Baker Steel Resources Trust : 2021 June Interim Accounts Unaudited

BAKER STEEL RESOURCES TRUST LIMITED

BAKER STEEL RESOURCES TRUST LIMITED

• The Investment Manager was authorised as an Alternative Investment Fund Manager ("AIFM") for the purpose of the Alternative Investment Fund Managers Directive ("AIFMD") on 22 July 2014.

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BAKER STEEL RESOURCES TRUST LIMITED

CHAIRMAN'S STATEMENT

For the period from 1 January 2021 to 30 June 2021

During the first six months of 2021, the unaudited net asset value per share rose 2.7% to 98.8 pence per share with the share price rising 27.7% to 94.5 pence per share. The market for mining shares was mixed with precious metals shares weaker in line with the reduction in the prices of gold and silver after their strong performances in 2020, whilst base metal and iron ore companies continued to be strong due to robust demand for their products. The EMIX Global Mining Index in Sterling terms rose 11.4% over the same period.

In the past 6 months markets have continued to be volatile as investors struggle to balance the deflationary pressure from the Covid-19 pandemic and the inflationary pressure from government stimulus programmes coupled with historically low interest rates. The Company's Investment Manager believes that on balance inflation is likely to be the winner of this battle which will be good for precious metals especially if negative real interest rates persist. It is clear that one of the main beneficiaries of these stimulus programmes and the recovery of the global economy will be commodities, particularly those metals required for improving infrastructure, especially related to the energy transition as countries look to "build back better". Your Company is well positioned for these developments with a material exposure to copper, silver and tin.

It was a frustrating half for the Company's largest holding, Bilboes Gold Ltd. Bilboes reached outline terms for a partial sale of the company to a large gold producer but was unable to reach a final agreement. The process is more fully described in the Investment Manager's Report but ultimately Bilboes gold mine in Zimbabwe remains a very attractive project and we are confident that its value can be realised, albeit with some delay.

There is little doubt that the sale of Bilboes was affected by the travel restrictions imposed by the Covid-19 pandemic with potential acquirors unable to visit the project and meet with management in person. With strong commodity prices over the past year, most producing companies have generated significant cash and once travel restrictions start to ease, we expect to see increased mergers and acquisition activity in the mining sector. This should help the Company to monetize some of its development projects.

COVID-19

The Company itself has been able to operate efficiently during the global lockdown with the full use of video conferencing and other electronic media. All of our major service providers have maintained normal service levels throughout. The main issue has been the Investment Manager's inability to visit potential and existing operations due to travel restrictions. Although the Investment Manager has continued to keep close contact with the management of all the Company's investments and there has not been any significant impact on any of the portfolio holdings due to Covid during 2021, it is hoped that site visits to both existing and potential new investments can resume shortly.

Outlook

While broader stock markets appear to be highly valued based on historical norms, mining share valuations have lagged considerably and look undervalued in absolute and relative terms to the general market. Some commentators are forecasting that the commodity markets are entering a new "supercycle" due to strong supply/demand dynamics. This remains to be seen but either way your Company is well positioned for either a continuation of the bull market for commodities or a period of consolidation. In the second half of the year we can look forward to potential IPO's from two of our core holdings, Tungsten West Limited in the second half of 2021 and First Tin Ltd (formerly Anglo Saxony Mining Ltd) in the first half of 2022. Although IPO's provide price discovery and a route towards liquidity, as major shareholders in both companies we can expect to be requested by the sponsoring brokers to enter into lock-ups for a period to ensure an orderly market although if there is excess demand there may be an opportunity to sell part of holdings concurrent with the IPO.

It was pleasing to see the discount between the share price and the NAV narrowing towards the end of the period albeit it has opened up again somewhat. The Investment Manager is seeing a number of interesting opportunities and once we have realised some of the latent value in the current portfolio, the Company will seek to take advantage of these ahead of a potential further increase in commodities. and possibly use its equity should the discount narrow again.

Howard Myles

Chairman

14 September 2021

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