May 22, 2015 / 11:05 AM / 2 years ago

RPT-Red Kite co-founder plans new Orion metals fund - sources

(Repeats with no changes)

* Hires Mike Sheehan to join new fund

* Red Kite co-founder wants to replicate Red Kite model

* Sets up merchant business to sell copper

By Josephine Mason and Clara Denina

NEW YORK/LONDON, May 22 (Reuters) - U.S. mining financier Oskar Lewnowski is preparing to launch a base and precious metals fund, sources say, his latest step in recreating the famed trading and investment enterprise he co-founded a decade ago, Red Kite.

Two years after striking out on his own to create private equity investment firm Orion Resource Partners, the 50-year-old New York native has already deployed almost $1 billion in equity, loans and royalty streams into at least 17 junior mining firms, and hired a physical metals trader to handle supply.

Now, Lewnowski is preparing for the third phase of his growth plan: setting up a hedge fund that will initially focus on precious and base metals, according to four sources familiar with the plan who are unauthorized to speak to the media.

Mike Sheehan, precious metals portfolio manager at Red Kite's RK Capital Management, will join the yet-to-be-named fund when he leaves Red Kite at the end of July, two of the sources said. The size and timing of the fund were not known, nor was it clear what role he would assume there.

Sheehan worked at Red Kite for nine years and has almost 25 years experience dealing in gold and silver.

With $1.8 billion in assets under management at end-December, Orion Mine Finance has helped finance EMED Mining , which is reviving the historic Rio Tinto copper mine in Spain, and Weatherly International Plc, which has built the Tschudi copper operation in Namibia.

Its biggest deal was a $200 million financing of diamond explorer Stornoway Diamond Corp.

Earlier this year, Orion Merchant Services made its first foray into the lucrative and competitive business of merchanting metals, hiring veteran copper and zinc trader Joe Spiciarich to market the copper from Tschudi, the fund's first base metals project to go into production.

Orion Mine Finance also has a stake in Scale, a metals warehousing firm shared with Macquarie Group Ltd.

Lewnowski, who started his career in the 1980s in investment banking at Deutsche Bank and Credit Suisse, was not available to comment for this article.

Sheehan declined to comment on the move.

FROM INVESTOR TO TRADER

The aim is to replicate the investment-and-trader model perfected by Red Kite and other big merchants like Trafigura and Louis Dreyfus over the past decade, drawing on close ties to the physical metals to give the funds investing in the futures market an edge over rivals, sources said.

For Lewnowski, the fund would be a significant milestone in a career stretching more than two decades.

He was a founding partner and head of mine finance investment at Red Kite, which since 2004 has grown into one of the world's biggest physical metal merchants. The mine finance business Red Kite Mine Finance fund had $2 billion in assets under management as of January 2015, according to its website.

Lewnowski, a keen supporter of the New York Rangers ice hockey team, oversaw 10 projects worth $400 million in a three-year period til September 2012. He split with Red Kite's British co-founders, David Lilley and Mike Farmer, a year later.

While the separation was amicable, two of the sources who know the men say the rivalry between Lewnowski and his former partners is strong.

Before Red Kite, he was head of corporate development at Varomet Ltd, which was formed to buy parts of Enron's metals and mining assets.

The fund would also stand out as one of the few commodity fund launches in recent years after plunging oil, copper and grain prices forced the closure of some big names, including Hermes, Brevan Howard and Hall Commodities, last year.

Still, many merchants are expanding to fill the gap left by the retreat of European and U.S. banks, which have retrenched from physical trading amid regulatory glare and tight margins.

Revenues from base and precious metals at the world's ten largest investment banks fell for a third straight year hitting $1.2 billion in 2014, according to analysis from industry analytics firm Coalition. That was down almost a third from the record set in 2009. (Editing by Jonathan Leff and Marguerita Choy)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below