TIDMBSRT
RNS Number : 5060M
Baker Steel Resources Trust Ltd
15 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)
15 September 2023
BAKER STEEL RESOURCES TRUST LTD
(the "Company")
Half-Yearly Report and Unaudited Condensed Interim Financial
Statements
For the period from 1 January 2023 to 30 June 2023
The Company herby submits its Half Year Report for the period
ended 30 June 2023 as required by the Uk Listing Authority's
Disclosure Guidance and Transparency Rules 4.2.
The Report is available via www.bakersteelresourcestrust.com and
will shortly be submitted to the National Storage Mechanism and be
available for inspection at FCA National Storage Mechanism
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)
HSBC Securities Services (Guernsey) Limited + 44 (0)1481 717 852
Company Secretary
MANAGEMENT AND ADMINISTRATION
DIRECTORS: Howard Myles (Chairman)
Charles Hansard
Fiona Perrott-Humphrey
John Falla
(all of whom are non-executive and independent)
REGISTERED OFFICE: Arnold House
St. Julian's Avenue
St. Peter Port
Guernsey, GY1 3NF
Channel Islands
MANAGER: Baker Steel Capital Managers (Cayman) Limited
PO Box 309
George Town
Grand Cayman KY1-1104
Cayman Islands
INVESTMENT MANAGER: Baker Steel Capital Managers LLP*
34 Dover Street
London W1S 4NG
United Kingdom
STOCK BROKERS: Numis Securities Limited
10 Paternoster Square
London EC4M 7LT
United Kingdom
SOLICITORS TO THE COMPANY: Norton Rose Fulbright LLP
(as to English law) 3 More London Riverside
London SE1 2AQ
United Kingdom
ADVOCATES TO THE COMPANY: Mourant Ozanne
(as to Guernsey law) Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey GY1 4HP
Channel Islands
ADMINISTRATOR & COMPANY SECRETARY: HSBC Securities Services (Guernsey) Limited
Arnold House
St. Julian's Avenue
St. Peter Port
Guernsey GY1 3NF
Channel Islands
* The Investment Manager was authorised as an Alternative
Investment Fund Manager ("AIFM") for the purpose of
the Alternative Investment Fund Managers Directive ("AIFMD") on 22 July 2014.
HSBC
Securities
Services
SUB-ADMINISTRATOR TO THE COMPANY: (Ireland) DAC
1 Grand Canal
Square
Grand Canal
Harbour
Dublin 2
Ireland
HSBC
Continental
CUSTODIAN TO THE COMPANY: Europe
1 Grand Canal
Square
Grand Canal
Harbour
Dublin 2
Ireland
SAFEKEEPING
AND HSBC
MONITORING Continental
AGENT: Europe
1 Grand Canal
Square
Grand Canal
Harbour
Dublin 2
Ireland
AUDITOR: BDO Limited
P O Box 180
Place du Pre
Rue du Pre
St. Peter
Port
Guernsey GY1
3LL
Channel
Islands
Computershare
Investor
Services
(Jersey)
REGISTRAR: Limited
Queensway
House
Hilgrove
Street
St Helier
JE11ES,
Jersey
Channel
Islands
Computershare
Investor
Services
(Jersey)
UK PAYING AGENT AND TRANSFER AGENT: Limited
Queensway
House
Hilgrove
Street
St Helier
JE11ES,
Jersey
Channel
Islands
Computershare
Investor
Services
(Jersey)
RECEIVING AGENT: Limited
Queensway
House
Hilgrove
Street
St Helier
JE11ES,
Jersey
Channel
Islands
PRINCIPAL BANKER: HSBC Bank plc
8 Canada
Square
London E14
5HQ
United
Kingdom
CHAIRMAN'S STATEMENT
For the period from 1 January 2023 to 30 June 2023
The first half of 2023 remained challenging for your Company
after a difficult 2022, with the NAV per share falling by 15.2% to
67.3 pence, versus a 7.1% fall in the EMIX Global Mining Index in
Sterling terms. The EMIX Index was down mainly due to falls in
commodity prices, investor concern that interest rates are likely
to stay higher for longer due to more persistent inflation and
concern that Chinese growth following its belated exit from COVID
measures was less robust than anticipated. Investors remain
cautious about the global economy and prospects for industrial
production levels, the key driver of commodities' demand, whilst
support from supply-chain related issues has largely abated, at
least in the short term.
Disappointingly, as at August 31st 2023 shares in the Company
were down by 25.5%, year to date, compared to a 16.8% decline in
NAV, as the discount to NAV widened to 47.5%, a level not seen
since 2016. Whilst most investment companies have seen a widening
in their discount to NAV due to the general risk aversion in
markets and particularly those with significant holdings in
unlisted assets, it is of note that as recently as June 2021 the
Company was trading at NAV, a reminder of how quickly market
perceptions and investor sentiment can change towards the mining
sector.
Financing new projects for junior mining development companies
is arguably tougher than it has been since the period following the
global financial crisis, and this has impacted valuations of these
companies adversely, including several held by the Company. Higher
interest rates also feed through to higher discount rates applied
to future cashflows from new projects and accordingly lower net
present values (NPVs) ascribed to them, often with a knock-on
effect on share prices. Although the current environment of risk
aversion is challenging in terms of value realisation for the
Company, it is important to adopt a careful and measured approach
during these periods, seeking to ensure that the latent value in
the projects in which we are invested is recognised and
maintained.
Against this backdrop and representing a major milestone, in
September 2023 Futura Resources secured the A$25m required to
commence production at its two Queensland steel making coal mines,
which at full capacity are projected to produce around 2 million
tonnes of saleable product for at least the next 15 years, at a
current mining cost of US$70 per tonne. Despite the significant
fall in hard coking coal prices from early 2022 levels, it is still
trading around the US$250 per tonne level which should produce a
strong margin. The Company is the largest investor in Futura with
around 27% of the equity and has agreed to invest a further
A$4.65m, or around its pro-rata entitlement, in the 3-year high
yield convertible note offering that was the primary source of
funding, taking the Futura investment from 25.3% NAV to
approximately 28.2% of pro-forma NAV at August 31st
2023.Shareholders had previously given the Company the authority to
invest further funds in Futura up to a limit of 35% NAV at the time
of investment, to allow additional flexibility so that it may seek
to protect its existing investment and support Futura in realising
the significant inherent value in its assets. Although the
financing of the development has taken somewhat longer and has been
achieved at a higher interest cost than anticipated, reflective of
the current environment, Futura is now expected to produce
significant cashflows in the coming years and implement a robust
dividend policy. The development of its mines will also result in
royalty payments being received by the Company, expected from Q2
2024
In another positive development, CEMOS Group plc, which is the
Company's largest holding, in 2022 achieved its third year of
profitable cement making operations in Morocco since commencing
production. Importantly, it has just committed to construct a
clinker making facility sufficient to meet CEMOS's internal
requirements, which is anticipated to significantly reduce current
clinker costs from third party suppliers and thus enhance margins.
Once the second grinding line, acquired in 2022, is installed CEMOS
should be able to double production at enhanced margins with ramp
up expected in 2025. The expansion is planned to be financed mainly
from internal cashflows supported by a term loan from a local
Moroccan bank.
Tungsten West Plc raised GBP7.1 million through a convertible
loan note which the Company, as its largest shareholder, supported
to maintain its pro rata position. The funding was required for
working capital to allow Tungsten West to complete submissions and
receive the final two key licences to operate. These are
anticipated to be received in the fourth quarter of 2023, at which
time Tungsten West will seek to raise the remaining funding
required for the recommencement of tungsten and tin production at
Hemerdon. The updated feasibility study indicates an IRR of 25% and
given the existing infrastructure, remaining capital requirements
are modest relative to the cashflows that the project is capable of
delivering.
In terms of other developments of note, First Tin PLC continued
to advance its two key tin projects, Tellerhäuser in Germany and
Taronga in Australia with a decision expected early next year on
which of the two projects should be prioritised for first
production. Nussir ASA, owner of a shovel ready copper project in
Norway, which is set to become the world's first fully electrified
mine, initiated a formal process to investigate a sale or merger of
the company with an existing producer.
Outlook
The outlook for mining is expected to remain challenging for the
remainder of 2023, with investors remaining risk averse until such
time as visibility on the timing of peak interest rates becomes
clearer. Nevertheless, the structural case for those metals and
commodities essential for the electrification and decarbonisation
transition continues to strengthen, whilst the growing themes of
deglobalisation and security of supply are likely to underpin
commodity prices in the longer term. Inventories remain low by
historic standards when measured in terms of weeks of consumption,
which does suggest that a recovery, when it comes, could be
magnified. Any major economic stimulus package announced by China
would provide a boost in sentiment towards the mining sector.
Historically, commodities, particularly precious metals, tend to
outperform other asset classes in time of persistent or rising
inflation or geopolitical uncertainty, such as in the 1970s, and
may therefore represent a hedge for portfolios during current
uncertain times.
