Baker Steel Resources Trust has provided an update on its intention to increase its ownership in Polar Silver Resources Limited. Polar Silver Resources is the trust’s largest investment (25.8% of net assets as at 31 March 2016). It is a private limited company, incorporated in the British Virgin Islands, which owns 100% of ZAO Argentum. ZAOAgentum is incorporated in Russia and in turn holds a 50% indirect interest in the Prognoz silver project, 444km north of Yakutsk in Russia. The Trust’s investment in the Polar Silver Group is in the form of shares in Polar Silver and loan notes in both ZAO Argentum and Polar Silver (both of which are convertible into Polar Silver Shares). The Company currently owns 27.25% of the equity of Polar Silver and has lent US$14.84m in aggregate to Polar Silver and Argentum.
The Company’s Investment Manager had previously advised the Board that there is a disagreement as to the strategy to develop the Prognoz Asset between another major Polar Silver shareholder and the holder of the other 50% interest in the Prognoz Asset. In order to remove the uncertainty and risk which this disagreement creates, the Investment Manager proposed that the Company increases its interest in the Polar Silver Group so that it can achieve majority control position and remove the uncertainty. Shareholders approved measures in January to allow this to take place.
The trust now says that its wholly owned subsidiary, Polar Acquisition Limited, has made an irrevocable offer to acquire Polar Silver’s entire holding in ZAO Argentum. They say that the offer has been made at a valuation around the Trust’s current carrying value and therefore is expected to have a minimal effect upon its NAV in the short term. The trust says that the valuation is regarded by the Investment Manager as fundamentally attractive relative to what it considers to be the risk adjusted fair value of the Prognoz Asset and, accordingly, the Investment Manager believes that acquiring a further interest in the Prognoz Asset should be value enhancing for the trust in the medium to longer term.
Assuming the Offer completes, the Trust’s holding in the Prognoz Asset through its new holdings in PAL will increase such that pro-forma it is expected to represent around 30% of the Company’s NAV as at 31 March 2016, which is in accordance with the revised investment restrictions as approved by shareholders at the EGM held on 5 January 2016. Assuming completion of the Offer, the Company’s effective equity interest in the Prognoz Asset will be between 30-35%. The trust says it will keep investors updated on developments.
Baker Steel Resources is moving ahead with Prognoz acquisition BSRT