Baker Steel Resources Trust (BSRT) has announced that Futura Resources, one of its key unlisted holdings, has secured a US$15m strategic loan from Abu Dhabi-based International Resources Holdings (IRH), a vertically integrated mining investment group. The loan agreement completed today (9 May 2025), with BSRT having helped facilitate the deal via a A$1.4m bridging loan provided in April.

As part of a potential wider transaction, BSRT and other Futura shareholders – together representing more than 50.1% of Futura’s fully diluted share capital – have granted IRH an option to acquire their shares at A$3.15 per share within the next nine months. If exercised in full, the deal would imply an enterprise value of around A$250m for Futura. This compares favourably to BSRT’s current carrying value of A$2.21 per share and its original acquisition cost of A$1.00. The company also retains a 1.5% gross revenue royalty over future production from Futura’s mines, unaffected by the transaction.

Futura has made significant operational strides in the past 18 months. Following a A$30m capital raise in late 2023, the Wilton open pit mine in Queensland commenced production in February 2024 and reached full planned ROM production rates of 80,000 tonnes per month by the third quarter. A second site, the Fairhill mine, has been funded through a US$24m offtake facility arranged in mid-2024. Fairhill produced its first coal in April 2025, with initial deliveries to the Gregory Crinum wash plant taking place this month. Combined ROM production across both sites is expected to reach 2.1Mt in 2025, growing to 4Mtpa by 2030.

Despite these operational milestones, market conditions remain challenging. A sharp decline in coking coal prices – from US$320/t at the end of 2023 to recent lows around US$170/t – has put pressure on producers across the metallurgical coal sector, including Futura. Additional working capital has therefore been sought to support the company through the ramp-up phase at Fairhill.

Futura management continues to view current market weakness as temporary, citing medium-term supply constraints and strong expected demand growth – particularly from India – as reasons for long-term optimism.

BSRT has not revalued its stake in Futura pending a binding offer from IRH. A further review is expected at 30 June 2025, in line with the trust’s valuation policy for unlisted holdings.

Commenting on the transaction, Trevor Steel, Chief Investment Officer of Baker Steel Capital Managers LLP, said: “Whilst it is uncertain at this stage as to whether IRH will exercise their option to acquire the Company’s shares in Futura, we are pleased to note the high level of interest in consolidation of the coking coal sector in Australia, in which Futura can potentially participate. This underlines the potential for your Company to realise attractive returns from this asset.”

[QD comment MR: This update highlights a potentially significant value realisation opportunity for BSRT through its investment in Futura Resources. The A$3.15 per share option price suggests there could be a meaningful uplift on both the current carrying value and the original acquisition cost for BSRT, if Futura continues to make progress and IRH exercises its option. Regardless, BSRT will continue to benefit from its Futura royalty (1.5% gross revenue), assuming that Futura continues to operate, and this should grow assuming production expands to capacity at the Fairhill mine.

That said, market headwinds in the coking coal sector are clearly a concern, but Futura’s operational progress and the interest from a strategic investor like IRH suggest that the asset could be well positioned for longer-term success if pricing improves, although the IRH option inevitably places a cap on the potential upside for BSRT.]