REG-BlackRock World Mining Trust Plc: Final Results
07/03/2024 17:45
BlackRock World Mining Trust plc
LEI: LNFFPBEUZJBOSR6PW155
Annual Report and Financial Statements 31 December 2023
Performance record
As at As at
31 December 31 December
2023 2022
Net assets (£’000)¹ 1,160,051 1,299,285
Net asset value per ordinary share (NAV) (pence) 606.78 688.35
Ordinary share price (mid-market) (pence) 587.00 697.00
Reference index 2 – net total return 6,002.54 5,863.32
(Discount)/premium to net asset value 3 (3.3)% 1.3%
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For the For the
year ended year ended
31 December 31 December
2023 2022
Performance (with dividends reinvested)
Net asset value per share 3 -6.2% +17.7%
Ordinary share price 3 -10.4% +26.0%
Reference index 2 +2.4% +11.5%
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Performance since inception (with dividends reinvested)
Net asset value per share 3 +1,319.4% +1,413.6%
Ordinary share price 3 +1,365.9% +1,535.8%
Reference index 2 +1,005.2% +979.6%
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For the For the Change
year ended year ended %
31 December 31 December
2023 2022
Revenue
Net revenue profit after taxation (£’000) 64,691 76,013 -14.9
Revenue return per ordinary share (pence) 4 33.95 40.68 -16.6
--------------- --------------- ---------------
Dividends per ordinary share (pence)
– 1st interim 5.50 5.50 –
– 2nd interim 5.50 5.50 –
– 3rd interim 5.50 5.50 –
– Final 17.00 23.50 -27.7
--------------- --------------- ---------------
Total dividends paid and payable 33.50 40.00 -16.3
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1 The change in net assets reflects portfolio movements, share reissues and
dividends paid during the year.
2 MSCI ACWI Metals & Mining 30% Buffer 10/40 Index (net total return). With
effect from 31 December 2019, the reference index changed to the MSCI ACWI
Metals & Mining 30% Buffer 10/40 Index (net total return). Prior to 31
December 2019, the reference index was the EMIX Global Mining Index (net total
return). The performance returns of the reference index since inception have
been blended to reflect this change.
3 Alternative Performance Measures, see Glossary in the Annual Report and
Financial Statements.
4 Further details are given in the Glossary in the Annual Report and
Financial Statements.
Chairman’s Statement
Highlights
· NAV per share -6.2%1 (with dividends reinvested)
· Share price -10.4%1 (with dividends reinvested)
· Total dividends of 33.50p per share
Overview
After a solid year of performance in 2022, the last 12 months to 31 December
2023 have proved more difficult for the mining sector. The sector performed
strongly at the start of the financial year with mined commodity prices up
almost across the board, supported by the pace of China’s reopening
following COVID-19 and expectations for a pick-up in demand. However, the
mining sector soon pulled back as improvements in Chinese economic data were
slower than had been hoped for and, as we progressed through the year, there
were concerns about the demand outlook in major Western economies as well.
Increased geopolitical tensions in the Middle East and expectations that
higher interest rates would persist for longer than initially anticipated also
contributed to a challenging time for the sector. As we entered the final part
of the Company’s financial year, signs of moderating inflation and easing
interest rate expectations led to positive market sentiment for both the
mining sector and broader equity markets.
Performance
Over the twelve months to 31 December 2023, the Company’s net asset value
per share (NAV) returned -6.2%1 and the share price returned -10.4%1. In
comparison, over the same period, the Company’s reference index, the MSCI
ACWI Metals & Mining 30% Buffer 10/40 Index (net total return), returned
+2.4%, the FTSE All-Share Index returned +7.9% and the UK Consumer Price Index
increased by 4.0%.
Our portfolio managers provide a more detailed explanation on the Company’s
performance and the factors that contributed to, or detracted from,
performance during the year in their Investment Manager’s Report that
follows. They also provide more insight into the positioning of the portfolio
and their views on the outlook for the coming year.
Revenue return and dividends
The Company’s revenue return per share for the year amounted to 33.95p, a
16.6% decrease compared with the prior year revenue return per share of
40.68p. Lower commodity prices, higher all in costs and a weakening US Dollar
(as many commodity company dividends are paid in US Dollars) contributed to
the reduction in earnings, leading to lower returns for shareholders.
During the year, three quarterly interim dividends of 5.50p per share were
paid on 5 May 2023, 6 October 2023 and 24 November 2023. The Board is
proposing a final dividend payment of 17.00p per share for the year ended 31
December 2023. This, together with the quarterly interim dividends, makes a
total of 33.50p per share (2022: 40.00p per share) representing a decrease of
16.3% on payments made in the previous financial year.
As in past years, all dividends are fully covered by income. In accordance
with the Board’s stated policy, the total dividends represent substantially
all of the year’s available income.
Subject to approval at the Annual General Meeting, the final dividend will be
paid on 14 May 2024 to shareholders on the Company’s register on 22 March
2024, the ex-dividend date being 21 March 2024. It remains the Board’s
intention to seek to distribute substantially all of the Company’s available
income along similar lines in the future.
Gearing
The Company operates a flexible gearing policy which depends on prevailing
market conditions. The Company may borrow up to 25% of the Group’s net
assets. The maximum level of gearing used during the year was 14.6% and the
level of gearing at 31 December 2023 was 11.9%. Average gearing over the year
to 31 December 2023 was 11.9%. For the calculations, please see the Glossary
in the Annual Report and Financial Statements.
Management of share rating
The Directors recognise the importance to investors that the market price of
the Company’s shares should not trade at a significant premium or discount
to the underlying NAV. Accordingly, in normal market conditions, the Board may
use the Company’s share buyback authority or alternatively re-issue shares
from treasury or issue new shares (at a premium to NAV) to ensure that the
share price is broadly in line with the underlying NAV, if it is deemed to be
in shareholders’ interests.
The Company’s shares started the year under review trading at a premium and
I am pleased to report that during the year the Company reissued 2,430,000
ordinary shares from treasury for a total gross consideration of £15,658,000,
at an average price of 644.37p per share and an average 1.4% premium to NAV.
The Company did not buy back any shares and, since the year end, no further
shares have been reissued. The discount at the year end was 3.3% and on 5
March 2024 (the latest date before approving this Annual Report) was 6.5%.
Resolutions to renew the authorities to issue and buy back shares will be put
to shareholders at the forthcoming Annual General Meeting.
Board composition
As mentioned in the Half Yearly Financial Report, the Board was delighted to
welcome Charles (Chip) Goodyear as a non-executive Director. I also advised at
that time that I would be stepping down as Chairman following the forthcoming
Annual General Meeting (AGM) and that Chip would succeed me as Chairman. It
has been a privilege to be Chairman of the Company for the past five years. I
would like to thank all shareholders for their support, as well as thanking my
Board colleagues and the team at BlackRock for making my tenure as Chairman as
rewarding and enjoyable as it has undoubtedly been. With Chip’s extensive
experience of leading mining companies, I leave the Company in the capable
hands of the Board and Investment Manager and wish it every success for the
future.
The Board commenced a search to identify a new Director in early 2024,
assisted by a third-party recruitment firm, Fletcher Jones. The successful
candidate will be appointed as a Director following the conclusion of the AGM
on 9 May 2024.
30th anniversary
In celebration of the Company’s 30th anniversary, the Board agreed to make
an annual donation of US$15,000 over three years to the Julian Baring
Scholarship Fund (the Fund). The Fund was established in 2000 in the name of
the Company’s first fund manager, Julian Baring. The advisers to the Fund,
with the support of the industry, endow annual scholarships for talented, but
financially disadvantaged, students in Africa and South America to continue
their studies and to pursue a career in the mining industry. The Fund has
assisted more than 150 individuals since inception in mining related
faculties.
Following Chip Goodyear’s appointment last August, he sought approval to
waive his rights to compensation related to his role as a Director of the
Company. This waiver was at his initiative and request. The Board discussed
the matter and decided it was appropriate to donate annually to the Fund an
amount equivalent to Chip’s Director’s fee, in addition to the US$15,000
discussed above. With our previous support at the time of the Company’s 25th
anniversary, the Fund was able to broaden its reach from Africa to include
South America. The Board receives regular updates from the Fund trustees about
students past and present and their progress and Justin Baring, the chair of
the Fund, will provide a brief introduction to shareholders at the forthcoming
AGM.
Annual General Meeting arrangements
The Company’s AGM will be held at the offices of BlackRock at 12 Throgmorton
Avenue, London EC2N 2DL on Thursday, 9 May 2024 at 11.30 a.m. Details of the
business of the meeting are set out in the Notice of Meeting on pages 156 to
159 in the Annual Report and Financial Statements. The Board very much looks
forward to meeting shareholders and answering any questions you may have on
the day.
For the benefit of shareholders who are unable to attend this year’s AGM in
person, we have arranged for the proceedings to be viewed via a webinar. You
can register to watch the AGM by scanning the QR Code inside the cover of the
Annual Report or by visiting our website at www.blackrock.com/uk/brwm and
clicking on the registration banner.
Please note that it is not possible to speak or vote at the AGM via this
medium and joining the webinar does not constitute attendance at the AGM.
Shareholders wishing to exercise their right to attend, speak and vote at the
AGM should either attend in person or exercise their right to appoint a proxy
to do so on their behalf.
Outlook
Higher interest rates and greater volatility have resulted in a high level of
uncertainty for markets and a remarkable dispersion in commodity price returns
during 2023. There has also been a challenging geopolitical backdrop with
little end in sight for the conflicts in both Eastern Europe and the Middle
East, as well as structural competition between US and China. The number of
volatile situations worldwide is the highest in decades and 2024 is set to be
the biggest election year, with more than half the world’s population
voting.
However, against this backdrop, inflationary pressures are easing in the US
and UK and inflation is expected to return towards target in 2024. Remaining
COVID-19 pandemic era supply disruptions are also fading and the Chinese
government has moved forward with a series of stimulus measures to turn round
its ailing economy which should support commodity demand. The energy
transition to a low carbon economy is also set to increase demand for
materials in the supply chain for low carbon technologies, including copper,
steel and lithium, which is a positive tailwind for selective parts of the
mining sector.
DAVID CHEYNE
Chairman
7 March 2024
1 Alternative Performance Measures. All percentages calculated in Sterling
terms with dividends reinvested. Further details of the calculation of
performance with dividends reinvested are given in the Glossary in the Annual
Report and Financial Statements.
Investment Manager’s Report
Overview
2023 was a year of huge swings in performance for the sector as a whole and
markets more broadly. While 2022 as a year finished with strong gains across
the sector but much of this came from the rally in the fourth quarter of 2022
on the expectation that the reopening of China, post its zero COVID-19 policy,
would drive further growth in 2023. Sadly, this was not to be as momentum
stalled as January ended due to the complex array of headwinds that drove
moves in 2023. Financial factors such as interest rates and inflation,
combined with lower-than-expected growth in China and geo-political events,
created uncertainty amongst investors leading to a significant dispersion in
returns.
Commodity price returns were similarly diverse across the suite. These ranged
from iron ore prices massively exceeding estimates by failing to move lower,
whilst lithium fell sharply finishing the year well below even the most
cautious of forecasts. Copper prices, despite tight market conditions, did not
react to large production downgrades and surprise disruptions. Precious metals
also moved in different directions with gold moving higher, whilst the
platinum group metals fell. Mining company share prices generally derated
during the year as investors, fearful of China demand weakness, moved out of
the sector into either higher yielding cash or to gain exposure to the
“magnificent 7” (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and
Tesla) opportunity. This left the sector trading on multi decade low
multiples, presenting an opportunity for the Company.
However, overall the year was disappointing for the Company as a number of key
holdings failed to generate returns for a variety of factors. Examples
include: First Quantum Minerals where the Panama Government enforced the
closure of the company’s largest asset due to a populist agenda; Chalice
Mining set unrealistic project parameters; weakness in lithium prices impacted
valuations of holdings in the Company, but the opposite for South Korean steel
company POSCO with shares rerated on their exposure; and mid-sized copper
growth holdings heavily derated during the year. The cumulative impact of this
caused the Company’s NAV to underperform the reference index (MSCI ACWI
Metals & Mining 30% Buffer 10/40 Index (net total return)) for only the second
time in the last 9 years.
For the year as a whole, the NAV of the Company was down by 6.2% with income
reinvested and share price total return was -10.4% as the discount widened
slightly over the year. This compares to the FTSE 100 rising by 7.7%, Consumer
Price Index (CPI) up by 4.0% and the reference index up by 2.4% (all numbers
based in Sterling terms). Despite this poor one-year performance the
Company’s track record over three and five years remains firmly intact.
Seismic shifts
2023 arrived with a huge spread of expectations. How much further would
interest rates rise? Would inflation be sticky or start to fade? Would
companies be able to manage margins? These questions were then mixed in with
slower growth, bank rescues (Silicon Valley Bank, First Republic and Credit
Suisse), conflict in the Middle East and a far slower reopening trade in
China. Given the above, it is amazing to have finished the year with such
positive returns for equity markets (S&P 500 Index up 18.6% in Sterling terms)
and without widespread recession across the world.
For the mining sector the fundamentals of the medium term have remained firmly
in place. Energy transition related commodity demand growth remains robust.
Sales of electric vehicles (EVs) broke new records in both total numbers and
market share levels. Installation of renewable power infrastructure also broke
records with huge amounts built during the year and an industry sales pipeline
for future projects as full as can be expected.
On the supply side, copper production numbers both for 2023 and beyond look to
be less than expected as mines have been unable to ramp-up on time or to
expected levels. Capital expenditure for new projects continues to exceed
expectations, making project development less likely. Metal inventories
generally declined during the year leaving them at multi year lows, again
keeping markets tight. Resource nationalism remains an ever-present threat
with risks in many countries around the world and some mines have been forced
to close, including Cobre de Panama. With supply looking increasingly price
inelastic in the near to medium term there seems little room to manoeuvre
should disruptions escalate in 2024.
Despite these supportive factors the sector was unable to generate enough
momentum to create widespread investor interest and the alternative, such as
money market deposits at 5%, captured much of the flow of savings. Mining
shares significantly underperformed the broader markets as valuations moved to
multi decade lows. This is in stark contrast to 2022 when the sector,
alongside oil, was one of the best places to be exposed.
Merger and acquisition (M&A) activity was elevated versus recent years, but
most was characterised by failing to complete. Lithium companies in Australia
were the focus of deals during the year. Despite a number of suitors being
able to announce terms the deals were eventually thwarted by domestic
interest, for example Liontown and Azure. In Canada, Teck Resources (Teck)
announced plans to separate into an energy metals company by divesting its
metallurgical coal mines. Soon after being announced, Teck received a bid from
Glencore for the whole company which was rebuffed by management. Eventually
Teck announced a joint plan to sell the coal business to Glencore for cash.