On 31 August 2023, the share price traded at a 47.5% discount to
the NAV and continues to be closely monitored by the Board. We have
again sought authority to undertake a share buyback if the Board
considers it to be in the Company's best interests. With Futura
Resources making the transformative step to become a producer, this
significant de-risking of an important investment for the Company,
coupled with the prospect of dividends generated from the regular
income expected to be provided by royalties, should help to reduce
this discount in the future supported by the Company's policy of
distributing to Shareholders a portion of any realised profits by
way of dividend or capital return.
Howard Myles
Chairman
14 September 2023
INVESTMENT MANAGER'S REPORT
For the period from 1 January 2023 to 30 June 2023
Financial Performance
The unaudited Net Asset Value per Ordinary Share ("NAV") as at
30 June 2023 was 67.3 pence (31 December 2022:79.4 pence), a
decrease of 15.20% in the period compared with the decrease in the
EMIX Global Mining Index of 7.1% in Sterling terms.
For the purpose of calculating the NAV per share, unquoted
investments were carried at fair value as at 30 June 2023 as
determined by the Directors, based on reports received from the
Investment Manager following a process detailed in the Annual
Report and Account. Quoted investments were carried at their quoted
prices as at that date.
Net assets at 30 June 2023 comprised the following:
GBPm % of net assets
Unquoted Investments 54.8 76.3
Quoted Investments 16.7 23.4
Cash and other net assets 0.2 0.3
------- ------------------
71.7 100.0
Investment Update
Largest 10 Holdings - 30 June 2023 % of NAV
Cemos Group Plc 29.2
Futura Resources Limited 25.4
Caledonia Mining Corporation Plc 10.3
Bilboes Royalty 7.9
Kanga Investments Limited 5.1
Silver X Mining Corporation 4.5
First Tin Plc 3.8
Nussir ASA 3.7
Metals Exploration Plc 2.6
Tungsten West Plc 2.2
94.7
Other Investments 5.0
Cash and other net assets 0.3
100.0
=========
Largest 10 Holdings - 31 December 2022 % of NAV
Futura Resources Limited 27.7
Cemos Group Plc 22.8
Bilboes Gold Limited 16.2
Kanga Investments Limited 5.7
Tungsten West Plc 5.4
Silver X Mining 5.4
First Tin Plc 4.8
Nussir ASA 4.1
Metals Exploration plc 1.7
PRISM Diversified Limited 1.5
95.3
Other Investments 4.5
Cash and other net assets 0.2
---------
100.0
=========
Review
At 30 June 2023, the Company was fully invested, holding 16
investments of which the top 10 holdings comprised 95% of the
portfolio by value. The portfolio is diversified both in terms of
commodity and the geographical location of the projects. In terms
of commodity the portfolio has exposure to cement, copper, gold,
iron, lead, lithium, potash, silver, steel making coal, tin,
tungsten, vanadium, and zinc. Its projects are located in
Australia, Canada, Germany, Indonesia, Madagascar, Morocco, Norway,
Peru, the Philippines, Republic of Congo, Russia, the UK and
Zimbabwe.
During the first half of 2023, the market for commodities and
mining shares was generally weak with the EMIX Global Mining Index
ending the period down 7.1% in Sterling terms over concerns for
global and Chinese growth. In precious metals, gold rose 5.2% but
silver was down 4.9% over the period. The copper price was
unchanged after its fall in 2022 though tin recovered 10.9% after
falling 37.1% in 2022 (all in US dollars). Steel making coal
continued its retreat from its all-time highs as a result of the
war in Ukraine, falling a further 12% in the first half of 2023
following the 17.6% fall in 2022 after its 252% gain in 2021.
Likewise, potash fell back a further 36% to around US$320 per tonne
following its peaks in excess of US$1,000 per tonne in 2021.
The Company's main investments at the period end:
Cemos Group plc ("Cemos")
Cemos is a private cement producer at Tarfaya in Morocco.
Investment: 24,004,167 ordinary shares (24.6%) valued at GBP10.0 million
1,045 Convertible Loan Units (31.6% fully diluted incl existing
holding) valued at GBP10.9 million
In the first half of 2023 the demand for cement in Morocco
continued to be subdued due to inflationary pressures in the
economy although the sales for the year remained at around 200,000
tonnes, similar to 2022, and efforts are underway to grow and
diversify the client portfolio to mitigate the effects of lower
overall demand. At the end of June, the Board of Cemos gave the go
ahead to construct a compact calcination unit (CCU) to enable it to
produce its own clinker the main consumable for Cemos' operation,
subject to the requisite permits which are expected in the second
half of 2023. The CCU plant will cost around EUR10 million to
install, and is budgeted to increase the overall margin by around
50% or EUR5 million a year and also provide better security of
supply. Cemos continues to investigate the potential for
manufacture of 'green cement' products by replacing some clinker in
the production process with more environmentally friendly
supplementary cementitious materials such as pozzolan which would
not only reduce the CO2 footprint of the operation but may also
have a positive impact on costs.
Futura Resources Ltd ("Futura")
Futura owns the Wilton and Fairhill steel making coal projects
in the Bowen Basin in Queensland, Australia which hold Measured and
Indicated coal resources of 843 million tonnes.
Investment: 11,309,005 ordinary shares (26.9%) valued at GBP6.7 million
1.5% Gross Revenue Royalty valued at GBP11.2 million
A$600,000 million bridging loan valued at GBP0.27 million
On 23 November 2022, Futura was awarded the mining licences for
its projects and during the first half of 2023, it focused on
raising the necessary finance to commence production at Wilton. On
11 September 2023, Futura announced that it had completed an A$26.2
million financing which will be sufficient to commence production
at Wilton as well pay the landowner compensation due for Wilton and
Fairhill. Pre-production works are relatively simple consisting of
pre-stripping of overburden and upgrading of roads given the
existing agreement in place for the coal to be processed at the
nearby Gregory Crinum wash plant. As a result, Wilton is expected
to commence in production at the beginning of 2024. The expectation
is to develop Fairhill utilising cash flow generated from Wilton,
though that could be accelerated with offtake finance once the coal
quality from Wilton is proven. At full operating capacity the two
mines will produce around 2 million tonnes of coal per annum at a
cost of circa US$70 per tonne compared to the current spot price
for coking coal in excess of US$200 per tonne.
Caledonia Mining Corporation Plc ("Caledonia")
Investment: 800,000 ordinary shares (4.2%) valued at GBP7.4 million
On 6 January 2023 the shareholders of Bilboes Gold Ltd completed
its sale to Caledonia Mining Corporation Plc. Caledonia is a NYSE,
AIM and Victoria Falls Exchange listed gold producer whose primary
asset is the Blanket Mine in Zimbabwe. Part of the Company's
consideration for its 22% interest in Bilboes was in the form of
800,000 shares in Caledonia.
In the first half of 2023, Caledonia reported production of
33,472 ounces of gold which was down 13% on the previous year due
to a number of technical problems in the first half. These problems
have since been addressed and Caledonia was sufficiently confident
to maintain its production guidance at 75,000 to 80,000 of gold
from Blanket for 2023. Caledonia currently pays a dividend of
US$0.14 per quarter.
Bilboes Royalty ("Bilboes")
Investment: 1% net smelter royalty valued at GBP5.7 million
The other part of the Company's consideration for the sale of
Bilboes Gold Ltd was a 1% net smelter royalty (NSR) over the
Bilboes properties. The Bilboes' gold project in Zimbabwe has a
JORC compliant Proved and Probable Reserve containing 1.8 million
ounces of gold out of a total Mineral Resource of 3.8 million
ounces of gold.
Caledonia has indicated that it will re-engineer the original
Bilboes feasibility study which outlined production of an average
of 168,000 ounces per annum over 10 years, to a phased development
approach which would lower up-front capital. During the first half
of 2023, Caledonia recommenced gold production at Bilboes from near
surface oxide ores with the aim of generating additional cash and
with the benefit of pre-stripping for the underlying sulphide
project thus accelerating its development. However due to
variations in anticipated grades which had been extrapolated from
the drilling for the underlying sulphide resources in the
feasibility study, Caledonia has decided to cease mining and
metallurgical processing of the Bilboes Oxides at the end of
September 2023. Thereafter leaching of material that has already
been deposited on the leach pad will continue. Oxide mining and
processing will resume when the stripping of the waste for the
sulphide project commences.
At the average production rate of 168,000 ounces per annum in
the Bilboes feasibility study, the NSR would generate some US$2.5
million per annum after tax, although the expected production
profile will become clearer once Caledonia publishes its revised
plans for Bilboes,
Kanga Potash Investments Ltd
Kanga Potash is a private company which holds the Kanga potash
project, in the Republic of the Congo .
