REG - Baker Steel Res.Tst. - Half-year Report
13/09/2024 07:00
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RNS Number : 0419E Baker Steel Resources Trust Ltd 13 September 2024
BAKER STEEL RESOURCES TRUST LIMITED
(Incorporated in Guernsey with registered number 51576 under the provisions of
The Companies (Guernsey) Law, 2008 as amended)
13 September 2024
BAKER STEEL RESOURCES TRUST LIMITED
(the "Company")
LEI: 213800JUXEVF1QLKCC27
Half-Yearly Report and Unaudited Condensed Interim Financial Statements for
the period
1 January 2024 to 30 June 2024
The Company has today, in accordance with DTR 4.2, released its Half-Yearly
Report for the period ended 30 June 2024. The Report is available via
www.bakersteelcap.com/baker-steel-resources-trust/
(http://www.bakersteelcap.com/baker-steel-resources-trust/) and the National
Storage Mechanism.
Further details of the Company and its investments are available on the
Company's website www.bakersteelcap.com/baker-steel-resources-trust/
(http://www.bakersteelcap.com/baker-steel-resources-trust/)
Enquiries:
Baker Steel Resources Trust Limited +44 20 7389 8237
Francis Johnstone
Trevor Steel
Deutsche Numis
+44 20 7260 1000
David Benda (corporate)
James Glass (sales)
Aztec Financial Services (Guernsey) Limited
Company
Secretary
+44 1481 749771
BAKER STEEL RESOURCES TRUST LIMITED
Half-Yearly Report and Unaudited Condensed Interim Financial Statements
For the period from 1 January 2024 to 30 June 2024
CONTENTS PAGE
Chairman's Statement 2-3
Investment Manager's Report 4-8
Directors' Report 9-11
Unaudited Portfolio Statement 12-14
Unaudited Condensed Interim Statement of Financial Position 15
Unaudited Condensed Interim Statement of Comprehensive Income 16
Unaudited Condensed Interim Statement of Changes in Equity 18
Unaudited Condensed Interim Statement of Cash Flows 19
Notes to the Unaudited Condensed Interim Financial Statements 20-29
Management and Administration 30-31
CHAIRMAN'S STATEMENT
For the period from 1 January 2024 to 30 June 2024
Following several barren years in the funding market for junior mining
development companies, we have noticed several green shoots appearing in the
first half of 2024, and it is hoped that the market may have turned for the
sector in which your company invests. The NAV per share increased by 4.9% to
81.0 pence with the share price rising by 34% to 53.0 pence at 30 June 2024.
Nevertheless, although an encouraging improvement, this price still puts the
shares on a 35% discount to NAV at 30 June.
The general market, as represented by the larger producers in the MSCI World
Metals and Mining Index, rose 11.4% on the back of stronger commodity prices.
As is often the case, this was led by gold which moved to an all-time high, up
12.8% on 30 June 2024. Since that date it has risen further to US$2,500 per
ounce. Despite this, gold-based equities still trade at around two thirds of
the share prices which they recorded when bullion was some US$700 per ounce
lower. The underperformance of equities compared to metals prices, although
most striking in the gold sector, also applies to the general mining market
which has, in turn, lagged the overall stock market in recent years. Despite
recent gains and growing M&A activity, the junior mining equity market
can only be regarded currently as one in recovery rather than in a bull
market. History suggests that it is only once we enter a bull market, with
mining equities outperforming general equities, that junior mining companies
strongly outperform established producers. This might be more pronounced than
previously particularly for junior companies exposed to gold, silver and
future facing metals, such as copper, as the major diversified miners have
been underpinned by the strong iron ore price in recent years.
At the 2023 year-end, we highlighted Futura Resources' initial production at
its first mine, Wilton, following the A$30 million convertible financing last
September. Futura has since signed and drawn down a A$34 million pre-payment
debt offtake and marketing facility with a major coal trading company. This
has allowed it to commence development of its second mine, Fairhill, which is
contiguous with Wilton. Wilton took approximately 3 months to bring into
production and Fairhill is expected to take a similar amount of time: both
mines are basic near-surface open pits with product trucked to the nearby
Gregory Crinum Coal Handling and Preparation Plant. At full capacity the
combined Wilton and Fairhill mines are projected to produce some 1.5 to 2
million tonnes of saleable coking coal for at least the next 15 years, at a
current operating cost of around US$85 per tonne. During the first half of
2024, the price of hard coking coal has reverted towards the long-term
consensus price of US$210 per tonne used in the Company's models but at even
these lower levels the mines should still have healthy margins. Your Company
owns a 1.5% gross revenue royalty on production from these licenses and
therefore can shortly look forward to receiving its first royalty receipts.
During 2023, our second largest investment, CEMOS Group Plc, which produces
cement in Morocco, experienced lower sales of 182,000 tonnes due to subdued
economic activity in the area served by CEMOS. Market conditions have
recovered somewhat in 2024 and CEMOS is on track for sales of over 200,000
tonnes this year. The construction of the calcination plant, announced in
2023, is progressing well, which will allow CEMOS to produce its own clinker
by the end of this year. By generating its own clinker and Supplementary
Cementitious Materials, the main ingredient in cement production, CEMOS
expects to significantly reduce costs and enhance the operating margin as well
as lowering associated carbon emissions. CEMOS has identified a site to
construct the second grinding line which it acquired in 2022. This should
allow it to double production at the new enhanced margins, and with
installation planned to commence by the end of this year, first production is
anticipated in the second half of 2025. CEMOS is expected to adopt a
progressive dividend policy following the current investment phase.
In recent times, the first part of the classic "S" shape of the development
risk curve has levelled out noticeably allowing a commensurate increase in
project valuation upon successful financing of the production stage. Several
of the smaller investments in the Company's portfolio, although in aggregate
representing only around 20%, are at such a pre-financing, pre-step-up in
valuation stage. A number of these made good progress on the project
development and financing track during the first part of 2024, as outlined
below.
Notably in June 2024, Caledonia released the results of the Preliminary
Economic Assessment on the Bilboes project indicating production of 1.5
million ounces of gold over a 10-year period. The economics, as summarised in
the Investment Manager's report below, look attractive even at US$1,884 per
ounce gold price which is used in Caledonia's model; at the current gold price
the outlook is very exciting with the current NPV being a multiple of
Caledonia's current market capitalisation which mostly reflects just its
existing production from the Blanket mine. We look forward to Caledonia
publishing its revised Feasibility Study in early 2025 together with details
of its plans to finance the development of the mine.
Tungsten West plc made good progress in the first half of 2024, having been
awarded the final two key operating permits which will allow the Hemerdon
tungsten mine to return to production. An updated feasibility study is due
before the end of the year followed by financing in early 2025. First Tin plc
also maintained good momentum on its Taronga tin project in Australia,
completing a positive feasibility study and attracting Australia's largest tin
producer, Metals X Limited, as a strategic shareholder.
Kanga and Nussir are also at the pre-financing stage and progress on the main
investments in the portfolio can be found in the Investment Manager's Report.
Outlook
The outlook for the global economy continues to look uncertain with concerns
about a wide range of issues including the Chinese property sector, war
continuing in Ukraine, heightened tension in the Middle East and the growth
prospects in the developed world looking sluggish. However, inflationary
pressures appear to be abating and interest rates are expected to be reduced
during the second half of 2024. A decline in US interest rates would normally
lead to a weaker dollar, which should be a positive driver for commodity
prices, led by precious metals.
