What is RCF?
RCF is a mining-focused private equity firm that partners with companies to build strong, successful and sustainable businesses that strive to produce superior returns to all stakeholders. A trusted partner, RCF takes pride in the caliber of its people, breadth of industry experience and extensive networks in the global mining and financial industries.
Who is RCF?
Two of RCF’s partners, James McClements and Hank Tuten, pioneered the concept of a mining-focused private equity fund in the late 1990’s while working together at Rothschild North America. The first RCF fund was launched in 1998 and RCF closed its sixth fund in early 2013.
What is a portfolio company?
Companies in which RCF’s Funds invest are referred to as the Funds’ portfolio companies.
What is a Limited Partner (LP)?
Limited Partners are the university endowments, funds-of-funds, family offices, charitable trusts, foundations, pension funds and other groups who invest in a private equity fund. RCF’s LP are almost exclusively US institutional investors.
Is RCF private equity or more like an institutional investor?
Private equity. RCF has raised six separate funds with committed capital of $4.0B. The Funds employ a range of investment styles including provision of development capital and buyout or distressed investing. The style of the transaction will vary depending on the nature of the investment. In all cases, the opportunity will represent a fundamental value proposition.
Is private equity suited to the cyclical nature of the mining industry?
Yes, RCF provides patient capital and remains committed to strategies irrespective of short-term commodity or equity price fluctuations. The affordable, discrete and stable funding provides an alternative to public equity markets. RCF has no redemption pressure and committed funds of up to 10 years.
Does RCF only invest in large companies?
No, the Funds have the ability to invest in companies and assets of all sizes and stages of development. The Funds have a disciplined approach to investment but the company size will not determine whether an investment is made.
Does RCF invest in exploration?
Yes, if it is the right opportunity. RCF has made investments in more than 130 private and public mining companies across a broad range of minerals, stages of development and geographic location.
How does RCF structure its investments?
RCF employs a range of investment styles and works with portfolio company management teams to structure transactions that reflect the risks and opportunities associated with each company. When investing its funds, RCF uses flexible and diverse investment instruments including equity, convertible debt, bridge loans, mezzanine financings, direct project interests and royalties.
How does RCF engage with the management and strategic direction of portfolio companies?
RCF’s team has an in-depth knowledge of diverse operational environments, commodities and industry dynamics. RCF prides itself on providing high-quality technical and strategic support for the management of portfolio companies and has added a significant amount of value for all shareholders by doing so.
At the same time, RCF has a rigorous assessment process and respects the ability of its portfolio companies to manage their assets. It does not interfere with the day-to-day running of its portfolio companies. Instead, RCF’s expertise is often welcomed and its track record suggests this involvement has been pivotal in creating significant value in a number of its portfolio companies.
Why would a company raise money through private equity rather than traditional equity or debt?
Three main reasons:
- RCF’s Funds’ cost of capital is extremely competitive when compared to alternative funding sources;
- RCF’s Funds are a very steady and long-term source of capital and availability is not dependent on the performance of equity or debt markets. For example, RCF was able to raise $1.02B for its RCF V fund during 2009, a time when most mining companies found it very difficult to raise financing; and
- Finally, RCF is more than a source of capital. RCF prides itself on providing high-quality technical and strategic support for the management of portfolio companies and has added significant value for all shareholders by doing so.
What does RCF expect from its Fund’s portfolio companies?
RCF conducts extensive and rigorous due diligence on all of its Funds’ investments and will only proceed after an opportunity has satisfied a broad range of criteria. As a result, RCF has confidence in the assets and management of portfolio companies and respects their ability to drive returns.
What does RCF look for in an investment? What criteria must it satisfy?
RCF looks for opportunities that will generate strong returns for its Funds and all company shareholders. Therefore, RCF looks at commodity profile, the project or projects held by the potential portfolio company, the location of these projects and whether there is anything unique that RCF can bring to the table. In addition, management is very important. Ultimately, the fundamental value of the project is what will attract the investment for RCF.
Are there any regions where RCF would not invest?
RCF will not invest in jurisdictions with excessive sovereign risk or which are experiencing military conflict, countries that are the subject of international sanctions or those in which it is illegal for a US entity to invest. As a general rule, if RCF would not send its people there, then it would not invest there.
As a private equity firm, RCF‘s Funds will have to exit their investment at some point. How does RCF do this and doesn’t it pose a risk to other shareholders?
The Funds have an established record of exiting investments in a managed and disciplined manner with a strong emphasis on minimizing disruption to the portfolio company and if listed, its stock. After all, the Fund’s interests are aligned with the interests of other investors.
On average, the Funds hold investments for approximately four years with a few hold periods as long as six to seven years. However, there are occasions when market dynamics and opportunities lead to monetizing part of all of its investment, in a shorter or longer time frame.
Are there any sectors or commodities RCF would not invest in?
The Funds invest in all mineral commodities with the exception of oil and gas. However, RCF does not invest in any commodity, company or geographic region where there is no opportunity to invest meaningfully and see the strong prospect of a good return.
RCF invests across a wide range of geographies and commodities - but are there any common characteristics of the companies RCF typically invests in?
RCF seeks to make investments that it believes have the following characteristics:
- A project with sufficient technical and other data to allow RCF to analyze the value proposition and to conclude that its investment objectives are likely to be met;
- An experienced and effective management team with a strong record and a deep commitment to the company and the project;
- An environment where RCF can actively participate in dialogue regarding forward planning for the company and the project. Board participation is welcomed by the management team; and
- Factors which allow RCF to reasonably conclude that there will likely be one or more opportunities for a profitable exit from the investment in the three-to-five year time frame.
What does RCF look for in an effective management team?
RCF believes that effective management is just as important as a project’s technical characteristics or market conditions. RCF has found that the vast majority of success stories in the mining sector over time have been instances in which there were strong management teams in place that are open minded to growing as the project grows.
Where required, RCF has been instrumental in assisting the Funds’ portfolio companies in strengthening their management teams. Most often this has taken the form of helping to identify and recruit senior managers or board members to supplement the skills of, and to work alongside existing management and directors. Good management continuity and development are very important to RCF.
