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Blast Movement Technologies wins 2017 Premier of Queensland’s Export Award

Blast Movement Technologies wins 2017 Premier of Queensland’s Export Award

Blast Movement Technologies (BMT), a joint investment of Resource Capital Fund VI L.P. (RCF VI) and Jolimont Global Mining Systems, has won the 2017 Queensland Export Award (Minerals and Energy category). This marks the fourth consecutive year that BMT has won the prestigious award, recognising excellence in export and innovation.

Blast Movement Technologies was introduced to RCF via the relationship with Jolimont, and has been part of RCF VI portfolio since 2015.

Resource Capital Funds is proud of BMT’s performance, and considers the award an endorsement of BMT’s and Jolimont’s efforts in marketing the technology.

The award highlights the importance of innovative technology blasting solutions to optimizing processes while reducing ore loss and dilution. RCF is proud to support a technology which directly benefits the mining industry.

“It is a surprise and honour to be recognised again for our innovation and export focus”, said Jacques Janse, CEO of Blast Movement Technologies. “In 2017 we expanded our teams in Africa and the Americas. A new sales and support office in Accra (Ghana) enables us to better support our customers throughout Africa. We have also increased the number of consultants in the Americas and expect to see a growth in our customer base in 2017/18.”

https://www.tiq.qld.gov.au/awards/winners/2017-export-award-winners/

 

About BMT

Blast Movement Technologies (BMT) helps resource companies significantly increase ore yield and minimize dilution through a unique solution that accurately measures 3-dimensional blast movement.

BMT’s blast movement monitoring (BMM) system is designed and manufactured in Brisbane and exported to customers throughout Australia, Africa, Europe, North and South America.

BMT works with the top nine gold producers and the top three, Barrick, Newmont and AngloGold Ashanti, have adopted the BMM system as their corporate standard for grade control. The BMM System has been fully implemented at more than 80 mines, in 34 countries, for use in all commodities, including copper, gold, iron ore, nickel, platinum, silver and zinc.

www.bmt.com.au/

BMT

Caption: Blast Movement Technologies’ Brisbane team were winners at the 2017 Premier of Queensland’s Export Awards

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Alufer Mining rapidly advancing the Bel Air project in Guinea

Alufer Mining rapidly advancing the Bel Air project in Guinea

Alufer Mining Ltd. is an independent private mineral exploration and development company headquartered in London, with significant bauxite assets in the Republic of Guinea, in West Africa. Bauxite is the main commercial mineral from which aluminium oxide is extracted, which in turn is smelted to form aluminium metal. The company is focused on the development of the Bel Air project, which is expected to commence production in 2018. Significant capital has been invested in exploration since January 2011 and substantial work programmes have been identified both at Bel Air and at Labé, which was Alufer Mining’s original bauxite asset.

The mining industry in Guinea accounts for over 70% of the country’s exports (African Business Magazine, March 2017). Guinea has deposits of bauxite, iron ore, gold, and diamonds all with significant geological potential. Guinean bauxite reserves contribute to 94% of Africa’s reserves and 25% globally. Bauxite from Guinea has certain qualities which make it useful to Chinese refineries. Medium and long term bauxite demand is high, driven by growth in key sectors including transportation, construction, and consumer products.

Alufer

RCF Involvement

RCF has built a strategic partnership with Alufer Mining. RCF’s Fund VI was originally approached by Alufer in May 2011 for funding to conduct exploration on Bel Air, but declined due to the early stage of the project. RCF kept in contact with the Company over the next two and a half years and began to look seriously at the Project again in Q4 2013, upon the completion of its 2013 Feasibility Study. In 2013, the original management team of Alufer Mining approached RCF representative, Mike Price, in London with an intriguing project proposal. RCF was extremely interested in this project for a variety of reasons. Firstly, RCF believed the envisioned project in Guinea would have a lot of material to offer, aside from having potentially one of the biggest bauxite resources in the world. Secondly, RCF identified that the Bel Air project had an attractive logistical advantage. Generally, the majority of bauxite deposits are inland. However, the Bel Air project was unique in that it is located right on the coast. Thirdly, the deposit was of a good quality, therefore from a mining perspective, RCF believed it would be relatively easy to mine and anticipated it also could be easily exported straight away. In conducting its initial due diligence RCF identified that the company first needed to complete fundamental work to get to a satisfactory feasibility study, followed by the actual construction of the project.

