Former Xstrata Chief in New Venture

LONDON â€" Mick Davis, the former Xstrata chief executive who lost out in the Glencore takeover, is attempting a comeback.

Trading house Noble Group and the American private equity firm TPG will each invest $500 million in a private mining venture led by Mr. Davis, according to a statement on Monday. The business, called X2 Resources, is intended to create a “mid-tier” metals and mining company.

Mr. Davis is credited with expanding Xstrata from a small collection of mining assets into one of the world’s largest mining groups. He was ousted as chief executive earlier this year after the company’s takeover by its largest shareholder, Glencore International, the Swiss-based trading house founded in 1974 by Marc Rich.

Mr. Davis was originally supposed to be chief executive of the combined company, now known as GlencoreXstrata, but after an improved offer, Glencore chief Ivan Glasenberg became ceo.

The name X2 appears to be a not-so-subtle suggestion that the new venture is an effort to replicate Mr. Davis’s success at Xstrata. Whether a similar opportunity exists today in mining is open to question. In his former role, Mr. Davis was able to cash in on the huge rise in the price of iron ore, copper and other commodities in the early part of this century generated by a building and industrial boom in China and other emerging markets.

“He was the most bullish of C.E.O.’s in the biggest bull cycle we have ever seen,” said Paul Gait, a mining analyst with Bernstein Research in London. “We are not going to see that kind of structural change again. ”

After the boom years, the mining industry has been rocked by slower demand and cooling prices. Deals concluded at high prices no longer look smart and most of the chief executives of large mining companies have lost their jobs. Mr. Glasenberg, who is more trader than miner, is one of the few left.

Mr. Gait believes that X2 could profit from picking up assets that other mining companies, which are under pressure financially to raise money to fund ongoing projects, are forced to sell cheaply in a downturn.

But X2 may need more capital than it has now. Even after the boom good mining assets tend to cost several billion dollars, possibly putting them out of X2’s reach. X2’s statement says it is “in discussions with a further select group of potential investors”.

X2 will also try to use Noble’s trading smarts to gain market intelligence in the way Xstrata is thought to have worked with Glencore.

The industry believes Xstrata’s close ties to Glencore gave it a strategic advantage in making decisions on how to deploy capital. In return, Noble will be given “preferred” status in marketing whatever output X2 Resources eventually produces, according to the statement.