Baker Steel Resources Trust : 2020 December Annual Report

BAKER STEEL RESOURCES TRUST LIMITED

Annual Report and Audited Financial Statements

For the year ended 31 December 2020

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.

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BAKER STEEL RESOURCES TRUST LIMITED

CONTENTS	PAGE
Management and Administration	1-2
Chairman's Statement	3
Investment Manager's Report	4-8
Portfolio Statement	9-11
Strategic Report	12-16
Board of Directors	17
Directors' Report	18-25
Report of the Audit Committee	26-28
Independent Auditor's Report	29-35
Statement of Financial Position	36
Statement of Comprehensive Income	37-38
Statement of Changes in Equity	39
Statement of Cash Flows	40
Notes to the Financial Statements	41-61
Appendix - Additional Information (Unaudited)	62
Glossary of Terms	63-64

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BAKER STEEL RESOURCES TRUST LIMITED

MANAGEMENT AND ADMINISTRATION

DIRECTORS:	Howard Myles (Chairman)
	Charles Hansard
	Clive Newall (resigned 15 September 2020)
	Fiona Perrott-Humphrey (appointed 15 September 2020)
	David Staples
	(all of whom are non-executive and independent)
REGISTERED OFFICE:	Arnold House
	St. Julian's Avenue
	St. Peter Port
	Guernsey, GY1 3NF
	Channel Islands
MANAGER:	Baker Steel Capital Managers (Cayman) Limited
	PO Box 309
	George Town
	Grand Cayman KY1-1104
	Cayman Islands
INVESTMENT MANAGER:	Baker Steel Capital Managers LLP*
	34 Dover Street
	London W1S 4NG
	United Kingdom
STOCK BROKERS:	Numis Securities Limited
	10 Paternoster Square
	London EC4M 7LT
	United Kingdom
SOLICITORS TO THE COMPANY:	Norton Rose Fulbright LLP
(as to English law)	3 More London Riverside
	London SE1 2AQ
	United Kingdom
ADVOCATES TO THE COMPANY:	Ogier
(as to Guernsey law)	Redwood House
	St. Julian's Avenue
	St. Peter Port
	Guernsey GY1 1WA
	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.

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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:	HSBC Continental Europe*
	1 Grand Canal Square
	Grand Canal Harbour
	Dublin 2
	Ireland
SAFEKEEPING AND MONITORING AGENT:	HSBC Continental Europe *
	1 Grand Canal Square
	Grand Canal Harbour
	Dublin 2
	Ireland
AUDITOR:	BDO Limited
	P O Box 180
	Place du Pre
	Rue du Pre
	St. Peter Port
	Guernsey GY1 3LL
	Channel Islands
REGISTRAR:	Computershare Investor Services (Jersey) Limited
	Queensway House
	Hilgrove Street
	St Helier
	JE11ES
	Jersey
UK PAYING AGENT AND TRANSFER AGENT:	Computershare Investor Services (Jersey) Limited
	Queensway House
	Hilgrove Street
	St Helier
	JE11ES
	Jersey
RECEIVING AGENT:	Computershare Investor Services (Jersey) Limited
	Queensway House
	Hilgrove Street
	St Helier
	JE11ES
	Jersey
PRINCIPAL BANKER:	HSBC Bank plc
	8 Canada Square
	London E14 5HQ
	United Kingdom

• HSBC France, Dublin Branch changed its name to HSBC Continental Europe with effect from 1 December 2020.
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BAKER STEEL RESOURCES TRUST LIMITED

CHAIRMAN'S STATEMENT

For the year ended 31 December 2020

2020 was a year of great uncertainty and market volatility as the world came to grips with the consequences of the Covid -19 pandemic. Initial investor reaction saw a sharp sell-off in global equity markets including metals and mining shares but this proved short lived as sentiment recovered when it became evident that governments would support economies with unprecedented fiscal measures. The future inflationary risk of this massive government borrowing propelled the gold price to all-time highs. This was then followed by increases in base metal prices with increased expected demand from government stimulus packages including resource intensive infrastructure projects to kick start their economies.

This backdrop has a been a positive one for the Company with the NAV rising 31.5% over the year to 31 December 2020 and the Company's share price increasing by 35.8%, while the EMIX Global Mining Index rose by 22.2% in Sterling terms.

During the year the Company concentrated its resources on ensuring that our existing investee companies were able to progress their projects in the prevailing difficult operating and market conditions. To this end, supplemental investments were made in Futura Resources, Anglo Saxony Mining, Azarga Metals, Nussir, and Mines & Metals Peru PLC (MMTP). The market for junior mining development companies to raise funds then opened up in the final quarter of 2020 and MMTP was able to raise equity from new shareholders at the end of the year, following this up with a listing via a merger with TSX-V listed Oro X and raising a further C$14 million to create Silver X. Likewise since the year end Anglo Saxony has been able to raise £5 million at a higher price than we were carrying it at ahead of an anticipated IPO later this year. Futura continued to progress its coking coal projects towards production but decided to push back the planned start-up of operations until more stability and transparency in coking coal markets prevails. The investment in CEMOS was particularly rewarding, especially given initial Covid-related problems, as it ramped up production and sales to full capacity at its cement plant in Morocco and posted record financial results.

The Company is well placed to benefit from the improved investor sentiment towards metals and mining with several of our investee companies such as Bilboes, Futura, Tungsten West and Nussir having reached a stage where they need and are seeking significant amounts of capital to develop their mines. In the case of Bilboes a comprehensive process was undertaken during 2020 to investigate the options for financing the mine, including merging with another gold mining company or a sale for cash . In the end, it was decided that a sale for cash was the most attractive option and negotiations are continuing with a major gold company to sell the Company's interest in Bilboes for approximately £20 million subject to regulatory approvals. This would represent a return of around four times our investment in Bilboes. In accordance with our commitment to shareholders, at least 15% of realised gains will be distributed to shareholders. Further details of the size, method and timing of such distribution will be sent to shareholders following completion and once the consideration has been finalised and received.

Although the listed market has shown an increased willingness to finance mining projects, most institutional investors are unable or unwilling to invest in private companies. This provides a continuing opportunity for the Company, particularly as private companies are currently keen to raise finance to progress themselves to a sufficiently advanced stage to seek a stock exchange listing. The Company intends to reinvest a major portion of the proceeds from the sale of Bilboes into advanced pre-IPO opportunities and we are currently analysing a number of attractive propositions.

The mining industry has generally coped well with the Covid-19 pandemic as mines are usually in isolated locations and most mining companies have been able to put in place protocols which have enabled them to continue operating. Furthermore, most of the Company's investments are not yet in operation so they have been relatively less affected than some, other than through some slowing down of progress. The Company's policy of investing through convertible bonds has meant we have at least accrued interest on those loans during these delays, and our husbanding of our investments by ensuring they had sufficient working capital when times were most difficult, as mentioned above, means our investments are in a strong position as the world starts to emerge from the pandemic.

During the year we welcomed Fiona Perrott-Humphrey, who has over 30 years' experience in mining finance, to the Board. She replaced Clive Newall, whom I would like to thank for his invaluable insights on the mining industry and contribution to the Company since its formation.

Howard Myles

Chairman

22 April 2021

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