REG - Baker Steel Res Tst - Sale of Bilboes Gold

Baker Steel Resources TrustAnnouncement

21/07/2022 07:00

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RNS Number : 2178T  Baker Steel Resources Trust Ltd  21 July 2022

 

BAKER STEEL RESOURCES TRUST LIMITED

(Incorporated in Guernsey with registered number 51576 under the provisions of
The Companies (Guernsey) Law, 2008 as amended)

 

21 July 2022

Sale of Bilboes Gold to Caledonia Mining

Baker Steel Resources Trust Limited (the "Company") announces that it and the
other shareholders of Bilboes Gold Limited ("Bilboes") have signed an
agreement to sell Bilboes to Caledonia Mining Corporation Plc ("Caledonia")
(NYSE: CMCL; AIM: CMCL; VFEX: CMCL) for a total consideration of 5,123,044
Caledonia shares and a 1% net smelter royalty ("NSR") on Bilboes's gold
project. Completion of 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 2022.

 

The Company's share of the consideration for its 24.2% shareholding in Bilboes
will be 800,000 shares in Caledonia and instead of receiving all its
consideration in shares the Company negotiated part of it in the form of a 1%
NSR. Valuing the royalty as if the Company is receiving the same value per
Bilboes share as the other Bilboes shareholders and the closing Caledonia
share price on the New York Stock Exchange on 18 July 2022 of US$10.40 values
the Company's consideration at US$14.3 million. However, in future the royalty
will be valued based on the Company's policy of a development risk adjusted
economic model.

Caledonia is a profitable NYSE, AIM and Victoria Falls Exchange listed gold
producer whose primary asset is the Blanket Mine in Zimbabwe which is on
target to produce 73,000-80,000 ounces of gold during 2022 and Caledonia
currently pays a quarterly dividend of 14 cents a share (approx. 5.5% yield)
and trades on a P/E of 6 times prospective 2022 earnings (source: Bloomberg).

Earlier this year independent consultant DRA Africa Holdings (Pty) Ltd ("DRA")
completed a feasibility study on Bilboes' Isabella/McCays/Bubi gold project in
Matabeleland, Zimbabwe indicating the potential for an open pit gold mine with
average annual production of approximately 168koz per annum with a 10-year
life at a projected all-in sustaining cost (AISC) of US$826/oz. According to
the study, the project has a Net Present Value at a 10% discount rate of
US$323 million at a gold price of US$1,650/oz. 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.

Although the headline consideration for the Company's share of Bilboes is
approximately 10% lower than the Company's carrying value at 30 June 2022,
largely due to the recent fall in Caledonia's share price in line with other
gold producers, there are significant synergies with the transaction. Not only
will financing the development of Bilboes' mine 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
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 Company believes that the Bilboes project has a very good prospect of
becoming a successful gold mine in the near term, with potential to expand its
reserves and extend its mine life over the medium term. It has thus opted for
an ongoing direct interest in the mine through the NSR. This could start as
early as next year from initial oxide mining albeit at a considerably lower
rate but 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. Together with the other royalties in the
portfolio it is hoped that this will become the basis for regular cashflow to
the Company which in turn can be passed on as dividends to shareholders

 

Further details of the proposed transaction can be found in Caledonia's RNS
made today available on its website www.caledoniamining,com .

 

Further details of the Company and its investments are available on the
Company's website (about%3Ablank) www.bakersteelresourcestrust.com
(http://bakersteelresourcestrust.com/)

 

 

 

 

Enquiries:

Baker Steel Resources Trust Limited             +44 20 7389 8237

Francis Johnstone

Trevor Steel

 

Numis Securities
Limited                               +44 20
7260 1000

David Benda (corporate)

James Glass (sales)

 

The Net Asset Value ("NAV") figure stated is based on unaudited estimated
valuations of the underlying investments and not necessarily based on
observable inputs. Such estimates are not subject to any independent
verification or other due diligence and may not comply with generally accepted
accounting practices or other generally accepted valuation principles. In
addition, some estimated valuations are based on the latest available
information which may relate to some time before the date set out above.

 

Accordingly, no reliance should be placed on such estimated valuations and
they should only be taken as an indicative guide. Other risk factors which may
be relevant to the NAV figure are set out in the Company's Prospectus dated 26
January 2015.

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