Investment: 56,042 ordinary shares (6.6%) valued at GBP3.7 million
Kanga Potash completed a positive Definitive Feasibility Study
("DFS") in 2020 on its Kanga Potash project in the Republic of
Congo for a mine producing 600,000 tonnes per annum of Muriate of
Phosphate ("MOP"). The DFS economic model gave a Net Present Value
at a 10% discount rate of US$511 million with an IRR of 22% based
on an MOP price of US$282 per tonne compared to the current price
of around US$350 per tonne. In addition, there is potential for the
mine to be expanded on a modular basis up to 2.4M tonnes per annum
over 30 years as set out in the DFS. Kanga Potash continues to have
discussions regarding the financing or sale of the project. In the
second half of 2022 the government of Congo published a decree
awarding the Kanga Exploitation/Mining Licence to Kanga Potash, a
key condition of potential acquirors.
Silver X Mining Corporation ("Silver X")
Silver X is a TSX-V listed company whose Recuperada project in
Peru comprises 11,261 Ha of mining concessions centred around a 600
tonne per day processing plant.
Investment: 19,502,695 ordinary shares (11.7%) valued at GBP3.2 million
In the first half of 2023 Silver X produced 531,099 ounces of
silver equivalent at its Nueva Recuperada Silver mine in Peru. The
mine performed below the level anticipated though no guidance had
been announced nor has any full year production guidance been
announced. As a result, in June 2023, the company announced the
appointment of a new Chief Operating Officer to reorganize
operations in order to bring them back on track. In July 2023 the
new CEO ordered a 30-45-day cessation of operations whilst a new
operational plan is implemented. In February 2023 Silver X released
the results of a Preliminary Economic Assessment ("PEA") under
Canadian National Instrument 43-101 Standards for the expansion of
the Tangana Mining Unit at Nueva Recuperada. The PEA outlined the
potential to treble annual production to 4.2 million ounces silver
equivalent by constructing an additional recovery plant at a
capital cost of US$61 million to give a post-tax NPV10 of US$175
million. A more detailed feasibility study will be undertaken
before a decision is made to move forward with this expansion.
First Tin PLC ("First Tin")
First Tin is a company listed on the London Stock Exchange which
holds the Tellerhäuser and Gottesburg tin projects in Germany and
the Taronga tin project in Australia. Combined contained tin for
the three projects totals 143,000 tonnes.
Investment: 37,128,014 ordinary shares (14.0%) valued at GBP2,7 million
During the first half of 2023 First Tin completed the infill and
extension drilling required for the feasibility study for Taronga
open pit tin project in Australia. This successfully outlined a
400-metre extension to the current resource area which should be
reflected in an updated mineral resource statement expected to be
released in Q3 2023. Once this has been completed First Tin can
optimize the scale of future operations which will be reflected in
a definitive feasibility study ("DFS") expected to be completed in
early 2024. In June 2023, First Tin submitted the complete
documentation for its mine permit application to the Saxonian
Mining Authority for the Tellerhäuser underground tin project. A
decision is expected prior to the end of Q3 2024. In the meantime,
First Tin plans to publish an updated JORC compliant Resource on
Tellerhäuser, with the DFS scheduled for completion in early
2024.
Nussir ASA ("Nussir")
Nussir is a Norwegian private company whose key asset is the
Nussir copper project in Northern Norway.
Investment: 12,785,361 ordinary shares (12.1%) valued at GBP2.7 million
In early April 2023 Nussir completed the update of the DFS on
its Nussir copper project in northern Norway changing the
operations from diesel based to a fully electrified mine producing
around 14,000 tonnes of copper per year over a 14 year mine life.
The updated DFS economics gave a NPV(8%) of US$191 million with an
IRR of 22% based on a copper price of US$8,000 per tonne (Spot
US$8,327 at June 2023). Nussir is currently in a formal process of
seeking an industry partner to assist with financing the
development of the mine.
Metals Exploration plc ("Metals Exploration")
Metals Exploration is an AIM listed company which owns the
Runruno gold mine in the Philippines.
Investment: 103,860,000 ordinary shares (5.4%) valued at GBP1.9 million
In the first half of 2023 Metals Exploration plc sold a record
46,186 ounces of gold from its Runruno gold mine in the
Philippines, an approximate 50% increase on the 30,676 ounces sold
in the first half of 2022. This resulted in record half-year gold
revenue of US$89.6 million (H1 2022: US$57.6 million) and record
half-year positive free cash flow of US$41.9 million (H1 2022:
US$13.6 million). This strong performance enabled Metals
Exploration to accelerate debt repayments to US$35.05 million
during the half year, leaving net debt at US$48.3 million at 30
June 2023.
Tungsten West Plc ("Tungsten West")
Tungsten West owns the Hemerdon Mine in Devon, United Kingdom
and is quoted on the AIM market of the London Stock Exchange.
Investment: 28,846,515 ordinary shares (15.4%) valued at GBP0.9 million
GBP600,000 convertible loan valued at GBP612,057
1,657,195 second options valued at GBP0.02 million
1,657,195 third options valued at GBP0.01 million
On 16 January 2023 Tungsten West announced the results of its
updated feasibility study on the Hemerdon tungsten and tin mine in
Devon. The feasibility study detailed a mine with average annual
production of 2,900 tonnes of tungsten (WO(3) ) and 310 tonnes of
tin in concentrate over 27 years. The economics showed a post-tax
NPV(5) of GBP297 million with an Internal Rate of Return (IRR) of
25%. It also highlighted an Upside Case post-tax NPV(5%) of GBP416
million with an IRR of 32%. Total pre-production capex, corporate
commitments and working capital was estimated at GBP54.9 million.
In June 2023, Tungsten West raised GBP7.1 million through a
convertible loan note issuance payable in two tranches. As Tungsten
West's largest shareholder, the Company supported this issue to
maintain its pro rata position. In August 2023. Tungsten West
announced completion of a low frequency noise trial, which enabled
it to make a formal submission to the Environment Agency to secure
the Mineral Processing Facility permit. Tungsten West also
submitted a section 73 (variation of a condition of existing
permission) application to vary the tonnage cap on truck movements
from site. It is anticipated that these two key licenses could be
received in the fourth quarter of 2023, at which time Tungsten West
will seek to raise the remaining funding required for the
recommencement of tungsten and tin production at Hemerdon.
Outlook
The disruption in availability of financing for junior companies
with development projects continued during the first half of 2023
and it is unclear when this position will change. Inflation fears
combined with sluggish global growth have led to investors
generally adopting a "risk off" position, whilst seeking to
preserve capital. Commentators expect inflation and interest rates
to remain high into 2024. An eventual change in the trend in
interest rates could be the trigger for a return to a healthier
market. However there remain concerns that the Chinese economy in
particular has not bounced back post covid lockdowns, and that
their government is no longer capable of stimulating the economy in
the face of a deteriorating housing market. Against this, there
remains the medium term demand profile for many minerals to
underpin the energy transition plus the growing interest by
governments to secure supply chains for essential minerals.
Attempting to call the exact timing on the potential recovery in
the markets for both commodity prices and shares would be
unrealistic. But shareholders should draw comfort from the mature
nature of many of the projects in which the Company holds
positions. This should mean that the portfolio is well placed to
benefit when momentum changes.
Baker Steel Capital Managers LLP
Investment Manager
September 2023
DIRECTORS' REPORT
For the period from 1 January 2023 to 30 June 2023
The Directors of the Company present the Half-Yearly Report and
Unaudited Condensed Interim Financial Statements for the six months
ended 30 June 2023.
The Directors' Report contains information that covers this
period and the period up to the date of publication of this Report.
Please note that more up to date information is available on the
Company's website www.bakersteelresourcestrust.com .
Status
Baker Steel Resources Trust Limited (the "Company") is a
closed-ended investment company with limited liability incorporated
on 9 March 2010 in Guernsey under the Companies (Guernsey) Law,
2008 with registration number 51576. The Company is a registered
closed-ended investment scheme registered pursuant to the
Protection of Investors (Bailiwick of Guernsey) Law, 2020, ("POI
Law") and the Registered Collective Investment Scheme Rules and
Guidance, 2021 issued by the Guernsey Financial Services Commission
("GFSC"). On 28 April 2010 the Ordinary Shares and Subscription
Shares of the Company were admitted to the Official List of the UK
Listing Authority and to trading on the Main Market of the London
Stock Exchange, Premium Segment.
Investment Objective
The Company's investment objective is to seek capital growth
over the long-term through a focused, global portfolio consisting
principally of the equities, loans or related instruments of
natural resources companies. The Company invests predominantly in
unlisted companies (i.e. those companies that have not yet made an
initial public offering ("IPO")) but also in listed securities
(including special situations opportunities and less liquid
securities) with a view to making attractive investment returns
through the uplift in value resulting from the development
progression of the investee companies' projects and through
exploiting value inherent in market inefficiencies and pricing
anomalies.
Performance
During the period ended 30 June 2023, the Company's unaudited
NAV per Ordinary Share decreased by 15.20% and the share price
decreased by 4.4 % on the London Stock Exchange. This compares with
a fall in the EMIX Global Mining Index (capital return in Sterling
terms) of 7.1%. A more detailed explanation of the performance of
the Company is provided within the Investment Manager's Report on
pages 5 to 9.
The results for the period are shown in the Statement of
Comprehensive Income on pages 17 and 18 and the Company's financial
position at the end of the period is shown in the Statement of
Financial Position on page 16.
