BAKER STEEL RESOURCES TRUST LIMITED
Annual Report and Audited Financial Statements
For the year ended 31 December 2022
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.
BAKER STEEL RESOURCES TRUST LIMITED
CONTENTS
Management and Administration
Chairman’s Statement
Investment Manager’s Report
Portfolio Statement
Strategic Report
Board of Directors
Directors’ Report
Report of the Audit Committee
Independent Auditor’s Report
Statement of Financial Position
Statement of Comprehensive Income
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Appendix - Additional Information (Unaudited)
Glossary of Terms
PAGE
1-2
3-4
5-9
10-11
12-17
18
19-26
27-29
30-36
37
38-39
40
41
42-63
64
65-66
BAKER STEEL RESOURCES TRUST LIMITED
MANAGEMENT AND ADMINISTRATION
DIRECTORS:
REGISTERED OFFICE:
MANAGER:
INVESTMENT MANAGER:
STOCKBROKERS:
SOLICITORS TO THE COMPANY:
(as to English law)
ADVOCATES TO THE COMPANY:
(as to Guernsey law)
Howard Myles (Chairman)
Charles Hansard
Fiona Perrott-Humphrey
David Staples (retired 31 December 2022)
John Falla (appointed 13 October 2022)
(all of whom are non-executive and independent)
Arnold House
St. Julian’s Avenue
St. Peter Port
Guernsey, GY1 3NF
Channel Islands
Baker Steel Capital Managers (Cayman) Limited
PO Box 309
George Town
Grand Cayman KY1-1104
Cayman Islands
Baker Steel Capital Managers LLP*
34 Dover Street
London W1S 4NG
United Kingdom
Numis Securities Limited
10 Paternoster Square
London EC4M 7LT
United Kingdom
Norton Rose Fulbright LLP
3 More London Riverside
London SE1 2AQ
United Kingdom
Mourant Ozanne
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.
1
BAKER STEEL RESOURCES TRUST LIMITED
MANAGEMENT AND ADMINISTRATION (CONTINUED)
SUB-ADMINISTRATOR TO THE COMPANY:
HSBC Securities Services (Ireland) DAC
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
CUSTODIAN TO THE COMPANY:
SAFEKEEPING AND MONITORING AGENT:
AUDITOR:
REGISTRAR:
UK PAYING AGENT AND TRANSFER AGENT:
RECEIVING AGENT:
PRINCIPAL BANKER:
HSBC Continental Europe
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
HSBC Continental Europe
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
BDO Limited
P O Box 180
Place du Pre
Rue du Pre
St. Peter Port
Guernsey GY1 3LL
Channel Islands
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
JE11ES
Jersey
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
JE11ES
Jersey
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
JE11ES
Jersey
HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom
2
BAKER STEEL RESOURCES TRUST LIMITED
CHAIRMAN’S STATEMENT
For the year ended 31 December 2022
2022 was a difficult year for your Company with the NAV per share falling by 19.3% to 79.4 pence, versus a 10.2% rise in the
EMIX Global Mining Index in Sterling terms. This divergence in performance can be explained mainly by the difficulty
experienced in financing new projects for junior mining development companies and the consequent effect on their valuations,
as opposed to the EMIX Index which is dominated by much larger producers. Following the invasion of Ukraine by Russia in
February 2022, potential investors in mining companies became increasingly risk averse with regard to committing capital to the
construction of new projects whilst existing producers benefitted from strong commodity prices largely as a result of supply
chain-related disruption to supply.
One bright point during 2022 was the sale of Bilboes Gold to AIM listed gold producer Caledonia Mining. The consideration
comprised a combination of equity and a royalty stream, which was signed in July 2022 and completed on 6 January 2023.
Caledonia’s technical team has demonstrated its ability to operate successfully in Zimbabwe having recently increased the
production capacity at its Blanket mine from 50,000 ounces to 80,000 ounces gold per annum. The two teams have already
shown their ability to work together with the restart of oxide heap leach operations at Bilboes whilst Caledonia implements its
plan to bring the larger sulphide ore reserve into production. Caledonia’s recent acquisition of the much earlier stage Motapa
exploration project, which is contiguous to Bilboes, has the potential to double the resources of a combined project and to create
a 300,000 ounce per annum gold operation in due course. The financial structure of the acquisition by Caledonia has allowed
your Company to maintain its exposure to the Bilboes project through its shareholding in Caledonia and the royalty, which
together with the other royalties in the portfolio should form the basis of regular income stream in the future.
Futura Resources received its Mining Licences from the Queensland Government in November 2022 but the financing of the
development has taken longer than anticipated which is particularly frustrating at a time of high steel-making coal prices. When
operating at full capacity, Futura’s two mines are projected to produce around 2 million tonnes of saleable product after washing
and processing. Given a margin of some US$150 per tonne at current prices, this would mean the start-up capex of around US$35
million could be repaid in under a year.
CEMOS achieved its third year of profitable cement making operations in Morocco since commencing production. It has now
acquired a second grinding line which will enable it to double production with ramp up expected in 2025. Technical and financial
studies were also undertaken with a view to constructing a clinker making facility sufficient to meet CEMOS’s internal
requirements, which it is anticipated could significantly reduce current clinker costs from third party suppliers and thus enhance
margins. A decision is likely in 2023.
Tungsten West Plc successfully raised £35 million at its IPO in October 2021. Having signed a term sheet for a royalty sale,
which together with the funds raised from the IPO should have provided it with sufficient capital to redevelop the Hemerdon
tungsten mine in Devon, it nevertheless had to pause the redevelopment in the face of soaring energy prices. In the circumstances
it therefore reconfigured its ore processing design to consume significantly less energy and lower both operating and capital
requirements. This has culminated in a revised Feasibility Study the results of which were released in January 2023. The
economics of the new study demonstrated an acceptable post-tax Net Present Value (NPV5%) of £297 million with an Internal
Rate of Return (IRR) of 25%. However, during the delay, the share price of Tungsten West fell substantially such that raising
finance for the redevelopment of Hemerdon has become increasingly difficult. The Company is therefore planning to support an
interim financing announced in early April 2023 to provide time to put together the full financing package
In April 2022, First Tin PLC completed a successful IPO, raising the £20 million needed to undertake feasibility studies on both
its two key tin projects Tellerhäuser in Germany and Taronga in Australia. These studies are expected to be completed in late
2023/early 2024 at which point we will have a much better indication of which of the two projects should be prioritised. Although
world tin prices and the performance of First Tin shares have been disappointing, there is significant optionality built into these
projects to capitalise on an improvement in market sentiment should it occur. We recognise the commodity’s attractions given
its critical requirement as solder in the structural electrification trend.
During 2022, Nussir also sought to raise the finance to develop its fully electrified copper project in northern Norway. Although
good interest was generated, Nussir ran into the same difficulty in completing the financing that other single project junior
companies have experienced as discussed above. It has therefore engaged an investment bank to investigate a sale or merger of
the company with an existing producer. We would hope that any transaction would be similar to that of Bilboes and that we can
therefore retain some exposure to the project.
Although the current risk aversion of banks and other financiers to providing capital for the development of mining assets is
proving challenging in terms of value realisation for the Company, experience suggests that these periods are usually transitory.
We believe that in due course the global economy will need these minerals in large quantities and in order to satisfy this demand
new mines will have to be discovered, developed and brought into production. It is therefore important to adopt a careful and
measured approach during these periods in order to seek to ensure that the latent value in the projects in which we are invested
is maintained.
3
BAKER STEEL RESOURCES TRUST LIMITED
CHAIRMAN’S STATEMENT (CONTINUED)
For the year ended 31 December 2022
Outlook
The outlook for 2023 for mining is expected to remain challenging with uncertainty about the macro-economic and global
geopolitical situation continuing to encourage investors to remain risk averse and thus creating a difficult environment for raising
development capital. However, we are beginning to see major mining companies building up mergers and acquisition teams
which may lead to increased activity in the junior space. The structural case for those metals and commodities essential for the
electrification and decarbonisation trends continues to strengthen and was considerably boosted by the Inflation Reduction Act
under the Biden Administration. The longer-term and geopolitical consequences of the war in Ukraine as yet remain unclear;
however, deglobalisation and security of-supply themes are likely to gain traction and underpin commodity prices in the longer
term.
At the year end, your Company’s portfolio consisted of 19.2% (31 December 2021: 18.0%) listed equity, 63.1% (31 December
2021: 65.2%) unlisted equity and convertible loans and 17.5% (31 December 2021: 15.7%) royalty interests with 0.2%(31
December 2021: 1.1%) net cash and receivables with no gearing. The listed equity and royalty interests have since been increased
by the conversion of Bilboes Gold into listed Caledonia Mining and the royalty. On 31st December 2022, the share price traded
at a 44% discount to the NAV at that date and continues to be monitored by the Board. It is hoped that dividends generated from
the regular income to be provided by the royalties will help to reduce this discount in the future.
On 31st December 2022, David Staples retired as a director and I would like to reiterate my thanks for his invaluable contribution
to the Board. We welcomed John Falla to the Board as a non-executive director in October 2022. John qualified as a chartered
accountant with Ernst and Young in London, before transferring to its Corporate Finance Department. His specialist knowledge
in the valuation of unquoted securities will be of particular value as Chairman of the Audit Committee.
Howard Myles
Chairman
21 April 2023
4
BAKER STEEL RESOURCES TRUST LIMITED
INVESTMENT MANAGER’S REPORT
For the year ended 31 December 2022
Financial Performance
The audited Net Asset Value per Ordinary Share (“NAV”) as at 31 December 2022 was 79.4 pence, a decrease of 19.3% in the
year compared with the increase in the EMIX Global Mining Index of 10.2% in Sterling terms.
