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Red Kite Explorer Fund Ltd

Red Kite Explorer Fund Ltd
Based in London
Active in Western Australia, United States, North America, Spain, Kazakstan, Quebec
Targeted base metals, copper, precious metals

Red Kite Explorer Fund Ltd is a London-based hedge fund, operated by RK Capital Partners LLP(qv). It has provided mining companies with project financing and metal offtake agreements which facilitated their initiating or expanding mine production. All such transactions enabled the Fund to purchase part of a mine's future metal production.

However, in September 2013, the three managing partners of the Red Kite Group agreed to split the business in two, and spin off its US$1.14 billion mining finance arm under one of those partners, Oscar Lewnowski.

According to the Mining Journal: "The fund, which has been involved in more than 15 mining transactions would now operate separately from Red Kite and be renamed Orion. It would continue to finance junior miners", while Red Kite itself would "continue to work in a hedge fund fund supported by Red Kite" [MJ 27 September 2014]

The split was, apparently, an amicable one, though it's not exactly known why it occurred at this time.

For Red Kite has proved to be one of the highest flying of mining hedge funders since 2009.

In mid-2009, Red Kite made an investment in Triton Gold Ltd [MJ 7 August 2009] and provided a US$10 million loan to ATW Gold Corp, along with a standby facility of US40 million that enabled ATW to acquire Kinbauri Gold Corp (See also Casimir Capital LP).

In October 2009, ATW reached an agreement in principle with Red Kite, under which the latter would transfer remaining debt from a previously-announced Gold Loan for ATW's Burnakura project, into a loan for the mining company's Gullewa project - both in Western Australia. ATW also has gold projects in the US; Kinbauri has several similar projects in both North America and Spain.

In April 2010, Augusta Resource Corporation secured a US$43 million loan, with interest, from Red Kite, in exchange for which the Tucson-based mining company undertook to supply Red Kite with 16.125% of its Rosemont mine's copper concentrate production each year, starting in 2012 [Marketwire 23 April 2010].

Three months later, the London-listed, Australia-based Norseman Gold plc agreed an "off-take and working capital facility" with the Red Kite Group of funds, valued at US$15.6 million [MJ 8 July 2011].

During summer 2011, what Reuters dubbed a "summer shoot-out" occurred between "two of the biggest copper traders in the business" as Barclays Capital bet on prices of the red metal rising, while Red Kite expected them to fall, and "Red Kite won, hands down" [Reuters, 23 December 2011].

Describing Red Kite as having "the most renowned trading team in metals", Reuters pointed out that: "Known for its connections in China, Red Kite decided demand from the world's biggest copper consumer was suffering from a spike to $10,000 a tonne in copper earlier in the year. It shorted the market". Barclays' losses were estimated at tens of millions of dollars on the London Metal Exchange (LME), compounded by its losses on aluminium futures [Reuters, ibid].

On November 19 2012, London-domiciled, TSX and AIM-listed, base and precious metals exploration company Orsu Metals announced it had signed a "non-binding term sheet" with RK Mine Finance (Master)Fund II LP.

Subject to certain conditions, Red Kite would supply sub-ordinated secured debt finance facilities of up to $25 million for Orsu's Karchiga Project in Kazakhstan. In return, Red Kite would secure 100% of any future annual production of copper concentrate during the "life" of the mine.

In May 2013, Toronto-listed Royal Nickel’s Dumont project in the Abitibi region of Quebec was given a boost after it signed a royalty purchase agreement with Red Kite. Royal Nickel claimed that Dumont contains the third-largest nickel reserve in the world and is among the five largest nickel sulphide operations.

Under the terms of the agreement, Red Kite would pay US$15 million for a 1-percent net smelter royalty in Dumont [Stockwatch 9 May 2013].

In May 2014, 'RK Mine Finance Trust released US$6 million of an agreed US$7.5 million to Augusta Resource Corp for its Rosemont copper project in Arizona. This was despite the fact that Augusta has still to receive a "Record of Decision" from the US Fish and Willife Service, after a member of the ocelot endangered species had been sighted in the mine study area [MJ 30 May 2014].