Baker Steel Resources Trust Limited says its 64% owned investment Polar Acquisition Limited (PAL) has agreed to issue a new zero coupon US$4.75 million convertible loan to discretionary clients of Sprott Inc (a Toronto listed fund management company well known for its expertise in natural resources investment and its interest in silver). The proceeds of the convertible will be utilised to offer to buy back up to 10% of the shares in PAL proportionate to current shareholdings. This reflects the fact that PAL does not require any further funds for the foreseeable future following the announcement on 19 January 2017 of the US$3 million subscription by Polymetal International for a 10% interest in PAL’s subsidiary, Polar Silver Resources and its commitment to fund the feasibility study into the Prognoz Silver project.
The share buyback will be undertaken at a valuation which represents a 13.6% premium to the current carrying value and Baker Steel will receive at least US$3.0m in cash from the buyback, which is anticipated to be completed by mid-April 2017.
Baker Steel sees this as a first step towards achieving its stated aim of reducing the proportion of its net assets represented by PAL. It also provides cash at an opportune moment in the mining cycle for new investment and/or share buybacks, and will take place at a premium to the carrying value as at 28 February 2017, following the significant uplift in carrying value at 31 December 2016. The addition of Sprott as a specialist institutional investor in PAL is also welcomed and a further endorsement of the Prognoz silver project’s potential.
BSRT : Baker Steel Resources benefits from Polar buy-back