For the purpose of calculating the NAV per share, unquoted investments were carried at fair value as at 31 December 2022 as
determined by the Directors and quoted investments were carried at their quoted prices as that date.
Net assets at 31 December 2022 comprised the following:
Unquoted Investments
Quoted Investments
Cash and other net assets
Investment Update
Largest 10 Holdings – 31 December 2022
Futura Resources Limited
Cemos Group Plc
Bilboes Gold Limited
Kanga Investments Limited
Tungsten West Plc
Silver X Mining Corporation
First Tin Plc
Nussir ASA
Metals Exploration plc
PRISM Diversified Limited
Other Investments
Cash and other net assets
Largest 10 Holdings – 31 December 2021
Cemos Group Plc
Futura Resources Limited
Tungsten West Plc
Bilboes Gold Limited
First Tin Limited (previously Anglo Saxony Mining Limited)
Polar Acquisition Limited
Kanga Potash (previously Sarmin Minerals Exploration)
Nussir ASA
Silver X Mining Corporation (previously Mines & Metals Trading (Peru) Plc
Azarga Metals Corporation
Other Investments
Cash and other net assets
5
£m
68.1
16.2
0.2
84.5
% net assets
80.6
19.2
0.2
100.0
% of NAV
27.7
22.8
16.2
5.7
5.4
5.4
4.8
4.1
1.7
1.5
95.3
4.5
0.2
100.0
% of NAV
18.6
18.1
14.7
13.0
7.7
7.5
4.1
3.6
2.8
2.4
92.5
6.4
1.1
100.0
BAKER STEEL RESOURCES TRUST LIMITED
INVESTMENT MANAGER’S REPORT (CONTINUED)
For the year ended 31 December 2022
Review
At the year end, the Company was fully invested, holding 20 investments of which the top 10 holdings comprised 95% 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 cement, copper, gold, iron, lead, lithium, potash, silver, steel making coal, tin,
tungsten, vanadium, and zinc. Its projects are located in Australia, Canada, Germany, Indonesia, Madagascar, Morocco, Norway,
Peru, the Philippines, Republic of Congo, Russia, South Africa, the UK and Zimbabwe.
During the year, mining market performance showed significant diversity by commodity with overall the EMIX Global Mining
Index ending the year up 10.2% in Sterling terms. Precious metals were volatile but were flat over the year with gold down 0.3%
and silver up 2.8% in US Dollars. After a strong 2021, metals required for the electrification of the world’s infrastructure fell
back on global recessionary concerns with copper falling 14.1% during the year and tin falling 37.1% having almost doubled in
2020 (all in US dollars). Steel making coal gave back some of its 252% gain in 2021, falling 17.6% with iron ore also falling
some 7.4% during 2022. Likewise, potash fell back 39.8% but still remained almost double the price at the end of 2020.
The Company’s NAV fell 19.3% during the year primarily due to the reduction in carrying value of Polar Acquisition Limited
following the invasion of Ukraine and falls in the quoted prices of Tungsten West, First Tin and Azarga Metals Corporation.
The Company’s main investments at the year-end:
Futura Resources Ltd (“Futura”)
Futura owns the Wilton and Fairhill steel making coal projects in the Bowen Basin in Queensland, Australia which hold
Measured and Indicated resources of 843 million tonnes of coal.
Investment:
11,309,005 ordinary shares (26.9%) valued at £9.6 million
1.5% Gross Revenue Royalty valued at £13.7 million
A$300,000 million bridging loan valued at £0.14 million
During the year Futura sought to finance the start-up of its two steel making coal mines Wilton and Fairhill to take advantage of
historically high coal prices. This was not assisted by the Queensland government unexpectedly introducing higher royalties at
high coal prices. The effect of these additional royalties is not material to asset valuation at the long-term consensus pricing used
in Futura’s economic model but it was a sufficient shock to the market for potential investors to pause the process. A pre-
condition of all the financing proposals being discussed was receipt of the mining licences for both projects which were awarded
on 23 November 2022. Financing discussions are continuing, with mining able to commence approximately three months
following closing given the existing agreement in place for the coal to be processed at the nearby Gregory Crinum wash plant.
Once in full production the mines are scheduled to produce around 2 million tonnes of coal per year at a cost of around US$70
per tonne. During the year the Company converted a bridging loan it had extended to Futura, thereby increasing its gross revenue
royalties over both mines from 1% to 1.5% in addition to its ownership of approximately 27% of Futura.
Cemos Group plc (‘‘Cemos’’)
Cemos is a private cement producer at Tarfaya in Morocco.
Investment:
24,004,167 ordinary shares (24.6%) valued at £9.2 million
1,045 Convertible Loan Units valued at £10.1 million
Percentage of Company owned at full conversion 31.6%
During 2022, Cemos Group PLC continued profitable operations selling 202,000 tonnes of cement from its cement plant in
Morocco. This was approximately 14% lower than the previous year due to difficulty in sourcing local clinker earlier in the year
together with lower demand in the local market later in the year. Unaudited EBITDA for 2022 was still estimated at a healthy
€8 million albeit around 14% lower than 2021. After successful establishment of its first cement plant Cemos is planning an
expansion and has acquired a second grinding plant identical to the existing operation which will allow it to double its production.
It is also undertaking a feasibility study into the production of its own clinker, the main raw material in cement production, which
will not only provide security of supply but has the potential to further increase margins. Cemos is also testing potential for
manufacture of ‘green cement’ products by replacing some clinker in the production process with more environmentally friendly
supplementary cementitious materials such as pozzolan which would not only reduce the CO2 footprint of the operation but may
also have a positive impact on costs.
6
BAKER STEEL RESOURCES TRUST LIMITED
INVESTMENT MANAGER’S REPORT (CONTINUED)
For the year ended 31 December 2022
Bilboes Gold Limited ("Bilboes")
The Bilboes’ gold project in Zimbabwe has a JORC compliant Proved and Probable Reserve containing 1.8 million ounces of
gold out of a total Mineral Resource of 3.8 million ounces of gold. Following its acquisition in January 2023, Bilboes is a
subsidiary of Caledonia Mining Corporation Plc.
Investment:
535,943 ordinary shares (24.2%) valued at £13.7 million
In July 2022, the Company announced the sale of Bilboes Gold to Caledonia Mining Corporation Plc which is a NYSE, AIM
and Victoria Falls Exchange listed gold producer whose primary asset is the Blanket Mine in Zimbabwe currently producing at
the rate of 80,000 ounces of gold per annum. The transaction closed on 6 January 2023 so the investment is still shown as Bilboes
Gold at the year-end though the Company now holds a 1% Net Smelter Royalty over the Bilboes properties together with shares
in Caledonia. Caledonia has indicated that it will re-engineer the Bilboes feasibility study which outlined production of an
average of 168,000 ounces per annum over 10 years, to a phased development approach which would lower up-front capital. It
has already moved forward with recommencing gold production at Bilboes from near surface oxide ores which should not only
generate additional cash but will have the benefit of pre-stripping for the underlying sulphide project, thus accelerating its
development. The recent acquisition by Caledonia of the Motapa exploration ground, contiguous to Bilboes’s properties, is an
important strategic addition to the project. It had been tracked by the Bilboes management team for some time as initial
exploration on Motapa was undertaken by Anglo American when it owned Bilboes and additional resources at Motapa could
both expand and extend the life of the Bilboes project.
Kanga Investments Ltd (“Kanga”)
Kanga is a private company which holds the Kanga potash project, in the Republic of the Congo.
Investment:
56,042 ordinary shares (6.6%) valued at £4.8 million
Kanga Investments Ltd (“Kanga”) completed a positive Definitive Feasibility Study (“DFS”) in 2020 on its Kanga Potash project
in the Republic of Congo for a mine producing 600,000 tonnes per annum of Muriate of Phosphate (“MOP”). The DFS economic
model gave a Net Present Value at a 10% discount rate (NPV10) of US$511 million with an IRR of 22% based on an MOP price
of US$282 per tonne compared to the current price of around US$500 per tonne. In addition, there is potential for the mine to be
expanded on a modular basis up to 2.4m tonnes per annum over 30 years as set out in the DFS. Kanga continues to have advanced
discussions regarding the financing or sale of the project. In the second half of 2022 the government published a decree awarding
the Kanga Exploitation/Mining Licence to Kanga, a key condition of the potential acquirors.
Silver X Mining Corporation (“Silver X”)
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.
Investment:
19,502,695 ordinary shares (12.5%) valued at £4.5 million
During 2022, the Company’s convertible loan to Mines and Metals Trading Peru PLC was converted into equity of Silver X
Mining Corporation, listed on the TSX-V exchange, and as a result became its largest shareholder. In the second half of the year
Silver X successfully ramped up production to 673,458 ounces of silver equivalent at its Nueva Recuperada Silver mine in Peru,
with the operation turning cashflow positive. In February 2023 Silver X released the results of a Preliminary Economic
Assessment (“PEA”) under Canadian National Instrument 43-101 Standards for the expansion of the Tangana Mining Unit at
Nueva Recuperada. The PEA outlined the potential to treble annual production to 4.2 million ounces silver equivalent by
constructing an additional recovery plant at a capital cost of US$61 million to give a post-tax NPV10 of US$175 million.
.
7
BAKER STEEL RESOURCES TRUST LIMITED
INVESTMENT MANAGER’S REPORT (CONTINUED)
For the year ended 31 December 2022
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.
