Wolf Minerals: The First UK Mine in 45 Years

About the company

Wolf Minerals Ltd is an ASX (WLF) and AIM (WLFE) listed specialty-metals company currently developing the Hemerdon Tungsten and Tin Project (“the Project”), a tungsten mine in Devon, Southwest United Kingdom.  The company commenced construction in February 2014 and is on schedule and fully-funded to begin production in the September quarter of 2015. The development is the first new metal mine in the United Kingdom in more than 40 years and currently the only fully-funded tungsten project in development globally.

When complete, the Project will produce approximately 5,000 tonnes of tungsten concentrate and 1,000 tonnes of tin concentrate per annum. In March 2015, the company announced a 34% increase to its proved and probable ore reserve to 35.7 million tonnes through steeper pit walls, effectively extending the 10-year mine life by a further three years. Wolf Minerals’ Hemerdon Tungsten and Tin Project is the third largest in the world and will provide at least 300 direct and indirect jobs throughout the life of the mine.

About the investment

Resource Capital Funds (“RCF”) originally invested A$2M as part of a A$4M equity raising in 2009 aimed at completing a pre-feasibility study on the Project. RCF continued to support the Company investing equity both on and off-market through to August 2011, when Wolf Minerals accepted an offer from RCF for a US$6.3 million 12-month secured development capital facility to enable the company to commence initial project development activities at the Project. In 2012, RCF provided a US$82 million development funding package to the company comprised of a US$75 million, 12 month secured Bridge Finance Facility and the purchase of a 2% gross revenue royalty for US$7 million.

This funding package allowed Wolf Minerals to continue the development of the Project without waiting for public equity market support, ensuring critical path activities were not delayed including essential permitting and approvals. It was structured with interaction from Wolf’s management team to provide the Company with a 12-month window to raise the required equity for the Project at a more acceptable share price.

In early 2014, Wolf successfully completed the main equity raising for the Project. The fundraising was done in a better price environment than otherwise would have been the case without RCF support. RCF’s participation in the raise totaled approximately A$75 million, funding from which was used to retire the bridge. RCF now hold approximately 40% of Wolf Minerals. RCF Principal Chris Corbett maintains a non-executive director role bringing experience in mining, corporate business development and investment management to the Board.

Flexible funding options

RCF is able to employ a range of investment styles and works with management teams to structure transactions that reflect the risks and opportunities associated with each company. The funding package provided to Wolf Minerals has provided the flexibility and resources needed to complete the construction phase of the Project in a timely manner.  

Tungsten: A Strategic Metal

What is tungsten?

The name ‘tungsten’ comes from the Swedish words ‘tung sten’ meaning ‘heavy stone’ in reference to the mineral scheelite. Tungsten’s chemical symbol W comes from the German name Wolfram. Wolframite and scheelite are the two naturally occurring tungsten ores important for industrial use. In its raw form tungsten is a hard steel-grey metal that is often brittle and hard to work, pure tungsten metal is shiny white and quite pliant. Its hardness in carbide form is second only to that of diamond and it has the highest melting point (at 3410°C) of all metallic elements.

The main use of tungsten is the manufacture of cemented carbides or hard metals; wear resistant materials used in metalworking, mining, oil and construction industries. It has diverse commercial, industrial and military applications including hardening steels, use in the manufacture of armaments, lighting (light bulb filaments), electronic and chemical industries. Another of its numerous applications includes the technology market where it is used in the touch screens of smartphone devices.

Wolframite, from which tungsten is derived, is also a known conflict metal in the Democratic Republic of Congo where proceeds from its production are used to fund civil conflict. To read more about RCF’s responsible investment in Africa click here.

Why is tungsten a strategic metal?

Tungsten is one of the raw materials identified by the British Geological Surveys, US Department of Defense and European Commission as a ‘critical’ raw material due to its economic importance and supply risk. They describe raw materials such as tungsten as ‘being essential for maintaining and improving our quality of life’ and as a result, securing reliable access is of a concern across all of these jurisdictions and around the world.

Strategic metals are distinct from precious metals such as silver and gold, because most are not as vital to technology and industry. They also differ from base metals, such as copper, lead, iron and zinc, in that those metals are relatively abundant in locations around the world.

Tungsten has few, if any, substitutes available in its key applications due to its unique properties of heat resistance and wear rate. China is the largest consumer of tungsten globally and also the largest supplier, according to US Geological Survey estimates it accounted for 85% of production in 2013. China’s Government regulates its tungsten industry through its Chinese Ministry of Land and Resources who delivers an annual extraction quota for the country’s tungsten production.

What is the global outlook for tungsten?