The Company's performance in the next 12 months is going to be a function of
how well Futura ramps up production from its two mines and CEMOS integrates
its new calcination plant and commences development of its second line to
double production. These two companies should start to generate significant
cashflow from next year. In addition, the Company also has five investments in
Bilboes, Tungsten West, Nussir, First Tin and Kanga which are ready to be
financed into development and if that can be achieved could make an
appreciable impact on NAV. The nature of these investments means that the
timing and success of them is always difficult to predict, and we are
fortunate to have in Baker Steel our Investment Manager a team of
professionals who have experienced previous market cycles and are able to give
us sound advice for both the short and long-term.
At the recent AGM, I am pleased to report that the vote to discontinue the
Company was not passed and therefore a vote with regard to continuation will
not be proposed by the Board until the AGM in three years' time as is required
by the Company's Articles. I would like to thank our shareholders for their
continuing support. The Board is always keen to engage with shareholders and
can be contacted via the Company Secretary.
Corporate
I would like to welcome Patrick Meier to the Board. Patrick has a long and
distinguished career in corporate finance with a focus on mining for most of
his career. Under his Chairmanship of Ecora Resources plc he guided that
company's transition towards future facing metals, and he has already made a
positive contribution to our strategic thinking.
As previously announced, at the end of the year I will be stepping down from
the Board, after 14 years as Chairman since the Company's listing, and Fiona
Perrott-Humphrey will take the Chair on my retirement. Fiona has been advising
in the natural resources sector for over 30 years and I am confident that I
will be leaving the Company in good hands to guide its strategy. The Company
is approaching an inflexion point where it expects to receive significant
regular income from its two largest investments, and I believe that is in in a
strong position as it moves into a positive future.
Howard Myles
Chairman
12 September 2024
INVESTMENT MANAGER'S REPORT
For the period from 1 January 2024 to 30 June 2024
Financial Performance
The unaudited Net Asset Value per Ordinary Share ("NAV") as at 30 June 2024
was 81.0 pence (31 December 2023:77.2 pence), an increase of 4.9% in the
period compared with the increase in the MSCI World Metals and Mining Index of
11.4% in Sterling terms.
For the purpose of calculating the NAV per share, unquoted investments were
carried at fair value as at 30 June 2024 as determined by the Directors, based
on reports received from the Investment Manager following a process detailed
in the Annual Report and Account. Quoted investments were carried at their
quoted prices as at that date.
Net assets at 30 June 2024 comprised the following:
£m % of NAV
Unquoted Investments 71.5 83.0
Quoted Investments 13.2 15.2
Cash and other net assets 1.5 1.8
86.2 100.0
Investment Update
Largest 10 Holdings - 30 June 2024 % of NAV
Futura Resources Ltd 34.2
Cemos Group plc 30.6
Bilboes Royalty 7.9
Tungsten West Plc 4.4
Caledonia Mining Corporation Plc 4.1
Nussir ASA 3.8
Metals Exploration Plc 3.5
Silver X Mining Corporation 3.4
First Tin PLC 2.1
Kanga Investments Ltd 1.5
95.5
Other Investments 2.7
Cash and other net assets 1.8
100.0
Largest 10 Holdings - 31 December 2023 % of NAV
Futura Resources Ltd 36.3
CEMOS Group Plc 29.3
Bilboes Gold Royalty 7.2
Caledonia Mining Corporation Plc 5.4
Kanga Investments Ltd 3.6
Silver X Mining Corporation 3.5
Nussir ASA 4.1
Metals Exploration Plc 3.0
First Tin plc 2.1
Tungsten West Plc 1.7
96.2
Other Investments 3.4
Cash and other net assets 0.4
100.0
Review
At 30 June 2024, the Company was fully invested, holding 15 investments of
which the top 10 holdings comprised 95.5% of the portfolio by value. In terms
of commodity the portfolio has exposure to cement, copper, gold, iron, lead,
lithium, potash, silver, steel making coal, tin, tungsten, vanadium, and zinc.
Its projects are located in Australia, Canada, Germany, Madagascar, Morocco,
Norway, Peru, the Philippines, Republic of Congo, Russia, the UK and Zimbabwe.
During the first half of the year, the mining market started to show some
recovery on the back of stronger commodity prices. The MSCI World Metals and
Mining Index composed of large and mid-cap companies rose 11.4% in Sterling
terms. The Company's NAV which is more exposed to developing companies rose
4.9% during the period.
All expressed in US dollar terms, gold rose 12.8% and silver was up 22.5%
during the first half of 2024. Base metals prices were likewise stronger with
copper up 11.7%, tin up 29% and tungsten up 11.9%. The exceptions were the
steel making minerals: iron ore down 23.6% and metallurgical coal down 24.2%.
Potash recovered 6.9% following a 42.0% fall in 2023.
The increase in the Company's NAV of 4.9% in Sterling terms during the period
reflected rises in the carrying values of CEMOS and the Bilboes Gold Royalty
outweighing a fall in the listed price of Caledonia Mining, a reduction in the
carrying value of Kanga Investments, and the write off of Black Pearl.
The Company's main investments at the end of the period:
Futura Resources Ltd ("Futura")
Futura owns the Wilton and Fairhill steel making coal projects in the Bowen
Basin in Queensland, Australia which hold Measured and Indicated resources of
843 million tonnes of coal.
Investment: 11,309,005 ordinary shares (26.9% - undiluted)
valued at £10.9 million
1.5% Gross
Revenue Royalty valued at £15.8 million
A$4.7 million
convertible loan valued at £2.8 million (23.4% fully diluted)
Futura commenced production from its Wilton mine in March 2024. By the end of
June 2024, Futura had washed in excess of 70,000 tonnes at the nearby Gregory
Crinum plant. Results on steel making coal quality and recoveries have been
encouraging but more data is required before a reduction can be considered in
the development risk discounts applied to the models. Accordingly, the
valuations of both the equity and royalty for Futura were left unchanged at 30
June 2024.
Once in full production, Futura anticipates that the two mines will produce
approximately 1.5 to 2 million tonnes per annum in saleable primary and
secondary coking coal products from its two mines at a cost of around US$85
per tonne.
Coking coal prices have weakened during the first half of 2024 towards the
long term consensus price of US$210 per tonne. Once both mines are in full
production in 2025, Futura forecasts generating an EBITDA of around A$90m,
based on forward coal price expectations.
CEMOS Group Plc (''CEMOS'')
CEMOS is a private cement producer with production operations at Tarfaya in
Morocco.
Investment: 24,004,167 ordinary shares (24.3%) valued at
£12.6 million
1,045
Convertible Loan Units valued at £13.8 million
Percentage of
Company owned at full conversion 31.1%
The cement market in CEMOS's southern area of Morocco normalized with a strong
first quarter cement sales in line with budgeted annual sales of 220,000
tonnes for 2024 against the 182,000 tonnes achieved in 2023. Southern Morocco
is one of the fastest growing regions in Morocco, due mainly to new
infrastructure developments in a relatively large and undeveloped part of the
country.
Towards the end of 2023, CEMOS commenced the development of a Compact
Calcination Unit (CCU) at the Tarfaya cement plant site to produce its own
clinker and supplementary cementitious materials (SCMs), the principal raw
materials in cement production. This will not only provide security of supply
of clinker but should materially reduce costs as well as lowering the carbon
footprint associated with cement production. Commissioning of the calcination
plant remains on track for the fourth quarter of 2024 with the benefit
realised from 2025 onwards.
During 2022 CEMOS acquired a second grinding plant essentially identical to
the existing operation which will allow it to double its production. A site
for this second plant has been identified and installation is planned to be
undertaken during 2025. The commissioning of this second plant is anticipated
to take place after the CCU plant has been established in order to manage the
impacts on both financial and human resources.
Cemos' growth strategy is focussed on the development and marketing of low
CO(2) "green cement" products. The Moroccan standards agency is currently
following the European Union initiative of establishing a low CO(2) cement
category which is expected to be approved in the coming months. The main
feature of low CO(2) cements are a reduced clinker content through the use of
alternative hydraulic binders. The green cement clinker content can be as low
as 45%, compared to current levels around 70%. These alternative binders
include industrial and natural pozzolans, blast furnace slags, and fly ash.