Investment:
28,846,515 ordinary shares (16.1%) valued at £4.3 million
1,657,195 second options valued at £0.1 million
1,657,195 third options valued at £0.1 million
On 16 January 2023 Tungsten West announced the results of its updated feasibility study on the Hemerdon tungsten and tin mine
in Devon. The feasibility study detailed a mine with average annual production of 2,900 tonnes of tungsten (WO3) and 310
tonnes of tin in concentrate over 27 years. The economics showed a post-tax NPV5 of £297 million with an Internal Rate of
Return (IRR) of 25%. It also highlighted an Upside Case post-tax NPV5 of £416 million with an IRR of 32%. Total pre-
production capex, corporate commitments and working capital was estimated at £54.9 million. Key to the improved economics,
following a reworking of the development plan due to higher energy costs, has been a complete redesign of the front-end crushing
circuit which has considerably reduced capex. Optimisation of ore-sorting parameters has significantly reduced opex by allowing
the re-purposing of the dense media separation circuits and the removal of the refinery kiln from the circuit reducing diesel
consumption by 1.3 million litres per annum. Tungsten West is in the process of raising up to £8.95 million in convertible debt
and equity whilst it finalises the finance for the redevelopment of Hemerdon.
First Tin PLC (“First Tin”)
First Tin is a company listed on the London Stock Exchange which owns 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.
Investment:
37,128,014 ordinary shares (14.0%) valued at £4.1 million
In April 2022 First Tin PLC completed a successful IPO, raising the £20 million required to undertake feasibility studies on both
its two key tin projects, Tellerhäuser in Germany and Taronga in Australia. Progress at Taronga is particularly promising with
drilling outlining a 350 metre extension to the current resource area. This will be followed up by First Tin and has the potential
to increase the previously suggested production rate at Taronga once incorporated in the Feasibility Study on the project. The
price of tin has been extremely volatile over the past 12 months though consensus analysis suggests strong future demand given
that tin will be an important component of the global trend towards electrification. At the time of listing the economic models in
the pre-feasibility studies, using a US$30,000 per tonne price assumption for tin on the two projects, together totalled a pre-tax
NPV8 of US$433 million. The price of tin during 2022 was volatile, ranging between US$18,000/tonne and US$46,000/tonne.
The Feasibility Study on Taronga due to be completed before the end of 2023 and that on Tellerhäuser in 2024 will provide a
more accurate and up to date reflection of value.
Nussir ASA ("Nussir")
Nussir is a Norwegian private company whose key asset is the Nussir copper project in Northern Norway.
Investment:
12,785,361 ordinary shares (12.1%) valued at £3.5 million
In early 2022 Nussir reconfigured its 2021 DFS on its Nussir copper project in northern Norway to a fully electrified mine
producing around 14,000 tonnes of copper per year over a 14-year mine life. This has since been reoptimized and updated and
is expected to be completed in the second quarter of 2023. Following this Nussir will seek to attract an industry partner to assist
with financing the development of the mine.
Metals Exploration plc (“Metals Exploration”)
Metals Exploration is an AIM listed company which owns the Runruno gold mine in the Philippines.
Investment:
112,510,000 ordinary shares (5.4%) valued at £1.4 million
Metals Exploration plc produced 72,537 ounces of gold in 2022 from its Runruno gold mine in the Philippines and paid off its
senior debt which allowed for conversion of its remaining high interest mezzanine debt into new lower interest senior debt.
8
BAKER STEEL RESOURCES TRUST LIMITED
INVESTMENT MANAGER’S REPORT (CONTINUED)
For the year ended 31 December 2022
Polar Acquisition Limited ("PAL")
PAL is a private company which holds a 1.8% to 0.9% (reducing over 10 years) net smelter royalty over the Prognoz silver
project ("Prognoz"), 444km north of Yakutsk in Russia, owned by Polymetal. Prognoz has a 267-million-ounce silver equivalent
Indicated and Inferred Mineral Resource at a grade of 755 g/t silver equivalent.
Investment:
16,352 ordinary shares (49.99%) valued at £1.1 million
Polymetal International PLC, the owner of the Prognoz silver project net smelter royalty, advised in January 2023 that the mine
development was progressing on schedule with mining due to commence in late 2023 with ore to be shipped to Polymetal’s
Nezhda mine concentrator on the winter road during the first half of 2024. As a result of the invasion of Ukraine by Russia in
February 2022 the carrying value of PAL has been reduced by 86.2%. Although none of the parties are presently sanctioned
and legal advice is that PAL is currently able to receive the royalty, the Company is cognisant of the issues surrounding political
sanctions affecting Russian investments and appreciates that the situation is continually changing. Despite the underlying Russian
operating company acknowledging that it has a contractual obligation to pay the royalty, the sanctions regime may also change
and there is a risk that financial institutions may not be willing to process bank transfers with contractual parties. It is therefore
possible that the royalty stream might be delayed, frozen, or never received.
Outlook
The invasion of Ukraine by Russia during 2022 led to higher energy prices, inflation and the advent of rising interest rates, which
have impacted the mining industry during 2022. The consequent disruption in availability of financing particularly impacted
junior companies with development projects. Inflationary increases in key energy price costs have also meant companies have
had to refresh their feasibility studies as they have quickly become outdated. Higher interest rates have increased the discount
rates that investors apply when evaluating new mining projects thereby reducing valuations. Although we expect inflation and
interest rates are likely to peak in 2023, economic and geopolitical uncertainties may well persist and continue to weigh on
investor confidence during the year and possibly beyond. More optimistically, the hiatus in new mine developments is likely to
lead to sustained higher commodity prices as the world will require the metals to meet the considerable demands of the global
energy transition and potential rebuilding of Ukraine. This will be against the possible backdrop of some government stockpiling
of strategic metals in a deglobalising world where security of supply chains has become of national interest.
Baker Steel Capital Managers LLP
Investment Manager
April 2023
9
BAKER STEEL RESOURCES TRUST LIMITED
PORTFOLIO STATEMENT
AT 31 DECEMBER 2022
Investments
Shares
/Warrants/
Nominal
Listed equity shares
Australian Dollars
4,091,910 Akora Resources Limited
4,170,600 Resolute Mining Limited
409,000 St Barbara Limited
Australian Dollars Total
Canadian Dollars
65,193,952 Azarga Metals Corporation
19,502,695 Silver X Mining Corporation
Canadian Dollars Total
Great Britain Pounds
37,128,014 First Tin Plc
112,510,000 Metals Exploration plc
17,000 Polymetal International Plc
28,846,515 Tungsten West Plc
Great Britain Pounds Total
Total investment in listed equity shares
Debt instruments
Australian Dollars
300,000 Futura Resources Limited – Bridging Loan
Australian Dollars Total
Canadian Dollars
305,000 PRISM Diversified Limited Loan Note 1
250,500 PRISM Diversified Limited Loan Note 2
Canadian Dollars Total
Euro
1,045 Cemos Group Plc
Euros Total
United States Dollars
26,301 Bilboes Gold Limited
7,028,352 Black Pearl Limited Partnership
United States Dollars Total
Fair value
£ equivalent
% of Net
assets
380,826
470,484
178,789
1,030,099
749,655
4,544,972
5,294,627
4,054,778
1,434,503
41,735
4,326,977
9,857,993
16,182,719
137,764
137,764
92,457
294,592
387,049
10,088,046
10,088,046
25,090
726,171
751,261
0.45
0.56
0.21
1.22
0.89
5.38
6.27
4.80
1.70
0.05
5.12
11.67
19.16
0.16
0.16
0.11
0.35
0.46
11.94
11.94
0.03
0.86
0.89
Total investments in debt instruments
11,364,120
13.45
10
Fair value
£ equivalent
% of Net
assets
BAKER STEEL RESOURCES TRUST LIMITED
PORTFOLIO STATEMENT (CONTINUED)
AT 31 DECEMBER 2022
Investments
Shares
/Warrants/
Nominal
Unlisted equity shares, warrants and royalties
Australian Dollars
10,100,000 Futura Gross Revenue Royalty
11,309,005 Futura Resources Limited
Australian Dollars Total
Canadian Dollars
6,666,666 Azarga Metals Warrants 09/05/2025
13,083,936 PRISM Diversified Limited
40,000 PRISM Diversified Limited – Royalty
1,000,000 PRISM Diversified Limited Warrants 31/12/2023
324,000 Unkur Option Warrants 12/31/2023
Canadian Dollars Total
Great Britain Pounds
1,594,646 Celadon Mining Limited
24,004,167 Cemos Group Plc
1,657,195 Tungsten West Plc Second Option Share Warrants 18/10/2026
1,657,195 Tungsten West Plc Third Option Share Warrants 18/10/2026
Great Britain Pounds Total
Norwegian Krone
12,785,361 Nussir ASA
Norwegian Krone Total
United States Dollars
535,943 Bilboes Gold Limited
56,042 Kanga Investments Limited
16,352 Polar Acquisition Limited
United States Dollars Total
13,700,733
9,568,238
23,268,971
12,692
802,401
24,531
23,261
198,700
1,061,585
15,945
9,201,855
129,261
77,557
9,424,618
3,499,979
3,499,979
13,650,910
4,775,628
1,083,425
19,509,963
Total Unlisted equity shares, warrants and royalties
56,765,116
Financial assets held at fair value through profit or loss
84,311,955
Other Assets & Liabilities
170,893
Total Equity
84,482,848
100.00
11
16.22
11.33
27.55
0.02
0.95
0.03
0.03
0.24
1.27
0.02
10.89
0.15
0.09
11.15
4.14
4.14
16.16
5.65
1.28
23.09
67.20
99.81
0.19
BAKER STEEL RESOURCES TRUST LIMITED
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 and the next discontinuation vote will be held at the AGM in 2024
which is expected to be held in the third quarter of that 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 13.
