TIDMBSRT
RNS Number : 4710I
Baker Steel Resources Trust Ltd
14 April 2022
BAKER STEEL RESOURCES TRUST LIMITED
(Incorporated in Guernsey with registered number 51576 under the
provisions of The Companies (Guernsey) Law, 2008 as amended)
14 April 2022
BAKER STEEL RESOURCES TRUST LTD
(the "Company")
Annual Report and Audited Financial Statements
For the year ended 31 December 2020
The Company has today, in accordance with DTR 6.3.5, released
its Annual Audited Financial Report for the year ended 31 December
2021. The Report is available via www.bakersteelresourcestrust.com
and will shortly be submitted to the 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
Company Secretary: +44 1481 717 852
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.
SUB-ADMINISTRATOR TO THE COMPANY: HSBC Securities Services (Ireland) DAC
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
CUSTODIAN TO THE COMPANY: HSBC Continental Europe
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
SAFEKEEPING AND MONITORING AGENT: HSBC Continental 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
GY1 3LL
Guernsey
REGISTRAR: Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
JE11ES
Jersey
UK PAYING AGENT, RECEIVING AGENT AND TRANSFER AGENT: Computershare Investor Services (Jersey) 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 year ended 31 December 2021
2021 was a mixed year for your Company as the global economy
started to recover after the severe shock of the Covid-19 pandemic.
The NAV per share increased by 1.2% to 98.4 pence, compared to a
5.0% rise in the EMIX Global Mining Index in Sterling terms. The
Company's share price on the London Stock Exchange rose 3.4% during
the year. This overall flat performance masks some significant
movements in the underlying portfolio. In particular, the carrying
values of First Tin doubled and Kanga Potash increased 52% on the
back of surging prices of tin and potash, whereas those of Bilboes
Gold and Polar Acquisitions fell on weaker precious metal markets.
Whilst the investment policy of the Company concentrates on the
specific characteristics of the individual projects, this
demonstrates the importance of diversification in terms of
commodity, geography and development stage of the projects as
well.
Two Listings During 2021
During the year two of the Company's core investments were
listed. Tungsten West PLC completed a successful listing on the AIM
market of the London Stock Exchange in October 2021, raising GBP39
million. This, together with a US$49 million royalty and loan
facility from Orion Resource Partners, was well in excess of the
GBP45 million capital required to bring Tungsten West's Hemerdon
tungsten mine into production despite the 10% inflation in capex
being seen across the mining industry. The listing price
represented approximately three times the Company's average
investment price and although our shares are locked-up until
October this year under AIM rules, we believe there is significant
upside potential for Tungsten West once the mine comes into
production which is targeted for early next year.
The other investment to achieve a listing was Mines & Metals
Peru PLC which merged with Oro X Mining Corp to create Silver X
Mining Corporation, listed on the Toronto Venture Exchange and
raising C$14 million. Unfortunately, since its listing Silver X's
share price has fallen, probably due to a weaker silver price and
the election of a left-wing government in Peru which is targeting
the mining industry with increased taxes. Fortunately, the majority
of the Company's investment in Silver X remains via a convertible
debenture, repayable in June 2022, albeit the conversion price is
well below the current share price. We are in negotiation with
Silver X either for our capital to be repaid or for another
mutually acceptable solution. This re-emphasises the benefits of
the Company's strategy to make new investments via convertible
loans, maintaining the equity upside whilst providing a measure of
downside risk protection.
The termination of negotiations for the cash offer for Bilboes
Gold was a disappointment during 2021, however the type and length
of warranties demanded by the potential buyer would have tied up
too much of our capital for an unacceptable period of time. Bilboes
is currently reviewing its options for the refinancing of what will
be Zimbabwe's largest gold mine but our preference is one that
enables the Company to retain a stake in the future of the mine
Environment, Social and Governance ("ESG")
The focus on ESG has become increasingly important for all
industries but particularly the mining industry which historically
has had a poor reputation, not always unjustified. It is therefore
important for the mining industry to demonstrate that it can be
part of the solution to the environmental issues facing the world,
rather than a problem, whether through metals for electricity
storage such as lithium, nickel and cobalt or through electricity
transmission and connections such as copper and tin. Until scalable
and economically viable alternative can be put in place, however,
even coking coal will have an important role in producing the steel
required to create the infrastructure for a carbon neutral future.
Mines themselves can also move to lower their carbon footprint by
installing solar plants or moving to electric equipment. The Nussir
copper project in northern Norway in which the Company has a 12.1%
interest is contender for the world's first truly carbon neutral
mine having recently updated its feasibility study based on a 100%
electric primary mining fleet plus utility vehicles. All of
Nussir's electricity needs will be covered from renewable energy
sources.
Social & Governance issues have always been an important
part of the Company's investment criteria as a properly run company
which has the right employee culture and sensitivity to the
concerns of local communities should encounter fewer problems and
outperform in the longer term. However, it is important that we as
responsible allocators of capital do our best not to let the
current trends on ESG become a "tick box" exercise where companies
make glib statements on ESG in annual reports whilst not following
through with actions. We expect the debate around what are
appropriate and realistic measures of ESG to continue. Part of the
strategy of the Company is to seek board representation on our
investments so that we are in a position to guide policy on ESG,
which is also becoming an increasingly important factor in the cost
of capital for mining companies. Further details on the Company's
investments are given in the Investment Manager's Report.
Outlook
The maturity of the Company's investment portfolio is
demonstrated by the expectation of a further three listings during
2022. First Tin PLC successfully listed on the main market of the
London Stock Exchange raising GBP20 million in April 2022 and is
planning a secondary listing on the Australian Stock Exchange later
this year. As mentioned above Nussir has completed the update on
its feasibility study and expects to list later this year to raise
the equity for the development of its copper project. Kanga Potash
is likewise planning an IPO in London later this year in order to
fund the final engineering studies following its positive
feasibility study on its world class potash project in the Republic
of Congo which is supported by the recent more than doubling of
potash prices.
The Investment Manager continues to evaluate and monitor a
number of interesting potential new projects which could meet our
criteria for investment. Due to the size of the Company's ownership
interests in the companies being listed however, its holdings are
likely to be locked up for a period before potential cash
realisations can be made, therefore any new investments are
unlikely until the latter part of the year.
The escalation of tensions between Russia and the West,
following Russia's invasion of Ukraine, presents a range of
implications for both precious metals and broader commodity
markets. Gold has moved higher driven by both safe haven demand,
and soaring energy costs suggesting that higher inflation is likely
to last longer than governments are currently forecasting. The war
has also further emphasised the issue of supply chains. The
importance of where commodities are produced and how easily they
can reach their end markets had already been highlighted during the
Covid pandemic. Some commentators are now suggesting an end to the
trend of extreme globalisation that has occurred in recent decades.
Should this be the case, the reverse trend could see even more
significant supply chain disruptions leading to higher commodity
inflation.
The other key outcome from the sanctions on Russia and the
resulting increases in oil and gas prices is likely to be an
acceleration in the West of the existing drive towards
electrification, renewable energy and greater energy
self-sufficiency over the medium term. Most European countries have
announced major plans for increased renewables. In addition,
President Biden's plans to employ the little-used Defense
Production Act to increase American production of minerals vital
for building electric vehicles (EVs) and other forms of battery
storage that are key to weaning the United States from fossil fuels
is further evidence of this trend.
On the downside for mining companies, higher energy prices and
wage inflation will undoubtedly raise operating costs, and supply
chain issues could mean a requirement for greater working capital.
This could particularly apply to development projects such as those
in which the Company is investing. However, we expect this to be
more than compensated for by higher commodity prices.
Howard Myles
Chairman
14 April 2022
INVESTMENT MANAGER'S REPORT
For the year ended 31 December 2021
Financial Performance
The audited Net Asset Value per Ordinary Share ("NAV") as at 31
December 2021 was 98.4pence, an increase of 1.20% in the year
compared with the increase in the EMIX Global Mining Index of 5.0%
in Sterling terms.
For the purpose of calculating the NAV per share, unquoted
investments were carried at fair value as at 31 December 2021 as
determined by the Directors and quoted investments were carried at
their quoted prices as that date.
Net assets at 31 December 2021 comprised the following:
GBPm % net assets
Unquoted Investments 84.8 80.9
Quoted Investments 18.9 18.0
Cash and other net assets 1.1 1.1
--------------- --------------
104.8 100.0
Investment Update
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 (previously Anglo Saxony
Mining Limited) 7.7
Polar Acquisition Limited 7.5
Kanga Potash (previously Sarmin Minerals Exploration) 4.1
Nussir ASA 3.6
Silver X Mining Corporation (previously Mines
& Metals Trading (Peru) Plc 2.8
Azarga Metals Corporation 2.4
92.5
Other Investments 6.4
Cash and other net assets 1.1
---------
100.0
=========
Largest 10 Holdings - 31 December 2020 % of NAV
Bilboes Gold Limited 19.5
Futura Resources Limited 16.2
Cemos Group Plc 14.5
Tungsten West Limited 13.2
Polar Acquisition Limited 8.9
Mines & Metals Trading (Peru) Plc (now Silver
X Mining Corporation) 4.4
Anglo Saxony Mining Limited (now First Tin
Limited) 3.9
Nussir ASA 3.4
Azarga Metals Corporation 2.7
Sarmin Minerals Exploration (now Kanga Potash) 2.7
89.4
Other Investments 9.7
Cash and other net assets 0.9
--------------------------
100.0
==========================
Review
At the year end, the Company was fully invested, holding 22
investments of which the top 10 holdings comprised 92.5% of the
portfolio by value. The portfolio is well diversified both in terms
of commodity and the geographical location of the projects. In
terms of commodity the portfolio has exposure to gold, silver,
metallurgical coal, cement, tungsten, copper, tin, iron, potash,
lead and zinc. Its projects are located in Australia, Canada,
Germany, Indonesia, Madagascar, Mongolia, Morocco, Norway, Peru,
the Philippines, Republic of Congo, Russia, South Africa, the UK
and Zimbabwe.
During the year, the performance of mining markets was variable
dependent on commodity but overall performance was flat with EMIX
Global Mining Index ending the year up 5% in Sterling terms.
Following the strong gains in 2020 precious metals fell back with
gold down 4% and silver down 12% in US Dollars. Iron ore likewise
fell 24% during 2021 after rising 74% in 2020. Metals required for
the electrification of the world's infrastructure continued to be
strong with copper rising a further 26% during the year having
risen 26% in 2020 and, tin more than doubling (all in US dollars).
Coking coal more than reversed its 31% fall in 2020, rising 252%
during 2021 and potash was similarly strong - more than doubling
during the year.
Although two of the Company's core investments, Tungsten West
and Silver X listed during the year, it did not monetise either of
these investments and therefore did not have surplus funds to make
any significant new investments during 2021. The Company's shares
in Tungsten West are locked-up until October 2022 and the majority
of the Company's interest in Silver X is held through a convertible
debenture which matures in June 2022.
During 2021, Cemos Group PLC continued profitable production at
its cement plant in Morocco. 2021 cement sales of approximately
EUR30 million were at a similar level to 2020 despite the adverse
impact of clinker import restrictions which were brought in by the
Moroccan authorities in the second quarter of the year. This
affected the second and third quarters in particular as Cemos had
to source alternative sources of clinker albeit the situation had
improved by the fourth quarter following successful negotiation of
supply arrangements with local clinker producers. Due to the
continued steady performance of Cemos's operations and increased
confidence in Cemos's profitability and forecasting it was decided
to reduce the discount applied to Cemos's valuation compared to the
rating of its Moroccan listed peers, which resulted in a 35%
increase in carrying value. Cemos continues to examine the
potential to double its production as well as the possibility of
installing its own clinker plant. This may be financed through a
fund raising via listing on the Moroccan stock exchange which is
also being considered.
For most of 2021 progress on financing Futura's Wilton and
Fairhill coking coal projects was stalled as a result of China
ceasing to import coking coal from Australia. This resulted in
significant disruption to the international market with the price
of coking coal falling to around US$100 per tonne. The market has
since recovered considerably with coking coal recently trading in
excess of US$500 per tonne. Futura is currently in advanced
discussions for the finance to commence both mines sequentially
with the aim of starting production in the third quarter of 2022.
Once in full production the mines are due to produce around 2
million tonnes of coal per year at a cost of around US$70 per
tonne. The Company owns approximately 27% of Futura as well as a 1%
revenue royalty.
In October 2021, Tungsten West, which owns the Hemerdon Tungsten
Mine 7 miles northeast of Plymouth in Devon, England listed on the
AIM market of the London Stock Exchange raising approximately GBP35
million after expenses. Together with the agreement to sell a
royalty for US$21 million and a project finance facility of US$28
million, Tungsten West is well funded to meet the GBP45 million
capital cost outlined in its Bankable Feasibility Study ("BFS") to
bring the Hemerdon Mine back into production. Tungsten prices have
been steadily increasing over the past year with European Ammonium
Paratungstate ("APT") prices standing at $335-$345 per MTU compared
to US$275 per MTU used in the BFS. This should more than offset
inflation in operating and capital costs being seen across the
mining industry. Tungsten West is well advanced with its
development plans with the appointment of Fairport Engineering as
Engineering Procurement and Construction Management ("EPCM")
contractor and key capital equipment either delivered or on order
and key hires for project delivery made with targeted production in
early 2023.
It was disappointing that Bilboes Gold shareholders had to
terminate negotiations for the cash sale of that company in July
2021. Although the value of the offer had been agreed, the ongoing
conditions demanded by the potential buyer were outside ordinary
market practice and would have reduced the opportunity to reinvest
or distribute the proceeds for at least 2 years. As the initial
Definitive Feasibility Study ("DFS") on its Isabella/McCays/Bubi
gold project in Zimbabwe was completed in January 2020 Bilboes
decided to update it for current pricing. The updated DFS,
completed in January 2022, defined an open -pit gold mine with an
average gold production of 167,000 ounces of gold per year over a
ten-year mine life (2020 DFS 152,000 oz). This would make the mine
the largest gold mine in Zimbabwe. The peak funding requirement
rose 9% to US$250million with All-In Sustaining Costs rising 4.4%
to US$826/oz of gold production. Using a gold price of US$1,650/oz
the project economics show an after tax NPV10% of US$323 million
with an internal rate of return of 33% and a payback on investment
of one and a half years. Bilboes shareholders are now considering
the best way to finance the development of the project.
First Tin PLC (formerly Anglo Saxony Mining) completed a
Pre-Feasibility Study ("PFS") on its Tellerhauser tin project in
Saxony, Germany, in April 2020. The study base case economics
showed that the project required a higher tin price than the
US$20,500/tonne used in the study to be financeable. Since then,
the tin price has more than doubled as markets have come to
understand that tin is one of the principal beneficiaries of the
global move towards electrification due to its use as solder for
electrical connections. In November 2021 First Tin signed an
agreement to acquire the Taronga Tin Project in New South Wales
which contains estimated resources containing 57,000 tonnes tin,
28,000 tonnes copper and 4.4 million ounces' silver. The
acquisition was subject to First Tin undertaking an IPO on the
London Stock Exchange raising at least GBP20 million. The IPO was
completed in early April 2022, raising GBP20 million at a price of
30 pence per share compared to the Company's acquisition price of
approximately 8 pence per share. As the Company is the largest
shareholder in First Tin, its shares will be locked up for one
year. First Tin plans to use the proceeds of the IPO to undertake
bankable feasibility studies on both the Tellerhauser and Taronga
projects and further exploration.
In August 2021 Polymetal International PLC announced that it had
approved an accelerated development of the open-pit mine at the
Prognoz silver project in the Republic of Sakha (Yakutia), Russia
over which Polar Acquisition Limited ("PAL") holds a 1.8% to 0.9%
net smelter royalty, with ore processing to take place at
Polymetal's Nezhda mine concentrator. First production and
therefore payment of the royalty is now planned for 2024
approximately three years earlier than previously envisaged. The
plan proposes silver equivalent production of approximately 6.5
million ounces per annum in concentrate over 18 years. This is a
lower production rate over a longer period than the previous
guidance, however given the additional resources already identified
which could be mineable using underground methods, as well as the
further exploration potential, there is a reasonable likelihood
that the production rate could be doubled with processing to take
place on site at Prognoz, as had previously been planned in the
PFS, once the mine is producing positive cashflow. At the end of
February 2022, the Company reviewed the carrying value of PAL.
Although Polymetal is a Jersey registered company and is listed on
the London Stock Exchange, the majority of its assets are situated
in Russia and Kazakhstan. As at the end of March 2022, Polymetal
had not been the subject of targeted sanctions. To account for the
increased risk in relation to investments in Russia the Company
decided to reduce the carrying value of PAL by 50%. The revaluation
is not reflected in the Annual Report as it is considered a
non-adjusting Post Balance Sheet Event.