In the United States (US), Newmont Corporation agreed terms to buy Newcrest
Mining and this deal was completed in the final quarter of the year. Also, US
Steel announced terms of a deal that could see it sold to Nippon Steel if the
deal is approved by US regulators, the unions and of course shareholders.
ESG and the social license to operate
ESG (Environmental, Social and Governance) issues are highly relevant to the
mining sector and we seek to understand the ESG risks and possible related
opportunities facing companies and industries in the portfolio. As an
extractive industry, the mining sector naturally faces a number of ESG
challenges given its dependence on water, carbon emissions and geographical
location of assets. However, we consider that the sector can provide critical
infrastructure, taxes and employment to local communities, as well as
materials essential to technological development, enabling the carbon
transition through the production of the metals required for the technology
underpinning that transition.
We consider ESG insights and data, including sustainability risks, within the
total set of information in our research process and make a determination as
to the materiality of such information as part of the investment process used
to build and manage the portfolio. ESG insights are not the sole consideration
when making investment decisions but, in most cases, the Company will not
invest in companies which have high ESG risks (risks that affect a company’s
financial position or operating performance) and which have no plans to
address existing deficiencies or controversies in an appropriate way.
· We take a long-term approach, focused on engaging with portfolio company
boards and executive leadership to understand the drivers of risk and
financial value creation in companies’ business models, including material
sustainability-related risks and opportunities, as appropriate.
· There will be cases where a serious event has occurred, for example an
accident at mine site and, in that case, we will assess whether the relevant
portfolio company is taking appropriate action to resolve matters before
deciding what to do.
· There will be companies which have derated (the downward adjustment of
multiples) as a result of an adverse ESG event or generally due to poor ESG
practices where there may be opportunities to invest at a discounted price.
However, the Company will only invest in these value-based opportunities if we
are satisfied that there is real evidence that the relevant company’s
culture has changed and that better operating practices have been put in
place.
Given the activities that mining companies undertake, it is no surprise that
there are always events that unfold during any calendar year. 2023 was a year
where there were fewer events for the Company and this meant that engagement
once again focused mainly on our holdings’ approach to the energy transition
and how they plan to not only benefit from the opportunities, but also how
they are planning to decarbonise their own operations.
During the year the main areas of focus were prior ESG issues relating to Vale
and governance in relation to the board’s fiduciary responsibilities. Vale
has continued to make further progress on its journey to raise its ESG profile
following the tragic tailings related events from the last decade. The company
paid US$55.9 million in March 2023 to settle charges related to misleading
disclosures in relation to the Brumadinho dam. On the governance front,
changes have been made to the board with new international independent
directors being added. Vale also announced plans to separate its base metals
division and raised capital to support this process. Analysts from BlackRock
visited Brazil to review restoration work done around the tailings failures
and engaged with local communities impacted by these initiatives. It was
pleasing to see ESG ratings agencies reflect the work the company has done in
improved rating scores.
General price weakness
Similar to last year, average prices were generally lower across the suite
aside from gold and silver. This, however, hides the intra year volatility
which was more elevated than in recent times. For example, the price of copper
over the year was basically flat but this hides the fact that at one point it
had fallen 17% from peak to trough. This pattern played out across the metals
universe and, were it not for the year end rally, most would have finished
2023 well below levels seen at the start of the year.
Despite the overall negative tone to price moves, the standout performer was
iron ore which over the year was up by 20.3%. Even more importantly, the
average price was flat which might not sound like a win but with estimates
forecasting it to decline sharply the impact on margins of it being flat was
significant.
Commodity price moves
31 December 2023 % Change in 2023 % Change average
prices 2023 vs 2022
Commodity
Gold US$/ounce (oz) 2,065 13.8% 7.8%
Silver US$/oz 24.25 2.1% 7.3%
Platinum US$/oz 1,006 -2.4% 0.6%
Palladium US$/oz 1,119 -37.0% -36.4%
Copper US$/pound (lb) 3.84 1.2% -3.9%
Nickel US$/lb 7.43 -45.2% -17.9%
Aluminium US$/lb 1.06 -0.2% -16.6%
Zinc US$/lb 1.2 -12.1% -23.9%
Lead US$/lb 0.92 -12.9% -0.7%
Tin US$/lb 11.42 1.7% -17.3%
Baltic Freight Rate 2,094 38.2% -27.9%
West Texas Intermediate Oil (Cushing) US$/barrel 71.9 -10.4% -18.2%
Iron Ore (China 62% fines) US$/tonne 142 20.3% -0.9%
Thermal Coal US$/tonne 146.4 -62.4% -47.7%
Coking Coal US$/tonne 323.8 9.9% -19.1%
Lithium US$/lb 108.7 -43.2% -32.9%
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Sources: Datastream and Bloomberg, December 2023.
Income
As highlighted in last year’s report, income received by the Company has
exceeded expectations for several years in a row. This has been driven by
higher absolute pay out levels for ordinary dividends, a greater number of
holdings in the portfolio paying dividends, improved capital discipline by
companies and generally stronger balance sheets. Looking back, the peak seems
to have been in 2021 with last year a close second.
This year has seen income fall due to lower commodity prices and higher all in
costs reducing profitability, meaning less to return to shareholders. In
addition, as highlighted in last year’s report, companies allocated more
surplus cash to share buy backs which bodes well for the future but in the
short term further reduced dividend payments. It is noticeable just how
rapidly share counts have declined on the back of these buy backs. For
example, the shares in issue for ArcelorMittal and Glencore have declined by
8% and 5% respectively with a combined total of US$2.9 billion used to buy the
shares back.
Looking forward, we see no reason for companies not to honour their capital
allocation plans and as such with commodity prices lower than in 2023 payments
could in turn be below that of last year. However, at the time of writing, the
commodity most important for dividends, iron ore, is well in excess of market
forecasts meaning there is room for upgrades to dividend estimates.
The energy transition
As alluded to earlier, the energy transition continues to gather pace. EVs are
taking market share away from combustion engine vehicles at levels well in
excess of expectations. The roll out of renewable power projects and related
infrastructure is happening far quicker than planned. This has, in part, been
driven by a desire by European countries to diversify away from Russian
supplied fossil fuels and the fact that with fossil fuel prices so high,
renewable power is substantially more cost effective, not to mention helping
countries/companies to meet their net zero commitments.
It is clear that we remain very close to the start of the energy transition
cycle given the enormous scale of investment that is going to be needed over
the coming decades. Looking at the data for renewable power, it is
increasingly obvious how much more resource intensive it is. On top of this
there will also be commodity demand from battery storage needs and the
buildout of the hydrogen economy.
It is also essential for mining companies to embrace the need to decarbonise
their own operations as future demand is likely to seek out supply from
companies that do not just meet quality but also have green credentials. This
move from “Brown to Green” presents a range of investment opportunities
for the Company both in trying to reduce the heavy discount rates applied to
carbon intensive production techniques, as well as new technologies that could
solve some of the more damaging historical processes.
Base metals
It was a difficult year for the base metals with average prices down across
the board as concerns around global growth, higher interest rates and
China’s property sector saw significant destocking of metals which depressed
prices. With prices moving lower and costs increasing (albeit at a slower rate
than in 2022) margins for the producers also declined reducing cash generation
and dividends. Encouragingly, as we approached the end of the year,
expectations of US interest rate cuts and signs of demand stabilisation and
stimulus in China buoyed prices.
Copper, our favoured base metal, finished the year flat as macro concerns
offset improving fundamentals particularly on the supply side. Despite
headwinds from China’s property market, China’s copper demand was healthy
with apparent demand +12% year-on-year. China’s focus on “green” related
investments in renewables, EVs and the grid, offset the drag on copper demand
from the property sector.
The most interesting feature in the copper market this year has been the
escalation in copper supply disruptions as we approached the end of the year.
It was widely expected that 2024 would see notable supply growth as assets
recovered post COVID-19 and new assets such as Anglo American’s Quelleveco
mine and Teck’s Quebrada Blanca Phase 2 (QB2) project in Chile began
ramping-up. However, we now expect copper concentrate supply to be lower in
2024 versus 2023.
The most impactful supply shock is the closure of First Quantum Minerals’
Cobre Panama mine, which is now on care and maintenance. Cobre Panama has
capacity to produce about 400ktpa of copper and there is a high degree of
uncertainty when this mine will be restarted. We have also seen meaningful
production downgrades from Anglo American, which lowered its copper production
guidance by 180-210kt in 2024; Southern Copper, Vale and Rio Tinto all lowered
their copper supply forecast in 2024 and we see ramp-up risk for Teck QB2 in
2024. Given the low level of copper inventories, the lack of investment in new
mine capacity and structural operating challenges for many copper mines,
prices are poised to rebase higher once the demand outlook improves.
With the long-term fundamentals of the copper market remaining robust, in
particular copper’s role in enabling the energy transition, we continue to
remain positively exposed to copper producers within the Company. It was a
mixed performance result among the companies with strong share price
performance, including Foran Mining (0.9% of the portfolio). Foran Mining also
delivered exciting exploration results at McIlvenna Bay and its Tesla
Discovery site in Canada which has potential to increase production rates in
the future. Lundin Mining (1.2% of the portfolio) also performed well,
delivering improved operational performance and acquiring a 51% stake in the
Casserone’s copper mine in Chile. Ivanhoe Mines (1.9% of the portfolio)
continues to deliver as their Komoa-Kakula asset in the Democratic Republic of
the Congo ramps-up and they also announced exciting exploration results at
their earlier stage Western Forelands land package. The key disappointment
during the year was the performance of First Quantum Minerals (1.5% of the
portfolio) which saw its share price decline by approximately 60% as the
government of Panama requested the closure of the Cobre Panama mine.
The aluminium price finished the year flat compared with 2022. However, this
masks the 17% decline in average prices year-on-year. Aluminium prices have
declined significantly over the last two years as energy prices have fallen
which is the largest cost component of producing aluminium. China’s demand
for aluminium has been strongly boosted by its solar rollout, but so too has
its production levels which has left the Chinese market largely balanced.
Demand ex-China declined by circa 1% in 2023 largely due to inventory
de-stocking with limited new supply coming into the market ex-China. Longer
term we see upside to aluminium prices as carbon costs begin to be
incorporated into prices. The demand for “green” or “low-carbon”
aluminium continues to grow with these products sold at a premium to
traditional London Metals Exchange grade aluminium. The Company’s largest
exposure to aluminium is via Hydro (2.6% of the portfolio) which is one of the
lowest-carbon producers of aluminium by virtue of its access to hydro power in
Norway. Hydro continues to pursue its strategy of growing its low-carbon
product mix via recycling and investing into renewable energy, with the
company announcing an investment into its renewable energy company Hydro Rein
by Macquarie Asset Management which acquired a 49.9% stake for US$332 million
during the year.
The nickel market was particularly challenging in 2023 with the nickel price
finishing the year down 45% and average prices declining 18% year-on-year.
Significant growth in Indonesian nickel supply has structurally changed the
nickel market in recent years and with nickel pig iron (NPI) producers rapidly
growing production and adapting their facilities to allow the production of
nickel matte and other intermediary products. This allows them to sell into
the market for class 1 battery grade nickel which is expected to see
increasing demand alongside the growth in EVs. A key question for the nickel
market is whether or not we see differential pricing for nickel based on the
carbon intensity of production which is significant for many of the Indonesian
producers given their reliance on thermal coal. The Company has two pure play
exposures to nickel – the first Nickel Industries (0.5% of the portfolio)
today a NPI producer which is transitioning towards LME grade nickel
production which will improve earnings and margins. The second investment was
done via a “PIPE” deal in 2022 into Lifezone Metals which has traded as a
public company since the end of June 2023. Lifezone Metals, in conjunction
with BHP, owns the Kabanga project in Tanzania which is one of the world’s
largest undeveloped nickel sulphide deposits.
Bulks and steel
The iron ore market was an area of strength in 2023 with the price finishing
20% higher and average prices flat year-on-year. Given the depressed outlook
for China’s property sector, the broad expectation from commodity analysts
was for prices to decline in 2023 alongside falling steel production in China.
The iron ore market benefited from better-than-expected Chinese steel
production in 2023, rising blast furnace production at the expense of lower
scrap-fed electric arc furnace production and higher steel exports from China
which were up 40% year-on-year. With steel margins in China under pressure,
the premium for higher grade material declined. However, we remain positive on
the outlook for higher grade iron ore longer term, particularly as the steel
industry looks to reduce its carbon intensity.
The iron ore market remains highly concentrated with the four largest
producers accounting for circa 70% of the seaborne market. We have seen the
industry remain disciplined from a supply perspective with limited supply
growth from the major producers, despite strong cash generation from their
existing iron ore assets. We expect this to remain the case over the next few
years as producers continue to focus on value over volume and decarbonising
their operations.
The Company’s exposure to iron ore is primarily via the diversified majors
BHP, Vale and Rio Tinto. These companies tend to generate strong margins and
free cash flow from the iron ore businesses which underpins the attractive
dividend yield they trade on. Given better than expected iron ore prices in
2023, we see scope for dividends from the iron ore producers to surprise to
the upside. In addition, the Company has exposure to two pure play high grade
iron ore producers, Champion Iron and Labrador Iron. Champion Iron is
ramping-up its Bloom Lake operation in Canada and targeting the production of
high grade (69% Fe) iron ore which is a key component of low carbon steel
production.
During 2023 we saw notable differences in the performance of steel margins and
equity prices for each of the key steel producing regions. The US has remained
an area of strength in the global steel market, supported by higher
infrastructure and re-shoring investment, alongside supply discipline from the
producers. In Europe, steel prices and margins have been under pressure as
industrial production in areas such as Germany have remained depressed and
higher Chinese exports have weakened prices. Steel margins in China have
remained around breakeven levels for much of the year, with steel prices
largely tracking moves in its key cost inputs iron ore and coking coal. Our
expectation was for steel production in China to moderate in the second half
of 2023 in line with the government’s target of reducing steel production
year-on-year. However, this did not eventuate supporting iron ore prices.
From an equity perspective, the Asian (ex-China) steel producers outperformed
in 2023, a detraction from relative performance for the Company given its lack
of exposure. Korean listed POSCO performed strongly in 2023 on the
announcement of its battery material plans, with Japanese listed Nippon Steel
also performing well with renewed interest in Japanese listed equities. The
Company’s exposure to steel is focused on companies with a track record of
capital returns through share buybacks and dividends, as well as disciplined
growth and an industry leading approach to decarbonisation. Our preference in
the Company is to have exposure to low carbon producers such as the US
Electric Arc Furnace producers Nucor and Steel Dynamics, or to be invested in
those producers which might be carbon intensive today but have credible plans
to decarbonise their production as is the case with Arcelor Mittal.
Stronger than expected steel demand and rising blast furnace utilisation also
benefited coking coal prices which averaged US$295.5/tonne during the year.
