TIDMBSRT
RNS Number : 6723Z
Baker Steel Resources Trust Ltd
15 September 2022
BAKER STEEL RESOURCES TRUST LIMITED
(Incorporated in Guernsey with registered number 51576 under the
provisions of The Companies (Guernsey) Law, 2008 as amended)
15 September 2022
BAKER STEEL RESOURCES TRUST LTD
(the "Company")
Half-Yearly Report and Unaudited Condensed Interim Financial
Statements
For the period from 1 January 2022 to 30 June 2022
The Company herby submits its Half Year Report for the period
ended 30 June 2022 as required by the Uk Listing Authority's
Disclosure Guidance and Transparency Rules 4.2.
The Report is available via www.bakersteelresourcestrust.com and
will shortly be submitted to the National Storage Mechanism and be
available for inspection at FCA National Storage Mechanism
Further details of the Company and its investments are available
on the Company's website www.bakersteelresourcestrust.com
Enquiries:
Baker Steel Resources Trust Limited +44 20 7389 8237
Francis Johnstone
Trevor Steel
Numis Securities Limited +44 20 7260 1000
David Benda (corporate)
James Glass (sales)
HSBC Securities Services (Guernsey) Limited + 44 (0)1481 717 852
Company Secretary
MANAGEMENT AND ADMINISTRATION
DIRECTORS: Howard Myles (Chairman)
Charles Hansard
Fiona Perrott-Humphrey
David Staples
(all of whom are non-executive and independent)
REGISTERED OFFICE: Arnold House
St. Julian's Avenue
St. Peter Port
Guernsey, GY1 3NF
Channel Islands
MANAGER: Baker Steel Capital Managers (Cayman) Limited
PO Box 309
George Town
Grand Cayman KY1-1104
Cayman Islands
INVESTMENT MANAGER: Baker Steel Capital Managers LLP*
34 Dover Street
London W1S 4NG
United Kingdom
STOCK BROKERS: Numis Securities Limited
10 Paternoster Square
London EC4M 7LT
United Kingdom
SOLICITORS TO THE COMPANY: Norton Rose Fulbright LLP
(as to English law) 3 More London Riverside
London SE1 2AQ
United Kingdom
ADVOCATES TO THE COMPANY: Mourant Ozanne
(as to Guernsey law) Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey GY1 4HP
Channel Islands
ADMINISTRATOR & COMPANY SECRETARY: HSBC Securities Services (Guernsey) Limited
Arnold House
St. Julian's Avenue
St. Peter Port
Guernsey GY1 3NF
Channel Islands
* The Investment Manager was authorised as an Alternative
Investment Fund Manager ("AIFM") for the purpose of
the Alternative Investment Fund Managers Directive ("AIFMD") on 22 July 2014.
HSBC
Securities
Services
SUB-ADMINISTRATOR TO THE COMPANY: (Ireland) DAC
1 Grand Canal
Square
Grand Canal
Harbour
Dublin 2
Ireland
HSBC
Continental
CUSTODIAN TO THE COMPANY: Europe
1 Grand Canal
Square
Grand Canal
Harbour
Dublin 2
Ireland
SAFEKEEPING
AND HSBC
MONITORING Continental
AGENT: Europe
1 Grand Canal
Square
Grand Canal
Harbour
Dublin 2
Ireland
AUDITOR: BDO Limited
P O Box 180
Place du Pre
Rue du Pre
St. Peter
Port
Guernsey GY1
3LL
Channel
Islands
Computershare
Investor
Services
(Jersey)
REGISTRAR: Limited
Queensway
House
Hilgrove
Street
St Helier
JE11ES
Jersey
Computershare
Investor
Services
(Jersey)
UK PAYING AGENT AND TRANSFER AGENT: Limited
Queensway
House
Hilgrove
Street
St Helier
JE11ES
Jersey
Computershare
Investor
Services
(Jersey)
RECEIVING AGENT: Limited
Queensway
House
Hilgrove
Street
St Helier
JE11ES
Jersey
PRINCIPAL BANKER: HSBC Bank plc
8 Canada
Square
London E14
5HQ
United
Kingdom
CHAIRMAN'S STATEMENT
For the period from 1 January 2022 to 30 June 2022
During the first six months of 2022, the Company's unaudited net
asset value per share fell 18.3% to 80.4 pence per share, and the
share price fell 12.67% to 65.5 pence per share. The first half of
the year was a difficult one for precious metals mining shares
which were weaker in line with a decline in the prices of gold and
silver as well as a very bearish sentiment in general markets. The
FT Gold Mines Index was off 11.6%, while the FTSE 250 declined by
20.50%. Other mining sectors were mixed as represented by the EMIX
Global Mining Index which was up 1.2% in Sterling terms.
Commodity prices were particularly volatile during the period,
as Covid continued to affect demand from the key market of China
where the draconian policy of zero-tolerance significantly
disrupted industry. Additionally, the Russian invasion of Ukraine
sent oil and energy prices spiralling. Such a background has left
market participants trying to evaluate how long the current high
level of inflation will continue into the future or whether these
economic shocks and rising interest rates will trigger a global
recession and potentially deflation. However, in the short term at
least, one result has been increased wage demands from workers
seeking to keep up with the cost of living.
The markets for metals associated with electric vehicles, such
as Copper, Cobalt, Nickel, Aluminum and Tin, were extremely
volatile reaching all-time highs in some cases by March and then
falling back to more normal levels by the summer. For example, tin,
one of the key metals in the move towards electrification, reached
a price of US$58,000 /tonne in March and had fallen to
US$26,774/tonne three months later. Moves in some metal prices such
as copper have been exacerbated by reversals in financial flows
into the various paper instruments available to track the physical
metals.
Historically inflation has been positive for precious metals and
commodities, at least in nominal terms since they are real assets,
but in the short-term markets have been more concerned about the
implications for demand. Mining equities have clearly been affected
by this background, with lower commodity prices hitting revenues
whilst the increased cost of energy and numerous other inputs is
severely impacting margins. Development companies such as the those
in which your Company principally invests have been particularly
impacted by this as they also have to contend with higher capital
costs of construction and a less conducive environment for raising
capital in which investors have decidedly moved into "risk off"
mode.
The increase in energy prices was the main reason given by
Tungsten West PLC when its board decided to delay the redevelopment
of its Hemerdon mine in Devon. It has since announced a revised
plan reconfiguring its operations so that it is much less energy
intensive. It also continues to examine options for adding either
solar or wind power which could further lower energy costs. The
market reacted extremely badly to the initial news on the pause in
development, falling by some 66% to almost 20 pence per share from
its Initial Public Offering ("IPO") price of 60 pence per share,
before recovering to the current price of around 30 pence per share
on the announcement of the revised plan. Although this has
certainly been disappointing, it should be noted that your
Company's acquisition price is approximately 20 pence per share.
The lock-up on the Company's shares in Tungsten West falls away in
October 2022 and although we have no immediate plans to sell as we
continue to believe the mine can be successful, it means the
discount which we currently apply to the market price will also
fall away.
In April 2022 First Tin PLC completed a successful IPO, raising
GBP20 million at a price of 30 pence per share. Importantly, First
Tin has raised the necessary funds it requires to undertake
feasibility studies on both its Tellerhäuser tin project in Germany
and the Taronga tin project in Australia (which it acquired at the
same time as the IPO). The two feasibility studies are targeted to
be completed mid-2023, shortly after the one-year lock-up on the
Company's shares will end and the ideal time to evaluate the
investment in First Tin. Post the IPO, First Tin's share price has
been hit by the sharp fall in the tin price, closing at 15.5p at 30
June 2022, However, the IPO financing significantly de-risks the
Company's investment which it acquired at approximately 8 pence per
share on conversion of its convertible loan in 2021.
After the disappointment of having to withdraw from the cash
sale of Bilboes Gold Ltd during 2021 owing to unacceptable warranty
requirements , we are pleased to have recently come to an agreement
with AIM listed gold producer Caledonia Mining for the sale of
Bilboes for a mixture of equity and a royalty stream . Bilboes has
been in discussions with Caledonia on and off for over five years.
