Builder of Xstrata eyes Rio’s Hunter coal assets

Mick Davis formed private equity vehicle X2 two years ago and has US$5.6bn in financial commitments from his backers burning a hole in his pocket.

Speculation has been rife on where he would deploy his funds and leaks to the London financial press suggest that he aims to go back to his thermal coal roots with the purchase of Rio Tinto’s Hunter Valley thermal coal mines.

Davis is talking to Rio about a deal which Bloomberg says could be worth US$2bn to US$4bn.

However, looming in the wings is Glencore whose Hunter Valley mines border, in some places, Rio’s assets.Glencore has talked to Rio before about a deal, but with no agreement on price.

Glencore’s boss, Ivan Glasenberg, believes his firm’s mines are best positioned to maximise synergies with Rio’s.

In October 2013, Rio Tinto sold its 50.1 per cent stake in the big Clermont thermal coalmine in Queensland to Glencore and Sumitomo for just over $US1.05 billion.

Rio Tinto is believed to be cool on parts of its coal portfolio, which, including Queensland coking coal mines, is valued at around US$3.1bn. It recently moved management of its coal assets to its copper division.