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Baker Steel hopeful of announcing major transaction on Bilboes before the end of the year

The Bilboes project has several million ounces of gold to its name

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Baker Steel Resources Trust Ltd (LON:BRST) recently put out an update which showed that the overall net asset value per share of the company increased by 1.5% during the course of October, to 76.2p.

The value derives from a diverse portfolio of assets that ranges from gold and silver in Russia to coal in Australia, and from cement in North Africa, to tungsten in the UK.

But as at 30 October 2020, the company’s largest asset as a percentage of NAV was the Bilboes gold project in Zimbabwe.

Allowing that total net assets run to about £80mln, the 20.8% that’s accounted for by Bilboes nets out at around £16mln.

That’s a tidy sum for a Zimbabwean gold asset that to date has flown under the radars of most investors.

But it’s more than supported, argues Baker Steel’s Francis Johnstone, by the quality of the project.

At around 170,000 ounces per year, Bilboes rings in as larger than average, certainly in terms of anything a junior miner might attempt. Its resource base runs up at the five million ounce mark, and it should be easy to mine.

“It’s a nice project,” says Johnstone.

“It’s open pit. It’s got a good production rate, and the government is very keen to see it happen.”

Zimbabwe has its challenges to be sure, but Baker Steel is partnered by local interests at Bilboes, and the idea that foreign investors are financing the success of locals makes the arrangement attractive from all sides.

Having said all that though, Baker Steel has made it be known that it would be willing to undertake a transaction on Bilboes, partly because there are gains to crystallise, but more significantly to help take it on towards the next stage of financing and getting it into production.

“We went about a formal process of either selling the whole thing, or looking for a partner to come in,” says Johnstone.

“We have a range of options that are being handled by Hannams. We have one of the best datarooms I’ve ever seen.”

And, with the gold price riding high, there’s certainly been interest.

“There are three very serious parties that we’re talking to,” says Johnstone. “I would hope that we would be able to make an announcement before the end of the year.”

What might such a deal look like? The answer to that question is hard to know at this stage, but for context it’s worth taking a look at the ongoing tussle between Nordgold and Shandong over Cardinal Resources (ASX:CDV). Cardinal’s asset, albeit in Ghana and not Zimbabwe, is of a similar size, and is at a similar stage.

If there does end up being some kind of bidding war for Bilboes, the hope has to be that it doesn’t get as ugly as the Cardinal tussle does. But what the Cardinal tussle does make clear is that big projects like Bilboes are very much in demand.

 

Quick facts: Baker Steel Resources Trust Ltd

Price: 82 GBX

LSE:BSRT
Market: LSE
Market Cap: £87.3 m
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Baker Steel Resources Trust - Mining Capital May 2019

Baker Steel Resources Trust PLC's (LON:BSRT) Trevor Steel presents to investors at the May Mining Capital Conference in London. For more information visit: www.bakersteelcap.com/en/baker-steel-funds/

on 9/5/19

3 min read