Lighthouse Resources Plans to Supply Cleaner Coal to Asian Market

Lighthouse Resources is an owner and operator of two thermal coal mines in and around the Powder River Basin which stretches across southeast Montana and much of Wyoming. Currently the mines produce approximately 5.8 million metric tons per annum for the US domestic market (4.4 million tons per annum to Lighthouse’s account) and the Company is currently working towards expanding production and exporting coal to the international market.

The mines include the wholly-owned Decker mine in Montana and the 50/50 joint venture Black Butte mine in Wyoming with Anadarko Petroleum Corporation where Lighthouse is the operator. The Powder River Basin is known for producing some of the highest quality and lowest cost coal in the U.S. and the region currently supplies approximately 40 percent of coal consumed in the US.

Lighthouse Resources is focused on the coal export market and it is developing two port projects in the Northwestern U.S.  The Company holds a 62% interest in the Millennium Bulk Terminals-Longview port facility located near the mouth of the Columbia River at Longview Washington.  This industrial site includes an active dock and was used previously for aluminum smelting.  The site is currently being permitted for coal handling.  Lighthouse also holds a 100% interest in the development stage Morrow Pacific port located in Oregon on the Columbia River.  This port is in the permitting stage.

Lighthouse Resources was previously known as Ambre Energy North America before the company announced in April 2015 that it would change its name to reflect the company’s core business strategy to focus on resource management and infrastructure projects. Resource Capital Funds through RCF V initially financed what was then Ambre Energy North America’s purchase of the Decker and Black Butte mines in 2011.

Since its original investment in 2011, RCF has made a number of additional investments in the Company.  In late 2014, RCF purchased the North American assets of Ambre from its Australian Parent and it now holds a 92% interest in these assets with 8% being held by the shareholders of the Australian entity.  As part of the acquisition, RCF retained the North American management team which is based in Salt Lake City, Utah.  The purpose of the acquisition was to have a core management team focused on developing its port facilities and the coal mining operations.

Firestone Diamonds

Liqhobong Diamond Mine

Firestone Diamonds is developing its flagship asset, the Liqhobong Diamond Mine located at the head of the Liqhobong Valley in the Maluti Mountains of northern Lesotho in Southern Africa. The Liqhobong Diamond Mine is owned 75% by Firestone Diamonds, and 25% by the Kingdom of Lesotho.

Construction of the Liqhobong Diamond Mine treatment plant and associated infrastructure commenced in July 2014. At the time of writing, the project remains on time and on budget, and it is anticipated full production will commence in mid 2016.  At least 89% of orders and lead items under engineering, procurement and construction budget have been placed.  Key related infrastructure, including connection to the main power grid, is expected to be achieved in the second half of 2015, ahead of schedule. RCF Senior Project Director Allan Brownrigg chairs the Project Steering Committee for Firestone Diamonds’ Liqhobong Mine.

The project team is fully in place, and the development has already created over 400 jobs, which will increase over the course of the project, and is maintaining its target of zero lost time injuries.

Once constructed, it is anticipate the mine will produce diamonds at a rate of 1.1 million carats per annum.

RCF’s Investment

In early 2014, RCF VI provided a bridge facility in an amount of US$5M, a mezzanine facility in an amount of US$10M and an equity subscription in an amount of US$30M, which with other funding (including other funding facilities from third parties, project finance debt, and a public equity raising of US$40M) completed a total funding package of US$222.4M, that should fully fund development of the Liqhobong Mine.

In addition, in April 2015, RCF provided a further standby debt facility of US$15M. This provides the company with a buffer in developing the project. The funding also satisfied a condition that would allow the company to drawdown on a project debt facility of up to US$82.4 million provided by Absa, one of Africa’s major financial services providers. As the project is on time and on budget, it is not anticipated that the standby facility will be needed.

Supportive Investment Structuring

RCF’s Firestone Diamonds investment is an example of how the firm can provide flexible funding options to meet the needs of companies as well as long-term patient capital that supports emerging companies to process the development of projects. In April 2015, RCF Managing Partner James McClements acknowledge that it had been a tough time recently for the mining sector with falling commodity prices and weak public markets impacting cash flows of operating companies.