China’s coking coal imports remained healthy with domestic supply impacted
by accidents and rising safety inspections. India, the world’s fastest
growing steel market, continued to increase its imports of coking coal and is
set to increase its coking coal demand by circa 50Mt by the end of the decade,
equivalent in size to Japan’s coking coal demand today. Combined with
limited supply growth we expect a “stronger for longer” price environment
over the medium term to persist. During the year we saw M&A in the space with
Glencore acquiring a 77% interest in Teck’s coking coal business for US$6.9
billion with the deal expected to complete in Q3 of 2024. BHP sold its
Blackwater and Daunia coking coal mines in Queensland to Whitehaven for a cash
consideration of up to US$4.1 billion. The Company’s exposure to
metallurgical coal remains in the two leading producers, BHP and Teck
Resources, which have been able to generate very strong levels of free cash
flow from their coking coal businesses to support returns to shareholders in
recent years.
After record-high thermal coal prices in 2022 following the European energy
crisis, prices declined meaningfully in 2023 but finished modestly above
market expectations. China has dominated coal demand growth in 2023 with
thermal power generation higher in 2023, with both coal imports and domestic
coal production in China higher year-on-year. This higher level of demand was
largely met by rising Indonesian coal exports, along with higher Australian
supply which has been hampered in recent years by heavy rainfall. We have seen
less supply disruption in Australia during 2023 which has helped stabilise
demand.
The Company’s thermal coal exposure is via our 8.3% position in Glencore
which has used elevated thermal coal prices in recent years to deleverage the
business and buyback shares. During the year, Glencore made a proposal to Teck
to merge their two businesses and subsequently demerger the combined coal
business to create two separate companies – a metals business and a coal
business. This proposal was not accepted by the Teck board and instead they
chose to sell their coking coal business which Glencore acquired. Glencore has
indicated that it will separate coal from the rest of the business over time.
As a reminder, the Company has no exposure to pure play thermal coal
producers.
Precious metals
Precious metals were an area of strength during 2023 with the gold price up by
14% and the average price 8% higher year-on-year. The gold price benefited
from elevated geopolitical issues during the year, strong central bank
purchases and as we approached the end of the year and the expectation of
Federal Reserve interest rate cuts which would see real yields fall. Central
bank net purchases of gold in 2023 of 1,037 tonnes almost matched the 2022
record, falling just 45 tonnes short. Central bank purchases have been
dominated by China which continues to build gold reserves.
Another interesting feature of the gold market in recent years has been the
disconnect between the gold price and real yields. Historically, gold has
performed well in an environment of low real yields, as gold is a non-yielding
asset. Conversely, in an environment of rising real yields, the attractiveness
of other “safe haven” assets such as cash and government bonds improves,
which typically acts as a headwind to gold. Rising physical demand for gold
from central banks alongside elevated geopolitical risk partly explains the
strong performance of gold despite elevated real yields in 2023. As we
approached the end of 2023 and the market began to price in rate cuts, we did
see the gold price rally, more in line with the traditional correlation
between gold and rates.
The silver price has modestly underperformed gold when looking at average
prices during 2023 versus the same period last year. Industrial demand for
silver was strong during 2023 with solar installations globally exceeding
expectations. With silver inventories declining over the last two years and
supply challenges in the world’s largest producer of silver, Mexico, the
physical market for silver is set to tighten further particularly if solar
installations continue to supply to the upside.
The Company has increased its exposure to gold producers during the year given
the improved gold price outlook. However, we have maintained our strategy of
focusing on high quality producers which have an attractive operating margin
and solid production profile and resource base. Typically, gold royalty
companies offer a higher quality and lower risk exposure to gold as they do
not face operating and capital cost inflation. Disappointingly,
Franco-Nevada’s (1.4% of the portfolio) exposure to First Quantum
Minerals’ Cobre Panama mine which was placed into care and maintenance
towards the end of the year saw the shares finish the year down by 19% in US
Dollar terms. 2023 marked another year of consolidation in the gold industry
with Newmont Corporation (3.6% of the portfolio) successfully acquiring
Australian listed Newcrest Mining to create the world’s largest gold
producer.
Energy transition metals
Battery electric vehicles (BEVs) sales continued to grow in 2023, with
estimates that sales would reach over 14 million battery electric vehicle
units. This growth has been mainly driven by China, where BEV sales totalled
8.8 million units, +38% year-on-year according to the China Passenger Car
Association. Globally, competition has resulted in EV price declines
supporting volumes. However, this has cost profitability and led to weakening
investor sentiment as some large equipment manufacturers, particularly in the
US, have slowed investment plans as they prioritise returns.
Legislation continued to evolve and of particular note was the US looking to
exclude Foreign Entity of Concern (FEOC) owned companies from qualifying for
EV incentives under the Inflation Reduction Act. Beginning in 2024, an
eligible clean vehicle may not contain any battery components that are
manufactured by an FEOC and beginning in 2025 an eligible clean vehicle may
not contain any critical minerals that were extracted, processed or recycled
by a FEOC. This is disruptive as it will exclude many Chinese companies from
the US supply chain.
The Company has exposure to the raw materials that go into EV batteries and
the e-motor. Lithium is a critical component of an EV battery and, although
demand for lithium has been strong this year, prices have been weak falling by
43% as the sector saw both destocking and increased supply. The Company’s
holdings in lithium producers such as Albemarle and SQM cost performance. The
holding in Sigma Lithium was an exception, up a modest 6.6% over the year. The
company started producing lithium concentrate from its Brazilian project
during the year, as well as announcing a Strategic Review was underway.
A critical component of the electric car is also the e-motor, which most
commonly uses a Praseodymium-Neodymium (NdPr) magnet, an alloy of two rare
earth elements (REEs). REEs are commonly mined and processed in China and have
been deemed of strategic importance by both Europe and the US. The Company has
exposure to REEs through Lynas Rare Earths (Lynas), a REE miner and processor
crucially based in Malaysia and Australia. In 2023 Lynas equity fell by 13.4%
during a period of weaker Rare Earth Mineral pricing. This year the company
successful commissioned their cracking and leaching plant in Australia, as
well as progressing their US plant securing a site in Texas.
2023 saw a rapid rise in interest around uranium cumulating at the 28th United
Nations Climate Change Conference (COP28), which recognised the key role of
nuclear energy in reaching Net Zero with a declaration to triple nuclear
energy capacity by 2050. The uranium price rose sharply during the year with
the Ux Consulting weekly spot price up by 82.3%. The Company’s holding in
uranium producer Cameco rose by 81% in the year, benefiting from rising
prices. They also completed an acquisition of 49% of Westinghouse, a nuclear
reactor technology original equipment manufacturer and service provider,
further integrating them into the nuclear power supply chain.
Royalty and unquoted investments
During the year the Company evaluated several new private investment deals but
in the end declined to participate for a variety of reasons. As mentioned in
previous reports, the focus of the unquoted investments is to aim to generate
both capital growth and income to deliver the superior total return goal for
the portfolio.
We continue to actively look for opportunities to grow royalty exposure given
it is a key differentiator of the Company and an effective mechanism to
lock-in long-term income which further diversifies the Company’s revenues.
2023 saw several of the recently listed shares deliver further progress at
their projects. Bravo Mining reported excellent drilling results, an updated
resource for their Luanga project and completed a financing which covers them
for the next couple of years. Ivanhoe Electric reported strong drill results
and completed a significant capital raise during the period.
As at the end of 2023, the unquoted investments in the portfolio amounted to
6.7% of the portfolio and consist of the BHP Brazil Royalty, the Vale
Debentures, Jetti Resources and MCC Mining. These, and any future investments,
will be managed in line with the guidelines set by the Board as outlined to
shareholders in the Strategic Report of this Annual Report.
BHP Brazil Royalty Contract (1.4% of the portfolio)
In July 2014 the Company signed a binding royalty agreement with Avanco
Minerals (Avanco). The Company provided US$12 million in return for a Net
Smelter Return royalty payments (net revenue after deductions for freight,
smelter and refining charges) comprising 2% on copper, 25% on gold and 2% on
all other metals produced from mines built on Avanco’s Antas North and Pedra
Branca licences. In addition, there is a flat 2% royalty over all metals
produced from any other discoveries within Avanco’s licence area as at the
time of the agreement.
In 2018 we were delighted to report that Avanco Minerals was acquired by OZ
Minerals, an Australian based copper and gold producer for A$418 million. We
were equally pleased to report that in early 2023 OZ Minerals was acquired by
BHP, the world’s largest mining company and which now operates the assets
underlying the royalty. Since our initial US$12 million investment was made,
we have received US$27.4 million in royalty payments with the royalty
achieving full payback on the initial investment in 3½ years. As at the end
of December 2023, the royalty was valued at £18.4 million (1.4% of the
portfolio) which equates to a 329.6% cash return on the initial US$12 million
invested.
In August, the Pedra Branca mine experienced a geotechnical event which
suspended operations in line with BHP’s global safety standards. The mine
recommenced operations in October and is targeting normal production levels in
early 2024. This has reduced 2023 production levels and associated royalty
payments, but it is not expected to impact overall reserves and resources or
long-term production rates. BHP has implemented changes to the mine design and
mining method, along with additional monitoring systems to reduce the risk of
future events.
Vale debentures (2.8% of the portfolio)
At the beginning of 2019 the Company completed a significant transaction to
increase its holding in Vale debentures. The debentures consist of a 1.8% net
revenue royalty over Vale’s Northern System and Southeastern System iron ore
assets in Brazil, as well as a 1.25% royalty over the Sossego copper mine. The
iron ore assets are world class given their grade, cost position,
infrastructure and resource life which is well in excess of 50 years.
Dividend payments are expected to grow once royalty payments commence on the
Southeastern System in 2025 and volumes from S11D and Serra Norte improve. At
Vale’s Capital Markets Day in December, the company outlined 50Mt of iron
ore growth to 2026 of which S11D is the largest component and an improved
quality mix which the royalty will benefit from.
The debentures offer a yield in excess of 10% based on the 1H-2023 annualised
dividend. This is an attractive yield for a royalty investment, with this
value opportunity recognised by other listed royalty producers, Franco-Nevada
and Sandstorm Gold Royalties, which have both acquired stakes in the
debentures in 2021.
Whilst the Vale debentures are a royalty, they are also a listed security on
the Brazilian National Debentures System. As we have highlighted in previous
reports, shareholders should be aware that historically there has been a low
level of liquidity in the debentures and price volatility is to be expected,
although this is improving following the sell-down in April 2021.
Jetti Resources (2.1% of the portfolio)
In early 2022, the Company made an investment into mining technology company
Jetti Resources (Jetti) which has developed a new catalyst that improves
copper recovery from primary copper sulphides (specifically copper contained
in chalcopyrite which is often uneconomic) under conventional leach
conditions. Jetti is currently trialling their technology across a number of
mines where they will look to integrate their catalyst into existing heap
leach SX-EW mines to improve recoveries at a low capital cost. The technology
has been demonstrated to work at scale at Capstone’s Pinto Valley copper
mine, as well as Freeport-McMoRan’s Bagdad and El Abra operations. If
Jetti’s technology continues to work at scale, we see valuation upside with
Jetti sharing in the economics of additional copper volumes recovered through
the application of their catalyst.
During the second half of 2022 we were pleased to report that Jetti completed
its Series D financing to raise US$100 million at a substantially higher
valuation than when our investment was made at the beginning of 2022. This
sees the company fully financed to execute on their expected growth plans in
the years ahead.
MCC Mining (0.4% of the portfolio)
MCC Mining is a private company exploring for copper in Columbia. It is
undertaking early-stage greenfield exploration and has strong geological
potential to host multiple world class porphyry deposits. Shareholders include
other mid- to large-cap copper miners, which is another indication of the
strategic value of the company. Following new regulations in Colombia which
allowed for the exploration drilling in the forestry reserve, the company
commenced drilling at its Comita and Pantanos deposits in 2023. Initial
drilling results were very encouraging, which confirmed two porphyry deposits
at Comita and Pantanos. The valuation of the Company is based on the US$170.7
million equity value implied by the April 2022 equity raise. The focus for the
company is to continue exploration into 2024.
Derivatives activity
The Company from time to time enters into derivatives contracts, mostly
involving the sale of “puts” and “calls”. These are taken to revenue
and are subject to strict Board guidelines which limit their magnitude to an
aggregate 10% of the portfolio. In 2023 income generated from options was
£6.0 million, in line with contributions from prior periods. During the year
implied volatility was generally lower than in prior years making the
opportunity set less attractive. In addition, the cost of the trades had to be
looked at in the context of higher interest rates, given that the borrowing
capacity is generally used for such transactions. Despite these, enough
opportunities were found to generate revenues almost in line with previous
years without having to take too much risk. At the end of the year the Company
had 0.1% of the net assets exposed to derivatives and the average exposure to
derivatives during the year was less than 5% of net assets.
Gearing
At 31 December 2023, the Company had £149.8 million of net debt, with a
gearing level of 11.9%. The debt is held principally in US Dollar rolling
short-term loans and managed against the value of the debt securities and the
high yielding royalty positions in the Company. As in recent years, the
Company sought to maximise the use of gearing against the equity holdings
rather than debt securities. This was driven by the risk adjusted relative
value available in shares where dividend yields were mostly in excess of the
coupons being paid on the bonds. Since the companies also have strong balance
sheets, it was opportune to gear up the equity portfolio of the Company since
we were not adding debt to holdings that were already heavily leveraged
themselves. However, in 2023 the debt came with a higher cost and this meant
absolute gearing was kept below that of prior years to minimise the interest
cost.
Outlook
The dominant story for 2023 was that of interest rates versus inflation. The
transition to higher rates was far from smooth as short-term expectations
gyrated markets creating a bumpy ride for investors. However, it now looks
likely that inflationary pressures have more than peaked and there is an
increasing consensus that rates are not moving higher. It is worth remembering
that the post global financial crisis and Covid period of zero rates are an
outlier versus history and as such the new norm should be anchored around
current levels rather than a return to such extreme lows.
At the time of writing it appears we are seeing a change in China’s demand
for commodities, with investment into renewable infrastructure, manufacturing
and EV’s growing significantly, against more traditional areas of commodity
demand such as property declining. Energy transition spending globally
continues to drive commodities demand growth and with supply growth across a
number of commodities increasingly constrained markets look set to tighten
further over the next few years which bodes well for prices.
For mining companies whose balance sheets remain strong and management teams
are anchored to disciplined capital allocation frameworks, the challenge will
be balancing the desire to invest either for decarbonisation or growth, versus
returning capital to shareholders. Given the high level of capital intensity
attached to building new capacity, those with the flexibility to repurchase
shares should take advantage of the current low equity valuations given that
it generally remains cheaper to buy existing capacity than to build it.