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.
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. At the year-end the Company’s Ordinary shares traded at a discount to NAV
of 44%, however the Directors consider that the Company does not currently have sufficient surplus funds to buy back shares,
irrespective of other considerations such as long term market liquidity and the effect on its Ongoing Charges Ratio.
The Board continues to review the Company’s 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 2022, the Board comprised four Directors (2021: four), excluding David Staples who retired from the Board
on 31 December 2022.
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.
12
BAKER STEEL RESOURCES TRUST LIMITED
STRATEGIC REPORT (CONTINUED)
Investment Management (continued)
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 and energy, 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.
13
BAKER STEEL RESOURCES TRUST LIMITED
STRATEGIC REPORT (CONTINUED)
Investment Restrictions (continued)
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.
The Company's investment in Futura Resources Limited (“Futura”) may exceed the limit set out above provided that the
Company will not invest or lend more than 35 per cent in aggregate of the value of its gross assets in Futura 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 2022.
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 continues to be climate change. 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 Manager’s own ESG policy. The Company’s ESG policy is available on its
website.
The Board will continue to monitor the growing risks identified by ESG and the resulting pressures on its investments.
14
BAKER STEEL RESOURCES TRUST LIMITED
STRATEGIC REPORT (CONTINUED)
Principal risk and uncertainties (continued)
Emerging Risks and Uncertainties (continued)
The invasion of Ukraine 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 of PAL to reflect the risk that
Polymetal may not be able to pay the royalty when due and the question of whether PAL is able to receive payments owing due
to potential sanctions. 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.
There is a growing risk that measures imposed by Governments in response to cost of living challenges will impact on the
Company’s investments, specifically price caps imposed by Governments may have implications on sales prices that the investee
companies can achieve.
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.
An analysis of sensitivity to foreign exchange is presented on pages 54-55.
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 nature of the investment strategy means that portfolio
diversification cannot be rebalanced on a short term basis.
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.
15
BAKER STEEL RESOURCES TRUST LIMITED
STRATEGIC REPORT (CONTINUED)
Risk of a vote to wind-up the Company (continued)
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. 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 a three-year period. 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 traded at sufficient volumes in the context of the 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.
16
BAKER STEEL RESOURCES TRUST LIMITED
STRATEGIC REPORT (CONTINUED)
Stakeholder Engagement
During the year-ending 31 December 2022, the Board sought to voluntarily comply with the requirements of Section 172 of the
Companies Act 2006 to promote the success of the Company for the benefit of its members as a whole, having regard to the
interests of all stakeholders.
Identification of key stakeholders
As an externally managed investment company, the Company has no employees, operations or premises. The Board has
identified its key stakeholders as the Company’s shareholders, the Investment Manager, other service providers and the Investee
Companies,
Engagement with stakeholders
The table below explains how the Board have engaged with all stakeholders.
Stakeholder
Engagement
Shareholders
The Board seeks an open and constructive engagement with shareholders who have the opportunity
to vote at and to attend the Company’s AGM.
The annual and half year results are available on the Company’s website with the results and
monthly updates also announced via a regulatory news service.
Investment Manager
The Board receives regular updates on the shareholder register and any trading activity and
feedback received from investor meetings and briefings conducted by the Investment Manager, the
Broker and research analysts.
Open and collaborative dialogue is maintained between the Board and the Investment Manager.
The Investment Manager is invited to all Board and Audit Committee meetings and provides
regular reports on the performance of the investments and any potential issues the Board needs to
be aware of.
Other Service Providers The Board receive reports from all service providers at each meeting
Investee Companies
The Administrator attends all Board and Committee meetings
During 2022 the Administrator provided the Board a presentation on the Cyber controls in place.
The Board conducted a market review of the Depositary during 2022.
The Board receives detailed updates on operating performance of material investee companies
provided at each meeting. Additionally, the Board receives details of projects being undertaken by
the investee companies, including where these may require the Company to consider providing
financial support. Though its investments and board positions on investee companies, the Company
seeks to promote good ESG practise, with particular attention to Health and Safety of employees
at investee companies.
Key Decisions
Key decisions are those that are material or of strategic importance to any of the Company’s key stakeholders as described above.
An example of a key decisions made during the year was the sale of Bilboes as described in more detail in the Chairman’s Report,
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:
John Falla
21 April 2023
17
BAKER STEEL RESOURCES TRUST LIMITED
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. 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 abrdn Latin
American Income Fund Limited, and Chelverton UK Dividend Trust plc both 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 NB Global Monthly
Income Fund, which is listed on the London Stock Exchange. He is also chairman of the general partner companies of private
equity funds advised by Apax Partners.
David was the Chairman of the Audit Committee until his retirement from the Board on 31 December 2022
John Falla: John qualified as a chartered accountant with Ernst and Young in London, before transferring to its Corporate
Finance Department, specialising in the valuation of unquoted shares and securities. On his return to Guernsey in 1996 he worked
for an international bank before joining The International Stock Exchange (formerly the Channel Islands Stock Exchange) on its
launch in 1998 as a member of the Market Authority. In 2000 Mr Falla joined the Edmond de Rothschild Group, where he
provided corporate finance advice to international clients including open and closed-ended funds, and institutions with significant
property interests. He was a director of a number of Edmond de Rothschild operating and investment entities, retiring in 2015.
Mr Falla has been a non-executive director of London listed companies for over 10 years and is an experienced audit committee
chair. He is currently a director and audit committee chair of NB Private Equity Partners Limited and of Marble Point Loan
Financing Limited.
John has been appointed as Chairman of the Audit Committee following the retirement of David Staples
18
BAKER STEEL RESOURCES TRUST LIMITED
DIRECTORS’ REPORT
For the year ended 31 December 2022
The Directors of the Company present their eleventh annual report and the audited financial statements (the “Annual Report”)
for the year ended 31 December 2022.
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 13.
Performance
In the year to 31 December 2022, the Company’s NAV per Ordinary Share decreased by 19.3% (2021: 1.2%). This compares
with a rise in the EMIX Global Mining Index (capital return in Sterling terms) of 10.2% (2021: 5.0%). 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 38 and 39 and the Company’s financial
position at the end of the year is shown in the Statement of Financial Position on page 37.
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 significant 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 2022.
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 (retired 31 December 2022)
John Falla (appointed 13 October 2022)
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.
19
BAKER STEEL RESOURCES TRUST LIMITED
DIRECTORS’ REPORT (CONTINUED)
For the year ended 31 December 2022
Directors and their interests (continued)
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 10 November 2022, John Falla purchased 60,000 shares in the Company. 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 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 (2021: 106,453,335) Ordinary Shares outstanding with an additional 700,000 (2021:
700,000) held in treasury. The Company has 9,167 (2021: 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.
Significant Shareholdings
As at 31 December 2022, 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.
Ordinary Shareholder
The Sonya Trust
Northcliffe Holdings Pty Limited
Overseas Asset Management
Premier Miton Investors
RIT Capital Partners
Armstrong Investments
Baker Steel Capital Managers
Interactive Investor
Hargreaves Lansdown Asset Management
Jarvis Investment Manager
Number of
Ordinary Shares
12,637,350
12,452,177
12,435,915
9,250,000
7,766,803
7,600,000
4,922,877
4,138,994
4,010,686
3,208,131
% of Total
Shares in issue
11.87
11.70
11.68
8.69
7.30
7.14
4.62
3.89
3.77
3.01
The Investment Manager, Baker Steel Capital Managers LLP had an interest in 9,167 Management Ordinary Shares at 31
December 2022 (31 December 2021: 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 2022 (2021: 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 Pty Limited
and The Sonya Trust respectively.
20
BAKER STEEL RESOURCES TRUST LIMITED
DIRECTORS’ REPORT (CONTINUED)
For the year ended 31 December 2022
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. To be passed, the discontinuation vote requires 75% of shareholders to vote to discontinue.
The Directors have received no indication that the resolution will be passed. The Board are satisfied that the Company has the
resources to continue in business for at least 12 months following the signing of these financial statements. As at 31 December
2022, approximately 13.8% of the Company’s assets were represented by cash and unrestricted listed and quoted investments
which are readily realisable. Although the continuing Russian invasion of Ukraine has resulted in a reduction in the carrying
value of investments with a Russian nexus 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 a material 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 is a member of the Association of Investment Companies.
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.
21
BAKER STEEL RESOURCES TRUST LIMITED
DIRECTORS’ REPORT (CONTINUED)
For the year ended 31 December 2022
Corporate Governance Compliance (continued)
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 on pages 22 to 24.
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.
There is no formal policy in respect of the tenure of the Chairman. The Board have initiated a process of refreshing its
membership and in recent years thee directors have retired with new appointments made. It is envisaged the Chairman will
retire as part of this succession programme within the next two years.
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 and independent recruitment
consultants may be used where appropriate as was the case in 2022 when OSA assisted in the recruitment of Mr Falla. 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. The Board will seek the assistance of recruitment specialists to identify suitable candidates for the Board
to consider.
22
BAKER STEEL RESOURCES TRUST LIMITED
DIRECTORS’ REPORT (CONTINUED)
For the year ended 31 December 2022
Corporate Governance Compliance (continued)
Operation and composition of the Board (continued)
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. 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 and facilitated by the Company Secretary. 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:
Howard Myles
Charles Hansard
Fiona Perrott-Humphrey
David Staples (retired 31 December 2022)
John Falla (appointed 13 October 2022)
*Held since appointment
Board Meetings
Audit Committee
Meetings
Held
4
4
4
4
1*
Attended
4
4
4
4
1
Held
4
n/a
4
4
1*
Attended
4
n/a
4
4
1
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.