Cemos has continued extensive development work in relation to the new type of
binders complemented by its CCU investment.
Bilboes Gold Royalty
The Company holds a 1% Net Smelter Royalty ("NSR") over future production from
the Bilboes' gold project in Zimbabwe owned by Caledonia Mining Corporation
Plc ("Caledonia"). (See below for details of the Company's equity investment
in Caledonia).
Investment: 1% NSR valued at £6.8 million
The Bilboes properties host a JORC compliant Proved and Probable Reserve
containing 1.8 million ounces of gold out of a total Mineral Resource of 3.8
million ounces of gold.
In June 2024, Caledonia released the results of the Preliminary Economic
Assessment ("PEA") into the Bilboes project indicating production of 1.5
million ounces of gold over a 10 year period. Caledonia concluded that a
single-phase development of the project will provide the best economic return
having considered alternative development options for the Project, including
multi-phase development and changes to certain other aspects of the Project.
At a gold price of US$1,884/oz used in the PEA, the economic model calculated
an NPV10% of US$309 million with an IRR of 34%. At a gold price of US$2,400
per ounce the project would achieve approximately US$75 million in additional
revenue over the PEA figures each year with the Company receiving in excess of
US$3 million per annum from its 1% Net Smelter Royalty on the Bilboes mine.
Tungsten West Plc (''Tungsten West'')
Tungsten West owns the Hemerdon Tungsten Mine in Devon, United Kingdom and is
quoted on the AIM market of the London Stock Exchange.
Investment: 28,846,515 ordinary shares (15.4%) valued at
£1.44 million
£1,200,000
convertible loan valued at £2.27 million
1,657,195
second options valued at £0.04 million
1,657,195 third
options valued at £0.02 million
On 16 January 2023 Tungsten West announced the results of its updated
feasibility study on the Hemerdon tungsten and tin mine in Devon. The
feasibility study detailed a mine with average annual production of 2,900
tonnes of tungsten (WO(3)) and 310 tonnes of tin in concentrate over 27
years. The economics showed a post-tax NPV5% of £297 million with
an Internal Rate of Return (IRR) of 25%. It also highlighted an upside case
post-tax NPV5% of £416 million with an IRR of 32%. Total pre-production
capex, corporate commitments and working capital was estimated at £54.9
million.
Key to the economics of the project is the production of secondary aggregates,
a by-product from mining which, once sold, will provide an early revenue
stream and reduce the storage of barren rock and associated operating
expenditure at site. To enable the delivery of the aggregates business, and to
optimise the core tungsten and tin business, in December 2023 Tungsten West's
Section 73 application, to vary the tonnage cap associated with the existing
permission for 50 truck movements per day from the site, was approved by Devon
County Council.
In June 2024 Tungsten West announced that the Environment Agency had granted
the permit to operate the Mineral Processing Facility. This was the final
permit required for Tungsten West to restart operations at Hemerdon With the
permitting process complete, Tungsten West is currently updating the
feasibility study which is expected to be complete in the second half of
2024 with a view to raising the capital for redevelopment in the first
half of 2025. This will enable it to recommence production of tungsten and
tin in 2026.
Caledonia Mining Corporation Plc ("Caledonia")
Caledonia is a NYSE, AIM and Victoria Falls Exchange listed gold producer
whose primary assets are the producing Blanket Mine and the Bilboes gold
project (outlined above) both in Zimbabwe.
Investment: 455,000 ordinary shares (2.4%) valued at £3.5
million
During the first half of 2024 Caledonia produced 37,823 oz from its Blanket
gold mine in Zimbabwe and reiterated guidance of 74,000 to 78,000 ounces of
gold for the full year 2024. Profit after tax for the period was reported to
be US$13.1 million compared to a loss of US$4.1 million the previous year.
Caledonia currently pays a dividend of US$0.14 per quarter. It is expected
that at least this level of dividend will continue until the Bilboes project
can be brought into production.
Nussir ASA ("Nussir")
Nussir is a Norwegian private company whose key asset is the Nussir copper
project in northern Norway.
Investment: 12,785,361 ordinary shares (12.1%) valued at
£3.1 million
NOK 2,000,000
Loan Note valued at £0.17 million
In 2023, Nussir completed the update of the DFS on its Nussir copper project
in northern Norway changing the operations from diesel based to one based on a
fully electrified mine producing around 14,000 tonnes of copper per year over
a 14 year mine life. The updated DFS economics gave a NPV8% of US$191 million
with an IRR of 22% based on a copper price of US$8,000 per tonne. Nussir is
currently in a formal process of seeking an industry partner to assist with
financing the development of the mine. Following the period end the Company
was the main subscriber to a deeply discounted rights issue by Nussir to fund
ongoing working capital and as a result increased its interest in Nussir to
21.6%.
Metals Exploration plc ("Metals Ex")
Metals Ex is an AIM listed company which owns the Runruno gold mine in the
Philippines.
Investment: 63,860,000 ordinary shares (3.0%) valued at £3.1
million
During the first half of 2024 Metals Ex produced of 42,535 ounces from its
Runruno gold mine in the Philippines at an All-in-Sustaining-Cost of US$1,066
per ounce. This generated positive free cash flow of US$46.4 million, which
allowed it to pay down the remainder of its debt during the period.
In June 2024, Metals Exploration plc announced agreement to buy back the 18.6%
interest in the company held by Runruno Holdings Limited for aggregate
consideration of £19.7 million. This will allow it to pursue a strategy to
continue life of the company within the Philippines, once the Runruno Mine is
exhausted in around two years' time. During Q1 2024, the Company announced
the proposed acquisition of an extensive exploration tenement in the
prospective Abra area of the Philippines, covering 16,200 hectares, which is
approximately 200km north of the Company's Runruno mine.
Metals Ex has forecast production for 2024 of 74,000 - 80,000 ounces of gold
at an AISC of between US$1,175 and US$1,275 per ounce of gold.
Silver X Mining Corporation ("Silver X")
Silver X is a TSX-V listed company whose Recuperada silver/lead/zinc project
in Peru comprises 11,261 Ha of mining concessions centred around a 600 tonne
per day processing plant.
Investment: 19,502,695 ordinary shares (11.7%) valued at
£2.9 million
During the first half of 2024 Silver X produced 582,074 ounces of silver
equivalent ("AgEq") (2023H1 566,714 AgEq ozs) at its Nueva Recuperada Silver
mine in Peru. This generated a positive EBITDA of US$1.1 million (2023 loss
US$1.1 million) and an overall loss of US$1.0 million (2023 US$1.5 million
loss).
In 2023 Silver X released the results of a Preliminary Economic Assessment
("PEA") under Canadian National Instrument 43-101 Standards for the expansion
of the Tangana Mining Unit at Nueva Recuperada. The PEA outlined the potential
to increase annual production to 4.2 million ounces silver equivalent by
constructing an additional recovery plant at a capital cost of US$61 million
to give a post-tax NPV10% of US$175 million.
In May 2024 Silver X signed a 15-year social agreement with the Community of
Carhuapata in Huancavelica in Peru which covers the Plata mining area. Silver
X is currently undertaking a further PEA to incorporate Plata.
First Tin PLC ("First Tin")
First Tin is a company listed on the London Stock Exchange which owns the
Taronga tin project in Australia and the Tellerhäuser and Gottesburg tin
projects in Germany.