Dividend and distribution policy
During the year ended 31 December 2015, the Board introduced a
capital returns policy whereby, subject to applicable laws and
regulations, it will allocate cash for distributions to
shareholders. The amount to be distributed will be calculated and
paid following publication of the Company's audited financial
statements for each year and will be no less than 15% of the
aggregate net realised cash gains (after deducting losses) in that
financial year. The Board will retain discretion for determining
the most appropriate manner to make such distribution which may
include share buybacks, tender offers and dividend payments. In the
longer term the Board intends to formulate a more regular dividend
policy once it starts to receive income from its royalty interests.
As it is not expected that there will be net realised cash gain
during the year, it is unlikely that there will be any distribution
in respect of the year ended 31 December 2023.
Directors and their interests
The Directors of the Company who served during the period and up
until the date of signing of the financial statements are:
Howard Myles (Chairman)
Charles Hansard
Fiona Perrott-Humphrey
John Falla
Biographical details of each of the Directors who were on the
Board of the Company at the time of signing the annual report and
financial statements for the year ended 31 December 2022 ("the
Annual Report") are presented on page 18 of that report.
Each of the Directors is considered to be independent in
character and judgement.
Each Director is asked to declare his interests at each Board
Meeting. No Director has any material interest in any other
contract which is significant to the Company's business.
John Falla holds 60,000 shares in the Company (31 December 2022:
60,000). No other director has a beneficial interest in the
Company.
Attendance at the quarterly Board and Audit Committee meetings
during the period was as follows:
Audit Committee
Board Meetings Meetings
Held Attended Held Attended
Howard Myles 2 2 2 2
Charles Hansard 2 2 n/a n/a
Fiona Perrott-Humphrey 2 2 2 2
John Falla 2 2 2 2
In addition to the quarterly meetings, ad hoc Board and
committee meetings are convened as required. All Directors
contribute to a significant ad hoc exchange of views between the
Directors and the Investment Manager on specific matters, in
particular in relation to developments in the portfolio.
The Directors are remunerated for their services at such rate as
the Directors determine provided that the aggregate amount of such
fees may not exceed GBP200,000 per annum (or such sum as the
Company in a general meeting shall from time to time determine).
Effective 1 October 2022 the Board, recognising that Board
remuneration was below market rates having not changed since the
Company's flotation in 2010, resolved to increase their
remuneration to GBP32,500 per annum for each Director. The Chairman
receives a supplement of GBP10,000 per annum and the Chairman of
the Audit Committee a supplement of GBP5,000 per annum.
For the period ended 30 June 2023 the total remuneration of the
Directors was GBP72,500 (30 June 2022: GBP57,500). There were no
Director's fees outstanding as at 30 June 2023 (31 December 2022:
GBPNil).
Authorised share capital
The share capital of the Company on incorporation was
represented by an unlimited number of Ordinary Shares of no-par
value. The Company may issue an unlimited number of shares of a
nominal or par value and/or of no par value or a combination of
both.
Shares in issue
The Company was admitted to trading on the London Stock Exchange
on 28 April 2010. The Company has a total of 106,453,335 (31
December 2022: 106,453,335) ordinary shares outstanding with an
additional 700,000 (31 December 2022: 700,000) held in treasury.
The Company has 9,167 (31 December 2022: 9,167) Management Ordinary
shares in issue, which are held by the Investment Manager.
Going concern
Having reassessed the principal and emerging risks described on
pages 14 and 15 of the 31 December 2022 Annual Report, and the
other matters discussed in connection with the viability statement
as set out on page 16 of the said report, the Directors consider it
is appropriate to adopt the going concern basis in preparing these
interim Financial Statements. The discontinuation vote in 2021 was
not passed and the next vote is in 2024. The Board have no reason
to believe that investors will vote in favour of discontinuation.
As at 30 June 2023, approximately 23.3% of the Company's assets
were represented by cash and unrestricted listed and quoted
investments which are readily realisable. Although the continuing
Russian invasion of Ukraine has resulted in a reduction in the
carrying value of investments with a Russian nexus it is not
expected that it will affect the Company's ability to operate on a
normal basis. Neither of the two affected investments, PAL and
Azarga were expected to be a material source of revenue in the next
two years. The Directors are not aware of any material
uncertainties that may cast significant doubt upon the Company's
ability to continue as a going concern.
Related party transactions
Transactions with related parties are based on terms equivalent
to those that prevail in an arm's length transaction and are
disclosed in Note 9 .
Principal and emerging risks
The principal and emerging risks facing the Company, which
include market and financial risk and portfolio management and
performance risk, are considered in detail, on pages 14 and 15 of
the 31 December 2022 Annual Report which is available on the
Company's website www.bakersteelresourcestrust.com. The Directors
do not consider that these risks have materially changed during the
period ended 30 June 2023 and do not expect any changes in the
second half of 2023.
Directors' responsibility statement
The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements have been prepared
in accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union ("EU") and give a true
and fair view of the assets, liabilities and financial position and
profit or loss of the Company; and
- the Interim Report and Accounts includes a fair review of the
information required by 4.2.7R and 4.2.8R of the FCA's Disclosure
and Transparency Rules.
Corporate governance compliance
The Company is a member of the Association of Investment
Companies.
The Board has therefore considered the Principles and Provisions
of the AIC Code of Corporate Governance (AIC Code). The AIC Code
addresses the Principles and Provisions set out in the UK Corporate
Governance Code (the UK Code), as well as setting out additional
Provisions on issues that are of specific relevance to the
Company.
The Board considers that reporting against the Principles and
Provisions of the AIC Code, which has been endorsed by the
Financial Reporting Council and the Guernsey Financial Services
Commission, provides more relevant information to shareholders.
The Company has complied with the Principles and Provisions of
the AIC Code and therefore the UK Code except as where explained in
the Annual Report on pages 22 to 24.
There is no change in compliance since the Annual Report.
Signed for and on behalf of the Directors:
Howard Myles John Falla
Director Director
14 September 2023
UNAUDITED PORTFOLIO STATEMENT
AS AT 30 JUNE 2023
Shares Investments Fair value % of Net
/Warrants/ GBP equivalent assets
Nominal
Listed equity shares
Australian Dollars
4,091,910 Akora Resources Limited 364,426 0.51
Australian Dollars Total 364,426 0.51
---------------------- ----------------
Canadian Dollars
6,519,395 Azarga Metals Corporation 290,561 0.41
19,502,695 Silver X Mining Corporation 3,245,053 4.53
Canadian Dollars Total 3,535,614 4.94
---------------------- ----------------
Great Britain Pounds
800,000 Caledonia Mining Corporation Plc 7,392,204 10.31
37,128,014 First Tin Plc 2,691,781 3.75
103,860,000 Metals Exploration Plc 1,869,480 2.61
28,846,515 Tungsten West Plc 901,454 1.26
Great Britain Pounds Total 12,854,919 17.93
---------------------- ----------------
Total investment in listed equity
shares 16,754,959 23.38
---------------------- ----------------
Debt instruments
Australian Dollars
Futura Resources Limited - Bridging
600,000 Loan 270,427 0.38
Australian Dollars Total 270,427 0.38
---------------------- ----------------
Canadian Dollars
PRISM Diversified Limited Loan Note
305,000 1 89,589 0.12
PRISM Diversified Limited Loan Note
250,500 2 285,454 0.40
Canadian Dollars Total 375,043 0.52
---------------------- ----------------
Shares Investments Fair value % of Net
/Warrants/ GBP equivalent assets
Nominal
Great Britain Pounds
1,045 Cemos Group Convertible Loan 10,936,853 15.25
600,000 Tungsten West Convertible Loan 612,057 0.85
Great Britain Pounds Total 11,548,910 16.10
--------------- -----------
United States Dollars
7,028,352 Black Pearl Limited Partnership 688,543 0.96
United States Dollars Total 688,543 0.96
--------------- -----------
Total investments in debt instruments 12,882,923 17.96
--------------- -----------
Unlisted equity shares, warrants
and royalties
Australian Dollars
10,100,000 Futura Gross Revenue Royalty 11,179,654 15.59
11,309,005 Futura Resources Limited 6,754,034 9.42
Australian Dollars Total 17,933,688 25.01
--------------- -----------
Canadian Dollars
666,667 Azarga Metals Warrants 09/05/2025 923 0.00