The potential synergies of a combination of the two companies ha ve
always been recognised but it has been a matter of negotiating a
transaction acceptable to both parties. Being part of a larger cash
generative group will make the financing of the Bilboes' gold
project more achievable , and Caledonia's technical team has
demonstrated its ability to operate successfully in Zimbabwe having
recently increased the production capacity at its Blanket mine from
50,000 ounces to 80,000 ounces of gold per annum. The acquisition
of Bilboes will be transformative for Caledonia with a clear path
to becom ing a 250,000 ounce per annum gold producer and with the
potential for a significant re-rating of its shares. The
transaction is subject to a number of conditions precedent , in
particular Zimbabwean Government approvals , which are expected to
be satisfied before the end of this year .
In a wholly unexpected move, the State government in Queensland,
Australia announced significant increases in the royalties payable
on metallurgical coal by miners in the State at progressively
higher price levels. When taken with the UK government's recent
'superprofit' taxes levied on North Sea oil production it is a
reminder that 'resources nationalism' is a growing risk around the
world, particularly in times of higher commodity prices such as we
have seen recently. The Company's largest investment, Futura
Resources, holds two shovel-ready metallurgical coal projects in
Queensland which are seeking to complete financing to enable them
to enter production. The significantly higher metallurgical coal
pricing environment has been supportive of this process although
the Queensland government's increasing taxes has been an untimely
and unwelcome development, adversely impacting investor sentiment,
at least in the short term. Despite the tax increase, the economic
models for Futura's mines are not materially impacted as they are
based on long-term prices, and the higher royalty rates apply only
in a higher price environment than that assumed in the models.
Outlook
The outlook for the remainder of this year is expected to remain
uncertain owing to the macro-economic situation discussed above
keeping commodity prices volatile, but the Company's investments
are generally well positioned to weather a storm in the short-term.
Closing of the financing required to see Futura into production
will be an important value driver for the Company, although the
uncertainty around the timing of this has increased somewhat. Two
other holdings, Nussir and Kanga, had planned listings during the
year but the timing of those could be reviewed owing to current
market conditions.
The negotiation of a royalty as part of the Bilboes transaction
was an important factor in the deal as it is a further step in the
Company's strategy to achieve a regular cashflow from royalties,
adding to those of Futura and Polar Acquisition Limited. This in
turn should be the basis for regular and sustainable dividends to
shareholders in the future.
Assuming the Bilboes transaction closes, a significant portion
of the Company's portfolio will be listed and concentrated in a few
major holdings. Depending on market conditions we will look to
diversify the portfolio into new investments in 2023 as well as
considering the potential for another tender offer in accordance
with our returns policy.
Howard Myles
Chairman
15 September 2022
INVESTMENT MANAGER'S REPORT
For the period from 1 January 2022 to 30 June 2022
Financial Performance
The unaudited Net Asset Value per Ordinary Share ("NAV") as at
30 June 2022 was 80.4 pence, a decrease of 18.3% in the period
compared with the increase in the EMIX Global Mining Index of 1.2%
in Sterling terms.
For the purpose of calculating the NAV per share, unquoted
investments were carried at fair value as at 30 June 2022 as
determined by the Directors and quoted investments were carried at
their quoted prices as at that date.
Net assets at 30 June 2022 comprised the following:
GBPm % of net assets
Unquoted Investments 69.0 80.6
Quoted Investments 16.6 19.4
Cash and other net assets 0.0 -
------- ------------------
85.6 100.0
Investment Update
Largest 10 Holdings - 30 June 2022 % of NAV
Futura Resources Limited 27.2
Cemos Group Plc 20.5
Bilboes Gold Limited 15.3
Tungsten West Plc 7.5
Kanga Potash 5.5
First Tin Plc 5.5
Polar Acquisition Limited 4.4
Nussir ASA 3.5
Silver X Mining Corporation 3.0
Black Pearl Limited Partnership 1.7
94.1
Other Investments 5.9
Cash and other net assets -
100.0
==========================
Largest 10 Holdings - 31 December 2021 % of NAV
Cemos Group Plc 18.6
Futura Resources Limited 18.1
Tungsten West Plc 14.7
Bilboes Gold Limited 13.0
First Tin Limited 7.7
Polar Acquisition Limited 7.5
Kanga Potash 4.1
Nussir ASA 3.6
Silver X Mining Corporation 2.8
Azarga Metals Corporation 2.4
92.5
Other Investments 6.4
Cash and other net assets 1.1
---------
100.0
=========
During the first half of 2022, the performance of commodities
was volatile with precious metals weaker (gold down 1.2% and silver
down 13%) and base metal prices mixed with copper down 15.3% on
concerns of a global slowdown whilst nickel and iron ore were both
up around 8% on supply issues from Russia and Ukraine. The price of
coking coal from Australia fell 18% albeit from historically high
levels following the 250% increase in 2021.
It was a frustrating period for the Company's largest
investment, Futura Resources. With all planning and environmental
permissions in place other than the final operating licence which
is pending the completion of financing, Futura has been seeking the
finance to start production from both its Wilton and Fairhill mines
in Queensland. At current coking coal prices the approximate A$50
million capital required to bring both mines into production could
be recouped in less than a year but the funding of coal from
traditional providers such as banks or institutional investors has
become increasingly challenging on growing ESG reservations even
though coking coal is different to thermal coal and fundamental to
primary steel production. Futura was close to finalizing a loan via
an offtake arrangement to be able to start both mines when the
Queensland government unexpectedly introduced higher royalties at
high coal prices. Although the effect of these additional royalties
on Futura's economic forecast was minimal as the new royalties only
apply at prices above the long-term consensus pricing used in the
economic model, it was an unwelcome measure to the Queensland coal
industry and proved untimely for Futura in closing its financing
arrangements. Despite the initial shock of the introduction of the
new royalties and the additional uncertainty on timing as a result,
the higher coal pricing environment is supportive of Futura's
projects, the company remains in discussion with a number of
parties to finance the start of its mines and it is hoped a closing
can be achieved in the next few months.
Cemos Group has continued to perform well and expects to produce
a similar amount of cement from its Tarfaya plant in Morocco this
year as it did in 2021 despite periodic difficulties experienced in
sourcing clinker, the main ingredient for the production process.
It is sufficiently confident of its market in Morocco that it has
decided to acquire a second grinding line which can double
production from 2023 and it is investigating the potential for
installing its own clinker production which would secure reliable
supplies and significantly increase margins with a decision
expected early in 2023.
In July 2022, the Company announced the sale of Bilboes Gold to
Caledonia Mining a NYSE, AIM and Victoria Falls Exchange listed
gold producer whose primary asset is the Blanket Mine in Zimbabwe.
Earlier this year Bilboes completed a feasibility study on its
project in Matabeleland, Zimbabwe indicating the potential for an
open pit gold mine with average annual production of approximately
168,000 ounces per annum of gold. However, Caledonia has indicated
that it will re-engineer the feasibility study to a phased
development approach which would entail lower up-front capital and
initial production costs. Not only will financing the development
of the Bilboes mine, comprising the Isabella, McCays, and Bubi open
pittable deposits, be easier in a larger cash generative group but
also Caledonia's technical team has demonstrated its ability to
operate successfully in Zimbabwe having recently increased the
production capacity at its Blanket mine from 50,000 ounces to
80,000 ounces of gold per annum. With the acquisition of Bilboes,
there is now a clear path for Caledonia to move to become a 250,000
ounce per annum gold producer with the potential for a significant
re-rating of its shares. The transaction is subject to number of
conditions precedent including Zimbabwe government approvals which
are expected to be satisfied before year end.
The Company's consideration for its 24.2% shareholding in
Bilboes will be 800,000 shares in Caledonia and a 1% net smelter
royalty (" NSR "), which it was able to negotiate as a condition of
the transaction . Should the full production rate of 168,000 ounces
per annum be achieved the NSR would generate around US$2.6 million
per annum for the Company at current gold prices. This is in line
with the Company's strategy to generate a series of royalties in
the portfolio which can become the basis for regular cashflow to
the Company which in turn can be passed on as dividends to
shareholders .
