Baker Steel Resources Trust Ltd Acquisition of Gross Revenue Royalty (7211O)
February 01 2019 - 2:00AM
UK Regulatory
TIDMBSRT
RNS Number : 7211O
Baker Steel Resources Trust Ltd
01 February 2019
BAKER STEEL RESOURCES TRUST LIMITED
(Incorporated in Guernsey with registered number 51576 under the
provisions of The Companies (Guernsey) Law, 2008 as amended)
1 February 2019
Acquisition of 0.75% Gross Revenue Royalty ("GRR") and option to
acquire an additional 0.25% GRR (the "Royalties") on the
metallurgical coal assets of Futura Resources Limited ("Futura") in
Queensland, Australia
Baker Steel Resources Trust Limited (the "Company") is pleased
to announce the acquisition of a 0.75% GRR over the future
production of coal from the Wilton and Fairhill properties in
Queensland, Australia for A$6 million, including the option to
acquire an additional 0.25% GRR for a further A$2 million,
exercisable by the Company at any time up to 45 days following the
production of 2 million tonnes of saleable coal from the
properties.
The Wilton and Fairhill properties subject to the Royalties
contain significant JORC resources of 2.6 billion tonnes of coal,
of which 738 million tonnes are less than 100m below surface.
Production from Wilton is expected to commence mid-2019, with first
royalty payments made to the Company on a quarterly basis
thereafter. Fairhill production is scheduled to commence in 2020
and then aggregate coal production will ramp-up to a targeted
sustainable level of 2.5milliontonnes of coal per annum of saleable
processed coal by 2021/2 for at least 25 years.
At consensus long term average prices for metallurgical and
thermal coal, the Royalties (assuming the option is exercised and
therefore a 1% GRR) are anticipated to generate around A$3.5m per
year for the Company before tax.
The Wilton and Fairhill properties are 100% owned by Futura, and
the high quality metallurgical and thermal coal produced is planned
to be processed at the nearby Gregory Crinum coal washplant which
is in the process of being acquired by Sojitz from the BHP
Mitsubishi Alliance, before being transported by existing rail
infrastructure to the Queensland coast and the export markets.
The shallow open-pittable nature of the deposits supports low
operating costs, with the projects expected to be in the lowest
quartile of global metallurgical coal operating costs and therefore
sustainable through any future cyclical downturn in coking coal
prices. The markets for both metallurgical and thermal coal have
been well above consensus long term average prices in recent times.
Whilst in the medium to long term the decarbonisation trend may
curb thermal coal demand, metallurgical coal is an essential
component of steel making and long-term fundamentals appear
supportive for demand and pricing. Around 60% of the coal sold by
tonnage will be for the metallurgical market and 40% for the
thermal market. Metallurgical coal sales are anticipated to
represent around 75% of revenues, given the typical price premium
for metallurgical coal.
In December 2017 the Company invested A$10m in Futura via a
convertible loan note (representing 12.5% NAV at 31 December 2018),
to finance the preparatory works for production from the Wilton and
Fairhill properties. Good progress has been made, and discussions
are well advanced with lenders for the finance to bring the
properties into production.
The Company's acquisition of the Royalties is in line with its
strategy to add attractive investments to its portfolio which can
also generate meaningful income supportive of the returns policy to
shareholders and is the second significant royalty asset to be
acquired by the Company after the Net Smelter Royalty on the
Prognoz silver asset held through Polar Acquisition Limited.
Pro-forma 31 December 2018, the initial Futura Royalty holding
would represent 4.9% of NAV.
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 Johnstone
Trevor 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.
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END
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