23
BAKER STEEL RESOURCES TRUST LIMITED
DIRECTORS’ REPORT (CONTINUED)
For the year ended 31 December 2022
Corporate Governance Compliance (continued)
Operation and composition of the Board (continued)
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. The engagement with stakeholders is
covered in more detail in the Strategic Report on page 17.
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 backgrounds
and skills appropriate for the specifics of the Company. Due to the small size of the Board, there are no plans to implement
targets for diversity metrics however recruitment agencies who assist with identifying candidates for Board appointments
are instructed to do so with diversity in mind.
Committees
The Audit Committee is the sole committee of the Board. Terms of Reference for the Audit Committee 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 was Chairman of the Audit Committee until 31 December 2022, with Fiona Perrott-Humphrey, Howard Myles
and (effective 13 October 2022) John Falla 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. Following David Staples
retirement from the Board on 31 December 2022 John Falla assumed the role of Chairman of the Audit Committee.
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.
24
BAKER STEEL RESOURCES TRUST LIMITED
DIRECTORS’ REPORT (CONTINUED)
For the year ended 31 December 2022
Corporate Governance Compliance (continued)
Operation and composition of the Board (continued)
Internal Controls (continued)
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. Effective 1 October 2022
the Board, recognising the Board remuneration was below market rates having not changed since the Company’s flotation in
2010, resolved to increase their remuneration to £32,500 per annum for each Director. The Chairman will receive a supplement
of £10,000 per annum and the Chairman of the Audit Committee a supplement of £5,000 per annum.
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 £200,000 per annum (or such sum as the Company in general meeting shall from time to time
determine).
For the year ended 31 December 2022, the total remuneration of the Directors was £129,489 (2021: £115,000). There were no
director fees payable at the year-end (2021: £28,750).
25
BAKER STEEL RESOURCES TRUST LIMITED
DIRECTORS’ REPORT (CONTINUED)
For the year ended 31 December 2022
Corporate Governance Compliance (continued)
Operation and composition of the Board (continued)
Director’s Remuneration Policy (continued)
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 2022 and 31 December 2021 are shown below.
Howard Myles
David Staples
Charles Hansard
Fiona Perrott-Humphrey
John Falla
Independent Auditors
2022
£
36,875
31,875
26,875
26,875
6,989
2021
£
35,000
30,000
25,000
25,000
-
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:
John Falla
21 April 2023
26
BAKER STEEL RESOURCES TRUST LIMITED
REPORT OF THE AUDIT COMMITTEE
For the year ended 31 December 2022
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 was Chairman of the Audit Committee until
31 December 2022 when he was replaced by John Falla. Fiona Perrott-Humphrey and Howard Myles are the other members of
the Audit Committee. 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 typically meets four times a year, aligned to Board Meeting dates, 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 2022, 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.
27
BAKER STEEL RESOURCES TRUST LIMITED
REPORT OF THE AUDIT COMMITTEE (CONTINUED)
For the year ended 31 December 2022
Through its meetings during the year ended 31 December 2022 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 14-15.
Risk Considered
How addressed
The accuracy of the Company’s Annual Report and Financial
Statements
Adequacy of the Company’s accounting and internal controls
systems
Valuation of the Company’s investments, in particular the
valuation of unquoted investments
The effectiveness and independence of the external audit
process
Emerging risks
Review of the Annual Report and 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.
Consideration of the Company’s risk 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.
Reports received from and discussed in depth with the
Investment Manager 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 Audit Committee has regular 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.
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:
Audit fees
Audit Fees
Non-audit fees
Total Fees
Agreed Upon Procedures relating to the
review of the Company’s half year report
2022
£
70,000
9,625
79,625
2021
£
58,500
8,750
67,250
28
BAKER STEEL RESOURCES TRUST LIMITED
REPORT OF THE AUDIT COMMITTEE (CONTINUED)
For the year ended 31 December 2022
External Audit (Continued)
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.
The Audit Committee has reviewed the effectiveness of the auditor including:
Independence: The auditor discusses with the Audit Committee, at least annually, the steps it takes to ensure independence
and confirms the same to the Audit Committee. The audit fees paid to BDO are presented on Page 28 of the Annual Report.
The only non-audit fees paid to BDO are in relation to the Agreed Upon Procedures work completed on the Interim Report
and Accounts. The audit director will rotate after 5 years; this is the third year of the current audit director.
Quality of Audit Work: The Audit Committee assess the completion of the audit versus the plan and will seek feedback
from the Investment Manager and the Administrator on any issues experienced through the Audit. The Chairman of the
Audit Committee will separately engage with the audit director to discuss progress and issues with the audit.
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 12 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 16 and 21 and has advised the Board accordingly.
John Falla
Audit Committee Chairman
21 April 2023
29
BAKER STEEL RESOURCES TRUST LIMITED
INDEPENDENT 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 2022 and of its loss 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 2022 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. Our audit opinion is consistent with the additional report to the audit committee.
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 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;
Challenging the Directors’ cash flow forecasts for the twelve months from the approval of these financial statements by
stress testing future income and expenditure, the ability to realise the Company’s assets and the impact on the going concern
assessment;
Challenging the key inputs into the cash flow forecasts by comparing these to historic results of the Company and whether
they were consistent with our understanding of the company;
Challenging the Directors around the 2024 discontinuation vote and its possible impact on the going concern status of the
company by considering the related party shareholders; 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.
30
BAKER STEEL RESOURCES TRUST LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAKER STEEL RESOURCES TRUST LIMITED (continued)
Overview
Key
matters
audit
Materiality
Valuation of unlisted investments and
listed investments subject to a lock up
period
Financial statements as a whole
2022
2021
Yes
Yes
£1.54m (2021: £1.84m) based on 1.75% (2021: 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 investment, involvement of the Manager and
the Company’s 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’s Administrator. We considered the
control environment in place at the Manager and the Company’s 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 statement.
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. These matters were 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 these matters.
31
BAKER STEEL RESOURCES TRUST LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAKER STEEL RESOURCES TRUST LIMITED (continued)
Key audit matter
Valuation of unlisted investments and listed investments
subject to a lock up period.
Refer to the accounting policies set out in Note 2 and Note
3 to the Financial Statements.
The valuations are subjective, with a high level of
judgment and estimation linked to the determination of
fair value with limited third-party pricing information
available.
As a result of the subjectivity, there is a risk of an
inappropriate valuation model being applied, together
with the risk of inappropriate inputs to the model being
used which could significantly impact the valuation
output.
The valuation of these investments is a key driver of the
Company's net asset value and total return. Accordingly,
incorrect valuations of these investments could have a
significant impact on the net asset value of the Company
and therefore the return generated for shareholders. We
therefore consider this to be a key audit matter.
How the scope of our audit addressed the key audit matter
Our procedures included the following:
For all unlisted investments:
We considered the processes, policies and methodologies
used by management for determining the fair value of
unlisted investments held by the Company;
Agreed
the Manager’s application of valuation
techniques as appropriate to the circumstances of the
investment and the accounting policies applied; and
Agreed the valuation per the models to the financial
statements.
In respect of the investments using a valuation model, we: -
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 largest impact on the
valuation; and
Tested the mathematical accuracy of the models.
investments valued on an
For
recalculated, using independently obtained information,
management’s applied basket of indices for each investment.
index valuation, we
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
32
BAKER STEEL RESOURCES TRUST LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAKER STEEL RESOURCES TRUST LIMITED (continued)
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.
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:
Materiality
Company financial statements
2022
£1.48m
2021
£1.84m
Basis for determining materiality
1.75% of total assets
Rationale for the benchmark applied
Due to it being an investment fund with the objective of long-
term capital growth, with investment values being a key focus
of users of the financial statements.
Performance materiality
£0.97m
£1.19m
Basis for determining performance materiality
65% of materiality
This was determined using our professional judgement and
the
considered
engagement, together with history of minimal historical errors
and adjustments.
the complexity and our knowledge of
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £44,000 (2021:
£55,140). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
33
BAKER STEEL RESOURCES TRUST LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAKER STEEL RESOURCES TRUST LIMITED (continued)
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 Statement 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 or our knowledge obtained during the audit.
Going concern and
term viability
longer-
The Directors' statement with regards the 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 its assessment of the entity’s prospects, the
period this assessment covers and why the period is appropriate set out on page
16.
Other Code provisions
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 pages 14-15 and 24;
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 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.
34
BAKER STEEL RESOURCES TRUST LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAKER STEEL RESOURCES TRUST LIMITED (continued)
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 who were
all deemed to have appropriate competence and capabilities 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;
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.
further description of our
A
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
is available on
responsibilities
the Financial Reporting Council’s website at:
The engagement director on the audit resulting in this independent auditor’s opinion is Justin Hallett.
