In “is it a Baker Steel?” I set out the case for BSRT and why it should be part of the OB top 20.
Yesterday Baker Steel Resources Trust Limited (the "Company") announced its unaudited net asset value per share at 29 December 2023.
Net asset value per share grew to 77.2 pence - growing 16.3% November to December 2023.
At a market price of 44p buy that leaves BSRT on a 42.8% discount to NAV, despite an over 33% share price rise from recent 33p lows (and +10% YTD).
Let’s explore the question “is there more to come?”
PUBLIC:
MTL - now 3% of the portfolio just announced bumper Q4 results. 85.1Koz compared to 78-81Koz guidance, at $1126 AISC. Its FCF means it will be debt free in the next few months, and it is exploring in the Abra area, while its RunRuno mine will run run out in 2027 so it has 3-4 years of free cash flow (which cumulatively will be over 100% of its current market cap) and is busy working on exploration for its next mine. H&P see a 50% upside to its target price. That would be worth an additional £1.5m to BSRT.
CLDN - Liberum wrote yesterday that they have “turned bullish on gold equities” and at current market price is a clear bid target. Production in FY23/24 should be 10%-20% according to guidance and the underground exploration drilling at Bilboes-Motopa offers substantial further upside and economies of scale (on top of an attractive AISC of $1,035. BSRT stands to gain double here since there’s a NSR of 1% over Bilboes. BSRT gets a ~£0.5m dividend from CLDN.
Silver X - has been in the wars and undergoing a strategic reset - and it plans to turnaround and reach 2Moz silver in 2024.
PRIVATE
Futura - even though this has had a 64% rerating month on month (in Sterling) it remains discounted due to being private and for development risk. Yet what risk remains? It has finance for mine #1 (Wilton) and the update says first coal is imminent, while it needs A$35m (about £17.6m) finance for mine #2 (Fairhill). BSRT has 2 options here - either to finance it through further debt or to finance it through profits at Wilton. It appears the former is the preferred (and faster route).
BSRT holds a 1.5% royalty which at 2MT a year is worth at least £2m. On top of this its A$4.7m loan yields a further £0.5m, then it also owns 26.9% of the company so dividends could be worth as much as £5m a year. £7.5m income on a £47m market cap.
Cemos and its clinkers
Cement producer Cemos was revalued by 14% based on the ramp up of its compact calcination unit to produce its own clinker (a key input, making up c 70% of production costs) in 2024. BSRT think this could potentially double the company’s EBITDA and improve supply chain too. £4m a year dividends may be possible
Nussir
Nussir is a copper/gold/silver mine in Norway was rerated 19% based on comparable valuations. Copper is nearly $3.89 a lb. Is a rerate of copper underway?
Kanga
Down due to falling Muriate of Potash (MOP) prices (which is strange given over 40% comes from Belarus, Ukraine and Russia). Prices have stabilised and should slightly rise in 2024. Kanga has 25 billion tonnes of MOP.
Conclusion
While there’s still some holdings which are struggling, the progress at Futura’s Coal, and Cemos’ Cement is very encouraging, and along with Caledonia’s Gold will begin to generate lots of cash.
On one hand that could generate very generous dividends (or buy backs), on another that cash could be redeployed to support weaker projects. When I say “support” BSRT are commercially astute so support is done at advantageous rates and terms. Nussir for example has a 25% IRR and modest capital requirements. Could BSRT offer terms? Or First Tin a 58% IRR and its DFS should complete in 2024. Or are there new projects to consider?
When pretty much all of junior mining (at least in the UK) is in a quagmire of depressed prices, a lack of available finance it seems there are bargains out there. After a few years in the wilderness, BSRT is an exciting and I believe overlooked investment trust for 2024.
This is not advice
Oak