13,083,936 PRISM Diversified Limited 777,513 1.08
40,000 PRISM Diversified Limited Royalty 23,770 0.03
PRISM Diversified Limited Warrants
1,000,000 31/12/2023 16,520 0.02
324,000 Unkur On-sale Entitlement 48,134 0.07
Canadian Dollars Total 866,860 1.20
--------------- -----------
Great Britain Pounds
1,594,646 Celadon Mining Limited 15,946 0.02
24,004,167 Cemos Group Plc 10,009,738 13.96
Tungsten West Plc Second Option Share
1,657,195 Warrants 18/10/2026 19,887 0.03
Tungsten West Plc Third Option Share
1,657,195 Warrants 18/10/2026 11,932 0.02
Great Britain Pounds Total 10,057,503 14.03
--------------- -----------
Norwegian Krone
12,785,361 Nussir ASA 2,656,393 3.70
Norwegian Krone Total 2,656,393 3.70
--------------- -----------
Shares Investments Fair value % of Net
/Warrants/ GBP equivalent assets
Nominal
United States Dollars
- Bilboes Net Smelter Royalty 5,671,027 7.91
56,042 Kanga Investments Limited 3,684,536 5.14
16,352 Polar Acquisition Limited 999,290 1.39
United States Dollars Total 10,354,853 14.44
--------------- ---------
Total Unlisted equity shares, warrants
and royalties 41,869,297 58.38
--------------- ---------
Financial Assets held at fair Value
through profit or loss 71,507,179 99.72
--------------- ---------
Other Assets & Liabilities 191,488 0.28
--------------- ---------
Total Equity 71,698,667 100.00
--------------- ---------
UNAUDITED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
Unaudited Audited
30 June 31 December
2023 2022
Notes GBP GBP
Assets
Cash and cash equivalents 260,862 254,140
Interest receivable 56,092 57,917
Other receivables 24,717 17,899
Financial assets held at fair value through
profit or loss 3 71,507,179 84,311,955
Total assets 71,848,850 84,641,911
------------- -------------
Equity and Liabilities
Liabilities
Management fees payable 7,9 70,339 69,854
Administration fees payable 33,711 9,659
Audit fees payable 35,000 70,000
Custodian fees payable 6,166 7,158
Other payables 4,967 2,392
Total liabilities 150,183 159,063
------------- -------------
Equity
Management Ordinary Shares 8 9,167 9,167
Ordinary Shares 8 75,972,688 75,972,688
Revenue Reserves 8,421,427 8,771,186
Capital Reserves (12,704,615) (270,193)
Total equity 71,698,667 84,482,848
------------- -------------
Total equity and liabilities 71,848,850 84,641,911
============= =============
Net Asset Value per Ordinary Share (in
Pence) - Basic and Diluted 5 67.3 79.4
These unaudited condensed financial statements on pages 16 to 30 were
approved by the Board of Directors on 14 September 2023 and signed
on its behalf by:
Howard Myles John Falla
Director Director
UNAUDITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2023 TO 30 JUNE 2023
Unaudited Unaudited Unaudited
period ended period ended period ended
30 June 30 June 30 June
2023 2023 2023
Revenue Capital Total
Notes GBP GBP GBP
Income
Interest income 229,828 - 229,828
Dividend income 176,396 - 176,396
Other income 1,618 - 1,618
Net loss on financial assets at
fair value through profit or loss 3 - (12,429,311) (12,429,311)
Net foreign exchange loss - (5,111) (5,111)
Net income/(loss) 407,842 (12,434,422) (12,026,580)
-------------- -------------- --------------
Expenses
Management fees 7,9 453,417 - 453,417
Administration fees 55,298 - 55,298
Directors' fees 9 72,500 - 72,500
Legal fees 10,226 - 10,226
Other expenses 48,753 - 48,753
Custody fees 43,724 - 43,724
Audit fees 35,000 - 35,000
Broker fees 17,500 - 17,500
Directors' insurance 18,414 - 18,414
Directors' expenses 2,769 - 2,769
Total expenses 757,601 - 757,601
-------------- -------------- --------------
Net loss for the period (349,759) (12,434,422) (12,784,181)
============== ============== ==============
Net loss for the period per Ordinary
Share:
Basic and Diluted (in pence) 5 (0.33) (11.68) (12.01)
In the period ended 30 June 2023, there were no other gains or losses than those recognised
above.
The Directors consider all results to derive from continuing activities.
The format of the Statement of Comprehensive Income follows the recommendations of the AIC
Statement of Recommended Practice.
UNAUDITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2022 TO 30 JUNE 2022
Unaudited Unaudited Unaudited
period ended period ended period ended
30 June 30 June 30 June
2022 2022 2022
Revenue Capital Total
Notes GBP GBP GBP
Income
Interest income 320,808 - 320,808
Dividend income 7,249 - 7,249
Net loss on financial assets at
fair value through profit or loss 3 - (18,569,776) (18,569,776)
Net foreign exchange gain - 4,925 4,925
-------------- -------------- --------------
Net income 328,057 (18,564,851) (18,236,794)
-------------- -------------- --------------
Expenses
Management fees 7,9 649,850 - 649,850
Administration fees 60,897 - 60,897
Directors' fees 9 57,500 - 57,500
Legal fees 55,112 - 55,112
Other expenses 51,932 - 51,932
Custody fees 30,787 - 30,787
Audit fees 29,250 - 29,250
Depositary fees 20,037 - 20,037
Broker fees 17,500 - 8,879
Directors' insurance 6,000 - 6,000
Directors' expenses 151 - 151
-------------- -------------- --------------
Total expenses 979,016 - 979,016
-------------- -------------- --------------
Net loss for the period (650,960) (18,564,850) (19,215,810)
-------------- -------------- --------------
Net loss for the period per Ordinary
Share:
Basic and Diluted (in pence) 5 (0.61) (17.44) (18.05)
In the period ended 30 June 2022, there were no other gains or losses than those recognised
above.
The Directors consider all results to derive from continuing activities.
The format of the Statement of Comprehensive Income follows the recommendations of the AIC
Statement of Recommended Practice.
UNAUDITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2023 TO 30 JUNE 2023
Management
Ordinary Ordinary Treasury Revenue Capital Period
Shares Shares Shares reserves reserves end
GBP GBP GBP GBP GBP GBP
Balance as at 1 January
2023 9,167 76,113,180 (140,492) 8,771,186 (270,193) 84,482,848
Net loss for the
period - - - (349,759) (12,434,422) (12,784,181)
Balance as at 30
June 2023 9,167 76,113,180 (140,492) 8,421,427 (12,704,615) 71,698,667
------------- ----------- ----------- ----------- ------------- -------------
Note: 8 8
UNAUDITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2022 TO 30 JUNE 2022
Management
Ordinary Ordinary Treasury Revenue Capital Period
Shares Shares Shares reserves reserves end
GBP GBP GBP GBP GBP GBP
Balance as at 1 January
2022 9,167 76,113,180 (140,492) 10,047,160 18,769,941 104,798,956
Net gain for the
period - - - (650,959) (18,564,851) (19,215,810)
Balance as at 30
June 2022 9,167 76,113,180 (140,492) 9,396,201 205,090 85,583,146
------------- ----------- ----------- ----------- ------------- -------------
Note: 8 8
UNAUDITED CONDENSED INTERIM STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM 1 JANUARY 2023 TO 30 JUNE 2023
Unaudited Unaudited
Period Period
ended ended
30 June 30 June
2023 2022
GBP GBP
Cash flows from operating activities
Net loss for the period (12,784,181) (19,215,810)
Adjustments to reconcile net gain for the period
to net cash used in operating activities:
Interest income (229,828) (320,808)
Dividend income (176,396) (7,249)
Net loss on financial assets at fair value through
profit or loss 3 12,429,311 18,569,776
Net (increase)/decrease in other receivables (6,818) 567
Net decrease in payables (8,880) (54,524)
------------- -------------
(776,792) (1,028,048)
Interest received 231,653 514,027
Dividend received 176,396 7,249
------------- -------------
Net cash used in operating activities (368,743) (506,772)
------------- -------------
Cash flows from investing activities
Purchase of financial assets at fair value through
profit or loss (772,888) (1,209,441)
Sale of financial assets at fair value through
profit or loss 1,148,353 768,643
Net cash generated from/ (used in) investing
activities 375,465 (440,798)
------------- -------------
Net increase/(decrease) in cash and cash equivalents 6,722 (947,570)
Cash and cash equivalents at the beginning of
the period 254,140 1,077,482
Cash and cash equivalents at the end of the
period 260,862 129,912
============= =============
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL
STATEMENTS
FOR THE PERIOD FROM 1 JANUARY 2023 TO 30 JUNE 2023
1. GENERAL INFORMATION
Baker Steel Resources Trust Limited (the "Company") is a
closed-ended investment company with limited liability incorporated
and domiciled on 9 March 2010 in Guernsey under the Companies
(Guernsey) Law, 2008 with registration number 51576. The Company is
a registered closed-ended investment scheme registered pursuant to
the Protection of Investors (Bailiwick of Guernsey) Law, 2020 and
the Registered Collective Investment Scheme Rules and Guidance,
2021 issued by the Guernsey Financial Services Commission ("GFSC").
On 28 April 2010 the Ordinary Shares and Subscription Shares of the
Company were admitted to the Official List of the UK Listing
Authority and to trading on the Main Market of the London Stock
Exchange. The Company's Ordinary and Subscription Shares were
admitted to the Premium Listing Segment of the Official List on 28
April 2010.
The final exercise date for the Subscription Shares was 2 April
2013. No Subscription Shares were exercised at this time and all
residual/unexercised Subscription Shares were subsequently
cancelled.