Following the invasion of Ukraine by Russian forces in February
and the imposition of sanctions on certain Russian individuals and
institutions, the Company reviewed the carrying value of Polar
Acquisition Limited ("PAL") which holds a royalty over the Prognoz
silver project in far eastern Russia, owned by Polymetal
International PLC (Polymetal). Polymetal is a Jersey registered
company which continues to be listed on the London Stock Exchange,
has not been the subject of targeted sanctions and continues to
operate its mines in Russia and Kazakhstan. Polymetal has stated
that the development of Prognoz remains on track for commissioning
in the first quarter of 2024. As result of potential uncertainty in
the ability of Polymetal to pay the royalty when due, the Company
imposed an additional 50% discount to its development risk adjusted
valuation of PAL albeit it is hoped that there can be some
resolution in the two years until a first royalty payment would be
due.
.
Tungsten West PLC has been the investment most severely affected
by the increase in energy prices following the invasion of Ukraine.
In April 2022, Tungsten West announced that it was pausing the
redevelopment of its Hemerdon tungsten project in Devon, to
evaluate alternative lower cost approaches. In July 2022 it
announced it had concluded its re-evaluation and was progressing
with a re-configured development plan the most important aspects of
which are a lower capex requirement and much lower diesel and power
consumption whilst still delivering profitable operating margins.
Tungsten West is now proceeding with detailed engineering design
and has recommenced construction of the Hemerdon Project with the
target of restarting production during H1 2023.
In April 2022 First Tin PLC completed an IPO on the London Stock
Exchange raising GBP20 million. Concurrently with the IPO it
acquired the Taronga open pit tin project in Australia, giving it
three advanced tin projects in stable jurisdictions. The proceeds
of the IPO will be used to complete feasibility studies on Taronga
and its existing Tellerhauser tin mine in Saxony, Germany as well
as further exploration on the Gottesburg tin project close to
Tellerhauser.
Elsewhere in the portfolio, Kanga Potash and Nussir are both
making good progress towards financing their respect potash and
copper projects following positive feasibility studies however it
is likely that the current market uncertainty will need to improve
before they can be finalised.
Silver X Mining Corporation recently reported that its Nuevo
Recuperada silver/lead/zinc mine in Peru had processed 124,000
silver equivalent ounces through its plant in July 2022, an
increase of 58% over the previous month as production ramps up
following a plant upgrade earlier in the year.
During the first half of 2022 the Company did not make any new
core investments as it remained fully invested. A number of new
projects were reviewed and opportunities will continue to be
monitored pending receipt of funds from any disposals.
At 30 June 2022 Price / Index % Change % Change
Level in 6 Months in 3 years
Net Asset Value (pence/share) 80.4 -18.3% +20.3%
-------------- ------------- ------------
Ordinary Share Price (pence/share) 65.5 -12.7% +3.4%
-------------- ------------- ------------
EMIX Global Mining Index (GBP) 981.60 +1.2% +42.9%
-------------- ------------- ------------
SBB Premium Hard Coking Coal Australia
Export (US$/t) 294.00 17.7% +67.2%
-------------- ------------- ------------
Gold (US$/oz) 1,807 -1.2% +28.2%
-------------- ------------- ------------
Silver (US$/oz) 20.28 -13.0% +32.4%
-------------- ------------- ------------
Brazil Potash CFR Granular Spot (US$/t) 1,100 +32.5% +218.8%
-------------- ------------- ------------
Copper (US$/t) 8,254 -15.3% +38.0%
-------------- ------------- ------------
Chinese Import Iron Ore Fines 62% Fe
spot (US$) 130.00 +8.2% +15.1%
-------------- ------------- ------------
European Tungsten APT 88.5% w/h Rotterdam
(US$/MTU) 330.00 +4.1% +35.8%
-------------- ------------- ------------
Tin (US$/t) 26,689 -32.2% +41.7%
-------------- ------------- ------------
Baker Steel Capital Managers LLP
Source: Bloomberg
Investment Manager
September 2022
DIRECTORS' REPORT
For the period from 1 January 2022 to 30 June 2022
The Directors of the Company present the Half-Yearly Report and
Unaudited Condensed Interim Financial Statements for the six months
ended 30 June 2022.
The Directors' Report contains information that covers this
period and the period up to the date of publication of this Report.
Please note that more up to date information is available on the
Company's website www.bakersteelresourcestrust.com .
Status
Baker Steel Resources Trust Limited (the "Company") is a
closed-ended investment company with limited liability incorporated
on 9 March 2010 in Guernsey under the Companies (Guernsey) Law,
2008 with registration number 51576. The Company is a registered
closed-ended investment scheme registered pursuant to the
Protection of Investors (Bailiwick of Guernsey) Law, 2020, ("POI
Law") and the Registered Collective Investment Scheme Rules and
Guidance, 2021 issued by the Guernsey Financial Services Commission
("GFSC"). On 28 April 2010 the Ordinary Shares and Subscription
Shares of the Company were admitted to the Official List of the UK
Listing Authority and to trading on the Main Market of the London
Stock Exchange, Premium Segment.
Investment Objective
The Company's investment objective is to seek capital growth
over the long-term through a focused, global portfolio consisting
principally of the equities, loans or related instruments of
natural resources companies. The Company invests predominantly in
unlisted companies (i.e. those companies that have not yet made an
initial public offering ("IPO")) but also in listed securities
(including special situations opportunities and less liquid
securities) with a view to making attractive investment returns
through the uplift in value resulting from the development
progression of the investee companies' projects and through
exploiting value inherent in market inefficiencies and pricing
anomalies.
Performance
During the period ended 30 June 2022, the Company's unaudited
NAV per Ordinary Share decreased by 18.3% and the share price
decreased by 12.67% on the London Stock Exchange. This compares
with a rise in the EMIX Global Mining Index (capital return in
Sterling terms) of 1.2%. A more detailed explanation of the
performance of the Company is provided within the Investment
Manager's Report on pages 5 to 7.
The results for the period are shown in the Statement of
Comprehensive Income on pages 15 and 16 and the Company's financial
position at the end of the period is shown in the Statement of
Financial Position on page 14.
Dividend and distribution policy
During the year ended 31 December 2015 the Board introduced a
capital returns policy whereby, subject to applicable laws and
regulations, it will allocate part of the cash realised from
disposals for distribution to shareholders. The amount to be
distributed will be calculated and paid following publication of
the Company's audited financial statements for each year and will
be not less than 15% of the aggregate net realised cash gains
(after deducting losses) in that financial year. The Board will
retain discretion for determining the most appropriate manner to
make such distribution which may include share buybacks, tender
offers and dividend payments. In the longer term the Board intends
to announce a more formal dividend policy once it starts to receive
a regular stream of income from its royalty interests.
Directors and their interests
The Directors of the Company who served during the period and up
until the date of signing of the financial statements are:
Howard Myles (Chairman)
Charles Hansard
Fiona Perrott-Humphrey
David Staples
Biographical details of each of the Directors who were on the
Board of the Company at the time of signing the annual report and
financial statements for the year ended 31 December 2021 ("the
Annual Report") are presented on page 18 of that report.
Each of the Directors is considered to be independent in
character and judgement.
Each Director is asked to declare his interests at each Board
Meeting. No Director has any material interest in any other
contract which is significant to the Company's business.
David Staples holds 35,000 shares in the Company. No other
director has a beneficial interest in the Company.
Attendance at the Board and Audit Committee meetings during the
period was as follows:
Audit Committee
Board Meetings Meetings
Held Attended Held Attended
Howard Myles 2 2 2 2
Charles Hansard 2 2 n/a n/a
Fiona Perrott-Humphrey 2 2 2 2
David Staples 2 2 2 2
In addition to the quarterly meetings, ad hoc Board and
committee meetings are convened as required. All Directors
contribute to a significant ad hoc exchange of views between the
Directors and the Investment Manager on specific matters, in
particular in relation to developments in the portfolio.
The Directors are remunerated for their services at such rate as
the Directors determine provided that the aggregate amount of such
fees may not exceed GBP200,000 per annum (or such sum as the
Company in general meeting shall from time to time determine).
For the period ended 30 June 2022 the total remuneration of the
Directors was GBP57,500 (30 June 2021: GBP57,500), with GBP28,750
payable at 30 June 2022 (31 December 2021: GBP28,750).
Authorised share capital
The share capital of the Company on incorporation was
represented by an unlimited number of Ordinary Shares of no par
value. The Company may issue an unlimited number of shares of a
nominal or par value and/or of no par value or a combination of
both.