In September 2020, Kanga Potash (formerly Sarmin Mineral
Exploration) completed a positive DFS on its Kanga Potash project
in the Republic of Congo for a mine producing 600,000 tonnes per
annum of Muriate of Phosphate ("MOP"). It also has the potential to
be expanded on a modular basis up to 2.4M tonnes per annum over 30
years. The DFS economic model gave a NPV10% of US$511 million with
an IRR of 22% based on an MOP price of US$282 per tonne. Over the
past year the MOP price has risen to over US$800/tonne. Kanga is
currently planning an IPO in the second half of the year.
In early 2022 Nussir completed the update of its 2022 DFS on its
Nussir/Ulveryggen copper project in northern Norway on the basis of
a fully electrified mine producing around 13,000 tonnes of copper
per year over a 14-year mine life. The revised DFS economics gave a
NPV6% US$148 million with an IRR of 17% based on a copper price of
US$7,500 per tonne, well below the current market price of
approximately US$10,000 per tonne. Nussir is currently in
discussions with potential financiers for the development of the
mine.
In the first half of 2021, Mines & Metals Trading Peru PLC
completed a business combination with TSX-V listed mineral
exploration company Oro X Mining Corp together with a C$14.2
million equity raising with the resultant merged company called
Silver X Mining Corporation. Silver X's Recuperada project in Peru
has secured the environmental permitting approval required to
increase production capacity to 720 tonnes per day and installation
of a new crushing circuit and flotation cells has commenced. Silver
X's exploration focus is on expanding and improving its
understanding of its central Tangana mining unit. A 10,000 metres
drilling campaign is underway to evaluate these structures for
delivery of an upgraded resource statement in 2022.
Amongst the smaller investments in the portfolio Azarga Metals
Corp. released the results of its updated Preliminary Economic
Assessment on its Unkur copper/silver project in far eastern
Russia. Although the project economics looked attractive, countries
around the world have imposed a number of sanctions on Russia in
response to the Russian invasion of Ukraine. These sanctions
include, but are not limited to, removing certain Russian banks
from the Society for Worldwide Interbank Financial
Telecommunication ("SWIFT") messaging system, which will likely
affect Azarga's ability to fund the Unkur project and could
jeopardize the viability of the Company's business operations in
Russia. Azarga is therefore concentrating on its second project:
The Marg Volcanic Massive Sulphide ("VMS") exploration project in
the Yukon. At the end of February 2022, the Company reviewed the
carrying value of its convertible loan to Azarga. To account for
the increased risk in relation to investments in Russia the Company
decided to reduce the carrying value of the loan by 50%. Metals
Exploration plc continued to improve the production rate from its
Runruno gold mine in the Philippines and is steadily reducing its
debt burden, Black Pearl continued discussions with Chinese
partners regarding the use of its mine as the basis for a new steel
plant in Indonesia, and Prism Diversified is currently discussing a
re-organisation and financing to further its iron ore and lithium
projects in Alberta Canada.
Outlook
The invasion of Ukraine by Russia is expected to have a profound
effect on the mining industry during 2022 and possibly beyond.
Although commodity prices are expected to be strong due to supply
disruptions there will also be inflationary pressures on capital
and operating costs and this may in turn reduce investors' appetite
for risk in financing new projects through IPO's or otherwise.
Increased safe haven demand, and inflation concerns, have sent the
gold price to a 17-month high, while the imposition of sanctions
will likely exacerbate existing supply issues, particularly for
those commodities where a significant portion of production is from
Russia or Belarus, and where markets are very tight already as
discussed in the Chairman's Statement.
Further details of each of these investments are provided
below.
Cemos Group plc ("Cemos")
Cemos is a private cement producer at Tarfaya in Morocco. Cemos
produced 235,000 tonnes of cement in 2021.
Futura Resources Ltd ("Futura")
Futura owns the Wilton and Fairhill coking coal projects in the
Bowen Basin in Queensland, Australia which hold Measured and
Indicated resources of 843 million tonnes of coal. Production is
targeted to commence during H2 2022, for a targeted combined
sustainable level of approximately 2 million tonnes per annum of
saleable processed coal for at least 25 years once in full
production.
Tungsten West PLC ("Tungsten West")
Tungsten West owns the Hemerdon Mine in Devon, United Kingdom
and is quoted on the AIM market of the London Stock Exchange.
Construction of the mine is underway for a mine producing
approximately 350,000 mtu tungsten per annum over 25 years and is
due start production in early 2023.
Bilboes Gold Limited ("Bilboes")
Bilboes is a private Zimbabwean based gold mining company which
has a JORC compliant Proved and Probable Reserves containing 1.8
million ounces of gold out of a total Mineral Resource of 3.8
million ounces of gold. An updated definitive feasibility study
into a mine producing an average of 170,000 ounces of gold per
annum was completed in January 2022.
First Tin PLC ("First Tin") (formerly Anglo Saxony)
First Tin is a company listed on the London Stock Exchange which
holds the Tellerhäuser and Gottesburg tin projects in Germany and
the Taronga tin project in Australia. Combined contained tin for
the three projects totals 143,000 tonnes.
Polar Acquisition Limited ("PAL")
PAL is a private company which holds a 0.9% to 1.8% royalty over
the Prognoz silver project ("Prognoz"), 444km north of Yakutsk in
Russia, owned by Polymetal. Prognoz has a 7.9Mt ore reserve with an
average silver grade of 560 g/t containing 142 million ounces of
silver
Kanga Potash (previously Sarmin Minerals Exploration)
Kanga Potash is private company which holds the Kanga potash
project, in the Republic of the Congo. A feasibility study
producing 600,000 tonnes per annum of Muriate of Phosphate was
completed in September 2020.
Nussir ASA ("Nussir")
Nussir is a Norwegian private company whose key asset is the
Nussir/Ulveryggen copper project in Northern Norway. An updated
definitive feasibility study for a fully electric mine producing
approximately 14,000 tonnes of copper per annum was completed in
January 2022.
Silver X Mining Corp ("Silver X") formerly Mines & Metals
Trading Peru PLC
Silver X is a TSX-V listed company whose Recuperada project in
Peru comprises 11,261 Ha of mining concessions centred around a 600
tonne per day processing plant. In October 2021 Silver X secured
the environmental permitting approval required to increase
production capacity to 720 tonnes per day.
Azarga Metals Corp. ("Azarga")
Azarga is a TSX-V listed company which holds the Unkur
copper/silver project in far eastern Russia and the Marg Copper
rich VMS project, located in Central Yukon, Canada.
Metals Exploration plc ("Metals Exploration")
Metals Exploration is an AIM listed company which owns the
Runruno gold mine in the Philippines. The Runruno mine produced
72,447 ounces of gold in 2021.
PRISM Diversified Limited ("PRISM")
PRISM is a private Canadian company which owns the Clear Hills
Iron Ore/Vanadium Project ("Clear Hills") in Alberta, Canada. Clear
Hills currently has Indicated Resources of 557.7 million tonnes at
33.3% iron and 0.2% vanadium.
Black Pearl Limited Partnership ("Black Pearl")
Black Pearl is a special purpose vehicle formed to invest in the
Black Pearl beach placer iron sands project in West Java,
Indonesia. Negotiations are ongoing for the Black Pearl project to
form the base production for an integrated steel production
facility.
Akora Resources Ltd ("Akora")
Akora is an Australian Stock Exchange Listed mineral exploration
company with three prospective exploration target areas comprising
some 308 km2 of iron ore tenements in Madagascar.
Baker Steel Capital Managers LLP
Investment Manager
14 April 2022
PORTFOLIO STATEMENT
AS AT 31 DECEMBER 2021
Shares Investments Fair value % of Net
/Warrants/ GBP equivalent assets
Nominal
Listed equity shares
Australian Dollars
5,091,910 Akora Resources Limited 642,664 0.61
283,000 Regis Resources Limited 296,385 0.28
1,570,000 Resolute Mining Limited 328,851 0.32
270,000 St Barbara Limited 212,440 0.20
Australian Dollars Total 1,480,340 1.41
--------------- ---------
Canadian Dollars
11,601,786 Azarga Metals Corporation 338,570 0.32
57,000 Kinross Gold Corporation 244,188 0.23
2,104,744 Silver X Mining Corporation 411,526 0.39
Canadian Dollars Total 994,284 0.94
--------------- ---------
Great Britain Pounds
31,000 Fresnillo Plc 276,768 0.27
122,760,000 Metals Exploration Plc 1,718,640 1.64
28,846,515 Tungsten West Plc 14,064,224 13.42
Great Britain Pounds Total 16,059,632 15.33
--------------- ---------
United States Dollars
110,000 Coeur Mining Inc 409,454 0.39
United States Dollars Total 409,454 0.39
--------------- ---------
Total investment in listed equity
shares 18,943,710 18.07
--------------- ---------
Debt instruments
Australian Dollars
2,000,000 Futura Resources Limited 1,235,273 1.18
Australian Dollars Total 1,235,273 1.18
--------------- ---------
Canadian Dollars
PRISM Diversified Limited Loan Note
305,000 1 87,992 0.08
PRISM Diversified Limited Loan Note
250,500 2 280,363 0.27
Canadian Dollars Total 368.355 0.35
--------------- ---------
Euro
Cemos Group Plc Convertible Unsecured
1,045 Loan Security 10,186,419 9.72
Euro Total 10,186,419 9.72
--------------- ---------
Shares Investments Fair value % of Net
/Warrants/ GBP equivalent assets
Nominal
Debt instruments (Continued)
United States Dollars
Azarga Metals Secured Convertible
3,500,000 Loan Note 2,206,301 2.11
440,000 Bilboes Holdings Loan Note 1 1,807,495 1.72
220,000 Bilboes Holdings Loan Note 2 350,162 0.33
7,028,352 Black Pearl Limited Partnership 1,292,467 1.23
Silver X Mining Corporation Convertible
4,000,000 Debenture 2,481,030 2.37
United States Dollars Total 8,137,455 7.76
--------------- ---------
Total investments in debt instruments 19,927,502 19.01
--------------- ---------
Unlisted equity shares, warrants and
royalties
Australian Dollars
7,800,000 Futura Gross Revenue Royalty 8,625,430 8.23
11,309,005 Futura Resources Limited 9,110,681 8.69
Australian Dollars Total 17,736,111 16.92
--------------- ---------
Canadian Dollars
13,490,414 Azarga Metals Warrants 31/12/2022 33,744 0.03
13,083,936 PRISM Diversified Limited 809,465 0.77
PRISM Diversified Limited Warrants
1,000,000 31/12/2023 17,920 0.02
PRISM Diversified Limited Convertible
40,000 Royalty 23,346 0.02
--------------- ---------
Canadian Dollars Total 884.475 0.84
--------------- ---------
Great Britain Pounds
First Tin Limited (previously Anglo
35,788,014 Saxony Mining Limited) 8,052,303 7.69
1,594,646 Celadon Mining Limited 15,946 0.02
24,004,167 Cemos Group plc 9,306,914 8.88
Tungsten West plc Second Option Share
1,657,195 Warrants 18/10/2026 676,066 0.65
Tungsten West plc Third Option Share
1,657,195 Warrants 18/10/2026 636,363 0.61
Great Britain Pounds Total 18,687,592 17.85
--------------- ---------
Norwegian Krone
12,785,361 Nussir ASA 3,751,021 3.58
Norwegian Krone Total 3,751,021 3.58
--------------- ---------
Shares Investments Fair value % of Net
/Warrants/ GBP equivalent assets
Nominal
Unlisted equity shares, warrants and
royalties (Continued)
United States Dollars
451,445 Bilboes Gold Limited 11,527,651 11.00
4,244,550 Gobi Coal & Energy Limited 147,337 0.14
Kanga Potash (formerly Sarmin Minerals
56,042 Exploration) 4,249,921 4.06
16,352 Polar Acquisition Limited 7,830,273 7.47
United States Dollars Total 23,755,182 22.67
--------------- ---------
Total unlisted equity shares, warrants
and royalties 64,814,381 61.86
--------------- ---------
Financial assets held at fair value
through profit or loss 103,685,593 98.94
--------------- ---------
Other Assets & Liabilities 1,113,363 1.06
--------------- ---------
Total Equity 104,798,956 100.00
--------------- ---------
STRATEGIC REPORT
Company Structure
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"). The Company is not
authorised or regulated as a collective investment scheme by the
Financial Conduct Authority. The Company is subject to the Listing
Rules and the Disclosure and Transparency Rules of the UK Listing
Authority.
The Articles of the Company contain provisions as to the life of
the Company. At the Annual General Meeting ("AGM") falling in 2018
and at each third AGM convened by the Board thereafter, the Board
will propose a special resolution to discontinue (the Company)
which if passed will require the Directors, within 6 months of the
passing of the special resolution, to submit proposals to
shareholders that will provide shareholders with an opportunity to
realise the value of their Ordinary Shares. Shareholders voted
against discontinuing the Company at the 2021 AGM, the next
discontinuation vote will be held at the AGM in 2024 which is
expected to be held in the third quarter of the year.
Company Purpose and Values
The purpose of the Company is to carry out business as an
investment company and to provide returns to shareholders through
achieving its investment objective as described on page 14.
The values of the Company are discussed and agreed upon by the
Board. The Board seeks to run the Company with a culture of
openness, high integrity and accountability. It aims to demonstrate
these values through its behaviour both within itself and its
dealings with its stakeholders. It seeks to act in the spirit of
mutual respect, trust and fairness. The Board is robust in its
challenge of the Investment Manager and other service providers but
tries always to be constructive and collegiate. The Board expects
its members to exhibit an independence of mind and not to be wary
of asking difficult questions. Moreover, it expects and encourages
its key service providers to exhibit similar values.
Role and Composition of the Board
The Board is the Company's governing body; it sets the Company's
strategy and is collectively responsible for its long-term
performance. The Board, which is comprised entirely of independent
Non-Executive Directors, is responsible for appointing and
subsequently monitoring the activities of the Manager and other
service providers to ensure that the investment objectives of the
Company continue to be met. The Board also ensures that the Manager
adheres to the investment restrictions described in the Company's
Prospectus and acts within the parameters set by it in any other
respect. It also identifies and monitors the key risks facing the
Company.
Investment activities are predominantly monitored through
quarterly Board meetings at which the Board receives detailed
reports and updates from the Investment Manager, who attends each
Board meeting. Services from other key service providers are
reviewed as appropriate. As government responses to Covid-19
continued to make travel for physical meetings impractical, the
Board has made use of video conference facilities to maintain
engagement with service providers.
Subject to meeting solvency requirements, if the Ordinary Shares
trade at a discount in excess of 15 per cent to their NAV, the
Board will consider whether the Company should buy back its own
Ordinary Shares, taking into account the Company's liquidity,
conditions in the stock market and mining markets. Since the
year-end the Company's shares have fallen to a 26% discount at 31
March 2022. In any event, however, the Directors consider that the
Company does not currently have sufficient surplus funds to buy
back shares, irrespective of other considerations.
The Board continues to review the Company's ongoing expenditure
to ensure that the total costs incurred in the running of the
Company remain competitive. An analysis of the Company's costs,
including management fees (which are based on the market
capitalisation of the Company), Directors' fees and general
expenses, is submitted to each Board meeting.
As at 31 December 2021, the Board comprised four Directors
(2020: four).
Investment Management
The Manager was appointed pursuant to a management agreement
with the Company dated 31 March 2010 (the Management Agreement).
Under the Management Agreement, the Manager acts as manager of the
Company, subject to the overall control and supervision of the
Directors and was authorised to appoint the Investment Manager to
manage and invest the assets of the Company. The Manager is
responsible for the payment of the fees of the Investment Manager.
The Manager is a company incorporated in the Cayman Islands on 10
April 2002 with registration number 117030 and is an affiliate of
the Investment Manager.
Baker Steel Capital Managers LLP acts as Investment Manager of
the Company and was constituted in England and Wales on 19 December
2001. It is authorised and regulated by the Financial Conduct
Authority in the United Kingdom. The Investment Manager is a
limited liability partnership with registration number OC301191 and
is an affiliate of the Manager. The Investment Manager has been
appointed by the Company to act as its Alternative Investment Fund
Manager ("AIFM") and is responsible for the portfolio management
and investment risk management of the Company. The Investment
Manager manages the Company in accordance with the Alternative
Investment Fund Managers Directives ("AIFMD"). The Investment
Manager is a specialist natural resources asset management and
advisory firm operating from its head office in London and its
branch office in Sydney.
It has an experienced team of fund managers covering the
precious metals, base metals and minerals sectors worldwide, both
in relation to commodity equities and the commodities
themselves.
The Directors formally review the performance of the Investment
Manager on an annual basis and remain satisfied that the Investment
Manager has the appropriate resources and expertise to manage the
portfolio of the Company in the best interests of the Company and
its shareholders.
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.
