TIDMBSRT
RNS Number : 9096L
Baker Steel Resources Trust Ltd
11 September 2023
BAKER STEEL RESOURCES TRUST LIMITED
(Incorporated in Guernsey with registered number 51576 under the
provisions of The Companies (Guernsey) Law, 2008 as amended)
11 September 2023
LEI: 213800JUXEVF1QLKCC27
Futura Resources closes A$26.2 million financing
Baker Steel Resources Trust Limited ("the Company" or "BSRT")
announces that its second largest investment Futura Resources Ltd
("Futura") has completed a A$26.2 million financing package to fund
the commencement of production of steel making coals at its Wilton
Mine in Queensland, Australia.
The funding package comprises a A$21.2 million 3-year term
unsecured redeemable convertible note issue, accompanied by in-kind
commitments from a number of contractors and suppliers to the value
of c. A$5 million.
BSRT has committed to invest its approximate pro-rata interest
totalling A$4.7 million (GBP2.40 million), which will be satisfied
through the rolling of its existing outstanding A$0.7 million
bridging loan as well as a further investment of A$4 million in new
funds. Together with the investment in the convertible the
transaction will, assuming full conversion by noteholders,
approximately maintain BSRT's 27% equity interest in Futura.
The new investment will increase the Company's overall
investment exposure to Futura (which includes a 1.5% Gross Revenue
Royalty on Futura's mines), from the current 25.3% NAV to 28.2% NAV
on investment based on 31 August 2023 valuations, remaining below
the 35% NAV limit approved by shareholders on 9 November 2022. The
valuation of the various elements comprising the investment in
Futura will be reviewed at 31 December 2023, at which point the
Wilton Mine should be in or close to being in production.
It is currently expected that Futura's second mine, the Fairhill
mine can be brought into production utilising cash generated by
Wilton but this might be accelerated should Futura decide to raise
further finance, likely to be debt, once Wilton is up and running.
A total of around A$50 million is required in funding for
development of both the Wilton and Fairhill mines. Several parties
have expressed interest in participating in the convertible note
issue, but are yet to complete the subscription agreement, and as
such Futura will leave the convertible offer open for a short
period after this first closing to allow for potential further
subscriptions up to a maximum of A$30 million.
According to Futura management forecasts, the Wilton and
Fairhill mines are expected to produce around 2 million tonnes per
annum of saleable product once both mines are in full production in
2025 which based on forward price expectations is forecast to
generate an EBITDA of A$92m*. There remains potential to increase
production rates subject to additional licensing approval and
available processing capacity.
As these are open-pit operations with near surface coal and
utilising existing infrastructure, both projects benefit from low
capital intensity and can be brought into production within 3
months of the necessary funding being made available. A key
infrastructure cost saving is the right Futura has to process its
coal at the existing Gregory Crinum coal processing plant, which is
estimated to have a replacement cost of around A$300m.
Futura's economic model shows a net present value at a 10
percent discount rate (NPV(10) of A$339m over the 20 years of
planned production based on forward price expectations, or NPV(10)
of A$642m if current prices were maintained over the longer term*.
In addition, the overall mineral resource is extensive and could
sustain a mine life well beyond the currently planned term.
The convertible notes carry a 21% annual coupon with a
pre-conversion equity valuation of A$100 million, which equates to
A$2.38 per Futura share conversion price. Upon an IPO by Futura,
noteholders would have the right to convert at the lower of A$2.38
per share or a 20% discount to the IPO price. The high coupon
reflects recent precedents for the cost of financing for coal
development companies in Australia.
Approximately A$100m has been spent historically on exploration,
bulk sample testing and permitting in today's money to bring these
projects to the current stage of development with both Wilton and
Fairhill being granted Mining Licenses in November 2022.
The projects are coming into a coal market where supply is tight
for steel making coals and demand is strong, particularly from
developing countries like India, Vietnam and Indonesia, which are
all expanding steel production to meet domestic demand.
The Queensland government has expressed strong support for the
development of these two mines with Resources Minister Scott
Stewart saying,
"This investment is a strong vote of confidence in the
Queensland resources sector and our state's large deposits of
high-quality steelmaking coal"
"These projects are in the heart of the Bowen Basin and will
benefit from the existing infrastructure in place from nearby
mines".
"...regional communities will benefit from job opportunities and
the economic flow-on effects of these projects."
"Treasury forecasts show Queensland will likely remain the
world's largest seaborne exporter of steelmaking coal for many
decades to come,"
*Source: Futura management projections and mine plan financial
models
Further details of the Company and its investments are available
on the Company's website www.bakersteelresourcestrust.com
Enquiries:
Baker Steel Resources Trust Limited +44 20 7389 8237
Francis Johnstone
Trevor Steel
Numis Securities Limited +44 20 7260 1000
David Benda (corporate)
James Glass (sales)
The Net Asset Value ("NAV") figure stated is based on unaudited
estimated valuations of the underlying investments and not
necessarily based on observable inputs. Such estimates are not
subject to any independent verification or other due diligence and
may not comply with generally accepted accounting practices or
other generally accepted valuation principles. In addition, some
estimated valuations are based on the latest available information
which may relate to some time before the date set out above.
Accordingly, no reliance should be placed on such estimated
valuations and they should only be taken as an indicative guide.
Other risk factors which may be relevant to the NAV figure are set
out in the Company's Prospectus dated 26 January 2015.
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END
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(END) Dow Jones Newswires
September 11, 2023 02:00 ET (06:00 GMT)
Baker Steel Resources (LSE:BSRT)
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