Shares in issue
The Company was admitted to trading on the London Stock Exchange
on 28 April 2010. The Company had 107,153,335 Ordinary and 9,167
Management Ordinary Shares totalling 107,162,502 Ordinary Shares in
issue as at 30 June 2022, of which 700,000 Ordinary Shares were
held in Treasury.
Going concern
Having reassessed the principal and emerging risks described on
pages 15 and 16 of the 31 December 2021 Annual Report, and the
other matters discussed in connection with the viability statement
as set out on pages 17 of the said report, the Directors consider
it is appropriate to adopt the going concern basis in preparing
these interim Financial Statements. The discontinuation vote in
2021 was not passed and the next vote is in 2024. As at 30 June
2022, approximately 5.85% of the Company's assets were represented
by cash and unrestricted listed and quoted investments which are
readily realisable. The Directors are not aware of any material
uncertainties that may cast significant doubt upon the Company's
ability to continue as a going concern.
Related party transactions
Transactions with related parties are based on terms equivalent
to those that prevail in an arm's length transaction and are
disclosed in Note 9.
Principal and emerging risks
The principal and emerging risks facing the Company, which
include market and financial risk and portfolio management and
performance risk, are considered in detail, on pages 15 and 16 of
the 31 December 2021 Annual Report which is available on the
Company's website www.bakersteelresourcestrust.com. The Directors
do not consider that these risks have materially changed during the
period ended 30 June 2022 and do not expect any changes in the
second half of 2022.
Directors' responsibility statement
The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements have been prepared
in accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union ("EU") and give a true
and fair view of the assets, liabilities and financial position and
profit or loss of the Company; and
- the Interim Management Report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the FCA's Disclosure
and Transparency Rules.
Corporate governance compliance
As described in the Company's Annual Report, the Board has
considered the principles and recommendations set out in UK
Corporate Governance Code that was revised in 2018 and is effective
for periods commencing on or after 1 January 2019 (the "UK Code")
issued by the Financial Reporting Council (the "FRC"). Pages 21 and
22 of the 31 December 2021 Annual Report presents and explains
those matters where the Company has not complied with the UK Code.
There is no change in compliance since the Annual Report.
Signed for and on behalf of the Directors:
David Staples
Audit Committee Chairman
15 September 2022
UNAUDITED PORTFOLIO STATEMENT
AS AT 30 JUNE 2022
Shares Investments Fair value % of Net
/Warrants/ GBP equivalent assets
Nominal
Listed equity shares
Australian Dollars
4,091,910 Akora Resources Limited 417,596 0.49
367,000 Regis Resources Limited 270,500 0.32
2,103,000 Resolute Mining Limited 268,275 0.31
388,000 St Barbara Limited 164,987 0.19
Australian Dollars Total 1,121,358 1.31
--------------- ---------
Canadian Dollars
58,527,286 Azarga Metals Corporation 560,902 0.65
19,502,695 Silver X Mining Corporation 2,554,382 2.98
Canadian Dollars Total 3,115,284 3.63
--------------- ---------
Great Britain Pounds
37,128,014 First Tin Plc 4,714,040 5.51
42,000 Fresnillo Plc 322,056 0.38
112,510,000 Metals Exploration Plc 1,040,718 1.22
17,000 Polymetal International Plc 30,770 0.04
28,846,515 Tungsten West plc 6,049,456 7.07
Great Britain Pounds Total 12,157,040 14.22
--------------- ---------
United States Dollars
89, 000 Coeur Mining Inc 222,656 0.26
United States Dollars Total 222,656 0.26
--------------- ---------
Total investment in listed equity
shares 16,616,338 19.42
--------------- ---------
Debt instruments
Canadian Dollars
PRISM Diversified Limited Loan Note
305,000 1 96,322 0.11
PRISM Diversified Limited Loan Note
250,500 2 306,906 0.36
Canadian Dollars Total 403,228 0.47
--------------- ---------
Euro
Cemos Group Plc Convertible Unsecured
1,045 Loan Security 9,193,506 10.74
Euro Total 9,193,506 10.74
--------------- ---------
Shares Investments Fair value % of Net
/Warrants/ GBP equivalent assets
Nominal
Debt instruments (Continued)
United States Dollars
7,028,352 Black Pearl Limited Partnership 1,440,152 1.68
26,301 Bilboes Gold Limited 22,275 0.03
United States Dollars Total 1,462,427 1.71
--------------- -----------
Total investments in debt instruments 11,059,161 12.92
--------------- -----------
Unlisted equity shares, warrants
and royalties
Australian Dollars
10,100,000 Futura Gross Revenue Royalty 13,658,236 15.96
11,309,005 Futura Resources Limited 9,617,750 11.24
Australian Dollars Total 23,275,986 27.20
--------------- -----------
Canadian Dollars
13,490,414 Azarga Metals Warrants 31/12/2022 2 -
13,083,936 PRISM Diversified Limited 835,941 0.98
40,000 PRISM Diversified Limited Royalty 25,556 0.03
PRISM Diversified Limited Warrants
1,000,000 31/12/2023 4,682 0.00
324,000 Unkur Option 12/31/2023 207,006 0.24
Canadian Dollars Total 1,073,187 1.25
--------------- -----------
Great Britain Pounds
1,594,646 Celadon Mining Limited 15,946 0.02
24,004,167 Cemos Group plc 8,370,684 9.78
Tungsten West plc Second Option Share
1,657,195 Warrants 18/10/2026 212,536 0.25
Tungsten West plc Third Option Share
1,657,195 Warrants 18/10/2026 143,182 0.17
Great Britain Pounds Total 8,742,348 10.22
--------------- -----------
Norwegian Krone
12,785,361 Nussir ASA 3,013,711 3.52
Norwegian Krone Total 3,013,711 3.52
--------------- -----------
Shares Investments Fair value % of Net
/Warrants/ GBP equivalent assets
Nominal
Unlisted equity shares and warrants
and royalties (Continued)
United States Dollars
535,943 Bilboes Gold Limited 13,112,443 15.32
4,244,550 Gobi Coal & Energy Limited 164,172 0.19
56,042 Kanga Potash 4,735,541 5.53
16,352 Polar Acquisition Limited 3,763,727 4.40
United States Dollars Total 21,775,883 25.44
--------------- ---------
Total unlisted equity shares, warrants
and royalties 57,881,115 67.63
--------------- ---------
Financial assets held at fair value
through profit or loss 85,556,614 99.97
--------------- ---------
Other Assets & Liabilities 26,532 0.03
--------------- ---------
Total Equity 85,583,146 100.00
--------------- ---------
UNAUDITED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
Unaudited Audited
30 June 31 December
2022 2021
Notes GBP GBP
Assets
Cash and cash equivalents 129,912 1,077,482
Interest receivable 56,227 249,445
Other receivables 21,565 22,132
Financial assets held at fair value through
profit or loss 3 85,556,614 103,685,593
Total assets 85,764,318 105,034,652
------------ -------------
Equity and Liabilities
Liabilities
Directors' fees payable 9 28,750 28,750
Management fees payable 7,9 95,289 122,894
Administration fees payable 17,857 10,638
Audit fees payable 29,250 58,500
Custodian fees payable 7,459 8,443
Other payables 2,567 6,471
Total liabilities 181,172 235,696
------------ -------------
Equity
Management Ordinary Shares 8 9,167 9,167
Ordinary Shares 8 75,972,688 75,972,688
Revenue Reserves 9,396,201 10,047,160
Capital Reserves 205,090 18,769,941
Total equity 85,583,146 104,798,956
------------ -------------
Total equity and liabilities 85,764,318 105,034,652
============ =============
Net Asset Value per Ordinary Share (in
Pence) - Basic and Diluted 5 80.4 98.4
These unaudited condensed financial statements on pages 14 to 29 were
approved by the Board of Directors on 15 September 2022 and signed
on its behalf by:
David Staples
Director
UNAUDITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2022 TO 30 JUNE 2022
Unaudited Unaudited Unaudited
period ended period ended period ended
30 June 30 June 30 June
2022 2022 2022
Revenue Capital Total
Notes GBP GBP GBP
Income
Interest income 320,808 - 320,808
Dividend income 7,249 - 7,249
Net loss on financial assets at
fair value through profit or loss 3 - (18,569,776) (18,569,776)
Net foreign exchange gain - 4,925 4,925
Net income 328,057 (18,564,851) (18,236,794)
-------------- -------------- --------------
Expenses
Management fees 7,9 649,850 - 649,850
Administration fees 60,897 - 60,897
Directors' fees 9 57,500 - 57,500
Legal fees 55,112 - 55,112
Other expenses 51,932 - 51,932
Custody fees 30,787 - 30,787
Audit fees 29,250 - 29,250
Depositary fees 20,037 - 20,037
Broker fees 17,500 - 17,500
Directors' insurance 6,000 - 6,000
Directors' expenses 151 - 151
Total expenses 979,016 - 979,016
-------------- -------------- --------------
Net loss for the period (650,959) (18,564,851) (19,215,810)
============== ============== ==============
Net loss for the period per Ordinary
Share:
Basic and Diluted (in pence) 5 (0.61) (17.44) (18.05)
In the period ended 30 June 2022 there were no other gains or losses than those recognised
above.
