The Deal: Former Xstrata CEO Launches Mining Acquisition Vehicle

NEW YORK (The Deal) -- Former Xstrata CEO Mick Davis will make his return to the mining sector with X2 Resources, a startup venture that aims to buy mid-tier mining assets with $1 billion of funds from buyout shop TPG Capital and commodity trader Noble Group.

Davis announced the new venture on Monday, Sept. 30, five months after he officially left Xstrata following its acquisition by the-then Glencore International.

"The X2 Resources investment proposition is to create a new mid-tier diversified mining and metals group by ... acquiring assets and businesses at an opportune time in the cycle," the company said.

TPG and Hong Kong-based Noble will each invest $500 million in the venture. Other investors could join them after X2 Resources said it was still in talks with a "select group of potential investors."

Davis was initially due to take over as CEO of Glencore Xstrata following the takeover of his company by its largest shareholder, but lost control of the deal and that position after a shareholder rebellion over deal terms and executive pay. That rebellion ended with an improved offer by Glencore and the ousting of Davis, who was replaced by Glencore CEO Ivan Glasenberg.

Davis' new venture will see him team with one of Glencore's main trading rivals in the form of Noble, which will be installed as X2 Resources "preferred marketer and provider of supply chain management and logistics services," according to a statement made by the two companies.

South African-born Davis has ample experience acquiring assets and building a diversified mining company. He took over as CEO of Xstrata in 2001 a year before the company was seeded with Glencore's Australian and South African coal assets and listed on the London exchange. He subsequently oversaw a 100-fold increase in the company's market capitalization; much of it fuelled by acquisitions of disparate mine assets ranging from copper to zinc to vanadium.

Former Xstrata finance director Trevor Reid is also part of the new venture.

Goldman Sachs acted as financial adviser to X2 Resources.

Written by Paul Whitfield