Baker Steel Resources Trust (BSRT) has seen its discount widen to 33% as its shares lag a portfolio surging in the commodity boom and benefiting from last month’s rally in Tungsten West.

The £102m investment company managed by Trevor Steel of Baker Steel Capital Managers saw net asset value (NAV) jump 11.9% to £162m last month with NAV per share rising 16.2p to 152.2p at 31 January following strong price rises in metals.

BSRT shares responded this morning with a 6.8% or 6.5p rise to 102p, widening the gap between their price, which at yesterday’s close had advanced 69% over one year, and the NAV which rose 53% over 12 months.

Gold and silver pullback an “opportunity”

Steel said that despite a sharp correction at the end of January, gold and silver ended up 13% and 19% higher in dollar terms.

After surging more than 64% last year, gold peaked at an all-time high of $5,994.82 on 29 January before plummeting more than 9% following the nomination of Kevin Warsh as Federal Reserve chair but has stabilised at around $4,907. Silver has been similarly volatile. 

Although they had been significantly higher during the month, BSRT’s holdings in precious metals miners Silver X, Caledonia and Metals Exploration were still up 8%, 5% and 1% respectively, he said, accounting for 6.8%, 2.5% and 4.2% of the fund.

“The parabolic rise in gold and silver prices could not continue forever and they are due a period of consolidation. We expect the precious metal prices to remain volatile in the short term, but the recent pullback may present a window of opportunity for long-term investors seeking wealth protection to build positions,” said Steel.  

The three largest contributors to BSRT’s performance last month were Canada’s Blue Moon Metals, now a 9.5% holding, on the back of 5% higher copper prices and the commencement of trading on Nasdaq exchange in the US.

First Tin, a 5.1% London-listed holding operating in Australia and Germany, also rallied as tin prices soared 25%.

Tungsten West takes off

Steel was particularly pleased at the 73% leap last month in Tungsten West (TUN), in which BSRT owns 8.5%, a 13.3% weighting in the fund, its third largest.

Alongside Lansdowne Partners and another strategic investor, BSRT is supporting a £43m fund raise launched yesterday at 18p per share to fund the $93m (£68.5m) cost of restarting its Hemerdon tungsten and tin mine in south Devon. This included an over-subscribed retail offer that raised £3m from private investors.  

From 3p a year ago the shares have shot up 867% to stand at 29p. They have leaped 155% from 11.3p at the start of this year, valuing the company at £225m.

Since it released its updated positive feasibility study last August, the price of tungsten, a hard, dense and corrosion resistant metal used in high-tech industries, had risen by over 200%, and tin prices by 70%, further enhancing prospects for a mine expected to be open for 40 years.

“It is pleasing to see that our positive outlook on tungsten and our persistence in supporting Tungsten West, is finally being rewarded by the performance of its shares as it moves towards re-commencing production,” the manager said.