The Directors consider all results to derive from continuing activities.
The format of the Statement of Comprehensive Income follows the recommendations of the AIC
Statement of Recommended Practice.
UNAUDITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2021 TO 30 JUNE 2021
Unaudited Unaudited Unaudited
period ended period ended period ended
30 June 30 June 30 June
2021 2021 2021
Revenue Capital Total
Notes GBP GBP GBP
Income
Interest Income 778,743 - 778,743
Dividend Income 39,189 - 39,189
Loan guarantee income 46,247 - 46,247
Net gain on financial assets at
fair value through profit or loss 3 - 2,994,059 2,994,059
Net foreign exchange loss - (12,098) (12,098)
Net income 864,179 2,981,961 3,846,140
-------------- -------------- --------------
Expenses
Management fees 7,9 816,287 - 816,287
Directors' fees 9 57,500 - 57,500
Administration fees 63,393 - 63,393
Other expenses 53,900 - 53,900
Custody fees 51,725 - 51,725
Audit fees 27,000 - 27,000
Broker fees 17,500 - 17,500
Directors' insurance and expenses 3,750 - 3,750
Legal fees 17,740 - 17,740
Total expenses 1,108,795 - 1,108,795
-------------- -------------- --------------
Net gain / (loss) for the period (244,616) 2,981,961 2,737,345
============== ============== ==============
Net gain / (loss) for the period
per Ordinary Share:
Basic and Diluted (in pence) 5 (0.23) 2.80 2.57
In the period ended 30 June 2021 there were no other gains or losses than those recognised
above.
The Directors consider all results to derive from continuing activities.
The format of the Statement of Comprehensive Income follows the recommendations of the AIC
Statement of Recommended Practice.
UNAUDITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2022 TO 30 JUNE 2022
Management
Ordinary Ordinary Treasury Revenue Capital Total
Shares Shares Shares reserves reserves Equity
GBP GBP GBP GBP GBP GBP
Balance as at 1 January
2022 9,167 76,113,180 (140,492) 10,047,160 18,769,941 104,798,956
Net loss for the
period - - - (650,959) (18,564,851) (19,215,810)
Balance as at 30
June 2022 9,167 76,113,180 (140,492) 9,396,201 205,090 85,583,146
------------- ----------- ----------- ----------- ------------- -------------
Note: 8 8
UNAUDITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2021 TO 30 JUNE 2021
Management
Ordinary Ordinary Treasury Revenue Capital Total
Shares Shares Shares reserves reserves Equity
GBP GBP GBP GBP GBP GBP
Balance as at 1 January
2021 9,167 76,113,180 (140,492) 10,971,969 16,537,575 103,491,399
Net (loss) / gain
for the period - - - (244,616) 2,981,961 2,737,345
Balance as at 30
June 2021 9,167 76,113,180 (140,492) 10,727,353 19,519,536 106,228,744
------------- ----------- ----------- ----------- ----------- ------------
Note: 8 8
UNAUDITED CONDENSED INTERIM STATEMENT OF CASH
FLOWS
FOR THE PERIOD FROM 1 JANUARY 2022 TO 30 JUNE
2022
Unaudited Unaudited
Period Period
ended ended
30 June 30 June
2022 2021
Note GBP GBP
Cash flows from operating activities
Net (loss)/gain for the period (19,215,810) 2,737,345
Adjustments to reconcile net gain for the period
to net cash used in operating activities:
Interest income (320,808) (778,743)
Dividend income (7,249) (39,189)
Net loss/ (gain) on financial assets at fair
value through profit or loss 3 18,569,776 (2,994,059)
Net increase/(decrease) in other receivables 567 (593)
Net decrease in payables (54,524) (4,980)
------------- -------------
(1,028,048) (1,080,219)
Interest received 514,027 837,191
Dividend received 7,249 39,189
------------- -------------
Net cash used in operating activities (506,772) (203,839)
------------- -------------
Cash flows from investing activities
Purchase of financial assets at fair value through
profit or loss (1,209,441) (12,665,636)
Sale of financial assets at fair value through
profit or loss 768,643 12,781,961
Net cash (used in)/provided by investing activities (440,798) 116,325
------------- -------------
Net decrease in cash and cash equivalents (947,570) (87,514)
Cash and cash equivalents at the beginning of
the period 1,077,482 424,140
Cash and cash equivalents at the end of the
period 129,912 336,626
============= =============
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL
STATEMENTS
FOR THE PERIOD FROM 1 JANUARY 2022 TO 30 JUNE 2022
1. GENERAL INFORMATION
Baker Steel Resources Trust Limited (the "Company") is a
closed-ended investment company with limited liability incorporated
and domiciled on 9 March 2010 in Guernsey under the Companies
(Guernsey) Law, 2008 with registration number 51576. The Company is
a registered closed-ended investment scheme registered pursuant to
the Protection of Investors (Bailiwick of Guernsey) Law, 2020 and
the Registered Collective Investment Scheme Rules and Guidance,
2021 issued by the Guernsey Financial Services Commission ("GFSC").
On 28 April 2010 the Ordinary Shares and Subscription Shares of the
Company were admitted to the Official List of the UK Listing
Authority and to trading on the Main Market of the London Stock
Exchange, Premium Segment.
On 16 July 2021 the Company re-joined the Association of
Investment Companies ("AIC").
The final exercise date for the Subscription Shares was 2 April
2013. No Subscription Shares were exercised at this time and all
residual/unexercised Subscription Shares were subsequently
cancelled.
The Company's portfolio is managed by Baker Steel Capital
Managers (Cayman) Limited (the "Manager"). The Manager has
appointed Baker Steel Capital Managers LLP (the "Investment
Manager") as the Investment Manager to carry out certain duties.
The Company's investment objective is to seek capital growth over
the long-term through a focused, global portfolio consisting
principally of the equities, or related instruments, of natural
resources companies. The Company invests predominantly in unlisted
companies (i.e. those companies which have not yet made an Initial
Public Offering ("IPO")) and also in listed securities (including
special situations opportunities and less liquid securities) with a
view to exploiting value inherent in market inefficiencies and
pricing anomalies.
Baker Steel Capital Managers LLP was authorised to act as an
Alternative Investment Fund Manager ("AIFM") of Alternative
Investment Funds ("AIFs") on 22 July 2014. On 14 November 2014, the
Investment Manager signed an amended Investment Management
Agreement with the Company, to take into account AIFM regulations.
AIFMD focuses on regulating the AIFM rather than the AIFs
themselves, so the impact on the Company is limited.
The Half-Yearly financial report has not been audited or
reviewed by the auditors pursuant to the Auditing Practices
Board
Guidance on review of Interim Financial Information. However,
the Board did procure the independent external auditor to undertake
certain agreed upon procedures to assist the Audit Committee and
Board with its review of this report.
2. SIGNIFICANT ACCOUNTING POLICIES
The unaudited condensed interim financial statements in the half
year report for the six months ended 30 June 2022 have been
prepared in accordance with International Accounting Standard (IAS)
34, 'Interim Financial Reporting' as adopted by the European Union.
