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Forbes Focus

Best. Private Equity Deal. Ever (Maybe).

Nathan Vardi, 02.14.11, 6:00 PM ET

Move over, billionaires Stephen Schwarzman and David Rubenstein. Eat your heart out, Goldman Sachs. One of the greatest private equity deals going, an investment in Molycorp, belongs to little-known private equity firm Resource Capital Funds, headquartered in Denver.

Resource Capital has not realized a penny from its investment in Molycorp, which aims to produce rare earth minerals (used in things like electric cars, wind turbines and iPods) at a previously shuttered mine in Mountain Pass, Calif. But on paper the investment is staggering. In the last two years Resource Capital has invested $110 million in Molycorp. At Molycorp's recent share price that investment is now worth $1.2 billion.

In the private equity business that kind of return doesn't happen very often, especially with figures as big as these (see table).

The man behind the investment is Ross Bhappu, 50, a partner at Resource Capital. As a child Bhappu, who grew up in Socorro, N.M., spent summers hanging around Molycorp's mines while his father did engineering consulting work for the company. Decades later, in September 2008, Bhappu, who has degrees in metallurgical engineering and mineral economics, led a group that included Goldman Sachs to purchase Molycorp from Chevron.

Last July he had Resource Capital purchase more Molycorp shares in its initial public offering. Goldman Sachs went in another direction, selling its stake in the spring of 2010. The shares have since more than tripled. Resource owns 34% of the company.

Behind the surge: China, which supplies the vast majority of rare earth minerals, has started to restrict exports. These elements have in recent months become an investment fad, some would argue a bubble.

Resource Capital moved in late January to sell part of its Molycorp holdings as the lockup on insider transactions expired. The prospect of such selling, and the fear that prices...