The Company's portfolio is managed by Baker Steel Capital
Managers (Cayman) Limited (the "Manager"). The Manager has
appointed Baker Steel Capital Managers LLP (the "Investment
Manager") as the Investment Manager to carry out certain duties.
The Company's investment objective is to seek capital growth over
the long-term through a focused, global portfolio consisting
principally of the equities, or related instruments, of natural
resources companies. The Company invests predominantly in unlisted
companies (i.e. those companies which have not yet made an Initial
Public Offering ("IPO")) and also in listed securities (including
special situations opportunities and less liquid securities) with a
view to exploiting value inherent in market inefficiencies and
pricing anomalies.
Baker Steel Capital Managers LLP was authorised to act as an
Alternative Investment Fund Manager ("AIFM") of Alternative
Investment Funds ("AIFs") on 22 July 2014. On 14 November 2014, the
Investment Manager signed an amended Investment Management
Agreement with the Company, to take into account AIFM regulations.
AIFMD focuses on regulating the AIFM rather than the AIFs
themselves, so the impact on the Company is limited.
The Half-Yearly financial report has not been audited or
reviewed by the auditors pursuant to the Auditing Practices
Board
Guidance on review of Interim Financial Information. However,
the Board did procure the independent external auditor to undertake
certain agreed upon procedures to assist the Audit Committee and
Board with its review of this report.
2. SIGNIFICANT ACCOUNTING POLICIES
The unaudited condensed interim financial statements in the half
year report for the six months ended 30 June 2023 have been
prepared in accordance with International Accounting Standard (IAS)
34, 'Interim Financial Reporting' as adopted by the European Union.
This half year report and condensed financial statements should be
read in conjunction with the Company's annual report and financial
statements for the year ended 31 December 2022, which have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union and are available
at the Company's website (www.bakersteelresourcestrust.com).
The accounting policies adopted and methods of computation
followed in the condensed interim financial statements are
consistent with those applied in the preparation of the Company's
annual financial statements for the year ended 31 December 2022 and
are expected to be applied to the Company's annual financial
statements for the year ending 31 December 2023.
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Period Year
ended 30 ended
June 31 December
Investment Summary: 2023 2022
GBP GBP
Opening book cost 75,709,282 82,910,887
Purchases at cost 14,257,610 1,882,060
Proceeds on sale of investments (14,633,075) (2,216,780)
Net realised gains/(losses) 9,119,889 (6,886,885)
------------- -------------
Closing cost 84,453,706 75,709,282
Net unrealised (losses)/gains (12,946,527) 8,602,673
------------- -------------
Financial assets held at fair value through profit
or loss 71,507,179 84,311,955
============= =============
The following table analyses net gains on financial assets at
fair value through profit or loss for the period/year ended 30 June
2023, 31 December 2022 and 30 June 2022.
Period Period
ended 30 Year ended ended 30
June 31 December June
2023 2022 2022
GBP GBP GBP
Financial assets at fair value through
profit or loss
Realised (losses)/gains on:
- Listed equity shares (608,024) (1,438,318) (1,117,529)
- Unlisted equity shares 9,727,913 (5,118,472) -
- Debt instruments - (296,970) (1,390,462)
- Warrants - (13,125) -
9,119,989 (6,866,885) (2,507,991)
Movement in unrealised gains/(losses)
on:
- Listed equity shares (5,391,591) (13,716,492) (14,370,970)
- Unlisted equity shares (13,859,987) 7,893,046 947,253
- Royalties (2,718,767) (2,763,850) 968,471
- Debt instruments 765,220 (2,675,240) (2,809,854)
- Warrants (344,075) (909,497) (796,685)
------------- ------------- -------------
(21,549,200) (12,172,033) (16,061,785)
------------- ------------- -------------
Net loss on financial assets at fair
value through profit or loss (12,429,311) (19,038,918) (18,569,776)
------------- ------------- -------------
The following table analyses investments by type and by level
within the fair valuation hierarchy at 30 June 2023.
Quoted prices
in active Quoted market Unobservable
markets based observables inputs
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets at
fair value through profit
or loss
Listed equity shares 16,464,398 290,561 - 16,754,959
Unlisted equity shares - - 23,898,160 23,898,160
Royalties - - 17,873,741 17,873,741
Warrants - - 97,396 97,396
Debt instruments - - 12,882,923 12,882,923
------------- ------------------ ------------ ----------
16,464,398 290,561 54,752,220 71,507,179
============= ================== ============ ==========
The following table analyses investments by type and by level
within the fair valuation hierarchy at 31 December 2022.
Quoted prices
in active Quoted market Unobservable
markets based observables inputs
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets at
fair value through profit
or loss
Listed equity shares 11,378,285 4,804,434 - 16,182,719
Unlisted equity shares - - 41,514,956 41,514,956
Royalties - - 14,808,689 14,808,689
Warrants - - 441,471 441,471
Debt instruments - - 11,364,120 11,364,120
------------- ------------------ ------------ ----------
11,378,285 4,804,434 68,129,236 84,311,955
============= ================== ============ ==========
The table below shows a reconciliation of beginning to ending
fair value balances for Level 3 investments and the amount of total
gains or losses for the period included in net gain on financial
assets and liabilities at fair value through profit or loss held at
30 June 2023.
Unlisted
30 June 2023 Equities Royalties Debt instruments Warrants Total
GBP GBP GBP GBP GBP
Opening balance 1 January
2023 41,514,956 14,808,689 11,364,120 441,471 68,129,236
Purchases of investments - 5,783,819 772,888 - 6,556,707
Sales of investments (13,484,722) - (19,304) - (13,504,026)
Change in net unrealised
gains/(losses) (13,859,987) (2,718,767) 765,219 (344,075) (16,157,610)
Realised gain 9,727,913 - - - 9,729,913
------------- ------------ ----------------- ---------- -------------
Closing balance 30 June
2023 23,898,160 17,873,741 12,882,923 97,396 54,752,220
------------- ------------ ----------------- ---------- -------------
Unrealised (losses)/gains
on investments still
held at 30 June 2023 (3,310,376) (793,547) 2,440,938 97,396 (1,565,589)
============= ============ ================= ========== =============
The table below shows a reconciliation of beginning to ending
fair value balances for Level 3 investments and the amount of total
gains or losses for the year included in net loss on financial
assets and liabilities at fair value through profit or loss held at
31 December 2022.
Unlisted Debt
31 December 2022 Equities Royalties instruments Warrants Total
GBP GBP GBP GBP GBP
Opening balance 1 January
2022 46,971,239 16,479,048 19,927,503 1,364,093 84,741,883
Purchases of investments - - 189,649 - 189,649
Conversion - 1,093,491 (1,093,491) - -
Sales of investments (178,554) - - - (178,554)
Transfer out of Level
3 (8,052,304) - (4,687,331) - (12,739,635)
Change in net unrealised
gains/losses 7,893,046 (2,763,850) (2,675,240) (909,497) 1,544,459
Realised gains (5,118,471) - (296,970) (13,125) (5,428,566)
------------ ------------ ------------ ---------- -------------
Closing balance 31 December
2022 41,514,956 14,808,689 11,364,120 441,471 68,129,236
------------ ------------ ------------ ---------- -------------
Unrealised gains on
investments still held
at 31 December 2022 10,549,611 1,905,220 1,675,718 441,471 14,592,020
============ ============ ============ ========== =============
It is the Company's policy to recognise a change in hierarchy
level when there is a change in the status of the investment, for
example when a listed company delists or vice versa, or when shares
previously subject to a restriction have that restriction released.
The transfers between levels are recorded either on the value of
the investment immediately after the event or the carrying value of
the investment at the beginning of the financial year.
On 9 January 2023 the Company sold its investment in Bilboes
Gold Limited to Caledonia Mining Corporation plc ("Caledonia"), the
sale was partially settled by receipt of shares in Caledonia.
Bilboes was presented as a Level 3 investment at the year end.
Caledonia is NYSE, AIM and Victoria Exchange listed, and therefore
considered Level 1 in the fair value hierarchy. The transaction
resulted in the realisation of US$9.7million previously unrealised
gains in Bilboes.
At the year-end, First Tin was presented as Level 2 on the
hierarchy, this was because although the shares were listed on the
LSE, they were locked up. The lock-up expired on 8 April 2023 and
the shares are now included within Level 1.
In determining an investment's position within the fair value
hierarchy, the Directors take into consideration the following
factors :
Investments whose values are based on quoted market prices in
active markets are classified within Level 1. These include listed
equities with observable market prices. The Directors do not adjust
the quoted price for such instruments, even in situations where the
Company holds a large position, and a sale could reasonably impact
the quoted price. The Company does not currently hold a
sufficiently large position in any listed company that it could
impact the quoted price via a sale of its investment.