In summary, the near term as always remains volatile, but with medium-term
demand and supply fundamentals strong, the Company is well positioned to
capture returns from this imbalance. In the meantime dividend payments, whilst
lower than the peak of a few years ago, remain competitive with alternatives
such as bonds and cash meaning shareholders are paid to wait for the positive
outlook to be reflected in share prices.
EVY HAMBRO AND OLIVIA MARKHAM
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
7 March 2024
Ten largest investments
Together, the ten largest investments represented 54.8% of total investments
of the Company’s portfolio as at 31 December 2023 (2022: 54.3%).
1 ► BHP1,2 (2022: 1st)
Diversified mining group
Market value: £130,674,000
Share of investments: 10.1% comprising equity of 8.7% and Mining Royalty of
1.4% (2022: 9.5%)
The world’s largest diversified mining group by market capitalisation. The
group is an important global player in a number of commodities including iron
ore, copper, thermal and metallurgical coal, manganese, nickel, silver and
diamonds.
2 ► Vale2,3,4 (2022: 2nd)
Diversified mining group
Market value: £124,601,000
Share of investments: 9.6% comprising equity of 6.9%, debentures of 2.8% and
option of (0.1)% (2022: 9.1%)
One of the largest mining groups in the world, with operations in 30
countries. Vale is the world’s largest producer of iron ore and iron ore
pellets and the world’s largest producer of nickel. The group also produces
manganese ore, ferroalloys, metallurgical and thermal coal, copper, platinum
group metals, gold, silver and cobalt.
3 ► Glencore (2022: 3rd)
Diversified mining group
Market value: £108,173,000
Share of investments: 8.3% (2022: 7.7%)
One of the world’s largest globally diversified natural resources groups.
The group’s operations include approximately 150 mining and metallurgical
sites and oil production assets. Glencore’s mined commodity exposure
includes copper, cobalt, nickel, zinc, lead, ferroalloys, aluminium, thermal
coal, iron ore, gold and silver.
4 ▲ Rio Tinto (2022: 5th)
Diversified mining group
Market value: £94,600,000
Share of investments: 7.3% (2022: 4.5%)
One of the world’s leading mining groups. The group’s primary product is
iron ore, but it also produces aluminium, copper, diamonds, gold, industrial
minerals and energy products.
5 ▲ Freeport-McMoRan (2022: 8th)
Copper producer
Market value: £65,125,000
Share of investments: 5.0% (2022: 4.0%)
A global mining group which operates large, long-lived, geographically diverse
assets with significant proven and probable reserves of copper, gold and
molybdenum.
6 ▲ Newmont Corporation4 (2022: 18th)
Gold producer
Market value: £44,450,000
Share of investments: 3.6% (2022: 1.9%)
Following the acquisition of Goldcorp in the first half of 2019, Newmont
Corporation is the world’s largest gold producer by market capitalisation.
The group has gold and copper operations on five continents, with active gold
mines in Nevada, Australia, Ghana, Peru and Suriname.
7 ▲ Barrick Gold (2022: 13th)
Gold producer
Market value: £41,299,000
Share of investments: 3.2% (2022: 2.3%)
Barrick Gold is the second largest gold producer by market capitalisation and
has operations and projects in 15 countries across the world. In 2019 the
group successfully established a joint venture with Newmont across their
Nevada assets to maximize the synergies across both sets of assets.
8 ▲ Wheaton Precious Metals (2022: 14th)
Gold producer
Market value: £38,795,000
Share of investments: 3.0% (2022: 2.3%)
Wheaton Precious Metals is one of the world’s largest precious metals
streaming companies, offering investors cost predictability, direct leverage
to increasing precious metals prices and a high-quality asset base consisting
of 18 operating mines and 26 development assets.
9 ▲ Hydro (2022: 15th)
Aluminium producer
Market value: £34,264,000
Share of investments: 2.6% (2022: 2.1%)
Hydro is a Norwegian aluminium and renewable energy company, headquartered in
Oslo. It is one of the largest aluminium companies worldwide. It has
operations in some 50 countries around the world. The company is present
throughout the aluminium value chain, from energy to bauxite mining and
alumina refining, primary aluminium, aluminium extrusions and aluminium
recycling.
10 ▼ Teck Resources (2022: 9th)
Diversified mining group
Market value: £30,282,000
Share of investments: 2.3% (2022: 3.6%)
A diversified mining group headquartered in Canada. The company is engaged in
mining and mineral development with operations and projects in Canada, the US,
Chile and Peru. The group has exposure to copper, zinc, metallurgical coal and
energy.
1 Includes mining royalty contract.
2 Includes investments held at Directors’ valuation.
3 Includes fixed income securities.
4 Includes options.
All percentages reflect the value of the holding as a percentage of total
investments. For this purpose, where more than one class of securities is
held, these have been aggregated.
Arrows indicate the change in relative ranking of the position in the
portfolio compared to its ranking as at 31 December 2022.
Investments as at 31 December 2023
Main Market % of
geographical value investments
exposure £’000
Diversified
Vale Global 88,855 } 9.6
Vale Debentures*#^ Global 36,516
Vale Call Option Jan 24 BRL15.5 Global (770)
BHP Global 112,240 8.7
Glencore Global 108,173 8.3
Rio Tinto Global 94,600 7.3
Teck Resources Global 30,282 2.3
Anglo American Global 24,081 } 1.9
Anglo American Put Option 19/01/24 GBP£18.00 Global (99)
Trident Global 3,708 0.3
--------------- ---------------
497,586 38.4
========= =========
Copper
Freeport-McMoRan Global 65,125 5.0
Ivanhoe Electric United States 27,443 2.1
Jetti Resources# Global 27,204 2.1
Ivanhoe Mines Other Africa 24,627 1.9
Sociedad Minera Cerro Verde Latin America 20,142 1.6
First Quantum Minerals* Global 19,942 1.5
BHP Brazil Royalty#~ Latin America 18,316 1.4
Lundin Mining Global 15,672 1.2
Develop Global Australasia 14,145 1.1
Foran Mining Canada 11,225 0.9
CSA Cobar Mine Australasia 8,739 0.7
Ero Copper Latin America 6,890 0.6
MCC Mining# Latin America 5,491 0.4
Solaris Resources Latin America 5,473 0.4
Filo Mining Latin America 3,528 0.3
Aurubis Global 3,219 0.3
Antofagasta Latin America 2,627 0.2
MTAL Founders Shares Australasia 611 0.1
Metals Acquisition Australasia 339 –
--------------- ---------------
280,758 21.8
========= =========
Gold
Newmont Corporation Global 44,982 } 3.6
Newmont Corporation Call Option 19/01/24 US$41.50 Global (532)
Barrick Gold Global 41,299 3.2
Wheaton Precious Metals Global 38,795 3.0
Agnico Eagle Mines Canada 20,729 1.6
Franco-Nevada Global 18,661 1.4
Northern Star Resources Australasia 14,040 1.1
Endeavour Mining Other Africa 9,090 0.7
Allied Gold* Other Africa 7,770 0.6
Polymetal International Russia – –
Polyus Russia – –
--------------- ---------------
194,834 15.2
========= =========
Steel
Steel Dynamics United States 28,799 2.2
Nucor United States 27,629 2.1
ArcelorMittal Global 23,207 1.8
Stelco Holdings Canada 8,172 0.6
SSAB Global 7,977 0.6
--------------- ---------------
95,784 7.3
========= =========
Industrial Minerals
Sigma Lithium Latin America 17,100 1.3
Mineral Resources Australasia 16,266 1.3
Albemarle Global 10,963 0.8
Iluka Resources Australasia 9,280 0.7
Lynas Rare Earths Australasia 8,825 0.7
Sheffield Resources Australasia 6,951 0.5
Chalice Mining Australasia 2,297 0.2
--------------- ---------------
71,682 5.5
========= =========
Aluminium
Hydro Global 34,264 2.6
Alcoa Global 9,019 0.7
--------------- ---------------
43,283 3.3
========= =========
Iron Ore
Champion Iron Canada 14,425 1.1
Labrador Iron Canada 13,301 1.0
Deterra Royalties Australasia 5,672 0.4
Equatorial Resources Other Africa 201 –
--------------- ---------------
33,599 2.5
========= =========
Uranium
Cameco Canada 30,264 2.3
--------------- ---------------
30,264 2.3
========= =========
Platinum Group Metals
Bravo Mining Latin America 15,945 1.2
Northam Platinum Global 2,610 0.2
Impala Platinum South Africa 1,598 0.1
Sibanye Stillwater South Africa 1,029 0.1
--------------- ---------------
21,182 1.6
========= =========
Mining Services
Woodside Energy Group Australasia 7,209 0.5
Epiroc Global 6,421 0.5
--------------- ---------------
13,630 1.0
========= =========
Nickel
Lifezone Metals Global 7,091 0.5
Nickel Industries Indonesia 5,923 0.5
Bindura Nickel Global 28 –
--------------- ---------------
13,042 1.0
========= =========
Zinc
Titan Mining United States 1,375 0.1
--------------- ---------------
1,375 0.1
========= =========
Comprising: 1,297,019 100.0
========= =========
– Investments 1,298,420 100.1
– Options (1,401) (0.1)
--------------- ---------------
1,297,019 100.0
========= =========
* Includes fixed income securities.
# Includes investments held at Directors’ valuation.
~ Mining royalty contract.
^ The investment in the Vale debentures is illiquid and has been valued using
secondary market pricing information provided by the Brazilian Financial and
Capital Markets Association (ANBIMA).
All investments are in equity shares unless otherwise stated.
The total number of investments as at 31 December 2023 (including options
classified as liabilities on the balance sheet) was 69 (31 December 2022: 68).
As at 31 December 2023 the Company did not hold any equity interests in
companies comprising more than 3% of a company’s share capital.
Commodity Exposure1
2023 portfolio 2022 portfolio # 2023 reference index*
Diversified 38.4% 40.0% 35.6%
Copper 21.8% 22.0% 9.9%
Gold 15.2% 13.0% 21.0%
Steel 7.3% 8.1% 20.7%
Industrial Minerals 5.5% 6.5% 1.8%
Aluminium 3.3% 3.3% 2.8%
Iron Ore 2.5% 3.1% 5.0%
Uranium 2.3% 0.4% 0.0%
Platinum Group Metals 1.6% 2.0% 1.4%
Mining Services 1.0% 0.4% 0.0%
Nickel 1.0% 0.8% 0.0%
Zinc 0.1% 0.1% 0.4%
Other & 0.0% 0.3% 1.4%
1 Based on index classifications.
# Represents exposure at 31 December 2022.
* MSCI ACWI Metals & Mining 30% Buffer 10/40 Index (net total return).
& Represents a very small exposure.
Geographic Exposure1
2023
Global 67.4%
Canada 7.5%
Latin America 7.4%
Australasia 7.3%
Other 2 7.0%
Other Africa (ex South Africa) 3.2%
South Africa 0.2%
2022
Global 69.2%
Australasia 9.0%
Latin America 7.5%
Other 3 7.1%
Canada 4.1%
Other Africa (ex South Africa) 2.4%
South Africa 0.7%
1 Based on the principal commodity exposure and place of operation of each
investment.
2 Consists of Indonesia and United States.
3 Consists of Indonesia, Russia, United Kingdom and United States.
Strategic Report
The Directors present the Strategic Report of BlackRock World Mining Trust plc
for the year ended 31 December 2023. The aim of the Strategic Report is to
provide shareholders with the information to assess how the Directors have
performed their duty to promote the success of the Company for the collective
benefit of shareholders.
The Chairman’s Statement together with the Investment Manager’s Report
form part of this Strategic Report. The Strategic Report was approved by the
Board at its meeting on 7 March 2024.
Principal activities
The Company carries on business as an investment trust and has a premium
listing on the London Stock Exchange. Its principal activity is portfolio
investment and that of its subsidiary, BlackRock World Mining Investment
Company Limited (together the Group), is investment dealing. The Company was
incorporated in England on 28 October 1993 and this is the thirtieth Annual
Report.
Investment trusts are pooled investment vehicles which allow exposure to a
diversified range of assets through a single investment, thus spreading
investment risk.
Objective
The Company’s objective is to maximise total returns to shareholders through
a worldwide portfolio of mining and metal securities.
The Board recognises the importance of dividends to shareholders in achieving
that objective, in addition to capital returns.
Strategy, business model and investment policy
Strategy
The Company invests in accordance with the objective given above. The Board is
collectively responsible to shareholders for the long-term success of the
Company and is its governing body. There is a clear division of responsibility
between the Board and BlackRock Fund Managers Limited (the Manager). Matters
reserved for the Board include setting the Company’s strategy, including its
investment objective and policy, setting limits on gearing (both bank
borrowings and the effect of derivatives), capital structure, governance and
appointing and monitoring of the performance of service providers, including
the Manager.
Business model
The Company’s business model follows that of an externally managed
investment trust. Therefore, the Company does not have any employees and
outsources its activities to third party service providers including the
Manager who is the principal service provider. In accordance with the
Alternative Investment Fund Managers’ Directive (AIFMD), as implemented,
retained and onshored in the UK, the Company is an Alternative Investment Fund
(AIF). BlackRock Fund Managers Limited is the Company’s Alternative
Investment Fund Manager.
The management of the investment portfolio and the administration of the
Company have been contractually delegated to the Manager who in turn (with the
permission of the Company) has delegated certain investment management and
other ancillary services to BlackRock Investment Management (UK) Limited (the
Investment Manager). The Manager, operating under guidelines determined by the
Board, has direct responsibility for the decisions relating to the day-to-day
running of the Company and is accountable to the Board for the investment,
financial and operating performance of the Company.
The Company delegates fund accounting services to the Manager, which in turn
sub-delegates these services to The Bank of New York Mellon (International)
Limited (BNYM). Other service providers include the Depositary (also BNYM) and
the Registrar, Computershare Investor Services PLC. Details of the contractual
terms with the Manager and the Depositary and more details of the arrangements
in place governing custody services are set out in the Directors’ Report.
Investment policy
The Company’s investment policy is to provide a diversified investment in
mining and metal securities worldwide actively managed with the objective of
maximising total returns. While the policy is to invest principally in quoted
securities, the Company’s investment policy includes investing in royalties
derived from the production of metals and minerals as well as physical metals.
Up to 10% of gross assets may be held in physical metals.
In order to achieve its objective, it is intended that the Group will normally
be fully invested, which means at least 90% of the gross assets of the Company
and its subsidiary will be invested in stocks, shares, royalties and physical
metals. However, if such investments are deemed to be overvalued, or if the
Manager finds it difficult to identify attractively priced opportunities for
investment, then up to 25% of the Group’s assets may be held in cash or cash
equivalents. Risk is spread by investing in a number of holdings, many of
which themselves are diversified businesses.
The Group may occasionally utilise derivative instruments such as options,
futures and contracts for difference, if it is deemed that these will, at a
particular time or for a particular period, enhance the performance of the
Group in the pursuit of its objectives. The Company is also permitted to enter
into stock lending arrangements.