35
BAKER STEEL RESOURCES TRUST LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAKER STEEL RESOURCES TRUST LIMITED (continued)
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
21 April 2023
36
BAKER STEEL RESOURCES TRUST LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Assets
Cash and cash equivalents
Interest receivable
Other receivables
Financial assets held at fair value through profit or loss
Total assets
Equity and Liabilities
Liabilities
Directors’ fees payable
Management fees payable
Administration fees payable
Audit fees payable
Custodian fees payable
Other payables
Total liabilities
Equity
Management Ordinary Shares
Ordinary Shares
Revenue Reserves
Capital Reserves
Total equity
Total equity and liabilities
Notes
9
2(c)(i)
3
11
7,11
6
10
10
2022
£
2021
£
254,140
57,917
17,899
84,311,955
84,641,911
1,077,482
249,445
22,132
103,685,593
105,034,652
-
69,854
9,659
70,000
7,158
2,392
159,063
28,750
122,894
10,638
58,500
8,443
6,471
235,696
9,167
75,972,688
8,771,186
(270,193)
84,482,848
9,167
75,972,688
10,047,160
18,769,941
104,798,956
84,641,911
105,034,652
Net Asset Value per Ordinary Share (in Pence) – Basic and Diluted
12
79.4
98.4
The financial statements on pages 37 to 63 were approved and authorised for issue by the Board of Directors on
21 April 2023 and signed on its behalf by:
John Falla
The accompanying notes form an integral part of these audited financial statements
37
BAKER STEEL RESOURCES TRUST LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
Income
Interest income
Dividend income
Net loss on financial assets at fair value through profit or loss
Net foreign exchange loss
Net income / (loss)
Expenses
Management fees
Directors’ fees
Administration fees
Other expenses
Depositary fees
Custody fees
Broker fees
Audit fees
Directors’ insurance
Directors’ expenses
Legal fees
Total expenses
Net loss for the year
Notes
2(i)
2(j)
3
7,11
11
6
8
Year ended
2022
Revenue
£
Year ended
2022
Capital
£
Year ended
2022
Total
£
549,607
9,356
-
-
558,963
-
-
(19,038,918)
(1,216)
(19,040,134)
549,607
9,356
(19,038,918)
(1,216)
(18,481,171)
1,160,507
129,489
118,002
130,321
36,942
58,918
35,000
79,625
6,000
3,344
76,789
1,834,937
-
-
-
-
-
-
-
-
-
-
-
1,160,507
129,489
118,002
130,321
36,942
58,918
35,000
79,625
6,000
3,344
76,789
1,834,937
(1,275,974)
(19,040,134)
(20,316,108)
Net loss for the year per Ordinary Share:
Basic and Diluted (in pence)
12
(1.20)
(17.88)
(19.08)
In the year ended 31 December 2022 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.
The accompanying notes form an integral part of these audited financial statements
38
BAKER STEEL RESOURCES TRUST LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
Income
Interest income
Dividend income
Net gain on financial assets at fair value through profit or loss
Net foreign exchange loss
Net income
Expenses
Management fees
Directors’ fees
Administration fees
Other expenses
Depositary fees
Custody fees
Broker fees
Audit fees
Directors’ Insurance
Directors’ expenses
Legal fees
Total expenses
Notes
2(i)
2(j)
3
7,11
11
6
8
Year ended
2021
Revenue
£
Year ended
2021
Capital
£
Year ended
2021
Total
£
1,228,691
45,880
-
-
1,274,571
1,587,121
115,000
126,876
103,389
41,336
62,628
35,000
67,250
15,750
515
44,515
2,199,380
-
-
2,254,094
(21,728)
2,232,366
1,228,691
45,880
2,254,094
(21,728)
3,506,937
-
-
-
-
-
-
-
-
-
-
-
-
1,587,121
115,000
126,876
103,389
41,336
62,628
35,000
67,250
15,750
515
44,515
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.
The accompanying notes form an integral part of these audited financial statements
39
BAKER STEEL RESOURCES TRUST LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Management
Ordinary
Shares
£
Ordinary
Shares
£
Treasury
Shares
£
Revenue
reserves
£
Capital
reserves
£
Total
equity
£
Balance as at 1 January 2021
Net (loss)/gain for the year
Balance as at 31 December 2021
9,167
-
9,167
76,113,180
-
76,113,180
(140,492)
-
(140,492)
10,971,969
(924,809)
10,047,160
16,537,575
2,232,366
18,769,941
103,491,399
1,307,557
104,798,956
Net loss for the year
Balance as at 31 December 2022
Note
-
9,167
10
-
-
76,113,180
(140,492)
10 10
(1,275,974)
8,771,186
(19,040,134)
(270,193)
(20,316,108)
84,482,848
The accompanying notes form an integral part of these audited financial statements
40
BAKER STEEL RESOURCES TRUST LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
Cash flows from operating activities
Net (loss)/gain for the year
Adjustments to reconcile net (loss) /gain for the year to net cash used in operating
activities:
Interest income
Dividend income
Net loss/(gain) on financial assets at fair value through profit or loss
Net decrease/(increase) in receivables
Net decrease in payables
Interest received
Dividend received
Net cash used in operating activities
Cash flows from investing activities
Purchase of financial assets at fair value through profit or loss
Sale of financial assets at fair value through profit or loss
Net cash provided by investing activities
Year ended
2022
£
Year ended
2021
£
Notes
(20,316,108)
1,307,557
3
(549,607)
(9,356)
19,038,918
4,233
(76,633)
(1,908,553)
741,135
9,356
(1,158,062)
(1,228,691)
(45,880)
(2,254,094)
(2,504)
(8,804)
(2,232,416)
903,607
45,880
(1,282,929)
(1,882,060)
2,216,780
334,720
(1,776,426)
3,712,697
1,936,271
Net (decrease)/increase in cash and cash equivalents
(823,342)
653,342
Cash and cash equivalents at the beginning of the year
1,077,482
424,140
Cash and cash equivalents at the end of the year
9
254,140
1,077,482
The accompanying notes form an integral part of these audited financial statements
41
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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.
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 (“£”), 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 £. 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.
Assets and liabilities are presented in order of liquidity. Their maturities are disclosed in Note 4(b).
42
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
a) Basis of preparation (continued)
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 2023 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 material impact on the Company’s financial
statements:
- 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 2022 and were adopted from their effective date. These amendments did not have a material
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).
43
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
b)
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:
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
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.
c) 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
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. To be passed, the discontinuation vote requires 75% of shareholders to vote to
discontinue. The Directors have received no indication that the resolution will be passed. The Board are satisfied that the
Company has the resources to continue in business for at least 12 months following the signing of these financial statements.
As at 31 December 2022, approximately 13.8% of the Company’s assets were represented by cash and unrestricted listed
and quoted investments which are readily realisable. Although the continuing Russian invasion of Ukraine has resulted in a
reduction in the carrying value of investments with a Russian nexus 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 a material 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.
44
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
c) Significant accounting judgements and estimates (continued)
(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. Please refer to Note 3 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 (2021: £Nil).
45
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Investment Summary:
Opening book cost
Purchases at cost
Proceeds on sale of investments
Net realised (losses)/gains
Closing cost
Net unrealised gains
Financial assets held at fair value through profit or loss
Year ended
2022
£
82,910,887
1,882,060
(2,216,780)
(6,866,885)
75,709,282
8,602,673
84,311,955
Year ended
2021
£
81,003,041
2,536,249
(3,712,697)
3,084,294
82,910,887
20,774,706
103,685,593
The following table analyses net gains on financial assets at fair value through profit or loss for the years ended
31 December 2022 and 31 December 2021.
Financial assets at fair value through profit or loss
Realised (losses)/gains on:
- Listed equity shares
- Unlisted equity shares
- Debt instruments
- Warrants
Movement in unrealised (losses)/gains on:
- Listed equity shares
- Unlisted equity shares
- Royalties
- Debt instruments
- Warrants
Net (loss)/gain on financial assets at fair value through profit or loss
Year ended
2022
£
Year ended
2021
£
(1,438,318)
(5,118,472)
(296,970)
(13,125)
(6,866,885)
(792,604)
-
3,893,470
(16,572)
3,084,294
(13,716,492)
7,893,046
(2,763,850)
(2,675,240)
(909,497)
(12,172,033)
(19,038,918)
4,589,432
1,571,711
1,943,286
(10,157,233)
1,222,604
(830,200)
2,254,094
The following table analyses investments by type and by level within the fair valuation hierarchy at 31 December 2022.
Financial assets at fair value through
profit or loss
Listed equity shares
Unlisted equity shares
Royalties
Warrants
Debt instruments
Quoted prices in
active markets
Level 1
£
Quoted market
based observables
Level 2
£
Unobservable
inputs
Level 3
£
11,378,285
-
-
-
-
11,378,285
4,804,434
-
-
-
-
4,804,434
-
41,514,956
14,808.689
441,471
11,364,120
68,129,236
Total
£
16,182,719
41,514,956
14,808,689
441,471
11,364,120
84,311,955
46
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
The following table analyses investments by type and by level within the fair valuation hierarchy at 31 December 2021.
Financial assets at fair value through
profit or loss
Listed equity shares
Unlisted equity shares
Royalties
Warrants
Debt instruments
Quoted prices in
active markets
Level 1
£
Quoted market
based observables
Level 2
£
Unobservable
inputs
Level 3
£
Total
£
4,879,486
-
-
-
-
4,879,486
14,064,224
-
-
-
-
14,064,224
-
46,971,239
16,479,049
1,364,093
19,927,502
84,741,883
18,943,710
46,971,239
16,479,049
1,364,093
19,927,502
103,685,593
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 2022.
31 December 2022
Opening balance 1 January 2022
Purchases of investments
Conversion
Sales of investments
Transfer out of Level 3
Change in net unrealised gains/(losses)
Realised losses
Closing balance 31 December 2022
Unrealised gains on investments still
held at 31 December 2022
Unlisted
Equities
£
46,971,239
-
-
(178,554)
(8,052,304)
7,893,046
(5,118,471)
41,514,956
Debt
Royalties
£
instruments Warrants
£
£
Total
£
16,479,048
-
1,093,491
-
-
(2,763,850)
-
14,808,689
19,927,503
189,649
(1,093,491)
-
(4,687,331)
(2,675,240)
(296,970)
11,364,120
1,364,093
-
-
-
-
(909,497)
(13,125)
441,471
84,741,883
189,649
-
(178,554)
(12,739,635)
1,544,459
(5,428,566)
68,129,236
10,549,611
1,905,220
1,675,718
441,471
14,592,020
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.
