LONDON Former Xstrata Plc
chief executive officer Mick Davis has hired Goldman Sachs
Group Inc. as part of a plan to raise a major mining
fundpotentially worth billions of dollarsand could
make a play for the Las Bambas copper project in Peru,
AMM sister publication Metal Bulletin
"First up is likely to be Las
Bambas, being sold by Glencore as part of the Chinese
(authorities) condition (for approving the merger between
Glencore and Xstrata)," an analyst said.
Davis viewed the 400,000
tonne-per-year Las Bambas project, which was due to be
commissioned at the end of 2014 after an estimated $5.2 billion
investment, as a flagship project for his former company.
"Second choice (could be)
International Ferro Metals (Ltd.) for its
ferrochromethats where Xstrata started in the
ferrochrome business," the analyst added.
"There is so much opportunity
coming out of Rio Tinto (Plc), BHP (Billiton) and Anglo
(American Plc)its like feeding chum to a school of
starving sharks," the analyst said.
"I heard Daviss team had
been offered an initial $200 million, but I suspect their
broker will turn this into pledges of $1 billion in fairly
short order and this will leverage, with revolving credit and a
bond issue, into several billion on the back of a decent asset
acquisition," he told Metal Bulletin.
The total fund is likely to be
in the region of $3 billion to $5 billion once the structure is
in place, the analyst said, but added that he is not sure
whether Davis will use a "pure fund structure."
"Im not sure it is so
flexible for managing mining assets," he said.
It has been thought likely since
last year that Davis would raise funds to invest in mines and
Davis fuelled such speculation
when he told Metal Bulletin in an interview earlier
this year that there is still great scope for creating value in
the resource sector.
"I think there are a number of
companies out there that are starved of capital and maybe
dont have sufficient management expertise and experience,
that a combination of the right amount of capital, the right
amount of management, would help them actually move up the
value curve significantly. So I think there are great
opportunities there, and I think theres a space to play,"
he said shortly before the deal with Glencore was complete.
Daviss experience and
backing could help make him a "true master" in the industry,
according to the analyst, with the potential to bring about
major performance improvements for mining assetsas he did
Davis, one of the executives instrumental in creating
London-based BHP Billitonset up St. Peter Port,
Guernsey-based Pallinghurst Resources Ltd. to invest in natural
resources in 2007. It had assets of around $400 million at the
end of 2012.
But other analysts have been
quiet on the subject so far, as further concrete information on
Daviss plans has yet to emerge.
New York-based Goldman Sachs
declined to comment on the reports.
"I know the common
speculationa fund, with Goldman Sachs onboard to help,
maybe some Middle Eastern money, but in any case, not publicly
listed, to buy mining assetsI dont have any other
insight than these public rumors," another analyst said.
A number of others declined to
venture even this far.
"His new company is called X2
Resources, I believethere must be a clue in that," a
third analyst said.
Aside from Las Bambas, there are
numerous possibilities for Daviss as-yet-hypothetical
fund, especially as mining companies look to trim their
portfolios by divesting non-core assets.
The majors, such as London-based
Rio Tinto and Anglo American, are already in the process of
selling off certain assets. Indeed, Ivan Glasenberg, now the
chief executive officer of Baar, Switzerland-based Glencore
Xstrata Plc, has said the companys greenfield assets will
be the first to go.
This means Davis will be
presented with a vast array of potential acquisitions.
However, the state of the
sectorwhich has been blighted by falling grades,
diminishing returns, declining prices, weak demand and even
weaker investor interestmeans that such a venture is not
without risk, industry observers pointed out.
In his exit interview, Davis
highlighted the way in which he had tackled a comparable
challenge through the development of Xstrata.