pdacc

Post 2017 PDAC discussion

The Prospectors & Developers Association of Canada (PDAC) is one of the premier international events for the mining industry. PDAC is held annually in Toronto in early March. 

PDAC is the world’s largest mining and exploration convention, with more than 24,000 attendees this year from across the globe. Participants from the Americas, Africa, Europe and elsewhere brave the inclement weather to travel to Toronto in March for deal making and to promote doing business in their respective countries. This year RCF had a 20-person strong contingent from our Denver, Toronto, and Santiago offices in attendance.

A happy coincidence is that our Toronto office is a mere five minute walk from the convention centre. This enables us to have companies come to our office, rather than scrambling to find a place to meet (which can be a challenge during the convention). We can efficiently meet with management teams, investment bankers and commodities consultants on our “home turf”, increasing the number of people we can connect with over the course of the convention.

For the second straight year, RCF hosted a booth on the trade show floor, the only investment fund to do so.  Tucked in between big and small mining companies alike, we were a magnet for companies that were in search of capital for advancing their projects. We also find the booth attracts numerous individuals who are curious about a career in private equity. We are more than happy to spend some time with them, as it is an ideal opportunity for recruiting and to highlight some of the university programs we support through scholarships and internships. We also held our seventh annual dinner in which 60 guests had an opportunity to catch up and discuss our sector. Given the dinner’s informal setting and the close knit nature of the business, most invitees make time in their busy PDAC schedules to attend our event every year.

The mood at PDAC this year was the polar opposite of a year ago. Last year the sector was four years into a prolonged industry slump. The mood was subdued, with many smaller exploration companies scrambling to find “keep the lights on” funding. This year’s sentiment was considerably more buoyant, with many companies focused on renewed exploration spending and a desire to replace and grow their resource bases. Some capital is slowly becoming available to the sector after a long hiatus and a new sense of optimism for the future is palpable.

 

Private equity will continue to invest in the mining industry

 RCF has been investing in mining for nearly 20 years, through good times and through tough times. This is what we do. We are a group of mining professionals who are in this for the long run. The opportunity set is broad and deep and there are always great projects to invest in, regardless of where we are in the investment cycle.

We have found that the private equity style of investment is well suited to investing in the mining space. We are a source of patient capital and are comfortable operating in this cyclical industry.

 

RCF is very active in Canada

 RCF has carried out a tremendous amount of investment activity in Canada both in the past and more recently. Several of our larger deals in RCF VI, the current fund, are in Canada — TMAC Resources and Riversdale Resources.

RCF recognizes Toronto as a global financial hub for the mining industry and understands the importance of having a physical presence here, especially given the number of mining companies in Toronto. RCF is here for the long haul, and we will keep working with companies that have great assets and strong management teams to maximise the value of those assets for all stakeholders.

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David_Thomas

Interview with RCF Managing Director Canada, Dave Thomas

Dave Thomas is a Partner and Managing Director of RCF’s Toronto office. He joined RCF in 2010 and was tasked with establishing the office and building RCF’s in-country presence.

Toronto is considered one of the key global mining finance hubs. On the heels of closing RCF V, RCF’s senior management believed that the timing was right to establish a Canadian branch head and that it made sense to hit the ground running by hiring someone with a deep understanding of the local market and with an established network within the mining industry. I was at a point in my career where, after spending the previous 16 years in investment banking, the idea of acting more as an owner of investments rather than as a middle man, connecting buyers with sellers, was an attractive proposition.

After coming on board in 2010, I was tasked with setting up an office in Toronto. Sourcing space in a new building that was a bare concrete shell in an area that was considered, literally, “on the wrong side of the tracks”, I worked with the architect and designers to come up with a modern space that would suit our needs for the coming years. From touring the furniture factory, purchasing and hanging artwork and buying the coffee maker, I got us up and running in under four months. It was great fun!   Fast forward to today and we have just expanded our square footage by half and added a fourth person to the office. We are also a “home away from home” for the many RCF people who visit Toronto regularly to meet with mining company management teams, attend board meetings or participate in conferences. Having a comfortable work space while in Toronto is important for our team, given how much time we collectively spend on the road each year.

  

Dave started out as an exploration geologist working in northern Canada. When the opportunity presented itself, he moved into the mining investment world and pursued a career as an equities analyst and subsequently in institutional sales.

In keeping with a common RCF theme, my background is on the technical side of the mining industry. I actually got my start as a field assistant in a remote corner of northern Ontario when I was still in high school. This experience of spending the summer outdoors as part of a team confirmed my desire to pursue undergraduate and graduate geology degrees followed by a career in mineral exploration.

