Baker Steel Resources Trust Ltd Notice of EGM (5248J)
18 December 2015 - 6:04PM
UK Regulatory
TIDMBSRT
RNS Number : 5248J
Baker Steel Resources Trust Ltd
18 December 2015
BAKER STEEL RESOURCES TRUST LIMITED
(Incorporated in Guernsey with registered number 51576 under the
provisions of The Companies (Guernsey) Law, 2008 as amended)
Proposed amendment of the Company's investment policy
Adoption of new Articles of Incorporation
Temporary Suspension of Discount Management Policy
Notice of Extraordinary General Meeting
Introduction
The Board today announces that, following consultation with a
number of the Company's largest Shareholders, it is seeking
approval from Shareholders for an amendment to the Company's
investment policy (the Investment Policy Proposal). The amendment,
if approved, will enable the Company to increase its existing
investment in Polar Silver Resources Limited and/or any company
within its group (the Polar Silver Group) so that such investment
may represent up to 35 per cent. of the value of the Company's
gross assets at the time of the relevant transaction.
As the Investment Policy Proposal involves a material amendment
to the Company's existing investment policy, the approval of the
holders of Ordinary Shares is required in accordance with the
Listing Rules and the Investment Policy Proposal is therefore
conditional on the passing of the Investment Policy Resolution,
which will be proposed at the Extraordinary General Meeting of the
Company as an ordinary resolution.
Separately, the Company's Existing Articles provide that a
majority of the Directors shall be resident for tax purposes
outside the United Kingdom and if as a result of the death or
resignation of a Director, such majority no longer exists, one or
more Directors who are resident in the United Kingdom must resign
in order to restore such majority.
As announced by the Board on 19 October 2015, Mr Edward Flood,
one of the Directors sadly passed away. As a result and following a
recent change in UK tax legislation which for some UK tax purposes
removes the need for non-UK alternative investment funds, such as
the Company, to appoint local directors and hold their Board
meetings outside the UK, the Board believes that it is appropriate
for the Existing Articles to be amended to remove these
requirements in order to provide the Company with additional
flexibility with regard to the composition of the Board. A special
resolution will therefore be proposed at the Extraordinary General
Meeting to adopt new Articles of Incorporation which will not
include any of the existing restrictions relating to UK resident
directors (the New Articles Proposal).
The Investment Policy Proposal and the New Articles Proposal are
not inter-conditional.
Background to and reasons for the Investment Policy Proposal
Following consultation with a number of the Company's largest
Shareholders, the Board is seeking approval from the holders of
Ordinary Shares to amend the Company's investment policy in order
to enable the Company to increase its existing investment in the
Polar Silver Group so that such investment may represent up to 35
per cent. of the value of the Company's gross assets at the time of
the relevant transaction.
As at 30 November 2015, the Company had net assets of GBP45.7
million and a market capitalisation of approximately GBP21 million.
The Company is fully invested with the top 10 investments
representing approximately 96 per cent. of the Portfolio by
value:
Asset Sector Location % of Net Asset
Value
--- ----------------------- ----------------- -------------- ---------------
Polar Silver Resources
1 Limited Silver Russia 21.5
--- ----------------------- ----------------- -------------- ---------------
Global Oil Shale Group Australia
2 plc Oil Shale/Cement and Morocco 18.1
--- ----------------------- ----------------- -------------- ---------------
Black Pearl Limited
3 Partnership Iron Ore Indonesia 16.1
--- ----------------------- ----------------- -------------- ---------------
4 Bilboes Gold Limited Gold Zimbabwe 10.6
--- ----------------------- ----------------- -------------- ---------------
Metals Exploration
5 plc Gold Philippines 8.9
--- ----------------------- ----------------- -------------- ---------------
Gobi Coal & Energy
6 Limited Coking Coal Mongolia 6.2
--- ----------------------- ----------------- -------------- ---------------
Copper, Zinc, Democratic
Platinum Group Republic of
Metals and Congo and
7 Ivanhoe Mines Limited Nickel South Africa 5.0
--- ----------------------- ----------------- -------------- ---------------
Ironstone Resources
8 Limited Iron Ore Canada 4.3
--- ----------------------- ----------------- -------------- ---------------
China Polymetallic Silver, Lead
9 Mining Limited and Zinc China 2.9
--- ----------------------- ----------------- -------------- ---------------
Archipelago Metals
10 Limited Chrome Vietnam 2.3
--- ----------------------- ----------------- -------------- ---------------
Other Investments 3.0
--- ----------------------- ----------------- -------------- ---------------
Net Cash, Equivalents
and Accruals 1.1
--- ----------------------- ----------------- -------------- ---------------
The Company's largest investment is Polar Silver Resources
Limited (Polar Silver) which is a private limited company
incorporated in the British Virgin Islands that owns 100 per cent.
