Edison issues update on Baker Steel Resources Trust (BSRT): Futura Resources financing is a major milestone.

London, UK, 21 September 2023

Edison issues update on Baker Steel Resources Trust (BSRT): Futura Resources financing is a major milestone.

Baker Steel Resources Trust (BSRT) announced that Futura Resources (its second-largest holding, making up 25.3% of end-August 2023 NAV) closed a c A$26.2m funding round (A$21.2m convertible note and A$5m in-kind commitments from contractors and suppliers). This should fully fund the advancement of the Wilton coking coal mine to production. We see it as a major milestone and possibly also a considerable trigger for BSRT’s year-end NAV uplift. We note Futura’s high royalty and dividend income potential once in full production, possibly at a high single- to low double-digit yield on BSRT’s share price at its current c 47% discount to NAV.

Futura (which owns the Wilton and Fairhill coking coal mines) has access to the nearby Gregory Crinum site for its coal processing and associated handling infrastructure (secured by 15-year binding agreements), and to the existing local port and rail infrastructure. Given this and the open-pit nature of its operations, both projects can be brought into production quickly, within three months of securing funding (with a production rate of 1m tonnes pa possible within approximately six months). Wilton should therefore be in or close to production at the time of BSRT’s year-end portfolio valuation review. BSRT expects that Fairhill can be advanced to production based on cash generated by the Wilton mine within c 24 months. However, Futura may accelerate it by a new fund-raising (most likely debt) once Wilton delivers on the expectations in terms of output quality. BSRT highlighted that A$50m is required to bring both Wilton and Futura to production (A$25m for each), and Futura left the convertible offer open for a short period to allow for potential further subscriptions, which could bring the total offer to up to A$30m.  

  
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