Investment Policy
The core of the Company's strategy is to invest in natural
resources companies, predominantly unlisted, that the Investment
Manager considers to be undervalued and that have strong
fundamentals and attractive growth prospects. Natural resources
companies, for the purposes of the investment policy, are those
involved in the exploration for and production of base metals,
precious metals, bulk commodities, thermal and metallurgical coals,
industrial minerals, energy and uranium, and include single-asset
as well as diversified natural resources companies.
It is intended that unlisted investments be realised through an
IPO, trade sale, management repurchase or other methods.
The Company focuses primarily on making investments in companies
with producing and/or tangible assets such as resources and
reserves that have been verified under internationally recognised
standards for reporting, such as those of the Australasian Joint
Ore Reserves Committee ("JORC"). The Company may also invest from
time to time in exploration companies whose activities are
speculative by nature.
The Company has flexibility to invest in a wide range of
investments in addition to unlisted and listed equities and
equity-related securities, including but not limited to
commodities, convertible bonds, debt securities, royalties,
options, warrants and futures. Derivatives may be used for
efficient portfolio management, hedging and for the purposes of
obtaining investment exposure. The Company may also have exposure
from time to time to other companies within the wider resources and
materials sector, including services companies, transport and
infrastructure companies, utilities and downstream processing
companies.
The Company may take legal or management control of a company
from time to time. The Company may invest in other investment funds
or vehicles, including any managed by the Manager or Investment
Manager, where such investment would be complementary to the
Company's investment objective and policy.
Borrowing and Leverage
The Company may, at the discretion of the Investment Manager,
and within limits set by the Board, incur leverage for liquidity
purposes by borrowing funds from banks, broker-dealers or other
financial institutions or entities. The costs and impact of
leverage, positive and negative will affect the operating results
of the Company.
During the current and prior year, no leverage was used by the
Company.
Investment Restrictions
There are no fixed limits on the allocation between unlisted and
listed equities or equity-related securities and cash although, as
a guideline, typically the Investment Manager will aim for the
Company to be invested over the long-term as follows:
-- between 40 and 100 per cent of the value of its gross assets
in unlisted equities or equity-related securities;
-- up to 50 per cent of the value of its gross assets in listed
equities or equity-related securities;
-- up to 10 per cent of the value of its gross assets in cash or cash-like holdings; and
-- in 10 to 20 core positions to provide adequate
diversification whilst retaining a focused core approach. Core
positions will be between 5 per cent and 15 per cent of NAV as at
the date of acquisition.
The actual percentage of the Company's gross assets invested in
listed and unlisted equities and equity-related securities and cash
and cash-like holdings and the number of positions held may fall
outside these ranges from time to time. The portfolio may become
focussed on fewer holdings as certain investments mature and
increase in value. Once such investments are realised it is
intended that the consideration will be reinvested in several new
investments thereby diversifying the portfolio.
Listed securities might exceed the above guideline following a
significant number of IPOs or in certain market conditions and
likewise cash balances may exceed the above guideline following the
realisation of one or more investments or following the issue of
new equity in the Company, pending investment or distribution of
the proceeds.
The investment policy has the following limits:
-- Save in respect of cash and cash-like holdings awaiting
investment, and except as set out below, the Company will invest or
lend no more than 20 per cent in aggregate of the value of its
gross assets in or to any one particular company or group of
companies, as at the date of the relevant transaction.
-- No more than 10 per cent in aggregate of the value of the
gross assets of the Company may be invested in other listed
closed-ended investment funds, except for those which themselves
have stated investment strategies to invest no more than 15 per
cent of their gross assets in other listed closed-ended investment
funds.
Where derivatives are used for investment exposure, these limits
will be applied in respect of the investment exposures so
obtained.
The Company will avoid (a) cross-financing between the
businesses forming part of its investment portfolio and (b) the
operation of common treasury functions between it and the investee
companies. When deemed appropriate, the Company may borrow up to 10
per cent of NAV for temporary purposes such as settlement of
mis-matches. Borrowings will not however be incurred for the
purposes of any Share repurchases. Any material change in the
investment objective, investment policy or borrowing policy will
only be made with the prior approval of holders of Ordinary Shares
by Ordinary Resolution. In the event of any breach of the
investment restrictions the Investment Manager would report the
breach to the Board and shareholders would be informed of any
corrective action required.
No breaches of investment restrictions occurred during the year
ended 31 December 2021.
Hedging
The Investment Manager will not normally hedge the exposure of
the Company to currency fluctuations.
Performance
The Company monitors NAV against the EMIX Global Mining Index as
a key performance indicator. An outline of performance, market
background, investment activity and portfolio strategy during the
year under review, as well as outlook, is provided in the
Chairman's Statement on page 3 to 4 and the Investment Manager's
Report on pages 5 to 9.
Principal risk and uncertainties
The Board is responsible for the Company's system of risk
management and internal control and for reviewing its
effectiveness.
The Board has adopted a detailed matrix of principal risks
affecting the Company's business as an investment company and has
established associated policies and processes designed to manage
and, where possible, mitigate those risks, which are monitored by
the Audit Committee on an ongoing basis. This system assists the
board in determining the nature and extent of the risks it is
willing to take in achieving the Company's strategic
objectives.
Although the Board believes that it has a robust framework of
internal controls in place this can provide only reasonable, and
not absolute, assurance against material financial misstatement or
loss and is designed to manage, not eliminate, risk. Actions taken
by the Board and, where appropriate, its committees, to manage and
mitigate the Company's principal risks and uncertainties are
discussed in more detail below.
Emerging Risks and Uncertainties
During the year, the Board also discussed and monitored a number
of risks that could potentially impact the Company's ability
to meet its strategic objectives. The principal emerging risk
was agreed to be climate change risk. Climate change risk includes
how climate change could affect the Company's investments, and
potentially shareholder returns. The Board has implemented an ESG
policy which has been developed from the Managers own ESG policy.
The Company's ESG policy is available on its website.
The Board will continue to monitor the implications of growing
ESG pressures as an emerging risk.
Since year-end, the invasion of Ukraine by Russia and resulting
sanctions on Russia has increased the risk of investing in
companies with interests in Russia. It has also increased the
uncertainty around previous projections made by those companies, in
the face of growing financial and operational constraints. As a
result, the Company reduced its carrying values for Polar
Acquisition Limited and Azarga Metals Corporation by 50% at the end
of February 2022. There is also a growing risk that rising energy
prices and disrupted supply chains could further fuel inflationary
pressures. This, plus more aggressive monetary tightening that
might be undertaken by central banks to curb inflation, raises the
risk of a global recession.
Market and financial risks
Market risk arises from volatility in the prices of the
Company's underlying investments which, in view of the Company's
investment policy, are in turn particularly sensitive to commodity
prices. Market risk represents the potential loss the Company might
suffer through holding investments in the face of negative market
movements. The Board has set investment restrictions and guidelines
to help mitigate this risk. These are monitored and reported on by
the Investment Manager on a regular basis. Further details are
disclosed in note 4 on pages 54 to 59.
The Company's investment activities also expose it to a variety
of financial risks including in particular foreign currency risk. A
sensitivity to foreign exchange is presented on pages 54 and
55.
Portfolio management and Performance risks
The Board is responsible for determining the investment strategy
to allow the Company to fulfil its objectives and also for
monitoring the performance of the Investment Manager to which has
been delegated day to day discretionary management of the Company's
portfolio. An inappropriate strategy may lead to poor performance.
The investment policy of the Company allows for a highly focused
portfolio which can lead to a concentration of risk. To manage this
risk, the Investment Manager provides to the Board, on an ongoing
basis, an explanation of the significant stock selection
recommendations and the rationale for the composition of the
investment portfolio. The Board mandates and monitors an adequate
diversification of investments, both geographically and by
commodity, in order to reduce the risks associated with particular
sectors, based on the diversification requirements inherent in the
Company's investment policy.
The Company invests in certain companies whose projects are
located in emerging markets. In such countries governments can
exercise substantial influence over the private sector and
political risk can be a significant factor. In adverse social and
political circumstances, governments have been involved in policies
of expropriation, confiscatory taxation, nationalisation,
intervention in the securities markets and imposition of foreign
exchange controls and investment restrictions. The Investment
Manager and the Board take into account specific political and
other such risks through its approach to pricing when entering into
an investment, and seek to mitigate them by diversifying
geographically.
The Company's ability to implement its investment policy depends
on the Investment Manager's ability to identify, analyse and invest
in investments that meet the Company's investment criteria. Failure
by the Investment Manager to find additional investment
opportunities meeting the Company's investment objectives and to
manage investments effectively could have a material adverse effect
on the Company's business, financial condition, and results of
operations. The Company has no employees and, subject to oversight
by the Board, is reliant on the Investment Manager, which has
significant discretion as to the implementation of the Company's
operating policies and strategies. The Company is subject to the
risk that the Investment Manager or its key investment
professionals will cease to be involved in the management of any
part of the Company's assets and that no suitable replacement will
be found. The Board regularly monitors the performance and
capabilities of the Investment Manager and its key man risk
plans.
There is the risk that the market capitalisation of the Company
(on which the Investment Manager's fee is calculated) falls to such
an extent that it will no longer be viable for the Investment
Manager to provide the services that it currently provides. The
Board monitors this possibility and, should it start to become an
issue, would review it with the Investment Manager.
Risk of a vote to wind-up the Company
The Articles contain provisions for a special resolution of
shareholders at the AGM in 2018 and every three years thereafter on
whether to discontinue the Company. Should there be a catastrophic
loss of value in the Company's assets, possibly as a result of the
risks above, or merely a change in sentiment towards the mining
sector generally by a sufficient proportion of investors, there is
the risk of shareholders voting to wind-up the Company at that
time. Because the Company's investments are largely unlisted it
could then take a protracted amount of time to realise them or they
may need to be sold at a discount to Fair Value if an accelerated
timetable is required.
To be passed the discontinuation vote would require a majority
of 75% of those shareholders voting. To understand the requirements
of the Company's major shareholders, the Investment Manager
regularly liaises with the Company's broker and meets major
shareholders. The Chairman is also available to meet with
shareholders as required.
In the event of a winding up of the Company, Shareholders will
rank behind any creditors of the Company.
Viability Statement
In accordance with provision 31 of the UK Corporate Governance
Code, published by the Financial Reporting Council ("FRC") in July
2018 (the "UK Code"), the Directors, as advised by the Audit
Committee, have assessed the prospects of the Company over 3 years,
being the period one year after the next discontinuation vote at
the AGM in 2024. The Board considers that this is an appropriate
timeframe to assess the viability of the Company as, in relation to
the types of investments the Company makes, three years generally
provides sufficient time for major milestones to be reached on
mining projects together with some realisations and new investments
to be made by the Company. Beyond three years, the Board considers
the mining and minerals markets to be too difficult to predict to
be sufficiently helpful.
The Company has previously seen pressures from falls in
commodity prices and a move by its share price to an increased
discount to its NAV. The mining market is inherently cyclical and
dependent on world economic output. Notwithstanding this, it is a
feature of closed-ended investment companies such as BSRT that the
greatest risk to viability is that the investments lose value to an
extent where the expense ratio becomes excessive such that the
Company becomes an unattractive investment proposition. In such
conditions, it may also be a risk that liquidity (i.e. the ability
to sell or realise cash from the portfolio, or raise borrowings
should that be necessary) is insufficiently available to meet
liabilities.
In the case of the Company, which has no gearing, the Investment
Manager has conducted stress and sensitivity tests of future income
and expenditure and the ability to realise assets, and it and the
Board have concluded that, even in circumstances representing a
deterioration in value of 50% of net assets and a complete
inability to sell any of the unlisted assets in the portfolio, the
Company should remain viable over the period one year following the
2024 AGM. The key factor in this assessment is that currently the
Company's greatest expense is the management fee which is
calculated on the market capitalisation of the Company. Should net
assets fall, market capitalisation would be expected to fall in
line or at a higher rate, such that the costs of the Company would
also fall. It is also assumed that the liquidity required over the
three-year period and under the highly stressed conditions
modelled, is largely provided by regular realisations of the
Company's listed equities. The Directors believe this to be
reasonable given that the majority of these equities are regularly
traded at sufficient volumes in the context of the very minor
positions the Company's holdings represent.
As a result, the Board has a reasonable expectation that the
Company will be able to continue in operation and meet its
liabilities as they fall due over the period of their
assessment.
Environmental, Social and Governance
The Company believes that monitoring environmental, social and
governance ("ESG") factors is important not only to support
sustainable and ethical investment but because ESG considerations
are key for creating and maintaining shareholder value. The Company
has developed an ESG Investment Policy which draws from
international best practice and builds upon the principles and
processes outlined in the United Nations Principles for Responsible
Investment, of which the Investment Manager is a signatory. A copy
of the Company's ESG policy is available on the Company's
website.
ESG considerations are considered as an enhanced risk management
tool and, as such, are incorporated into the Investment Manager's
investment decision process at multiple levels during stock
screening and company analysis, as well as being directly addressed
with company management during meetings and on-site visits. The
Company is an active investor and will use its voting rights to
influence company direction in a sustainable way where deemed
appropriate. The Company considers that social and environmental
responsibility, along with good governance, are an integral element
of running a successful mining company. For example, the Nussir
copper project in Norway aims to become the first zero carbon mine
globally through being fully electric with the electricity
generated from entirely renewable sources . The Company has used
its representation on the Board of Nussir to actively promote this
evolution to electrification.
Non-Mainstream Pooled Investment
The Directors intend to operate the Company in such a manner
that its shares are not categorised as non-mainstream pooled
investments.
Future Developments
The future performance of the Company depends upon the success
of the Company's investment strategy and, as to its share price and
market rating, partly on investors' view of mining related
investments as an asset class. Further comments on the outlook for
the Company can be found in the Chairman's Statement on pages 3 and
4 and the Investment Manager's Report on pages 5 to 9.
Signed on behalf of the Board of Directors by:
David Staples
14 April 2022
BOARD OF DIRECTORS
The Board of Directors is listed below. In 2018 the Board put in
place a succession plan to refresh its membership while maintaining
a degree of continuity. David Staples was appointed on 29 May 2019
and Fiona Perrott-Humphrey on 15 September 2020 through the
succession planning. No limit on the overall length of service of
any of the Company's Directors, including the Chairman, has been
imposed, as the Board believes that any decisions regarding tenure
should consider the balance between the need for continuity of
knowledge and experience, and the need periodically to refresh the
Board's composition in terms of skills, diversity and length of
service.
Howard Myles: Howard Myles currently acts as a non-executive
director of a number of investment companies. Howard was a partner
in Ernst & Young from 2001 until 2007 and was responsible for
the Investment Funds Corporate Advisory team. He was previously
with UBS Warburg from 1987 to 2001. Howard began his career in
stockbroking in 1971 as an equity salesman and joined Touche Ross
in 1975 where he qualified as a chartered accountant. In 1978 he
joined W. Greenwell & Co. in the corporate broking team and in
1987 moved to SG Warburg Securities where he was involved in a wide
range of commercial and industrial transactions in addition to
leading UBS Warburg's corporate finance function for investment
funds. He is a Fellow of the Institute of Chartered Accountants and
of The Chartered Institute for Securities and Investments. Howard
is a director of Aberdeen Latin American Income Fund Limited,
Chelverton UK Dividend Trust plc and BBGI Global Infrastructure
S.A. all of which are listed on the London Stock Exchange.
Howard is a member of the Company's Audit Committee.
Notwithstanding that Howard's tenure extends beyond eleven years,
the Board is satisfied that he continues to demonstrate
independence of the Investment Manager.
Charles Hansard: Charles Hansard has over 40 years' experience
in the investment industry as a professional and in a non-executive
capacity. He currently serves as a non-executive director on a
number of boards which include JJJ Moore part of the Moore Capital
group of funds of which he was a director for 25 years. He is a
director of NYSE listed Los Gatos Silver Inc and Electrum Ltd., a
privately owned US gold exploration company. He formerly served as
a director of Apex Silver Mines Ltd., where he chaired the finance
committee during its capital raising phase and as chairman of the
board of African Platinum Plc, which he led through reorganisation
and feasibility prior to its sale to Impala Platinum. He commenced
his career in South Africa with Anglo American Corporation and
Fleming Martin as a mining analyst. He subsequently worked in New
York as an investment banker for Hambros before returning to the UK
to co-found IFM Ltd., one of the earliest European hedge fund
managers. Charles holds a B.B.S. from Trinity College Dublin.
Notwithstanding that Charles's tenure extends beyond eleven
years, the Board is satisfied that he continues to demonstrate
independence of the Investment Manager.
Fiona Perrott-Humphrey: Fiona Perrott-Humphrey has over 30
years' experience in the mining finance industry in London. She
moved to the UK in 1987 after a period in academia in South Africa,
and over the next 15 years, was a rated mining analyst for a number
of stockbroking firms including James Capel, Cazenove and Citigroup
(the latter as head of European Mining Research). After leaving
full time broking, Fiona has had a portfolio of roles drawing on
her experience of covering the global mining sector. She is a
founder of a mining strategic consulting business, and director of
AIM Mining Research and in 2007 published a book entitled
Understanding Junior Miners. In 2004, she was appointed Adviser to
the Mining team at Rothschild and Co. Fiona was a non-executive
director of Dominion Diamonds, located in northern Canada, for two
years from 2014. She is invited to present regularly at global
mining conferences.
