The UK National Wealth Fund’s decision to back Devon miner Tungsten West last month helped lift the net asset value of Baker Steel Resources Trust (BSRT) by over 17%, consolidating its position at the top of the buoyant AIC Commodities and Natural Resources sector.
Tungsten West (TUN), a £646m tin and tungsten miner that is BSRT’s top holding, jumped 47% in response to the UK government’s infrastructure backer buying a 7% stake for £36m, the mining fund’s latest fact sheet shows. The National Wealth Fund also provided £25m in debt.
BSRT said the financing would not only fully fund the company’s Hemerdon tungsten mine into production but boded well for future license extensions given the importance the government was placing on the project to provide a domestic supply of vital minerals to British defence, energy and aerospace businesses.
Trevor Steel, chief investment officer of BSRT’s fund manager Baker Steel Capital Managers, said: “The support for the Hemerdon tungsten mine by the UK National Wealth Fund means its redevelopment is now fully funded and ensures the project stays on track for full production by the end of the first quarter next year thus taking advantage of the current high tungsten price which has increased ten-fold since the beginning of last year which if maintained would mean margins of around 90%.”
Following this, Tungsten West makes up 28% of BSRT, with its stake worth £53.2m.
The 17.3% rise in BSRT’s portfolio to £190.2m – with net asset value (NAV) per share up 26.6p to 180.7p at 31 August – was not fully reflected in the investment company’s share price, however, which rose 9% from 129p to 141p.
Nevertheless, it maintained BSRT’s top position in its AIC peer group extending its one-year total shareholder return to 110.5%.
Over three years BSRT has generated 299% for shareholders as it has benefited from the intense demand for minerals caused by the expansion of artificial intelligence and the transition to clean energy.
That impressive growth is overshadowed by Golden Prospect Precious Metals (GPM) which has soared 314%. Steel won’t worry about that too much that given in July the gold mining fund appointed him and co-manager Mark Burridge to take on its portfolio after its previous managers Keith Watson and Robert Crayfourd left CQS Manulife for Tufton Investment Management.
The wide discount on BSRT’s shares remains a puzzle given its strong performance. The gap between the share price and NAV widened to 22% in August but has narrowed from 28% in January after BSRT’s board launched its first buybacks in 11 years in February. Since then the company has purchased £1.4m of its shares though none were bought back in August.
“Significant opportunities” at First Tin
BSRT’s update also highlighted progress at First Tin (1SN), a London-listed “sustainable” Australian miner that is its eighth biggest holding. Shares in the £62m company spiked last month after an updated feasibility study on its Taronga open pit mine forecast average production of 3,200 tonnes of tin over a 13.5 year life, though there were “significant opportunities” to extend this, Steel said. The company anticipates spending US$208m in bringing this production on line.
Steel said: “First Tin’s updated feasibility study on the Taronga tin project demonstrates a robust project for this critical mineral. The next major milestone will be the grant of its operating licence which First Tin hope to receive by the year end.”
Frist Tin accounted for 3.4% of BSRT at the end of August, a stake worth £6.5m.
Our view
Richard Williams, senior analyst at QuotedData, said: “BSRT’s strategy of backing development-stage mining assets, where significant value can be unlocked as projects are de-risked, is clearly illustrated here. The National Wealth Fund financing removes a major hurdle for Tungsten West’s Hemerdon project, demonstrating how a key development milestone can translate into a meaningful NAV uplift.”
