Baker Steel Share Price (BSRT)

A quick look at the 1-year chart shows significant destruction of shareholder value. Yes, the bounce over the last month is nice, but I hope the BoD get roasted at the AGM.

Well, the fruits of patience are coming rapidly to ripeness.

1/ Bilboes - sold to Caledonia - 1% NSR, Listed Caledonia Holding (10-25% TP upside Liberum/WH Ireland), 3.2% Div.
2/ Futura - 26% stake in 2 Metalurgical Mines now permitted, Wilton and Fairhill, moving to FID $25m, also 1.5% NSR
3/ Tungsten West - bombed out in 2022 but 25% IRR and Tungsten in demand following Ukraine conflict.
4/ Kanga - highly attractive economics fertiliser - IPO in 2023 or 2024
5/ Nussir - Copper DFS done - FID next step or IPO in 2023 or 2024
6/ Cemos - 2nd production line completed late 2022.
7/ Prognoz - tied to POLY - opens 2023 and NSR worth $1.5m a year. Possible issues extricating the money until war ends. (But POLY is going great guns as a business, and its share price has doubled in the past few months following growing optimism.
8/ First Tin - listed and bombed out in 2022; now recovering; tin is back to $30k; DFS being worked on.

There's so much good news filtering through and the discount has narrowed from 45% to 36% but the long term discount to NAV is on average 20% and each commodity area (gold, tin, fertiliser, coal, silver) are either at elevated levels or are heading higher. There's lots to like and compared to other royalty plays this one is inordinately cheap! Its market cap is £55m and holds assets worth (today) £88m.... but "worth £88m" is based on a locked-in value which unlocks this year or on a purchase price and not a fair value. So if we took this to be conservatively 25% then this is actually still on a 50% discount to NAV. Reversion to 20% suggests a 60% upside from here. (to about £0.85/share). If it reverts to par (as it did in June 2021 during a period of excitement around commmodities) then a target price of £1.10 is realistic.

It's difficult to see any downside here at its current 52p. Even if we do see severe recession later in 2023 (we aren't even close to that as I write) the breadth of geographies and commodities insulates the buyer.

Certainly, credit to its management who are rather (too) quietly plugging away on the deal flow and shepherding this array of commodity plays. This one dropped in 2022 along with its holdings and the uncertainty of finding a hobbit-sized home for Bilboes, and the news of stranded Russian assets, uncertainty of coal investment in Australia all seemed risky. But in 2023 much of that uncertainty is now looking much more positive and a path ahead to prosperity now is clearer.

GLA

I've been trying to dig into the assets here to understand them better. I've covered Bilboes previously so why not look at what is now the largest?
Futura is at FID (Final Investment Decision) stage. There should be a decision in late 2022.
See: https://cqtoday.com.au/news/2022/10/17/coal-regions-billion-dollar-baby/
See: http://bakersteelresourcestrust.com/wp-content/uploads/2022/09/Baker-Steel-Resources-Trust_30.06.2022.pdf

It has a large resource including a good proportion at sub 100m depth.
See: https://www.futuraresources.com.au/operations

Total 2.6bt metallurgical coal and 739mt at sub 100m
AISC per tonne of coal for Queensland Australia = £80/tonne
See: https://miningdataonline.com/property/list.aspx?cat=0&cmids=25&tids=1,4&ssids=1,3,2&fm=0&yr=21&rb=on&vw=11

Current Market price for coal is US$385/tonne ~ £350/tonne.
See: https://tradingeconomics.com/commodity/coal

Futura's mine are right next to transport links and other mines. This neighbouring mine was bought for AD$100m with a 60MT+ resource and will yield 3MT/year for 20 years.
https://www.sojitzblue.com.au/gregory-mine

So 1/10 of the size of Futura's resource at sub 100m (let alone the other 1.9bt deeper down).
A planned 2.3MT/year would bring annual revenue of £350x2.3m = £805m and EBITDA of £621m
Minus out the Queensland tax 15% and 40% above A$300 equates to about £100/tonne tax so EBIDA would drop to £390m.

BSRT is on a 40% discount to NAV. Futura NAV's book value is 27.7% of 80.4p/share so 22.27p/share or £24.1m (based on NAV). So the question is even if my numbers are out by a factor of 10 the value here is insane. Assuming the FID gets funding and in June they said "in the next couple of months", then something that generates significant profits of Price Earnings less than 1, but is valued at £24.1m and you can buy at a 40% discount...... (the equivalent of 13.4p/share)

So 51p to buy BSRT where Futura alone seems to be potentially worth at least that based on the nearby mine value and based on comparative Australian mine profitability.

The stranded asset challenge is another factor here but remember this is metallurgical coal not thermal. Hydrogen powered steel making is not happening any time soon so there's a 20-25 year life to this asset.

GLA

https://www.proactiveinvestors.co.uk/companies/news/992933/baker-steel-resources-well-positioned-to-weather-short-term-storm-992933.html

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