Net Asset Value(s)

RNS Number : 7311U

Baker Steel Resources Trust Ltd

05 December 2013

 



BAKER STEEL RESOURCES TRUST LIMITED

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

5 December 2013

29 November 2013 Unaudited NAV Statement

Net Asset Values

Baker Steel Resources Trust Limited (the "Company") announces its unaudited net asset value per share as at 29 November 2013:

Net asset value per Ordinary Share:    66.1 pence

During the month, the NAV per share decreased by 8.1% largely due to a fall in the prices of the listed part of the portfolio, in particular the share price of Ivanhoe Mines Limited on the Toronto Stock Exchange as well as an increase in the value of Sterling against the US Dollar and Canadian Dollar in which the majority of the Company's investments are denominated.

At 29 November 2013, the Company had a total of 66,142,533 Ordinary Shares in issue.

The Company is fully invested with top 10 investments as follows as a percentage of NAV:

Ivanhoe Mines Limited		20.2%
Bilboes Gold Limited		12.8%
Black Pearl Limited Partnership		12.5%
Ironstone Resources Limited		12.0%
Gobi Coal & Energy Limited		11.9%
Polar Silver Resources Ltd		8.3%
China Polymetallic Mining Limited		6.9%
Ferrous Resources Limited		6.0%
Metals Exploration plc		5.9%
South American Ferro Metals Limited		1.5%
Other Investments		2.3%
Net Cash, Equivalents and Accruals	-0.3%

Investment Update

Ivanhoe Mines Limited ("Ivanhoe")

On 18 November 2013 Ivanhoe reported the findings of a Preliminary Economic Assessment ("PEA") of its Kamoa copper discovery in the Democratic Republic of Congo. The PEA, which conforms with the requirements of Canada's National Instrument 43-101, was prepared by independent consultants AMC Consultants, AMEC E&C Services, SRK Consulting, Stantec Consulting International, Hatch and Golder Associates Africa.

The PEA reflects a two-phased approach to the development of Kamoa. The first phase of mining will target high-grade copper mineralization from shallow, underground resources mining at a rate of 3 million tonnes per annum to yield a high-value concentrate and generate early cashflows. The second phase will entail an expansion of the mine and mill to 11 million tonnes per annum and construction of a smelter with a capacity to produce 300,000 tonnes per annum of blister copper. The two-phased approach has the advantage of paring back pre-production capex requirements to US$1.4 billion, a more manageable sum to finance, which will help minimise potential equity dilution, one of the key concerns of the market towards Ivanhoe given its impressive growth profile.

The preliminary economic analysis is based on a long-term price assumption of US$3.00 per pound for copper and a sales price for sulphuric acid of US$250 per tonne. The economic analysis returns an after-tax Net Present Value of US$2.55 billion using an 8% discount rate,. It has an after-tax internal rate of return (IRR) of 15.2% and a payback period of 8.4 years. The life-of-mine average total cash cost, after credits, is US$1.18 per pound of copper.

The headline IRR of 15.2% may have disappointed some observers, hence the fall in share prices, but it is notoriously difficult to value large projects with significant infrastructure requirements, especially, as is the case with Kamoa, where there is significant capacity for further expansion but where the capital cost of the initially scoped project needs to carry all the infrastructure cost. Importantly the projected operating cost would put Kamoa in the lowest cost quartile of global producers, which suggests a robust project.

During the month Ivanhoe's share price on the Toronto Stock Exchange fell 21.5% to C$2.05 per share. The majority of the Company's holding is restricted by lock-up arrangements introduced on Ivanhoe's IPO and is carried at a 10% discount to the market price. Further information on Ivanhoe is available at www.ivanhoemines.com.

Ferrous Resources Limited ("Ferrous")

On 14 October 2013 Ferrous completed a transaction with the Correa Family, who were the original sellers of the mineral rights relating to the Viga Mine, which supported Ferrous' creation in 2007. Under the transaction Ferrous repurchased 60 million of its own shares from the Correa Family for US$81.0 million paid up front and US$30.3 million payable in two equal tranches in November 2014 and 2015. As part of the transaction the Correa Family repaid a loan from Ferrous of US$61.8 million.

Although the total value of the transaction of US$111.4 million divided by the number of shares repurchased would suggest a price of US$1.85 per Ferrous share, it appears that the transaction also cancelled a number of obligations from Ferrous to the Correa Family including a guaranteed minimum sale price for their shares. As such, US$1.85 cannot be regarded as fair value for Ferrous shares on an "arms length" basis and the Company continues to hold its interest at US$0.75 per share, close to the purchase price paid by Ferrexpo in acquiring its 14.4% interest (prior to cancellation of the Correa Family shares) in September 2013.

Further details of the Company and its investments are available on the Company's website www.bakersteelresourcestrust.com 

Enquiries:

Baker Steel Resources Trust Limited              [phone]

Francis Johnstone
Trevor Steel

Numis Securities Limited                                [phone]

David Benda (corporate)

James Glass (sales)

Pelham Bell Pottinger

Lorna Spears                                                  [phone]

Joanna Boon                                                   [phone]

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

Accordingly, no reliance should be placed on such estimated valuations and they should only be taken as an indicative guide. Other risk factors which may be relevant to the NAV figure is set out in the Company's Prospectus dated 31 March 2010.

 

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