“At RCF we take a long term view of value, and so are pleased to partner with Firestone Diamonds to provide development funding and support for the Liqhobong Diamond project,” said RCF Partner Mason Hills.

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.



Toro Gold

About the company

Toro Gold is a private gold exploration and development company focused on Africa. The company’s lead project is the Mako Project, situated in Eastern Senegal. Toro Gold completed a pre-feasibility study for the project in May 2014, indicating a robust 1.4 million ounce reserve project development opportunity. A definitive feasibility study is now underway and due for completion during the first half of 2015.

About the investment

RCF is currently the largest shareholder of Toro Gold at approximately 20% ownership and has been involved with the company since its early stages of development, shortly after the Mako Project discovery was made. Toro Gold is RCF’s first investment located in Senegal, which the firm believes is an up and coming African mining jurisdiction because of its quality resources and the country’s willingness towards new investment and building its economy.

Similar to many development projects around the world in recent times, Toro Gold has experienced a challenging market environment through which RCF has provided its ongoing support as the company has progressed its Mako Project through two additional financings post RCF’s initial investment.

Long term patient investor

To assist Toro Gold in completing its pre-feasibility study for the Mako Project, RCF provided a short-term bridge facility which was converted to equity as part of the company’s financing for its feasibility study. This provided a buffer while the study was concluded and allowed additional time to raise funds for its feasibility study. The bridge also provided capital to undertake a drilling program to support the feasibility study that otherwise would have been delayed by the onset of the wet season.

Despite the constraints of the current market, RCF asserts the fundamentally sound nature of Toro Gold’s projects and believes the company has a strong management team that can deliver positive outcomes. RCF’s first-hand industry experience has also helped to appoint appropriately skilled board members to oversee the explorer’s transition to a development company.

Conflict-free Tantalum Supported by Global Advanced Metals

What is tantalum?

The chemical element tantalum is most commonly used in developing electronic equipment such as mobile phones, DVD players, video game consoles and computers. Tantalum is found and mined in many parts of Africa, but is frequently linked with the conflict supply from the Democratic Republic of Congo (DRC) where mines are often controlled by rebels who extort the mine owners, impose forced labor conditions on workers and disregard the environment.

Developing a conflict-free supply chain

To help regulate the market for tantalum and support a reliable conflict-free supply chain, Global Advanced Metals (GAM), an Australian-based RCF portfolio company, became an early and strong advocate for an audited tantalum mining, transport and export process in the early 2000’s.

This action led to establishing an industry wide standard audit system called the ‘Conflict Free Smelter’ and the launching of the ‘Electronic Industry Citizenship Coalition’ (EICC), which GAM joined in 2009, to ensure smelters around the world bought only certified conflict-free material. The goals established by a conflict-free industry are to:

  • Ensure mineral trade does not contribute to human suffering; and
  • Ensure ongoing trade with legitimate artisanal miners to promote local economy and community development.

In 2010, GAM became the first smelter operation of any type of metal to be officially declared conflict-free while the results of GAM and many other industry participants’ efforts include:

  • Increased living and safety standards for central African artisanal miners;
  • Fair market price to legitimate miners and traders; and
  • Increased industry supply stability.

GAM has received significant recognition for their contribution from many throughout the supply chain, including an Intel award for enabling achievement of their goal of a “conflict free microprocessor by December 2013” and an award from Intel in July 2014 for leadership in establishing audit processes.

Conflict-free supply chain challenges

A conflict-free tantalum supply chain is still not without its challenges and members of the industry seek to continuously educate their key stakeholders on supply chain facts for a fully informed approach to compliance and improvement. There is also active engagement in Central African countries to help ensure that their miners who are legitimate conflict-free businesses, particularly within the DRC, are still able to receive market prices for their product and help to sustain their communities.

Next steps for conflict-free metals

The industry participants still recognize that there is more to do as they work to extend traceability programs throughout Central Africa, and continuously improve living and working conditions and fair trade opportunities. Industry support, education and stakeholder engagement is an ongoing process but serving to improve the transparency of the tantalum industry. It’s also serving to promote its growing conflict-free reputation among the end users including Intel and Apple who have made public announcements about their ‘conflict free’ sourcing status.