Baker Steel Regulatory News (BSRT)

BAKER STEEL RESOURCES TRUST LIMITED

(Incorporated in Guernsey with registered number 51576 under the provisions of The Companies (Guernsey) Law, 2008 as amended)

11 September 2023

LEI: 213800JUXEVF1QLKCC27

Futura Resources closes A$26.2 million financing

Baker Steel Resources Trust Limited ("the Company" or "BSRT") announces that its second largest investment Futura Resources Ltd ("Futura") has completed a A$26.2 million financing package to fund the commencement of production of steel making coals at its Wilton Mine in Queensland, Australia.

The funding package comprises a A$21.2 million 3-year term unsecured redeemable convertible note issue, accompanied by in-kind commitments from a number of contractors and suppliers to the value of c. A$5 million.

BSRT has committed to invest its approximate pro-rata interest totalling A$4.7 million (£2.40 million), which will be satisfied through the rolling of its existing outstanding A$0.7 million bridging loan as well as a further investment of A$4 million in new funds. Together with the investment in the convertible the transaction will, assuming full conversion by noteholders, approximately maintain BSRT's 27% equity interest in Futura.

The new investment will increase the Company's overall investment exposure to Futura (which includes a 1.5% Gross Revenue Royalty on Futura's mines), from the current 25.3% NAV to 28.2% NAV on investment based on 31 August 2023 valuations, remaining below the 35% NAV limit approved by shareholders on 9 November 2022. The valuation of the various elements comprising the investment in Futura will be reviewed at 31 December 2023, at which point the Wilton Mine should be in or close to being in production.

It is currently expected that Futura's second mine, the Fairhill mine can be brought into production utilising cash generated by Wilton but this might be accelerated should Futura decide to raise further finance, likely to be debt, once Wilton is up and running. A total of around A$50 million is required in funding for development of both the Wilton and Fairhill mines. Several parties have expressed interest in participating in the convertible note issue, but are yet to complete the subscription agreement, and as such Futura will leave the convertible offer open for a short period after this first closing to allow for potential further subscriptions up to a maximum of A$30 million.

According to Futura management forecasts, the Wilton and Fairhill mines are expected to produce around 2 million tonnes per annum of saleable product once both mines are in full production in 2025 which based on forward price expectations is forecast to generate an EBITDA of A$92m*. There remains potential to increase production rates subject to additional licensing approval and available processing capacity.

As these are open-pit operations with near surface coal and utilising existing infrastructure, both projects benefit from low capital intensity and can be brought into production within 3 months of the necessary funding being made available. A key infrastructure cost saving is the right Futura has to process its coal at the existing Gregory Crinum coal processing plant, which is estimated to have a replacement cost of around A$300m.

Futura's economic model shows a net present value at a 10 percent discount rate (NPV10) of A$339m over the 20 years of planned production based on forward price expectations, or NPV10 of A$642m if current prices were maintained over the longer term*. In addition, the overall mineral resource is extensive and could sustain a mine life well beyond the currently planned term.

The convertible notes carry a 21% annual coupon with a pre-conversion equity valuation of A$100 million, which equates to A$2.38 per Futura share conversion price. Upon an IPO by Futura, noteholders would have the right to convert at the lower of A$2.38 per share or a 20% discount to the IPO price. The high coupon reflects recent precedents for the cost of financing for coal development companies in Australia.

Approximately A$100m has been spent historically on exploration, bulk sample testing and permitting in today's money to bring these projects to the current stage of development with both Wilton and Fairhill being granted Mining Licenses in November 2022.

The projects are coming into a coal market where supply is tight for steel making coals and demand is strong, particularly from developing countries like India, Vietnam and Indonesia, which are all expanding steel production to meet domestic demand.

The Queensland government has expressed strong support for the development of these two mines with Resources Minister Scott Stewart saying,

"This investment is a strong vote of confidence in the Queensland resources sector and our state's large deposits of high-quality steelmaking coal"

"These projects are in the heart of the Bowen Basin and will benefit from the existing infrastructure in place from nearby mines".

"…regional communities will benefit from job opportunities and the economic flow-on effects of these projects."

"Treasury forecasts show Queensland will likely remain the world's largest seaborne exporter of steelmaking coal for many decades to come,"

*Source: Futura management projections and mine plan financial models

Further details of the Company and its investments are available on the Company's website www.bakersteelresourcestrust.com

Enquiries:

Baker Steel Resources Trust Limited +44 20 7389 8237

Francis JohnstoneTrevor Steel

Numis Securities Limited +44 20 7260 1000

David Benda (corporate)

James Glass (sales)

The Net Asset Value ("NAV") figure stated is based on unaudited estimated valuations of the underlying investments and not necessarily based on observable inputs. Such estimates are not subject to any independent verification or other due diligence and may not comply with generally accepted accounting practices or other generally accepted valuation principles. In addition, some estimated valuations are based on the latest available information which may relate to some time before the date set out above.

Accordingly, no reliance should be placed on such estimated valuations and they should only be taken as an indicative guide. Other risk factors which may be relevant to the NAV figure are set out in the Company's Prospectus dated 26 January 2015.