Investment: 37,128,014 ordinary shares (14.0%) valued at
£1.8 million
On 2 May 2024 First Tin PLC announced the results of the Definitive
Feasibility Study ("DFS") for its 100% owned Taronga open pit tin project
located in New South Wales, Australia. The DFS outlines an open pit mine
mining 5 million tonnes of ore per annum followed by a crushing and a gravity
processing facility. This is forecast to produce an average of 3,600 tonnes of
tin per annum at an All-In-Sustaining costs of US$15,843 per tonne of tin
sold. Pre-production capex is estimated at US$116 million with the economic
model based on US$30,000 per tonne of tin (currently approximately US$
31,000/tonne) showing an NPV8% of US$120 million and an IRR of 28%. In
December 2023 tin was recognised by the Australian Government as a Strategic
Material, which should help with future licencing requirements. The results of
the DFS show significant optionality to further rises in the tin price.
Whilst the main focus of First Tin is on Taronga, it also continues to make
progress on its second project, the Tellerhäuser tin project in Saxony,
Germany. The review of a large amount of additional historic drilling data
discovered in the Saxony archives closed gaps in the mineral resource
statement and provided additional resource volume, without additional cost.
This led to a 35% increase in total Indicated plus Inferred Mineral Resources
in April 2024 to 138,600 tonnes of contained tin.
Kanga Investments Ltd ("Kanga")
Kanga is a private company which holds the Kanga potash project, in the
Republic of the Congo.
Investment: 56,042 ordinary shares (6.7%) valued at £1.3
million
Kanga completed a positive Feasibility Study in 2020 on its Kanga Potash
project in the Republic of Congo for a mine producing 600,000 tonnes per annum
of Muriate of Phosphate ("MOP"). The DFS economic model gave a Net Present
Value at a 10% discount rate of US$511 million with an IRR of 22% based on an
MOP price of US$282 per tonne compared to the current price of around US$300
per tonne. There has continued to be good interest in attracting potential
partners to acquire or finance the Kanga potash project but negotiations have
been protracted and in the meantime Kanga has struggled to attract short term
financing to fund working capital. As a result the carrying value was reduced
by 46% until such time as a definitive transaction is achieved.
Polar Acquisition Limited ("PAL")
PAL is a private company which holds a 1.8% to 0.9% (reducing over 10 years)
net smelter royalty over the Prognoz silver project ("Prognoz"), 444km north
of Yakutsk in Russia, from Solidcore Resources Plc (formerly Polymetal
International plc). Prognoz has a 267-million-ounce silver equivalent
Indicated and Inferred Mineral Resource at a grade of 755 g/t silver
equivalent.
Investment: 16,352 ordinary shares (49.99%) valued at £1.0
million
In March 2024 Solidcore, sold off its Russia business which included the
Prognoz silver project. However, the liability to pay the net smelter royalty
to PAL remains with Solidcore (which is now domiciled in Kazakstan) and the
royalty contract has no Russian entities as parties to the Agreement. Ore has
been transported to the Nezhda mine concentrator (part of the business sold)
and is due to be processed in the third quarter 2024 so that the first royalty
payment will be due in the fourth quarter 2024.
Baker Steel Capital Managers LLP
Investment Manager
12 September 2024
DIRECTORS' REPORT
For the period from 1 January 2024 to 30 June 2024
The Directors of the Company present the Half-Yearly Report and Unaudited
Condensed Interim Financial Statements for the six months ended 30 June 2024.
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.bakersteelcap.com/baker-steel-resources-trust/
(http://www.bakersteelcap.com/baker-steel-resources-trust/) .
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 2024, the Company's unaudited NAV per Ordinary
Share increased by 4.9% and the share price increased by 34.2 % on the London
Stock Exchange. This compares with a rise in MSCI World Metals and Mining
Index of 11.4% in Sterling terms. A more detailed explanation of the
performance of the Company is provided within the Investment Manager's Report
on pages 4 to 8.
The results for the period are shown in the Unaudited Statement of
Comprehensive Income on pages 16 and 17 and the Company's financial position
at the end of the period is shown in the Unaudited Statement of Financial
Position on page 15.
Dividend and distribution policy
During the year ended 31 December 2015, the Board introduced a capital returns
policy whereby, subject to applicable laws and regulations, it will allocate
cash for distributions to shareholders. The amount to be distributed will be
calculated and paid following publication of the Company's audited financial
statements for each year and will be no less than 15% of the aggregate net
realised cash gains (after deducting losses) in that financial year. The Board
will retain discretion for determining the most appropriate manner to make
such distribution which may include share buybacks, tender offers and dividend
payments. In the longer term the Board intends to formulate a more regular
dividend policy once it starts to receive income and dividends 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
John Falla
Patrick Meier (appointed 25 June 2024)
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 2023 ("the Annual Report") are presented on page 17
of that report.
Each of the Directors is considered to be independent in character and
judgement.
Each Director is asked to declare their interests at each Board Meeting. No
Director has any material interest in any other contract which is significant
to the Company's business.
John Falla holds 100,000 shares in the Company (31 December 2023: 100,000).
Patrick Meier holds 82,261 shares in the Company. No other director has a
beneficial interest in the Company.
Attendance at the quarterly Board and Audit Committee meetings during the
period was as follows:
Board Meetings Audit Committee
Meetings
Held Attended Held Attended
Howard Myles 2 2 2 2
Charles Hansard 2 2 n/a n/a
Fiona Perrott-Humphrey 2 2 2 2
John Falla 2 2 2 2
Patrick Meier* 2 1 2 1
*Appointed on 25 June 2024, therefore, was only eligible to attend one Board
Meeting and one Audit Committee Meeting
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
£200,000 per annum (or such sum as the Company in a general meeting shall
from time to time determine). The Chairman receives a supplement of £10,000
per annum and the Chairman of the Audit Committee a supplement of £5,000 per
annum.
For the period ended 30 June 2024 the total remuneration of the Directors was
£73,526 (30 June 2023: £72,500) of which £1,026 remains outstanding as at
30 June 2024 (31 December 2023: £36,250).
Authorised share capital
The share capital of the Company on incorporation was represented by an
unlimited number of Ordinary Shares of no-par value. The Company may issue an
unlimited number of shares of a nominal or par value and/or of no par value or
a combination of both.
Shares in issue
The Company was admitted to trading on the London Stock Exchange on 28 April
2010. The Company has a total of 106,453,335 (31 December 2023: 106,453,335)
ordinary shares outstanding with an additional 700,000 (31 December 2023:
700,000) held in treasury. The Company has 9,167 (31 December 2023: 9,167)
Management Ordinary shares in issue, which are held by the Investment Manager.
Going concern
Having reassessed the principal and emerging risks described on pages 13-14 of
the 31 December 2023 Annual Report, and the other matters discussed in
connection with the viability statement as set out on page 14 of the said
report, the Directors consider it is appropriate to adopt the going concern
basis in preparing these interim Financial Statements. As at 30 June 2024,
approximately 17% of the Company's assets were represented by cash and
unrestricted listed and quoted investments which are readily realisable. The
Board are satisfied that the Company has the resources to continue in business
for at least 12 months following the signing of these financial statements.
At the recent AGM, the vote to discontinue the Company was not passed and
therefore a vote with regard to continuation will not be proposed by the Board
until the AGM in three years' time as is required by the Company's Articles.
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 13 and 14 of the 31 December 2023 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 2024 and do not expect any changes in the second half of
2024.
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, financial position and profit or loss of the Company; and
- the Interim Report and Accounts includes a fair review of
the information required by 4.2.7R and 4.2.8R of the FCA's Disclosure and
Transparency Rules.
Corporate governance compliance
The Company is a member of the Association of Investment Companies.
The Board has therefore considered the Principles and Provisions of the AIC
Code of Corporate Governance (AIC Code). The AIC Code addresses the Principles
and Provisions set out in the UK Corporate Governance Code (the UK Code), as
well as setting out additional Provisions on issues that are of specific
relevance to the Company.
