When it comes to social lending, I thought I had a pretty good idea of where I thought the industry could go and some of the other niches that social lending companies could service. Last week that changed when I heard about Red Rock Assets. It seems like there is no lack of innovation when it comes to disrupting industries. Red Rock Assets has an interesting twist on social lending. For one, it offers only mining projects through its platform. Not only do lenders earn interest, but there is also a profit sharing aspect, which is a unique concept. Intrigued? I was, and that’s why I was anxious to talk with Matthew Freedman - CEO of Red Rock Assets - to learn more.
As mentioned above, Red Rocks Assets will offer projects specific to mining. These projects are of the type that have historically been funded solely by banks and other institutions until now. According to Red Rock Assets, junior mining companies are having difficulty financing projects. Coupled with the increased demand for mined commodities, financing these projects will be extremely important.
A prospectus for the general public is currently under consideration, which means that only accredited investors will be able to invest when the platform kicks off in May 2014. Unfortunately, as much as I would like to invest a small amount of money and document the progress on the blog, it will have to wait. You can view the definition of an accredited investor on their site here.
Like others in the social lending space, Red Rock Assets aims to give lenders the opportunity to receive better interest rates than you would receive from banks. One aspect that makes Red Rock Assets unique is that the loans are not unsecured loans like those with Lending Club and Prosper. On behalf of its lending members Red Rock Assets holds security charges over the assets (mining equipment, property, etc.) of all mining projects funded through its platform. In order for a project to receive funding, there must be a loan coverage of 350%. In other words, this means that assets backed by the loan must equate to 3.5 times the value of the loan. Matthew noted that while each project is different, 350% could be on the low end of some projects.
The amount of funding for the initial projects will range from $5M to $25M, although as the platform grows Red Rock Assets could eventually present projects seeking as much as $100M to its lending members. At launch, the projects are estimated to seek $80M in funding, with 4-7 different projects from a variety of geographical locations constituting the first offering. Additionally, Red Rock Assets will not limits these early projects to any particular type of mineral. The key for them is that each project meets their criteria.
Accredited investors will be able to invest in increments of $5000 and can spread their investment across multiple projects. Promissory notes will start at 7.5% annual interest. In addition to that, investors will earn a profit share forecasted to be an additional 7.5% upon the commercial production of the mining project. The way these notes will work is a little different from a traditional Lending Club or Prosper note. They will have an expire date which can be many years in the future, but the anticipated pay off could be 3 or 5 years depending on the project. The profit share payout will however last until the expire date.
Red Rock Assets has partnered with Key Capital Corporation (OTC: KCPC) to originate and vet the first mining projects. Red Rock Assets will provide lender authentication, identity and bank account verification, interest collection and payment. You can view the press release here.
If you have any comments, please feel free to leave them in the comments section. Additionally, Matthew has agreed to respond to any questions you may have about Red Rock Assets.
You can learn more about Red Rock Assets on their website:
shuhai says
it is great idea, but the bar is too high to get in for most folks and it is only for the 1% investors at most. the mining lending is too risks for me.
Matthew Freedman says
Hi Shuhai, thanks for your response! The idea at Red Rock Assets is that we will launch with accredited investors and then once the platform is established we’ll look into the possibility of filing a prospectus for non-accredited investors, who will be able to see what’s already been done through the platform.
Regarding the potential risk in lending to a mining project, I’ll agree that a degree of risk exists in any loan. Right now, lots of people are comfortable making unsecured loans through P2P platforms to individuals and small business. Through Red Rock Assets, lenders will have an extra level of safety due to the security charges that we’ll hold over the assets of the borrowers. Additionally, since loans will be going to money-making ventures, instead of individuals, they may have a greater chance of being repaid. In other words, even though the mining industry may be perceived by some as being risky, Red Rock Assets believes that it will be able to offer promissory notes that reduce the overall risk of investing in both the mining industry and the P2P space. Of course, Red Rock Assets may not be for everyone, and that’s OK. That’s why it’s great that lots of P2P platforms are emerging right now!
shuhai says
Hi, Matthew, Thank you for your explanations. I will waiting for that possibility for non-accredited investors.
I like the idea of extra safety protection , but i am not comfortable for the $5000 per note. most p2p is for minimum $25 per note . what are the advantage of big note?
Thanks,
Shuhai
Matthew Freedman says
The $5000/note price is specific to our first offering and may not be the price that we use for further offerings in the future. We figured that it was a reasonable amount for accredited investors. As it is, with the $5000 note, the funds can be split between all the projects on the platform and apportioned as the lender sees fit. So if a lender buys one note, (s)he could split that up in a variety of ways, (for instance) designating $1000 to five different projects. So not all of the $5000 needs to go to one project.
If we eventually file a prospectus for non-accredited investors, then the notes will likely cost less money in order to accommodate a larger pool of lenders.
shuhai says
Great!.
There are so many niche markets that p2p can explore, why mining ? will your company only focus on the mining market or more other niche market in near future as well? Thanks.
Shuhai
Matthew Freedman says
Most of the founders of Red Rock Assets already work within the mining industry, and when considering the high number of worthy near-production projects in need of funding we thought that 1) the P2P space would be a good place from which to help these projects acquire capital and 2) the mining industry would be able to provide P2P lenders with some benefits they do not currently have — namely, the security assignments held by Red Rock Assets for the lenders; the profit shares in funded projects; and a focus on physical assets.
In short, we focus on mining because that’s our collective area of expertise, and we believe that the mining industry will be able to serve as a constant source of worthy borrowers.
shuhai says
Thanks for your quick replies.
You may contact Mr. Peter Renton of lend academy, he has huge p2p fans bases for his selfishness in sharing his p2p experiences and educating the average investors fall in love with p2p . So you can reach many more potential investors . Wish you greta luck.
Shuhai
Matthew Freedman says
Thanks for your questions!