Fiona is a member of the Company's audit committee.
David Staples: David Staples worked for PWC in London for 25
years, including 13 years as Partner. He has many years' experience
serving on boards of listed and private companies as a
non-executive director, including as chairman of listed investment
companies. David has a BSc in Economics and Accounting, is a Fellow
Chartered Accountant, a Chartered Tax Adviser and a holder of the
Institute of Directors' Certificate in Company Direction. He is a
Director of Ruffer Investment Company Limited and NB Global Monthly
Income Fund, both of which are listed on the London Stock Exchange.
He is also chairman of the general partner companies of private
equity funds advised by Apax Partners.
David is the Chairman of the Audit Committee.
DIRECTORS' REPORT
For the year ended 31 December 2021
The Directors of the Company present their eleventh annual
report and the audited financial statements (the "Annual Report")
for the year ended 31 December 2021.
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
Details of the Company's investment objectives and policies are
described in the Strategic Report on page 14.
Performance
In the year to 31 December 2021, the Company's NAV per Ordinary
Share increased by 1.20% (2020: 31.5%). This compares with a rise
in the EMIX Global Mining Index (capital return in Sterling terms)
of 5.0% (2020: 22.2%). A more detailed explanation of the
performance of the Company is provided within the Investment
Manager's Report on pages 5 to 9.
The results for the year are shown in the Statement of
Comprehensive Income on pages 39 and 40 and the Company's financial
position at the end of the year is shown in the Statement of
Financial Position on page 38.
Dividends 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 from its royalty interests.
As there was no net realised cash gain during the year, the Board
has determined that there will not be any distribution in respect
of the year ended 31 December 2021.
Directors and their interests
The Directors of the Company who served during the year 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 are
presented on page 18 of the Annual 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.
On 26 April 2021, David Staples purchased 35,000 shares in the
Company. Mr Staples also holds 30,000 shares in Tungsten West PLC,
one of the Company's core assets. No other Director has a
beneficial interest in the Company or any of its investee
companies.
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. On that date, 30,468,865 Ordinary Shares and
6,093,772 Subscription Shares were issued pursuant to a placing and
offer for subscription and 35,554,224 Ordinary Shares and 7,110,822
Subscription Shares were issued pursuant to a Scheme of
Reorganisation of Genus Capital Fund.
In addition, 10,000 Management Ordinary Shares were issued.
In May 2019, the Company enacted a tender offer for 9,677,478
Ordinary Shares at 51 pence per share. The repurchased shares were
cancelled.
The Company had a total of 106,453,335 Ordinary and 9,167
Management Ordinary Shares in issue as at 31 December 2021, of
which 700,000 Ordinary Shares were held in Treasury.
Significant Shareholdings
As at 31 December 2021, the Company had received notifications
in accordance with the FCA's Disclosure and Transparency Rule 5.1.2
R of the following interests in 3% or more of the voting rights
attaching to the Company's issued share capital.
Number of
Ordinary Shares % of Total
Ordinary Shareholder 000's Shares in issue
The Sonya Trust 12,722 11.95
Northcliffe Holdings Pty Limited 12,452 11.70
Overseas Asset Management 12,436 11.68
Premier Miton Investors 9,100 8.55
RIT Capital Partners 7,767 7.30
Armstrong Investments 6,300 5.92
Baker Steel Capital Managers 4,923 4.62
Hargreaves Lansdown Asset Management 3,964 3.72
Interactive Investor 3,946 3.71
Charles Stanley 3,197 3.00
The Investment Manager, Baker Steel Capital Managers LLP had an
interest in 9,167 Management Ordinary Shares at 31 December 2021
(31 December 2020: 9,167).
Baker Steel Global Funds SICAV - Precious Metals Fund ("Precious
Metals Fund") had an interest in 4,922,877 Ordinary Shares in the
Company at 31 December 2021 (2020: 4,922,877). Precious Metals Fund
has the same Investment Manager as 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.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the annual report
and financial statements in accordance with applicable Guernsey
law, Listing Rules, Disclosures and Transparency Rules, UK
Corporate Governance Code and generally accepted accounting
principles.
Guernsey company law requires the Directors to prepare financial
statements for each financial year which give a true and fair view
of the state of affairs of the Company and of the profit or loss of
the Company for that year. In preparing these financial statements
the Directors should:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable;
- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and which enable the Directors to
ensure that the financial statements comply with the Companies
(Guernsey) Law, 2008. The Directors are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors confirm that to the best of their knowledge:
- the financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union ("EU") and give a true and fair view of the
assets, liabilities and financial position and profit or loss of
the Company;
- the Annual Report includes a fair review of the position and
performance of the business of the Company together with the
description of the principal risks and uncertainties that the
Company faces, as required by the Disclosure and Transparency Rules
of the UK Listing Authority;
- the Annual Report and Financial Statements, taken as a whole,
is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's performance,
business model and strategy; and
- they have carried out a robust assessment of the emerging and
principal risks facing the Company, including those that would
threaten its business model, future performance, solvency or
liquidity.
Auditor Information
The Directors at the date of approval of this Report confirm
that, so far as each of the Directors is aware, there is no
relevant audit information of which the Company's auditor is
unaware and each Director has taken all the reasonable steps he
ought to have taken as a director to make himself aware of any
relevant audit information and to establish that the Company's
auditor is aware of that information.
Going Concern
The Directors, as advised by the Audit Committee, have made an
assessment of the Company's ability to continue as a going concern
and consider it appropriate to adopt the going concern basis of
accounting. The discontinuation vote in 2021 was not passed and the
next vote is in 2024. The Board are satisfied that it has the
resources to continue in business for at least 12 months following
the signing of these financial statements. As at 31 December 2021,
approximately 5.7% of the Company's assets were represented by cash
and unrestricted listed and quoted investments which are readily
realisable. Although the Russian Invasion of Ukraine has resulted
in a reduction in the carrying value of investments with a Russian
nexus after the year end it is not expected that it will affect the
Company's ability to operate on a normal basis. Neither of the two
affected investments PAL and Azarga were expected to be realised or
be a source of revenue in the next two years. 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 11.
Corporate Governance Compliance
The Company re-joined the Association of Investment Companies
during 2021.
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.
The AIC Code is available on the AIC website ( www
.theaic.co.uk) . It includes an explanation of how the AIC Code
adapts the Principles and Provisions set out in the UK Code to make
them relevant for investment companies.
The Code includes provisions relating to:
-- The role of the Chief Executive
-- Executive Directors' remuneration
-- The requirement for a senior Independent Director
-- Nomination and Remuneration Committees
-- The requirement for an internal audit function
The Board considers these provisions are not relevant for the
Company as it is an externally managed investment entity. The
Company has therefore not reported further in respect of these
provisions. The Directors are all independent and non-executive and
the Company does not have employees, hence no Chief Executive is
required for the Company. The Board is satisfied that any relevant
issues can be properly considered by the Board as explained further
on the following pages.
There have been no other instances of non-compliance, other than
those noted above.
Operation and composition of the Board
-- Composition and Independence
The Board has no executive directors and has contractually
delegated responsibility to service providers for the management of
the Company's investment portfolio, the arrangement of custodial
and cash flow monitoring and oversight services and the provision
of accounting and company secretarial services. The Company has no
employees.
The Board consists entirely of independent non-executive
Directors, of whom Howard Myles is the Chairman. Each of the
Directors confirms that they have no other significant commitments
that adversely impact on their ability to act for the Company and
its shareholders, and that they have sufficient time to fulfil
their obligations to the Company.
-- Senior Independent Director
In view of its non-executive nature and small size, the Board
considers that it is not necessary for a Senior Independent
Director to be appointed.
-- Appointment and re-election
The Company has a transparent procedure for the appointment and
re-election of the Directors. There are no service contracts in
place for the Directors.
The Directors are not required to retire by rotation. Instead
each director puts himself forward for re-election on an annual
basis at the AGM. The AGM also includes a resolution whereby
shareholders are able to approve the maximum cumulative
remuneration for the Board.
All the Directors are responsible for reviewing the size,
structure and skills of the Board and considering whether any
changes are required or new appointments are necessary to meet the
requirements of the Company's business or to maintain a balanced
Board.
Howard Myles and Charles Hansard have served as Directors for
more than 9 years. The Board believes that both these directors
continue to demonstrate independence of the Manager and to make a
valuable contribution to the Company, and therefore recommends that
shareholders vote in favour of their reappointment. The Board has a
succession plan under which its membership will be refreshed over
time and which has seen the retirement of Clive Newall and the
appointment of David Staples in 2019 and Fiona Perrott-Humphrey in
2020. It is intended that further new appointments will be made in
the course of the next two years. Specialists will be engaged as
the Board consider necessary to assist with future
appointments.
-- Information
The Board receives full details of the Company's performance,
assets, liabilities and other relevant information in advance of
Board meetings, including information on regulatory and accounting
developments.
-- Performance appraisal
The performance of the Board and the Audit Committee is
evaluated through a formal and rigorous assessment process led by
the Chairman. The performance of the Chairman is evaluated by the
other Directors.
-- Investment Manager assessment
The Investment Manager was appointed pursuant to an investment
management agreement with the Manager dated 31 March 2010 and which
was amended and restated, with the Company joining as a party, on
14 November 2014 (the Investment Management Agreement). The
Investment Manager is paid by the Manager and is not separately
remunerated by the Company. The Investment Management Agreement
pursuant to which the Company and the Manager have appointed the
Investment Manager is terminable by any party giving the other
parties not less than 12 months' written notice.
The Investment Manager prepares regular reports to the Board to
allow it to review and assess the Company's activities and
performance on an ongoing basis. The Board and the Investment
Manager have agreed clearly defined investment criteria, exposure
limits and specified levels of authority. The Board completes a
formal assessment of the Investment Manager on an annual basis. The
assessment covers such matters as the performance of the Company
relative to its peers and sector, the management of investor
relations and the reasonableness of fee arrangements. Based on its
assessment it is the opinion of the Board that the continuation of
the appointment of the Investment Manager is in the best interests
of shareholders of the Company.
-- Board meetings
The Board generally meets at least four times a year, at which
time the Directors review the management and performance of the
Company's assets and all other significant matters so as to ensure
that the Directors maintain overall control and supervision of the
Company's affairs. The Board is responsible for the appointment and
monitoring of all service providers to the Company. Between these
quarterly meetings there is regular contact with the Investment
Manager and Company Secretary. The Directors are kept fully
informed of investment and financial controls and other matters
which are relevant to the business of the Company and which should
be brought to the attention of the Directors. The Directors also
have direct access to the Company Secretary (through its appointed
representatives who are responsible for ensuring that Board
procedures are followed and that applicable rules and regulations
are complied with) and, where necessary in the furtherance of their
duties, to independent professional advice at the expense of the
Company.
Attendance at the quarterly Board and Audit Committee meetings
during the year was as follows:
Audit Committee
Board Meetings Meetings
Held Attended Held Attended
Howard Myles 4 4 4 4
Charles Hansard 4 4 n/a n/a
Fiona Perrott-Humphrey 4 4 4 4
David Staples 4 4 4 4
In addition to the quarterly meetings, adhoc Board and committee
meetings are convened as required. All Directors contribute to a
significant exchange of views with the Investment Manager on
specific matters, in particular in relation to developments in the
portfolio.
-- Relations with Shareholders
The Board believes that the maintenance of good relations with
shareholders is vital for the long-term prospects of the Company.
The Company's stockbrokers, Numis Securities Limited, and the
Investment Manager are responsible for managing relationships with
shareholders and each provides the Board with feedback on a regular
basis that includes a shareholder contact report and any concerns
the shareholder has raised. The Chairman and the Board are also
available to meet with shareholders at the Company's Annual General
Meeting or otherwise.
-- Engagement with key Stakeholders
The Board considers its key stakeholders, along with its
shareholders, to be the Company's Investment Manager,
Administrator, Company Secretary and Stockbroker. Engagement with
each Stakeholder is formalised by quarterly reporting at the Board
Meetings but outside of the formal meetings, is continuous as
required by the operations of the Company. The Board is very aware
of the importance to the success of the Company of these key
stakeholders and encourages open and frequent dialogue to
facilitate improvements to the way that the Company functions.
-- Principal and Emerging Risks
The Board has delegated responsibility for the assessment of its
key risks to the Audit Committee. The Audit Committee has
documented the key risks and controls in a detailed risk matrix and
meets on a quarterly basis to update it and to assesses the
adequacy and completeness of the controls. As the Audit Committee
identifies changes that affect the risk profile of the Company it
will recommend to the Board any actions required to effectively
manage risk. More details on the Principal and Emerging Risks are
presented in the Strategic Report.
-- Diversity
The Board has no formal policy on diversity but is cognizant of
the need to maintain a Board with a spectrum of skills appropriate
for the specifics of the Company.
Committees
The Committees of the Board have formal Terms of Reference which
are available on the Company's webpage
http://bakersteelresourcestrust.com/corporate-governance/ .
-- Audit Committee
The Board has established an Audit Committee. The Audit
Committee meets at least three times a year and is responsible for
ensuring that the financial performance of the Company is properly
reported on and monitored and provides a forum through which the
Company's external auditor may report to the Board. The Audit
Committee operates within established terms of reference. The
Directors consider there is no need for an internal audit function
because the Company operates through service providers and the
Directors receive control reports on its key service providers.
David Staples is Chairman of the Audit Committee with Fiona
Perrott-Humphrey and Howard Myles as the other members. As Chairman
of the Board, Howard Myles will not Chair the Audit Committee but
is considered independent and therefore sits as a committee
member.
-- Nomination, Remuneration and Management Engagement Committees
Given the size and nature of the Company and the fact that all
the Directors are independent and non-executive it is not deemed
necessary to form separate Nomination, Remuneration, and Management
Engagement Committees. The Board itself considers new Board
appointments, remuneration and the engagement of service
providers.
Internal Controls
The Board has delegated to service providers the day to day
responsibilities for the management of the Company's investment
portfolio, the provision of depositary services and administration,
registrar and corporate secretarial functions including the
independent calculation of the Company's NAV and the production of
the Annual Report and Financial Statements which are independently
audited.
Formal contractual agreements have been put in place between the
Company and providers of these services.
Even though the Board has delegated responsibility for these
functions, it retains accountability for them and is responsible
for the systems of internal control. However, it has delegated the
regular review and oversight of the systems of internal control to
the Audit Committee which reports back to the Board following each
Audit Committee meeting. At each quarterly Board meeting,
compliance reports are provided by the Administrator and Investment
Manager.
The Company's risk matrix continues to be the core element of
the Company's risk management process in establishing the Company's
system of internal financial and reporting control. The risk matrix
is prepared and maintained by the Investment Manager and reviewed
regularly by the Audit Committee which initially identifies the
risks facing the Company and then collectively assesses the
likelihood of each risk, the impact of those risks and the strength
of the controls mitigating each risk. The system of internal
financial and operating control is designed to manage rather than
to eliminate the risk of failure to achieve business objectives and
by its nature can only provide reasonable and not absolute
assurance against misstatement and loss. These controls aim to
ensure that assets of the Company are safeguarded, proper
accounting records are maintained and the financial information for
publication is reliable. The Audit Committee confirms to the Board
that there is an ongoing process for identifying, evaluating and
managing the significant risks faced by the Company.
This process has been in place for the year under review and up
to the date of approval of this Annual Report and Audited Financial
Statements and is reviewed by the Board by way of reporting from
the Audit Committee.
The Board therefore believes that the Company has adequate and
effective systems in place to identify, mitigate and manage the
risks to which it is exposed.
Director's Remuneration Policy
All Directors are non-executive and in view of the relatively
small size of the Board a Remuneration Committee has not been
established. The Board as a whole considers matters relating to the
Directors' remuneration. No advice or services were provided by any
external person in respect of its consideration of the Directors'
remuneration.
The Company's policy is that the fees payable to the Directors
should reflect the time spent by the Directors on the Company's
affairs and the responsibilities borne by the Directors and be
sufficient to attract, retain and motivate directors who have the
experience and qualities required to run the Company successfully.
The Chairs of the Board and the Audit Committee are paid a higher
fee in recognition of their additional responsibilities. The fee
levels are reviewed annually, no changes to the fees were proposed
at the last review.
There are no long term incentive schemes provided by the Company
and no performance fees are paid to Directors. No Director has a
service contract with the Company but each of the Directors is
appointed by a letter of appointment which sets out the main terms
of their appointment. Directors hold office until they retire or
cease to be a director in accordance with the Articles of
Incorporation or by operation of law.
