De-coded, for readers not up to speed with the latest gossip, the question is whether X2, the corporate comeback vehicle of former Xstrata boss Mick Davis, will make a move on the assets about to be discarded by BHP Billiton.

It is a delicious thought and while it seems far-fetched there are several reasons to support it as a working hypothesis, not least because:

• BHP Billiton really is pushing ahead with a wholesale clean-out of its non-core assets, either by quitting them one at a time, or packaging them into business dubbed BHP2
• the castoffs are what might be called “coal heavy” because three coal business units have been named among the assets to be dumped so BHP Billiton can focus on its “four pillars”, iron ore, copper, oil and metallurgical coal, with potash a possible fifth pillar
• Davis first made his name with Xstrata by acquiring unloved coal assets
• he has amassed a $US3.75 billion war chest in the private-equity backed X2
• some of the assets to be sold come from the company where he once served as chief financial officer, Billiton, in its time before the merger with BHP

• Davis would love to make a big bang return as a fast start on growing X2 into a business that might one day rival Glencore, the company which acquired Xstrata last year and is run by Davis’s one-time colleague, Ivan Glasenberg.

Much is unknown about BHP2, the business Hogsback likes to think of as the daughter of BHP Billiton, just as much is unknown about X2, the son of Xstrata.

It is possible, according to the chatter in the stock market that BHP Billiton’s preference is to gift-wrap its non-core assets and offer them to its existing shareholders as a complete package – which some shareholders would welcome and others would quickly sell once it started trading.

It is equally possible, after an assessment is made of the appetite of investors for a spin-off containing under-performing nickel, aluminium, manganese and thermal coal assets, that they will be sold to individual buyers.

For Davis, who has been looking for a way back into the upper echelons of the mining world the time is perfect because he has the financial backing to do a deal and BHP Billiton is a willing seller of the type of assets he wants.

It is his desire to recreate Xstrata, and re-make his reputation, which causes The Hog to lean towards a “take-it-all” bid from Davis and his X2 vehicle, leaving the sorting out to a later date.

Several factors lean towards a belief that Davis will make an offer that BHP Billiton will find hard to reject, including:

• it would be a clean exit of from unwanted assets which avoids the needs to create a new company and associated stock exchange listing
• it leaves the clean-up of under-performing assets, such as the nickel and aluminium divisions, to someone else who is prepared to swing the axe vigorously

• the Davis led X2 is keen on coal and the BHP Billiton asset clean-out is coal heavy

• the current capital base in X2 of $US3.75 billion is interestingly close to being the standard 30% equity component of a traditional resource sector financial structure which is around 70% debt and 30% equity
• the X2 capital base was, until a few weeks ago, said to be around $US2 billion with the sudden increase to $US3.75 billion a sign that interest in a big deal is growing and Davis has been able to marshal extra firepower.

If there are problems for X2 in its appeal to BHP Billiton it lies in the way BHP Billiton has gone public with its sell-off plans that show an interest in creating “deal tension”, which might flush out alternative offers while also testing the appetite of existing shareholders for a slice of a second listed company, albeit one stuffed with assets currently rated as under-performing.

The next few weeks should see that release of more detail from BHP Billiton with a formal proposal for the discard deal schedule for discussion at the company’s monthly board meetings in April and May.

Let the games being.