The Board considers that reporting against the Principles and Provisions of
the AIC Code, which has been endorsed by the Financial Reporting Council and
the Guernsey Financial Services Commission, provides more relevant information
to shareholders.
The Company has complied with the Principles and Provisions of the AIC Code
and therefore the UK Code except as where explained in the Annual Report on
pages 21 to 24.
There is no change in compliance since the Annual Report.
Signed for and on behalf of the Directors:
Howard Myles John Falla
Director Director
12 September 2024
UNAUDITED PORTFOLIO STATEMENT
AS AT 30 JUNE 2024
Shares Investments Fair value % of Net
/Warrants/ £ equivalent assets
Nominal
Listed equity shares
Australian Dollars
4,091,910 Akora Resources Limited 323,760 0.38
Australian Dollars Total 323,760 0.38
Canadian Dollars
6,519,395 Azarga Metals Corporation 56,536 0.07
19,502,695 Silver X Mining Corporation 2,931,532 3.40
Canadian Dollars Total 2,988,068 3.47
Great Britain Pounds
340,000 Caledonia Mining Corporation Plc 2,635,000 3.06
37,128,014 First Tin Plc 1,811,847 2.10
63,860,000 Metals Exploration Plc 3,058,894 3.55
28,846,515 Tungsten West Plc 1,436,556 1.67
Great Britain Pounds Total 8,942,297 10.38
United States Dollars
115,000 Caledonia Mining Corporation Plc 884,001 1.03
United States Dollars Total 884,001 1.03
Total investments in listed equity shares 13,138,126 15.24
Debt instruments
Australian Dollars
94 Futura Resources Limited - Convertible Loan 2,747,111 3.19
Australian Dollars Total 2,747,111 3.19
Canadian Dollars
305,000 PRISM Diversified Limited Loan Note 1 87,160 0.10
250,500 PRISM Diversified Limited Loan Note 2 277,711 0.32
Canadian Dollars Total 364,871 0.42
Great Britain Pounds
1,200,000 Tungsten West Convertible Loan 2,268,720 2.63
Great Britain Pounds Total 2,268,720 2.63
Shares Investments Fair value % of Net
/Warrants/ £ equivalent assets
Nominal
United States Dollars
7,028,352 Black Pearl Limited Partnership - 0.00
United States Dollars Total - 0.00
Euro
1,045 CEMOS Group Plc 13,789,467 15.99
Euro Total 13,789,467 15.99
Norwegian Krone
2,000,000 Nussir ASA Loan Note 167,324 0.19
Norwegian Krone Total 167,324 0.19
Total investments in debt instruments 19,337,493 22.43
Unlisted equity shares, warrants and royalties
Australian Dollars
10,100,000 Futura Gross Revenue Royalty 15,776,971 18.30
11,309,005 Futura Resources Limited 10,916,430 12.66
Australian Dollars Total 26,693,401 30.96
Canadian Dollars
666,667 Azarga Metals Warrants 09/05/2025 0 0.00
13,083,936 PRISM Diversified Limited 529,497 0.61
40,000 PRISM Diversified Limited Royalty 23,125 0.03
324,000 Unkur On-sale Entitlement 46,829 0.05
Canadian Dollars Total 599,451 0.69
Great Britain Pounds
24,004,167 Cemos Group Plc 12,626,192 14.64
1,657,195 Tungsten West Plc Second Option Share Warrants 18/10/2026 39,607 0.05
1,657,195 Tungsten West Plc Third Option Share Warrants 18/10/2026 23,698 0.03
Great Britain Pounds Total 12,689,497 14.72
Norwegian Krone
12,785,361 Nussir ASA 3,076,430 3.57
Norwegian Krone Total 3,076,430 3.57
United States Dollars
- Bilboes Holdings (Private) Limited - Royalty 6,843,810 7.94
56,042 Kanga Investments Limited 1,316,312 1.53
16,352 Polar Acquisition Limited 986,160 1.14
United States Dollars Total 9,146,282 10.61
Total Unlisted equity shares, warrants and royalties 52,205,061 60.55
Financial Assets held at fair value through profit or loss 84,680,680 98.20
Other Assets & Liabilities 1,535,311 1.80
Total Equity 86,215,991 100.00
UNAUDITED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2024
Unaudited Audited
30 June 31 December
2024 2023
Notes £ £
Assets
Cash and cash equivalents 1,201,659 277,694
Interest receivable 585,110 190,249
Other receivables 26,093 30,355
Financial assets held at fair value through profit or loss 3 84,680,680 81,870,016
Total assets 86,493,542 82,368,314
Equity and Liabilities
Liabilities
Management fees payable 7,9 85,023 57,735
Administration fees payable 139,583 37,083
Audit fees payable 37,500 75,000
Directors' fees payable 1,026 36,250
Other payables 14,419 2,667
Total liabilities 277,551 208,735
Equity
Management Ordinary Shares 8 9,167 9,167
Ordinary Shares 8 75,972,688 75,972,688
Revenue Reserves 8,107,173 8,235,802
Capital Reserves 2,126,963 (2,058,078)
Total equity 86,215,991 82,159,579
Total equity and liabilities 86,493,542 82,368,314
Net Asset Value per Ordinary Share (in Pence) 5 81.0 77.2
These unaudited condensed financial statements on pages 15 to 29 were approved
by the Board of Directors on 12 September 2024 and signed on its behalf by:
Howard Myles John Falla
Director Director
UNAUDITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2024 TO 30 JUNE 2024
Unaudited period ended 30 June Unaudited period ended 30 June Unaudited period ended 30 June
2024 2024 2024
Revenue Capital Total
Notes £ £ £
Income
Interest income 542,466 - 542,466
Dividend income 25,286 - 25,286
Royalties income 115,038 - 115,038
Net gain on financial assets at fair value through profit or loss 3 - 4,187,110 4,187,110
Net foreign exchange loss - (2,069) (2,069)
Net income 682,790 4,185,041 4,867,831
Expenses
Management fees 7,9 448,369 - 448,369
Administration fees 102,595 - 102,595
Directors' fees 9 73,526 - 73,526
Other expenses 105,465 - 105,465
Depositary fees 16,200 - 16,200
Custody fees 27,764 - 27,764
Audit fees 37,500 - 37,500
Total expenses 811,419 - 811,419
Net (loss) / income for the period (128,629) 4,185,041 4,051,412
Earnings per Ordinary Share for the period:
Basic and Diluted (in pence) 5 (0.12) 3.93 3.81
In the period ended 30 June 2024, 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 2023 TO 30 JUNE 2023
Unaudited period ended 30 June Unaudited period ended 30 June Unaudited period ended 30 June
2023 2023 2023
Revenue Capital Total
Notes £ £ £
Income
Interest income 229,828 - 229,828
Dividend income 176,396 - 176,396
Other income 1,618 - 1,618
Net loss on financial assets at fair value through profit or loss 3 - (12,429,311) (12,429,311)
Net foreign exchange loss - (5,111) (5,111)
Net income/(loss) 407,842 (12,434,422) (12,026,580)
Expenses
Management fees 7,9 453,417 - 453,417
Administration fees 55,298 - 55,298
Directors' fees 9 72,500 - 72,500
Other expenses 97,662 - 97,662
Custody fees 43,724 - 43,724
Audit fees 35,000 - 35,000
Total expenses 757,601 - 757,601
Net loss for the period (349,759) (12,434,422) (12,784,181)
Earnings per Ordinary Share for the period:
Basic and Diluted (in pence) 5 (0.33) (11.68) (12.01)
In the period ended 30 June 2023, there were no other gains or losses than
those recognised above.
The Directors consider all results to derive from continuing activities.
The format of the Statement of Comprehensive Income follows the
recommendations of the AIC Statement of Recommended Practice.
UNAUDITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2024 TO 30 JUNE 2024
Capital reserves Total Equity
Management Revenue
Ordinary Ordinary Treasury reserves
Shares Shares Shares
£ £ £ £ £ £
Balance as at 1 January 2024 9,167 76,113,180 (140,492) 8,235,802 (2,058,078) 82,159,579
Net (loss)/gain for the period - - - (128,629) 4,185,041 4,051,412
Balance as at 30 June 2024 9,167 76,113,180 (140,492) 8,107,173 2,126,963 86,215,991
UNAUDITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2023 TO 30 JUNE 2023
Capital reserves Total Equity
Management Revenue
Ordinary Ordinary Treasury reserves
Shares Shares Shares
£ £ £ £ £ £
Balance as at 1 January 2023 9,167 76,113,180 (140,492) 8,771,186 (270,193) 84,482,848
Net loss for the period - - - (349,759) (12,434,422) (12,784,181)
Balance as at 30 June 2023 9,167 76,113,180 (140,492) 8,421,427 (12,704,615) 71,698,667
UNAUDITED CONDENSED INTERIM STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM 1 JANUARY 2024 TO 30 JUNE 2024
Unaudited Period ended Unaudited Period ended
30 June 30 June
2024 2023
£ £
Cash flows from operating activities
Net income/(loss) for the period 4,051,412 (12,784,181)
Adjustments to reconcile net gain for the period to net cash used in operating
activities:
Interest income (542,466) (229,828)
Dividend income (25,286) (176,396)
Royalties income (115,038) -
Net (gain)/loss on financial assets at fair value through profit or loss 3 (4,187,110) 12,429,311
Net foreign exchange loss 2,068 -
Net decrease/(increase) in other receivables 4,262 (6,818)
Net increase/(decrease) in payables 72,908 (8,880)
(739,250) (776,792)
Interest received 147,605 231,653
Dividend received 25,286 176,396
Royalties received 115,038 -
Net cash used in operating activities (451,321) (368,743)
Cash flows from investing activities*
Purchase of financial assets at fair value through profit or loss (117,931) (772,888)
Sale of financial assets at fair value through profit or loss 1,493,217 1,148,353
Net cash generated from investing activities 1,375,286 375,465
Net increase in cash and cash equivalents 923,965 6,722
Cash and cash equivalents at the beginning of the period 277,694 254,140
Cash and cash equivalents at the end of the period 1,201,659 260,862
* As permitted under IFRS, purchases and sales of financial assets at fair
value through profit or loss are classified as investing activities due the
nature and intention to generate future income and cash flows from these
investments
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JANUARY 2024 TO 30 JUNE 2024
1. GENERAL INFORMATION
Baker Steel Resources Trust Limited (the "Company") is a closed-ended
investment company with limited liability incorporated and domiciled on 9
March 2010 in Guernsey under the Companies (Guernsey) Law, 2008 with
registration number 51576. The Company is a registered closed-ended investment
scheme registered pursuant to the Protection of Investors (Bailiwick of
Guernsey) Law, 2020 and the Registered Collective Investment Scheme Rules and
Guidance, 2021 issued by the Guernsey Financial Services Commission ("GFSC").
On 28 April 2010 the Ordinary Shares and Subscription Shares of the Company
were admitted to the Official List of the UK Listing Authority and to trading
on the Main Market of the London Stock Exchange. The Company's Ordinary and
Subscription Shares were admitted to the Premium Listing Segment of the
Official List on 28 April 2010.
The final exercise date for the Subscription Shares was 2 April 2013. No
Subscription Shares were exercised at this time and all residual/unexercised
Subscription Shares were subsequently cancelled.
The Company's portfolio is managed by Baker Steel Capital Managers (Cayman)
Limited (the "Manager"). The Manager has appointed Baker Steel Capital
Managers LLP (the "Investment Manager") as the Investment Manager to carry out
certain duties. The Company's investment objective is to seek capital growth
over the long-term through a focused, global portfolio consisting principally
of the equities, or related instruments, of natural resources companies. The
Company invests predominantly in unlisted companies (i.e. those companies
which have not yet made an Initial Public Offering ("IPO")) and also in listed
securities (including special situations opportunities and less liquid
securities) with a view to exploiting value inherent in market inefficiencies
and pricing anomalies.
Baker Steel Capital Managers LLP was authorised to act as an Alternative
Investment Fund Manager ("AIFM") of Alternative Investment Funds ("AIFs") on
22 July 2014. On 14 November 2014, the Investment Manager signed an amended
Investment Management Agreement with the Company, to take into account AIFM
regulations. AIFMD focuses on regulating the AIFM rather than the AIFs
themselves, so the impact on the Company is limited.
The Half-Yearly financial report has not been audited or reviewed by the
auditors. 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. MATERIAL ACCOUNTING POLICY INFORMATION
The unaudited condensed interim financial statements in the half year report
for the six months ended 30 June 2024 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 2023, 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 2023 and are expected to be applied to the Company's annual
financial statements for the year ending 31 December 2024.
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Period ended 30 June Year ended 31 December 2023
Investment Summary: 2024
£ £
Opening book cost 80,839,379 75,709,282
Purchases at cost 117,067 7,871,359
Sale of investments (1,690,611) (8,527,232)
Net realised (losses)/gains (197,394) 5,785,970
Closing cost 79,068,441 80,839,379
Net unrealised gains 5,612,239 1,030,637
Financial assets held at fair value through profit or loss 84,680,680 81,870,016
The following table analyses net gains on financial assets at fair value
through profit or loss for the period/year ended 30 June 2024, 31 December
2023 and 30 June 2023.
Period ended 30 June Year ended Period ended 30 June
2024 31 December 2023 2023
£ £ £
Financial assets at fair value through profit or loss
Realised (losses)/gains on:
- Listed equity shares (197,394) (1,338,513) (608,024)
- Unlisted equity shares - 7,123,472 9,727,913
- Debt instruments - 1,011 -
(197,394) 5,785,970 9,119,989
Movement in unrealised gains/(losses) on:
- Listed equity shares 2,352,945 (5,927,825) (5,391,591)
- Unlisted equity shares (1,015,206) (5,665,664) (13,859,987)
- Royalties 1,008,999 2,028,559 (2,718,767)
- Debt instruments 1,977,405 2,384,592 765,220
- Warrants 60,361 (391,698) (344,075)
4,384,504 (7,572,036) (21,549,200)
Net gain/(loss) on financial assets at fair value through profit or loss 4,187,110 (1,786,066) (12,429,311)
The following table analyses investments by type and by level within the fair
valuation hierarchy at 30 June 2024.
Quoted prices in active markets Quoted market based observables Unobservable
inputs
Level 1 Level 2 Level 3 Total
£ £ £ £
Financial assets at fair value through profit or loss
Listed equity shares 13,081,590 56,536 - 13,138,126
Unlisted equity shares - - 28,464,861 28,464,861
Royalties - - 23,630,066 23,630,066
Warrants - - 110,134 110,134
Debt instruments - - 19,337,493 19,337,493
13,081,590 56,536 71,542,554 84,680,680
The following table analyses investments by type and by level within the fair
valuation hierarchy at 31 December 2023.
Quoted prices in active markets Quoted market based observables Unobservable
inputs
Level 1 Level 2 Level 3 Total
£ £ £ £
Financial assets at fair value through profit or loss
Listed equity shares 12,170,931 188,483 - 12,359,414
Unlisted equity shares - - 29,480,067 29,480,067
Royalties - - 22,621,067 22,621,067
Warrants - - 49,773 49,773
Debt instruments - - 17,359,695 17,359,695
12,170,931 188,483 69,510,602 81,870,016
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 2024.