The Directors recognise the benefits of diversity in terms of
gender and ethnicity and will take these into account when
considering future appointments to the Board. However, their
principal criteria will remain the skills and experience of new
directors and the Board will select the candidates whom it believes
will add most value.
The Directors are remunerated for their services at such rate as
the Directors determine provided that the aggregate amount of such
fees may not exceed GBP200,000 per annum (or such sum as the
Company in general meeting shall from time to time determine).
For the year ended 31 December 2021, the total remuneration of
the Directors was GBP115,000 (2020: GBP115,136), with GBP28,750
(2020: GBP28,750) payable at the year end.
Directors are remunerated in the form of fees, payable quarterly
in arrears, to the Director personally. The fees paid to each
Director in respect of the years ended 31 December 2021 and 31
December 2020 are shown below.
2021 2020
GBP GBP
Howard Myles 35,000 35,000
David Staples 30,000 30,000
Charles Hansard 25,000 25,000
Clive Newall (resigned 15 September
2020) - 17,731
Fiona Perrott-Humphrey (appointed
15 September 2020) 25,000 7,405
Independent Auditors
The auditors, BDO Limited, have indicated their willingness to
continue in office and a resolution for their re-appointment will
be proposed at the Annual General Meeting.
Subsequent Events
Please refer to Note 14 of the financial statements on page
63.
Signed on behalf of the Board of Directors by:
David Staples
14 April 2022
Report of the Audit CommitteE
For the year ended 31 December 2021
The function of the Audit Committee as described in its Terms of
Reference is to ensure that the Company maintains high standards of
integrity in its financial reporting and internal controls. David
Staples is Chairman of the Audit Committee with Fiona
Perrott-Humphrey and Howard Myles as the other members. As Chairman
of the Board, Howard Myles will not Chair the Audit Committee but
is considered independent and therefore sits as a committee
member
The Audit Committee is appointed by the Board and all members
are considered to be independent both of the Investment Manager and
the external auditor. The Audit Committee meets a minimum of three
times a year to discuss the Interim and Annual Report and Audited
Financial Statements, the audit plan and engagement letter, and the
Company's risks and controls, via discussion of its risk matrix.
The Board is satisfied that the Audit Committee is properly
constituted with members having recent and relevant financial
experience, including two members who are chartered
accountants.
The Board, advised by the Audit Committee considers the nature
and extent of the Company's risk management framework and the risk
profile that is acceptable in order to achieve the Company's
strategic objectives. As a result, it is considered that the Board
has fulfilled its obligations under the AIC Code and the UK
Code.
The Audit Committee continues to be responsible for reviewing
the adequacy and effectiveness of the Company's on-going risk
management systems and processes. The Company's system of internal
controls, along with its design and operating effectiveness, is
subject to review by the Audit Committee through reports received
from all key service providers.
In the event of any deficiencies or breaches being reported, the
Board would consider the actions required to remedy and prevent
significant failings or weaknesses. During the year ended 31
December 2021, no significant weaknesses or failings were
identified.
Fraud, Bribery and Corruption
The Audit Committee continues to monitor the fraud, bribery and
corruption policies of the Company. The Board receives a
confirmation from all service providers that they are not aware of
any instances of fraud or bribery.
The Audit Committee considers the adequacy and security of the
arrangements for the employees of its service providers to raise
concerns, in confidence, about possible wrongdoing in financial
reporting or other matters. The Audit Committee is satisfied it has
the ability and resources to investigate any matters that are
brought to its attention and to follow up on any conclusion reached
by such investigation.
Primary Areas of Judgement
As part of its review of the Company's financial statements, the
Audit Committee takes account of the most significant issues and
risks, both operational and financial, likely to impact on the
financial statements and the mitigating controls to address these
risks. The Audit Committee has determined that the key risk of
misstatement is the valuation of investments for which there is no
readily observable market price. Such investments are recorded at
fair value which is the price that would be expected to be received
to sell an asset in an orderly transaction between market
participants at the measurement date. Significant judgements are
required in respect of the valuation of the Company's investments
for which there is no observable market price. Further information
on the Company's methodologies is provided in Note 3 to the
financial statements.
The risk is mitigated through the review by the Audit Committee
and Board of detailed reports prepared by the Investment Manager on
portfolio valuation including valuation methodology, the underlying
assumptions and the valuation process.
The Investment Manager also provides information to the Audit
Committee and Board on relevant market indices, recent transactions
in similar assets and other relevant information to allow an
assessment of appropriate carrying value having regard to the
relevant factors.
The ultimate responsibility for ensuring that investments are
carried at fair value lies with the Board.
Through its meetings during the year ended 31 December 2021 and
its review of the Company's Annual Report and Audited Financial
Statements, the Audit Committee considered the following
significant risks as well as the principal risks and uncertainties
described on pages 15 and 16.
Risk Considered How addressed
The accuracy of the Company's Annual Review of the Annual Report and
Report and Financial Statements Audited Financial Statements, discussions
with the external auditor and meetings
with the auditor to understand the
audit approach and findings having
regard to the level of materiality
agreed with it.
Adequacy of the Company's accounting Consideration of the Company's risk
and internal controls systems matrix, taking account of the relevant
risks, the potential impact to the
Company and the mitigating controls
in place. The Committee also reviews
control and compliance reports in
this respect and receives explanations
of any breaches and how any control
weaknesses have been addressed.
Valuation of the Company's investments, Reports received from and discussed
in particular the valuation of unquoted in depth with the Investment Manager
investments providing support for the investment
valuations. The Investment Manager
reporting is then challenged and
reconciled to the independent auditor's
review of the investment valuations.
The effectiveness and independence The Audit Committee has regular
of the external audit process dialogue with the external auditor
both before and during the audit
process. The auditor presents to
the Audit Committee at both the
planning and audit review stage,
and confirms its independence at
each stage. The Audit Committee
receives feedback from the Investment
Manager on the audit process and
any concerns or challenges faced.
Emerging risks The Audit Committee discusses the
Company's risk matrix each time
it meets. Through these discussions
emerging risks such as those caused
by the Russian invasion of Ukraine
are assessed. The matrix also documents
long term implications for the sector
from secular trends such as climate
change.
The Audit Committee also provides a forum through which the
Company's auditor reports to the Board. The Board, advised by the
Audit Committee, approves all non-audit work carried out by the
auditor in advance and the fees paid to the auditor in this
respect.
External Audit
The Company's external auditor is BDO Limited ("BDO").
The fees due to the auditor during the year were as follows:
2021 2020
GBP GBP
Audit fees Audit Fees 58,500 54,000
Agreed Upon Procedures
relating to the review
of the Company's half year
Non-audit fees report 8,750 8,000
Total Fees 67,250 62,000
================== =======
The external auditor provides an audit planning report in
advance of the annual audit. The Audit Committee has the
opportunity to question and challenge the auditor in respect of
their work. Based on levels of interaction with the auditor, and
the assessment of auditor reporting, the audit planning, adherence
to audit standards, competence of the audit team and feedback from
the Investment Manager, the Audit Committee and the Board are
satisfied that the reappointment of the external auditor should be
proposed at the Annual General Meeting of the Company.
Internal Audit
The Audit Committee believes that the Company does not require
an internal audit function because it delegates its day to day
functions to market leading third party service providers, although
the Audit Committee oversees these operations and receives regular
control reports in this respect.
Risk Management and Internal Controls
The Board is responsible for the Company's system of internal
controls and risk management. The Audit Committee has been
delegated the responsibility for reviewing the ongoing
effectiveness of the Company's internal controls and it discharges
its duties in this area by assessing the nature and extent of the
significant risks the Company is willing to accept in achieving the
Company's objectives, and ensuring that effective systems of risk
identification, assessment and mitigation have been implemented.
The Strategic Report on pages 13 to 17 outlines the principal risks
and uncertainties affecting the Company and the section on Internal
Controls in the Directors Report on pages 19 to 26 gives details of
the work performed by the Audit Committee in this area.
By their nature, the control mechanisms can only provide
reasonable rather than absolute assurance against misstatement or
loss. The Audit Committee seeks continual improvement in the
Company's internal control mechanisms. The Audit Committee is not
aware of any significant failings or weaknesses in the Company's
internal controls in the year under review nor up to the date of
this report.
Financial Reporting
The primary role of the Audit Committee in relation to financial
reporting is to review the Annual Report and Financial Statements
and the Half Year Report with the Administrator and the Investment
Manager and assess their appropriateness. It focuses in this
respect, amongst other matters, on:
-- the clarity of the disclosures in the financial reporting and
compliance with statutory, regulatory and other financial reporting
requirements;
-- the quality and acceptability of accounting policies and practices;
-- material areas where significant judgements and estimates
have been applied or where there has been discussion with the
auditor; and
-- taken as a whole, whether the financial statements are fair,
balanced and understandable and provide shareholders with the
necessary information to assess the Company's performance and
strategy, reporting to the Board in this respect.
Going Concern and Viability
The Audit Committee has made an assessment of the Company's
ability to continue as a going concern and of its viability, see
pages 17 and 21 and has advised the Board accordingly.
David Staples
Audit Committee Chairman
14 April 2022
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF BAKER STEEL
RESOURCES TRUST LIMITED
Opinion on the financial statements
In our opinion, the financial statements of Baker Steel
Resources Trust Limited ("the Company"):
-- give a true and fair view of the state of the Company's
affairs as at 31 December 2021 and of its profit for the year then
ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the European Union;
and
-- have been properly prepared in accordance with the
requirements of the Companies (Guernsey) Law, 2008.
We have audited the financial statements of the Company for the
year ended 31 December 2021 which comprise the Statement of
Financial Position, the Statement of Comprehensive Income, the
Statement of Changes in Equity, the Statement of Cash Flows and
notes to the financial statements, including a summary of
significant accounting policies.
The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards as adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs(UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remain independent of the Company in accordance with the
ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
Directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the Directors' assessment of the Company's
ability to continue to adopt the going concern basis of accounting
included:
-- Obtaining the paper prepared by those charged with governance
and management in respect of going concern and discussing this with
both the Directors and management;
-- Examining management's cash flow forecasts for the twelve
months from the approval of these financial statements and their
stress tests of future income and expenditure and the ability to
realise the Company's assets;
-- Reviewing the key inputs into the cash flow forecasts to
ensure that these were consistent with our understanding and the
historic results of the company; and
-- Reviewing the minutes of the Directors, the RNS announcements
and the compliance reports for any indicators of concerns in
respect of going concern.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Company's ability to continue as a going concern for a period of at
least twelve months from when the financial statements are
authorised for issue.
In relation to the Company's reporting on how it has applied the
UK Corporate Governance Code, we have nothing material to add, or
draw attention to, in relation to the Directors' statement in the
financial statements about whether the Directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Overview
2021 2020
Key audit matters Investment valuation
and ownership
Materiality Financial statements as a whole
GBP1.84m (2020: GBP1.815m) based on
1.75% (2020: 1.75%) of total assets.
---------------------------------------
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the
Company and its environment, including the Company's system of
internal control, and assessing the risks of material misstatement
in the financial statements. We also addressed the risk of
management override of internal controls, including assessing
whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
We tailored the scope of our audit taking into account the
nature of the Company's investments, involvement of the Manager and
the company Administrator, the accounting and reporting environment
and the industry in which the Company operates.
This assessment took into account the likelihood, nature and
potential magnitude of any misstatement. As part of this risk
assessment, we considered the Company's interaction with the
Manager and the company Administrator. We considered the control
environment in place at the Manager and the company Administrator
to the extent that it was relevant to our audit. Following this
assessment, we applied professional judgement to determine the
extent of testing required over each balance in the financial
statements.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources
in the audit, and directing the efforts of the engagement team.
This matter was addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on this
matter.
Key audit matter How the scope of our audit addressed
the key audit matter
Valuation of and ownership of unlisted
investments and listed investments Our procedures included the following:
subject to a lock up period, including
unrealised gains/(losses). For the listed investments we agreed
the number of shares to the custodian.
Refer to the accounting policies
on pages 43 to 46 and Note 3 to For all unlisted investments we
the Financial Statements. agreed the
number of warrants to the warrant
95.29% (2020: 92.06%) of the carrying instrument and obtained direct
value of the investments relates con rmation from the underlying
to the Company's holdings in unlisted investee for the holdings of other
investments or listed investments unlisted investments.
subject to a lock up period, which
are valued using di erent valuation For all unlisted investments:
techniques as explained in Note
3. * We considered the processes, policies and
methodologies used by management for determining the
The valuations are subjective, with fair value of unlisted investments held by the
a high level of judgment and estimation Company;
linked to the determination of fair
value with limited third party pricing
information available.
* Agreed the Manager's application of valuation
As a result of the subjectivity, techniques as appropriate to the circumstances of the
there is a risk of an inappropriate investment and the accounting policies applied; and
valuation model being applied, together
with the risk of inappropriate inputs
to the model being used.
* Agreed the valuation per the models to the financial
The valuation of these investments statements.
is a key driver of the Company's
net asset value and total return.
Incorrect valuations could have
a signi cant impact on the net asset In respect of the investments using
value of the Company and therefore a valuation model, we: -
the return generated for shareholders.
* Obtained and challenged, through discussion and
corroboration to external sources, the inputs and
assumptions used in management's model based on our
understanding of the investment.
* Agreed the inputs, for example volatility, resource
prices, and tax rates, into the models to independent
sources;
* Evaluated whether all key terms of the underlying
agreements had been considered within the models;
* Performed an independent sensitivity analysis of
certain inputs to identify and challenge, through
discussion and corroboration to third party sources,
in more detail, those which have the large impact on
the valuation; and
* Tested the mathematical accuracy of the models.
For investments valued on an index
valuation, we recalculated, using
independently obtained information,
management's applied basket of
indices for each investment.
For those investments which used
recent Investment as a basis, we
considered if there were any material
changes in the market or changes
in the performance of the investee
company affecting the fair value
of the investment at year end.
For listed investments subject
to a lock up period we: -
* Obtained management's calculation of the appropriate
discount to apply to the market price and the
underlying model prepared to support this;
* Challenged the appropriateness of the model, based on
standard practice valuation methods for investments
subject to a lockup;
* Calculated our own discount, utilising an appropriate
valuation model and external data sources obtained
independently and compared with that of management;
and
* Agreed the listed price to a third-party data source
and reperformed the discount adjustment.
Key observation:
Based on the procedures performed,
we are satisfied that judgements
applied in valuing the unlisted
investments and listed investments
subject to a lock up period are
appropriate and the Company has
valid ownership of these investments.
------------------------------------------------------------------------
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent
of testing needed. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole and performance materiality
as follows:
Company financial statements
2021 2020
GBPm GBPm
------------------- -------------------
Materiality 1,838,000 1,815,000
------------------- -------------------
Basis for determining materiality 1.75% of total assets
----------------------------------------
Rationale for the benchmark Due to it being an investment
applied fund with the objective of long-term
capital growth, with investment
values being a key focus of users
of the financial statements.
----------------------------------------
Performance materiality 1,194,000 1,179,000
------------------- -------------------
Basis for determining performance 65% of materiality
materiality
This was determined using our
professional judgement and took
into account the complexity and
our knowledge of the engagement,
together with history of minimal
historical errors and adjustments
----------------------------------------
Specific materiality
We also determined that for investment income and sensitive
fees, which include management fees, administration fees Directors'
fees and custodian fees, a misstatement of less than materiality
for the financial statements as a whole, specific materiality,
could influence the economic decisions of users. As a result, we
determined materiality for these items based on 10% of materiality
being GBP183,800 (2020: GBP181,500). We further applied a
performance materiality level of 65% of specific materiality to
ensure that the risk of errors exceeding specific materiality was
appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them
all individual audit differences in excess of GBP55,140 (2020:
GBP54,000) and, for items audited to specific materiality,
differences above GBP5,514 (2020: GBP5,400). We also agreed to
report differences below this threshold that, in our view,
warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information. The
other information comprises the information included in the Annual
Report and Audited Financial Statements, other than the financial
statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors' statement
in relation to going concern, longer-term viability and that part
of the Corporate Governance Statement relating to the Company's
compliance with the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial
statements and our knowledge obtained during the audit.
Going concern
and longer-term * The Directors' statement with regards to the
viability appropriateness of adopting the going concern basis
of accounting and any material uncertainties
identified set out on page 21; and
* The Directors' explanation as to their assessment of
the Company's prospects, the period this assessment
covers and why this period is appropriate set out on
page 17.
Other Code provisions
* The Directors' statement on fair, balanced and
understandable set out on page 21;
* Board's confirmation that it has carried out a robust
assessment of the emerging and principal risks set
out on page 21;
* The section of the Annual Report that describes the
review of effectiveness of risk management and
internal control systems set out on page 29; and
* The section of the Annual Report describing the work
of the audit committee set out on page 24 and pages
27 to 29.