31 December 2021
Opening balance 1 January 2021
Purchases of investments
Sales of investments
Conversion*
Transfer out of Level 3
Change in net unrealised gains/losses
Realised gains
Closing balance 31 December 2021
Unrealised gains on investments still
held at 31 December 2021
Unlisted
Equities
£
36,987,733
300,143
-
11,987,827
(3,876,175)
1,571,711
-
46,971,239
Royalties
£
14,512,762
23,000
-
-
-
1,943,286
-
16,479,048
Debt
instruments Warrants
£
141,489
-
16,572
-
-
1,222,604
(16,572)
1,364,093
£
43,780,112
541,140
(399,576)
(12,730,410)
(5,000,000)
(10,157,233)
3,893,470
19,927,503
Total
£
95,422,096
864,283
(383,004)
(742,583)
(8,876,175)
(5,419,632)
3,876,898
84,741,883
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
47
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
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.
The following transfers from Level 3 have taken place during the year ended 31 December 2022:
On 8 April 2022 First Tin listed on the London Stock Exchange. The shares held by the Company are locked up until 8 April
2023 and are therefore held at a discount to the market price and accordingly the investment has been transferred from Level
3 to Level 2 in these financial statements.
On 15 June 2022 the Company converted its convertible loan to Azarga into Equity. The Company holds over 30% of
Azarga and the investment is therefore carried at a discount to the market prices as it is considered unlikely the quoted price
could be achieved if the Company decided to sell its investment. Accordingly, the investment has been transferred from
Level 3 to Level 2 in these financial statements.
On 8 June 2022 the Company converted its US$4m convertible debenture into Silver X shares. This resulted in a transfer
from level 3 to level 1 of the investment.
The following transfer from Level 2 has taken place during the year ended 31 December 2022:
On 21 October 2022, the lock-up relating to the shares held in Tungsten West Plc expired and accordingly the investment
has been transferred from Level 2 to Level 1.
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 two Level 2 investments at
31 December 2022 (31 December 2021: one).
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.
48
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
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. If it is assessed
that a recent transaction is not at an arm’s length or there are other indicators that it has not been executed at a price that is
representative of fair value then the transaction value will not be used as the carrying value of the investment. 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.
49
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
Valuation methodology of Level 3 investments (continued)
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
2022
£
Valuation technique
Unobservable input
Range of
unobservable input
(weighted average)
Description
Unlisted Equity
Unlisted Equity
Unlisted Equity
Royalties
28,797,176 Transactions
3,499,979 IndexVal
9,201,855 EBITDA Multiple
14,808,689 Royalty Valuation model
Unlisted Equity
15,946 Other
Private transactions
Change in index
EBITDA Multiple
Commodity price and
discount rate risk
Exploration results,
study results,
financing
n/a
n/a
n/a
n/a
n/a
Debt Instruments
Black Pearl Limited
Partnership
Other Convertible
Debentures/Loans
Warrants
Warrants
726,171 Valued at mean estimated
recovery
10,637,949 Valued at fair value with
Estimated recovery
range
Rate of Credit Risk
+/-50%
20%-40%
reference to credit risk
242,771 Simplified Black Scholes
Volatilities
50%
Model
198,700 External valuation
50
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
Quantitative information of significant unobservable inputs – Level 3 (continued)
2021
£
Valuation technique
Unobservable input
Range of
unobservable input
(weighted average)
Description
Unlisted Equity
Unlisted Equity
Unlisted Equity
Royalties
20,914,006 Transactions
16,587,037
IndexVal
9,306,914 EBITDA Multiple
16,479,048 Royalty Valuation model
Unlisted Equity
163,284 Other
Private transactions
Change in index
EBITDA Multiple
Commodity price and
discount rate risk
Exploration results,
study results,
financing
n/a
n/a
n/a
n/a
n/a
Debt Instruments
Black Pearl Limited
Partnership
Other Convertible
Debentures/Loans
Other Convertible
Debentures/Loans
1,292,467 Valued at mean estimated
2,157,657
recovery
IndexVal
Estimated recovery
range
Change in Index
+/-50%
n/a
16,477,378 Valued at fair value with
Rate of Credit Risk
20%-40%
reference to credit risk
Warrants
1,364,093 Simplified Black Scholes
Volatilities
50%
Model
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.
51
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
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 2022 are as shown below:
Description
Input
Sensitivity used
Effect on Fair Value (£)
Unlisted Equity
Transactions & Expected Transactions
+/- 20%
+/-5,759,434
Unlisted Equity
Change in IndexVal
+44%/-79%*
+1,539,991/-2,764,984
Unlisted Equity
EBITDA Multiple
Royalties
Royalties
Debt Instruments
Black Pearl Limited
Partnership
Commodity Price
Discount Rate
Probability weighting
Others/Loans
Risk discount rate
Convertibles /Loans
Volatility of Index Basket
Warrants
Volatility of Index Basket
+/- 20%
+/-20%
+/-1,840,371
+/-2,956,853
+/-20%
-1,597,086/+1,939,463
+/-33%
+/-20%
+/-40%
+/-40%
+/- 239,627
-1,160,677/+227,963
+206,177/-1,656
+21,662/-18,733
* The sensitivity analysis refers to a percentage amount added or deducted from the input and the effect this has on the fair
value. The +44%/-79% sensitivity was used as this was the range of movements of the constituents in the IndexVal baskets
for Nussir
52
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
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 used
Effect on Fair Value (£)
Unlisted Equity
Transactions & Expected Transactions
+/- 10%
+/- 2,091,401
Unlisted Equity
Change in IndexVal
+101%/-57%*
+ 16,752,907/-9,454,611
Unlisted Equity
EBITDA Multiple
Royalties
Royalties
Debt Instruments
Commodity Price
Discount Rate
Black Pearl Limited
Partnership
Probability weighting
Others/Loans
Risk discount rate
Convertibles /Loans
Volatility
Warrants
Volatility
+/- 20%
+/-20%
+/-20%
+/-33%
+/-20%
+/-40%
+/-40%
+/-1,861,383
+/- 3,291,141
+/- 4,788,365
+/- 426,514
-2,417,009/+1,292,006
+704,696/-262,075
-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
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.
53
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
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 2022, the largest non-Sterling portion of the Company’s financial assets and liabilities was denominated
in Australian 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 2022 and 31 December 2021.
31 December 2022
Currency
AUD
CAD
EUR
GBP
NOK
USD
31 December 2021
Currency
AUD
CAD
EUR
GBP
NOK
USD
Amount in
local currency
43,324,009
10,995,550
11,430,526
19,408,238
41,552,423
24,410,380
Amount in
local currency
38,079,806
3,850,097
12,176,338
35,626,057
44,748,764
43,995,802
54
Conversion rate
(based on £)
0.5640
0.6133
0.8868
1.0000
0.0842
0.8299
Conversion rate
(based on £)
0.5371
0.5837
0.8401
1.0000
0.0838
0.7386
Value % of net assets
£
24,436,834
6,743,260
10,136,120
19,408,238
3,499,979
20,258,417
84,482,848
28.93%
7.98%
12.00%
22.97%
4.14%
23.98%
100.00%
Value % of net assets
£
20,451,724
2,247,114
10,229,833
35,626,057
3,751,021
32,493,207
104,798,956
19.52%
2.14%
9.76%
33.99%
3.58%
31.01%
100.00%
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
4. RISK MANAGEMENT POLICIES AND DISCLOSURES (CONTINUED)
a) Market risk (continued)
ii. Currency risk (continued)
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 2022 and 2021 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.
Currency
AUD
CAD
EUR
NOK
USD
Reasonably
possible
move
10%
11%
13%
20%
16%
2022
Value
£
2,443,683
741,759
1,317,696
699,996
3,241,347
8,444,481
2021
Value
£
2,045,172
247,183
1,329,878
750,204
5,198,913
9,571,350
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 2022
Assets
Cash and cash equivalents
Financial assets held at fair value through profit or loss*
Other receivables
Interest receivable*
Total Assets
Liabilities
Other liabilities
Total Liabilities
Interest rate sensitivity gap
Less than
6 months
£
254,140
524,813
-
57,917
836,870
More than Non-interest
bearing
£
-
72,947,836
17,899
-
72,965,735
6 months
£
-
10,839,306
-
-
10,839,306
Total
£
254,140
84,311,955
17,899
57,917
84,641,911
-
-
836,870
-
-
10,839,306
159,063
159,063
159,063
159,063
*The interest rate risks on these items are considered as part of overall price risk in valuing the convertibles.
