Can Mick Davis build another Xstrata? – by Stephen Bartholomeusz (Business Spectator – March 6, 2015)

Mick Davis’s announcement overnight that his X2 Resources has raised $US5.6 billion could be a signal that he is about to begin the much-anticipated reprising of the game-plan that created Xstrata. Or else it could be another false dawn.

X2 announced that it had successfully completed its “initial” capital raising, securing $US5.6 billion in equity capital from a small number of “word-class” investors to create a new “mid-tier diversified” mining and metals group.

It described the raising, which comprises $US4 billion in committed capital available for immediate drawn-down and $US1.6 billion in conditional equity, as “one of the largest ever first-time raises by a private vehicle”.

The uncertainty about what the raising foreshadows relates to three earlier announcements by X2. The first, in 2013, not long after the merger/takeover of Xstrata by Glencore that saw Davis ousted as chief executive, announced that Noble Group and TPG had agreed to invest $US500 million each in X2.

The second, in March last year, was an announcement that X2 had secured $US2.5 billion in committed capital and another $US1.25 billion in conditional capital from five investors, including Noble, TPG, sovereign wealth and pension fund investors.

The third, in October last year, was that X2 had secured a further $US1 billion in funding and now had $US3.3 billion in committed equity and $US1.5 billion in conditional capital.

It isn’t clear whether the latest statement represents additional capital or reflects an incremental, raising of $US700 million of committed equity. It also isn’t necessarily certain, given the inertia of X2 thus far, that the “completion” of X2’s capital raising process fires a starter’s gun for large-scale investment.

Davis himself said overnight that X2 would continue to review a number of opportunities on the resource sector but, while value-creating opportunities were increasingly evident, the long-term nature of his strategy provided the group with flexibility to target those where it saw the greatest potential for value creation.

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