-------------------------------------------------------------
Other Companies (Guernsey) Law, 2008 reporting
We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to report to
you if, in our opinion:
-- proper accounting records have not been kept by the Company; or
-- the financial statements are not in agreement with the accounting records; or
-- we have failed to obtain all the information and explanations
which, to the best of our knowledge and belief, are necessary for
the purposes of our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors'
Responsibilities within the Directors' Report, the Directors are
responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Company and have a direct
impact on the preparation of the financial statements. We
determined that the most significant frameworks which are directly
relevant to specific assertions in the financial statements are
those that relate to the reporting framework such as IFRSs and the
Companies (Guernsey) Law, 2008. We evaluated management's
incentives and opportunities for fraudulent manipulation of the
financial statements (including the risk of management override of
controls) and determined that the principal risks were related to
revenue recognition on the Company's investments and the management
bias and judgement involved in accounting estimates, specifically
in relation to the valuation of investments (the response to which
is detailed in our key audit matter above).
We communicated relevant identified laws and regulations and
potential fraud risks to all engagement team members and remained
alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit.
Audit procedures performed by the engagement team to respond to
the risks identified included:
-- Discussion with and enquiry of management and those charged
with governance concerning known or suspected instances of
non-compliance with laws and regulations or fraud;
-- Reading minutes of meetings of those charged with governance,
correspondence with the Guernsey Financial Services Commission,
internal compliance reports, complaint registers and breach
registers to identify and consider any known or suspected instances
of non-compliance with laws and regulations or fraud;
-- For listed investments, recalculating investment income and
realised and unrealised gains and losses in full based on external
source information;
-- For unquoted investments, recalculating realised and
unrealised gains and losses in full. For investment income, the
amounts were recalculated where based on an agreement. Where not
agreement based, we obtained direct confirmation from the
underlying unquoted investee companies in relation to investment
income; and
-- Performing analytical procedures of the mid-year net asset
valuations, with a focus on reviewing and corroborating movements
over a set threshold.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising that
the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our responsibilities is available on
the Financial Reporting Council's website at:
https://www.frc.org.uk/auditorsresponsibilities . This description
forms part of our auditor's report.
The engagement Director on the audit resulting in this
independent auditor's opinion is Justin Hallett.
Use of our report
This report is made solely to the Company's members, as a body,
in accordance with Section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state to
the Company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's
members, as a body, for our audit work, for this report, or for the
opinions we have formed.
For and on behalf of BDO Limited
Chartered Accountants and Recognised Auditor
Place du Pré
Rue du Pré
St Peter Port
Guernsey
Date
14 April 2022
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
2021 2020
Notes GBP GBP
Assets
Cash and cash equivalents 9 1,077,482 424,140
Interest receivable 2(i) 249,445 684,184
Other receivables 22,132 19,628
Financial assets held at fair value through
profit or loss 3 103,685,593 102,607,947
Total assets 105,034,652 103,735,899
------------- ------------
Equity and Liabilities
Liabilities
Directors' fees payable 11 28,750 28,750
Management fees payable 7,11 122,894 110,825
Administration fees payable 6 10,638 35,000
Audit fees payable 58,500 54,000
Custodian fees payable 8,443 7,587
Other payables 6,471 8,338
Total liabilities 235,696 244,500
------------- ------------
Equity
Management Ordinary Shares 10 9,167 9,167
Ordinary Shares 10 75,972,688 75,972,688
Revenue Reserves 10,047,160 10,971,969
Capital Reserves 18,769,941 16,537,575
103,491,
Total equity 104,798,956 399
------------- ------------
Total equity and liabilities 105,034,652 103,735,899
============= ============
Net Asset Value per Ordinary Share (in Pence)
- Basic and Diluted 12 98.4 97.2
The financial statements on pages 38 to 63 were approved and authorised
for issue by the Board of Directors on
14 April 2022 and signed on its behalf by:
David Staples
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2021
Year ended Year ended Year ended
2021 2021 2021
Revenue Capital Total
Notes GBP GBP GBP
Income
Interest income 2(i) 1,228,691 - 1,228,691
Dividend income 2(j) 45,880 - 45,880
Net gain on financial assets at
fair value through profit or loss 3 - 2,254,094 2,254,094
Net foreign exchange loss - (21,728) (21,728)
----------- ----------- -----------
Net income 1,274,571 2,232,366 3,506,937
----------- ----------- -----------
Expenses
Management fees 7,11 1,587,121 - 1,587,121
Directors' fees 11 115,000 - 115,000
Administration fees 6 126,876 - 126,876
Other expenses 8 103,389 - 103,389
Depositary fees 41,336 41,336
Custody fees 62,628 - 62,628
Broker fees 35,000 - 35,000
Audit fees 67,250 - 67,250
Directors' Insurance 15,750 - 15,750
Directors' expenses 515 515
Legal fees 44,515 - 44,515
Total expenses 2,199,380 - 2,199,380
----------- ----------- -----------
Net (loss)/gain for the year (924,809) 2,232,366 1,307,557
=========== =========== ===========
Net (loss)/gain for the year per
Ordinary Share:
Basic and Diluted (in pence) 12 (0.87) 2.10 1.23
In the year ended 31 December 2021 there were no gains or losses other 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 and is provided for information purposes.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2020
Year ended Year ended Year ended
2020 2020 2020
Revenue Capital Total
Notes GBP GBP GBP
Income
Interest income 2(i) 1,703,620 - 1,703,620
Dividend income 2(j) 138,129 - 138,129
Net gain on financial assets at
fair value through profit or loss 3 - 24,674,768 24,674,768
Net foreign exchange loss - (10,012) (10,012)
----------- ----------- -----------
Net income 1,841,749 24,664,756 26,506,505
----------- ----------- -----------
Expenses
Management fees 7,11 1,104,344 - 1,104,344
Directors' fees 11 115,136 - 115,136
Administration fees 6 114,250 - 114,250
Other expenses 8 123,918 - 123,918
Depositary fees 31,262 31,262
Custody fees 53,330 - 53,330
Broker fees 35,000 - 35,000
Audit fees 62,000 - 62,000
Directors' insurance and expenses 12,670 - 12,670
Legal fees 26,506 - 26,506
Total expenses 1,678,416 - 1,678,416
----------- ----------- -----------
Net gain for the year 163,333 24,664,756 24,828,089
=========== =========== ===========
Net gain for the year per Ordinary
Share:
Basic and Diluted (in pence) 12 0.15 23.17 23.32
In the year ended 31 December 2020 there were no gains or losses other 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 and is provided for information purposes.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 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
2020 9,167 76,113,180 (140,492) 10,808,636 (8,127,181) 78,663,310
Net gain for the
year - - - 163,333 24,664,756 24,828,089
Balance as at 31
December 2020 9,167 76,113,180 (140,492) 10,971,969 16,537,575 103,491,399
Net loss/gain
for
the year - - - (924,809) 2,232,366 1,307,557
------------------- ------------------- ---------------- ----------- ------------ ------------
Balance as at 31
December 2021 9,167 76,113,180 (140,492) 10,047,160 18,769,941 104,798,956
=================== =================== ================ =========== ============ ============
Note 10 10 10
STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2021
Year ended Year ended
2021 2020
Notes GBP GBP
Cash flows from operating activities
Net gain for the year 1,307,557 24,828,089
Adjustments to reconcile gain for the year to
net cash used in operating activities:
Interest income (1,228,691) (1,703,620)
Dividend income (45,880) (138,129)
Net gain on financial assets at fair value through
profit or loss 3 (2,254,094) (24,674,768)
Net increase in receivables (2,504) (2,344)
Net (decrease)/increase in payables (8,804) 31,766
------------- -------------
(2,186,169) (1,659,006)
Interest received 903,607 615,510
Dividend received 45,880 138,129
Net cash used in operating activities (1,282,929) (905,367)
------------- -------------
Cash flows from investing activities
Purchase of financial assets at fair value through
profit or loss (1,776,426) (11,200,266)
Sale of financial assets at fair value through
profit or loss 3,712,697 11,870,016
------------- -------------
Net cash provided by investing activities 1,936,271 669,750
------------- -------------
Net increase/(decrease) in cash and cash equivalents 653,342 (235,617)
Cash and cash equivalents at the beginning of
the year 424,140 659,757
Cash and cash equivalents at the end of the
year 9 1,077,482 424,140
============= =============
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2021
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.
On 16 July 2021 the Company re-joined the Association of
Investment Companies ("AIC").
2. SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation
The financial statements have been prepared on a historical cost
basis except for Financial Instruments at Fair Value Through Profit
or Loss ("FVTPL") in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union. The
financial statements have been prepared on a going concern
basis.
The Company's functional currency is the Great Britain pound
Sterling ("GBP"), being the currency in which its Ordinary Shares
are issued and in which returns are made to shareholders. The
presentation currency is the same as the functional currency. The
financial statements have been rounded to the nearest GBP. The
Company invests in companies around the world whose shares are
denominated in various currencies.
Income encompasses both revenue and capital gains/losses. For a
listed investment company, it is best practice to distinguish
revenue from capital. Revenue includes items such as dividends,
interest, fees and other equivalent items. Capital is the return,
positive or negative, from holding investments other than that part
of the return that is revenue. The format of the Statement of
Comprehensive Income follows the recommendations of the AIC
Statement of Recommended Practice and is provided for information
purposes.
Assets and liabilities are presented in order of liquidity.
Their maturities are disclosed in Note 4(c).
New standards, amendments and interpretations to existing
standards which are not yet effective for the current year
A number of new standards are effective for annual periods
beginning after 1 January 2022 and earlier application is
permitted, however the Company has not early adopted the new or
amended standards in preparing these financial statements.
The following amended standards and interpretations are not
expected to have a significant impact on the Company's financial
statements:
- Property, Plant and Equipment: Proceeds before Intended Use -
Amendments to IAS 16 (effective for periods starting on or after 1
January 2022).
- Reference to the Conceptual Framework - Amendments to IFRS 3
(effective for periods starting on or after 1 January 2022).
- Onerous Contracts - Cost of Fulfilling a Contract (Amendments
to IAS 37) (effective for periods starting on or after 1 January
2022).
- IFRS 9 Financial Instruments - Fees in the '10 per cent' test
for derecognition of financial liabilities (effective for periods
starting on or after 1 January 2022).
- Disclosure of Accounting Policies - Amendments to IAS 1 and
IFRS Practice Statement 2 (effective for periods starting on or
after 1 January 2023).
- Definition of Accounting Estimates - Amendments to IAS 8
(effective for periods starting on or after 1 January 2023).
- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction - Amendments to IAS 12 (effective for periods
starting on or after 1 January 2023).
- IFRS 17 Insurance Contracts (effective for periods starting on
or after 1 January 2023).
- Classification of Liabilities as Current or Non-current -
Amendments to IAS 1 (effective for periods starting on or after 1
January 2023).
New standards, amendments and interpretations to existing
standards which are effective for the current year
There are a number of new standards, amendments to standards and
interpretations that are effective for annual periods beginning
after 1 January 2021 and were adopted from their effective date.
These amendments did not have a significant impact on the Company's
financial statements.
IFRS 9 Financial Instruments
IFRS 9 sets out the requirements for recognising and measuring
financial assets, financial liabilities and some contracts to buy
or sell non-financial items.
Classification and measurement of financial assets and financial
liabilities
A financial asset or liability is measured at amortised cost if
it meets both of the following conditions and are not
designated
as at FVTPL:
Ø it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
Ø its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
All financial assets of the Company are measured at FVTPL,
except for cash and cash equivalents which are measured at
amortised cost.
All financial liabilities of the Company are measured at
amortised cost.
Impairment of financial assets
Under IFRS 9 for trade receivables the Company has applied the
simplified model. Under the simplified approach the requirement is
to always recognise lifetime expected credit loss ("ECL"). Under
the simplified approach there is no need to monitor significant
increases in credit risk and measure lifetime ECLs at all times.
The interest receivable is in respect of the Convertible loan
notes, a list of which is presented in Note 4(c) on Page 58 of the
Annual Report, and no provision has been made for credit losses.
This is on the basis that the fair value of the underlying asset
supports the convertible receivable.
For other receivables, the Directors have concluded that any ECL
on these receivables would be highly immaterial.
b) Significant accounting judgements and estimates
The preparation of the Company's financial statements requires
the Directors to make judgements, estimates and assumptions that
affect the reported amounts recognised in the financial statements
and disclosure of contingent liabilities. However, uncertainty
about these assumptions and estimates could result in outcomes that
could require a material adjustment to the carrying amount of the
asset or liability in future periods.
(i) Judgements
In the process of applying the Company's accounting policies,
the Directors have made the following judgements, which have had
the most significant effect on the amounts recognised in the
financial statements:
Going Concern
As described in the Directors' Report, the Directors have made
an assessment of the Company's ability to continue as a going
concern and considered it appropriate to adopt the going concern
basis of accounting. There was a discontinuation vote in 2021 which
was not passed. The next discontinuation vote will be at the AGM in
2024. Particular regard has been given to the fact that the Company
holds listed securities that can if necessary be realised to meet
liabilities as they become due. As at 31 December 2021,
approximately 5.7% of the Company's assets were represented by cash
and unrestricted quoted investments. Although the Russian Invasion
of Ukraine has resulted in a reduction in the carrying value of
investments with a Russian nexus after the year end it is not
expected that it will affect the Company's ability to operate on a
normal basis. Neither of the two affected investments PAL and
Azarga were expected to be realised or be a source of revenue in
the next two years. 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.
(ii) Estimates and assumptions
The key assumptions concerning the future and other key sources
of uncertainty at the reporting date, that have a significant risk
of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year, are discussed
below. The Company based its assumptions and estimates on
parameters available when the financial statements were prepared.
However, existing circumstances and assumptions about future
developments may change due to market changes or circumstances
arising beyond the control of the Company. Such changes are
reflected in the assumptions when they occur. Please refer to Note
3 for further information.
(iii) Fair value of financial instruments
When the fair values of financial assets and financial
liabilities recorded in the Statement of Financial Position cannot
be derived from active markets, their fair value is determined
using a variety of valuation techniques that include the use of
valuation models. The inputs to these models are taken from
observable markets where possible, but where this is not feasible,
estimation is required in establishing fair values. The estimates
include considerations of liquidity and model inputs related to
items such as credit risk, correlation and volatility. Changes in
assumptions about these factors could affect the reported fair
value of financial instruments in the Statement of Financial
Position and the level where the instruments are disclosed in the
fair value hierarchy. To assess the significance of a particular
input to the entire measurement, the Company performs sensitivity
analysis or stress testing techniques. The Russian invasion of
Ukraine may have an impact on future valuations, however this is a
non-adjusting Post Balance Sheet Event and therefore no impact has
been taken into account in the valuations as at 31 December 2021.
Please refer to Note 14 for further information. Investments in
associates are carried at fair value as they are held as part of
the investment portfolio which is valued on a fair value basis.
d) Interest income and expense
Bank interest income and interest expense are recognised on an
accruals basis using the effective interest method.
e) Expenses
All expenses are recognised on an accruals basis.
f) Translation of foreign currencies
Foreign currency transactions during the year are translated
into Sterling at the rate of exchange ruling at the date of the
transaction. Assets and liabilities denominated in foreign
currencies are translated into Sterling at the rate of exchange
ruling at the Statement of Financial Position date. Exchange
differences including those arising from adjustment to fair value
of financial instruments during the year, are included in the
Statement of Comprehensive Income. The foreign exchange movements
relating to financial assets form part of the fair value movement
in the Statement of Comprehensive Income.
g) Segment information
The Directors are of the opinion that the Company is engaged in
a single segment of business: investing in natural resources
companies.
h) Net asset value per share
Net Asset Value per Ordinary Share disclosed on the face of the
Statement of Financial Position is calculated in accordance with
the Company's Prospectus by dividing the net assets of the Company
on the Statement of Financial Position date by the number of
Ordinary Shares (including the Management Ordinary Shares)
outstanding at that date. Treasury Shares are excluded from the Net
Asset Value per Ordinary Share calculation.
i) Interest on investments
These comprise of interest accrued and interest received from
convertible loans where interest is payable throughout the life of
the instrument which are accounted for on an accruals basis and
recognised in the Statement of Comprehensive Income.
j) Dividend income
Dividend income is accrued on an ex-dividend basis and
recognised in the Statement of Comprehensive Income and is
presented net of withholding tax. No withholding taxes were
suffered during the year (2020: GBPNil).