The demand for tungsten is often linked to general economic activity which makes regional gross domestic product (GDP) a helpful growth indicator. With minimal growth in Chinese domestic tungsten production, research completed by Roskill Information Services predicts that ‘China is likely to further reduce exports and increase imports of tungsten products to ensure domestic demand is satisfied. Non-Chinese sources of tungsten will have to replace falling Chinese exports and allow global demand to increase unrestricted.’

The US Geological Survey estimates also forecast that mine production from outside China is expected to increase. Their research predicts that the amount, location and timing of future production will depend on the companies’ abilities to acquire the necessary funding to complete new projects.








Interview with Chris Corbett

Chris Corbett is a Principal at RCF who is responsible for leading one of the firm’s deal teams. Before joining RCF, Chris’ early career was predominately field based as an engineer in country Australia, learning from hands on experience alongside operators.

I’ve always enjoyed solving problems but it was a BHP Science Award and a trip to BHP’s Newman iron ore operations that set me on the engineering path.  I finished school and enrolled in a combined Engineering and Commerce degree, commerce-based on advice from my parents, at the University of Western Australia (UWA). I graduated five years later with first-class honors in Mechanical Engineering and a purposely broad commerce degree with a major in general management and a minor in strategic management.

As a graduate engineer you can either go into a graduate program with a major company, join a consultant and crunch some numbers, or you get your hands dirty on site. It was the latter that appealed to me because I wanted a solid practical foundation as a complement to my tertiary qualifications. I had completed some vacation work with Byrnecut, one of Australia’s largest underground mining contractors, and was offered a role once I graduated.  It wasn’t long before I was on a plane to Mount Isa, Queensland to work as a project engineer on the M62 shaft project, a 715m deep internal shaft sink and associated haulage system fit out that started almost 1km underground.

I really enjoyed working in a small team delivering a key project on the critical path and was fortunate to be surrounded by some very experienced operators. I learned a great deal from them as a result (both technically and commercially) and was fortunate to be given a lot of responsibility early on.

Chris gained further experience both technically and academically whilst working as a mining engineer, before looking to change lanes from engineering to mining finance.

Toward the end of the project I was tasked with writing a technical paper on the delivery of the project and presented it to Byrnecut’s majority owner, Thyssen Schachtbau, in Germany which was great experience and a lot of fun. Not long after, I relocated from Mount Isa back to Kalgoorlie in Western Australia in a maintenance support and commercial analyst role.  At the time we were looking at improving some of the reporting systems so plenty of analytical work.  While in Kalgoorlie, I completed a Graduate Diploma in Mining at the Western Australian School of Mines (WASM) to add formal technical qualifications to the mining engineering knowledge I’d gained on site.

My work with Byrnecut took me as far as Portugal on a due diligence trip for a client led by a mining engineer turned investment banker. In hindsight, it was a pivotal moment for me since the more I listening to this guy speak, the more I realised that by staying in a focused engineering capacity I wasn’t likely to be exposed to the funding related decisions around a mining business. I felt like I was missing out on part of what I wanted to be doing.

I resigned from Byrnecut soon after and spent a few months working for an engineering consultant in Perth but I was more interested in breaking into a finance-orientated role.  I remember spending most lunch breaks arranging and taking meetings with finance professionals seeking advice and contacts and this ultimately resulted in a job offer from Wesfarmers Business Development as a Financial Analyst (and more study – I completed a Graduate Diploma in Applied Finance and Investment). I was fortunate to work with some very commercially astute people who were also great teachers. We evaluated at many different types of businesses in a range of sectors including agriculture, mining, retail and energy. It was a great opportunity and gave me a solid grounding in business generally whilst developing my understanding of detailed commercial practices through being involved in competitive tender processes, providing financial analysis to support business cases, negotiating term sheets and solving commercial issues.

An opportunity with RCF came up during Chris’ time back in Perth. Chris provided some insight into the dynamics of his team and the benefits RCF brings to the portfolio companies it invests in.

I bumped into James McClements (RCF Managing Partner) around seven years ago at a leadership course and was later offered a role. The focus was specifically mining (compared to the broader focus at Wesfarmers) and I felt like I was back in my element then two years ago I started leading one of the investment teams. When it comes to leadership everyone has a different style, my style is collegiate and practical which comes from experience working on site and at Wesfarmers. We employ very intelligent and motivated people and I trust my guys to deliver on the aspects of a deal under their watch, with me it’s a team effort.