As approved by shareholders in August 2013, the Group may invest in any single
holding of quoted or unquoted investments that would represent up to 20% of
gross assets at the time of acquisition. Although investments are principally
in companies listed on recognised stock exchanges, the Company may invest up
to 20% of the Group’s gross assets in investments other than quoted
securities. Such investments include unquoted royalties, equities or bonds. In
order to afford the Company the flexibility of obtaining exposure to metal and
mining related royalties, it is possible that, in order to diversify risk, all
or part of such exposure may be obtained directly or indirectly through a
holding company, a fund or another investment or special purpose vehicle,
which may be quoted or unquoted. The Board will seek the prior approval of
shareholders to any unquoted investment in a single company, fund or special
purpose vehicle or any single royalty which represents more than 10% of the
Group’s assets at the time of acquisition.
In March 2015 the Board refined the guidelines associated with the Company’s
royalty strategy and proposed to maintain the 20% maximum exposure to
royalties but the royalty/unquoted portfolio should itself deliver
diversification across operator, country and commodity. To this end, new
investments into individual royalties/unquoted investments should not exceed
circa 3% of gross assets at the time of investment. Total exposure to any
single operator, including other issued securities such as debt and/or equity,
where greater than 30% of that operator’s revenues come from the mine over
which the royalty lies, must also not be greater than 3% at the time of
investment. In addition, the guidelines require that the Investment Manager
must, at the time of investment, manage total exposure to a single operator,
via reducing exposure to listed securities if they are also held in the
portfolio, in a timely manner where royalties/unquoted investments are
revalued upwards. In the jurisdictions where statutory royalties are possible
(in countries where mineral rights are privately owned) these will be
preferred and in respect of contractual royalties (a contractual obligation
entered into by the operator and typically unsecured) the valuation must take
into account the higher credit risk involved. Board approval will continue to
be required for all royalty/unquoted investments.
While the Company may hold shares in other listed investment companies
(including investment trusts), the Board has agreed that the Company will not
invest more than 15% of the Group’s gross assets in other UK listed
investment companies. In order to comply with the current Listing Rules, the
Company will also not invest more than 10% of its gross asset value in other
listed closed-ended investment funds which themselves may invest more than 15%
of their gross assets in other listed closed-ended investment funds. This
restriction does not form part of the Company’s investment policy.
The Group’s financial statements are maintained in Sterling. Although many
investments are denominated and quoted in currencies other than Sterling, the
Board does not intend to employ a hedging strategy against fluctuations in
exchange rates.
No material change will be made to the investment policy without shareholder
approval.
Gearing
The Investment Manager believes that tactical use of gearing can add value
from time to time. This gearing is typically in the form of an overdraft or
short-term loan facility, which can be repaid at any time or matched by cash.
The level and benefit of gearing is discussed and agreed with the Board
regularly. The Company may borrow up to 25% of the Group’s net assets. The
maximum level of gearing used during the year was 14.6% and, at the financial
reporting date, net gearing (calculated as borrowings less cash and cash
equivalents as a percentage of net assets) stood at 11.9% of shareholders’
funds (2022: 9.6%). For further details on borrowings refer to note 14 in the
Financial Statements and the Alternative Performance Measure in the Glossary
in the Annual Report and Financial Statements.
Portfolio analysis
Information regarding the Company’s investment exposures is contained within
Section 2 (Portfolio) of the Annual Report and Financial Statements, with
information on the ten largest investments, the investments listed and
portfolio analysis above. Further information regarding investment risk and
activity throughout the year can be found in the Investment Manager’s
Report.
As at 31 December 2023, the Level 3 unquoted investments (see note 18 in the
Financial Statements) in the BHP Brazil Royalty Contract and preferred shares
and equity shares of Jetti Resources and MCC Mining were held at Directors’
valuation, representing a total of £51,129,000 (US$65,178,000) (2022:
£56,891,000 (US$67,269,000)). Unquoted investments can prove to be more risky
than listed investments.
Continuation vote
As agreed by shareholders in 1998, an ordinary resolution for the continuation
of the Company is proposed at each Annual General Meeting. The Directors
remain confident on the value available in the mining sector and therefore
recommend that shareholders vote in support of the Company’s continuation.
Performance
Details of the Company’s performance for the year are given in the
Chairman’s Statement. The Investment Manager’s Report includes a review of
the main developments during the year, together with information on investment
activity within the Company’s portfolio.
Results and dividends
The results for the Company are set out in the Consolidated Statement of
Comprehensive Income. The total loss for the year, after taxation, was
£78,985,000 (2022: profit of £202,420,000) of which £64,691,000 (2022:
£76,013,000) is revenue profit.
It is the Board’s intention to distribute substantially all of the
Company’s available income. The Directors recommend the payment of a final
dividend as set out in the Chairman’s Statement. Dividend payments/payable
for the year ended 31 December 2023 amounted to £64,016,000 (2022:
£75,405,000).
Future prospects
The Board’s main focus is to maximise total returns over the longer term
through investment in mining and metal assets. The outlook for the Company is
discussed in both the Chairman’s Statement and the Investment Manager’s
Report.
Social, community and human rights issues
As an investment trust, the Company has no direct social or community
responsibilities or impact on the environment and the Company has not adopted
an ESG investment strategy or exclusionary screens. However, the Directors
believe that it is important and in shareholders’ interests to consider
human rights issues and environmental, social and governance factors when
selecting and retaining investments. Details of the Company’s approach to
ESG and the Manager’s approach to ESG integration are also set out in the
Annual Report and Financial Statements.
Modern Slavery Act
As an investment vehicle, the Company does not provide goods or services in
the normal course of business and does not have customers. The Investment
Manager considers modern slavery as part of supply chains and labour
management within the investment process. Accordingly, the Directors consider
that the Company is not required to make any slavery or human trafficking
statement under the Modern Slavery Act 2015. In any event, the Board considers
the Company’s supply chains, dealing predominantly with professional
advisers and service providers in the financial services industry, to be low
risk in relation to this matter.
Directors, gender representation and employees
The Directors of the Company on 31 December 2023 are set out in the
Directors’ Biographies in the Annual Report and Financial Statements. The
Board consists of three male Directors and two female Directors. The
Company’s policy on diversity is set out in the Annual Report and Financial
Statements. The Company does not have any executive employees.
Key performance indicators
At each Board meeting, the Directors consider a number of performance measures
to assess the Company’s success in achieving its objectives. The key
performance indicators (KPIs) used to measure the progress and performance of
the Company over time and which are comparable to other investment trusts are
set out below. As indicated in the footnote to the table, some of these KPIs
fall within the definition of ‘Alternative Performance Measures’ under
guidance issued by the European Securities and Markets Authority (ESMA) and
additional information explaining how these are calculated is set out in the
Glossary in the Annual Report and Financial Statements. Additionally, the
Board regularly reviews the performance of the portfolio, as well as the net
asset value and share price of the Company and compares this against various
companies and indices. Information on the Company’s performance is given in
the Chairman’s Statement.
Year ended Year ended
31 December 31 December
2023 2022
Net asset value total return 1,2 -6.2% 17.7%
Share price total return 1,2 -10.4% 26.0%
(Discount)/premium to net asset value 2 (3.3)% 1.3%
Revenue earnings per share 33.95p 40.68p
Total dividends per share 33.50p 40.00p
Ongoing charges 2, 3 0.91% 0.95%
Ongoing charges on gross assets 2, 4 0.81% 0.84%
========= =========
1 This measures the Company’s NAV and share price total return, which
assumes dividends paid by the Company have been reinvested.
2 Alternative Performance Measures, see Glossary in the Annual Report and
Financial Statements.
3 Ongoing charges represent the management fee and all other operating
expenses, excluding finance costs, direct transaction costs, custody
transaction charges, VAT recovered, taxation, prior year expenses written back
and certain non-recurring items, as a % of average daily net assets.
4 Ongoing charges based on gross assets represent the management fee and all
other operating expenses, excluding finance costs, direct transaction costs,
custody transaction charges, VAT recovered, taxation, prior year expenses
written back and certain non-recurring items, as a % of average daily gross
assets. Gross assets are calculated based on net assets during the year before
the deduction of the bank overdraft and loans. Ongoing charges based on gross
assets are considered to be an appropriate performance measure as management
fees are payable on gross assets (subject to certain adjustments and
deductions).
Principal risks
The Company is exposed to a variety of risks and uncertainties. As required by
the 2018 UK Corporate Governance Code (the UK Code), the Board has put in
place a robust ongoing process to identify, assess and monitor the principal
risks and emerging risks facing the Company including those that would
threaten its business model. A core element of this process is the Company’s
risk register which identifies the risks facing the Company and assesses the
likelihood and potential impact of each risk and the quality of controls
operating to mitigate it. A residual risk rating is then calculated for each
risk based on the outcome of the assessment.
The risk register, its method of preparation and the operation of key controls
in BlackRock’s and third-party service providers’ systems of internal
control, are reviewed on a regular basis by the Audit Committee. In order to
gain a more comprehensive understanding of BlackRock’s and other third party
service providers’ risk management processes and how these apply to the
Company’s business, BlackRock’s internal audit department provides an
annual presentation to the Audit Committee chairs of the BlackRock investment
trusts setting out the results of testing performed in relation to
BlackRock’s internal control processes. The Audit Committee also
periodically receives and reviews internal control reports from BlackRock and
the Company’s service providers.
The Board has undertaken a robust assessment of both the principal and
emerging risks facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity. The COVID-19
pandemic gave rise to unprecedented challenges for businesses across the
globe. Additionally, the risk that unforeseen or unprecedented events
including (but not limited to) heightened geo-political tensions such as the
war in Ukraine and the conflict in the Middle East, high inflation and the
current cost of living crisis has had a significant impact on global markets.
The Board has taken into consideration the risks posed to the Company by these
events and incorporated these into the Company’s risk register. The threat
of climate change has also reinforced the importance of more sustainable
practices and environmental responsibility for investee companies.
Emerging risks are considered by the Board as they come into view and are
incorporated into the existing review of the Company’s risk register. They
were also considered as part of the annual evaluation process. Additionally,
the Manager considers emerging risks in numerous forums and the BlackRock Risk
and Quantitative Analysis team produces an annual risk survey. Any material
risks of relevance to the Company through the annual risk survey will be
communicated to the Board.
The Board will continue to assess these risks on an ongoing basis. In relation
to the UK Code, the Board is confident that the procedures that the Company
has put in place are sufficient to ensure that the necessary monitoring of
risks and controls has been carried out throughout the reporting period.
The principal risks and uncertainties faced by the Company during the
financial year, together with the potential effects, controls and mitigating
factors, are set out in the following table.
Market
Principal risk
Market risk arises from volatility in the prices of the Company’s
investments. It represents the potential loss the Company might suffer through
realising investments in the face of negative market movements.
Changes in general economic and market conditions, such as currency exchange
rates, interest rates, rates of inflation, industry conditions, tax laws,
political events and trends, can also substantially and adversely affect the
securities and, as a consequence, the Company’s prospects and share price.
Market risk includes the potential impact of events which are outside the
Company’s control, including (but not limited to) heightened geo-political
tensions and military conflict, a global pandemic and high inflation.
Companies operating in the sectors in which the Company invests may be
impacted by new legislation governing climate change and environmental issues,
which may have a negative impact on their valuation and share price.
Mitigation/Control
The Board considers the diversification of the portfolio, asset allocation,
stock selection and levels of gearing on a regular basis and has set
investment restrictions and guidelines which are monitored and reported on by
the Investment Manager.
The Board monitors the implementation and results of the investment process
with the Investment Manager.
The Board also recognises the benefits of a closed-end fund structure in
extremely volatile markets such as those experienced as a consequence of the
COVID-19 pandemic and the war in Ukraine and conflict in the Middle East.
Unlike open-ended counterparts, closed-end funds are not obliged to sell-down
portfolio holdings at low valuations to meet liquidity requirements for
redemptions. During times of elevated volatility and market stress, the
ability of a closed-end fund structure to remain invested for the long term
enables the Investment Manager to adhere to disciplined fundamental analysis
from a bottom-up perspective and be ready to respond to dislocations in the
market as opportunities present themselves.
The Investment Manager seeks to understand the Environmental, Social and
Governance (ESG) risks and opportunities facing companies and industries in
the portfolio. The Company has not adopted an ESG investment strategy and does
not exclude investment in stocks based on ESG criteria, but the Investment
Manager considers ESG information when conducting research and due diligence
on new investments and again when monitoring investments in the portfolio.
Further information on BlackRock’s approach to ESG integration can be found
in the Annual Report and Financial Statements.
Investment performance
Principal risk
The returns achieved are reliant primarily upon the performance of the
portfolio.
The Board is responsible for:
· deciding the investment strategy to fulfil the Company’s objective; and
· monitoring the performance of the Investment Manager and the
implementation of the investment strategy.
An inappropriate investment strategy may lead to:
· underperformance compared to the reference index;
· a reduction or permanent loss of capital; and
· dissatisfied shareholders and reputational damage.
The Board is also cognisant of the long-term risk to performance from
inadequate attention to ESG issues and in particular the impact of climate
change.
Mitigation/Control
To manage this risk the Board:
· regularly reviews the Company’s investment mandate and long-term
strategy;
· has set investment restrictions and guidelines which the Investment
Manager monitors and regularly reports on;
· receives from the Investment Manager a regular explanation of stock
selection decisions, portfolio exposure, gearing and any changes in gearing,
and the rationale for the composition of the investment portfolio;
· oversees the maintenance of an adequate spread of investments in order to
minimise the risks associated with particular countries or factors specific to
particular sectors, based on the diversification requirements inherent in the
investment policy; and
· receives and reviews regular reports showing an analysis of the
Company’s performance against other indices, including the performance of
major companies in the sector.
ESG analysis is integrated into the Investment Manager’s investment process
as set out in the Annual Report and Financial Statements. This is monitored by
the Board. As the world works toward a transition to a low-carbon economy, the
Investment Manager is interested in hearing from companies about their
strategies and plans for responding to the challenges and capturing the
opportunities that this transition creates. When companies consider
climate-related risks, it is likely they will also assess their impact and
dependence on natural capital.
Operational
Principal risk
In common with most other investment trust companies, the Company has no
employees. The Company therefore relies on the services provided by third
parties and is dependent on the control systems of the Manager, the Depositary
and Fund Accountant which maintain the Company’s assets, dealing procedures
and accounting records.
The security of the Company’s assets, dealing procedures, accounting records
and adherence to regulatory and legal requirements depend on the effective
operation of the systems of these third party service providers. There is a
risk that a major disaster, such as floods, fire, a global pandemic, or
terrorist activity, renders the Company’s service providers unable to
conduct business at normal operating effectiveness.
Failure by any service provider to carry out its obligations to the Company
could have a material adverse effect on the Company’s performance.
