Baker Steel Resources Trust : 2022 June Interim Accounts Unaudited

BAKER STEEL RESOURCES TRUST LIMITED

Half-Yearly Report and Unaudited Condensed Interim Financial Statements

For the period from 1 January 2022 to 30 June 2022

Baker Steel Resources Trust Limited (the "Company") is a closed-ended investment company with limited liability incorporated on 9 March 2010 in Guernsey under The Companies (Guernsey) Law, 2008 with registration number 51576.

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BAKER STEEL RESOURCES TRUST LIMITED

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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 2022 to 30 June 2022

During the first six months of 2022, the Company's unaudited net asset value per share fell 18.3% to 80.4 pence per share, and the share price fell 12.67% to 65.5 pence per share. The first half of the year was a difficult one for precious metals mining shares which were weaker in line with a decline in the prices of gold and silver as well as a very bearish sentiment in general markets. The FT Gold Mines Index was off 11.6%, while the FTSE 250 declined by 20.50%. Other mining sectors were mixed as represented by the EMIX Global Mining Index which was up 1.2% in Sterling terms.

Commodity prices were particularly volatile during the period, as Covid continued to affect demand from the key market of China where the draconian policy of zero-tolerance significantly disrupted industry. Additionally, the Russian invasion of Ukraine sent oil and energy prices spiralling. Such a background has left market participants trying to evaluate how long the current high level of inflation will continue into the future or whether these economic shocks and rising interest rates will trigger a global recession and potentially deflation. However, in the short term at least, one result has been increased wage demands from workers seeking to keep up with the cost of living.

The markets for metals associated with electric vehicles, such as Copper, Cobalt, Nickel, Aluminum and Tin, were extremely volatile reaching all-time highs in some cases by March and then falling back to more normal levels by the summer. For example, tin, one of the key metals in the move towards electrification, reached a price of US$58,000 /tonne in March and had fallen to US$26,774/tonne three months later. Moves in some metal prices such as copper have been exacerbated by reversals in financial flows into the various paper instruments available to track the physical metals.

Historically inflation has been positive for precious metals and commodities, at least in nominal terms since they are real assets, but in the short-term markets have been more concerned about the implications for demand. Mining equities have clearly been affected by this background, with lower commodity prices hitting revenues whilst the increased cost of energy and numerous other inputs is severely impacting margins. Development companies such as the those in which your Company principally invests have been particularly impacted by this as they also have to contend with higher capital costs of construction and a less conducive environment for raising capital in which investors have decidedly moved into "risk off" mode.

The increase in energy prices was the main reason given by Tungsten West PLC when its board decided to delay the redevelopment of its Hemerdon mine in Devon. It has since announced a revised plan reconfiguring its operations so that it is much less energy intensive. It also continues to examine options for adding either solar or wind power which could further lower energy costs. The market reacted extremely badly to the initial news on the pause in development, falling by some 66% to almost 20 pence per share from its Initial Public Offering ("IPO") price of 60 pence per share, before recovering to the current price of around 30 pence per share on the announcement of the revised plan. Although this has certainly been disappointing, it should be noted that your Company's acquisition price is approximately 20 pence per share. The lock-up on the Company's shares in Tungsten West falls away in October 2022 and although we have no immediate plans to sell as we continue to believe the mine can be successful, it means the discount which we currently apply to the market price will also fall away.

In April 2022 First Tin PLC completed a successful IPO, raising £20 million at a price of 30 pence per share. Importantly, First Tin has raised the necessary funds it requires to undertake feasibility studies on both its Tellerhäuser tin project in Germany and the Taronga tin project in Australia (which it acquired at the same time as the IPO). The two feasibility studies are targeted to be completed mid-2023, shortly after the one-yearlock-up on the Company's shares will end and the ideal time to evaluate the investment in First Tin. Post the IPO, First Tin's share price has been hit by the sharp fall in the tin price, closing at 15.5p at 30 June 2022, However, the IPO financing significantly de-risks the Company's investment which it acquired at approximately 8 pence per share on conversion of its convertible loan in 2021.

After the disappointment of having to withdraw from the cash sale of Bilboes Gold Ltd during 2021 owing to unacceptable warranty requirements, we are pleased to have recently come to an agreement with AIM listed gold producer Caledonia Mining for the sale of Bilboes for a mixture of equity and a royalty stream. Bilboes has been in discussions with Caledonia on and off for over five years. The potential synergies of a combination of the two companies have always been recognised but it has been a matter of negotiating a transaction acceptable to both parties. Being part of a larger cash generative group will make the financing of the Bilboes' gold project more achievable, and Caledonia's technical team has demonstrated its ability to operate successfully in Zimbabwe having recently increased the production capacity at its Blanket mine from 50,000 ounces to 80,000 ounces of gold per annum. The acquisition of Bilboes will be transformative for Caledonia with a clear path to becoming a 250,000 ounce per annum gold producer and with the potential for a significant re-rating of its shares. The transaction is subject to a number of conditions precedent, in particular Zimbabwean Government approvals, which are expected to be satisfied before the end of this year.

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