When it comes to what RCF brings to portfolio companies, I believe one of the biggest benefits is our patience and the longevity of the funds. We buy into business strategies and support management teams to successfully deliver. People might say ‘everyone says that’, but we’ve got the track record that differentiates ourselves from other players in the market. Mining is a cyclical environment, a lot of investors simply walk away when markets turn or sit on their hands. We not only see these markets as an opportunity to make new investments but also to support existing portfolio companies to take advantage of the conditions.  Portfolio companies also get access to our experienced team of technical professionals around the world which can have great financial and operational benefits.

I see RCF as having the flexibility to adapt quickly as market conditions change. If we see a quality asset for a commodity with interesting market dynamics we can take the long term view and support its development. Often public markets can’t, so we bridge the gap acting as a catalyst to execute on deals and create long term value. This flexibility and patience leads to the development of some different and complex projects that might not otherwise be able to secure all the necessary pieces of the funding puzzle. With Wolf (Wolf Minerals), I’m watching the first new metals mine in the last 45 years being built in the UK, which is a direct result of this approach.

Market Update From RCF
James McClements, Managing Partner

It remains a tough environment for the mining sector with falling commodity prices and weak public markets impacting cash flows of operating companies and the capacity of emerging companies to progress development of projects. Having been involved with the mining sector for more than three decades, the current cycle, while painful for some at this time, is not unique. As a patient investor, we take a long term approach to the market and know that cycles come and go, so we certainly expect to see the sector recover at some point. We are actively supporting portfolio companies, both to maintain intact ownership and tenure of assets for the benefit of all shareholders, in addition to our core role of funding companies to develop assets and achieve cash flow as soon as practicable, even in this difficult financing environment.

Studies undertaken by RCF show that value is created by achieving cash flow and demonstrating the availability of construction financing. These studies have demonstrated over the past 3-4 years that the  share price of companies 90 days after announcing a positive study have a high probability of falling more than 20%, likely in response to the gap between capital requirement and funding capacity.

We can’t say how long it will be before the sector sees a recovery but it will eventuate at some point as the natural process of attrition kicks in in an oversupplied market. Some commodities that experienced price falls several years ago are already seeing tentative signs of recovery.  In the meantime, we will continue to support good quality assets and management teams and partner with them to progress the development and construction of projects to operating outcomes that will deliver benefits to all shareholders. For good assets it is highly dilutive to existing shareholders to fund piecemeal development work over many years that does not meaningfully contribute to achievement of cash flow. It is best to take a fully funded approach to project development.

This quarter, we’ve provided a new series of ‘In Focus’ and ‘Case Study’ material about a portfolio company with plenty in the pipeline. RCF initially invested in Wolf Minerals several years ago to enable the company to complete initial feasibility studies for its tungsten development in the United Kingdom. It is now well into the construction phase and on schedule to commence production in the September quarter of this year.

Wolf Minerals: The first UK mine in 45 years

Tungsten: A strategic metal

About our people: Chris Corbett, RCF Principal

We will be watching mining industry trends around the world closely and look forward to bringing more news and updates over the coming months.

Firestone Diamonds PLC Proposed Standby Debt Facility

Resource Capital Funds advises that it recently reached an agreement, subject to shareholder approval, with Firestone Diamonds PLC (“Firestone”) to provide a standby debt facility and restructured mezzanine facility for the construction of its Liqhobong Mine Development Project in Lesotho, Africa. This investment follows a significant equity investment by Resource Capital Fund VI L.P. in Firestone during 2014. Resource Capital Funds Managing Partner, James McClements, said that the standby debt facility would provide the company with a buffer, if needed, in developing its project.

“It has been a tough time recently for the mining sector with falling commodity prices and weak public markets impacting cash flows of operating companies, and the capacity of emerging companies to progress development of projects. At RCF we take a long term view of the market irrespective of price fluctuations so are pleased to support Firestone in the development of its Liqhobong Mine Development Project.”

Click here to read the full announcement from Firestone Diamonds PLC.

Related articles

–          Market update from RCF

–          Responsible mining investment in Africa


Interview with James McClements

RCF Managing Partner James McClements co-founded the firm in 1998 with a vision to enable resources development through private equity participation. Today he maintains a strong passion for the mining and resources industry which began during a childhood spent in the Pilbara.

“My family moved from Perth to the town of Dampier in the Pilbara in 1968 which set the scene for what would ultimately become an extensive career in mining and resources. The family (all seven of us, my parents and my four siblings) moved to Newman in 1975 where I completed high school before beginning my professional career with a BHP Limited traineeship that allowed me to complete an Honours degree in Economics at the University of Western Australia (UWA), which was certainly instrumental in setting me on my career path.”