Disruption to the accounting, payment systems or custody records (including
cyber security risk) could prevent the accurate reporting and monitoring of
the Company’s financial position.
Mitigation/Control
Due diligence is undertaken before contracts are entered into with third-party
service providers. Thereafter, the performance of the provider is subject to
regular review and reported to the Board.
The Board reviews on a regular basis an assessment of the fraud risks that the
Company could potentially be exposed to and also a summary of the controls put
in place by the Manager, Depositary, Custodian, Fund Accountant and Registrar
specifically to mitigate these risks.
Most third-party service providers produce Service Organisation Control (SOC
1) reports to provide assurance regarding the effective operation of internal
controls as reported on by their reporting accountants. These reports are
provided to the Audit Committee for review. The Committee would seek further
representations from service providers if not satisfied with the effectiveness
of their control environment.
The Company’s financial instruments held in custody are subject to a strict
liability regime and, in the event of a loss of such financial instruments,
the Depositary must return financial assets of an identical type or the
corresponding amount, unless able to demonstrate the loss was a result of an
event beyond its reasonable control.
The Board reviews the overall performance of the Manager, Investment Manager
and all other third-party service providers on a regular basis and compliance
with the Investment Management Agreement annually.
The Board also considers the business continuity arrangements of the
Company’s key service providers on an ongoing basis and reviews these as
part of its review of the Company’s risk register.
Legal and regulatory compliance
Principal risk
The Company has been approved by HM Revenue & Customs as an investment trust,
subject to continuing to meet the relevant eligibility conditions, and
operates as an investment trust in accordance with Chapter 4 of Part 24 of the
Corporation Tax Act 2010. As such, the Company is exempt from corporation tax
on capital gains tax on the profits realised from the sale of its investments.
Any breach of the relevant eligibility conditions could lead to the Company
losing investment trust status and being subject to corporation tax on capital
gains realised within the Company’s portfolio. In such event, the investment
returns of the Company may be adversely affected.
A serious breach could result in the Company and/or the Directors being fined
or the subject of criminal proceedings or the suspension of the Company’s
shares which would in turn lead to a breach of the Corporation Tax Act 2010.
Amongst other relevant laws, the Company is required to comply with the
provisions of the Companies Act 2006, the Alternative Investment Fund
Managers’ Directive as implemented, retained and onshored in the UK (AIFMD),
the UK Listing Rules, Disclosure Guidance and Transparency Rules and the
Market Abuse Regulation (as retained and onshored in the UK).
Mitigation/Control
The Investment Manager monitors investment movements, the level and type of
forecast income and expenditure and the amount of proposed dividends to ensure
that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010
are not breached. The results are reported to the Board at each meeting.
Compliance with the accounting rules affecting investment trusts is also
carefully and regularly monitored.
The Company Secretary, Manager and the Company’s professional advisers
provide regular reports to the Board in respect of compliance with all
applicable rules and regulations. The Board and the Manager also monitor
changes in government policy and legislation which may have an impact on the
Company.
The Company’s Investment Manager at all times complies with the sanctions
administered by the UK Office of Financial Sanctions Implementation, the
United States Treasury’s Office of Foreign Assets Control, the United
Nations, European Union member states and any other applicable regimes.
Financial
Principal risk
The Company’s investment activities expose it to a variety of financial
risks which include market risk, counterparty credit risk, liquidity risk and
the valuation of financial instruments.
Mitigation/Control
Details of these risks are disclosed in note 18 to the Financial Statements,
together with a summary of the policies for managing these risks.
In the view of the Board, there have not been any changes to the fundamental
nature of these risks and these principal risks and uncertainties are equally
applicable for the current financial year.
Viability statement
In accordance with provision 31 of the 2018 UK Corporate Governance Code, the
Directors have assessed the prospects of the Company over a longer period than
the twelve months referred to by the ‘Going Concern’ guidelines. The
Company is an investment trust with the objective of providing an attractive
level of income return together with capital appreciation over the long term.
The Directors expect the Company to continue for the foreseeable future and
have therefore conducted this review for a period up to the Annual General
Meeting in 2027. The Directors assess viability over a rolling three-year
period as they believe it best balances the Company’s long-term objective,
its financial flexibility and scope, with the difficulty in forecasting
economic conditions which could affect both the Company and its shareholders.
The Company also undertakes a continuation vote every year with the next one
taking place at the forthcoming Annual General Meeting.
In making an assessment on the viability of the Company, the Board has
considered the following:
· the impact of a significant fall in commodity markets on the value of the
Company’s investment portfolio;
· the ongoing relevance of the Company’s investment objective, business
model and investment policy in the prevailing market;
· the principal and emerging risks and uncertainties, as set out above, and
their potential impact;
· the level of ongoing demand for the Company’s shares;
· the Company’s share price discount/premium to NAV;
· the liquidity of the Company’s portfolio; and
· the level of income generated by the Company and future income and
expenditure forecasts.
The Directors have concluded that there is a reasonable expectation that the
Company will continue in operation and meet its liabilities as they fall due
over the period of their assessment based on the following considerations:
· the Investment Manager’s compliance with the investment objective and
policy, its investment strategy and asset allocation;
· the portfolio is liquid and mainly comprises readily realisable assets
which continue to offer a range of investment opportunities for shareholders
as part of a balanced investment portfolio;
· the operational resilience of the Company and its key service providers
and their ability to continue to provide a good level of service for the
foreseeable future;
· the effectiveness of business continuity plans in place for the Company
and its key service providers;
· the ongoing processes for monitoring operating costs and income which are
considered to be reasonable in comparison to the Company’s total assets;
· the Board’s discount management policy; and
· the Company is a closed-end investment company and therefore does not
suffer from the liquidity issues arising from unexpected redemptions.
In addition, the Board’s assessment of the Company’s ability to operate in
the foreseeable future is included in the Going Concern Statement which can be
found in the Directors’ Report in the Annual Report and Financial
Statements.
Section 172 statement: Promoting the success of the Company
The Companies (Miscellaneous Reporting) Regulations 2018 require directors of
large companies to explain more fully how they have discharged their duties
under Section 172(1) of the Companies Act 2006 in promoting the success of
their companies for the benefit of members as a whole. This includes the
likely consequences of their decisions in the longer term and how they have
taken wider stakeholders’ needs into account.
The disclosure that follows covers how the Board has engaged with and
understands the views of stakeholders and how stakeholders’ needs have been
taken into account, the outcome of this engagement and the impact that it has
had on the Board’s decisions. The Board considers the main stakeholders in
the Company to be the Manager, Investment Manager and the shareholders. In
addition to this, the Board considers investee companies and key service
providers of the Company to be stakeholders; the latter comprise the
Company’s Depositary, Registrar, Fund Accountants and Brokers.
Stakeholders
Shareholders
Continued shareholder support and engagement are critical to the continued
existence of the Company and the successful delivery of its long-term
strategy. The Board is focused on fostering good working relationships with
shareholders and on understanding the views of shareholders in order to
incorporate them into the Board’s strategy and objective in maximising total
returns to shareholders through a worldwide portfolio of mining and metal
securities.
Manager and Investment Manager
The Board’s main working relationship is with the Manager, who is
responsible for the Company’s portfolio management (including asset
allocation, stock and sector selection) and risk management, as well as
ancillary functions such as administration, secretarial, accounting and
marketing services. The Manager has sub-delegated portfolio management to the
Investment Manager. Successful management of shareholders’ assets by the
Investment Manager is critical for the Company to deliver successfully its
investment strategy and meet its objective. The Company is also reliant on the
Manager as AIFM to provide support in meeting relevant regulatory obligations
under the AIFMD and other relevant legislation.
Other key service providers
In order for the Company to function as an investment trust with a listing on
the premium segment of the official list of the Financial Conduct Authority
(FCA) and trade on the London Stock Exchange’s (LSE) main market for listed
securities, the Board relies on a diverse range of advisers for support in
meeting relevant obligations and safeguarding the Company’s assets. For this
reason, the Board considers the Company’s Depositary, Registrar, Fund
Accountants and Brokers to be stakeholders. The Board maintains regular
contact with its key external service providers and receives regular reporting
from them through the Board and Committee meetings, as well as outside of the
regular meeting cycle.
Investee companies
Portfolio holdings are ultimately shareholders’ assets and the Board
recognises the importance of good stewardship and communication with investee
companies in meeting the Company’s investment objective and strategy. The
Board monitors the Manager’s stewardship activities and receives regular
feedback from the Manager in respect of meetings with the management of
investee companies.
A summary of the key areas of engagement undertaken by the Board with its key
stakeholders in the year under review and how Directors have acted upon this
to promote the long-term success of the Company are set out in the table
below.
Area of Engagement
Investment mandate and objective
Issue
The Board is committed to promoting the role and success of the Company in
delivering on its investment mandate to shareholders over the long term.
The Board also has responsibility to shareholders to ensure that the
Company’s portfolio of assets is invested in line with the stated investment
objective and in a way that ensures an appropriate balance between spread of
risk and portfolio returns.
Engagement
The Board worked closely with the Investment Manager throughout the year in
further developing investment strategy and underlying policies, not simply for
the purpose of achieving the Company’s investment objective but in the
interests of shareholders and future investors. In addition the Company
continues to seek out new unquoted investments which could add long-term
value.
Impact
The portfolio activities undertaken by the Investment Manager can be found in
their Report. The Investment Manager continues to actively look for
opportunities to grow royalty exposure given it is a key differentiator of the
Company and an effective mechanism to lock-in long-term income which further
diversifies the Company’s revenues.
Details regarding the Company’s NAV and share price performance can be found
in the Chairman’s Statement and in this Strategic Report.
Responsible investing
Issue
More than ever, the importance of good governance and sustainability practices
are key factors in making investment decisions. Climate change is becoming a
defining factor in companies’ long-term prospects across the investment
spectrum with significant and lasting implications for economic growth and
prosperity. The mining industries in which the Company’s investment universe
operate are facing ethical and sustainability issues that cannot be ignored by
asset managers and investment companies alike.
Engagement
The Board works closely with the Investment Manager to review regularly and
challenge the Company’s performance, investment policy and strategy to seek
to ensure that the Company’s investment objective continues to be met in an
effective and responsible way in the interests of shareholders and future
investors. The Company has not adopted an ESG investment strategy and does not
exclude investment in stocks based on ESG criteria, but the Board believes
that responsible investment and sustainability are integral to the longer-term
delivery of the Company’s success.
The Investment Manager’s approach to the consideration of ESG factors in
respect of the Company’s portfolio, as well as the Investment Manager’s
engagement with investee companies to encourage sound corporate governance
practices, are kept under review by the Board. The Board also expects to be
informed by the Investment Manager of any sensitive voting issues involving
the Company’s investments.
The Investment Manager reports to the Board in respect of its approach to ESG
integration; a summary of BlackRock’s approach to ESG integration is set out
in the Annual Report and Financial Statements. The Investment Manager’s
approach to engagement with investee companies and voting guidelines is
summarised in the Annual Report and Financial Statements and further detail is
available on the BlackRock website.
Impact
The Board and the Investment Manager believe there is likely to be a positive
correlation between strong ESG practices and investment performance over time.
This is especially important in mining given the long investment cycle and the
impact of ESG practices on the ability of a mining company to maintain its
social licence to operate. ESG is one of the many factors that we look at and
site visits to companies’ operations provide valuable insights into their
ESG practices. The Investment Manager has continued to engage with investee
companies.
In 2020 BlackRock exited its active public debt and equity investment in
businesses generating greater than 25% of their revenue from thermal coal
production due to the heightened risks associated with their economic
activity. During the year under review, the Company has had no exposure to
companies whose principal activity is the extraction of thermal coal.
Within the parameters of the Company’s existing investment policy, the
Investment Manager is continuing to look for opportunities to deploy capital
in growth investments that should benefit from the energy transition. It is
likely that this area will become a more significant part of the portfolio.
Shareholders
Issue
Continued shareholder support and engagement are critical to the continued
existence of the Company and the successful delivery of its long-term
strategy.
Engagement
The Board is committed to maintaining open channels of communication and to
engage with shareholders. The Company welcomes and encourages attendance and
participation from shareholders at its Annual General Meetings. Shareholders
will have the opportunity to meet the Directors and Investment Manager and to
address questions to them directly. The Investment Manager will also provide a
presentation on the Company’s performance and the outlook for the mining
sector.
The Annual Report and Half Yearly Financial Report are available on the
BlackRock website and are also circulated to shareholders either in printed
copy or via electronic communications. In addition, regular updates on
performance, monthly factsheets, the daily NAV and other information are also
published on the website at www.blackrock.com/uk/brwm. The Company’s
website and marketing initiatives are geared to providing a breadth and depth
of informative and engaging content.
The Board also works closely with the Manager to develop the Company’s
marketing strategy with the aim of ensuring effective communication with
shareholders.
Unlike trading companies, one-to-one shareholder meetings normally take the
form of a meeting with the Investment Manager as opposed to members of the
Board. The Company’s willingness to enter into discussions with
institutional shareholders is also demonstrated by the programmes of
institutional presentations by the Investment Manager. Additionally, the
Investment Manager regularly presents at professional and private investor
events to help explain and promote the Company’s strategy.
If shareholders wish to raise issues or concerns with the Board, they are
welcome to do so at any time. The Chairman is available to meet directly with
shareholders periodically to understand their views on governance and the
Company’s performance where they wish to do so. He may be contacted via the
Company Secretary whose details are given in the Annual Report and Financial
Statements.
Impact
The Board values any feedback and questions from shareholders ahead of and
during Annual General Meetings in order to gain an understanding of their
views and will take action when and as appropriate. Feedback and questions
will also help the Company evolve its reporting, aiming to make reports more
transparent and understandable.
Feedback from all substantive meetings between the Investment Manager and
shareholders will be shared with the Board. The Directors will also receive
updates from the Company’s broker and Kepler, marketing consultants, on any
feedback from shareholders, as well as share trading activity, share price
performance and an update from the Investment Manager.
The portfolio management team attended a number of professional investor
meetings (many by video conference) and held discussions with a number of
wealth management desks and offices in respect of the Company during the year
under review.
Portfolio holdings are ultimately shareholders’ assets and the Board
recognises the importance of good stewardship and communication with investee
companies in meeting the Company’s investment objective and strategy. The
Board monitors the Manager’s stewardship activities and receives regular
feedback from the Investment Manager in respect of meetings with the
management of portfolio companies.
Management of share rating
Issue
The Board recognises the importance to shareholders that the market price of
the Company’s shares should not trade at either a significant discount or
premium to their prevailing NAV. The Board believes this may be achieved by
the use of share buyback powers and the issue of shares.
Engagement
The Board monitors the Company’s share rating on an ongoing basis and
receives regular updates from the Manager and the Company’s Brokers
regarding the level of discount/premium. The Board believes that the best way
of maintaining the share rating at an optimal level over the long term is to
create demand for the shares in the secondary market. To this end, the
Investment Manager is devoting considerable effort to broadening the awareness
of the Company, particularly to wealth managers and to the wider retail
market.
