
Regent’s Magris Resources Inc. is considering a bid, people with knowledge of the matter said last month. Jiangxi Copper Co. (358), China’s largest producer of the metal, is interested in Las Bambas, Company Secretary Pan Qifang said the same day.
X2 investors expect a repeat of the success Davis had with Xstrata, Meyer said. Noble will be X2’s preferred marketer and provider of supply-chain management and logistics services, while TPG, overseeing $55.3 billion of assets, will bring deals and access to investors, according to the statement.
Davis left as CEO of Glencore Xstrata in May, opting not to stay in the role for six months after the takeover, as had been planned. Glencore chief Ivan Glasenberg, 56, became CEO.
Goldman Sachs Group Inc. acted as financial adviser to X2 in the Noble-TPG transaction, according to the statement.
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