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As a share of investments this is a way to gain "private equity" access to funded juniors who are for the most part in the process of starting production. One exciting aspect is the fact that miners are leveraged plays. There are a number of reasons why there are price rises across many commodities should continue into 2022 and beyond. Even those which haven't done well (Silver and Gold) should see a better year in 2022, and certainly have a strong floor/resistance above $1750 where Indians and Chinese particularly will buy physical gold on any dips. Jewellery demand is strong. Moreover the fact the market doesn't appreciate is that gold and silver miners are very profitable at current prices.
Here are the final commodity prices for 2021
Gold 21% (2021 YOY fall 5%)
Coking Coal 16% (YOY rise 110%)
Tungsten 16% (YOY rise 250%
Silver 11% (YOY fall 11%)
Copper 7% (YOY rise 27%)
Tin 5% (YOY rise 93%)
Zinc 4% (YOY rise 29%)
Potash 3% (YOY rise 71%)
Other 4%
So there's a strong backdrop and a number of IPOs of Baker's portfolio which should help crystallise value. The other attraction? Current NAV is 97p and you can buy that at a 23% discount at current prices (75p). Discount has been 0% recently, especially when a periodic review is due.... And NAV has roughly doubled over the past 3 years and 141% TR over 5 years of mainly via IPOs crystallising that value suggesting there's further hidden value to be found here and 9 companies in its Portfolio have events during 2022 that are NAV triggers (Bilboes, Mines and Metals, Cemos, Tungsten West, Futura, Nussir, Kanga, Azarga, First Tin, ) so 97p may be (well) below its true NAV and therefore further value and insulation. While the portfolio is relatively small and concentrated it is geographically diverse as well as commodity diverse too.
Good luck fellow Bakers for 2022!
2022 First Half Thoughts:
BSRT now contains a mix of "private equity" access to funded juniors and listed holdings who are for the most part in the process of starting production. Expecting a continued price rise across many commodities should continue into 2022 let’s see where we are:
Gold YTD down -1% $1810/oz
Coking Coal up 147% $388/tonne
Tungsten up 14% $362/tonne
Silver down 4% $20/oz
Copper down 18% $7,980/tonne
Tin down 30% $26000/tonne
Zinc down 17% $3,029/tonne
Potash up 154% $341/tonne
Other 4%
NAV dropped 98.4p to 87p (31/5/22) largely due to Tungsten West Plc and First Tin Plc
We were due to see “a strong backdrop” and “a number of IPOs” to crystallise value. So what happened?
Negatives 2022 H1
? Commodity price falls – I don’t think anyone foresaw that copper, tin and zinc would be between 17-30% cheaper than 6 months ago. These are “energy transition metals” (zinc not so much) yet these are sensitive to economic growth/contraction. Judging by the extent of the falls quite a nasty contraction is coming.
? No “NAV trigger” events yet in 2022; IPO market conditions are generally poor
? The Prognoz silver mine royalties (with Polymetal Plc) held through Polar Acquisition (PAL) has been written off
Positives 2022 H1
? Ukraine Invasion – a positive for BSRT's portfolio has been the price of potash, tungsten and coal.
? Longer term energy transition fundamentals have not changed
? Silver X – a JORC 14.9MT at 162.65 g/t, 2.54% Pb and 2.5% Zn was a 104% uplift
? No comms beyond a brief monthly NAV report and the 2021 annual report
Conclusion: The discount to NAV dipped to 32% in June and has since rebounded to 25%. This is still above normal and BSRT’s convertibles give an upside/downside approach i.e. they hold debt but can convert the debt to equity if it suits them. There’s a chunky discount in some highly prized commodities which is anomalous and the price drops in copper, silver and tin cannot be sustained by producers who are close to or below their cost of production – suggesting a rebound will come. Some positions including Kanga, Cemos, PAL and Bilboes have book values potentially far below their realisable value so quite a few areas of uplifts. Has 2022 gone to plan for BSRT? Not really. But don’t write off BSRT just yet – there’s gold in them there hills!
GLA
My soliloquy continues: today’s news confirms my feeling that Bilboes baggins held upward value. The 800,000 shares in Caledonia realises the “book value” (assuming CLDN doesn’t drop in the following 6 months) however the NSR is worth a further $2.6m a year over 20 years so a NPV of £25m (assuming a gold price of just $1650) or a 40%uplift in NAV to a 60% discount to market value. This is completely overlooked by the market today (less than 1% move in price) so a screaming bargain in my opinion.
More so if you believe gold will exceed $1650 an ounce in the future or you consider Caledonia shares will increase in the future…..
CMCL is currently at £8.90/share but Cenkos forecast it at £15.25 while Liberum see a £14.21 value.
So 800,000 shares if it reached £15.25 would equate to £12.2m while the NSR gross value based on the probable and proven 1,964koz and at $1,900 gold price would equate to $37.5m gross. Out of interest the NSR is capped at $75m which either would be reached if discoveries doubled - or the price of gold doubled or a bit of both.
If dividends from CMCL only remain static at 56c (46.6p) for the next 9 years then those equate to a further £373k per annum which over 9 years is a further £3.35m.
So BSRT's market cap is £68m and the Bilboes deal could generate £12.2m (shareS)+£31.25m (NSR)+£3.35m (divis) = £46.8m
Bilboes represents 13.6% of BSRT's NAV so using the market cap that "valued" by the market at just £9.1m. So I've concluded that there's a £37.7m disparity in valuation.... or 56% uplift of the current market cap.
Meanwhile Future (coal) and Cemos (cement) are both doing (very) well. Tungsten West doing better. And these are the top 3 holdings (Bilboes is 4th largest). Also Kanga (Potash) looks exciting too (albeit it's just 4.4% of NAV)
https://www.edisongroup.com/publication/nav-broadly-flat-in-fy21-after-strong-fy20/30462/
I tried to top up today but couldn't buy BSRT on the mobile (a missing disclosure document?) but on the desktop this evening it's allowed me to place a limit order so hopefully I double my stake first thing tomorrow. Cannot believe that it only went up by 0.8% on today's news. Totally overlooked.
GLA