30 June 2024 Unlisted Equities Royalties Debt instruments Warrants Total
£ £ £ £ £
Opening balance 1 January 2024 29,480,068 22,621,067 17,359,694 49,773 69,510,602
Purchases of investments - - 117,067 - 117,067
Sales of investments - - (116,673) - (116,673)
Change in net unrealised (losses)/gains (1,015,207) 1,008,999 1,977,405 60,361 2,031,558
Closing balance 30 June 2024 28,464,861 23,630,066 19,337,493 110,134 71,542,554
Unrealised gains on investments still held at 30 June 2024 3,868,739 4,962,778 6,034,163 110,056 14,975,736
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 2023.
Unlisted Debt
31 December 2023 Equities Royalties instruments Warrants Total
£ £ £ £ £
Opening balance 1 January 2023 41,514,956 14,808,689 11,364,120 441,471 68,129,236
Purchases of investments - 5,783,819 3,973,519 - 9,757,338
Sales of investments (13,492,696) - (363,548) - (13,856,244)
Movement in net unrealised (losses)/gains (5,665,664) 2,028,559 2,384,592 (391,698) (1,644,211)
Realised gains 7,123,472 - 1,011 - 7,124,483
Closing balance 31 December 2023 29,480,068 22,621,067 17,723,242 49,773 69,510,602
Unrealised gains on investments still held at 31 December 2023 4,883,945 3,953,779 4,060,311 49,773 12,947,808
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 does not
currently hold a sufficiently large position in any listed company that it
could impact the quoted price via a sale of its investment.
As at 30 June 2024, the Investment Manager prepared the valuations and
considered whether there were any changes to performance or the circumstances
of the underlying investments which would affect the fair values. Methods,
assumptions, and data were consistently applied period on period except for
certain private equity investments where a change in assumption is deemed
appropriate to reflect the change in the market conditions or
investment-specific factors. The Investment Manager then made recommendations
to the Board of the fair values as at 30 June 2024.
Investments that trade in markets that are not considered to be active but are
valued based on quoted market prices, dealer quotations or alternative pricing
sources supported by observable inputs, are classified within Level 2. These
include certain less-liquid listed equities. Level 2 investments are valued
with reference to the listed price of the shares should they be freely
tradable after applying a discount for illiquidity if relevant. As Level 2
investments include positions that are not traded in active markets and/or are
subject to transfer restrictions, valuations may be adjusted to reflect
illiquidity and/or non-transferability, which are generally based on available
market information. The Company held one Level 2 investment at 30 June 2024
(31 December 2023: 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. If it is
assessed that a recent transaction is not at an arm's length or there are
other indicators that it has not been executed at a price that is indicative
of fair value, then the transaction value will not be used as the carrying
value of the investment. Where there has been no Latest Recent Transaction the
primary valuation driver is IndexVal. For each core unlisted investment, the
Company maintains a weighted average basket of listed companies which are
comparable to the investment in terms of commodity, stage of development and
location ("IndexVal"). IndexVal is used as an indication of how an
investment's share price might have moved had it been listed. Movements in
commodity prices are deemed to have been taken into account by the movement of
IndexVal.
A secondary tool used by Management to evaluate potential investments as well
as to provide underlying valuation references for the Fair Value already
established is Development Risk Adjusted Value ("DRAV"). DRAVs are not a
primary determinant of Fair Value. The Investment Manager prepares discounted
cash flow models for the Company's core investments annually taking into
account significant new information, and for decision making purposes when
required. From these, DRAVs are derived. The computations are based on
consensus forecasts for long term commodity prices and investee company
management estimates of operating and capital costs. Some market analysts
incorporate development risk into the discount rate in arriving at a net
present value ("NPV"). Instead, the Investment Manager establishes an NPV
discounted purely for cost of capital and country risk and then applies a
further overall discount to the project economics dependent on where such
project sits on the development curve per the DRAV calculations.
The valuation technique for Level 3 investments can be divided into seven
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 year-end but
have a high chance of success and are considered to represent the situation at
year 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 cashflows 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, its main asset is a cement plant with
no defined life like a mining project and therefore has been valued on the
basis of a multiple of a blend of historical and forecast earnings before
interest, tax, depreciation and amortisation ("EBITDA") when compared to
listed comparable cement producers.
v. Market Comparison
In the case of Futura Resources Ltd which moved into production in early 2024,
it was valued with reference to comparable listed coal producers both in terms
of EBITDA multiple and Net Present Value duly discounted for its stage of
development.
vi. 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.
vii. Convertible loans
Convertible loans are valued taking into account the value of the conversion
option based on a binomial model along with the associated credit risk of the
instrument.
Quantitative information on significant unobservable inputs - Level 3
Description 30 June Valuation technique Unobservable input Range of unobservable input
2024 (weighted average)
£
Unlisted Equity 1,845,808 Transactions & expected Transactions Private transactions n/a
Unlisted Equity 3,076,430 IndexVal Change in IndexVal +73%/-81%
Unlisted Equity 23,542,623 EBITDA Multiple EBITDA Multiple 4-14x
Royalties 23,606,941 Royalty Valuation model Commodity price and discount risk
Royalties 23,125 other n/a n/a
Debt Instruments
Convertible Loans 18,805,298 Valued at fair value with reference to credit risk Rate of Credit Risk 20%-40%
Other Loans 532,195 Risk Discount 0%-60%
Warrants 63,304 Discount for project milestones Discount 40%-64%
Contingent Interest 46,829 Discount to external valuation Risk Discount +/-75%
Description 31 December 2023 Valuation technique Unobservable input Range of unobservable input
£ (weighted average)
Unlisted Equity 3,773,733 Transactions Private transactions n/a
Unlisted Equity 3,206,973 IndexVal Change in index +38%/-53%
Unlisted Equity 22,499,362 EBITDA Multiple EBITDA Multiple 4x - 14x
Royalties 22,621,067 Royalty Valuation model Commodity price and discount rate risk 10% - 70%
Unlisted Equity - Other Exploration results, study results, financing n/a
Debt Instruments
Black Pearl Limited Partnership 343,388 Valued at mean estimated recovery Estimated recovery range +/-50%
Other Convertible Debentures/Loans 17,016,306 Valued at fair value with reference to credit risk Rate of Credit Risk 20%-40%
Warrants 1,736 Simplified Black Scholes Model Volatilities 50%
Contingent Interest 48,037 Discounted External valuation Discount +/-40%
Information on third party transactions in unlisted equities is derived from
the Investment Manager's market contacts. The change in IndexVal for each
particular unlisted equity is derived from the weighted average movements of
the individual baskets for that equity so it is not possible to quantify the
range of such inputs.
The significant unobservable inputs used in the fair value measurement
categorised within Level 3 of the fair value hierarchy together with a
quantitative sensitivity analysis as at 30 June 2024 are as shown below:
Description Input Sensitivity used* Effect on Fair Value (£)
Unlisted Equity Transactions & Expected Transactions +/- 20% +/-369,162
Unlisted Equity Change in IndexVal +73%/-81%* +2,245,794/-2,491,909
Unlisted Equity EBITDA Multiple +/- 20% +/-4,708,525
On-sale entitlement Discount to valuation +/-50% +/-23,414
Royalties Commodity Price +/-20% +/-4,721,388
Royalties Discount Rate +/-20% -2,836,851/+£3,425,708
Debt Instruments
Convertibles/Loans Risk discount rate +/-20% -1,883,308/+573397
Convertible Loans Volatility +/-40% +486,341/-441,980
Warrants Risk Discount Rate +/-40% -47,488/+68,594
* The sensitivity analysis refers to a percentage amount added or deducted
from the input and the effect this has on the fair value. The +73%/-81%
sensitivity was used as this was the range of movements of the constituents in
the IndexVal basket for Nussir..