of ZAO Argentum (Argentum), which is incorporated in Russia and in
turn holds a 50 per cent. indirect interest in the Prognoz silver
project, 444km north of Yakutsk in Russia (the Prognoz Asset). The
Company's investment in the Polar Silver Group is in the form of
shares in Polar Silver (the Polar Silver Shares), and loan notes in
Argentum and Polar Silver (both of which are convertible into Polar
Silver Shares). The Company currently owns 27.25 per cent. of the
equity of Polar Silver and has lent US$14.835m in aggregate to
Polar Silver and Argentum. The Company's Investment Manager, Baker
Steel Capital Managers LLP, has advised the Board that there is a
disagreement as to the strategy to develop the Prognoz Asset
between one of the other major shareholders of Polar Silver (the
Polar Shareholder) and the holder of the other 50 per cent.
interest in the Prognoz Asset (the Prognoz Shareholder).
In order to remove the uncertainty and risk which this
disagreement creates, the Investment Manager is proposing that the
Company increases its interest in Polar Silver so that it can
achieve a majority control position and undertake further work on
the Prognoz Asset so that it can be developed for the benefit of
the Shareholders. The effect of this increased interest in Polar
Silver, if completed, would be to increase the percentage of the
value of the Portfolio represented by the Company's investment in
the Polar Silver Group from approximately 21 per cent. to
approximately 28 per cent. (depending on the value of the Portfolio
at the time and final terms of the proposed additional investment
in Polar Silver).
The acquisition of the increased interest in Polar Silver would
be made at a valuation which is at, or slightly above, the
Company's current carrying value and therefore the acquisition is
expected to have a minimal effect upon the Net Asset Value of the
Company in the short term. This 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 Company in the medium to longer term.
The Board, as advised by the Investment Manager, believes that
the Prognoz Asset is currently under-developed as a result of the
disagreement between the Polar Shareholder and the Prognoz
Shareholder and that the increase of the Company's indirect
interest in the Prognoz Asset would enable the Company to progress
the development of the Prognoz Asset and unlock significant value,
whilst at the same time mitigating the risk to the value of its
current investment associated with a protracted period of on-going
disagreement between the Polar Shareholder and the Prognoz
Shareholder. In common with mining assets generally, the Prognoz
Asset is dependent on obtaining and maintaining appropriate
governmental licences. A renewal of the terms of the Prognoz
Asset's current mining licence is required by 31 December 2016. The
terms of this mining licence were successfully renewed and extended
by the owners of the Prognoz Asset in October 2013 and it is
expected that another renewal and extension will be approved
provided that a sufficient degree of technical work has been
undertaken. However, the rate of progress of work on the Prognoz
Asset has been hampered by the disagreement between the
shareholders, and there is a risk that unless technical work is
resumed, the relevant Russian governmental authorities will not
grant another extension of this licence, which could have a
material and adverse effect on the value of the Company's
investment in the Polar Silver Group.
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