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Year ended Year ended
Investment Summary: 2021 2020
GBP GBP
Opening book cost 81,003,041 74,539,152
Purchases at cost 2,536,249 12,871,078
Proceeds on sale of investments (3,712,697) (11,870,016)
Net realised gains 3,084,294 5,462,827
------------ -------------
Closing cost 82,910,887 81,003,041
Net unrealised gains 20,774,706 21,604,906
------------ -------------
Financial assets held at fair value through profit
or loss 103,685,593 102,607,947
============ =============
The following table analyses net gains on financial assets at
fair value through profit or loss for the years ended
31 December 2021 and 31 December 2020.
Year ended Year ended
2021 2020
GBP GBP
Financial assets at fair value through profit or
loss
Realised (losses)/gains on:
- Listed equity shares (792,604) 5,462,245
- Debt instruments 3,893,470 582
- Warrants (16,572) -
3,084,294 5,462,827
Movement in unrealised gains/(losses) on:
- Listed equity shares 4,589,432 (2,924,836)
- Unlisted equity shares 1,571,711 10,821,831
- Royalties 1,943,286 (428,348)
- Debt instruments (10,157,233) 11,731,267
- Warrants 1,222,604 12,027
------------- ------------
(830,200) 19,211,941
------------- ------------
Net gain on financial assets at fair value through
profit or loss 2,254,094 24,674,768
============= ============
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 following table analyses investments by type and by level
within the fair valuation hierarchy at 31 December 2020.
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 7,185,851 - - 7,185,851
Unlisted equity shares - - 36,987,733 36,987,733
Royalties - - 14,512,762 14,512,762
Warrants - - 141,489 141,489
Debt instruments - - 43,780,112 43,780,112
------------- ------------------ ------------ -----------
7,185,851 - 95,422,096 102,607,947
============= ================== ============ ===========
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 gain 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 and therefore
a Level 1 investment.
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 gain on financial
assets and liabilities at fair value through profit or loss held at
31 December 2020.
Unlisted Debt
31 December 2020 Equities Royalties instruments Warrants Total
GBP GBP GBP GBP GBP
Opening balance 1 January
2020 24,780,551 14,019,975 29,293,224 116,337 68,210,087
Purchases of investments 1,519,012 921,135 2,818,227 13,125 5,271,499
Sales of investments - - (63,188) - (63,188)
Transfer to Level 1 (133,661) - - - (133,661)
Change in net unrealised
gains 10,821,831 (428,348) 11,731,267 12,027 22,136,777
Realised gains - - 582 - 582
----------- ----------- ------------ --------- -----------
Closing balance 31 December
2020 36,987,733 14,512,762 43,780,112 141,489 95,422,096
----------- ----------- ------------ --------- -----------
Unrealised gains on investments
still held at 31 December
2020 9,366,113 2,745,785 13,105,480 128,364 25,345,742
=========== =========== ============ ========= ===========
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. Mines &
Metals Trading (Peru) Plc merged with Silver X Mining Corp (Silver
X) on 23 June 2021. The shares of Silver X are traded on the
Toronto Stock Exchange and accordingly the investment has been
transferred from Level 3 to Level 1 in these financial statements.
Tungsten West listed on the AIM Market in the UK on 21 October
2021, however as the Company's investment is locked up for 12
months from the time of listing, the shares are carried at a
discount to the market price and a Level 2 classification has
therefore been applied to the shares.
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 and neither did it during
the year hold a sufficiently large position in any listed company
classified as Level 1 that it could impact the quoted price via a
sale of its 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 liquidity 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 had one Level 2 investments at 31 December 2021 (31
December 2020: none).
Investments classified within Level 3 have significant
unobservable inputs. They include unlisted debt instruments,
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. The
Investment Manager takes account of market, country and development
risks in its discount factors. Some market analysts incorporate
development risk into the discount rate in arriving at a net
present value ("NPV") rather than establishing an NPV discounted
purely for cost of capital and country risk and then applying a
further overall discount to the project economics dependent on
where such project sits on the development curve per the DRAV
calculations.
The valuation techniques 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
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. 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 at fair value through profit or
loss, taking into account credit risk and the value of the
conversion aspect.
Quantitative information of significant unobservable inputs -
Level 3
Range of unobservable
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%
Range of unobservable
input
2020 Unobservable (weighted
Description GBP Valuation technique input average)
Unlisted Equity 27,236,964 Transactions Private transactions n/a
Unlisted Equity 2,790,916 IndexVal Change in index n/a
Unlisted Equity 6,943,907 EBITDA Multiple EBITDA Multiple n/a
Royalties 14,512,762 Royalty Valuation Commodity price n/a
model and discount
rate risk
Unlisted Equity 15,946 Other Exploration n/a
results, study
results, financing
Debt Instruments
Black Pearl Limited Valued at mean Estimated recovery
Partnership 1,281,629 estimated recovery range +/-50%
Other Convertible 13,070,904 Transactions Private transactions n/a
Debentures/Loans
Valued at fair
Other Convertible value with reference Rate of Credit
Debentures/Loans 29,427,579 to credit risk Risk 20%-40%
Simplified Black
Warrants 141,489 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 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 baskets for Bilboes
Gold, Kanga Potash and Prism
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 31 December
2020 are as shown below:
Description Input Sensitivity Effect on Fair Value
used (GBP)
Transactions & Expected
Unlisted Equity Transactions +/- 10% +/-2,723,696
Unlisted Equity Change in IndexVal +82/-42%* +2,288,551/-1,172,185
Unlisted Equity EBITDA Multiple +/- 20% +/-1,388,781
Royalties Commodity Price +/-20% +/-2,862,119
Royalties Discount Rate +/-20% -2,732,511/+2,223,695
Debt Instruments
Black Pearl Limited
Partnership Probability weighting +/-33% +/-422,938
Others/Loans Risk discount rate +/-20% -4,272,633/+1,996,328
Others/ Loans Volatility of Index Basket +/-40% +2,109,175/-2,346,725
Transactions and expected
Others/ Loans transactions +/-10% +/-1,307,090
Warrants Volatility of Index Basket +/-40% +87,968/-92,079
* The sensitivity analysis refers to a percentage amount added
or deducted from the input and the effect this has on the fair
value. The +82%/-42% sensitivity was used as this was the range of
movements of the constituents in the IndexVal basket for Sarmin,
the only investment valued on the basis of IndexVal in the year
(2020:+82%/-42%).
The Company has not disclosed the fair value for financial
assets such as cash and cash equivalents and short-term receivables
and payables, because their carrying amounts are a reasonable
approximation of fair values.
4. RISK MANAGEMENT POLICIES AND DISCLOSURES
The Company's principal financial instruments comprise financial
assets, primarily unlisted equity investments and loans in natural
resources companies. The portfolio is concentrated on projects on
the large liquid commodity markets and diversified in terms of
geography. These investments reflect the core of the Company's
investment strategy.
The Company manages its exposure to key financial risks
primarily through diversification of geography and commodity, and
through technical and legal due diligence. The objective of the
policy is to support the delivery of the Company's core investment
objective whilst maintaining future financial security. The main
risks that could adversely affect the Company's financial assets or
future cash flows are market risk (comprising market price risk,
currency risk and interest rate risk), commodity price risk,
liquidity risk, concentration risk and credit risk.
The Company's financial liabilities principally comprise fees
payable to various parties and arise directly from its
operations.
Risk exposures and responses
The Company's Board of Directors oversees the management of
financial risks, each of which is summarised below.
a) Market risk
Market risk is the risk that the fair value of a financial
instrument will fluctuate because of changes in market prices.
Market risk comprises three types of risk: market price risk,
currency risk and interest rate risk.
i. Market price risk
Market price risk is the risk that the fair value of future cash
flows will fluctuate because of changes in the market prices of the
Company's investment portfolio.
The sensitivity analysis on the previous page illustrates the
sensitivity of the key inputs into the market valuation and the
resulting impact of the fair values. The level of change is
considered to be reasonably possible. The sensitivity analysis
assumes all other variables are held constant.
ii. Currency risk
At 31 December 2021, the largest non-Sterling portion of the
Company's financial assets and liabilities was denominated in US
Dollars. The functional currency of the Company is Sterling.
Currency risk is the risk that the value of non-Sterling
denominated financial instruments will fluctuate due to changes in
foreign exchange rates. The tables below show the currencies and
amounts the Company was exposed to at 31 December 2021 and 31
December 2020.
31 December 2021
Currency Amount in Conversion rate Value % of net assets
local currency (based on GBP) GBP
AUD 38,079,806 0.5371 20,451,724 19.52%
CAD 3,850,097 0.5837 2,247,114 2.14%
EUR 12,176,338 0.8401 10,229,833 9.76%
GBP 35,626,057 1.0000 35,626,057 33.99%
NOK 44,748,764 0.0838 3,751,021 3.58%
USD 43,995,802 0.7386 32,493,207 31.01%
104,798,956 100.00%
------------ ---------------
31 December 2020
Currency Amount in Conversion rate Value % of net assets
local currency (based on GBP) GBP
AUD 33,258,402 0.5650 18,790,284 18.16%
CAD 3,906,292 0.5748 2,245,181 2.17%
EUR 9,115,280 0.8956 8,163,664 7.89%
GBP 27,672,415 1.0000 27,672,415 26.74%
NOK 41,552,423 0.0854 3,550,538 3.43%
USD 58,809,001 0.7324 43,069,317 41.61%
103,491,399 100.00%
----------- ---------------
Analysis has been completed to assess what movements in currency
rates are reasonably possible. This analysis has considered the
variance between the highest and lowest conversion rates in 2021
and 2020 for each of the currencies in the table below. The table
shows the potential movements in the Company's net assets as a
result of such foreign exchange movements.
Reasonably 2021 2020
Currency possible Value Value
move GBP GBP
AUD 10% 2,045,172 1,879,028
CAD 11% 247,183 246,970
EUR 13% 1,329,878 1,061,276
NOK 20% 750,204 710,108
USD 16% 5,198,913 6,891,091
---------- ----------
9,571,350 10,788,473
========== ==========
The estimated movement is based on management's determination of
a reasonably possible change in foreign exchange rates. In
practice, the actual results may differ from the sensitivity
analysis above and the difference could be material.
iii. Interest rate risk
Although the Company's financial assets and liabilities expose
it indirectly to risks associated with the effects of fluctuations
in the prevailing levels of market interest rates on its financial
position and fair value, it is subject to little direct exposure to
interest rate fluctuations as the majority of the financial assets
are equity investments or similar investments which do not pay
interest. For valuation purposes convertible loans all have fixed
interest rates and are treated more like quasi equity albeit with
higher ranking than equity. As such they are not directly exposed
to interest rates from a cash flow perspective. Any excess cash and
cash equivalents are invested at short-term market interest rates
which expose the Company, to a limited extent, to interest rate
risk and corresponding gains/losses from a change in the fair value
of these financial instruments.
The table below summarises the Company's exposure to interest
rate risk. It includes the Company's assets and liabilities at fair
values, categorised by the earlier of contractual re-pricing or
maturity dates.
At 31 December 2021 Less than More than Non-interest
6 months 6 months bearing Total
Assets GBP GBP GBP GBP
Cash and cash equivalents 1,077,482 - - 1,077,482
Financial assets held at fair value through profit or loss* 1,235,273 16,237,843 86,212,477 103,685,593
Other receivables - - 22,132 22,132
Interest receivable* 249,445 - - 249,445
---------- ----------- ------------ ------------
Total Assets 2,562,200 16,237,843 86,234,609 105,034,652
========== =========== ============ ============
Liabilities
Other liabilities - - 235,696 235,696
Total Liabilities - - 235,696 235,696
========== =========== ============ ============
Interest rate sensitivity gap 2,562,200 16,237,843
========== ===========
*The interest rate risks on these items are considered as part
of overall price risk in valuing the convertibles.
The table below summarises the Company's exposure to interest
rate risk. It includes the Company's assets and liabilities at fair
values, categorised by the earlier of contractual re-pricing or
maturity dates.
At 31 December 2020 Less than More than Non-interest
6 months 6 months bearing Total
Assets GBP GBP GBP GBP
Cash and cash equivalents 424,140 - - 424,140
Financial assets held at fair value through profit or loss* 585,887 28,983,181 73,038,879 102,607,947
Other receivables - - 19,628 19,628
Interest receivable* 684,184 - - 684,184
--------- ---------- ------------ -----------
Total Assets 1,694,211 28,983,181 73,058,607 103,735,899
========= ========== ============ ===========
Liabilities
Other liabilities - - 244,500 244,500
Total Liabilities - - 244,500 244,500
========= ========== ============ ===========
Interest rate sensitivity gap 1,694,211 28,983,181
========= ==========
*The interest rate risks on these items are considered as part
of overall price risk in valuing the convertibles.
Interest rate sensitivity
It is the opinion of the Directors that the Company is not
materially exposed to interest rate risk and accordingly no
interest rate sensitivity calculation has been provided in these
financial statements.
b) Liquidity risk
Liquidity risk is defined as the risk that the Company may not
be able to settle or meet its obligations as they fall due. The
Company invests in unlisted equities for which there may not be an
immediate market. The Company seeks to mitigate this risk by
maintaining cash and readily realisable listed equity positions
which will cover its ongoing operational expenses.
The Company has the ability to incur borrowings of up to 10% of
its NAV but the Company's policy is to restrict any such borrowings
to temporary purposes only, such as settlement mis-matches.
The table below analyses the Company's financial assets and
liabilities into relevant maturity groupings based on the remaining
period at the Statement of Financial Position date to the
contractual maturity date. The amounts in the table are the
contractual cash flows.
At 31 December 2021 Less than More than No contractual
1 month 1-3 months 3-12 months 12 months maturity Total
Assets GBP GBP GBP GBP GBP GBP
Cash and cash equivalents 1,077,482 - - - - 1,077,482
Financial assets held at fair value
through profit
or loss - 1,235,273 4,721,075 11,516,768 86,212,477 103,685,593
Receivables 249,445 16,132 6,000 - - 271,577
---------- ---------- ----------- ----------- -------------- ------------
Total Assets 1,326,927 1,251,405 4,727,075 11,516,768 86,212,477 105,034,652
========== ========== =========== =========== ============== ============
Less than More than No contractual
1 month 1-3 months 3-12 months 12 months maturity Total
Liabilities GBP GBP GBP GBP GBP GBP
Other payables
and accrued expenses 28,750 144,279 62,667 - - 235,696
--------- ---------- ----------- --------- -------------- -----------
Total Liabilities 28,750 144,279 62,667 - - 235,696
========= ========== =========== ========= ============== ===========
Net assets attributable to shareholders 104,798,956
===========
The table below analyses the Company's financial assets and
liabilities into relevant maturity groupings based on the remaining
period at the Statement of Financial Position date to the
contractual maturity date. The amounts in the table are the
contractual cash flows.
At 31 December 2020 Less than More than No contractual
1 month 1-3 months 3-12 months 12 months maturity Total
Assets GBP GBP GBP GBP GBP GBP
Cash and cash equivalents 424,140 - - - - 424,140
Financial assets held at fair value
through profit
or loss - - 9,759,932 19,809,136 73,038,879 102,607,947
Receivables 684,184 15,878 3,750 - - 703,812
--------- ---------- ----------- ---------- -------------- -----------
Total Assets 1,108,324 15,878 9,763,682 19,809,136 73,038,979 103,735,899
========= ========== =========== ========== ============== ===========
Less than More than No contractual
1 month 1-3 months 3-12 months 12 months maturity Total
Liabilities GBP GBP GBP GBP GBP GBP
Other payables
and accrued expenses 149,575 15,925 79,000 - - 244,500
--------- ---------- ----------- --------- -------------- -----------
Total Liabilities 149,575 15,925 79,000 - - 244,500
========= ========== =========== ========= ============== ===========
Net assets attributable to shareholders 103,491,399
===========
The value of the cash and level 1 listed equity positions held
by the Company at the year-end was GBP5,956,968 (2020:
GBP5,645,831) with the total liabilities at the year-end at
GBP235,696 (2020: GBP244,500).
c) Credit risk
Credit risk is the risk that a counterparty will be unable to
pay amounts in full as they fall due. The Company has exposure to
credit risk in relation to its cash balances, debt instruments,
loan and loan notes as stated in the Statement of Financial
Position.
The Company seeks to mitigate this risk by lending to companies
with projects which have significant value over and above the value
of the debt in such company so that there is a significant equity
"buffer". The maximum credit risk on debt instruments for the
Company is GBP19,950,848 (2020: GBP43,018,741).