“During and post University, I worked for BHP primarily at its Mt Whaleback iron ore operations in Newman, where some early entrepreneurial inclination saw me invest in what became a successful video store venture. Moving on from there I spent time travelling around Australia before returning to Perth where I worked in merchant banking at Standard Chartered Bank. Eager for a challenge and to test myself in a bigger market, I accepted a role in Sydney with NM Rothschild & Sons as an analyst in the mining project finance group. In Sydney I also met my wife, Meredith, also from humble Australian country origins.”

“Rothschild was a great environment and training ground to be involved with pre project finance mezzanine style loans. This played to my desire to be exposed to transactions with a greater perceived risk but with corresponding return potential. It was at this time I met Hank Tuten who was heading to the US to run Rothschild in North America after successfully leading and developing Rothschild in Australia and was asked by him to join the Denver office where the relationship continued to build. Hank informally became a mentor to me that ultimately led to a conversation in 1997 that became the catalyst for the creation of RCF.”

After time spent working at Rothschild with Hank Tuten, the pair had identified an untapped opportunity in the resources sector. Over the next year, the first fund was raised and the concept that is now RCF began to take shape. 

 “By 1997 the investment orientation had begun to change at Rothschild, adjusting to suit its preferred environment and reduce the level of risk on their balance sheet. This essentially was one of the catalysts for my discussions with Hank about how we could continue doing some of the business and transactions that Rothschild had been doing at the time but was  now pulling back from. Sitting down with Hank in Vancouver in September 1997, having previously discussed the concept of RCF and private equity, we looked at how to raise pools of capital to financially support mining companies through the engineering study phases of their projects. Hank and I began to map out what would become Resource Capital Funds.”

“The backing and ownership of RCF by Rothschild was critical in getting the initial meetings we needed and opened doors to attract investors. We started fundraising in early 1998 with an initial close in May 1998 which allowed us to make our first investment while fund raising continued until early 1999. In the end we raised $41 million, slightly short of our $50 million target from primarily six very brave investors that still largely remain with us today.”

“We were well advanced in raising our second fund in 2000 when circumstances at Rothschild changed even further and they chose to exit the private equity business. So three of us; Hank, me, and another of Hank’s team in New York, spun Resource Capital Funds off from Rothschild to become Management owned.”

RCF was gaining momentum in its own right and the firm’s reputation as a specialist in mining and a strategic partner was forged as new funds were established.  

“We raised $82 million in our second fund over 12 to 18 months while completing the spin off from Rothschild with a final close of RCF II in June 2001.”

“RCF has since prospered as an independent firm, having raised its sixth fund in 2013 with committed capital of $2.04 billion. The senior management group, several who worked together at Rothschild, continues to lead the organization and as a firm we are also very consciously looking to develop our own team. We hire very bright people with a passion for the industry and we go a long way in nurturing them to develop the skills necessary to be successful as investors in the minerals and mining sector. If external people engage with RCF we hope their takeaways are that they’re not only impressed with the depth and skill of the team but also our passion for the industry, which isn’t going to change.”

“The leadership team, in many instances, has been involved in the mining industry for over 30 years and experienced many mining commodity and public equity cycles.”

“Going back to the early 1980s while at university and working during summers up in Newman, I recall it was a very tough time for the iron ore industry with very low iron ore prices and the industry going through significant structural changes. The industry is a cyclical business and those that have been through the cycles appreciate that you’ve got to be patient and you need to take the long term view. With this in mind we look to work with companies with good assets and good people and we support them even when the times are tough.”

With RCF now investing its sixth fund valued at more than $2 billion, James and his wife, Meredith, are passionate about making opportunities available for others through their philanthropic efforts.   They have spent some time and resources assisting local educational and other Australian institutions.   

“For us, philanthropy generally came about through the nature of our limited partners and the exposure I have had to them over time. We’re dealing with very large endowments, foundations and charitable trusts in the US and one of the very positive aspects about a firm like RCF is if we’re successful, we’re actually supporting a lot of great underlying causes.”

“I certainly remain interested in supporting the development of new businesses and the other interests we have are orientated towards supporting a range of educational institutions. If I look back at my career it was the scholarships and traineeships that have helped me along the way. So we want to find ways to recognize that we have benefited from others generosity and feel that there’s a responsibility to do the same. At the end of the day Meredith and I, enjoy doing that.”

Alloycorp Mining Announces Arrangements for US $435 Million in Financing

Resource Capital Funds (RCF) recently provided Toronto-based, Alloycorp Mining, a conditional equity investment commitment of US$140 million for the company’s construction capital requirements. The molybdenum developer, whose Avanti Kitsault Project is located approximately 120 kilometres north of British Columbia, will use an initial US$50 million of the commitment to repay the outstanding secured bridge loan facility with RCF.


Visit Alloycorp Mining’s website to read the full release: