TIDMBSRT
RNS Number : 8407C
Baker Steel Resources Trust Ltd
19 April 2013
BAKER STEEL RESOURCES TRUST LIMITED
(Incorporated in Guernsey with registered number 51576 under the
provisions of The Companies (Guernsey) Law, 2008 as amended)
19 April 2013
BAKER STEEL RESOURCES TRUST LTD
(the "Company")
Annual Report and Audited Financial Statements
For the year to 31 December 2012
The Company has today, in accordance with DTR 6.3.5, released
its Annual Audited Financial Report for the year ended 31 December
2012. The Report is available via www.bakersteelresourcestrust.com
and will shortly be submitted to the National Storage Mechanism and
will also shortly be available for inspection at
www.hemscott.com/nsm.do
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
RBC Capital Markets +44 20 7653 4000
Martin Eales
Winterflood Investment Trusts +44 20 3100 0250
James Moseley
Pelham Bell Pottinger
Lorna Spears +44 20 7861 3883
Joanna Boon +44 20 7861 3867
HSBC Securities Services (Guernsey) Limited
Company Secretary + 44 (0)1481 707 000
MANAGEMENT AND ADMINISTRATION
DIRECTORS: Howard Myles (Chairman)
Edward Flood
Charles Hansard
Clive Newall
Christopher Sherwell
all of whom are independent and non-executive directors
REGISTERED OFFICE: Arnold House
St. Julian's Avenue
St. Peter Port
Guernsey
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
86 Jermyn Street
London SW1Y 6JD
England
United Kingdom
BROKERS: RBC Capital Markets
71 Queen Victoria Street
London EC4V 4DE
United Kingdom
Winterflood Securities Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
United Kingdom
SOLICITORS TO THE COMPANY: Simmons & Simmons
(as to English law) CityPoint
One Ropemaker Street
London EC2Y 9SS
United Kingdom
ADVOCATES TO THE COMPANY: Ogier
(as to Guernsey law) Ogier House
St. Julian's Avenue
St. Peter Port
Guernsey GY1 1WA
Channel Islands
ADMINISTRATOR & COMPANY SECRETARY: HSBC Securities Services (Guernsey) Limited
Arnold House
St. Julian's Avenue
St. Peter Port
Guernsey GY1 3NF
Channel Islands
SUB-ADMINISTRATOR TO THE COMPANY: HSBC Securities Services (Ireland) Limited
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
CUSTODIAN TO THE COMPANY: HSBC Institutional Trust Services (Ireland) Limited
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
AUDITORS: Ernst & Young LLP
Royal Chambers
St. Julian's Avenue
St. Peter Port
Guernsey GY1 4AF
Channel Islands
REGISTRAR: Capita Registrars (Guernsey) Limited
Longue Hougue House
St. Sampson
Guernsey GY2 4JN
Channel Islands
PRINCIPAL BANKER: HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom
INVESTMENT OBJECTIVES AND POLICIES
Investment objective
Baker Steel Resources Trust Limited's (the "Company") 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
will invest predominantly in unlisted companies (i.e. those
companies that have not yet made an initial public offering or
"IPO") but 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.
Investment policy
The core of the Company's strategy is to invest in natural
resources companies, predominantly unlisted, that the Investment
Manager considers to be undervalued and have strong fundamentals
and attractive growth prospects. Natural resources companies, for
the purposes of the investment policy, are those involved in the
exploration for and production of base metals, precious metals,
bulk commodities, thermal and metallurgical coals, industrial
minerals, energy and uranium and include single-asset as well as
diversified natural resources companies.
It is intended that unlisted investments be realised through an
IPO, trade sale, management repurchase or other methods.
The Company will focus primarily on making investments in
companies with producing and/or tangible assets such as resources
and reserves that have been verified under internationally
recognised standards for reporting, such as those of the
Australasian Joint Ore Reserves Committee. The Company may also
invest from time to time in exploration companies whose activities
are speculative by nature.
The Company has flexibility to invest in a wide range of
investments in addition to unlisted and listed equities and
equity-related securities, including but not limited to
commodities, convertible bonds, debt securities, royalties,
options, warrants and futures. Derivatives may be used for
efficient portfolio management, hedging and for the purposes of
obtaining investment exposure. The Company may also have exposure
from time to time to other companies within the wider resources and
materials sector, including services companies, transport and
infrastructure companies, utilities and downstream processing
companies.
The Company may take legal or management control of a company
from time to time. The Company may invest in other investment funds
or vehicles, including any managed by the Manager or Investment
Manager, where such investment would be complementary to the
Company's investment objective and policy.
There are no fixed limits on the allocation between unlisted and
listed equities or equity-related securities and cash although, as
a guideline, typically the Investment Manager will aim for the
Company to be invested over the long-term as follows:
-- between 40 and 100 per cent of the value of its gross assets
in unlisted equities or equity-related securities;
-- up to 50 per cent of the value of its gross assets in listed
equities or equity-related securities;
-- up to 10 per cent of the value of its gross assets in cash or cash-like holdings; and
-- typically in 10 to 15 core positions to provide adequate
diversification whilst retaining a focused core approach. Core
positions will typically be between 5 per cent and 15 per cent of
net asset value ("NAV") as at the date of acquisition.
The actual percentage of the Company's gross assets invested in
listed and unlisted equities and equity-related securities and cash
and cash-like holdings and the number of positions held may fall
outside these ranges from time to time. For example, listed
securities might exceed the above guideline following a significant
number of IPOs or in certain market conditions and likewise cash
balances may exceed the above guideline following the realisation
of one or more investments or following the issue of new equity in
the Company, pending investment of the proceeds.
The investment policy has the following limits:
-- Save in respect of cash and cash-like holdings awaiting
investment, the Company will invest or lend no more than 20 per
cent in aggregate of the value of its gross assets in or to any one
particular company or group of companies, as at the date of the
relevant transaction.
-- No more than 10 per cent in aggregate of the value of the
gross assets of the Company may be invested in other listed
closed-ended investment funds, except for those which themselves
have stated investment strategies to invest no more than 15 per
cent of their gross assets in other listed closed-ended investment
funds.
Where derivatives are used for investment exposure, these limits
will be applied in respect of the investment exposures so
obtained.
The Company will avoid (a) cross-financing between the
businesses forming part of its investment portfolio and (b) the
operation of common treasury functions between it and the investee
companies.
When deemed appropriate, the Company may borrow up to 10 per
cent of NAV for temporary purposes such as settlement mis-matches.
Borrowings will not however be incurred for the purposes of any
Share repurchases.
The Investment Manager will not normally hedge the exposure of
the Company to currency fluctuations.
Any material change in the investment objective, investment
policy or borrowing policy will only be made with the prior
approval of holders of Ordinary Shares by Ordinary Resolution.
CHAIRMAN'S STATEMENT
For the year ended 31 December 2012
I am pleased to present the Company's third annual report. 2012
was a difficult year for the Company like many other resource
sector investment companies, with the NAV falling 16.9%. The
Company seeks performance primarily from the uplift in value
through monetisation via an Initial Public Offering ("IPO"). Since
its admission to listing on 28 April 2010, the IPO market has
effectively been closed. This has not only resulted in a drag on
performance but has limited cash available for reinvestment in new
opportunities. Despite this, since 30 April 2010, the date of the
Company's first NAV, the undiluted NAV per share has increased by
11.4% (to 31/12/2012) compared to a broader market as represented
by the HSBC Global Mining Index which has fallen by 16.2%.
One company which bucked the trend was Ivanplats, having
successfully completed an IPO and listing on the Toronto Stock
Exchange ("TSX") in October 2012, raising approximately C$300
million. However it took a company with first class projects in
three separate commodities and the investor following of Ivanplats'
founder Robert Friedland to achieve this.
At the year end, the Company was fully invested, holding 16
investments of which the top 10 holdings comprised 96.5% by value
of the portfolio. Despite this strong focus on high conviction
investments, in line with the Company's investment objective, the
Investment Manager has established a diversified portfolio of
commodities concentrating on the large markets of iron ore, coal,
copper, platinum group metals, nickel, silver and gold and
eschewing the more exotic speciality metals where markets can often
become distorted.
Inevitably, mining projects are often found in emerging
countries which carry a higher political risk. The Board has
therefore focussed also on ensuring that the Company's portfolio
has geographic diversity and its investments are currently in
Democratic Republic of Congo, South Africa, Mongolia, China,
Brazil, Zimbabwe, Canada, Indonesia, Russia, and the Philippines.
One risk that has become more prevalent in recent years is that of
"resource nationalism" and, all too often, creeping nationalisation
whereby governments are seeking a greater slice of the "mining pie"
be it from royalties or direct stakes. It must be hoped that
governments, both in emerging nations such as Mongolia or more
established ones such as Australia, will come to realise that in a
world where investors are increasingly risk averse, erecting
barriers such as this will prove counter-productive to the
development of their mineral industries with the employment,
foreign exchange and taxes that they bring.
I would again like to thank all our shareholders for their
continuing support of the Company and am confident that their
patience will bear fruit once the market for mining IPOs
recovers.
Howard Myles
Chairman
19 April 2013
INVESTMENT MANAGER'S REPORT
For the year ended 31 December 2012
Financial Performance
The audited undiluted Net Asset Value per ordinary share as at
31 December 2012 was 109.1 pence, a decrease of 16.9% in the year
and an increase of 11.4% from the Company's first net asset value
("NAV") calculated on 30 April 2010. During the year the HSBC
Global Mining Index was down 4.6% (down 16.2% since 30 April
2010).
For the purpose of calculating the net asset value per share,
unquoted investments are carried at fair value as at 31 December
2012 as determined by the Directors and quoted investments are
carried at last quoted price as at 31 December 2012.
Net assets at 31 December 2012 comprised the following:
GBPm % net assets
Unquoted Investments 37.2 51.5
Quoted Investments 38.2 52.9
Net Cash Equivalents and
Accruals (3.2) (4.4)
------ -------------
72.2 100.0
Investment Update
Largest 10 Investments - 31 December 2012
Ivanplats Limited* 37.7%
Gobi Coal & Energy Limited 14.5%
China Polymetallic Mining Company Limited 9.0%
Bilboes Gold Limited 8.4%
Ironstone Resources Limited 7.5%
Black Pearl Limited Partnership 6.8%
Ferrous Resources Limited 6.1%
Polar Silver Resources Ltd/Argentum 5.1%
Metals Exploration plc 3.5%
Copperbelt Minerals Limited 2.2%
Other Investments 3.6%
Net Cash, Equivalents and Accruals (4.4%)
Largest 10 Investments - 31 December 2011
Ivanplats Limited* 25.6%
Gobi Coal & Energy Limited* 20.6%
Ferrous Resources Limited 12.8%
China Polymetallic Mining Company Limited 8.9%
Ironstone Resources Limited 6.1%
Black Pearl Limited Partnership 5.2%
Bilboes Holdings (Pvt) Limited 4.5%
Polar Silver Resources Ltd/Argentum 4.1%
Metals Exploration plc 4.0%
South American Ferro Metals Limited 3.1%
Other Investments 5.9%
Net Cash, Equivalents and Accruals (0.8%)
* represented less than 20% in aggregate of the value of gross
assets as at the date of the last relevant acquisition
Investment Update
At the beginning of the year, the Company was fully invested and
the lack of a meaningful re-opening of the Initial Public Offering
("IPO") market meant that there were no significant realisations or
new investments made during the year. The Investment Manager's
efforts were therefore concentrated on husbanding the existing core
portfolio.
Good progress was made on a number of the Company's investments,
in particular Ivanplats, the Company's largest position. Despite a
market which was generally unreceptive to new issues, Ivanplats
successfully completed an IPO and listing on the Toronto Stock
Exchange ("TSX") in October 2012, raising approximately C$300
million. As part of the IPO arrangements, a phased lock-up of up to
39 months was imposed on all shareholders prior to the IPO and
accordingly the Company has decided to carry its Ivanplats position
at a 10% discount to the market price on the TSX. At 31 December
2012, the carrying value of Ivanplats comprised 37.7% of the
Company's NAV, representing a 23.6% uplift on the year and a 141%
unrealised return on the Company's investment.
Since the year end Ivanplats has announced significant resource
upgrades to its two main projects, the Kamoa copper project in the
Democratic Republic of Congo and the Platreef
platinum/palladium/nickel/copper project in South Africa. The
revised resource totalling 24.1 million tonnes of contained copper
already puts Kamoa amongst the top copper discoveries ever made
with considerable scope for this to be expanded further. The
revised resource containing 79 million ounces of 4PE (platinum,
palladium, gold and rhodium) more than doubled the previously
declared resource at Platreef. The key to the Platreef project is
that its average true thickness of 24 metres and the flat lying
geometry of the reef compares to around the more common 1 metre
thick dipping reefs currently being mined in South Africa. As a
result Ivanplats will be able to employ mechanised mining
techniques rather than the highly labour intensive methods required
for the thin reef mines which make up the majority of the platinum
mines in South Africa and thereby could largely avoid the labour
disputes which appear to be an increasing problem to operations in
South Africa. Kamoa and Platreef together with its third project,
the Kipushi lead zinc mine, gives Ivanplats three tier 1 projects
and a strong foundation to become a major mining company.
Although Gobi Coal & Energy ("Gobi") commenced development
of its Shinejinst coking coal project in Mongolia in early 2012, a
significant fall in the price of coal paid by Chinese buyers at the
border led Gobi to suspend development mid year. Market sentiment
towards Mongolian companies has fallen sharply as a result of
"resource nationalism" rhetoric which was prevalent around the time
of the parliamentary elections in 2012. This sentiment is unlikely
to improve in 2013 with mid year presidential elections in
Mongolia, and an IPO for Gobi is therefore likely to be postponed
until at least 2014. The Company decided to mark down its carrying
value of Gobi in line with listed shares with Mongolian coal
projects.
Bilboes Gold Ltd made excellent progress during 2012, increasing
contained gold in sulphide resources at its Isabella/McCays/Bubi
gold complex from 534,000 ounces to 3,964,000 ounces of gold. Since
year end Bilboes has raised equity of US$10 million from a new
investor which will be used to complete a definitive feasibility
study on a mine producing 100,000 to 200,000 ounces per annum,
initially from open pit. Following this new investment Bilboes
remains over 51% owned by indigenous Zimbabweans and accordingly is
in full compliance with local indigenisation laws. In addition,
towards the end of 2012, Bilboes raised US$7 million through a loan
from Industrial Development Bank of South Africa. This is being
utilised to bring back into production the previously producing
oxide heap leach operations which are planned to be producing at
the rate of 12,000 ounces per annum by the end of 2013.
Operational progress was also made at two of the Company's
listed investments during the year: China Polymetallic Mining
("CPM") and South American Ferro Metals ("SAFM"). CPM achieved its
full targeted production rate for its first mine, the Shizishan
lead-zinc-silver mine in China, as did SAFM at its Ponto Verde iron
ore project in Brazil. Both these companies are now scheduled to
produce strong cashflows in 2013.
Ferrous Resources ("Ferrous") also made good operational
progress under its new management team, achieving budgeted
production of 3 million tonnes of iron ore during the year and it
remains confident that this will increase to 5 million tonnes in
2013. It also received licences to increase production to 25
million tonnes per annum. Despite this, Ferrous continues to be
held back by the volatility of its shareholder list with several
shareholders appearing to be forced sellers during the year. The
Company decided to write down its carrying value of Ferrous
following significant trading on the "grey market". Until a firm
base of shareholders committed to developing the company's project
can be forged, it will be difficult for Ferrous' management to
achieve its ambitions for its high quality projects.
In August 2012 Copperbelt Minerals signed a conditional
Settlement Agreement with its joint venture partner Gécamines
whereby Copperbelt would exit its Deziwa copper joint venture in
the Democratic Republic of Congo. This transaction closed in
January 2013 and Copperbelt has returned the majority of the
capital received from the sale to shareholders through a share
buyback, representing a 100% uplift on the Company's carrying value
at December 2012. The transaction was therefore reflected in the
published unaudited NAV at 31 January 2013.
Further details of each of these investments and the Company's
other significant holdings are provided below.
Description of Largest Investments
Ivanplats Limited ("Ivanplats")
Ivanplats is a company listed on the Toronto Stock Exchange
which holds the Kamoa copper project (95% owned) and Kipushi zinc
mine (68% owned) both in the Democratic Republic of Congo ("DRC")
and the Platreef nickel, platinum, palladium, copper and gold
project (90% owned) in South Africa.
The Kamoa Project is located in the Kolwezi District of Katanga
Province, approximately 25 kilometres west of the town of Kolwezi,
the DRC's copper mining hub. A revised Canadian National Instrument
43-101 ("NI 43-101") compliant report by independent technical
consultants AMEC was announced in January 2013. Indicated Mineral
Resources were estimated at 739 million tonnes grading 2.67% copper
containing 19.7 million tonnes of copper. The revised resource
statement also included 4.4 million tonnes of copper in Inferred
Mineral Resources so that the combined contained copper of 24.1
million tonnes establishes Kamoa as the largest high-grade copper
discovery in Africa and one of the largest in the world. Ivanplats
intends to use the new resource estimate as the basis for an
updated Preliminary Economic Assessment to be released later in the
first half of 2013.
The Platreef Project is on the Northern Limb of the PGM-bearing
Bushveld Complex, north of the town of Mokopane and approximately
280 kilometres northeast of Johannesburg. A revised NI 43-101
compliant report by independent technical consultants AMEC, was
announced in February 2013. Indicated Mineral Resources were
estimated at 223 million tonnes grading 4.1 grams per tonne (g/t)
4PE (platinum, palladium, gold and rhodium), 0.34% nickel and 0.16%
copper, at a 2.0 g/t 4PE cut-off grade and at a cumulative, average
true thickness of 24.3 metres. In addition, the estimate includes
Inferred Mineral Resources of 410 million tonnes grading 3.3 g/t
4PE, 0.32% nickel and 0.18% copper, at an average true thickness of
18.0 metres. The combined Indicated and Inferred resources contain
73.2 million ounces of 4PE.
The previously producing Kipushi zinc/polymetallic mine in the
DRC was acquired by Ivanplats in late 2011. From 1925-1993, Kipushi
produced 60 million tonnes of ore at 11% zinc and 7% copper. It
also produced 12,673 tonnes of lead and approximately 278 tonnes of
germanium between 1956 and 1978. The shaft is planned to be
dewatered by mid 2013 prior to the commencement of underground
drilling to define the mineral resources to NI 43-101
standards.
Gobi Coal & Energy Limited ("Gobi")
Gobi is an emerging coking coal producer based in Mongolia. Gobi
Coal owns 100% of three open cut coal development projects in south
western Mongolia. The Company's projects contain approximately 322
million tonnes of Joint Ore Resource Committee ("JORC") resources
and include more than 500,000 hectares of tenements.
Gobi's first project, Shinejinst, contains approximately 95
million tonnes of JORC reserves and 229 million tonnes of JORC
resources and it has completed site works in anticipation of the
start of production which will depend on a recovery of the price of
coking coal delivered to the Mongolian/Chinese border. At full
production, Shinejinst is planned to produce approximately 5
million tonnes per annum of high quality, semi-soft coking coal
product.
China Polymetallic Mining Company Limited ("CPM")
CPM is an emerging Chinese mining company listed on the Hong
Kong Stock Exchange. The Company's investment is via a special
purpose vehicle, Five Stars B.S. Limited Partnership. CPM has a
number of development projects in the Yunan province of China. The
first of these, the Shizishan lead-zinc-silver mine, started
production in 2011 and reached its full production rate of 2,000
tonnes per day in December 2012. The Shizishan Mine has JORC
compliant resources totalling 9.3 million tonnes grading 256g/t
silver, 9.4% lead and 6.0% zinc for contained metal of 77 million
ounces silver, 878,500 tonnes lead and 563,000 tonnes zinc. It is
planned to produce an average of 5 million ounces of silver, 57,000
tonnes lead and 35,000 tonnes zinc per annum over an expected mine
life of 15 years.
CPM's second project, the Dakuangshan silver lead-zinc mine,
started commercial production in December 2012 and will ramp up to
full production in 2013. CPM is also developing the Liziping Mine,
a large-scale lead-zinc project and the Menghu Mine, a high-grade
oxidized lead mine. It has also secured exclusive long-term,
low-cost polymetallic raw ore supply from Lushan, a tungsten-tin
mine.
Bilboes Gold Limited/Bilboes Holdings (pvt) Limited
("Bilboes")
Bilboes is a private Zimbabwean gold mining company which owns
four previously producing oxide mines in Zimbabwe. The oxide mines
are in the process of being restarted and are scheduled to produce
at the rate of approximately 12,000 ounces per annum by December
2013.
In addition Bilboes has JORC compliant Indicated Mineral
Resources of 29.3 million tonnes grading 2.12 g/t in the underlying
sulphide mineralisation and Inferred Mineral Resources of 30.0
million tonnes grading 2.03 g/t. Contained gold in the combined
Indicated and Inferred sulphide resources totals 3,964,000 ounces
of gold. The mineralisation is open along strike and at depth so
there is good potential for these mineral resources to be
increased. A feasibility study is underway to investigate a mine
producing 100,000 to 200,000 ounces per annum, initially from open
pit.
Ironstone Resources Limited ("Ironstone")
Ironstone is a private Canadian company which owns the Clear
Hills Iron Ore/Vanadium Project ("Clear Hills") in Alberta, Canada.
Clear Hills currently has an NI 43-101 compliant Indicated Mineral
Resource of 557.7Mt at 33.3% iron and 0.2% vanadium and an Inferred
Mineral Resource of 94.7Mt at 34.1% iron.
In conjunction with pyrotechnology experts HATCH of Toronto,
Ironstone is making good progress on developing a proprietary
metallurgical process to refine the ore into direct reduced iron.
Once proven, this process could be applied not only to Clear Hills
but also to other significant iron ore deposits globally.
Black Pearl Limited Partnership ("Black Pearl")
Black Pearl is a special purpose vehicle formed to invest in the
Black Pearl beach placer iron sands project in West Java,
Indonesia. The Black Pearl concession area is 15,000 ha of which
1,600 ha has been drilled. JORC compliant mineral resources stand
at 572 million tonnes grading 11% Fe .
The first dredges arrived on site in January 2013 and commercial
production commenced in March 2013. The mine is planned to reach a
capacity of 10 million tonnes per annum of iron ore concentrate
grading 58-60% Fe by the end of 2013 with a further expansion up to
20 million tonnes per annum by the end of 2014. Off-take agreements
have been signed with a number of Chinese steel mills for the full
planned production of 20 million tonnes per annum.
Ferrous Resources Limited("Ferrous")
Ferrous is a private company with five iron-ore projects in the
iron quadrilateral region in Minas Gerais state and one in Bahia
state in Brazil. It has JORC compliant resources of 5.1 billion
tonnes of iron ore.
Production of iron ore totalled 3.2 million tonnes in 2012 from
two of its mines, Emesa and Viga, with output of 5 million tonnes
planned for 2013. In December 2012 Ferrous received the requisite
permits to expand production at Viga to 25 million tonnes per
annum.
Polar Silver Resources Limited/ZAO Argentum ("Polar Silver")
Polar Silver is a private company which holds a 50% indirect
interest in the Prognoz silver project, 444km north of Yakutsk in
Russia ("Prognoz"). A NI 43-101 compliant report by independent
consultant Micon International Limited ("Micon") in July 2009,
estimated an indicated resource of 5.86 million tonnes of ore
grading 773 g/t silver containing 146 million ounces silver and
inferred resources of 9.64 million tonnes of ore grading 473g/t
silver containing 147 million ounces silver at Prognoz. A NI 43-101
compliant preliminary economic assessment by Micon envisages a mine
producing an average of 13 million ounces of silver per annum over
a 16 year mine life.
Metals Exploration plc ("Metals Exploration")
Metals Exploration is an AIM listed company which owns the
Runruno gold project in the Philippines. This investment was part
of a larger strategic interest totalling approximately 24% of
Metals Exploration acquired by the Company and other funds managed
by the Investment Manager. Site works for a mine producing
approximately 100,000 ounces of gold per annum at Runruno commenced
during 2012.
Copperbelt Minerals Limited ("Copperbelt")
Copperbelt is a private company which at 31 December 2012 had a
68% interest in the Deziwa Copper Project, one of the largest
copper oxide deposits in the DRC. Gecamines, a state owned mining
and exploration enterprise that holds most of the DRC's state
mining activities, held the remaining 32%.
In January 2013 Gecamines acquired Copperbelt's interest in
Deziwa, following which Copperbelt returned to shareholders the
majority of the capital received from the sale through a share
buyback.
South American Ferro Metals Limited("SAFM")
SAFM is a company listed on the Australian Stock Exchange whose
main asset is the Ponto Verde iron ore project in Minas Gerais in
Brazil. The property contains a JORC compliant Mineral Resource
estimated at 277.9 million tonnes ore grading 41.3% Fe.
During 2012 Ponto Verde achieved its full licenced production
rate of 1.5 million tonnes run of mine ("ROM") ore for the year.
SAFM is undertaking a feasibility study to increase the mining rate
to 8 million tonnes of ore per annum which is expected to be
completed during the fourth quarter 2013.
Market Outlook
China Growth
The IMF forecast a higher global growth rate in 2013, as fears
of faltering growth in the U.S and a Chinese hard-landing receded.
Chinese growth did slow in 2012, but the size of the Chinese
economy today means that even moderate growth in China is
significant for global growth and swings in China's performance
increasingly impact the rest of the world's economy. China's
economy is moving into a new phase of development with the twelfth
five year plan bringing economic restructuring and a new domestic
demand expansion policy. As GDP increases, infrastructure
construction investment and accelerated consumption of retail goods
will shift the emphasis of commodity demand away from steel raw
materials and into base and precious metals.
Rest of the World Growth
There are continued positive signs for economic growth in the
U.S. Capital deficiencies have been reduced and the economy appears
to be rebalancing; bank recapitalisation and deleveraging
programmes are reaching completion and institutions have begun
increasing lending, the effects of which are being observed in job
creation, and domestic consumption is rising. In Europe, progress
has been slower due to the inefficiency of the currency union and
compounded by a general deterioration in economic conditions. The
European Central Bank's pledge to do "whatever it takes" to save
the Euro has not eliminated anxiety and it is unlikely the Euro
Zone will return to sustained growth in the near term.
Mining Industry / Supply
The outlook for the mining sector in 2013 is mixed; many
companies are reining in capital expenditure in the face of
escalating costs and softening commodity prices. Mining companies
are less focused on growth through investment and more focused on
cost reduction and operational efficiency. This greater capital
discipline and the cancellation of marginal projects will reduce
supply side cost pressure and assist in sustaining commodity prices
at current levels.
Demand
The outlook for base and precious metals has become increasingly
positive, with growing industrial usage of lead, zinc, copper and
silver adding to consumption in China and the rest of the world.
Monetary easing policies, particularly those being pursued by the
U.S and Japan, should provide support for gold and silver prices.
The fundamentals for steel raw materials deteriorated in 2012, as
Chinese steel mills slowed down production in response to poor
demand. However, following the collective re-stocking, the market
for iron ore recovered in late 2012 and coking coal prices are
expected to follow.
Capital Markets
Access to capital through debt and equity markets has become
increasingly constrained since the financial crisis. While general
equity markets have strengthened, mining equities have
underperformed, partially due to volatility in prices and
uncertainty over the longevity of the commodities cycle. The upward
trend in the equities market is expected to continue as investors
shift asset allocation away from bonds and into equities, and
potentially increase allocation into the mining sector as risk
appetite increases. Ernst & Young, in its quarterly outlook on
Mergers, Acquisitions and Capital Raisings, predict an increase in
the number and value of mining and metals transactions in 2013
driven by parastatal organisations and multinational industrial
firms seeking to secure access to long-term sources of mineral
supply. M&A activity should increase as opportunistic companies
seek to take advantage of depressed market valuations.
Impact for BSRT investments
Stabilising prices for iron ore and metallurgical coal augurs
well for the Company's investments in companies with exposure to
these commodities, certain of which lost significant value in 2012.
Concurrently, increasing equity market activity bodes well for
privately held companies planning IPOs and a planned secondary
listing for Ivanplats. The outlook for copper and platinum group
metals appear positive; Ivanplats is well placed to benefit from
any uplift in the price of these metals.
DIRECTORS' REPORT
For the year ended 31 December 2012
The Directors of the Company present their third annual report
and the audited financial statements for the year ended 31 December
2012.
Principal activity and business review
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, 1987, as
amended ("POI Law") and the Registered Collective Investment Scheme
Rules 2008 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 Ordinary Shares are currently admitted to the Premium
Listing segment of the Official List. Following the expiry of the
Transitional Provision contained in Listing, Prospectus, Disclosure
and Transparency Rules 7 of the Listing Rules, effective 1 June
2012 Subscription Shares of no par value are assigned to the
Standard Segment of the Official List.
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 will invest predominantly in
unlisted companies (i.e. those companies that have not yet made an
initial public offering or "IPO") but 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.
The Company's investment policy is detailed on pages 3 and
4.
Portfolio analysis
A detailed analysis of the Portfolio has been provided on pages
18 and 19.
The Investment Manager's report on pages 6 to 10 includes a
review of the main developments during the year together with
information on investment activity within the Company's Portfolio
and on the market outlook.
Performance
In the year to 31 December 2012, the Company's undiluted NAV per
Ordinary Share decreased by 16.9% (2011: increase of 27.0%). This
compares with a fall in the HSBC Global Mining Index (capital
return in Sterling terms) of 4.6% (2011:fall of 28.4%).
Results and dividends
The results for the year are shown in the Statement of
Comprehensive Income on page 22 and the Company's financial
position at the end of the year is shown in the Statement of
Financial Position on page 21.
Dividend policy
It is not currently envisaged that any income or gains will be
distributed by the Company by way of dividend. This does not
preclude the Directors from declaring a dividend at any time in the
future if they consider it appropriate to do so. To the extent that
any dividends are paid they will be paid in accordance with any
applicable laws and the regulations of the UK Listing
Authority.
Directors
The Directors of the Company who served during the year
were:
Howard Myles (Chairman)
Edward Flood
Charles Hansard
Clive Newall
Christopher Sherwell
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 general meeting shall from time to time determine).
For the year ended 31 December 2012 the total remuneration of
the Directors was GBP140,000 (2011: GBP140,000), with GBP36,000
(2011: GBP36,000) payable at year end.
The Directors' interests in the share capital of the Company at
both 31 December 2012 and 31 December 2011 were:
Number of Number of
Ordinary Shares Subscription Shares
Edward Flood 65,000 13,000
Christopher Sherwell 25,000 5,000
Clive Newall 25,000 5,000
Mr Sherwell also has an indirect interest in the shares of the
Company through an investment in another fund managed by the
Manager.
Significant Shareholdings
The significant shareholdings in the Company at 31 December 2012
were:
Number of % of Total
Ordinary Shareholder Ordinary Shares Shares in issue
The Bank of New York (Nominees) Limited* 24,522,825 37.07
HSBC Global Custody Nominees Limited* 7,861,324 11.88
* Custodian accounts held on behalf of individual shareholders.
These holdings are aggregated.
CF Ruffer Baker Steel Gold Fund ("CFRBSGF") had an interest in
6,080,000 Ordinary Shares and 1,420,000 Subscription Shares in the
Company at 31 December 2012. These shares are held in a custodian
account with The Bank of New York (Nominees) Limited. CFRBSGF
shares a common Investment Manager with the Company.
The Manager, Baker Steel Capital Managers (Cayman) Limited, had
an interest in 504,832 Ordinary Shares and 100,876 Subscription
Shares at 31 December 2012.
The Investment Manager, Baker Steel Capital Managers LLP, had an
interest in 10,000 Management Ordinary Shares at 31 December
2012.
Authorised and Issued 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 raised GBP30,468,865 (before costs) through the
issue of 30,468,865 Ordinary Shares and 6,093,772 Subscription
Shares via a Placing and Offer. In addition, the Company issued
35,554,224 Ordinary Shares and 7,110,822 Subscription Shares to the
holders of shares in Genus Capital Fund pursuant to a scheme of
reorganisation of Genus Capital Fund, in exchange for substantially
all the non-cash assets of Genus Capital Fund. With effect from 30
September 2010, 7,543 Ordinary Shares were issued as a result of
the exercise of Subscription Shares. With effect from 31 March
2011, 2,429 Ordinary Shares were issued as a result of the exercise
of Subscription Shares. With effect from 2 April 2012, 107,549
Ordinary Shares were issued as a result of the exercise of
Subscription Shares. With effect from 1 October 2012, 1,923
Ordinary Shares were issued as a result of the exercise of
Subscription Shares.
Issue of Shares
The Company was admitted to trading on the London Stock Exchange
on 28 April 2010. On that date, 30,468,865 Ordinary Shares and
6,093,772 Subscription Shares were issued pursuant to a placing and
offer for subscription and 35,554,224 Ordinary Shares and 7,110,822
Subscription Shares were issued pursuant to a scheme of
reorganisation of Genus Capital Fund. In addition 10,000 Management
Ordinary Shares were issued. Following the exercise of Subscription
Shares at the end of September 2010, 7,543 Ordinary Shares were
issued and as a result, the Company had 66,030,632 Ordinary Shares
and 13,197,051 Subscription Shares in issue at 31 December
2010.
Following the exercise of Subscription Shares at the end of
March 2011, 2,429 Ordinary Shares were issued and as a result, the
Company had 66,033,061 Ordinary Shares and 13,194,622 Subscription
Shares in issue at 31 December 2011.
Following the exercise of Subscription Shares at the end of
March 2012 and September 2012, 109,472 Ordinary Shares were issued
and as a result, the Company had 66,142,533 Ordinary Shares,
13,085,150 Subscription Shares and 10,000 Management Shares in
issue at 31 December 2012. The final exercise date for Subscription
Shares was 2 April 2013. No Subscription Shares were exercised at
this time and the Company is in the process of cancelling all
remaining Subscription Shares.
Going Concern
The Directors have made an assessment of the Company's ability
to continue as a going concern and are satisfied that it has the
resources to continue in business for the foreseeable future.
Although there was insufficient cash at the year end to settle the
current payables and the Company had net current liabilities, this
was due to the accrual of the performance fee to the Manager in
2011. The Manager has agreed not to seek payment of the performance
fee until the Company has sufficient cash. During January 2013, the
Company received GBP3.3m from the sale of Copperbelt Minerals and
paid the Manager GBP2,500,000, in part settlement of the
outstanding performance fee. The Company also holds listed
securities that can if necessary, be realised to meet liabilities,
including shares in Ivanplats Limited for which the lock-up
applying to the shares will start to be released at 8% on a
quarterly basis from April 2013. Taking these factors into account,
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. Therefore, the financial statements have been
prepared on a going concern basis.
Corporate Governance Compliance
The Company is committed to maintaining high standards of
corporate governance. The Board has put in place a framework for
corporate governance which it believes is suitable for an
investment company and which enables the Company to comply with the
relevant provisions of the UK Corporate Governance Code issued by
the Financial Reporting Council in June 2010. There was a new UK
Corporate Governance Code released in September 2012 which will be
effective after 1 Jan 2013.
The Board has made the appropriate disclosures in this report to
ensure that the Company meets its continuing obligations. The
Company considers that it has complied with the provisions of the
UK Corporate Governance Code throughout the accounting year, except
where disclosed below.
Information and training
The Board receives full details of the Company's assets,
liabilities and other relevant information in advance of Board
meetings. Typically, the Board meets formally four times a year;
however, the Investment Manager and Company Secretary stay in more
regular, less formal contact with the Directors. Individual
Directors have direct access to the Company Secretary and may, at
the expense of the Company, seek independent professional advice on
any matter that concerns them in the furtherance of their duties.
New Directors will receive an induction from the Investment Manager
and Company Secretary on joining the Board, and all Directors
receive other relevant training as necessary.
Independence
The Board consists solely of non-executive Directors of whom
Howard Myles is Chairman. All directors are deemed as independent
under the UK Corporate Governance Code. Charles Hansard has
informed the Board that he no longer has a commercial relationship
with the Manager, Baker Steel Capital Managers (Cayman)
Limited.
Senior Independent Director
In view of its non-executive nature, the Board considers that it
is not appropriate for a Senior Independent Director to be
appointed.
Appointment and re-election
All the Directors are responsible for reviewing the size,
structure and skills of the Board and considering whether any
changes are required or new appointments are necessary to meet the
requirements of the Company's business or to maintain a balanced
Board. The Directors are not required to retire by rotation at each
annual general meeting of the Company. The Board's policy on tenure
is that continuity and experience are considered to add
significantly to the strength of the Board and, as such, no limit
on the overall length of service of any of the Company's Directors,
including the Chairman, has been imposed.
Performance appraisal
The performance of the Board and the Audit Committee are
evaluated through an assessment process led by the Chairman. The
performance of the Chairman is evaluated by the other
Directors.
Audit committee
The Board has established an Audit Committee. The Audit
Committee meets at least twice a year and is responsible for
ensuring that the financial performance of the Company is properly
reported on and monitored and provides a forum through which the
Company's external auditors may report to the Board. The Audit
Committee operates within established terms of reference. These are
available on the Company's website
www.bakersteelresourcestrust.com. The Directors consider there is
no need for an internal audit function because the Company operates
through service providers and the Directors receive control reports
on service providers.
Christopher Sherwell is Chairman of the Audit Committee.
Nomination, Remuneration and Management Engagement
Committees
Given the size and nature of the Company and the fact that all
the Directors are non-executive it is not deemed necessary to form
separate Nomination, Remuneration, and Management Engagement
Committees. The Board, as a whole, will consider new Board
appointments, remuneration and the engagement of service providers,
although in view of Charles Hansard's commercial relationship with
the Manager, he will not participate in Board discussions in
relation to the Manager's appointment.
Board meetings
The Board generally meets at least four times a year, at which
time the Directors review the management of the Company's assets
and all other significant matters so as to ensure that the
Directors maintain overall control and supervision of the Company's
affairs. The Board is responsible for the appointment and
monitoring of all service providers to the Company. Between these
quarterly meetings there is regular contact with the Investment
Manager. The Directors are kept fully informed of investment and
financial controls and other matters which are relevant to the
business of the Company and which should be brought to the
attention of the Directors. The Directors also have access to the
Company Secretary (through its appointed representatives who are
responsible for ensuring that Board procedures are followed and
that applicable rules and regulations are complied with) and, where
necessary in the furtherance of their duties, to independent
professional advice at the expense of the Company.
Internal Controls
The Board recognises the need for effective high-level internal
controls. The principal controls to address financial, operational
and compliance risks are embedded in the operational procedures of
the Investment Manager, the Administrator and the Custodian.
High-level controls in operation in relation to the Company
include segregation of duties between relevant functions and
departments within the Administrator and the Investment Manager. At
every quarterly meeting, the Board considers the compliance
reports, administration reports, and portfolio valuations provided
by the Administrator, and the Investment Manager's reports and
analyses.
The Administrator has a number of internal control functions
including a dedicated Compliance Officer who is appointed as a
statutory requirement and whose role is determined by the Guernsey
Financial Services Commission which includes the maintenance of a
log of errors and breaches which are reported to the Board at each
quarterly Board meeting. The Administrator also undertakes an
independent annual review of its internal control functions in
accordance with International Standard on Assurance Engagements
3402, "Assurance Reports on Controls at a Service Organisation",
issued by the International Auditing and Assurance Standards Board.
The Administrator makes this report available to the Board for
review and assessment of the control objectives and activities in
place.
The Board reviews the effectiveness of the Company's internal
control systems on an ongoing basis. Procedures are in place to
ensure that necessary action is taken to address any significant
weaknesses identified in the control framework. The Board is not
aware of any significant failings or weaknesses in the Company's
internal controls in the year under review. The Board recognises
that the internal controls framework is designed to manage rather
than to eliminate relevant risks. The key risks faced by the
Company are set out below. The Board reviews the policies for
managing each of these principal risks as summarised below. Please
also refer to note 5 on pages 31 to 35.
Investment Manager Assessment
The Investment Manager prepares regular reports to the Board to
allow it to review and assess the Company's activities and
performance on an ongoing basis. The Board and the Investment
Manager have agreed clearly defined investment criteria, exposure
limits and specified levels of authority. Regular reports on these
matters, including performance information and portfolio
valuations, are submitted to the Board at each meeting.
Relations with Shareholders
The Board believes that the maintenance of good relations with
shareholders is vital for the long-term prospects of the Company.
The Board receives feedback on the views of shareholders from the
Company's brokers, RBC Capital Markets and Winterflood Securities
Limited, and from the Investment Manager.
General Meetings
All general meetings of the Company are held in Guernsey. The
Company holds an Annual General Meeting each year.
Principal risks & uncertainties
Performance risk
The Board is responsible for determining the investment strategy
to allow the Company to fulfil its objectives and also for
monitoring the performance of the Investment Manager which has been
delegated day-to-day discretionary management of the Company's
portfolio. An inappropriate strategy may lead to poor performance.
The investment policy of the Company is for a highly focused
portfolio which can lead to a concentration of risk. To manage this
risk the Investment Manager provides to the Board, on an ongoing
basis, an explanation of the significant stock selection
recommendations and the rationale for the composition of the
investment portfolio. The Board mandates and monitors an adequate
diversification of investments, both geographically and sectorally,
in order to reduce the risks associated with particular sectors,
based on the diversification requirements inherent in the Company's
investment policy.
Market risk
Market risk arises from volatility in the prices of the
Company's underlying investments which, in view of the Company's
investment objectives, in turn are particularly sensitive to
commodity prices. Market risk represents the potential loss the
Company might suffer through holding investments in the face of
negative market movements. The Board has set investment
restrictions and guidelines which are monitored and reported on by
the Investment Manager on a regular basis.
Financial risk
The Company's investment activities expose it to a variety of
financial risks that include foreign currency risk and interest
rate risk. Further details are disclosed in note 5 on pages 31 to
35.
Operational risk
In common with most other investment vehicles, the Company has
no employees. The Company therefore relies upon the services
provided by third parties and is dependent on the control systems
of the Investment Manager and the Company's other service
providers. For example, the security of the Company's assets,
dealing procedures, accounting records and compliance with
regulatory and legal requirements depend on the effective operation
of these systems.
Business/Other risks
The Company invests in companies whose projects are located in
emerging markets. In such countries governments can exercise
substantial influence over the private sector and political risk
can be a significant factor. In adverse social and political
circumstances, governments have been involved in policies of
expropriation, confiscatory taxation, nationalisation, intervention
in the securities markets and imposition of foreign exchange
controls and investment restrictions. The Investment Manager and
the Board take into account specific political risks when entering
into an investment and seek to mitigate them by diversifying
geographically.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the financial
statements in accordance with applicable Guernsey law and generally
accepted accounting principles.
The Guernsey Company Law requires the Directors to prepare
financial statements for each financial year which give a true and
fair view of the state of affairs of the Company and of the profit
or loss of the Company for that year. In preparing these
consolidated financial statements the Directors should:
- select suitable accounting policies and then apply them consistently;
- make judgments and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business;
- confirm that there is no relevant audit information of which
the Company's auditor is unaware; and
- confirm that they have taken reasonable steps they ought to
have taken as directors to make themselves aware of any relevant
audit information and to establish that the Company's auditor is
aware of that information.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and which enable the Directors to
ensure that the financial statements comply with the Companies
(Guernsey) Law, 2008. The Directors are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors confirm that to the best of their knowledge:
- The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union (EU);
- The financial statements have been prepared in accordance with
the applicable set of accounting standards and give a true and fair
view of the assets, liabilities and financial position and profit
or loss of the Company;
- The Chairman's Statement, Directors' Report and Investment
Manager's Report include a fair review of the development and
performance of the business and position of the Company together
with the description of the principal risks and uncertainties that
the Company faces, as required by the Disclosure and Transparency
Rules of the UK Listing Authority; and
- So far as each of the Directors is aware, there is no relevant
audit information of which the Company's auditors are unaware and
each Director has taken all the reasonable steps he ought to have
taken as a director to make himself aware of any relevant audit
information and to establish that the Company's auditors are aware
of that information.
Signed on behalf of the Board of Directors by:
Howard Myles Christopher Sherwell
19 April 2013
BOARD OF DIRECTORS
Howard Myles (aged 63): Howard Myles currently acts as a
non-executive director of a number of investment companies. Howard
was a partner in Ernst & Young from 2001 until 2007 and was
responsible for the Investment Funds Corporate Advisory team. He
was previously with UBS Warburg from 1987 to 2001. Howard began his
career in stockbroking in 1971 as an equity salesman and joined
Touche Ross in 1975 where he qualified as a chartered accountant.
In 1978 he joined W. Greenwell & Co. in the corporate broking
team and in 1987 moved to SG Warburg Securities where he was
involved in a wide range of commercial and industrial transactions
in addition to leading UBS Warburg's corporate finance function for
investment funds. He is a fellow of the Institute of Chartered
Accountants and of The Chartered Institute for Securities and
Investments.
R. Edward Flood (aged 67): In March 2007, Edward Flood was
appointed Managing Director of Investment Banking at Haywood
Securities (UK) Limited. Following graduation from university
Edward enjoyed a career as an economic geologist with several
different companies in the mining industry over a 20-year period.
At Nerco Minerals he was head of the Company's acquisition team
during a period of rapid growth fuelled by the purchase of a number
of operating precious metal mines. This experience enabled him to
make a transition to the financial community as a principal at
Robertson Stephens investment bank in San Francisco in 1992. He
initially worked as a securities analyst following the gold mining
industry before becoming a member of the firm's investment
management team for the Contrarian Fund, a public mutual fund
concentrated on natural resource opportunities in emerging markets
around the world and the Orphan Fund, a similarly structured hedge
fund. The funds managed a portfolio of approximately US$2 billion.
Edward became Ivanhoe Mines' founding President in 1995 and served
in that capacity until 1999. He has been a member of the board of
directors since Ivanhoe was formed. Between 1999 and 2001, Edward
held the position of senior mining analyst with Haywood Securities
in Vancouver before returning to Ivanhoe Mines as deputy chairman,
a position held until joining Haywood Securities (UK) Limited in
March 2007. He is also the Chairman of Western Uranium Corporation
and a director of several mineral exploration and development
companies. Edward holds a Masters of Science (Geology) degree from
the University of Montana and is a member of the Geological Society
of London.
Charles Hansard (aged 64): Charles Hansard has over 30 years'
experience in the investment industry as a professional and in a
non-executive capacity. He currently serves as a non-executive
director on a number of boards which include the Moore Capital
group of funds, AAA- rated Deutsche Bank Global Liquidity Fund, and
Electrum Ltd., a privately owned gold exploration company. He
formerly served as a director of Apex Silver Mines Ltd., where he
chaired the finance committee during its capital raising phase and
as chairman of the board of African Platinum Plc, which he led
through reorganisation and feasibility prior to its sale to Impala
Platinum. He commenced his career in South Africa with Anglo
American Corporation and Fleming Martin as a mining analyst. He
subsequently worked in New York as an investment banker for Hambros
before returning to the UK to co-found IFM Ltd., one of the
earliest European hedge fund managers. Charles holds a B.B.S. from
Trinity College Dublin.
Clive Newall (aged 63): Clive Newall graduated from the Royal
School of Mines, University of London, England in 1971 with an
honours degree in Mining Geology, and was awarded an MBA from the
Scottish Business School at Strathclyde University. He has worked
in mining and exploration throughout his career, having held senior
management positions with Amax Exploration Inc. and the Robertson
Group plc. Clive has been a director of a number of public
companies in the United Kingdom and Canada.
Christopher Sherwell (aged 65): Christopher Sherwell has worked
since 2004 as a senior Non-Executive Director based in Guernsey
with roles in the offshore finance industry and is a director of a
number of listed investment companies. Prior to January 2004,
Christopher was a Managing Director of Schroders' offshore
investment and private banking operations in the Channel Islands.
Christopher was previously Investment Director from 1993-2000 and
also served on the boards of various Schroder group companies and
funds during his period there. Prior to Schroders he worked at
Smith New Court as a research analyst specialising in asset
allocation for Asian markets. Christopher is a Rhodes Scholar with
degrees in science and in economics and politics. He has worked as
a university lecturer and was for sixteen years a journalist, most
of them working for the Financial Times.
PORTFOLIO STATEMENT
AT 31 DECEMBER 2012
Shares Investments Fair value % of Net
/Warrants/ GBP equivalent assets
Nominal
Listed equity shares
Australian Dollars
20,560,122 South American Ferro Metals Limited 1,300,400 1.80
Australian Dollars Total 1,300,400 1.80
-------------------- ---------
Canadian Dollars
3,383,333 BacTech Environmental Corporation 188,020 0.26
1,100,000 Forbes & Manhattan Coal Corporation 455,076 0.63
9,787,495 Ivanplats Limited 27,195,682 37.66
1,931,667 REBgold Corporation 113,311 0.16
Canadian Dollars Total 27,952,089 38.71
-------------------- ---------
Great Britain Pounds
27,815,933 Metals Exploration Plc 2,503,434 3.47
Great Britain Pounds Total 2,503,434 3.47
-------------------- ---------
United States Dollars
6,576,192 China Polymetallic Mining Company Limited 6,458,568 8.94
United States Dollars Total 6,458,568 8.94
-------------------- ---------
Total investment in listed equity shares 38,214,491 52.92
-------------------- ---------
Fixed Income Instruments
United States Dollars
5,100,000 Argentum Convertible Note 3,138,075 4.35
750,000 Bilboes Holdings Convertible Note 461,482 0.64
830,000 Polar Silver Convertible Note 510,706 0.71
United States Dollars Total 4,110,263 5.70
-------------------- ---------
Total investments in Fixed Income Instruments 4,110,263 5.70
-------------------- ---------
Unlisted equity shares and warrants
Canadian Dollars
6,666,667 BacTech Mining Corporation Warrants 06/08/2013 0 -
10,250,000 BacTech Mining Corporation Warrants 17/06/2015 1,479 -
6,282,341 Ironstone Resources Limited 5,430,820 7.52
3,036,605 Ironstone Resources Limited Warrants 30/09/2013 18,210 0.03
2,400,000 REBgold Corporation Warrants 20/11/2016 15 -
Canadian Dollars Total 5,450,524 7.55
-------------------- ---------
Great Britain Pounds
1,594,646 Celadon Mining Limited 143,518 0.20
Great Britain Pounds Total 143,518 0.20
------------ -------
United States Dollars
3,034,734 Archipelago Metals Limited 466,825 0.65
451,445 Bilboes Gold Limited 5,621,343 7.79
7,000,000 Black Pearl Limited Partnership 4,907,947 6.80
372,058 Copperbelt Minerals Limited 1,602,514 2.22
5,713,642 Ferrous Resources Limited 4,394,568 6.09
4,244,550 Gobi Coal and Energy Limited 10,446,837 14.47
1,070 Polar Silver Resources Limited 658 -
United States Dollars Total 27,440,692 38.02
------------ -------
Total unlisted equity shares and warrants 33,034,734 45.77
------------ -------
Financial assets held at fair value through
profit or loss 75,359,488 104.39
------------ -------
Other assets & liabilities (3,159,833) (4.39)
------------ -------
Total equity 72,199,655 100.00
------------ -------
INDEPENDENT AUDITOR'S REPORT
For the year ended 31 December 2012
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF BAKER STEEL
RESOURCES TRUST LIMITED
We have audited the financial statements of Baker Steel
Resources Trust Limited for the year ended 31 December 2012 which
comprise the Statement of Financial Position, Statement of
Comprehensive Income, Statement of Changes in Equity, Statement of
Cash Flows, and the related notes 1 to 14. The financial reporting
framework that has been applied in their preparation is applicable
law and International Financial Reporting Standards as adopted by
the European Union.
This report is made solely to the Company's members, as a body,
in accordance with Section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state to
the Company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's
members as a body, for our audit work, for this report, or for the
opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Statement of Directors'
Responsibilities set out on page 16 of the Directors' Report, the
directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the Annual
Report to identify material inconsistencies with the audited
financial statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Opinion on financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's
affairs as at 31 December 2012, and of its comprehensive loss for
the year then ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the European Union;
and
-- have been prepared in accordance with the requirements of the
Companies (Guernsey) Law, 2008.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies (Guernsey) Law, 2008, we are required to
report to you, if in our opinion:
-- proper accounting records have not been kept; or
-- the financial statements are not in agreement with the accounting records; or
-- we have not received all the information and explanations we require for our audit.
Under the Listing Rules, we are required to review the parts of
the Corporate Governance disclosures in the Director's Report
relating to the Company's compliance with the nine provisions of
the UK Corporate Governance Code specified for our review.
Michael Bane
For and on behalf of Ernst & Young LLP
Recognised Auditors
Guernsey, Channel Islands
19 April 2013
Insofar as the financial statements are published on the company
website, the maintenance and integrity of the Baker Steel Resources
Trust Limited website is the responsibility of the directors; the
work carried out by the auditors does not involve consideration of
these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the
financial statements since they were initially presented on the
website.
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2012
2012 2011
Notes GBP GBP
Assets
Cash and cash equivalents 10 601,174 1,629,044
Tax refund receivable 6 - 1,402,642
Other receivables 57,671 12,111
Financial assets held at fair value through
profit or loss
(Cost: GBP64,336,833 (2011: GBP63,535,547)) 3 75,359,488 87,540,484
Total assets 76,018,333 90,584,281
----------- -------------
Equity and Liabilities
Liabilities
Performance fees payable 8 3,651,275 3,651,275
Management fees payable 8 79,317 84,635
Directors' fees payable 36,000 36,000
Audit fees payable 29,736 40,000
Administration fees payable 7 7,889 27,443
Other payables 14,461 21,278
Total liabilities 3,818,678 3,860,631
----------- -------------
Equity
Management Ordinary Shares 11 10,000 10,000
Ordinary Shares 11 64,767,056 64,657,584
Profit and loss account 7,422,599 22,056,066
Total equity 72,199,655 86,723,650
----------- -------------
Total equity and liabilities 76,018,333 90,584,281
=========== =============
Ordinary Shares in issue 11 66,152,533 66,043,061
Net asset value per Ordinary Share (in Pence)
- Basic 4 109.1 131.3
These financial statements were approved by the Board of Directors
on 19 April 2013 and signed on its behalf by:
Howard Myles Christopher Sherwell
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2012
Year ended Year ended Year ended
2012 2012 2012
Revenue Capital Total
Notes GBP GBP GBP
Income
Interest income 43,152 - 43,152
Net loss on financial assets and
liabilities at fair value through
profit or loss 3 (12,982,283) (12,982,283)
Net foreign exchange loss (24,836) (24,836)
Net income/(loss) 43,152 (13,007,119) (12,963,967)
------------ ------------- -------------
Expenses
Management fees 8 1,109,630 - 1,109,630
Directors' fees 140,000 - 140,000
Director's expenses 4,194 - 4,194
Audit fees 40,000 - 40,000
Administration fees 7 99,211 - 99,211
Custody fees 62,821 - 62,821
Other expenses 9 213,644 - 213,644
Total expenses 1,669,500 - 1,669,500
------------ ------------- -------------
Total comprehensive loss for the
year (1,626,348) (13,007,119) (14,633,467)
============ ============= =============
Net loss for the year per Ordinary
Share:
Basic and diluted (in pence) 4 (2.4) (19.7) (22.1)
Weighted Average Number of Ordinary
Shares Outstanding:
Basic and diluted 4 66,124,204
In the year ended 31 December 2012 there were no gains or losses other than those recognised
above.
The Directors consider all results to derive from continuing activities.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2011
Year ended Year ended Year ended
2011 2011 2011
Revenue Capital Total
Notes GBP GBP GBP
Income
Interest income 71,323 - 71,323
Net gain on financial assets and
liabilities at fair value through
profit or loss 3 - 24,624,322 24,624,322
Net foreign exchange loss - (166,176) (166,176)
Other income 112 - 112
Net income 71,435 24,458,146 24,529,581
------------ ----------- ---------------
Expenses
Performance fees 8 - 3,651,275 3,651,275
Management fees 8 1,129,886 - 1,129,886
Directors' fees 140,000 - 140,000
Audit fees 49,465 - 49,465
Administration fees 7 87,671 - 87,671
Custody fees 49,775 - 49,775
Other expenses 9 340,936 - 340,936
Total expenses 1,797,733 3,651,275 5,449,008
------------ ----------- ---------------
Less withholding tax paid - 633,650 633,650
Total comprehensive (loss)/income
for the year (1,726,298) 20,173,221 18,446,923
============ =========== ===============
Net (loss)/earnings for the year per
Ordinary Share:
Basic and diluted (in pence) 4 (2.6) 30.5 27.9
Weighted Average Number of Ordinary
Shares Outstanding:
Basic and diluted 4 66,042,454
In the year ended 31 December 2011 there were no gains or losses other than those recognised
above.
The Directors consider all results to derive from continuing activities.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2012
Management
Ordinary Ordinary Profit and Year ended
Shares Shares loss account 2012
GBP GBP GBP GBP
Balance as at 1 January
2012 10,000 64,657,584 22,056,066 86,723,650
Proceeds on issue of Ordinary
Shares - 109,472 - 109,472
Net loss for the year - - (14,633,467) (14,633,467)
Balance as at 31 December
2012 10,000 64,767,056 7,422,599 72,199,655
=========== =========== =============== =============
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2011
Management
Ordinary Ordinary Profit and Year Ended
Shares Shares loss account 2011
GBP GBP GBP GBP
Balance as at 1 January
2011 10,000 64,655,155 3,609,143 68,274,298
Proceeds on issue of Ordinary
Shares - 2,429 - 2,429
Net gain for the year - - 18,446,923 18,446,923
Balance as at 31 December
2011 10,000 64,657,584 22,056,066 86,723,650
=========== =========== =============== ===========
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2012
Year ended Year ended
2012 2011
Notes GBP GBP
Cash flows from operating activities
Net (loss)/income for the year (14,633,467) 18,446,923
Adjustments to reconcile income for the
year to net cash used in operating activities:
Net change in fair value of financial
assets at fair value through profit or
loss 12,982,283 (24,624,322)
Net decrease/(increase) in other receivables 1,357,082 (1,084,192)
Net (decrease)/increase in other payables (41,953) 3,630,014
------------- -------------
Net cash used in operating activities (336,055) (3,631,577)
------------- -------------
Cash flows from investing activities
Purchase of financial assets at fair value
through profit or loss (801,287) (22,167,287)
Sale of financial assets at fair value
through profit or loss - 26,411,973
------------- -------------
Net cash (used in)/provided by investing
activities (801,287) 4,244,686
------------- -------------
Cash flows from financing activities
Proceeds from shares issued 11 109,472 2,429
Net cash provided by financing activities 109,472 2,429
------------- -------------
Net (decrease)/increase in cash and cash
equivalents (1,027,870) 615,538
Cash and cash equivalents at the beginning
of the year 1,629,044 1,013,506
Cash and cash equivalents at the end of
the year 10 601,174 1,629,044
============= =============
Represented by:
Cash and cash equivalents 601,174 1,629,044
Cash and cash equivalents at the end of
the year 10 601,174 1,629,044
============= =============
.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
1. GENERAL INFORMATION
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 POI Law
and the Registered Collective Investment Scheme Rules 2008 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.
Effective 1 June 2012 the Subscription Shares are assigned to the
Standard Segment of the Official List.
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 or "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.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation
The financial statements have been prepared on a historic cost
basis except for financial assets at fair value through profit or
loss, which are designated at fair value through profit or
loss.
The Company's functional currency is the Great Britain pound
sterling ("GBP"), being the currency in which its Ordinary Shares
and Subscription Shares are issued and in which returns are made to
shareholders. The presentation currency is the same as the
functional currency. The Company invests in companies around the
world whose shares are denominated in various currencies. Currently
the majority of the portfolio is denominated in US Dollars but this
will not necessarily remain the case as the portfolio develops.
The Statement of Comprehensive Income is presented in accordance
with the Statement of Recommended Practice ("SORP") 'Financial
Statements of Investment Trust Companies and Venture Capital
Trusts' issued in January 2009 by the Association of Investment
Companies, to the extent that it does not conflict with
International Financial Reporting Standards ("IFRS").
Income encompasses both revenue and capital gains/losses. For a
listed investment Company it is necessary to distinguish revenue
from capital for the purpose of determining the distribution.
Revenue includes items such as dividends, interests, fees, rent and
other equivalent items. Capital is the return, positive or
negative, from holding investments other than that part of the
return that is revenue. SORP provides guidance on the items that
should be recognised as capital/revenue. Where specific guidance is
not given an item is recognised in accordance with its economic
substance.
Statement of Compliance
These financial statements have been prepared in accordance with
IFRS as adopted by the European Union.
b) Significant accounting judgements and estimates
The preparation of the Company's financial statements requires
the Directors to make judgements, estimates and assumptions that
affect the amounts recognised in the financial statements. However,
uncertainty about these assumptions and estimates could result in
outcomes that could require a material adjustment to the carrying
amount of the asset or liability affected in the future. The most
significant judgement relates to the valuation of the Company's
unlisted investments which are valued by the Board at fair value in
accordance with IFRS having regard to such factors as they deem
relevant. This may include information received from market and
other sources as to trading on unofficial or "grey" markets
requiring a judgement on whether a particular transactions
represents fair value and the appropriate timing for recognising
fair value changes when information about a transaction is
incomplete or unclear. It may also include using industry specific
models which require judgement about the investee Company's
resources, reserve estimates and associated operating and cost
projections. Judgement is also required regarding the long term
market prices for relevant commodities produced and comparison with
comparable transactions and listed company multiples.
c) Financial assets at fair value through profit or loss
The Company designates its investments, other than derivatives,
as at fair value through profit or loss, at initial recognition.
All derivatives are classified as held for trading and are included
in financial assets at fair value through profit or loss.
Recognition and derecognition
The Company recognises financial assets and financial
liabilities on the date it becomes a party to the contractual
provisions of the instruments. Routine purchases and sales of
investments are accounted for on the trade date.
Financial assets at fair value through profit or loss are
initially recognised at fair value. Transaction costs are expensed
in the Statement of Comprehensive Income. Subsequent to initial
recognition, all financial assets at fair value through profit or
loss are re-measured at fair value. Gains and losses arising from
changes in fair value are recognised in the Statement of
Comprehensive Income in the year in which they arise.
A financial asset is derecognised when the Company no longer has
control over the contractual rights that comprise that asset. This
occurs when the rights are realised, expired or are surrendered. A
financial liability is derecognised when it is extinguished or when
the obligation specified in the contract is discharged, cancelled
or expired.
Basis of designation of fair value
Designation of the investments in this way is consistent with
the Company's documented risk management policy and investment
strategy, and information about the investments is provided to the
Board on this basis.
After initial recognition, investments are measured at fair
value, with unrealised gains and losses on investments recognised
in the Statement of Comprehensive Income. Investments are
derecognised on sale. Gains and losses on sale of investments are
recognised in the Statement of Comprehensive Income.
Determination of fair value
Fair value is the amount for which an asset could be exchanged,
or a liability settled, between knowledgeable, willing parties in
an arm's length transaction.
The fair value for financial instruments traded in active
markets at the reporting date is based on their last quoted price
or binding dealer price quotations (bid price for long positions
and ask price for short positions), without any deduction for
transaction costs.
For all other financial instruments not traded in an active
market, fair value is determined by using appropriate valuation
techniques. Valuation techniques include: using recent arm's length
market transactions; reference to the current market value of
another instrument that is substantially the same; discounted cash
flow analysis and option pricing models making as much use of
available and supportable market data as possible. An analysis of
fair values of financial instruments and further details as to how
they are measured are provided in note 3.
d) Interest income and expense
Bank interest income, fixed income instruments interest and
interest expense are recognised on an accruals basis based on the
effective interest method.
e) Cash and cash equivalents, margin accounts with brokers and cash overdrawn
Cash and cash equivalents in the statement of financial position
comprise cash balances held at banks.
f) Expenses
All expenses are recognised on an accruals basis.
g) Translation of foreign currencies
Foreign currency transactions during the year are translated
into GBP at the rate of exchange ruling at the date of the
transaction. Assets and liabilities denominated in foreign
currencies are translated into GBP at the rate of exchange ruling
at the Statement of Financial Position date. Exchange differences
including those arising from adjustment to fair value of financial
instruments during the year, are included in the Statement of
Comprehensive Income.
h) Segment information
The Directors are of the opinion that the Company is engaged in
a single segment of business, being investing in natural resources
companies.
i) Net asset value per share
Net Asset Value per share disclosed on the face of the Statement
of Financial Position is calculated in accordance with the
Company's Prospectus by dividing the net assets of the Company on
the Statement of Financial Position date by the number of Ordinary
Shares outstanding at that date.
j) New accounting pronouncements
The following standards, amendments and interpretations are
effective for the current year:
IFRS 1: First time Adoption of IFRS - amended by Severe
Hyperinflation and Removal of Fixed Dates for First-time Adopters-
for accounting periods commencing on or after 1 July 2011
IFRS 7: Disclosures - Transfer of financial assets- for
accounting periods commencing on or after 1 July 2011
IAS 12: Income Taxes - amended in Deferred Tax: Recovery of
Underlying Assets
These standards have been adopted in the Company's accounting
policies but had no material impact on these financial
statements.
k) New accounting pronouncements not yet effective
At the date of authorisation of these financial statements, the
following standards and interpretations, which have not been
applied, were in issue but not yet effective:
IFRS 9 : Financial Instruments - for accounting periods
commencing on or after 1 January 2015
IFRS 10 : Consolidated Financial Statements - for accounting
periods commencing on or after 1 January 2013*
IFRS 11 : Joint Arrangements - for accounting periods commencing
on or after 1 January 2013*
IFRS 12 : Disclosure of Interests in Other Entities - for
accounting periods commencing on or after 1 January 2013*
IFRS 13 : Fair value measurement - for accounting periods
commencing on or after 1 January 2013**
IAS 1 : Presentation of Financial Statements - for annual
periods beginning on or after 1 July 2012, with early adoption
permitted.
IAS 19 : Employee Benefits (as amended in 2011) - applicable on
a modified retrospective basis to annual periods beginning on or
after 1 January 2013, with early adoption permitted.
IAS 27 : Consolidated and Separate Financial Statements (as
amended in 2011) - applicable to annual reporting periods beginning
on or after 1 January 2014
*partially endorsed by the EU from 1 January 2014.
**endorsed by the EU from 1 January 2013.
The Directors have not yet assessed the impact that the adoption
of these standards and interpretations in future periods will have
on the financial statements of the Company. These standards and
interpretations will be adopted when they become effective.
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Listed equity
31 December 2012 shares Unlisted equity shares Fixed income instruments Warrants Total
GBP GBP GBP GBP GBP
Financial assets at fair value
through profit or loss
Cost 24,353,651 35,760,976 4,222,206 - 64,336,833
Unrealised gain/(loss) 13,860,840 (2,745,946) (111,943) 19,704 11,022,655
Market value at 31 December
2012 38,214,491 33,015,030 4,110,263 19,704 75,359,488
============= ====================== ======================== ======== ===========
Listed equity
31 December 2011 shares Unlisted equity shares Fixed income instruments Warrants Total
GBP GBP GBP GBP GBP
Financial assets at fair value
through profit or loss
Cost 9,006,135 51,020,003 3,509,409 - 63,535,547
Unrealised (loss)/gain (873,563) 24,620,875 56,513 201,112 24,004,937
Market value at 31 December
2011 8,132,572 75,640,878 3,565,922 201,112 87,540,484
============= ====================== ======================== ======== ==========
3. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
The following table analyses net (losses)/gains on financial
assets at fair value through profit or loss for the year ended 31
December 2012 and 31 December 2011.
Year ended
Year ended 2012 2011
GBP GBP
Financial assets at fair value through profit
or loss
Realised gains/(losses) on:
- Listed equity shares - (317,716)
- Unlisted equity shares - 5,058,617
- Fixed income instruments - (257,320)
---------------- ------------
- 4,483,581
Movement in unrealised gains/(losses) on:
- Listed equity shares (1,168,637) (2,857,065)
- Unlisted equity shares (16,649,549) 26,362,666
- Investments transferred from unlisted
to listed 5,185,767 -
- Fixed income instruments (168,456) 239,838
- Warrants (181,408) (3,604,698)
---------------- ------------
(12,982,283) 20,140,741
Net (loss)/gain on financial assets and
liabilities at fair value through profit
or loss (12,982,283) 24,624,322
================ ============
The following table analyses investments by type and by level
within the fair valuation hierarchy at 31 December 2012.
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 4,560,241 33,654,250 - 38,214,491
Unlisted equity shares - - 33,015,030 33,015,030
Warrants - - 19,704 19,704
Fixed income instruments - - 4,110,263 4,110,263
------------- ------------------ ------------ -----------
4,560,241 33,654,250 37,144,997 75,359,488
============= ================== ============ ===========
The following table analyses investments by type and by level
within the fair valuation hierarchy at 31 December 2011.
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 8,132,572 - - 8,132,572
Unlisted equity shares - 75,640,878 75,640,878
Warrants - - 201,112 201,112
Fixed income instruments - - 3,565,922 3,565,922
------------- ------------------ ------------ ------------
8,132,572 - 79,407,912 87,540,484
============= ================== ============ ============
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
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 earnings attributable to
the change in unrealised gains or losses relating to assets and
liabilities held at 31 December 2012.
Fixed income
Total Equities instruments Warrants
GBP GBP GBP GBP
Opening balance 1 January
2012 79,407,912 75,640,878 3,565,922 201,112
Purchases of investments 801,287 88,489 712,798 -
Transfer out of Level
3 (15,347,517) (15,347,517) - -
Change in net unrealised
losses (27,716,685) (27,366,820) (168,457) (181,408)
------------- ------------- ------------- ----------
Closing balance 31 December
2012 37,144,997 33,015,030 4,110,263 19,704
============= ============= ============= ==========
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 earnings attributable to
the change in unrealised gains or losses relating to assets and
liabilities held at 31 December 2011.
Fixed income
Total Equities instruments Warrants
GBP GBP GBP GBP
Opening balance 1 January
2011 47,402,510 35,188,512 - 12,213,998
Purchases of investments 17,599,108 14,089,699 3,509,409 -
Investment option converted
and
exercised (8,408,187) - - (8,408,187)
Change in net unrealised
gains/(losses) 22,814,481 26,362,667 56,513 (3,604,699)
-------------- ----------- ------------- ------------
Closing balance 31 December
2011 79,407,912 75,640,878 3,565,922 201,112
============== =========== ============= ============
The Company did not hold any Level 2 investments in the prior
period.
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.
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. 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.
Investments classified within Level 3 have significant
unobservable inputs. They include unlisted fixed income
instruments, unlisted equity shares and warrants. Level 3
investments are valued using valuation techniques explained in the
Company's accounting policies. 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 to reflect illiquidity and/or non-transferability,
with the amount of such discount estimated by the Directors in the
absence of market information. In cases where there have been no
relevant transactions during the year, the Directors will take due
consideration of the change in Development Risk Adjusted Net
Present Values of the assets underlying the investments, prepared
by the Investment Manager, since the last change in valuation and
of whether such change is indicative of a change in fair value.
4. NET ASSET VALUE PER SHARE AND EARNING PER SHARE
Basic net asset value per share is based on the net assets of
GBP72,199,655 (31 December 2011: GBP86,723,650) and 66,152,333 (31
December 2011: 66,043,061) Ordinary Shares, being the number of
shares in issue at the year end. The Subscription Shares are
entitled to be converted to Ordinary Shares at 100p per share. The
calculation for basic net asset value is as below:-
31 December 2012 31 December 2011
Ordinary Subscription Ordinary Subscription
Shares Shares Shares Shares
Net assets at the year end (GBP) 72,199,655 13,085,150 86,723,650 13,194,622
Number of shares 66,152,533 13,085,150 66,043,061 13,194,622
Basic net asset value per share
(in pence) 109.1 131.3
The basic and diluted expense per share is based on the net loss
for the year of the Company of GBP14,633,467 (2011: gain of
GBP18,446,923) and on 66,124,204 (2011: 66,042,454) Ordinary
Shares, being the weighted average number of Ordinary Shares in
issue during the year. In addition, the average market share price
during the year of 95.8p is lower than the exercise price of 100p.
Basic and diluted earnings per share are the same due to the fact
that the conversion of Subscription Shares to Ordinary Shares would
decrease the loss per share, hence subscription shares are
anti-dilutive. This calculation is prepared in accordance with
IFRS.
5. RISK MANAGEMENT POLICIES AND DISCLOSURES
The Company's principal financial instruments comprise financial
assets, primarily unlisted equity investments in natural resources
companies. These investments reflect the core of the Company's
investment strategy.
The Company's financial liabilities principally comprise fees
payable to various parties and arise directly from its
operations.
Risk exposures and responses
The Company manages its exposure to key financial risks in
accordance with the Company's financial risk management policy. The
objective of the policy is to support the delivery of the Company's
core investment objective whilst maintaining future financial
security. The main risks that could adversely affect the Company's
financial assets, or future cash flows are market risk (comprising
market price risk, currency risk and interest rate risk), commodity
price risk, liquidity risk and credit risk.
The Company's Board of Directors oversees the management of
financial risks, each of which is summarised below.
a) Market risk
Market risk is the risk that the fair value of a financial
instrument will fluctuate because of changes in market prices.
Market risk comprises three types of risk: market price risk,
currency risk and interest rate risk.
i. Market Price risk
Market price risk is the risk that the fair value of future cash
flows will fluctuate because of changes in the market prices of the
Company's investment portfolio.
The following illustrates the sensitivity of the income to an
increase or decrease of 10% in the fair value of the Company's
investment portfolio. The level of change is considered to be
reasonably possible based on observations of current market
conditions in 2012. The sensitivity analysis assumes all other
variables are held constant.
The impact of a 10% decrease in the value of investments on the
net assets and income of the Company as at 31 December 2012 would
have been a decrease of GBP7,535,949 (31 December 2011:
GBP8,754,048). An increase of 10% would increase the net asset
value by GBP7,535,949. In practice, the actual results may differ
from the sensitivity analysis above and the difference could be
material.
ii. Currency risk
The majority of the Company's financial assets and liabilities
are denominated in US dollars. The functional currency of the
Company is sterling. Currency risk is the risk that the value of
non-GBP denominated financial instruments will fluctuate due to
changes in foreign exchange rates. The table below shows the
currencies and amounts the Company was exposed to at 31 December
2012 and 31 December 2011.
31 December 2012
Currency Amount in Conversion rate Value % of net assets
local currency (based on GBP) GBP
AUD 2,035,452 0.6389 1,300,400 1.80
CAD 54,095,924 0.6175 33,402,613 46.26
EUR (9,958) 1.2325 (8,080) (0.01)
GBP (544,517) 1.0000 (544,517) (0.75)
USD 61,837,624 0.6153 38,049,240 52.70
---------- ---------------
72,199,656 100.00
---------- ---------------
31 December 2011
Currency Amount in Conversion rate Value % of net assets
local currency (based on GBP) GBP
AUD 4,009,246 0.6592 2,642,935 3.05
CAD 15,225,605 0.6319 9,621,759 11.09
EUR (11,801) 0.8347 (9,930) (0.01)
GBP 1,352,133 1.0000 1,352,133 1.56
USD 113,800,395 0.6425 73,116,753 84.31
---------- ---------------
86,723,650 100.00
---------- ---------------
At 31 December 2012 and 31 December 2011, had any foreign
currencies strengthened by 10% relative to sterling, with all other
variables held constant, total equity would have increased by the
amounts shown below.
2012 2011
Currency Value Value
GBP GBP
AUD 130,040 264,294
CAD 3,340,261 962,176
EUR (808) (993)
USD 3,804,924 7,311,675
7,274,417 8,537,152
--------- -----------------
A 10% decrease in foreign currencies relative to sterling, with
all other variables held constant, would lead to a corresponding
decrease in the total equity by equal but opposite amounts as shown
in the above tables. The estimated movement is based on
management's determination of a reasonably possible change in
foreign exchange rates. In practice, the actual results may differ
from the sensitivity analysis above and the difference could be
material.
iii. Interest rate risk
Although the Company's interest-bearing financial assets and
liabilities expose it indirectly to risks associated with the
effects of fluctuations in the prevailing levels of market interest
rates on its financial position and cash flows, it is subject to
little direct exposure to interest rate fluctuations as the
majority of the financial assets are equity investments which do
not pay interest. Any excess cash and cash equivalents are invested
at short-term market interest rates which exposes the Company, to a
limited extent, to interest rate risk and corresponding
gains/losses from a change in the fair value of these financial
instruments.
The table below summarises the Company's exposure to interest
rate risk. It includes the Company's assets and liabilities at fair
values, categorised by the earlier of contractual re-pricing or
maturity dates.
At 31 December 2012 Up to More than Non-interest
1 month 6 months bearing Total
Assets GBP GBP GBP GBP
Cash and cash equivalents 601,174 - - 601,174
Financial assets held at fair value through profit or loss 3,138,075 972,188 71,249,225 75,359,488
Receivables - - 57,671 57,671
Total Assets 3,739,249 972,188 71,306,896 76,018,333
========= ========= ============ ==========
Liabilities
Performance fees accrued - - 3,651,275 3,651,275
Other liabilities - - 167,403 167,403
Total Liabilities - - 3,818,678 3,818,678
========= ========= ============ ==========
Interest rate sensitivity gap 3,739,249 972,188
========= =========
At 31 December 2011 Up to More than Non-interest
1 month 6 months bearing Total
Assets GBP GBP GBP GBP
Cash and cash equivalents 1,629,044 - - 1,629,044
Financial assets held at fair value through profit or loss - 3,565,922 83,974,562 87,540,484
Receivables - - 1,414,753 1,414,753
Total Assets 1,629,044 3,565,922 85,389,315 90,584,281
========= ========= ============ ============
Liabilities
Performance fees accrued - - 3,651,275 3,651,275
Other liabilities - - 209,356 209,356
Total Liabilities - - 3,860,631 3,860,631
========= ========= ============ ============
Interest rate sensitivity gap 1,629,044 3,565,922
========= =========
Interest rate sensitivity
At 31 December 2012, should interest rates have fallen by 25
basis points with all other variables remaining constant, the
decrease in net assets attributable to holders of Ordinary Shares
for the year would amount to approximately GBP9,348 (2011:
GBP4,073) for assets up to 1 month respectively and GBP2,430 (2011:
GBP8,915) for assets more than 6 months respectively. If interest
rates had risen by 25 basis points it would have an equal but
opposite effect as the decrease.
The income on the Company's cash assets is positively correlated
to interest rates. As interest rates rise, the interest earned
would follow (rise) thus increasing the value of the Company.
The Board reviews and agrees policies for managing these risks.
The Investment Manager assesses the exposure to market risk when
making investment decisions and monitors the overall level of
market risk on the investment portfolio on an ongoing basis.
b) Commodity price risk
The Company is exposed to the risk of fluctuations in prevailing
market commodity prices through its investment portfolio. Commodity
price risk is beyond the Company's control but will be mitigated to
a certain extent as a result of the Company's diversified portfolio
as long as commodity prices remain uncorrelated. It is not possible
to quantify within reasonable ranges the impact of commodity price
changes on the valuation of the Company's investments. However, in
general long term commodity price increases should give rise to an
increase in fair value of the Company's investments.
c) Liquidity risk
Liquidity risk is defined as the risk that the Company may not
be able to settle or meet its obligations on time or at a
reasonable price. The Company invests in unlisted equities for
which there may not be an immediate market. The Company seeks to
mitigate this risk by maintaining a cash and listed share position
which will cover its ongoing operational expenses.
The Company has the ability to incur borrowings of up to 10% of
its Net Asset Value but the Company's policy is to restrict any
such borrowings for temporary purposes only, such as settlement
mis-matches.
The table below analyses the Company's financial assets and
liabilities into relevant maturity groupings based on the remaining
period at the Statement of Financial Position date to the
contractual maturity date. The amounts in the table are the
contractual undiscounted cash flows.
At 31 December 2012 Less than More than No contractual
1 month 1-3 months 3-12 months 12 months maturity Total
Assets GBP GBP GBP GBP GBP GBP
Cash and cash equivalents 601,174 - - - 601,174
Financial assets held at fair value
through profit
or loss - 3,138,075 18,210 1,494 72,201,709 75,359,488
Receivables 57,671 - - - 57,671
--------- ---------- ----------- --------- -------------- ----------
Total Assets 658,845 3,138,075 18,210 1,494 72,201,709 76,018,333
========= ========== =========== ========= ============== ==========
Less than More than No contractual
1 month 1-3 months 3-12 months 12 months maturity Total
Liabilities GBP GBP GBP GBP GBP GBP
Other payables
and accrued expenses 2,623,206 14,461 29,736 - 1,151,275 3,818,678
--------- ---------- ----------- --------- -------------- ----------
Total liabilities 2,623,206 14,461 29,736 - 1,151,275 3,818,678
========= ========== =========== ========= ============== ==========
Net assets attributable to shareholders 72,199,655
==========
At 31 December 2011 Less than More than No contractual
1 month 1-3 months 3-12 months 12 months maturity Total
Assets GBP GBP GBP GBP GBP GBP
Cash and cash equivalents 1,629,044 - - - - 1,629,044
Financial assets held at fair value
through profit
or loss - 69,084 19,413 3,389,408 84,062,579 87,540,484
Receivables 1,414,753 - - - - 1,414,753
--------- ---------- ----------- --------- -------------- ----------
Total Assets 3,043,797 69,084 19,413 3,389,408 84,062,579 90,584,281
========= ========== =========== ========= ============== ==========
Less than More than No contractual
1 month 1-3 months 3-12 months 12 months maturity Total
Liabilities GBP GBP GBP GBP GBP GBP
Other payables
and accrued expenses 148,078 21,278 40,000 - 3,651,275 3,860,631
--------- ---------- ----------- --------- -------------- ----------
Total liabilities 148,078 21,278 40,000 - 3,651,275 3,860,631
========= ========== =========== ========= ============== ==========
Net assets attributable to shareholders 86,723,650
==========
d) Credit risk
Credit risk is the risk that a counterparty will be unable to
pay amounts in full as they fall due. The Company has exposure to
credit risk in relation to its cash balances, fixed income
instruments and trade receivables as stated in the Statement of
Financial Position.
As at 31 December 2012, the Company's financial assets were held
with the following weight:
Financial Assets Counterparty Credit 2012
Rating % of net assets
Fixed income instruments
- Convertible Loan Note ZAO Argentum NR 4.34
- Convertible Loan Note Bilboes Gold Limited NR 0.64
- Convertible Loan Note Polar Silver Resources Limited NR 0.71
Cash and cash equivalents HSBC Bank plc AA- 0.83
Total 6.52
===============
As at 31 December 2011, the Company's financial assets were held
with the following weight:
Financial Assets Counterparty Credit 2011
Rating % of net assets
Fixed income instruments
- Convertible Loan Note ZAO Argentum NR 3.78
- Convertible Loan Note Polar Silver Resources Limited NR 0.33
Cash and cash equivalents HSBC Bank plc AA- 1.88
Total 5.99
===============
6. TAXATION
The Company is a Guernsey Exempt Company and is therefore not
subject to taxation on its income under the Income Tax (Exempt
Bodies) (Guernsey) Ordinance, 1989. An annual exempt fee of GBP600
has been paid. The acquisition of First Coal by Xstrata Coal during
the financial year ended 31 December 2011 gave rise to Canadian
withholding tax of 25% of the gross proceeds of sale. The Company's
obligation was reduced following the filing of a Canadian tax
return. The Company received a refund of Canadian withholding tax
of CAD2,197,294.20 in September 2012.
7. ADMINISTRATION FEES
The Administrator, HSBC Securities Services (Guernsey) Limited,
is paid fees for acting as administrator of the Company at the rate
of 7 basis points of gross asset value up to US$250 million; the
rate reduces to 5 basis points of gross asset value above US$250
million. The Administrator is also reimbursed by the Company for
reasonable out-of-pocket expenses. These fees accrue and are
calculated as at the last business day of each month and paid
monthly in arrears.
The Administrator is also entitled to a fee for its provision of
corporate secretarial services provided to the Company on a time
spent basis and subject to a minimum annual fee of GBP40,000. The
Company is also responsible for any sub-administration fees as
agreed in writing from time to time, and reasonable out-of-pocket
expenses. The Administrator is also entitled to fees of EUR5,000
for preparation of the financial statements of the Company.
The administration fees paid for the year ended 31 December 2012
were GBP99,211 (2011: GBP87,671) of which GBP7,889 (2011:
GBP27,443) was payable at 31 December 2012. HSBC Securities
Services (Ireland) Limited, the sub-administrator, is paid a
portion of these fees by the Administrator.
8. 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% of the total market capitalisation of the Company
per month. The management fee is calculated and accrued as at the
last business day of each month and is paid monthly in arrears.
The Manager may in certain circumstances also be entitled to be
paid a performance fee if the Net Asset Value at the end of any
Performance Period exceeds the Hurdle as at the end of the
Performance Period. The performance period is each 12 month period
ending on 31 December in each year (the "Performance Period"). For
this purpose the "Hurdle" means an amount equal to the Issue Price
of GBP1 per Ordinary Share multiplied by the number of Shares in
issue as at Admission, as increased at a rate of 8% per annum
compounded to the end of the relevant Performance Period. In
respect of any Performance Period which is less than a full 12
months, the Hurdle is applied pro rata. The performance fee is
subject to adjustments for any issue and/or repurchase of Ordinary
Shares.
The amount of the performance fee is 15 per cent of the total
increase in the Net Asset Value, if the Hurdle has been met, at the
end of the relevant Performance Period, over the highest previously
recorded Net Asset Value as at the end of a Performance Period in
respect of which a performance fee was last accrued, (or the Issue
Price multiplied by the number of shares in issue as at Admission,
if no performance fee has been so accrued) having made adjustments
for numbers of Ordinary Shares issued and/or repurchased as
described above. In addition, the performance fee will only become
payable if there have been sufficient net realised gains. The
Manager has agreed not to seek payment of the performance fee
accrued at 31 December 2011 until the Company has sufficient
cash.
At the year end the Manager was due GBP3,651,275 (2011:
GBP3,651,275) relating to the performance period up to 31 December
2011. Following the year end, on 21 January 2013 GBP2,500,000 of
the outstanding Performance fee was paid to the Manager following
the receipts from sale of investments. The balance of the
outstanding Performance fee will be settled when cash becomes
available. No further performance fee will be accrued or paid until
the Net Asset Value exceeds GBP86,831,199 (131.3p per share) as
adjusted for further issues and repurchases of shares.
The management fee for the year ending 31 December 2012 was
GBP1,109,630 (2011: GBP1,129,886) out of which GBP79,317 (2011:
GBP84,635) was outstanding at the year end.
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.
9. OTHER EXPENSES
2012 2011
TOTAL TOTAL
GBP GBP
Brokerage fee 41,697 41,758
Marketing costs 32,557 37,531
Consulting fees 34,836 18,925
Legal and professional fees 25,620 92,916
Investor servicing fee 14,401 22,680
Board meeting expenses 12,767 23,221
Compliance fees 12,068 7,500
Listing fees 10,671 12,920
Other regulatory fees 5,073 -
Insurance fees 3,565 13,841
Guernsey regulatory fees 3,100 13,748
Website expenses 1,241 735
Miscellaneous expenses 16,048 55,161
--------
213,644 340,936
======== ============
10. CASH AND CASH EQUIVALENTS
2012 2011
GBP GBP
Deposits at HSBC Bank plc 601,174 1,629,044
======== ==========
11. 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.
Following the exercise of 107,549 Subscription Shares at the end
of March 2012 and 1,923 Subscription Shares at the end of September
2012, the Company has a total of 66,142,533 Ordinary Shares and
13,085,150 Subscription Shares in issue. In addition, the Company
has 10,000 Management Ordinary Shares in issue, which are held by
the Investment Manager.
The final exercise date for Subscription Shares was 2 April
2013. No Subscription Shares were exercised at this time and the
Company is in the process of cancelling all remaining Subscription
Shares.
The Ordinary Shares are currently admitted to the Premium
Listing segment of the Official List. Following the expiry of the
Transitional Provision contained in Listing, Prospectus, Disclosure
and Transparency Rules 7of the Listing Rules, effective 1 June 2012
Subscription Shares of no par value are assigned to the Standard
Segment of the Official List.
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.
Holders of Management Ordinary Shares have the right to receive
notice of and to attend and vote at general meetings of the
Company, except that the holders of Management Ordinary Shares are
not entitled to vote on any resolution relating to certain specific
matters, including a material change to the Company's investment
objective, investment policy or borrowing policy. Each holder of
Management 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 Management Ordinary Shares present in person or
by proxy will have one vote for each Management Ordinary Share held
by him.
Holders of Ordinary Shares and Management Ordinary Shares are
entitled to receive, and participate in, any dividends or other
distributions out of the profits of the Company available for
dividend and resolved to be distributed in respect of any
accounting period or other income or right to participate therein.
The Subscription Shares carry no right to any dividend or other
distribution by the Company.
The details of issued share capital of the Company are as
follows:
2012 2011
Issued and fully paid share capital
Ordinary Shares of no par value* 66,152,533 66,033,061
Subscription Shares of no par value 13,085,150 13,194,622
=========== ===========
The issue of Ordinary Shares during the year ended 31 December
2012 took place as follows:
Subscription
Ordinary Shares Shares
Balance at 1 January 2012 66,043,061 13,194,622
Conversion of Subscription Shares 109,472 (109,472)
Balance at 31 December 2012 66,152,533 13,085,150
================ =============
The issue of Ordinary Shares during the year ended 31 December
2011 took place as follows:
Subscription
Ordinary Shares Shares
Balance at 1 January 2011 66,040,632 13,197,051
Conversion of Subscription Shares 2,429 (2,429)
Balance at 31 December 2011 66,043,061 13,194,622
================ =============
* On 9 March 2010, 1 Management Ordinary Share was issued and on
26 March 2010, 9,999 Management Ordinary Shares were issued.
Capital Management
The Company regards capital as comprising its issued Ordinary
Shares and Subscription Shares. The Company does not have any debt
that might be regarded as capital. The Company's objectives in
managing capital are:
-- To safeguard its ability to continue as a going concern and
provide returns to shareholders in the form of capital growth over
the long-term through a focused, global portfolio consisting
principally of the equities or related instruments of natural
resources companies;
-- To allocate capital to those assets that the Directors
consider are most likely to provide the above returns; and
-- To manage, so far as is reasonably possible, the discount
between the Company's share price and its NAV per Ordinary
Share.
As described in the Directors' Report on page 11, the Company
does not currently intend to pay dividends or other distributions.
Subscription Shareholders had the right to subscribe for Ordinary
Shares.
The Directors monitor the extent to which capital has been
deployed and the manner in which capital has been invested using,
inter alia, sectoral and geographic analyses. The Directors also
consider whether the Company should undertake further share issues
or arrange buy-backs or other capital management programmes
consistent with the above objectives although no such action has
been taken so far.
The Company has authority to make market purchases of up to
14.99% of its own Ordinary Shares in issue. A renewal of such
authority is sought from Shareholders at each Annual General
Meeting of the Company or at a General Meeting of the Company, if
required. Any purchases of Ordinary Shares will be made within
internal guidelines established from time to time by the Board and
within applicable regulations.
The Company is not subject to any externally imposed capital
requirements.
12. RELATED PARTY TRANSACTIONS
The Directors' interests in the share capital of the Company at
both 31 December 2012 and 31 December 2011 were:
Number of Number of
Ordinary Shares Subscription Shares
Edward Flood 65,000 13,000
Christopher Sherwell 25,000 5,000
Clive Newall 25,000 5,000
Mr Sherwell also has an indirect interest in the shares of the
Company through an investment in another fund managed by the
Manager.
The Manager, Baker Steel Capital Managers (Cayman) Limited, had
an interest in 504,832 Ordinary Shares and 100,876 Subscription
Shares at 31 December 2012.
The Investment Manager, Baker Steel Capital Managers LLP, had an
interest in 10,000 Management Ordinary Shares at 31 December
2012.
13. SUBSEQUENT EVENTS
On 4 January 2013, the Company announced an unaudited NAV for 31
December 2012 of 109.1 pence per share.
In January 2013, the Company's investment in Copperbelt Minerals
was realised for GBP 3,282,589 resulting in a gain of GBP1,680,075
compared to the year end valuation. Although the sale of
Copperbelt's project to Gecamines had been agreed during 2012, at
31 December 2012 the Company considered that it was not
sufficiently certain to be completed given previous uncompleted
transactions on the project. Accordingly, the potential uplift in
the carrying value was not reflected at the year end.
The final exercise date for Subscription Shares was 2 April
2013. No Subscription Shares were exercised at this time and the
Company is in the process of cancelling all remaining Subscription
Shares.
14. APPROVAL OF ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS
The Annual Report and Audited Financial Statements for the year
end 31 December 2012 were approved by the Board of Directors on 19
April 2013.
GLOSSARY OF TERMS
4PE - Platinum, Palladium, Gold and Rhodium
DRC - Democratic Republic of Congo
GFSC - Guernsey Financial Services Commission
IPO - Initial Public Offering (stock market launch).
JORC - AUSTRALASIAN JOINT ORE RESERVES COMMITTEE
The Code for Reporting of Mineral Resources and Ore Reserves
(the JORC Code) of the Australasian Joint Ore Reserves Committee
(JORC) is widely accepted as a standard for professional reporting
of mineral resources and ore reserves. Mineral resources are
classified as 'inferred', 'indicated' or 'measured', while ore
reserves are either 'probable' or 'proven'.
NI 43-101 - CANADIAN NATIONAL INSTRUMENT 43-101
Canadian National Instrument 43-101 is a mineral resource
classification instrument which dictates reporting and public
disclosure of information in Canada relating to mineral
properties.
PGM - Platinum Group Metals - Platinum, Palladium, Rhodium,
Iridium, Ruthenium and Osmium
POI Law - Protection of Investors (Bailiwick of Guernsey) Law,
1987, as amended
ROM - Run of Mine - Uncrushed ore in its natural state
TSX - Toronto Stock Exchange
This information is provided by RNS
The company news service from the London Stock Exchange
END
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