This half year report and condensed financial statements should be
read in conjunction with the Company's annual report and financial
statements for the year ended 31 December 2021, which have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union and are available
at the Company's website (www.bakersteelresourcestrust.com).
The accounting policies adopted and methods of computation
followed in the condensed interim financial statements are
consistent with those applied in the preparation of the Company's
annual financial statements for the year ended 31 December 2021 and
are expected to be applied to the Company's annual financial
statements for the year ending 31 December 2022.
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Period Year
ended 30 ended
June 31 December
Investment Summary: 2022 2021
GBP GBP
Opening book cost 82,910,887 81,003,041
Purchases at cost 1,209,440 2,536,249
Proceeds on sale of investments (768,643) (3,712,697)
Net realised (losses)/gains (2,507,991) 3,084,294
------------ -------------
Closing cost 80,843,963 82,910,887
Net unrealised gains 4,712,921 20,774,706
------------ -------------
Financial assets held at fair value through profit
or loss 85,556,614 103,685,593
============ =============
The following table analyses net gains on financial assets at
fair value through profit or loss for the period/year ended 30 June
2022, 31 December 2021 and 30 June 2021.
Period Period
ended 30 Year ended ended 30
June 31 December June
2022 2021 2021
GBP GBP GBP
Financial assets at fair value through
profit or loss
Realised (losses)/gains on:
- Listed equity shares (1,117,529) (792,604) (273,452)
- Debt instruments (1,390,462) 3,893,470 3,933,880
- Warrants - (16,572) -
(2,507,991) 3,084,294 3,660,428
Movement in unrealised (losses)/gains
on:
- Listed equity shares (14,370,970) 4,589,432 (399,854)
- Unlisted equity shares 947,253 1,571,711 3,438,849
- Royalties 968,471 1,943,286 (445,518)
- Debt instruments (2,809,854) (10,157,233) (3,355,920)
- Warrants (796,685) 1,222,604 96,074
------------- ------------- ------------
(16,061,785) (830,200) (666,369)
------------- ------------- ------------
Net gain on financial assets at fair
value through profit or loss (18,569,776) 2,254,094 2,994,059
------------- ------------- ------------
The following table analyses investments by type and by level
within the fair valuation hierarchy at 30 June 2022.
Quoted prices
in active Quoted market Unobservable
markets based observables inputs
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets at
fair value through profit
or loss
Listed equity shares 5,852,841 10,763,497 - 16,616,338
Unlisted equity shares - - 39,866,188 39,866,188
Royalties - - 17,447,519 17,447,519
Warrants - - 567,408 567,408
Debt instruments - - 11,059,161 11,059,161
------------- ------------------ ------------ -----------
5,852,841 10,763,497 68,940,276 85,556,614
============= ================== ============ ===========
The following table analyses investments by type and by level
within the fair valuation hierarchy at 31 December 2021.
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 4,879,486 14,064,224 - 18,943,710
Unlisted equity shares - - 46,971,239 46,971,239
Royalties - - 16,479,049 16,479,049
Warrants - - 1,364,093 1,364,093
Debt instruments - - 19,927,502 19,927,502
------------- ------------------ ------------ -----------
4,879,486 14,064,224 84,741,883 103,685,593
============= ================== ============ ===========
The table below shows a reconciliation of beginning to ending
fair value balances for Level 3 investments and the amount of total
gains or losses for the period included in net gain on financial
assets and liabilities at fair value through profit or loss held at
30 June 2022.
Unlisted
30 June 2022 Equities Royalties Debt instruments Warrants Total
GBP GBP GBP GBP GBP
Opening balance 1 January
2022 46,971,239 16,479,048 19,927,503 1,364,093 84,741,883
Purchases of investments - - 19,305 - 19,305
Sales of investments - - - - -
Transfer from level
3 (8,052,304) - (4,687,331) - (12,739,635)
Change in net unrealised
gains/(losses) 947,253 968,471 (2,809,854) (796,685) (1,690,815)
Realised loss - - (1,390,462) - (1,390,462)
------------ ----------- ----------------- ----------- -------------
Closing balance 30 June
2022 39,866,188 17,447,519 11,059,161 567,408 68,940,276
------------ ----------- ----------------- ----------- -------------
Unrealised gains on
investments still held
at 30 June 2022 3,603,818 5,657,542 1,541,103 554,283 11,357,746
============ =========== ================= =========== =============
The table below shows a reconciliation of beginning to ending
fair value balances for Level 3 investments and the amount of total
gains or losses for the year included in net loss on financial
assets and liabilities at fair value through profit or loss held at
31 December 2021.
Unlisted Debt
31 December 2021 Equities Royalties instruments Warrants Total
GBP GBP GBP GBP GBP
Opening balance 1 January
2021 36,987,733 14,512,762 43,780,112 141,489 95,422,096
Purchases of investments 300,143 23,000 541,140 - 864,283
Sales of investments - - (399,576) 16,572 (383,004)
Conversion* 11,987,827 - (12,730,410) - (742,583)
Transfer out of Level 3 (3,876,175) - (5,000,000) - (8,876,175)
Change in net unrealised
gains/losses 1,571,711 1,943,286 (10,157,233) 1,222,604 (5,419,632)
Realised gains - - 3,893,470 (16,572) 3,876,898
------------ ----------- ------------- ---------- ------------
Closing balance 31 December
2021 46,971,239 16,479,048 19,927,503 1,364,093 84,741,883
------------ ----------- ------------- ---------- ------------
Unrealised gains on investments
still held at 31 December
2021 7,686,978 4,689,071 2,948,246 1,350,968 16,675,263
============ =========== ============= ========== ============
*Conversion of Futura and Anglo Saxony debt into Level 3 equity
positions and Mines & Metal Trading into Silver X, a Level 1
investment.
It is the Company's policy to recognise a change in hierarchy
level when there is a change in the status of the investment, for
example when a listed company delists or vice versa, or when shares
previously subject to a restriction have that restriction released.
The transfers between levels are recorded either on the value of
the investment immediately after the event or the carrying value of
the investment at the beginning of the financial year.
In determining an investment's position within the fair value
hierarchy, the Directors take into consideration the following
factors :
Investments whose values are based on quoted market prices in
active markets are classified within Level 1. These include listed
equities with observable market prices. The Directors do not adjust
the quoted price for such instruments, even in situations where the
Company holds a large position and a sale could reasonably impact
the quoted price. The Company holds a 35.8% interest in Azarga
Metals which could impact the quoted price if it decided to sell
the investment.
Investments that trade in markets that are not considered to be
active but are valued based on quoted market prices, dealer
quotations or alternative pricing sources supported by observable
inputs, are classified within Level 2. These include certain
less-liquid listed equities. Level 2 investments are valued with
reference to the listed price of the shares should they be freely
tradable after applying a discount for illiquidity if relevant. As
Level 2 investments include positions that are not traded in active
markets and/or are subject to transfer restrictions, valuations may
be adjusted to reflect illiquidity and/or non-transferability,
which are generally based on available market information. The
Company held two Level 2 investments at 30 June 2022 (31 December
2021: one).
Investments classified within Level 3 have significant
unobservable inputs. They include unlisted debt instruments,
royalty rights, unlisted equity shares and warrants. Level 3
investments are valued using valuation techniques explained below.
The inputs used by the Directors in estimating the value of Level 3
investments include the original transaction price, recent
transactions in the same or similar instruments if representative
in volume and nature, completed or pending third-party transactions
in the underlying investment of comparable issuers, subsequent
rounds of financing, recapitalisations and other transactions
across the capital structure, offerings in the equity or debt
capital markets, and changes in financial ratios or cash flows.
Level 3 investments may also be adjusted with a discount to reflect
illiquidity and/or non-transferability in the absence of market
information.
Valuation methodology of Level 3 investments
The primary valuation technique is of "Latest Recent
Transaction" being either recent external fund raises or
transactions. In all cases the valuation considers whether there
has been any change since the transaction that would indicate the
price is no longer fair value. Where an unquoted investment has
been acquired or where there has been a material arm's length
transaction during the past six months it will be carried at
transaction value, having taken into account any change in market
conditions and the performance of the investee company between the
transaction date and the valuation date. Where there has been no
Latest Recent Transaction the primary valuation driver is IndexVal.