As such, RCF became a key financier of the construction of the Bel Air project through its initial November 2015 investment in Alufer via a $10 million bridge loan funding completion of the Definitive Feasibility Study (“DFS”) of the Project.  After the company’s early 2016 completion of the feasibility study, RCF further extended the bridge loan and an additional $4 million was provided to the Company in September 2016.

Successful completion of project financing was completed in December 2016 in collaboration with the finance institution Africa Finance Corporation (AFC), and with specialist mining investor, Orion Mine Finance.  After significant negotiations with the Company led by RCF, a project financing package was agreed upon by the investment groups to provide US$110.0M in a combination of equity and convertible debt.

Construction activities commenced in 2017, resulting in the growth  from 15 employees to 1000 employees – over an estimated 15 month construction period.

At present, along with its ongoing financial assistance, RCF continues to assist in the facilitation of new appointments to the Company’s management team and governance committees to strengthen the expertise required for the ongoing work to fast track the project. As part of the financing package, RCF developed an independent board of directors and three separate committees:

  • The first committee is the Project Development Committee, which is chaired by RCF’s Allan Brownrigg, and oversees the construction and monitors the contractors, ensuring the project is on time and on budget.
  • The second committee is the Environmental, Social and Governance (ESG), chaired by RCF’s Allison Forrest. Community relations are fundamental as the project employs many local people and the Government of Guinea also being a major shareholder in the project.
  • The final committee is the Marketing Committee, encompassing the process of setting the offtake agreements for the purchase of materials, which is chaired by RCF’s Mason Hills.

 

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The significance of the project in Guinea

This project is very significant for the Guinean Government, who holds a 25% stake in the mine. The project is a milestone that will contribute to the development of the mining sector in Guinea, helping create around 3,500 direct and indirect jobs during its construction phase. Alufer Mining plans to extract bauxite using surface equipment that limits the negative impact on the environment and local communities; and transport will be undertaken with trucks to be loaded onto barges that deliver to vessels at sea.

The $205 million deal is one of the largest foreign investments in the country since the 2014 Ebola crisis.

The project is anticipated to be completed in September/October 2018. It has a nameplate capacity of 5 million tonnes per annum but can be easily scaled to 10 million tonnes per annum. It is one of the major projects of the Guinean Government and is of national significance, both in terms of the employment and community benefits it brings to the country.

RCF conducted significant risk work and took due diligence measures with the project. In 2014 the largest outbreak of Ebola hit multiple countries in West Africa, with Guinea, Sierra Leone and Liberia suffering most. Furthermore, Guinea historically had a reputation for corruption that had pervaded, in particular, the mining sector, as evidenced the international scandal involving the Simandou Project.  RCF General Counsel Cassie Boggs and RCF representative Mike Price first visited Guinea in May 2014 to conduct preliminary country due diligence in an effort to assess country risk. While in the country, RCF met with Ambassadors from the US, UK, South Africa, the Guinean Minster of Mines, Deputy Chief of Staff to the President, Mining Advisor to the President, the IFC, and along with other Guinean governmental, international-affairs, and business representatives. In parallel, RCF also engaged a London based law firm with significant experience in West Africa and Guinea to assist in certain legal due diligence, and a political risk consultant with extensive experience in Guinea to review and update political risks, conduct inquiries and to consider certain specific issues regarding the application and enforcement of environmental standards and regulations in Guinea, corruption issues, and issues of general political stability.

After the conclusion of its diligence, RCF was pleased to find that President Conde and Minister of Mines Kerfalla had demonstrated decisive governmental leadership in combating corruption, by requiring an unprecedented level of transparency in regards to the review and issuance of mining licenses, including the publication of all mining agreements on the Internet. RCF continues to monitor the country’s anti-corruption climate along with Alufer’s actions in Guinea through internal due diligence and third party consultants to ensure it maintains its strict procedures and complies with all local and international laws.

