viewBaker Steel Resources Trust Ltd

Baker Steel Resources hits five-year high as investments mature


  • Focus on 'high-conviction' portfolio of 15 investments
  • Closed-ended - allows high proportion of unlisted investments
  • Pretty unique fund among London peers 
  • Takes positions in early-stage investments

Quick facts: Baker Steel Resources Trust Ltd

Price: 53.7601 GBX

Market: LSE
Market Cap: £57.23 m

How it's doing

Still flushed with the success of its investment in the Prognoz silver mine last year, Baker Steel Resources Trust Limited (LON:BSRT) is hoping to repeat the trick.

The mineral resources-focused trust’s second-largest investment, Polar Acquisition Limited (PAL) sold Polar Silver Resources, which owns 50% of the Prognoz silver mine in Russia, for US$72mln worth of Polymetal International PLC (LON:POLY) shares.

“We made three times our money on Prognoz over a period when the silver price halved,” Trevor Steel, the chief investment officer and co-founder of Baker Steel, told Proactive Investors.

“10% is retained in terms of a revenue royalty on Prognoz so … that sets us up in terms of having more liquidity in the portfolio to pursue new ideas if we wish,” he added

Since then, Baker Steel has employed some of its cash by acquiring an Australian coal royalty and investing US$3mln via a convertible loan and warrants in Canadian-listed Azarga Metals Corp (CVE:AZR) as it undertakes a second-phase of exploration drilling at its Unkur copper-silver project in Russia.

Although around 40% of the portfolio is in early-stage investments, Steel said the team believe the portfolio was "maturing nicely and it's ripe for some further realisations in due course".

He has outlined four stocks that he thinks could provide significant uplifts to the trust’s NAV in the short- to medium-term, led by Futura Resources.

Futura, at 16.2% of the portfolio as of November 2019, has two advanced coking coal developments in the Bowen Basin in Australia, where capital costs to bring the projects into production are likely to be low. 

Another investment that could see a valuation catalyst is Sarmin, a world-class potash discovery in what Steel termed as “the good Congo”, ie the Republic of Congo.

Attention has also been moving towards Bilboes, a Zimbabwean gold mine, and Cemos, a private company that is about to start producing cement from its Moroccan operations.

Bilboes, currently represents 14.3% of Baker Steel’s portfolio

As for Cemos, that is currently being carried at book cost but Steel thinks that valuation will need to be revised next year.


In January, Baker steel gave its projections for gold over the coming year and not surprisingly, gold miners are seen as the way to plat a rising metal price.

“Gold’s strong performance in 2019 indicates that the bull market is intact and that substantial upside remains for the metal and for gold equities,” the manager said in its start of year review. 

“The gold price is still far from its historic high of around US$1900/oz while gold miners are still emerging from the severe downturn in the sector which ended in late-2015. 

“The most substantial opportunity in the precious metals sector is the recovery of the miners themselves, many of which are now in their strongest position for some years, having benefitted from management reforms, improved cost discipline and increased profitability.”

Inflexion points

  • Shares have reached a five-year high but still have some way to go to catch up with the NAV.
  • The discount to NAV has come down to about 17% on the latest valuation of 68.8p at end October 2019.
  • Four main holdings are: Futura Resources;Polymetal; Cemos and Bilboes  

Blue Sky

Baker Steel takes a longer-term view on commodity prices.

For instance, the company has some exposure to copper through its investment in Nussir, which is moving forward with a definitive feasibility study on its Nussir/Ulveryggen copper project in Norway, and sentiment towards the metal might take a short-term hit from the wrangling between the US and China.

“In the case of copper, we feel that the medium to longer-term fundamentals are really excellent with the demand and prospects from electric vehicles. I think that’s actually the more important driver than potentially the tariffs,” Steel opined.

About half of the company’s current portfolio is currently in precious metals but this is largely a by-product of the company’s successful investment in the Prognoz asset.

Steel clearly likes the battery metals but it steers clear of what he calls “the more esoteric metals” that are not traded on an exchange; geographically, it also steers clear of projected in “risky countries like the Democratic Republic of Congo”, so do not expect to see the trust taking a punt on cobalt any time soon.

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on 26/6/18

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