In addition, the Board has worked closely with the Manager to develop the
Company’s marketing strategy, with the aim of ensuring effective
communication with existing shareholders and to attract new shareholders to
the Company in order to improve liquidity in the Company’s shares and to
sustain the share rating of the Company.
Impact
The Board continues to monitor the Company’s premium/discount to NAV and
will look to issue or buy back shares if it is deemed to be in the interests
of shareholders as a whole. The Company participates in a focused investment
trust sales and marketing initiative operated by the Manager on behalf of the
investment trusts under its management. Further details are set out in the
Annual Report and Financial Statements.
During the financial year the Company reissued 2,430,000 shares from treasury.
As at 5 March 2024 the Company’s shares were trading at a discount of 6.5%
to the cum income NAV.
Service levels of third-party providers
Issue
The Board acknowledges the importance of ensuring that the Company’s
principal suppliers are providing a suitable level of service, including the
Investment Manager in respect of investment performance and delivering on the
Company’s investment mandate; the Custodian and Depositary in respect of
their duties towards safeguarding the Company’s assets; the Registrar in its
maintenance of the Company’s share register and dealing with investor
queries; and the Company’s Brokers in respect of the provision of advice and
acting as a market maker for the Company’s shares.
Engagement
The Manager reports to the Board on the Company’s performance on a regular
basis. The Board carries out a robust annual evaluation of the Manager’s
performance, their commitment and available resources.
The Board performs an annual review of the service levels of all third-party
service providers and concludes on their suitability to continue in their
role. The Board receives regular updates from the AIFM, Depositary, Registrar
and Brokers on an ongoing basis.
The Board has also worked closely with the Manager to gain comfort that
relevant business continuity plans are operating effectively for all of the
Company’s key service providers.
Impact
All performance evaluations were performed on a timely basis and the Board
concluded that all third-party service providers, including the Manager and
Investment Manager, were operating effectively and providing a good level of
service.
The Board has received updates in respect of business continuity planning from
the Company’s Manager, Custodian, Depositary, Fund Accountant, Registrar and
Printer and is confident that arrangements are in place to ensure a good level
of service will continue to be provided.
Board composition
Issue
The Board is committed to ensuring that its own composition brings an
appropriate balance of knowledge, experience and skills, and that it is
compliant with best corporate governance practice under the UK Code, including
guidance on tenure and the composition of the Board’s committees.
Engagement
The Board has engaged the services of an external search consultant, Fletcher
Jones, to identify potential candidates to replace Mr Cheyne who retires as a
Director and Chairman following the forthcoming Annual General Meeting. The
Nomination Committee has agreed the selection criteria and the method of
selection, recruitment and appointment.
All Directors are subject to a formal evaluation process on an annual basis
(more details and the conclusions of the 2023 evaluation process are given in
the Annual Report and Financial Statements). All Directors stand for
re-election by shareholders annually.
Shareholders may attend the Annual General Meeting and raise any queries in
respect of Board composition or individual Directors in person or may contact
the Company Secretary or the Chairman using the details provided with any
issues.
Impact
As at the date of this report, the Board was comprised of three men and two
women. Under the AIC Code the tenure of a director who is elevated to Chairman
may be extended by three years. The Board decided that this extension should
apply to Mr Cheyne’s tenure which was therefore extended until the Annual
General Meeting in May 2024. Mr Cheyne will not be seeking re-election at the
forthcoming Annual General Meeting. During the year, the Directors identified
Mr Goodyear as a suitable replacement to fill the vacancy following Mr
Edey’s retirement and he will succeed Mr Cheyne as Chairman. Following the
recruitment process, the successful candidate will be appointed as a Director
following the Annual General Meeting being held on 9 May 2024. Details of each
Director’s contribution to the success and promotion of the Company are set
out in the Directors’ Report and details of the Directors’ biographies in
the Annual Report and Financial Statements.
The Directors are not aware of any issues that have been raised directly by
shareholders in respect of Board composition in the year under review. Details
for the proxy voting results in favour and against individual Directors’
re-election at the 2023 Annual General Meeting are given on the Manager’s
website at www.blackrock.com/uk/brwm.
Environmental, Social and Governance issues and approach
The Board’s approach
Environmental, Social and Governance (ESG) issues can present both
opportunities and threats to long-term investment performance. The Company’s
investment universe comprises sectors that are undergoing significant
structural change and are likely to be highly impacted by increasing
regulation as a result of climate change and other social and governance
factors. Your Board is committed to ensuring that we have appointed an
Investment Manager that integrates ESG considerations into its investment
process and has the skill to navigate the structural transition that the
Company’s investment universe is undergoing. The Board believes effective
engagement with company management is, in most cases, the most effective way
of driving meaningful change in the behaviour of investee company management.
While the Company does not have an ESG or impact focused investment strategy
or apply exclusionary screens, as in most cases the Company will not invest in
companies which have high ESG risks and no plans to address existing
deficiencies. Where the Board is not satisfied that an investee company is
taking steps to address matters of an ESG nature, it may discuss with the
Investment Manager how this situation might be resolved, including potentially
by a full disposal of shares.
ESG integration does not change the Company’s investment objective or
constrain the Investment Manager’s investable universe, and does not mean
that an ESG or impact focused investment strategy or any exclusionary screens
have been or will be adopted by the Company. Similarly, ESG integration does
not determine the extent to which the Company may be impacted by
sustainability risks. More information on BlackRock’s global approach to ESG
integration, as well as activity specific to the BlackRock World Mining Trust
plc portfolio, is set out below.
The Company does not meet the criteria for Article 8 or 9 products under the
EU Sustainable Finance Disclosure Regulation (SFDR) and the investments
underlying this financial product do not take into account the EU criteria for
environmentally sustainable economic activities. The Investment Manager has
access to a range of data sources, including principal adverse indicator (PAI)
data, when making decisions on the selection of investments. However, whilst
BlackRock considers ESG risks for all portfolios and these risks may coincide
with environmental or social themes associated with the PAIs, the Company does
not commit to considering PAIs in driving the selection of its investments.
Additional information on ESG integration, sustainability risk and SFDR is set
out in the AIFMD Fund Disclosures available on the Company’s website.
BlackRock’s approach to ESG integration
BlackRock believes that sustainability risk, including climate risk are
investment risks. As a fiduciary, we manage material risks and opportunities
that could impact portfolios. Sustainability can be a driver of investment
risks and opportunities and we incorporate them in our firm wide processes
when they are material. This in turn (in BlackRock’s view) is likely to
drive a significant reallocation of capital away from traditional
carbon-intensive industries over the next decade. BlackRock believes that
carbon-intensive companies will play an integral role in unlocking the full
potential of the energy transition, and to do this, they must be prepared to
adapt, innovate and pivot their strategies towards a low carbon economy.
As part of BlackRock’s structured investment process, ESG risks and
opportunities (including sustainability/climate risk) are considered within
the portfolio management team’s fundamental analysis of companies and
industries and the Company’s portfolio managers work closely with the BIS
team to assess the governance quality of companies and understand any
potential issues, risks or opportunities.
As part of their approach to ESG integration, the portfolio managers use ESG
information when conducting research and due diligence on new investments and
again when monitoring investments in the portfolio. In particular, portfolio
managers now have access to 1,200 key ESG performance indicators in Aladdin
(BlackRock’s proprietary trading system) from third-party data providers.
BlackRock’s internal sustainability research framework scoring is also
available alongside third-party ESG scores in core portfolio management tools.
BlackRock’s analysts’ sector expertise and local market knowledge allows
it to engage with companies through direct interaction with management teams
and conducting site visits. BIS engages with company leadership to understand
how they are identifying and managing material business risks and
opportunities, including sustainability related risks and the potential
impacts these may have on long-term financial performance. BIS and the
portfolio management team’s understanding of material sustainability risks
and opportunities is further supported by BlackRock’s Sustainable and
Transition Solutions (STS) function. STS looks to advance ESG research and
integration, active engagement and the development of sustainable investment
solutions across the firm.
BlackRock World Mining Trust plc – BlackRock Investment Stewardship
engagement with portfolio companies for the year ended 31 December 2023
Given the Board’s belief in the importance of engagement and communication
with portfolio companies, they receive regular updates from the Investment
Manager in respect of activity undertaken for the year under review. The
Investment Manager engages with company management teams and undertakes
company meetings to identify the best management teams with the ability to
create value for shareholders over the long term. In addition, BlackRock also
has a separate BlackRock Investment Stewardship (BIS) team. Investment
stewardship is one of the ways in which BlackRock fulfils its fiduciary
responsibilities as an asset manager to its clients. BIS serves as a link
between them and the companies BlackRock invests in. BIS engages with investee
companies to build its understanding of these companies’ approach to
addressing material business risks and opportunities. Additional information
is set out in the table and charts in the Annual Report and Financial
Statements, as well as the key engagement themes for the meetings held in
respect of the Company’s portfolio holdings.
Year ended
31 December
2023
Number of engagements held 48
Number of companies met 22
% of equity investments covered 33
Shareholder meetings voted at 60
Number of proposals voted on 651
Number of votes against management 39
% of total items voted represented by votes against management 6.0
=========
Sources: BlackRock, Institutional Shareholder Services.
Investment stewardship
Consistent with BlackRock’s fiduciary duty as an asset manager, BIS seeks to
support investee companies in their efforts to deliver long-term financial
value on behalf of their clients. These clients include public and private
pension plans, governments, insurance companies, endowments, universities,
charities and, ultimately, individual investors, among others. BIS serves as a
link between BlackRock’s clients and the companies they invest in. Clients
depend on BlackRock to help them meet their investment goals; the business and
governance decisions that companies make may have a direct impact on
BlackRock’s clients’ long-term investment outcomes and financial well
being.
From BlackRock’s perspective, business relevant sustainability issues can
contribute to a company’s long-term financial performance, and thus further
incorporating these considerations into the investment research, portfolio
construction, and stewardship process can enhance long-term risk adjusted
returns. The Company’s Investment Manager works closely with BIS to assess
the governance quality of companies and business practices, and better
understand any potential issues, risks or opportunities. The Investment
Manager uses this information when conducting research and due diligence on
new investments and again when monitoring investments in the portfolio.
Global principles
The BIS Global Principle
(https://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-engprinciples-global.pdf)s,
regional voting guideline
(https://www.blackrock.com/corporate/insights/investment-stewardship#stewardship-policies)s,
and engagement priorities
(https://www.blackrock.com/corporate/literature/publication/blk-stewardship-priorities-final.pdf)
(collectively, the ‘BIS policies’) set out the core elements of corporate
governance that guide BIS’ efforts globally and within each regional market,
including when engaging with companies and voting at shareholder meetings when
authorised to do so on behalf of clients. Each year, BIS reviews its policies
and updates them as necessary to reflect changes in market standards and
regulations, insights gained over the year through third-party and its own
research, and feedback from clients and companies.
Regional proxy voting guidelines
BIS’ regional voting guidelines are intended to help clients and companies
understand its thinking on key governance matters. They are the benchmark
against which it assesses a company’s approach to corporate governance and
the items on the agenda to be voted on at a shareholder meeting. BIS applies
its guidelines pragmatically, taking into account a company’s unique
circumstances where relevant. BlackRock informs voting decisions through
research and engages as necessary. BIS reviews its voting guidelines annually
and updates them as necessary to reflect changes in market standards, evolving
governance practices and insights gained from engagement over the prior year.
BIS’ market-specific voting guidelines are available on its website at
www.blackrock.com/corporate/about-us/investment-stewardship#stewardship-policies.
BlackRock is committed to transparency in terms of disclosure on its
stewardship activities on behalf of clients. The BIS policies help
BlackRock’s clients understand its work to advance their interests as
long-term investors in public companies. Additionally, BIS publishes both
annual
(https://www.blackrock.com/corporate/literature/publication/annual-stewardship-report-2022.pdf)
and quarterly
(https://www.blackrock.com/corporate/insights/investment-stewardship#stewardship-reports)
reports detailing its stewardship activities, as well as vote bulletins
(https://www.blackrock.com/corporate/insights/investment-stewardship#vote-bulletins)
that describe its rationale for certain votes at high profile shareholder
meetings.
BlackRock’s reporting and disclosures
In terms of its own reporting, BlackRock believes that the Sustainability
Accounting Standards Board provides a clear set of standards for reporting
sustainability information across a wide range of issues, from labour
practices to data privacy to business ethics. For evaluating and reporting
climate-related risks, as well as the related governance issues that are
essential to managing them, the Task Force on Climate-related Financial
Disclosures (TCFD) provides a valuable framework. BlackRock recognises that
reporting to these standards requires significant time, analysis, and effort.
BlackRock’s 2022 TCFD report can be found at
www.blackrock.com/corporate/literature/continuous-disclosure-and-important-information/tcfd-report-2022-blkinc.pd
(http://www.blackrock.com/corporate/literature/continuous-disclosure-and-important-information/tcfd-report-2022-blkinc.pdf)f.
BY ORDER OF THE BOARD
CAROLINE DRISCOLL
FOR AND ON BEHALF OF
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
Company Secretary
7 March 2024
RELATED PARTY TRANSACTIONS
At the date of this report, the Board consists of five non-executive
Directors, all of whom are considered to be independent of the Manager by the
Board. Following the conclusion of the Annual General Meeting on 9 May 2024,
the Board will consist of five non-executive Directors. None of the Directors
has a service contract with the Company. The Chairman receives an annual fee
of £52,500, the Chairman of the Audit Committee receives an annual fee of
£43,750, and each other Director receives an annual fee of £35,000. The
Senior Independent Director receives an additional fee of £3,500. All five
members of the Board hold shares in the Company. Mr Cheyne holds 35,000
ordinary shares, Mr Goodyear holds 60,000 ordinary shares, Ms Lewis holds
5,362 ordinary shares, Ms Mosely holds 7,400 ordinary shares and Mr
Venkatakrishnan holds 2,000 ordinary shares. As at 31 December 2023, £17,000
(2022: £16,000) was outstanding in respect of Directors’ fees.
Statement of Directors’ Responsibilities in respect of the Annual Report and
Financial Statements
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable law and regulations. Company law
requires the Directors to prepare financial statements for each financial
year. Under that law, the Directors are required to prepare the financial
statements in accordance with UK-adopted International Accounting Standards
(IAS).