In February 2016, the Guinean Government and Alufer Mining signed the Mining Convention for the Bel Air bauxite project, and in his address, Prime Minister of Guinea Mr. Mamady Youla, commented “Efforts since 2010 to boost economic activity in developing countries have ended up paying off and the signing of the bauxite project Bel Air is a good example. This is a strong signal to the international community and investors. After two years of courageous struggle against Ebola, the fight against the epidemic is finally won, and the development of Guinea can resume vigorously”.

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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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Market Update from James McClements

Instability and volatility has characterized the resources industry in recent times as companies grapple with the impact of sustained low commodity prices, delays in the onset of supply discipline and uncertain global growth prospects.

Whilst the current market is not unusual for a cyclical industry such as resources, it does not make the situation any less challenging.

More recently, we have seen an increased level of optimism that has not been present for some time. While there are some positive indications that the market may have found a bottom earlier in 2016, I believe a sustained recovery is not imminent.  The key to understanding this market is differentiating between a demand driven and a supply driven market.

Impacts and influences on the current market environment

Throughout the decade to 2011, we saw a demand driven episode which David Jacks describes in his paper, ‘From Boom to Bust’, as an event closely linked to historical episodes of mass industrialization and urbanization which interact with acute capacity constraints[1].

This spike in demand was a catalyst for intense capital investment which eventually saw a supply surplus introduced to the market. This excess supply and slowing global growth in US dollar terms has culminated in heavy impacts on commodity prices. The strengthening US dollar has exacerbated excess supply in domestic dollar terms in commodity driven economies. Slowly, we are seeing signs that a correction across the industry is occurring, where supply and demand are recalibrating, and some commodities have seen limited price recoveries.

Mixed views remain as to when and to what extent the mineral commodity prices may start to recover sufficiently to incentivize idled capacity or even new supply to enter the market. An indicator that I find compelling is the correlation between commodity prices and the growth in global GDP. This point of view suggests that commodity demand is a function of global GDP, rather than solely linked to any single economy (e.g. China) and that as global GDP increase, demand for commodities generally increases over the medium-term. Copper is often used as proxy to demonstrate this effect; with the added advantage that copper is historically sensitive to early stage recovery trends.


[1] David S. Jacks, ‘From Boom to Bust: A Typology of Real Commodity Prices in the Long Run’ Revised March 2014

 

 

global_copper_supply

Source: IMF data, AME, Bloomberg, RCF analysis, February 2016[2]


 [2] Information shown for Copper is used for informational and demonstrative purposes only.  Each commodity will be subject to its own facts and circumstances which may make it more or less likely to align with the example provided.  This information should not be deemed to be a recommendation of any specific commodity, company or security.  This chart includes forward-looking information, and we caution you that such information is inherently less reliable.  Actual performance will vary due to a variety of factors, including general economic conditions.  Any projections have been prepared and are set out for illustrative purposes only, and do not constitute a forecast.  Any projections or opinions are current as of the date hereof only.  The statistical information provided herein has been supplied for “informational purposes” only and is not intended to be and does not constitute investment advice.  Neither RCF nor any independent third party has independently audited or verified this information.  RCF disclaims any and all liability relating to such information, and no representation or warranty is made, expressed or implied, as to the accuracy or completeness of the information provided in this presentation.

 

Following the copper growth trend line

While China’s impact and influence on commodity markets is certainly significant, RCF takes a more holistic global view of supply and demand trends. Generally, what the relationship between global copper and GDP growth demonstrates is that mine supply and nominal commodity prices rise over time, and must do so if demand is to be satisfied.

The China growth story is likely to continue yet perhaps not at the rates we have witnessed previously and it is also likely that price volatility will continue. Recent, long dated research by Paul Gait at Bernstein highlights that, ‘As the lead times and technical and social complexity of delivering the incremental unit of supply increase, we expect to see a continuation of the high levels of price volatility seen recently’[3].

We agree with this view and feel that commodity prices are going to experience higher levels of volatility in the next 1 to 2 years.  The industry is still in a period where demand and supply imbalances are adjusting, however, it is important to note that this is a supply-driven bear market; it will not trade like a demand-driven market. In the current market, demand hasn’t really changed, only its rate of change has decelerated. For prices to sustainably rise for current levels, it will take lower prices to push and keep supply below current demand levels, which are growing but more slowly than in the past, to create a deficit. As a result, higher prices are not likely to be sustainable in the near-term because supply, in the form of excess capacity, is primed to return with higher prices. It is likely that we will experience a number of false starts before demand eventually overtakes existing supply capacity, which will mark the starting point of the next sustained upcycle.