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 2023 are as shown below:
Description Input Sensitivity used Effect on Fair Value (£)
Unlisted Equity Transactions & Expected Transactions +/- 20% +/-754,747
Unlisted Equity Change in IndexVal +38%/-53%** + 1,218,650 /-1,699,695
Unlisted Equity EBITDA Multiple +/- 20% +/- 4,499,872
Royalties Commodity Price +/-20% +/- 4,524,213
Royalties Discount Rate +/-20% -2,708,225/+3,299,807
Debt Instruments
Black Pearl Limited Partnership Probability weighting +/-50% +/- 171,825
Others/Loans Risk discount rate +/-20% -1,890,967 /+ 700,781
Convertibles /Loans Volatility of Index Basket +/-40% + 549,500 /-492,756
Warrants Volatility of Index Basket +/-40% + 1,326 /-79
+/-20% +795/-662
Risk of milestones being achieved
Contingent Interest Risk discount rate +/-20% +/-19,215
** The sensitivity analysis refers to a percentage amount added or deducted
from the input and the effect this has on the fair value. The +44%/-79%
sensitivity was used as this was the range of movements of the constituents in
the IndexVal baskets for Nussir
4. NET ASSET VALUE PER SHARE AND EARNINGS PER SHARE
Net asset value per share is based on the net assets of £86,215,991 (31
December 2023: £82,159,579) and 106,462,502 (31 December 2023: 106,462,502)
Ordinary Shares, being the number of shares in issue at 30 June 2024, 31
December 2023 and 30 June 2023, excluding 700,000 shares which are held in
treasury. The calculation for basic and diluted NAV per share is as below:
30 June 2024 31 December 2023
Net assets at the period end (£) 86,215,991 82,159,579
Number of shares 106,462,502 106,462,502
Net asset value per share (in pence) basic and diluted 81.0 77.2
30 June 2024 30 June 2023
Net Profit/(loss) for the period (£) 4,051,411 (12,784,181)
Number of shares 106,462,502 106,462,502
Earnings per ordinary share (in pence) basic and diluted 3.81 (12.01)
There are no outstanding instruments which could result in the issue of new
shares or dilute the issued share capital.
5. 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 £1,600 (2023: £1,200)
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.
6. 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 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 management fee for the period ended 30 June 2024 was £448,369 (30 June 2023: £453,417) of which £85,023 (31 December 2023: £ 57,735) was outstanding at the period end.
The Manager is also entitled to a performance fee. The Performance Period is
each 12-month period ending on 31 December (the "Performance Period"). The
amount of the performance fee is 15 per cent of the total increase in the NAV,
if the Hurdle has been met, at the end of the relevant Performance Period,
over the highest previously recorded NAV as at the end of a Performance Period
in respect of which a performance fee was last accrued, having adjusted for
numbers of Ordinary Shares issued and/or repurchased ("Highwater Mark"). The
Hurdle is the Issue Price multiplied by the shares in issue, increased at a
rate of 8% per annum compounded to the end of the relevant performance period.
In addition, the performance fee will only become payable if there have been
sufficient net realised gains. As at 30 June 2024, the Highwater Mark was the
equivalent of approximately 94 pence per share with the relevant Hurdle being
the equivalent of approximately 183 pence per share.
There were no performance fees earned for the current or prior period.
Amendments have been made to the Management Agreement and Investment
Management Agreements with the Manager and Investment Manager respectively,
such that, that proportion of the Management Fee associated with discretionary
fund management is now paid directly to the Investment Manager i.e. the
Manager now receives no income from its appointment as a discretionary fund
manager pursuant to the Management Agreement, and this is paid directly to the
Investment Manager. There is no impact whatsoever on the overall Management
Fee paid by the Company. The amendments are effective from 1 July 2024.
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
Investment Manager and 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.
7. 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 2023: 106,453,335)
Ordinary Shares in issue with an additional 700,000 (31 December 2023:
700,000) held in treasury. In addition, the Company has 9,167 (31 December
2023: 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 2024 31 December 2023
Amount* No. of shares* Amount* No. of shares*
£ £
Issued and fully paid share capital
Ordinary Shares of no par value** 76,122,347 107,162,502 76,122,347 107,162,502
(including Management Ordinary Shares)
Treasury Shares (140,492) (700,000) (140,492) (700,000)
Total Share Capital 75,981,855 106,462,502 75,981,855 106,462,502
The outstanding Ordinary Shares as at the period ended 30 June 2024 are as
follows:
Ordinary Shares Treasury Shares
Amount* No. of shares* Amount No. of shares
£ £
Balance at 1 January 2024 & 30 June 2024 76,122,347 106,462,502 140,492 700,000
* Includes 9,167 (31 December 2023: 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 2023 are as
follows:
Ordinary Shares Treasury Shares
Amount* No. of shares* Amount No. of shares
£ £
Balance at 1 January 2023 & 31 December 2023 76,122,347 106,462,502 140,492 700,000
* Includes 9,167 (31 December 2023: 9,167) Management Ordinary Shares.
8. RELATED PARTY TRANSACTIONS
The Investment Manager, Baker Steel Capital Managers LLP, had an interest in
9,167 Management Ordinary Shares at 30 June 2024 (31 December 2023: 9,167).
The Management fees paid and accrued for the year are disclosed under Note 6.
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 12,460,677 shares (31 December 2023; 12,460,677) and The Sonya
Trust holds 12,637,350 shares (31 December 2023: 12,637,350).
John Falla holds 100,000 shares in the Company (31 December 2023: 100,000).
Patrick Meier holds 82,261 shares in the Company.
Management fees and Directors' fees paid and accrued during the periods to 30
June were:
2024 2023
£ £
Management fees 448,369 453,417
Directors' fees 73,526 72,500
The Management fees and Directors' fees outstanding at the period/year-end
were:
30 June 2024 31 December 2023
£ £
Management fees 85,023 57,735
Directors' fees 1,026 36,250
9. SUBSEQUENT EVENTS
There were no events subsequent to the period end that materially impacted the
Company.
MANAGEMENT AND ADMINISTRATION
DIRECTORS: Howard Myles (Chairman)
Charles Hansard
Fiona Perrott-Humphrey
John Falla
Patrick Meier (appointed 25 June 2024)
(all of whom are non-executive and independent)
REGISTERED OFFICE: East Wing, Trafalgar Court
Les Banques
St. Peter Port
Guernsey, GY1 3PP
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
STOCKBROKERS: Deutsche Numis
45 Gresham Street
London, EC2V 7BF
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: Aztec Financial Services (Guernsey) Limited
East Wing, Trafalgar Court
Les Banques
St. Peter Port
Guernsey, GY1 3PP
Channel Islands
CUSTODIAN TO THE COMPANY: Liberum Wealth Limited
1st Floor, Royal Chambers
St Julian's Avenue
St. Peter Port
Guernsey, GY1 2HH
Channel Islands
SAFEKEEPING AND MONITORING AGENT: Liberum Wealth Limited
1st Floor, Royal Chambers
St Julian's Avenue
St. Peter Port
Guernsey, GY1 2HH
Channel Islands
INDEPENDENT AUDITOR: BDO Limited
P.O. Box 180
Plaza House
2nd Floor, Admiral Park
St. Peter Port
Guernsey, GY1 3LL
Channel Islands
REGISTRAR: Computershare Investor Services (Guernsey) Limited
2(nd) Floor, Lefebvre Place
Lefebvre Street
St Peter Port
Guernsey
GY1 2JP
UK PAYING AGENT AND TRANSFER AGENT: Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
JE11ES
Jersey
RECEIVING AGENT: Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
JE11ES
Jersey
PRINCIPAL BANKER: HSBC Bank plc
Arnold House
St Julian's Avenue
St. Peter Port
Guernsey, GY1 3NF
Channel Islands
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