Investments that trade in markets that are not considered to be
active but are valued based on quoted market prices, dealer
quotations or alternative pricing sources supported by observable
inputs, are classified within Level 2. These include certain
less-liquid listed equities. Level 2 investments are valued with
reference to the listed price of the shares should they be freely
tradable after applying a discount for illiquidity if relevant. As
Level 2 investments include positions that are not traded in active
markets and/or are subject to transfer restrictions, valuations may
be adjusted to reflect illiquidity and/or non-transferability,
which are generally based on available market information. The
Company held one Level 2 investment at 30 June 2023 (31 December
2022: two).
Investments classified within Level 3 have significant
unobservable inputs. They include unlisted debt instruments,
royalty rights, unlisted equity shares and warrants. Level 3
investments are valued using valuation techniques explained below.
The inputs used by the Directors in estimating the value of Level 3
investments include the original transaction price, recent
transactions in the same or similar instruments if representative
in volume and nature, completed or pending third-party transactions
in the underlying investment of comparable issuers, subsequent
rounds of financing, recapitalisations and other transactions
across the capital structure, offerings in the equity or debt
capital markets, and changes in financial ratios or cash flows.
Level 3 investments may also be adjusted with a discount to reflect
illiquidity and/or non-transferability in the absence of market
information.
Valuation methodology of Level 3 investments
The primary valuation technique is of "Latest Recent
Transaction" being either recent external fund raises or
transactions. In all cases the valuation considers whether there
has been any change since the transaction that would indicate the
price is no longer fair value. Where an unquoted investment has
been acquired or where there has been a material arm's length
transaction during the past six months it will be carried at
transaction value, having taken into account any change in market
conditions and the performance of the investee company between the
transaction date and the valuation date. If it is assessed that a
recent transaction is not at an arm's length or there are other
indicators that it has not been executed at a price that is
indicative of fair value, then the transaction value will not be
used as the carrying value of the investment. Where there has been
no Latest Recent Transaction the primary valuation driver is
IndexVal. For each core unlisted investment, the Company maintains
a weighted average basket of listed companies which are comparable
to the investment in terms of commodity, stage of development and
location ("IndexVal"). IndexVal is used as an indication of how an
investment's share price might have moved had it been listed.
Movements in commodity prices are deemed to have been taken into
account by the movement of IndexVal.
A secondary tool used by Management to evaluate potential
investments as well as to provide underlying valuation references
for the Fair Value already established is Development Risk Adjusted
Value ("DRAV"). DRAVs are not a primary determinant of Fair Value.
The Investment Manager prepares discounted cash flow models for the
Company's core investments annually taking into account significant
new information, and for decision making purposes when required.
From these, DRAVs are derived. The computations are based on
consensus forecasts for long term commodity prices and investee
company management estimates of operating and capital costs. Some
market analysts incorporate development risk into the discount rate
in arriving at a net present value ("NPV"). Instead, the Investment
Manager establishes an NPV discounted purely for cost of capital
and country risk and then applies a further overall discount to the
project economics dependent on where such project sits on the
development curve per the DRAV calculations.
The valuation technique for Level 3 investments can be divided
into six groups:
i. Transactions & Offers
Where there have been transactions within the past 6 months
either through a capital raising by the investee company or known
secondary market transactions, representative in volume and nature
and conducted on an arm's length basis, this is taken as the
primary driver for valuing Level 3 investments, having taken into
account of any change in market conditions and the performance of
the investee company between the transaction date and the valuation
date. This includes offers, binding or otherwise from third parties
around the year end which may not have completed prior to the
period end but have a high chance of success and are considered to
represent the situation at period end.
ii. IndexVal
Where there have been no known transactions for 6 months, at the
Company's half year and year end, movements in IndexVal will
generally be taken into account in assessing Fair Value where there
has been at least a 10% movement in IndexVal over at least a
six-month period. The IndexVal results are used as an indication of
trend and are viewed in the context of investee company progress
and any requirement for finance in the short term for further
progression.
iii. Royalty Valuation Model
The rights to receive royalties are valued on projected cash
flows taking into account expected time to production and
development risk and adjusted for movement in commodity prices.
iv. EBITDA Multiple
In the case of Cemos Group plc, which moved to full production
during 2020 and so could reflect maintainable earnings, it is a
cement plant with no defined life, unlike a mining project and
therefore has been valued on the basis of a multiple of historical
and forecast earnings before interest, tax, depreciation and
amortisation when compared to listed comparable cement
producers.
v. Warrants
Warrants are valued using a simplified Black Scholes model
taking into account time to expiry, exercise price and volatility.
Where there is no established market for the underlying shares the
average volatility of the companies in that investment's basket of
IndexVal comparables is utilised in the Black Scholes model.
vi. Convertible loans
Convertible loans are valued taking into account credit risk and
the value of the conversion aspect.
Quantitative information on significant unobservable inputs -
Level 3
Range of
unobservable
30 June input
2023 Unobservable (weighted
Description GBP Valuation technique input average)
Unlisted Equity 777,513 Transactions Private transactions n/a
Unlisted Equity 13,094,653 IndexVal Change in IndexVal n/a
Unlisted Equity 10,009,738 EBITDA Multiple EBITDA Multiple n/a
Exploration
results, study
Unlisted Equity 15,946 other results, financing n/a
Commodity price
Royalty Valuation and discount
Royalties 17,849,971 model risk n/a
Royalties 23,770 other n/a n/a
Debt Instruments
Valued at fair
Other Convertible value with reference Rate of Credit
Debentures/Loans 12,194,380 to credit risk Risk 20%-40%
Black Pearl Limited Valued at mean Estimated recovery
Partnership 688,543 estimated recovery range +/-50%
Simplified Black
Warrants 17,443 & Scholes Model Volatilities 70%-125%
Discount for project
Warrants 31,819 milestones Discount 40%-64%
Discount to external
On-sale entitlement 48,134 valuation Risk Discount +/-75%
Range of
unobservable
31 December input
2022 Unobservable (weighted
Description GBP Valuation technique input average)
Unlisted Equity 28,797,176 Transactions Private transactions n/a
Unlisted Equity 3,499,979 IndexVal Change in index n/a
Unlisted Equity 9,201,855 EBITDA Multiple EBITDA Multiple n/a
Royalties 14,808,689 Royalty Valuation Commodity price n/a
model and discount
rate risk
Unlisted Equity 15,946 Other Exploration n/a
results, study
results, financing
Debt Instruments
Black Pearl Limited Valued at mean Estimated recovery
Partnership 726,171 estimated recovery range +/-50%
Valued at fair
Other Convertible value with reference Rate of Credit
Debentures/Loans 10,637,949 to credit risk Risk 20%-40%
Simplified Black
Warrants 242,771 Scholes Model Volatilities 50%
Warrants 198,700 External valuation
Information on third party transactions in unlisted equities is
derived from the Investment Manager's market contacts. The change
in IndexVal for each particular unlisted equity is derived from the
weighted average movements of the individual baskets for that
equity so it is not possible to quantify the range of such
inputs.
The significant unobservable inputs used in the fair value
measurement categorised within Level 3 of the fair value hierarchy
together with a quantitative sensitivity analysis as at 30 June
2023 are as shown below:
Description Input Sensitivity Effect on Fair
used* Value GBP)
Transactions & Expected
Unlisted Equity Transactions +/- 20% +/-155,503
Unlisted Equity Change in IndexVal +45%/-68%* +5,892,733/-8,904,575
Unlisted Equity EBITDA Multiple +/- 20% +/-2,001,947
On-sale entitlement Discount to valuation +/-50% +/-24,046
Royalties Commodity Price +/-20% +/-3,569,994
Royalties Discount Rate +/-20% -2,216,154/+2,574,473
Debt Instruments
Black Pearl Limited
Partnership Probability weighting +/-33% +/- 227,219
Others/Loans Risk discount rate +/-20% -1,273,725/+376.246
Convertibles /Loans Volatility +/-40% +93,461/-89,817
Warrants Volatility +/-40% +4,658/-4,958
Warrants Risk Discount Rate +/-40% +34,470/-23,863
* The sensitivity analysis refers to a percentage amount added
or deducted from the input and the effect this has on the fair
value. The +45%/-68% sensitivity was used as this was the range of
movements of the constituents in the IndexVal basket for Futura and
Kanga..
The significant unobservable inputs used in the fair value
measurement categorised within Level 3 of the fair value hierarchy
together with a quantitative sensitivity analysis as at 31 December
2022 are as shown below:
Description Input Sensitivity Effect on Fair
used Value (GBP)
Transactions & Expected
Unlisted Equity Transactions +/- 20% +/-5,759,434
Unlisted Equity Change in IndexVal +144%/-79%* +1,539,991/-2,764,984
Unlisted Equity EBITDA Multiple +/- 20% +/-1,840,371
Royalties Commodity Price +/-20% +/-2,956,853
Royalties Discount Rate +/-20% +-1,597,086/+1,939,463
Debt Instruments
Black Pearl Limited
Partnership Probability weighting +/-33% +/- 239,627
Others/Loans Risk discount rate +/-20% -1,160,677/+227,963
Volatility of Index
Convertibles /Loans Basket +/-40% +206.177/-1,656
Volatility of Index
Warrants Basket +/-40% +21,662/-18,733
* The sensitivity analysis refers to a percentage amount added
or deducted from the input and the effect this has on the fair
value. The +44%/-79% sensitivity was used as this was the range of
movements of the constituents in the IndexVal baskets for
Nussir
4. OTHER FINANCIAL INSTRUMENTS
The Directors consider the carrying amount for financial
instruments such as cash and cash equivalents and short-term
receivables and payables, are a reasonable approximation of fair
values.