Following 10 years of gold, copper and zinc exploration in northern Canada, I was offered an opportunity to move to the investment side of the mining industry, working as a geologist for a Vancouver, BC-based investment bank. Although I was hired for my ability to interpret exploration results, I was fascinated by valuation and investment evaluation, which led me to a career as a gold analyst. Over the next seven years I covered a variety of large and small Canadian gold companies which involved numerous visits to projects around the world. I then transitioned into institutional equity sales, culminating with a specialty mining sales role at one of Canada’s bank-owned investment dealers.

When RCF contacted me, I possessed only a rudimentary understanding of private equity, as most of my clients were mutual, pension and hedge funds. However, I was intrigued by the role on offer because it enabled me to get back to my technical “roots” in a manner that wasn’t possible in my sales role. I was attracted to RCF’s “patient capital” approach to investing whereby short-term market fluctuations are less important than longer-term trends. I was also impressed by the wealth of mining experience at RCF, the overt professionalism and the deep commercial knowledge within the organization. Combined with the attraction of being an owner of investments rather than an intermediary, I graciously accepted RCF’s offer to join the team.

 

RCF Toronto plays an important role in deal generation and deal making within RCF

 Working with my colleague Philip du Toit, the main goal of our two-person hunting team is to originate opportunities that fit within RCF’s investment mandates. We do this through our extensive network of mining, investment banking and consulting contacts, participating in conferences, and running screens on various data sources. Once we’ve identified an opportunity, we will conduct a “red flag” analysis and determine potential investment returns. Satisfied that the opportunity is suitable, we socialize the idea internally, resulting in allocation to the appropriate investment team. Although we stay involved throughout the due diligence process, detailed work that may involve utilizing the internal resources of our Technical Services team and possibly that of outside consultants is managed by the Investment Team, freeing us up to look for the next opportunity.

Leon Binedell is also based out of the Toronto office and engages with management and finance professionals at our portfolio companies globally. His role is to help build and support high quality business processes within our portfolio companies.

 

RCF was the first mining private equity fund to open in Toronto

 Despite Toronto’s importance in mining finance, besides RCF there is only one other mining private equity fund with an office here. I find this a bit odd, given the number of mining companies based in Toronto as well as the number of companies headquartered elsewhere which pass through Toronto, scouring the globe for capital. The city’s mining ecosystem is immense and an important part of the business landscape. A multitude of engineering, legal and accounting firms rely heavily on our industry as a significant revenue source. The large pool of qualified mining and investment professionals adds to the attraction.  Yet, the bulk of mining private equity funds are based elsewhere, including New York, London and Sydney, close to their investors.  I suspect that as the mining private equity sector grows and matures, other firms with establish offices in Toronto but by then RCF will have had a significant head start!

 

RCF is committed to investing in Canada

By opening a Toronto office, RCF signalled its long-term commitment to the Canadian mining industry. In addition to our physical presence, we maintain our profile in the community by speaking at conferences, participating in industry associations such as the Prospectors and Developers Association of Canada (PDAC) and the Canadian Institute of Mining and Metallurgy (CIM), and supporting several universities that are grooming the next generation of mining leaders. We also volunteer our time on various industry association committees. Canadian companies are active within the country and around the world, with RCF playing a role in funding numerous projects. Canada represents a significant portion of our allocated capital and I see this continuing based on the opportunities we are seeing in the marketplace. Although in recent years our industry has weathered a challenging investment environment, it would appear that early 2016 was the nadir. Since then, metal prices have rebounded and capital is flowing back into the sector. RCF is as excited as ever by the prospects of working with companies in advancing and developing their projects.

 

Dave was born 25 miles from where he now lives and works about 10 miles from where he was born. Dave feels privileged to have been able to pursue a varied career in an industry that he is passionate about and also be able to raise his family so close to his childhood home.

We are fortunate to be part of such a terrific industry, an industry that attracts talented, committed and ethical individuals in the pursuit of mineral resources. Mining is a truly global industry yet at the same time I am always amazed by its interconnectedness. There are few industries where former university colleagues working as summer students in northern Ontario bump into each other again in Santiago thirty years later and pick up the conversation like it was yesterday! When I speak with university students who are considering a mining career, I always cite the high quality people within the industry as the top reason why so many of us stay in the sector our entire professional lives.

On a personal note, although I’ve travelled the world visiting more than 50 countries and living across Canada, today I live a short train ride away from where I was born. My wife and I will be celebrating our 25th wedding anniversary in 2017 as well as seeing off the eldest of our two teenagers to university. As you’d expect from a geologist, my hobbies focus on spending as much time outdoors as possible. Hiking, cycling, sea kayaking and photography are at the top of the list of activities that my wife and I enjoy together. I am active on the Human Resources Development Committee of the PDAC and especially enjoy speaking with students who have an interest in pursuing careers in mining and mining finance.