Natural Resources Fund Launched: Exclusive

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.

If the firm does reach the $1 billion mark, it will be notable not only because of the difficulty many private equity firms face today when raising new funds but for the dramatic increase in fund size for Resource Capital. The firm’s fourth fund, raised in 2006, was $527 million. The firm did not hire a placement agent to help solicit funds.

Executives at Resource Capital began fundraising in April seeking to raise $800 million to $1 billion. There is sufficient demand that the firm could raise more than $1 billion, though it will not do so, 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 the standard “2 and 20” fee structure.

Founded in 1997, Resource Capital invests as little as $5 million and as much as $100 million of equity for control stakes in mining companies and projects in a variety of geographies. 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 and 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 pubic 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, though our source declined to discuss it in detail.

Executives at Resource Capital declined to comment.