Cash and cash equivalents include cash in hand, deposits held
with banks and other short-term investments in an active
market.
Other assets include the contractual amounts for settlement of
the trades and other obligations due to the Company. Any investment
management fees payable, Directors' fees payable, audit fees
payable, administration fees payable and other payables represent
the contractual amounts and obligations due by the Company for
settlement for trades and expenses.
5. NET ASSET VALUE PER SHARE AND GAIN / (LOSS) PER SHARE
Net asset value per share is based on the net assets of
GBP71,698,667 (31 December 2022: GBP84,482,848) and 106,462,502 (31
December 2022: 106,462,502) Ordinary Shares, being the number of
shares in issue at 30 June 2023, 31 December 2022 and 30 June 2022,
excluding 700,000 shares which are held in treasury. The
calculation for basic and diluted NAV per share is as below:
30 June 2023 31 December 2022
Net assets at the period end (GBP) 71,698,667 84,482,848
Number of shares 106,462,502 106,462,502
Net asset value per share (in pence)
basic and diluted 67.3 79.4
30 June 2023 30 June 2022
Net loss for the period (GBP) (12,784,181) (19,215,810)
Number of shares 106,462,502 106,462,502
Net loss per share (in pence) basic
and diluted (12.01) (18.05)
There are no outstanding instruments which could result in the
issue of new shares or dilute the issued share capital.
6. TAXATION
The Company is a Guernsey Exempt Company and is therefore not
subject to taxation in Guernsey on its income under the Income Tax
(Exempt Bodies) (Guernsey) Ordinance, 1989. An annual exemption fee
of GBP1,200 (2022: GBP1,200) has been paid. The Company may,
however, be exposed to taxes in certain other territories in which
it invests such as withholding taxes on interest payments and
dividends and taxes on realisations of investments.
7. MANAGEMENT AND PERFORMANCE FEES
The Manager was appointed pursuant to a management agreement
with the Company dated 31 March 2010 (the "Management Agreement").
The Company pays to the Manager a management fee which is equal to
1/12th of 1.75 per cent of the total average market capitalisation
of the Company during each month. The management fee is calculated
and accrued as at the last business day of each month and is paid
monthly in arrears. The Investment Manager's fees are paid by the
Manager.
The management fee for the period ended 30 June 2023 was
GBP453,417 (30 June 2022: GBP 649,850) of which GBP70,339 (31
December 2022: GBP 69,854 ) was outstanding at the period end.
The Manager is also entitled to a performance fee. The
Performance Period is each 12-month period ending on 31 December
(the "Performance Period"). The amount of the performance fee is 15
per cent of the total increase in the NAV, if the Hurdle has been
met, at the end of the relevant Performance Period, over the
highest previously recorded NAV as at the end of a Performance
Period in respect of which a performance fee was last accrued,
having adjusted for numbers of Ordinary Shares issued and/or
repurchased ("Highwater Mark"). The Hurdle is the Issue Price
multiplied by the shares in issue, increased at a rate of 8% per
annum compounded to the end of the relevant performance period. In
addition, the performance fee will only become payable if there
have been sufficient net realised gains. As at 30 June 2023, the
Highwater Mark was the equivalent of approximately 94 pence per
share with the relevant Hurdle being the equivalent of
approximately 170 pence per share.
There were no earned performance fees for the current or prior
period.
If the Company wishes to terminate the Management Agreement
without cause it is required to give the Manager 12 months prior
notice or pay to the Manager an amount equal to: (a) the aggregate
investment management fee which would otherwise have been payable
during the 12 months following the date of such notice (such amount
to be calculated for the whole of such period by reference to the
Market Capitalisation prevailing on the Valuation Day on or
immediately prior to the date of such notice); and (b) any
performance fee accrued at the end of any Performance Period which
ended on or prior to termination and which remains unpaid at the
date of termination which shall be payable as soon as, and to the
extent that, sufficient cash or other liquid assets are available
to the Company (as determined in good faith by the Directors),
provided that such accrued performance fee shall be paid prior to
the Company making any new investment or settling any other
liabilities; and (c) where termination does not occur at 31
December in any year, any performance fee accrued at the date of
termination shall be
payable as soon as and to the extent that sufficient cash or
other liquid assets are available to the Company (as determined in
good faith by the Directors), provided that such accrued
performance fee shall be paid prior to the Company making any new
investment or settling any other liabilities.
8. SHARE CAPITAL
The share capital of the Company on incorporation was
represented by an unlimited number of Ordinary Shares of no par
value. The Company may issue an unlimited number of shares of a
nominal or par value and/or of no par value or a combination of
both.
The Company has a total of 106,453,335 (31 December 2022:
106,453,335) Ordinary Shares in issue with an additional 700,000
(31 December 2022: 700,000) held in treasury. In addition, the
Company has 9,167 (31 December 2022: 9,167) Management Ordinary
Shares in issue, which are held by the Investment Manager.
The Ordinary Shares are admitted to the Premium Listing segment
of the Official List of the London Stock Exchange. Holders of
Ordinary Shares have the right to receive notice of and to attend
and vote at general meetings of the Company.
Each holder of Ordinary Shares being present in person or by
proxy at a meeting will, upon a show of hands, have one vote and
upon a poll each such holder of Ordinary Shares present in person
or by proxy will have one vote for each Ordinary Share held by
him.
The details of issued share capital of the Company are as
follows:
30 June 2023 31 December 2022
No. of No. of
Amount* shares* Amount* shares*
GBP GBP
Issued and fully paid share
capital
Ordinary Shares of no par value** 76,122,347 107,162,502 76,122,347 107,162,502
(including Management Ordinary
Shares)
Treasury Shares (140,492) (700,000) (140,492) (700,000)
----------- ------------ ----------- ------------
Total Share Capital 75,981,855 106,462,502 75,981,855 106,462,502
----------- ------------ ----------- ------------
The outstanding Ordinary Shares as at the period ended 30 June
2023 are as follows:
Ordinary Shares Treasury Shares
No. of
Amount* No. of shares* Amount shares
GBP GBP
Balance at 1 January 2023 &
30 June 2023 76,122,347 106,462,502 140,492 700,000
----------- --------------- ------------ ------------
* Includes 9,167 (31 December 2022: 9,167) Management Ordinary
Shares.
** The value reported for the Ordinary Shares represents the net
of subscriptions and redemptions (including any associated
expenses).
The outstanding Ordinary Shares as at the year ended 31 December
2022 are as follows:
Ordinary Shares Treasury Shares
No. of
Amount* No. of shares* Amount shares
GBP GBP
Balance at 1 January 2022 &
31 December 2022 76,122,347 106,462,502 140,492 700,000
----------- --------------- -------- --------
* Includes 9,167 (31 December 2022: 9,167) Management Ordinary
Shares.
9. RELATED PARTY TRANSACTIONS
The Investment Manager, Baker Steel Capital Managers LLP, had an
interest in 9,167 Management Ordinary Shares at 30 June 2023 (31
December 2022: 9,167).
The Management fees paid and accrued for the year are disclosed
under Note 7.
Baker Steel Global Funds SICAV - Precious Metals Fund ("Precious
Metals Fund") had an interest of 4,922,877 Ordinary Shares in the
Company at 30 June 2023 (31 December 2022: 4,922,877). Precious
Metals Fund shares a common Investment Manager with the
Company.
David Baker and Trevor Steel, Directors of the Manager, are
interested in the shares held by Northcliffe Holdings Limited
and The Sonya Trust respectively, which are therefore considered
to be Related Parties. Northcliffe Holdings Limited holds
12,452,177 shares (31 December 2022; 12,452,177) and The Sonya
Trust holds 12,637,350 shares (31 December 2022: 12,637,350).
John Falla holds 60,000 shares in the Company (31 December 2022:
60,000).
Management fees and Directors' fees paid and accrued during the
periods to 30 June were:
2023 2022
GBP GBP
Management fees 453,417 649,850
Directors' fees 72,500 57,500
The Management fees and Directors' fees outstanding at the
period-end were:
30 June 2023 31 December 2022
GBP GBP
Management fees 70,339 69,854
Directors' fees - -
10. SUBSEQUENT EVENTS
On 11 September 2023, Futura announced that it had completed an
A$26.2 million financing which will be sufficient to commence
production at Wilton as well pay the landowner compensation due for
Wilton and Fairhill
There were no other events subsequent to the period end that
materially impacted on the Company.
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END
IR EZLFFXKLFBBF
(END) Dow Jones Newswires
September 15, 2023 02:00 ET (06:00 GMT)
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