Natural Resources Fund Looks To $1B Close

Executives at Resource Capital Funds, a Denver-based firm that invests in mining companies, expect to close their fifth fund at $1 billion in the first quarter of 2010, a source familiar with the firm’s plans told Buyouts.

At $1 billion the fund would be notable for its generous size, achieved in a stingy fundraising market, but also for the dramatic increase in size over its predecessor. The firm’s fourth fund, raised in 2006, closed at $527 million.

Executives at Resource Capital began fundraising in April, without a placement agent, seeking to raise $800 million to $1 billion. Demand for slots exceeds $1 billion, though the fund will not breach that mark, our source said. In the past, Resource Capital has enjoyed the support of the Houston Police Officer’s Pension System, the John & Catherine MacArthur Foundation and Northwestern University, among other limited partners. The fund features a 2 percent management fee and 20 percent carried interest.

Founded in 1997, Resource Capital invests $5 million to $100 million for control stakes in mining companies and projects around the world. Its stable of more than 25 portfolio companies includes Anglo Asian Mining Plc, an operator of gold and copper mines based in Baku, Azerbaijan; and Constellation Copper Corp., a Lakewood, Colo.-based company that operates copper and zinc mines. The firm prefers to invest in secured convertible debt; beyond that it does not use debt financing for its deals. It usually tries to exit its investments after two to eight years through mergers and acquisitions, block sales to institutional investors, or through initial public offerings.

Resource Capital employs 21 investment professionals out of its Denver headquarters and its office in West Perth, Australia. The firm has made one investment so far from Fund V, although our source declined to discuss it in detail.

This story first appeared in Buyouts magazine, where Bernard Vaughan is a Senior Editor.