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MZI Resources Ltd. Completes Commissioning and First Product Shipment to Customers

Resource Capital Fund VI L.P.’s (“RCF VI”) portfolio company, MZI Resources Ltd., announced recently that it had completed commissioning and exported the first shipment of mineral sands at its main Keysbrook and Picton plant facilities in Western Australia.

MZI Resources’ shareholders initially approved a $58 million funding package from RCF VI in November 2014, negotiated to support the company’s completion of construction, commissioning and ramp-up at its Keysbrook project through to full production and positive cash flow.

On December 21, 2015, MZI Resources announced its first shipment of Keysbrook mineral sands to customers, approximately one month ahead of the original schedule. Commissioning was completed under budget several days earlier.

RCF Principal, Chris Corbett, said that the firm is pleased to support MZI Resources, particularly through the integral construction phase to the project completion milestone, which will eventually enable positive cash flow for the company.

“RCF is a strategic partner that consistently supports companies throughout market cycles and given that resources is our passion and our area of expertise, it’s always particularly positive when a company that we’ve supported through the development stage begins production,” said Mr. Corbett.

Please visit the MZI Resources website for more information and to read the full company release.

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Strategic Investments Provide Valuable Dimension to RCF Portfolio

When RCF began investing its first fund, the US$41.4 million (M) RCF I almost two decades ago, investments ranged up to $7.7M in size. With US$2.04 billion available to invest in Fund VI, it would be easy to ignore smaller opportunities.  RCF, however, continues to make investments at these levels for a variety of reasons.  These particular investments look for opportunities where a strategic benefit can be gained and may be from any number of areas such as a new commodity or country, an attractive opportunity not yet ready for material funding, or a new deal structure.

As the funds have grown substantially over time and the size of the investments increased significantly to include more advanced projects, RCF has made a conscious decision not to exclude strategic investments from its portfolio which make valuable contributions to the pipeline of new projects in the industry.

RCF Partner, Peter Nicholson, explains that as with any potential opportunity, RCF has the innate ability to be flexible and it is far better for potential portfolio companies to approach the firm with what they need to succeed rather than RCF try and define what may suit.

“When it comes to strategic investments, the benefits for RCF and our portfolio companies are numerous and include the opportunity to establish a relationship and understanding of management teams in the very early stages of a project’s development,” said Peter.

“We also have a deep understanding of a variety of countries as an investment jurisdiction and can support a company’s strategy as their projects are advanced, including the challenges presented throughout exploration, development and funding options through to cash flow from production.”

“Some of our strategic investments made to date have allowed us to gain an understanding of operating in countries such as Russia, India, Cambodia and the UK; with RCF being the driving force behind the first hard rock metals mine development in England in 45 years.  That particular investment, Wolf Minerals Limited, started as a strategic investment into study work of US$1.8M and has resulted in an RCF investment of US$105M and the mine commissioning in late 2015.

Strategic investments remain an important part of the firm’s investment consideration process and remains committed to exploring investment opportunities regardless of initial size.  Since RCF I in 1998, RCF has consistently invested in mining companies throughout market cycles and operates the firm with integrity, discipline and a view to creating long term value for all stakeholders.

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Partner Profile, Pete Nicholson

Pete Nicholson is one of RCF’s seven partners and is responsible for running one of RCF’s two Perth deal teams.

I’ve spent thirteen years with RCF now and in my current capacity head up of one of our two Perth based deal teams. Each deal team is responsible for identifying and sourcing new investment opportunities as well as managing our existing investments and making sure the right communication is happening, funding time frames and expectations are met as well as completing technical due diligence and legal obligations as part of our investment process.

Our philosophy when it comes to managing our investments are a ‘cradle to grave’ responsibility, so that when you start out with an investment it’s your responsibility to facilitate it all the way through. We don’t have someone who sources, and then someone who executes and someone who manages, it stays with us the whole way. We do this because we don’t walk into a deal thinking ‘we’ve done our due diligence so we know everything’, we understand that it’s necessary to spend anywhere up to 12 months with a company before you really understand how they operate. We think that by having the same person involved the whole way through the process provides continuity and learning which can be built upon for a better outcome for all stakeholders.

 

Pete has an undergraduate degree in engineering from the University of Queensland and started his career as a graduate with Western Mining Corporation (WMC) before undertaking a variety of operations roles and later becoming the company’s Underground Manager at its Longshaft mine. At a subsequent role with Canadian based nickel producer LionOre at their Western Australian nickel project, Pete was responsible for constructing the mine and its infrastructure.

Starting out as a graduate at WMC, it was necessary to complete 12 months’ underground experience in order to obtain your first class mine manager’s ticket. This included haulage, handing explosives, drilling and mobile plant operator among other roles to provide a well-rounded understanding of the underground mine operations.

After the initial 12 months, I went on to become a production and ventilation engineer and later moved into different planning roles, then shift boss for a while before becoming the underground manager at Longshaft. When the operation was flagged for sale, I left to join Canadian company LionOre and as Registered Underground Manager had significant responsibility for construction and development of the Emily Ann nickel mine.  I was on site during the year it took to take the project from a set of feasibility documents through to production, overseeing construction and commissioning.

 

Having completed postgraduate study in applied finance, majoring in investment analysis and a diploma in financial planning, Pete joined RCF as an analyst in 2003. Pete credits the valuable experience gained in his underground mining roles with being able to provide cost savings and advice on efficiency to portfolio companies.

Pete: Using the underground experience I’ve gained, we were able to help an investment held in Peru optimize its operations by improving its processes to reduce costs and increase production. The company was an existing operator with a number of underground mines and were very good miners but were insulated and unaware of what was happening at a global level. Understanding mining at an operational level helps to quickly identify not only the practical issues and risks faced by companies, but also to recognize the opportunities available.

Ultimately RCF take the view that whilst our capital is the same as the next investors we hope to provide more than just dollars and the sensible question that should be asked by any company is ‘why should I take RCF’s dollars ahead of somebody else’s?’ The real differentiator is that our people have a unique skill set, we’ve been in mines and we’ve operated mines and can add value to our portfolio companies beyond simply providing funding.

As an organisation, RCF has held majority ownership in mines and assisted management in both set up and operation of mines, we really understand the industry and don’t get frightened by short term issues whether it be macro issues concerning commodity prices or foreign exchange rates or micro issues that are mine centric. We understand that it is helpful to have someone who has completed their due diligence and understand a good asset.  Rather than walk away from an issue we’ll work through it and use our global network in terms of other means of raising debt or equity and providing advice on the best approach. It’s our depth of experience across the financial and resources industry that really sets RCF apart.

 

During his time as Captain of the First Response Mines Rescue Team on site in Kambalda, Pete recognized the important contribution mining operations can make to the community in rural locations.

For eight years after I graduated, I worked across nine different mine sites, living both residentially and in a fly in fly out role. I recognize the importance of the provision of services to remote or rural communities that the development or presence of mining often brings. During my time living in Kambalda, I was the Captain of the First Response Mines Rescue Team. This involved providing emergency response not just for any incident on site but providing back up to the community’s emergency services. During this period, I was also a volunteer fire fighter and a qualified industrial ambulance officer.

I was lucky enough to meet my wife during my time in Kambalda. She is a geologist and was working as part of the exploration team at another site. Personally, I found that I preferred being residential over having a FIFO roster during my time working on site as a Mining Engineer. Living as part of the broader community has its advantages in terms of quality of lifestyle, although it is not always a possibility for some companies or locations.