The Company's financial assets are exposed to credit risk, which
amounted to the following at the Statement of Financial Position
date:
2021 2020
GBP GBP
Assets
Cash and cash equivalents 1,077,482 424,140
Interest receivable 249,445 684,184
Other receivables 22,132 19,628
Financial assets held at fair value through
profit or loss 103,685,593 102,607,947
Total assets 105,034,652 103,735,899
------------- ------------
c) Credit risk
As at 31 December 2021, the Company's non-equity financial
assets exposed to credit risk were held with the following
ratings:
Financial Assets Counterparty **Credit 2021
Rating % of net assets
-Convertible Loan & Loan Note Azarga Metals NR* 2.11
-Convertible Loan & Loan Note Bilboes Holdings Loan Note 1 NR* 1.72
-Convertible Loan & Loan Note Bilboes Holdings Loan Note 2 NR* 0.33
Silver X Mining Corporation (Previously known as
-Convertible Loan & Loan Note Mines & Metals Trading (Peru) Plc) NR* 2.37
-Convertible Loan Note Black Pearl Limited Partnership NR* 1.23
-Convertible Unsecured Loan Security Futura Resources Limited NR* 1.18
-Loan Note Cemos Group Plc NR* 9.72
-Loan Note PRISM Diversified Limited Loan Note 1 NR* 0.08
-Loan Note PRISM Diversified Limited Loan Note 2 NR* 0.27
Cash and cash equivalents HSBC Bank plc AA- 1.03
Total 20.04
===============
As at 31 December 2020, the Company's non-equity financial
assets exposed to credit risk were held with the following
ratings:
Financial Assets Counterparty **Credit 2020
Rating % of net assets
-Convertible Loan & Loan Note Anglo Saxony Mining Limited NR* 3.29
-Convertible Loan & Loan Note Azarga Metals NR* 2.42
-Convertible Loan & Loan Note Bilboes Holdings Loan Note 1 NR* 2.58
-Convertible Loan & Loan Note Bilboes Holdings Loan Note 2 NR* 0.50
-Convertible Loan & Loan Note Mines & Metals Trading (Peru) Plc NR* 4.12
-Convertible Loan & Loan Note Tungsten West Limited NR* 9.73
-Convertible Loan Note Black Pearl Limited Partnership NR* 1.24
-Convertible Loan Note Futura Resources Limited NR* 10.05
-Convertible Unsecured Loan Cemos Group Plc NR* 7.44
-Loan Note Cemos Group Plc Loan Note NR* 0.40
-Loan Note PRISM Diversified Limited Loan Note 1 NR* 0.13
-Loan Note PRISM Diversified Limited Loan Note 2 NR* 0.40
Cash and cash equivalents HSBC Bank plc AA- 0.41
Total 42.71
===============
* No rating available
**As per S&P
d) Concentration risk
The Company's investment policy is to invest in natural
resources companies, both listed and unlisted, that the Investment
Manager considers to be undervalued and that have strong
fundamentals and attractive growth prospects which means that the
Company has significant concentration risk relating to natural
resources companies.
Concentration risks include, but are not limited to natural
resources asset category (such as gold) and geography. The Company
may at certain times hold relatively few investments. The Company
could be subject to significant losses if it holds a large position
in a particular investment that declines in value or is otherwise
adversely affected, including by the default of the issuer. Such
risks potentially could have a material adverse effect on the
Company's financial position, results of operations, business
prospects and returns to investors. The Company's investments are
geographically diverse reducing this aspect of concentration risk.
In terms of commodity, the portfolio is likewise diversified in the
large liquid markets of silver, gold, iron ore, coal and copper to
mitigate this aspect of concentration risk.
4. 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 (2020: 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 on realisations of investments.
5. ADMINISTRATION FEES
The Administrator, HSBC Securities Services (Guernsey) Limited,
is paid fees for acting as administrator of the Company at the rate
of 7 basis points of gross asset value up to US$ 250 million; the
rate reduces to 5 basis points of gross asset value above US$ 250
million. The Administrator is also reimbursed by the Company for
reasonable out-of-pocket expenses. These fees are calculated and
accrued as at the last business day of each month and paid monthly
in arrears.
The Administrator is also entitled to a fee for its provision of
corporate secretarial services provided to the Company on a time
spent basis and subject to a minimum annual fee of GBP40,000. The
Company is also responsible for any sub-administration fees as
agreed in writing from time to time, and reasonable out-of-pocket
expenses. The Administrator is also entitled to fees of EUR5,000
for preparation of the financial statements of the Company.
The administration fees payable for the year ended 31 December
2021 were GBP126,876 (2020: GBP114,250) of which GBP10,638 (2020:
GBP35,000) was payable at 31 December 2021. HSBC Securities
Services (Ireland) DAC, the sub-Administrator, is paid a portion of
these fees by the Administrator.
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 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 year ended 31 December 2021 was
GBP1,587,121 (2020: GBP1,104,344) of which GBP122,894 (2020:
GBP110,825) was outstanding at the year 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
has been sufficient net realised gains. As at 31 December 2021, the
Highwater Mark was the equivalent of approximately 94 pence per
share with the relevant Hurdle being the equivalent of
approximately 151 pence per share.
There were no earned performance fees payable for the current or
prior year.
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. OTHER EXPENSES
2021 2020
TOTAL TOTAL
GBP GBP
Research fees 33,910 31,199
Regulatory fees 30,970 25,316
Investor services fees 24,031 23,138
Public relation fees 10,080 7,500
FATCA review - 13,500
Board recruitment fees - 10,000
Miscellaneous expenses 4,398 13,265
103,389 123,918
======== ========
9. CASH AND CASH EQUIVALENTS
2021 2020
GBP GBP
Cash at HSBC Bank plc 1,077,482 424,140
========== ========
10. 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 (2020: 106,453,335)
Ordinary Shares in issue with an additional 700,000 (2020: 700,000)
held in treasury. The Company has 9,167 (2020: 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.
Holders of Management Ordinary Shares have the right to receive
notice of and to attend and vote at general meetings of the
Company, except that the holders of Management Ordinary Shares are
not entitled to vote on any resolution relating to certain specific
matters, including a material change to the Company's investment
objective, investment policy or borrowing policy. Each holder of
Management Ordinary Shares being present in person or by proxy at a
meeting will, upon a show of hands, have one vote and upon a poll
each such holder of Management Ordinary Shares present in person or
by proxy will have one vote for each Management Ordinary Share held
by him. Holders of Ordinary Shares and Management Ordinary Shares
are entitled to receive, and participate in, any dividends or other
distributions out of the profits of the Company available for
dividend and resolved to be distributed in respect of any
accounting period or other income or right to participate
therein.
The details of issued share capital of the Company are as
follows:
2021 2020
Amount No. of shares* Amount No. of 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 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
----------- --------------- ------------ ------------
The outstanding Ordinary Shares as at the year ended 31 December
2020 were as follows:
Ordinary Shares Treasury Shares
No. of
Amount No. of shares* Amount shares
GBP GBP
Balance at 31 December 2020 76,122,347 106,462,502 140,492 700,000
----------- --------------- ------------ ------------
* Includes 9,167 (2020: 9,167) Management Ordinary Shares.
** The value reported for the ordinary shares represents the net
of subscriptions and redemptions (including any associated
expenses)
Capital Management
The Company regards capital as comprising its issued Ordinary
Shares. The Company does not have any debt that might be regarded
as capital. The Company's objectives in managing capital are:
-- To safeguard its ability to continue as a going concern and
provide returns to shareholders in the form of capital growth over
the long-term through a focused, global portfolio consisting
principally of the equities or related instruments of natural
resources companies;
-- To allocate capital to those assets that the Directors
consider are most likely to provide the above returns;
-- To manage, so far as is reasonably possible and when
desirable, any discount or premium between the Company's share
price and its NAV per Ordinary Share; and
-- To make distributions to shareholders when circumstances
permit in accordance with the Company's distribution policy.
The Company has continued to hold sufficient cash and liquid
listed assets to enable it to meet its obligations as they arise
and the Investment Manager provides the Directors with reporting on
the activities of the investments of the Company such that they can
be satisfied with the allocation of capital.
As discussed in the Strategic Report, in August 2015, the
Company introduced a share buyback programme with the objective of
managing the discount the Company's shares trade at compared with
its NAV. The Company has repurchased 700,000 shares at an average
price of 20 pence per share through this programme and the
repurchased shares are held in Treasury.
The Company has authority to make market purchases of up to
14.99 Per Cent of its own Ordinary Shares in issue. A renewal of
such authority is sought from Shareholders at each Annual General
Meeting of the Company or at a General Meeting of the Company, if
required. Any purchases of Ordinary Shares will be made within
internal guidelines established from time to time by the Board and
within applicable regulations.
As described in the Directors' Report on page 19, the Company
has a policy to distribute at least 15 per cent of net realised
cash gains after deducting losses during the financial year through
dividends, tender offers or otherwise.
The Company is not subject to any externally imposed capital
requirements.
Reserves
As at the year- end the Company had Revenue Reserves of
GBP10,047,160 (2020: GBP10,971,969) and Capital Reserves of
GBP18,769,941 (2020: GBP16,537,575).
Under the Companies (Guernsey) Law 2008, the Company may buy
back its own shares, or pay dividends, out of any reserves, subject
to passing a solvency test. This test considers whether,
immediately after the payment, the Company's assets exceed its
liabilities and whether it will be able to pay its debts when they
fall due.
11. RELATED PARTY TRANSACTIONS
The Investment Manager, Baker Steel Capital Managers LLP, had an
interest in 9,167 Management Ordinary Shares at 31 December 2021
(31 December 2020: 9,167).
Baker Steel Global Funds SICAV - Precious Metals Fund ("Precious
Metals Fund") had an interest in 4,922,877 Ordinary Shares in the
Company at 31 December 2021 (2020: 4,922,877). These shares are
held in a custodian account with Citibank N.A. London. 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 (2020: 12,452,177) and The Sonya Trust holds 12,722,129
shares (2020: 12,722,129).
David Staples, a Director of the Company purchased 35,000 shares
in the Company on 26 April 2021.
The Company's Associates are described in Note 13 to these
financial statements.
The Management fees and Directors' fees paid and accrued for the
year were:
2021 2020
GBP GBP
Management fees 1,587,121 1,104,344
Directors' fees 115,000 115,136
The Management fees and Directors' fees outstanding at the
year-end were:
2021 2020
GBP GBP
Management fees 122,894 110,825
Directors' fees 28,750 28,750
12. NET ASSET VALUE PER SHARE AND GAIN PER SHARE
Net asset value per share is based on the net assets of
GBP104,798,956 (31 December 2020: GBP103,491,399) and 106,462,502
(31 December 2020: 106,462,502) Ordinary Shares, being the number
of shares in issue at the year-end excluding 700,000 shares which
are held in treasury. The calculation for basic and diluted NAV per
share is as below:
31 December 2021 31 December 2020
Ordinary Shares Ordinary Shares
Net assets at the year-end (GBP) 104,798,956 103,491,399
Number of shares 106,462,502 106,462,502
Net asset value per share (in pence)
basic and diluted 98.4 97.2
Weighted average number of shares 106,462,502 106,462,502
The basic and diluted gain per share for 2021 is based on the
net gain for the year of the Company of GBP1,307,557 and on
106,462,502 Ordinary Shares, being the weighted average number of
Ordinary Shares in issue during the year.
The basic and diluted gain per share for 2020 is based on the
net gain for the year of the Company of GBP24,828,089 and on
106,462,502 Ordinary Shares, being the weighted average number of
Ordinary Shares in issue during the year.
There are no outstanding instruments which could result in the
issue of new shares or dilute the issued share capital.
13. INVESTMENT IN ASSOCIATES
The interests in the below companies are for investment purposes
and they are deemed associates by virtue of the Company having
appointed a non-executive director ("NED") and/or holding in excess
of 20% of the voting rights of the relevant company. Investments in
associates are carried at fair value as they are held as part of
the investment portfolio which is valued on a fair value basis.
Investment Country of Incorporation Voting Rights held NED Appointed
Cemos Group Limited Jersey 32.50% Yes
Bilboes Gold Limited Mauritius 24.2% Yes
Nussir ASA Norway 12.10% Yes
Futura Resources Australia 26.90% Yes
Tungsten West Plc England and Wales 22.40% Yes
First Tin Limited England and Wales 26.00% Yes
Polar Acquisition British Virgin Yes
Limited Islands 49.99%
Azarga Canada Convertible Loan Yes
Various Baker Steel representatives and their associates
received fees and incentives for their role as directors to these
companies. These fees are received in addition to the management
fees charged.
14. SUBSEQUENT EVENTS
The potential impact of the Russian invasion of Ukraine to the
mining sector is discussed in the Chairman's Statement. The
valuations of the two investments with a direct interest in Russia,
PAL and Azarga Metals were reduced by 50% at the end of February
2022.
There were no events subsequent to the period end, not already
disclosed in the Annual Report and Accounts, that materially
impacted on the Company that require disclosure or adjustment to
these financial statements.
15. APPROVAL OF ANNUAL REPORT AND AUDITED FINANCIAL
STATEMENTS
The Annual Report and Audited Financial Statements for the
year-ended 31 December 2021 were approved by the Board of Directors
on 14 April 2022.
Appendix - additional information (UnAUDITED)
REMUNERATION DETAILS FOR INVESTMENT MANAGER'S STAFF
As noted earlier, under AIFMD, the Investment Manager received
approval to act as a full scope UK AIFM to the Company as of 22
July 2014. Pursuant to Article 22(2)9e) and (f) of AIFMD, an AIFM
must, where appropriate for each AIF it manages, make an annual
report available to the AIF investors. The annual report must
contain, amongst other items, the total amount of remuneration paid
by the AIFM to its staff for the financial year, split into fixed
and variable remuneration including, where relevant, any carried
interest paid by the AIF, along with the aggregate remuneration
awarded to senior management and members of staff whose actions
have a material impact on the risk profile of the AIF.
For the year ended 31 December 2021 the LLP as Investment
Manager paid fixed remuneration to members and those identified as
AIF code staff of GBP244,769. Variable remuneration amounted to
GBP2,699,589. No carried interest was paid by the Company. These
figures represent the aggregate remuneration paid to members and
those identified as AIF code staff of the LLP as Investment Manager
for the year ended 31 December 2021. The total remuneration of the
individuals whose actions have a material impact upon the risk
profile of the AIF managed by the AIFM amounted to
GBP2,944,538.
The total AIFM remuneration attributable to senior management
was GBP2,955,538. No other staff were identified as material risk
takers in the year. The remuneration figures reflect an
approximation of the portion of AIFM remuneration reasonably
attributable to the AIF.
GLOSSARY OF TERMS
AIF - Alternative Investment Fund
AIFM - Alternative Investment Fund Manager
AIFMD - Alternative Investment Fund Managers Directive
BSRT - Baker Steel Resources Trust Limited
Commission - Guernsey Financial Services Commission
DRAVs - Development Risk Adjusted Values
DFS - A Definitive Feasibility Study is an evaluation of a
proposed mining project to determine whether the mineral resource
can be mined economically. A DFS is the basis for detailed design
and construction of a project and determines definitively whether
to proceed with the project. Detailed feasibility studies require a
significant amount of formal engineering work, with costings
accurate to within 10-15%. The definitive feasibility study will be
based on indicated and measured mineral resources.
EU - European Union
EGM - Extraordinary General Meeting
FCA - Financial Conduct Authority
FRC - Financial Reporting Council
FVO - Fair value option
FVOCI- Fair value through other comprehensive income
FVTPL - Fair value through profit or loss
GFSC - Guernsey Financial Services Commission
GFSC Code - Guernsey Financial Services Commission Code of
Corporate Governance
g/t - Grams per tonne
IAS - International Accounting Standards
ITG - IFRS Transition Resource Group of Impairment of Financial
Instruments
IFRS - International Financial Reporting Standards as adopted by
the European Union
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.
IPO - Initial Public Offering (stock market launch)
JORC - AUSTRALASIAN JOINT ORE RESERVES COMMITTEE
The Code for Reporting of Mineral Resources and Ore Reserves
(the JORC Code) of the Australasian Joint Ore Reserves Committee
(JORC) is widely accepted as a standard for professional reporting
of mineral resources and ore reserves. Mineral resources are
classified as 'Inferred', 'Indicated' or 'Measured', while ore
reserves are either 'Probable' or 'Proven'.
Mt - million tonnes
NAV - Net Asset Value
GLOSSARY OF TERMS (CONTINUED)
NI 43 -101 - CANADIAN NATIONAL INSTRUMENT 43-101
Canadian National Instrument 43-101 is a mineral resource
classification instrument which dictates reporting and public
disclosure of information in Canada relating to mineral
properties.
NAV Discount - NAV to market price discount The Net Asset Value
("NAV") per share is the value of all the investment company's
assets, less any liabilities it has, divided by the number of
shares. However, because the Company's Ordinary Shares are traded
on the London Stock Exchange's Main Market, the share price may be
higher or lower than the NAV. The difference is known as a discount
or premium.
OCI - Other comprehensive income
PEA - Preliminary Economic Assessment
SORP - Statement of Recommended Practice issued by The
Association of Investment Companies dated November 2021
UK Code - UK Corporate Governance Code published by the
Financial Reporting Council in July 2018.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR SFMFLLEESEDL
(END) Dow Jones Newswires
April 14, 2022 10:45 ET (14:45 GMT)
Baker Steel Resources (LSE:BSRT)
Historical Stock Chart
From Feb 2024 to Mar 2024
Baker Steel Resources (LSE:BSRT)
Historical Stock Chart
From Mar 2023 to Mar 2024