"We want to be capable of investing across the mining development lifecycle, from exploration all the way through to operating assets, but also through the capital stack. Our goal is to be able to support equity all the way through to senior credit."
Can you provide an overview of RCF and its different investment strategies?
Currently, we have three live strategies (Private Equity, Opportunities, Jolimont) and a fourth strategy focused on credit and transition metals in development.
Our core business is private equity, so we look for businesses in the prefeasibility stage that we can take an influential or controlling stake in. We are an active investor, so we expect board representation and involvement in technical decisions. We also have ESG standards that we want to see imposed, and a lot of what we do is focused on human resources, where we help our portfolio companies identify the right board and management team. The other aspect about the mandate for private equity is that we pay more attention to timelines to achieve outcomes. We must have a high degree of confidence that the company we are investing in has a pathway to become permitted, construct the mine and ultimately move into production. The essence of private equity is around de-risking an asset from its late-stage study through to a cashflow outcome.
Can you elaborate on RCF’s move to diversify into different strategies including Opportunities, Innovation and Credit?
In addition to private equity, we have the RCF Opportunities strategy, which takes more technical risk and more top-down macro calls. It does not focus on influence or control positions, and it is a smaller, more nimble fund, with an average hold period of three years instead of five plus. While it can “go-anywhere” it’s focused on juniors and mid-cap mining companies and is built for real-time decision-making to maximize exit realizations and planned for liquidity. The next mandate that is live is RCF Jolimont strategy, which is our mining innovation fund. For Jolimont, we are looking to invest in established businesses in the mining equipment, technology, and services, or METS, space that have a product or service that is already in use in the industry. They are generally privately owned, but do not have the capacity to grow either the capital or the organizational people. We come in and generally seek to scale these businesses and accelerate their growth over a period of time. The final mandate that we are in the process of developing is a credit offering with a large focus on transition metals. From our point of view, we want to be capable of investing across the mining development lifecycle, from exploration all the way through to operating assets, but also through the capital stack. Our goal is to be able to support equity all the way through to senior credit.
Do you believe the passing of the Inflation Reduction Act will materially benefit the exploration and funding environment for US-based critical mineral projects?
Like many, RCF views the passage of the Inflation Reduction Act and associated critical minerals legislation as a net positive for our sector. Specifically, elements of the Inflation Reduction Act will support exploration and funding for mining projects, such as the earth & satellite mapping support that the US Department of Energy (DoE) has backed. However, the larger driver will be development of clean energy value chains and midstream infrastructure that will accelerate the demand for metals & mineral products. Ultimately, the commitment that the US has shown towards funding decarbonization and energy transition projects will influence commodity investment strategy, along with jurisdictional choices that align with the global trends RCF continues to follow closely.
What kinds of projects do you see currently getting funding, and where are the biggest funding gaps?
The US DoE has only deployed less than 1% of the capital that recent legislation has granted to the loans office. Additionally, there is the 5x to 10x multiplier which will come from private capital following those projects chosen by the DoE as worthy of support. So, there is literally trillions coming behind the US$369 billion that the DoE will deploy over the next five years or so. From that perspective, it is far too early to call where the funding gaps may be. From a RCF perspective, what is clear is that China, the EU and now the US are fully committed to transitioning from a fuels-based to minerals-based energy system. Quite simply, the energy transition begins and ends with metals & mining investment.