Global Resourc Investm Tr : GRIT Align Research Note

Global Resources Investment Trust -

Min Price Target 20p 27th December2016

Unique opportunity to purchase both a world class Bauxite prospect and Siberian Gold & Iron Ore mining opportunity for effective negative value.

At the current price of 6.75p, shares in Global Resources Investment Trust offer a rare opportunity to purchase large stakes in one of the largest Bauxite reserves in the world and a highly prospective Russian gold miner for, in effect, negative value. As the stakes in Anglo African Minerals (AAM) and Siberian Goldfields move towards anticipated liquidity events during 2017 we expect a sharp re-rating in the market's current discount to NAV.

CONVICTION BUY

Key data

EPIC GRIT

Share price 6.75p

A resumption in risk appetite to fund attractive mining prospects

With the investor sentiment cycle in commodity stocks moving resolutely

52 week high/low

9.89p/1.66p

into the bull market phase during 2016, viable and highly prospective

mining projects are again attracting capital and JV structures. GRIT holds large stakes in two such prospects - AAM & Siberian Goldfields.

Current quoted portfolio value alone (net of liabilities) in excess of the present stock price

8

7

6

The residual portfolio (ex. AAM & Siberian Goldfields) of GRIT holdings plus net cash and minus the repayment of the entire remaining CULS is in itself in excess of the current stock price of 6.75p - being equivalent to 8.4p alone.

Listing Full List

Shares in issue* 41,970,012 Market Cap* £2.83m Sector Investment

Pence

Global Resources Investments Trust PLC

Ord

9

9

GRIT

8

12 month share price chart

5

5

4

4

7

6

Siberian Goldfields and Anglo African Minerals stakes "in for free"

With a large minority stake in AAM and preferred capital structure positioning in Siberian Goldfields with the option to convert into equity in this case on a listing, the stock price offers to investors the opportunity to position for liquidity events in these two companies for free.

3

Volume (Daily) - th's

2000

2/11/15 Dec '16 Feb Mar Apr May Jun Jul Aug Sep

www.sharescope.co.uk

Analyst details

Mark Parfitt

3

2000

28/10/16

Chart (c) ShareScope

markparfitt@alignresearch.co.uk

Source: Align Research

* NAV as at 27 Dec 2016

This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.

IMPORTANT: GRIT is a research client of Align Research. Align Research holds an interest in the shares of GRIT. A Director of Align Research holds an interest in GRIT. For full disclaimer information please refer to the last page of this document.

* Adjusted for issue of 2m new shares

The History of GRIT

Global Resources Investment Trust (GRIT) was launched in March 2014, and is a unique financial structure borne of the dysfunctional capital markets in relation to mining projects around the world at that time. As the proxy for global commodities markets (the Reuters CRB index) illustrates below, after the rip roaring bull market which was set in motion from the ashes of the 2008/09 Great Financial Crisis, the commodities plane entered one of the severest bear markets on record in early 2012.

Reuters CRB index chart, January 2012 to present. Source: Reuters

For many junior miners (or those at the nascent stage of development), during the period between 2012 & 2015 raising capital to advance their projects was all but impossible. Enter GRIT and the Company's innovative stock swap mechanism.

The structure of GRIT was that for those resource companies looking to raise capital a diversified opportunity set was identified amongst these companies and a new company - what is GRIT - was created. The constituent companies then swapped equity in their companies for a stake in the GRIT entity. The mechanics of the company was effectively a "deferred" capital raising for the participating companies where each company's paper was swapped for GRIT paper. The expectation at the time was that the bear market was coming to an end and that the listed vehicle of GRIT would provide a secondary market exit for those companies wishing to convert into cash.

As we all now know with the benefit of hindsight, and as the chart above pays testimony to, the bear market was, sadly, only just getting started and indeed the commodities markets, in aggregate as measured by the CRB index, proceeded to promptly to halve again from the point of launch of GRIT. Such was the severity of this bear market that even goliaths like Anglo American & Glencore fell by near 90% from their former peaks.

As we moved through 2015 into 2016, many of the constituent companies, desperate for cash, became de facto forced sellers of GRIT paper simply to keep their projects alive. In January 2016 sentiment in commodity stocks and forced selling of GRIT stock had reached such an extreme that the discount to NAV was in excess of 90% - one of the largest ever seen for an investment trust.

Transformation of fortunes through two major quote stake sales during summer 2016

At the beginning of 2016, such was the depreciation of many of the portfolio companies and the consequent aggregate NAV reduction that the company was in default in relation to the covenants that had been set on the Convertible Unsecured Loan Stock (CULS) that GRIT had issued at launch of some £5m. This forced the fund managers to take drastic action to address this with, in the first instance a proposed capital raising with Prime Star Energy of the UAE and then, latterly, another proposed fund raising at 5p per share. Thankfully for existing shareholders, material rallies in some of the underlying companies (as well as pressure from large stakeholders) transformed GRIT's position and allowed them to exit NuLegacy Gold and also position for the realization of the Merrex Gold position. The company now has the liquidity to repay the entire outstanding CULS in full without the need for the consequent material dilution to existing shareholders. This was the catalyst that has transformed the outlook for shareholders.

Sterling depreciation against dollar has provided a tail wind for the portfolio value

A second stroke of luck for shareholders has been the material depreciation seen in sterling since the shock vote to exit the EU. Given that the majority of the company's quoted portfolio holdings are listed in either the US or Canada, the depreciation of near 20% against the US & Canadian dollars has been another boon for shareholders and management have now hedged a majority of the company's currency exposure in locking in these gains and which we feel is a sound approach.

Re-alignment of RDP Fund Management through stock vest levels illustrates their faith in the "new" GRIT portfolio.

For shareholders, the real positive we believe going forward (aside from the potential liquidity events in AAM and Siberian Goldfields) is the complete alignment and incentivisation of fund managers RDP with GRIT holders. The proposed circular of late December sets out the cancellation of the current fund management contract in exchange for the issuing of 2m shares in GRIT (which, we point out, is for a lesser immediate monetary value than the termination monies that would have been due). More importantly however are the stock price targets for the vesting of a further 6m shares - being 14, 16 and 18p respectively and with minimum 6 month lock-ins. From extensive conversations with RDP and per the analysis on AAM and Siberian Goldfields in the second part of this note, it is apparent that RDP expect to hit their final vest level of 18p.

The new remuneration structure in effect has GRIT operate like a hedge fund where up to approx 20% of the final realisation proceeds from the constituent companies goes to RDP if they are successful in narrowing the discount in part through their input into the 2 primary unquoted assets of AAM and Siberian Goldfields. Existing shareholders faced with a sub 2p stock price earlier this year will no doubt be pleased in the ultimate event of a distribution of cash that is north of 18p per share (the level required for the full vest to RDP).