55
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
4. RISK MANAGEMENT POLICIES AND DISCLOSURES (CONTINUED)
a) Market Risk (continued)
iii. Interest rate risk (continued)
At 31 December 2021
Assets
Cash and cash equivalents
Financial assets held at fair value through profit or loss*
Other receivables
Interest receivable*
Total Assets
Liabilities
Other liabilities
Total Liabilities
Interest rate sensitivity gap
Less than
6 months
£
1,077,482
1,235,273
-
249,445
2,562,200
More than Non-interest
bearing
£
-
86,212,477
22,132
-
86,234,609
6 months
£
-
16,237,843
-
-
16,237,843
Total
£
1,077,482
103,685,593
22,132
249,445
105,034,652
-
-
2,562,200
-
-
16,237,843
235,696
235,696
235,696
235,696
*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 2022
Assets
Cash and cash equivalents
Financial assets held at fair
value through profit
or loss
Receivables
Total Assets
Less than
1 month
£
254,140
1-3 months
£
-
3-12 months
£
-
More than
12 months
£
-
No
contractual
maturity
£
-
Total
£
254,140
-
64,364
318,504
524,813
11,452
536,265
10,088,045
-
10,088,045
491,092
73,208,005
491,092
73,208,005
84,311,955
75,816
84,641,911
Liabilities
Other payables
and accrued expenses
Total Liabilities
Less than
1 month
£
84,896
84,896
Net assets attributable to shareholders
1-3 months
£
3-12 months
£
More than
12 months
£
No
contractual
maturity
£
Total
£
-
-
74,167
74,167
-
-
-
-
159,063
159,063
84,482,848
56
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
4. RISK MANAGEMENT POLICIES AND DISCLOSURES (CONTINUED)
b) Liquidity risk (continued)
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
Assets
Cash and cash equivalents
Financial assets held at fair
value through profit
or loss
Receivables
Total Assets
Liabilities
Other payables
and accrued expenses
Total Liabilities
Less than
1 month
£
1,077,482
1-3 months
£
-
3-12 months
£
-
More than
12 months
£
-
No
contractual
maturity
£
-
Total
£
1,077,482
-
249,445
1,326,927
1,235,273
16,132
1,251,405
4,721,075
6,000
4,727,075
11,516,768
-
11,516,768
86,212,477 103,685,593
271,577
86,212,477 105,034,652
-
Less than
1 month
£
1-3 months
£
3-12 months
£
More than
12 months
£
No
contractual
maturity
£
Total
£
28,750
28,750
144,279
144,279
62,667
62,667
-
-
-
-
235,696
235,696
Net assets attributable to shareholders
104,798,956
The value of the cash and level 1 listed equity positions held by the Company at the year-end was £11,632,425 (2021:
£5,956,968 ) with the total liabilities at the year-end at £159,063 (2021: £235,696).
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 £11,364,120 (2021: £19,950,848).
The Company’s financial assets are exposed to credit risk, which amounted to the following at the Statement of Financial
Position date:
Assets
Cash and cash equivalents
Interest receivable
Other receivables
Financial assets held at fair value through profit or loss
Total assets
2022
£
254,140
57,917
17,899
84,311,955
84,641,911
2021
£
1,077,482
249,445
22,132
103,685,593
105,034,652
57
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
4. RISK MANAGEMENT POLICIES AND DISCLOSURES (CONTINUED)
c) Credit risk (continued)
As at 31 December 2022, the Company's non-equity financial assets exposed to credit risk were held with the following
ratings:
Financial Assets
Counterparty
-Convertible Loan Note
-Convertible Loan Note
-Convertible Loan Note
-Loan Note
-Loan Note
-Loan Note
Cash and cash equivalents
Total
Bilboes Gold Limited
Black Pearl Limited Partnership
Futura Resources Limited
Cemos Group Plc
PRISM Diversified Limited Loan Note 1
PRISM Diversified Limited Loan Note 2
HSBC Bank plc
**Credit
Rating
NR*
NR*
NR*
NR*
NR*
NR*
A+
2022
% of net assets
0.03
0.86
0.16
11.94
0.11
0.35
0.30
13.75
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
Azarga Metals
Bilboes Holdings Loan Note 1
Bilboes Holdings Loan Note 2
Silver X Mining Corporation (Previously
known as Mines & Metals Trading (Peru)
Plc)
Black Pearl Limited Partnership
Futura Resources Limited
Cemos Group Plc
PRISM Diversified Limited Loan Note 1
PRISM Diversified Limited Loan Note 2
HSBC Bank plc
-Convertible Loan & Loan Note
-Convertible Loan & Loan Note
-Convertible Loan & Loan Note
-Convertible Loan & Loan Note
-Convertible Loan Note
-Convertible Unsecured Loan
Security
-Loan Note
-Loan Note
-Loan Note
Cash and cash equivalents
Total
* No rating available
**As per S&P
**Credit
Rating
NR*
NR*
NR*
NR*
NR*
NR*
NR*
NR*
NR*
AA-
2021
% of net assets
2.11
1.72
0.33
2.37
1.23
1.18
9.72
0.08
0.27
1.03
20.04
58
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
4. RISK MANAGEMENT POLICIES AND DISCLOSURES (CONTINUED)
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.
5. 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 £1,200 (2021: £1,200) 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.
6. 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 £40,000. 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 €5,000 for preparation of the financial statements of the Company.
The administration fees payable for the year ended 31 December 2022 were £118,002 (2021: £126,876) of which £9,659
(2021: £10,638) was payable at 31 December 2022. HSBC Securities Services (Ireland) DAC, the sub-Administrator, is
paid a portion of these fees by the Administrator.
7. 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 2022 was £1,160,507 (2021: £1,587,121) of which £69,854 (2021:
£122,894) 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 2022, the
Highwater Mark was the equivalent of approximately 94 pence per share with the relevant Hurdle being the equivalent of
approximately 163 pence per share.
There were no earned performance fees payable for the current or prior year.
59
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
7. MANAGEMENT AND PERFORMANCE FEES (CONTINUED)
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
Research fees
Regulatory fees
Investor services fees
Public relation fees
Miscellaneous expenses
9. CASH AND CASH EQUIVALENTS
Cash at HSBC Bank plc
10. SHARE CAPITAL
2022
£
35,356
31,286
30,781
11,520
21,378
130,321
2021
£
33,910
30,970
24,031
10,080
4,398
103,389
2022
£
254,140
2021
£
1,077,482
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 (2021: 106,453,335) Ordinary Shares outstanding with an additional 700,000
(2021: 700,000) held in treasury. The Company has 9,167 (2021: 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.
60
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
10. SHARE CAPITAL (CONTINUED)
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. 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:
Issued and fully paid share capital
Ordinary Shares of no par value**
(including Management Ordinary Shares)
Treasury Shares
Total Share Capital
2022
Amount No. of shares*
£
2021
Amount
£
No. of shares*
76,122,347
107,162,502
76,122,347
107,162,502
(140,492)
75,981,855
(700,000)
106,462,502
(140,492)
75,981,855
(700,000)
106,462,502
The outstanding Ordinary Shares as at the year ended 31 December 2022 are as follows:
Balance at 1 January 2022 & 31 December 2022
Ordinary Shares
Amount
£
76,122,347
No. of shares*
106,462,502
Treasury Shares
Amount No. of shares
£
140,492
700,000
The outstanding Ordinary Shares as at the year ended 31 December 2021 were as follows:
Balance at 31 December 2021
* Includes 9,167 (2021: 9,167) Management Ordinary Shares.
Ordinary Shares
Treasury Shares
Amount
£
76,122,347
No. of shares*
Amount No. of shares
106,462,502
£
140,492
700,000
** 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.
61
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
10. SHARE CAPITAL (CONTINUED)
Capital Management (continued)
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 £8,771,186 (2021: £10,047,160) and Capital Reserves of
£(270,193) (2021: £18,769,941).
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 2022 (31 December 2021: 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 2022 (2021: 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 Pty Limited
holds 12,452,177 shares (2021: 12,452,177) and The Sonya Trust holds 12,637,350 shares (2021: 12,722,129).
John Falla purchased 60,000 shares in the Company on 10 November 2022.
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:
Management fees
Directors’ fees
The Management fees and Directors’ fees outstanding at the year-end were:
Management fees
Directors’ fees
62
2022
£
1,160,507
129,489
2022
£
69,854
-
2021
£
1,587,121
115,000
2021
£
122,894
28,750
BAKER STEEL RESOURCES TRUST LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
12. NET ASSET VALUE PER SHARE AND GAIN PER SHARE
Net asset value per share is based on the net assets of £84,482,848 (31 December 2021: £104,798,956) and 106,462,502 (31
December 2021: 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:
Net assets at the year-end (£)
Number of shares
Net asset value per share (in pence) basic and diluted
Weighted average number of shares
31 December 2022
Ordinary Shares
31 December 2021
Ordinary Shares
84,482,848
106,462,502
79.4
106,462,502
104,798,956
106,462,502
98.4
106,462,502
The basic and diluted loss per share for 2022 is based on the net loss for the year of the Company of £20,316,108 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 2021 is based on the net gain for the year of the Company of £1,307,557 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
Cemos Group Limited
Bilboes Gold Limited
Nussir ASA
Futura Resources
Tungsten West Plc
Silver X Mining Corporation
Polar Acquisition Limited
Azarga
Country of Incorporation
Jersey
Mauritius
Norway
Australia
England and Wales
Canada
British Virgin Islands
Canada
Voting Rights held
24.59%
24.16%
12.12%
26.94%
16.10%
12.46%
49.99%
31.33%
NED Appointed
Yes
No*
Yes
Yes
No**
Yes
Yes
No
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.
*Retired from the board on 6 January 2023
**Retired from the board on 13 March 2023
14. SUBSEQUENT EVENTS
On 6th January 2023, Caledonia Mining Corporation Plc acquired all the shares of Bilboes Gold Limited. The Company
received a 1% net smelter royalty over future production from Bilboes’ project area and shares in Caledonia. The expected
transaction was taken into account in the valuation of Bilboes at 31 December 2022.
There were no further 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 2022 were approved by the Board of
Directors on 21 April 2023.
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BAKER STEEL RESOURCES TRUST LIMITED
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 2022 the LLP as Investment Manager paid fixed remuneration to members and those identified
as AIF code staff of £437,346. Variable remuneration amounted to £2,225,935. 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 2022. 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 £2,662,740.
The total AIFM remuneration attributable to senior management was £2,662,740. 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.
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BAKER STEEL RESOURCES TRUST LIMITED
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
65
BAKER STEEL RESOURCES TRUST LIMITED
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.
66