For each core unlisted investment, the Company maintains a weighted
average basket of listed companies which are comparable to the
investment in terms of commodity, stage of development and location
("IndexVal"). IndexVal is used as an indication of how an
investment's share price might have moved had it been listed.
Movements in commodity prices are deemed to have been taken into
account by the movement of IndexVal.
A secondary tool used by Management to evaluate potential
investments as well as to provide underlying valuation references
for the Fair Value already established is Development Risk Adjusted
Value ("DRAV"). DRAVs are not a primary determinant of Fair Value.
The Investment Manager prepares discounted cash flow models for the
Company's core investments annually taking into account significant
new information, and for decision making purposes when required.
From these, DRAVs are derived. The computations are based on
consensus forecasts for long term commodity prices and investee
company management estimates of operating and capital costs. Some
market analysts incorporate development risk into the discount rate
in arriving at a net present value ("NPV"). Instead, the Investment
Manager establishes an NPV discounted purely for cost of capital
and country risk and then applies a further overall discount to the
project economics dependent on where such project sits on the
development curve per the DRAV calculations.
The valuation technique for Level 3 investments can be divided
into six groups:
i. Transactions & Offers
Where there have been transactions within the past 6 months
either through a capital raising by the investee company or known
secondary market transactions, representative in volume and nature
and conducted on an arm's length basis, this is taken as the
primary driver for valuing Level 3 investments, having taken into
account of any change in market conditions and the performance of
the investee company between the transaction date and the valuation
date. This includes offers, binding or otherwise from third parties
around the year end which may not have completed prior to the
period end but have a high chance of success and are considered to
represent the situation at period end.
ii. IndexVal
Where there have been no known transactions for 6 months, at the
Company's half year and year end, movements in IndexVal will
generally be taken into account in assessing Fair Value where there
has been at least a 10% movement in IndexVal over at least a
six-month period. The IndexVal results are used as an indication of
trend and are viewed in the context of investee company progress
and any requirement for finance in the short term for further
progression.
iii. Royalty Valuation Model
The rights to receive royalties are valued on projected cash
flows taking into account expected time to production and
development risk and adjusted for movement in commodity prices.
iv. EBITDA Multiple
In the case of Cemos Group plc, which moved to full production
during 2020 and so could reflect maintainable earnings, it is a
cement plant with no defined life like a mining project and
therefore has been valued on the basis of a multiple of historical
and forecast earnings before interest, tax, depreciation and
amortisation when compared to listed comparable cement
producers.
v. Warrants
Warrants are valued using a simplified Black Scholes model
taking into account time to expiry, exercise price and volatility.
Where there is no established market for the underlying shares the
average volatility of the companies in that investment's basket of
IndexVal comparables is utilised in the Black Scholes model.
vi. Convertible loans
Convertible loans are valued taking into account credit risk and
the value of the conversion aspect.
Quantitative information on significant unobservable inputs -
Level 3
Range of
unobservable
30 June input
2022 Unobservable (weighted
Description GBP Valuation technique input average)
Unlisted Equity 15,189,232 Transactions Private transactions n/a
Unlisted Equity 16,126,154 IndexVal Change in index n/a
Unlisted Equity 8,370,684 EBITDA Multiple EBITDA Multiple n/a
Exploration
results, study
Unlisted Equity 180,118 Other results, financing n/a
Commodity price
Royalty Valuation and discount
Unlisted Equity 17,447,519 Model risk n/a
Debt Instruments
Black Pearl Limited Valued at mean Estimated recovery
Partnership 1,440,151 estimated recovery range +/-50%
Valued at fair
Other Convertible value with reference Rate of Credit
Debentures/Loans 9,596,733 to credit risk Risk 0%-60%
Simplified Black
Warrants 360,402 & Scholes Model Volatilities 50%
Valued at fair Political risk
Unkur Option 207,006 value discount 40%-80%
Range of
unobservable
31 December input
2021 Unobservable (weighted
Description GBP Valuation technique input average)
Unlisted Equity 20,914,006 Transactions Private transactions n/a
Unlisted Equity 16,587,037 IndexVal Change in index n/a
Unlisted Equity 9,306,914 EBITDA Multiple EBITDA Multiple n/a
Royalties 16,479,048 Royalty Valuation Commodity price n/a
model and discount
rate risk
Unlisted Equity 163,284 Other Exploration n/a
results, study
results, financing
Debt Instruments
Black Pearl Limited Valued at mean Estimated recovery
Partnership 1,292,467 estimated recovery range +/-50%
Other Convertible 2,157,657 IndexVal Change in Index n/a
Debentures/Loans
Valued at fair
Other Convertible value with reference Rate of Credit
Debentures/Loans 16,477,378 to credit risk Risk 20%-40%
Simplified Black
Warrants 1,364,093 Scholes Model Volatilities 50%
Information on third party transactions in unlisted equities is
derived from the Investment Manager's market contacts. The change
in IndexVal for each particular unlisted equity is derived from the
weighted average movements of the individual baskets for that
equity so it is not possible to quantify the range of such
inputs.
Sensitivity analysis to significant changes in unobservable
inputs within Level 3 investments
The significant unobservable inputs used in the fair value
measurement categorised within Level 3 of the fair value hierarchy
together with a quantitative sensitivity analysis as at 30 June
2022 are as shown below:
Description Input Sensitivity Effect on Fair
used* Value (GBP)
Transactions & Expected
Unlisted Equity Transactions +/-10% +/- 1,518,923
Unlisted Equity Change in IndexVal +135%/-80% +21,770,308/-12,900,923
Unlisted Equity EBITDA Multiple +/-20% +/-1,674,137
Royalties Commodity Price +/-20% +/- 3,484,392
Royalties Discount Rate +/-20% -1,326,703/+1,547,820
Debt Instruments
Black Pearl
Limited Partnership Probability weighting +/-33% +/-480,050
Others/Loans Risk discount rate +/-20% -2,044,238/+201,614
Others/Loans Volatility +/-40% +57,342/-517
Transactions and expected
Unkor Option transactions +/-20% -/+ 162,000
Warrants Volatility of index basket +/-40% -15,938/+18,353
* The sensitivity analysis refers to a percentage amount added
or deducted from the input and the effect this has on the fair
value. The +135%/-80% sensitivity was used as this was the range of
movements of the constituents in the IndexVal basket for Nussir and
Futura..
The significant unobservable inputs used in the fair value
measurement categorised within Level 3 of the fair value hierarchy
together with a quantitative sensitivity analysis as at 31 December
2021 are as shown below:
Description Input Sensitivity Effect on Fair
used Value (GBP)
Transactions & Expected
Unlisted Equity Transactions +/- 10% +/- 2,091,401
Unlisted Equity Change in IndexVal +101%/-57%* + 16,752,907/-9,454,611
Unlisted Equity EBITDA Multiple +/- 20% +/-1,861,383
Royalties Commodity Price +/-20% +/- 3,291,141
Royalties Discount Rate +/-20% +/-4,788,365
Debt Instruments
Black Pearl
Limited Partnership Probability weighting +/-33% +/-426,514
Others/Loans Risk discount rate +/-20% -2,417,009/+1,292,006
Convertibles/Loans Volatility +/-40% +704,696/-262,075
Warrants Volatility +/-40% -36,769/+56,488
* The sensitivity analysis refers to a percentage amount added
or deducted from the input and the effect this has on the fair
value. The +101%/-57% sensitivity was used as this was the range of
movements of the constituents in the IndexVal basket for Bilboes
Gold, Kanga Potash and Prism.
4. OTHER FINANCIAL INSTRUMENTS
The Directors consider the carrying amount for financial
instruments such as cash and cash equivalents and short-term
receivables and payables, are a reasonable approximation of fair
values.
Cash and cash equivalents include cash in hand, deposits held
with banks and other short-term investments in an active
market.
Other assets include the contractual amounts for settlement of
the trades and other obligations due to the Company. Investment
management fees payable, Directors' fees payable, audit fees
payable, administration fees payable and other payables represent
the contractual amounts and obligations due by the Company for
settlement for trades and expenses.