[3] Bernstein: Gait, Floris and Absolon, ‘European Metals & Mining: Boom and Bust and Back Again, 246 Years of Copper Price Cycles’ January 19, 2016

mzi

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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RCF Provides Talon Metals US$15 million to Further Tamarak Project

In late 2015, Toronto Stock Exchange-listed junior developer Talon Metals announced it will use the US$15 million it received from Resource Capital Funds to earn an 18.45% interest in Rio Tinto Group subsidiary Kennecott’s high grade Tamarack Nickel-Copper-PGE Project, located west of Duluth, Minnesota, USA.

Talon CEO Henri van Rooyen said that the entire US$15 million will be used by Kennecott to advance the Tamarack Project, with planning already underway for the next phase of exploration. Talon’s technical team works collaboratively with the Kennecott team in planning programs and interpreting drill results, utilizing cutting-edge geoscience to drive decision-making.

“We are now one of the few junior exploration companies that is fully funded with the ability to progress exploration on an expedited basis” said Mr. van Rooyen.

RCF’s funding includes US$1 million by way of a private placement for Talon common shares at a subscription price of C$0.12 per common share, and US$14 million via an unsecured convertible loan at a conversion price of C$0.156 per common share.

RCF Managing Director, Canada, David Thomas said that the firm was pleased to support Talon in achieving its strategic goal of obtaining an interest in the Tamarack Project.

“RCF considers all opportunities, ranging from early-stage exploration projects to producing assets and in this instance we’re assisting Talon in obtaining meaningful ownership in an exciting project in partnership with a major mining company” said Mr Thomas.

In a separate release announcing Talon’s shareholder approval for the RCF financing, Mr van Rooyen stated that its completion was a major milestone for the company.

Please visit the Talon Metals website for more information and to read the full company release.

Bannerman-Resources

Bannerman Resources Shareholders Approve Company Restructure

Bannerman Resources Limited recently announced the acquisition of full ownership of its uranium asset, Etango, in Namibia, and a debt free balance sheet.

The resolutions, which were all endorsed by shareholders at the company’s Annual General Meeting in December 2015, included a transaction with Resource Capital Funds to raise A$3 million through an equity placement and to convert A$12 million of debt into equity and a 1.5 per cent royalty over the Etango project. Following the transaction, RCF now holds 38.3% per cent ownership of Bannerman Resources.

In addition to the transaction, further resolutions passed included a share acquisition by Bannerman Resources to obtain 100% Etango ownership and performance rights issued to Chief Executive Officer Len Jubber.

Bannerman Resources Chairman, Ronnie Beevor, in his address to shareholders said that the transactions with RCF deliver a debt free balance sheet with new funds that allow Etango to be taken to the next stage.

“Importantly, Bannerman has now established a sound project platform for extensive engagement with the global nuclear industry,” said Mr Beevor.

RCF Principal, Chris Corbett, said that RCF was pleased to engage with Bannerman Resources and support the company through to its next stages of development.

“RCF partners with portfolio companies to build strong, successful and sustainable businesses that strive to produce superior returns to all stakeholders and we’re pleased to be engaged with Bannerman Resources to help to achieve the strategic goals of the company,” said Mr Corbett.

RCF employs a range of investment styles and works with management teams to structure transactions that reflect the risks and opportunities associated with each company.

To read the full results of meeting and Chairman’s address from Bannerman Resources please visit their website.

corvus gold

Resource Capital Fund VI L.P. Acquires Approximately 5% of Explorer and Developer Corvus Gold

Corvus Gold, a junior gold explorer and developer, recently announced that RCF VI had acquired approximately 5% of the Company’s outstanding common shares via a private placement of CAD $2 million. Corvus Gold’s primary focus is advancing its wholly-owned North Bullfrog project, a new gold discovery in Nevada, USA.

