RCF VII Investment Update: Genesis Minerals

Hello, I’m Jacqui Murray, a partner at Resource Capital funds. We recently closed an investment from RCF VII, our private equity fund, to support Genesis Minerals acquisition of the major assets of Saint Barbara. This transaction creates a consolidation of the Leonora gold region in Western Australia. RCF worked with the company for almost a year and committed $90 million Australian dollars to the transaction. This particular transaction was very West Australian, so having one of our largest offices in Perth and having a key presence in that market certainly means we’re in the right position to source transactions such as this. And we’re quite proud of our long history of creating positive relationships in the mining community and certainly a focus on partnering with our companies to create value.

There were three key aspects in RCF investment thesis for Genesis. The first was creating operational synergies in the region of Leonora and what this really meant is we were matching resources and mining operations from one company with processing of another company. So, you had underutilized processing plants in the region that could drive economic efficiency by joining companies together. The second point of our thesis was around an investment in gold. RCF VII has a higher allocation to gold, which is reflective of our macro view of the market and certainly some key world events around inflation, war, growth in China, that is driving a strong allocation for us in this particular fund. And then the final point was around management team. Management is a key driver of our assessment for a transaction and in this case we had a team that had strong credibility and track record in executing in gold and delivering value for shareholders.

For the private equity strategy within RCF, we have two key buckets of investment strategies. The first is growth strategies and these are typically where we are funding companies most often in equity and bringing them from project stage through the operations. So, a lot of our capital goes through the construction process ramp up and a lot of support to the companies to get them through that stage. The other bucket that we have is value strategies and these are typically operating companies or operating companies with expansion potential and they can be distressed opportunities, M&A, or some other situation that means we feel like the value of the company is trading much lower where we can see some key change by what our funding is achieving. In this particular case, Genesis is a value strategy and that we are funding an acquisition of an operating asset and creating synergies through that M&A.

The critical value add that RCF brought to this transaction was our technical due diligence, commercial creativity, and a patient and supportive provider of capital. As an investor, RCF has an incredible, deep technical team, legal support and other areas that we use in our due diligence process. And in this instance, myself and our metallurgist, our geologist, our lawyer joined the site visits alongside Genesis management to the Saint Barbara assets. And so, I think really that a value add is just being another sounding board for the company, sense checking their findings, adding support to what they’re seeing on the ground and whether that matches what we’re seeing. The key then to closing the transaction is being commercially creative, and what that really means is that there are many twists and turns in a transaction and we’ve lived through many of these before, and knowing what potential solutions are to adapt to those situations and put the company we’re backing into the best possible situation to win a deal. And really the reason that we can be commercially creative is because we’ve done it before. RCF has invested in more than 200 companies, more than 50 countries, and more than 30 commodities. We’ve seen every iteration of every transaction previously and can be prepared with ideas and solutions for the company. Another aspect we bring to a transaction is a patient supportive investor and that’s really critical when a company, you think about this transaction, we worked with them for almost a year and the commitment of our funding came many months before the final close. And I think there are not many investors that can match that commitment to work with the company for that amount of time for the potential outcome and then stick with them to deliver on the strategy.

So, following the investment RCF now sits in a sub 10% holding. So, in terms of the investment strategy there, the intention would be to hold this until we get sufficient value creation and then our exit could be on-market or a block sale. For me personally, I recently joined the board. And after working with the company for almost a year to support them through to the transaction close, I was quite pleased that they were happy to invite me to join the board and excited to really be part of the team that will be driving execution of the strategy over the next few years.