This week a privately held gold company developing the Hope Bay gold project in Nunavut raised $78 million in equity, with $65 million of it coming from Resource Capital Funds which is a leading mining focused private equity firm. The private company is called TMAC Resources and is led by Chairman, Terry MacGibbon, who founded FNX Mining (which was merged with KGHM in a $1.5 billion deal) and CEO, Catharine Farrow who was formerly the Chief Operating Officer of KGHM.
In a recent interview with resource private equity firm founder, Michael Scherb (read interview here), he brought up Resource Capital Funds saying he respects their firm and that they, like Appian, (Mr. Scherb's firm) have the right team in place to be effective capital allocators in the mining sector.
Resource Capital Funds was founded by ex-Rothschild Group executives, James McClements and Henderson Tuten. The duo and their team have made a number of investments in the space including: Avanti Mining, AQM Copper and Molycorp.
TMAC Resources has been able to attract some serious capital, even while the rest of the mining sector struggles to find a bid anywhere. In March 2013, the team acquired the Hope Bay project from Newmont for $35 million as well as a $15 million credit facility from Newmont. Newmont is also able to appoint two directors and retains a 1% NSR royalty on the project.
The funds will be used to for their 2014 program including exploration, engineering, environmental permitting and compliance, a pre-feasibility study (planned for 2015) and for working capital. They will also pay off the Newmont loan which was set to mature in December of this year.
The company released a PEA in November 2013 which proposed a sequential development of the mine up to an average annual production rate of 224,000 ounces of gold per year at $750/oz AISC (all-in sustaining cost). The average grade mined is expected to be 11.4g/t gold and will be processed by a single, sulphide flotation, cyanide leach/Merrill Crowe processing plant. The capex is estimated at $238 million with an after-tax NPV(5%) of $403 million and 28% IRR.
TMAC's management is now backed by two very sophisticated investors in mining in Newmont and Resource Capital Funds. Mr. MacGibbon, who is also the Chairman of Torex Gold (TXG:TSX), has been able to raise $110 million in equity since March 2013 for this private venture. That is pretty amazing considering the non-existence of the public equity markets in mining during that time.
TMAC Resources had planned an IPO by mid-2013, but has still yet to list. Perhaps for the best, given the state of the mining capital markets today and this management team's ability to finance the project privately.
Read: TMAC Resources Completes $78 Million Equity Financing to Further Advance the Hope Bay Project