5. NET ASSET VALUE PER SHARE AND GAIN PER SHARE
Net asset value per share is based on the net assets of GBP
85,583,146 (31 December 2021: GBP 104,798,956) and 106,462,502 (31
December 2021: 106,462,502) Ordinary Shares, being the number of
shares in issue at 30 June 2022 excluding 700,000 shares which are
held in treasury. The calculation for basic and diluted NAV per
share is as below:
30 June 2022 31 December 2021
Ordinary Shares Ordinary Shares
Net assets at the period end (GBP) 85,583,146 104,798,956
Number of shares 106,462,502 106,462,502
Net asset value per share (in pence)
basic and diluted 80.4 98.4
Weighted average number of shares 106,462,502 106,462,502
The basic and diluted loss per share for the period ended 30
June 2022, of 18.05 pence per share (30 June 2021 gain of 2.57
pence per share), is based on the net loss for the period of the
Company of GBP19,215,810 (30 June 2021: GBP2,737,345) and on
106,462,502 shares (30 June 2021: 106,462,502) being the weighted
average number of Ordinary Shares in issue during the period.
6. TAXATION
The Company is a Guernsey Exempt Company and is therefore not
subject to taxation in Guernsey on its income under the Income Tax
(Exempt Bodies) (Guernsey) Ordinance, 1989. An annual exemption fee
of GBP1,200 (2021: GBP1,200) has been paid. The Company may,
however, be exposed to taxes in certain other territories in which
it invests such as withholding taxes on interest payments and
dividends and taxes on realisations of investments.
7. MANAGEMENT AND PERFORMANCE FEES
The Manager was appointed pursuant to a management agreement
with the Company dated 31 March 2010 (the "Management Agreement").
The Company pays to the Manager a management fee which is equal to
1/12th of 1.75 per cent of the total average market capitalisation
of the Company during each month. The management fee is calculated
and accrued as at the last business day of each month and is paid
monthly in arrears. The Investment Manager's fees are paid by the
Manager.
The management fee for the period ended 30 June 2022 was
GBP649,850 (30 June 2021: GBP 816,287) of which GBP95,289 (31
December 2021: GBP 122,894 ) was outstanding at the period end.
The Manager is also entitled to a performance fee. The
Performance Period is each 12-month period ending on 31 December
(the "Performance Period"). The amount of the performance fee is 15
per cent of the total increase in the NAV, if the Hurdle has been
met, at the end of the relevant Performance Period, over the
highest previously recorded NAV as at the end of a Performance
Period in respect of which a performance fee was last accrued,
having made adjustments for numbers of Ordinary Shares issued
and/or repurchased ("Highwater Mark"). The Hurdle is the Issue
Price multiplied by the shares in issue, increased at a rate of 8%
per annum compounded to the end of the relevant performance period.
In addition, the performance fee will only become payable if there
have been sufficient net realised gains. As at 30 June 2022, the
Highwater Mark was the equivalent of approximately 93.9 pence per
share with the relevant Hurdle being the equivalent of
approximately 157 pence per share. There were no earned performance
fees for the current or prior period.
If the Company wishes to terminate the Management Agreement
without cause it is required to give the Manager 12 months prior
notice or pay to the Manager an amount equal to: (a) the aggregate
investment management fee which would otherwise have been payable
during the 12 months following the date of such notice (such amount
to be calculated for the whole of such period by reference to the
Market Capitalisation prevailing on the Valuation Day on or
immediately prior to the date of such notice); and (b) any
performance fee accrued at the end of any Performance Period which
ended on or prior to termination and which remains unpaid at the
date of termination which shall be payable as soon as, and to the
extent that, sufficient cash or other liquid assets are available
to the Company (as determined in good faith by the Directors),
provided that such accrued performance fee shall be paid prior to
the Company making any new investment or settling any other
liabilities; and (c) where termination does not occur at 31
December in any year, any performance fee accrued at the date of
termination shall be payable as soon as and to the extent that
sufficient cash or other liquid assets are available to the Company
(as determined in good faith by the Directors), provided that such
accrued performance fee shall be paid prior to the Company making
any new investment or settling any other liabilities.
8. SHARE CAPITAL
The share capital of the Company on incorporation was
represented by an unlimited number of Ordinary Shares of no par
value. The Company may issue an unlimited number of shares of a
nominal or par value and/or of no par value or a combination of
both.
The Company has a total of 106,453,335 (31 December 2021:
106,453,335) Ordinary Shares in issue with an additional 700,000
(31 December 2021: 700,000) held in treasury. In addition, the
Company has 9,167 (31 December 2021: 9,167) Management Ordinary
Shares in issue, which are held by the Investment Manager.
The Ordinary Shares are admitted to the Premium Listing segment
of the Official List of the London Stock Exchange. Holders of
Ordinary Shares have the right to receive notice of and to attend
and vote at general meetings of the Company.
Each holder of Ordinary Shares being present in person or by
proxy at a meeting will, upon a show of hands, have one vote and
upon a poll each such holder of Ordinary Shares present in person
or by proxy will have one vote for each Ordinary Share held by
him.
The details of issued share capital of the Company are as
follows:
30 June 2022 31 December 2021
No. of No. of
Amount shares* Amount shares*
GBP GBP
Issued and fully paid share
capital
Ordinary Shares of no par value** 76,122,347 107,162,502 76,122,347 107,162,502
(including Management Ordinary
Shares)
Treasury Shares (140,492) (700,000) (140,492) (700,000)
----------- -----------
Total Share Capital 75,981,855 75,981,855
----------- -----------
The outstanding Ordinary Shares as at the period ended 30 June
2022 are as follows:
Ordinary Shares Treasury Shares
No. of
Amount No. of shares* Amount shares
GBP GBP
Balance at 1 January 2022 &
30 June 2022 76,122,347 106,462,502 140,492 700,000
----------- --------------- ------------ ------------
* Includes 9,167 (31 December 2021: 9,167) Management Ordinary
Shares.
** The value reported for the Ordinary Shares represents the net
of subscriptions and redemptions (including any associated
expenses).
The outstanding Ordinary Shares as at the year ended 31 December
2021 are as follows:
Ordinary Shares Treasury Shares
No. of
Amount No. of shares* Amount shares
GBP GBP
Balance at 1 January 2021 &
31 December 2021 76,122,347 106,462,502 140,492 700,000
----------- --------------- -------- --------
* Includes 9,167 (31 December 2021: 9,167) Management Ordinary
Shares.
9. RELATED PARTY TRANSACTIONS
The Investment Manager, Baker Steel Capital Managers LLP, had an
interest in 9,167 Management Ordinary Shares at 30 June 2022 (31
December 2021: 9,167).
The Management fees paid and accrued for the period are
disclosed under Note 7.
Baker Steel Global Funds SICAV - Precious Metals Fund ("Precious
Metals Fund") had an interest of 4,922,877 Ordinary Shares in the
Company at 30 June 2022 (31 December 2021: 4,922,877). Precious
Metals Fund shares a common Investment Manager with the
Company.
David Baker and Trevor Steel, Directors of the Manager, are
interested in the shares held by Northcliffe Holdings Limited
and The Sonya Trust respectively, which are therefore considered
to be Related Parties. Northcliffe Holdings Limited holds
12,452,177 shares (31 December 2021; 12,452,177) and The Sonya
Trust holds 12,722,129 shares (31 December 2021: 12,722,129).
David Staples, a Director of the Company holds 35,000 shares in
the Company.
Management fees and Directors' fees paid and accrued during the
periods to 30 June were:
2022 2021
GBP GBP
Management fees 649,850 816,287
Directors' fees 57,500 57,500
The Management fees and Directors' fees outstanding at the
period-end were:
30 June 2022 31 December 2021
GBP GBP
Management fees 95,289 122,894
Directors' fees 28,750 28,750
10. SUBSEQUENT EVENTS
On 21 July 2022, the Company and the other shareholders of
Bilboes signed an agreement to sell Bilboes to Caledonia Mining
Corporation Plc. The Company's share of the consideration for its
24.2% shareholding in Bilboes will be 800,000 shares in Caledonia
together with a 1% net smelter royalty ("NSR") over the future gold
production from the Bilboes properties. Completion of the
transaction is subject to a number of conditions precedent, which
are expected to be satisfied before the end of 2022.
There were no other events subsequent to the period end that had
a material impact on the Company.
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END
IR QELFFLKLZBBF
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