How it's doing
Still flushed with the success of its investment in the Prognoz silver mine last year, Baker Steel Resources Trust Limited (LON:BSRT) is hoping to repeat the trick.
The mineral resources-focused trusts second-largest investment, Polar Acquisition Limited (PAL) sold Polar Silver Resources, which owns 50% of the Prognoz silver mine in Russia, for US$72mln worth of Polymetal International PLC (LON:POLY) shares.
“We made three times our money on Prognoz over a period when the silver price halved,” Trevor Steel, the chief investment officer and co-founder of Baker Steel, told Proactive Investors.
“10% is retained in terms of a revenue royalty on Prognoz so … that sets us up in terms of having more liquidity in the portfolio to pursue new ideas if we wish,” he added
Since then, Baker Steel has employed some of its cash by acquiring an Australian coal royalty and investing US$3mln via a convertible loan and warrants in Canadian-listed Azarga Metals Corp (CVE:AZR) as it undertakes a second-phase of exploration drilling at its Unkur copper-silver project in Russia.
What the CIO says: Trevor Steel
Although around 40% of the portfolio is in early-stage investments, Steel said the team believe the portfolio was "maturing nicely and it's ripe for some further realisations in due course".
He has outlined four stocks that he thinks could provide significant uplifts to the trusts NAV in the short- to medium-term, led by Futura Resources.
Futura, at 16.2% of the portfolio as of November 2019, has two advanced coking coal developments in the Bowen Basin in Australia, where capital costs to bring the projects into production are likely to be low.
Another investment that could see a valuation catalyst is Sarmin, a world-class potash discovery in what Steel termed as “the good Congo”, ie the Republic of Congo.
Attention has also been moving towards Bilboes, a Zimbabwean gold mine, and Cemos, a private company that is about to start producing cement from its Moroccan operations.
Bilboes, currently represents 14.3% of Baker Steels portfolio
As for Cemos, that is currently being carried at book cost but Steel thinks that valuation will need to be revised next year.
Inflexion points
Shares have reached a five-year high but still have some way to go to catch up with the NAV.
The discount to NAV has come down to about 17% on the latest valuation of 68.8p at end October 2019.
Four main holdings are: Futura Resources;Polymetal; Cemos and Bilboes
Blue Sky
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