RCF Senior Partner, Russ Cranswick, said that the Corvus Gold investment was part of the firm’s exploration funding strategy to enable companies with strong underlying potential to aggressively develop and test new targets.

“Our exploration funding strategy has been designed to populate the future development pipeline by investing in early stage projects with recognized potential, such as Corvus Gold,” said Mr Cranswick.

In the Company’s announcement, CEO Jeff Pontius said that, “Bringing Resource Capital Fund VI L.P. into the Corvus family of major long-term investors is a significant accomplishment as it continues to build the depth of our shareholder base.

“In addition the vote of confidence that this brings to the Company and its projects is substantial, particularly in the challenging markets that junior explorers face today.  The proceeds from this financing will give the Company added flexibility to act decisively on exploration success from its ongoing drilling program well into 2016.  Driven by the strong results from the Company’s recent North Bullfrog PEA study and new exploration discoveries in the large and untested Eastern portion of the North Bullfrog area, Corvus is rapidly building what could be a new Nevada high-grade gold District.”

To read the full announcement from Corvus Gold, please visit the Company’s website.

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Value of Private Equity for TMAC Resources

Toronto-based TMAC Resources is currently developing the Hope Bay Project, a gold development in Canada’s Hope Bay region with planned first production by the end of 2016. In a market that has been otherwise difficult for gold companies, RCF provided over 85% of the last two rounds of private funding and, with RCF contributing one third of the amount raised, the company recently successfully closed its C$135 million initial public offering (IPO) on the Toronto Stock Exchange (TSX).  Priced at C$6.00 per share, the issue established a market value for the company of C$445 million.

RCF has built a strategic partnership with TMAC Resources, since its initial investment in early 2013, which has enabled the company to complete a positive pre-feasibility study to further advance and de-risk its Hope Bay project prior to accessing the public markets and  developing the mine. RCF VI now owns approximately 37.1% of TMAC’s common shares.

RCF Senior Partner Russ Cranswick said that the initial TMAC Resources evaluation completed by RCF revealed a good quality asset with a high value proposition, given its Hope Bay project’s previously known resources, significant existing infrastructure and strong management team.

“The investments which ultimately attract RCF are those where we can see the long term potential for future growth and opportunity. When we invest, it isn’t about making a quick entry and exit, it’s where we see that we can add value through our market environment agnostic financial support plus our mining and risk management expertise over time. Mining Journal has astutely identified that, as a shareholder, RCF has invested in TMAC Resources’ long term strategy from exploration to construction ready and now the company’s IPO / project development funding.”

The company has said that it would use the proceeds raised under the offering to advance the Hope Bay Project to planned first production by the end of 2016, for exploration activities and general corporate purposes.

The Wall Street Journal reported that Canada’s resource-heavy Toronto Stock Exchange hasn’t listed a mining company since December 2012, when Oban Mining Corp. completed a small, C$10 million IPO.

In the May 2015 issue of Mining Journal profiles the value of private equity over time for TMAC Resources. Read the Mining Journal article.

TMAC Resources is now trading under the TSX ticker ‘TMR’.

James_McClements

Managing Partner Message
James McClements, Managing Partner

As a specialist in mining, Resource Capital Funds regularly observes the benefits that our trusted partnership brings to portfolio companies. We have proven many times over the value of not just being an investor but a patient advisor with extensive industry experience.

We often work with companies which have known assets, yet possess limited capital but have the depth of technical capabilities to develop the asset into cash flow. It has been encouraging to see that even despite the downturn in the mining industry in recent times we are still observing positive progress across a range of our portfolio companies. Essentially this has been because we have been able to identify assets with upside potential prior to investing, despite weak market conditions, and then work with the company over the long term to realize the potential of their project.

This month we have published a case study on Firestone Diamonds, an African diamond developer with its flagship asset in Lesotho, Africa. Firestone Diamonds is under construction and has been supported by RCF throughout the process. We are able to support construction activities with insight from our Denver-based Senior Project Director, Allan Brownrigg, as well as the Senior Partner, responsible for a significant team with specialist technical skills, Ryan Bennett, which is integral in RCF’s technical and due diligence offering.

Please continue to check back to the website for more recent announcements and insight from Resource Capital Funds.