Mick Davis’s X2 bidding for Rio Tinto’s Aussie coal mines

(Bloomberg) — X2 Resources, the private-equity firm founded by former Xstrata Chief Executive Officer Mick Davis, is in talks to buy Rio Tinto Group's controlling stake in three Australian coal mines, according to two people familiar with the matter.

The negotiations are at an early stage and any deal, which may fetch $2 billion to $4 billion, could take two months to finalize, said one of the people, who asked not to be identified because the talks are private. The Rio mines in New South Wales have positive cash flow, despite the current coal-price slump, the person said.

Such a deal would mark the latest move by Rio CEO Sam Walsh to exit less-profitable assets as the London-based company focuses on iron ore and copper. It would also be the first deal for Davis since he raised several billions of dollars from investors to pursue mining acquisitions.

Ivan Glasenberg, the CEO of Glencore Plc, explored a potential deal with Rio for the mines, including forming a joint venture, about a year ago, according to two people with knowledge of the matter. So far Rio and Glencore, which bought Xstrata in 2013, haven't reached a deal, according to those people.

The three Rio mines — Bengalla, Hunter Valley Operations and Mount Thorley Warkworth — are near mines owned by Glencore. Rio owns 80 percent of the three assets, with the rest controlled by Mitsubishi Corp., the Japanese trading house.

The three mines produced 28 million metric tons of thermal coal used for electricity generation in 2013, the last year for which data is available. They also produced almost 6 million tons of semi-soft coking coal, used in the production of steel.

The talks were reported earlier by the Financial Times.