Under Company law, the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the profit or loss of the Group for
that period. In preparing those financial statements, the Directors are
required to:
· present fairly the financial position, financial performance and cash
flows of the Group and Company;
· select suitable accounting policies in accordance with IAS 8: Accounting
Policies, Changes in Accounting Estimates and Errors and then apply them
consistently;
· present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· make judgements and estimates that are reasonable and prudent;
· state whether the financial statements have been prepared in accordance
with UK-adopted IAS, subject to any material departures disclosed and
explained in the financial statements;
· provide additional disclosures when compliance with the specific
requirements in accordance with UK-adopted IAS is insufficient to enable users
to understand the impact of particular transactions, other events and
conditions on the Group’s and Company’s financial position and financial
performance; and
· prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group’s and Company’s transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and Company and enable them to ensure that the financial statements
comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are also responsible for preparing the Strategic Report,
Directors’ Report, the Directors’ Remuneration Report, the Corporate
Governance Statement and the Report of the Audit Committee in accordance with
the Companies Act 2006 and applicable regulations, including the requirements
of the Listing Rules and the Disclosure Guidance and Transparency Rules. The
Directors have delegated responsibility to the Manager for the maintenance and
integrity of the Company’s corporate and financial information included on
the BlackRock website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Each of the Directors, confirm to the best of their knowledge that:
· the financial statements, which have been prepared in accordance with
UK-adopted IAS, give a true and fair view of the assets, liabilities,
financial position and net return of the Group and Company; and
· the Strategic Report contained in the Annual Report and Financial
Statements includes a fair review of the development and performance of the
business and the position of the Group and Company, together with a
description of the principal risks and uncertainties that it faces.
The 2018 UK Corporate Governance Code also requires Directors to ensure that
the Annual Report and Financial Statements are fair, balanced and
understandable. In order to reach a conclusion on this matter, the Board has
requested that the Audit Committee advise on whether it considers that the
Annual Report and Financial Statements fulfil these requirements. The process
by which the Committee has reached these conclusions is set out in the Audit
Committee’s Report in the Annual Report and Financial Statements.
As a result, the Board has concluded that the Annual Report and Financial
Statements for the year ended 31 December 2023, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Group’s and Company’s position, performance,
business model and strategy.
FOR AND ON BEHALF OF THE BOARD
DAVID CHEYNE
Chairman
7 March 2024
Consolidated Statement of Comprehensive Income for the year ended 31 December
2023
2023 2022
Notes Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Income from investments held at fair value through profit or loss 3 68,317 630 68,947 78,087 811 78,898
Other income 3 6,827 – 6,827 7,909 – 7,909
--------------- --------------- --------------- --------------- --------------- ---------------
Total revenue 75,144 630 75,774 85,996 811 86,807
========= ========= ========= ========= ========= =========
Net (loss)/profit on investments and options held at fair value through profit or loss – (140,576) (140,576) – 152,937 152,937
Net profit/(loss) on foreign exchange – 9,018 9,018 – (17,645) (17,645)
--------------- --------------- --------------- --------------- --------------- ---------------
Total 75,144 (130,928) (55,784) 85,996 136,103 222,099
========= ========= ========= ========= ========= =========
Expenses
Investment management fee 4 (2,374) (7,317) (9,691) (2,615) (8,031) (10,646)
Other operating expenses 5 (1,278) (15) (1,293) (1,037) (28) (1,065)
--------------- --------------- --------------- --------------- --------------- ---------------
Total operating expenses (3,652) (7,332) (10,984) (3,652) (8,059) (11,711)
========= ========= ========= ========= ========= =========
Net profit/(loss) on ordinary activities before finance costs and taxation 71,492 (138,260) (66,768) 82,344 128,044 210,388
Finance costs 6 (2,375) (7,166) (9,541) (1,182) (3,520) (4,702)
--------------- --------------- --------------- --------------- --------------- ---------------
Net profit/(loss) on ordinary activities before taxation 69,117 (145,426) (76,309) 81,162 124,524 205,686
Taxation (charge)/credit (4,426) 1,750 (2,676) (5,149) 1,883 (3,266)
--------------- --------------- --------------- --------------- --------------- ---------------
Net profit/(loss) on ordinary activities after taxation 64,691 (143,676) (78,985) 76,013 126,407 202,420
========= ========= ========= ========= ========= =========
Earnings/(loss) per ordinary share (pence) – basic and diluted 8 33.95 (75.40) (41.45) 40.68 67.64 108.32
========= ========= ========= ========= ========= =========
The total columns of this statement represent the Group’s Statement of
Comprehensive Income, prepared in accordance with UK-adopted International
Accounting Standards (IAS). The supplementary revenue and capital accounts are
both prepared under guidance published by the Association of Investment
Companies (AIC). All items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the year. All
income is attributable to the equity holders of the Group.
The Group does not have any other comprehensive income/(loss) (2022: £nil).
The net profit/(loss) for the year disclosed above represents the Group’s
total comprehensive income.
Consolidated Statement of Changes in Equity for the year ended 31 December
2023
Group Notes Called Share Capital Special Capital Revenue Total
up share premium redemption reserve reserves reserve £’000
capital account reserve £’000 £’000 £’000
£’000 £’000 £’000
For the year ended 31 December 2023
At 31 December 2022 9,651 148,107 22,779 180,736 868,837 69,175 1,299,285
Total comprehensive (loss)/income:
Net (loss)/profit for the year – – – – (143,676) 64,691 (78,985)
Transactions with owners, recorded directly to equity:
Ordinary shares reissued from treasury 9,10 – 3,386 – 12,305 – – 15,691
Share reissue costs 9,10 – – – (33) – – (33)
Dividends paid 1 7 – – – – – (75,907) (75,907)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2023 9,651 151,493 22,779 193,008 725,161 57,959 1,160,051
========= ========= ========= ========= ========= ========= =========
For the year ended 31 December 2022
At 31 December 2021 9,651 138,818 22,779 155,123 742,430 74,073 1,142,874
Total comprehensive income:
Net profit for the year – – – – 126,407 76,013 202,420
Transactions with owners, recorded directly to equity:
Ordinary shares reissued from treasury – 9,289 – 25,683 – – 34,972
Share reissue costs – – – (70) – – (70)
Dividends paid 2 7 – – – – – (80,911) (80,911)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2022 9,651 148,107 22,779 180,736 868,837 69,175 1,299,285
========= ========= ========= ========= ========= ========= =========
1 The final dividend of 23.50p per share for the year ended 31 December 2022,
declared on 3 March 2023 and paid on 26 April 2023; 1st interim dividend of
5.50p per share for the year ended 31 December 2023, declared on 18 April 2023
and paid on 31 May 2023; 2nd interim dividend of 5.50p per share for the year
ended 31 December 2023, declared on 24 August 2023 and paid on 6 October 2023
and 3rd interim dividend of 5.50p per share for the year ended 31 December
2023, declared on 11 October 2023 and paid on 22 December 2023.
2 The final dividend of 27.00p per share for the year ended 31 December 2021,
declared on 8 March 2022 and paid on 19 May 2022; 1st interim dividend of
5.50p per share for the year ended 31 December 2022, declared on 6 May 2022
and paid on 30 June 2022; 2nd interim dividend of 5.50p per share for the year
ended 31 December 2022, declared on 23 August 2022 and paid on 30 September
2022 and 3rd interim dividend of 5.50p per share for the year ended 31
December 2022, declared on 16 November 2022 and paid on 22 December 2022.
Parent Company Statement of Changes in Equity for the year ended 31 December
2023
Company Notes Called Share Capital Special Capital Revenue Total
up share premium redemption reserve reserves reserve £’000
capital account reserve £’000 £’000 £’000
£’000 £’000 £’000
For the year ended 31 December 2023
At 31 December 2022 9,651 148,107 22,779 180,736 874,567 63,445 1,299,285
Total comprehensive (loss)/income:
Net (loss)/profit for the year – – – – (143,500) 64,515 (78,985)
Transactions with owners, recorded directly to equity:
Ordinary shares reissued from treasury 9,10 – 3,386 – 12,305 – – 15,691
Share reissue costs 9,10 – – – (33) – – (33)
Dividends paid 1 7 – – – – – (75,907) (75,907)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2023 9,651 151,493 22,779 193,008 731,067 52,053 1,160,051
========= ========= ========= ========= ========= ========= =========
For the year ended 31 December 2022
At 31 December 2021 9,651 138,818 22,779 155,123 748,107 68,396 1,142,874
Total comprehensive income:
Net profit for the year – – – – 126,460 75,960 202,420
Transactions with owners, recorded directly to equity:
Ordinary shares reissued from treasury – 9,289 – 25,683 – – 34,972
Share reissue costs – – – (70) – – (70)
Dividends paid 1 7 – – – – – (80,911) (80,911)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2022 9,651 148,107 22,779 180,736 874,567 63,445 1,299,285
========= ========= ========= ========= ========= ========= =========
1 The final dividend of 23.50p per share for the year ended 31 December 2022,
declared on 3 March 2023 and paid on 26 April 2023; 1st interim dividend of
5.50p per share for the year ended 31 December 2023, declared on 18 April 2023
and paid on 31 May 2023; 2nd interim dividend of 5.50p per share for the year
ended 31 December 2023, declared on 24 August 2023 and paid on 6 October 2023
and 3rd interim dividend of 5.50p per share for the year ended 31 December
2023, declared on 11 October 2023 and paid on 22 December 2023.
2 The final dividend of 27.00p per share for the year ended 31 December 2021,
declared on 8 March 2022 and paid on 19 May 2022; 1st interim dividend of
5.50p per share for the year ended 31 December 2022, declared on 6 May 2022
and paid on 30 June 2022; 2nd interim dividend of 5.50p per share for the year
ended 31 December 2022, declared on 23 August 2022 and paid on 30 September
2022 and 3rd interim dividend of 5.50p per share for the year ended 31
December 2022, declared on 16 November 2022 and paid on 22 December 2022.
For information on the Company’s distributable reserves please refer to note
17 in the Annual Report and Financial Statements.
Consolidated and Parent Company Statements of Financial Position as at 31
December 2023
31 December 2023 31 December 2022
Notes Group Company Group Company
£’000 £’000 £’000 £’000
Non current assets
Investments held at fair value through profit or loss 1,298,420 1,305,827 1,424,844 1,432,075
Current assets
Current tax asset 1,276 1,276 821 821
Other receivables 3,592 3,592 4,431 4,431
Cash collateral held with brokers 6,269 6,269 6,795 6,795
Cash and cash equivalents 10,612 4,261 29,492 23,317
--------------- --------------- --------------- ---------------
Total current assets 21,749 15,398 41,539 35,364
========= ========= ========= =========
Total assets 1,320,169 1,321,225 1,466,383 1,467,439
========= ========= ========= =========
Current liabilities
Current tax liability (352) (352) (373) (361)
Other payables (8,052) (9,108) (6,155) (7,223)
Derivative financial liabilities held at fair value through profit or loss (1,401) (1,401) (1,227) (1,227)
Bank loans (149,828) (149,828) (158,783) (158,783)
--------------- --------------- --------------- ---------------
Total current liabilities (159,633) (160,689) (166,538) (167,594)
========= ========= ========= =========
Total assets less current liabilities 1,160,536 1,160,536 1,299,845 1,299,845
========= ========= ========= =========
Non current liabilities
Deferred taxation liability (485) (485) (560) (560)
--------------- --------------- --------------- ---------------
Net assets 1,160,051 1,160,051 1,299,285 1,299,285
========= ========= ========= =========
Equity attributable to equity holders
Called up share capital 9 9,651 9,651 9,651 9,651
Share premium account 10 151,493 151,493 148,107 148,107
Capital redemption reserve 10 22,779 22,779 22,779 22,779
Special reserve 10 193,008 193,008 180,736 180,736
Capital reserves:
At 1 January 868,837 874,567 742,430 748,107
Net (loss)/profit for the year (143,676) (143,500) 126,407 126,460
--------------- --------------- --------------- ---------------
At 31 December 10 725,161 731,067 868,837 874,567
Revenue reserve:
At 1 January 69,175 63,445 74,073 68,396
Net profit for the year 64,691 64,515 76,013 75,960
Dividends paid (75,907) (75,907) (80,911) (80,911)
--------------- --------------- --------------- ---------------
At 31 December 10 57,959 52,053 69,175 63,445
========= ========= ========= =========
Total equity 1,160,051 1,160,051 1,299,285 1,299,285
========= ========= ========= =========
Net asset value per ordinary share (pence) 8 606.78 606.78 688.35 688.35
========= ========= ========= =========
Consolidated and Parent Company Cash Flow Statements for the year ended 31
December 2023
31 December 2023 31 December 2022
Group Company Group Company
£’000 £’000 £’000 £’000
Operating activities
Net (loss)/profit on ordinary activities before taxation (76,309) (76,309) 205,686 205,686
Add back finance costs 9,541 9,541 4,702 4,702
Net loss/(profit) on investments and options held at fair value through profit or loss (including transaction costs) 140,576 140,400 (152,937) (152,990)
Net (profit)/loss on foreign exchange (9,018) (9,018) 17,645 17,645
Sale of investments and return of capital on contractual rights 648,272 648,272 489,236 489,236
Purchase of investments and options held at fair value through profit or loss (662,250) (662,250) (503,782) (503,782)
Decrease in other receivables 1,069 1,069 13 13
Increase in other payables 1,556 1,556 1,025 1,013
(Increase)/decrease in amounts due from brokers (409) (409) 243 243
Net movement in cash collateral held with brokers 526 526 (6,215) (6,215)
--------------- --------------- --------------- ---------------
Net cash inflow from operating activities before taxation 53,554 53,378 55,616 55,551
========= ========= ========= =========
Taxation paid (12) (12) (432) (432)
Taxation on investment income included within gross income (2,664) (2,664) (3,210) (3,210)
--------------- --------------- --------------- ---------------
Net cash inflow from operating activities 50,878 50,702 51,974 51,909
========= ========= ========= =========
Financing activities
Drawdown of loans – – 2,359 2,359
Interest paid (9,571) (9,571) (4,720) (4,720)
Net proceeds from ordinary shares reissued from treasury 15,658 15,658 34,902 34,902
Dividends paid (75,907) (75,907) (80,911) (80,911)
--------------- --------------- --------------- ---------------
Net cash outflow from financing activities (69,820) (69,820) (48,370) (48,370)
========= ========= ========= =========
Decrease/(increase) in cash and cash equivalents (18,942) (19,118) 3,604 3,539
Cash and cash equivalents at start of the year 29,492 23,317 25,976 19,866
Effect of foreign exchange rate changes 62 62 (88) (88)
--------------- --------------- --------------- ---------------
Cash and cash equivalents at end of year 10,612 4,261 29,492 23,317
========= ========= ========= =========
Comprised of:
Cash and cash equivalents 10,612 4,261 29,492 23,317
--------------- --------------- --------------- ---------------
10,612 4,261 29,492 23,317
========= ========= ========= =========
Notes to the financial statements for the year ended 31 December 2023
1. Principal activity
The principal activity of the Company is that of an investment trust company
within the meaning of Section 1158 of the Corporation Tax Act 2010. The
Company was incorporated in England on 28 October 1993 and this is the 30th
Annual Report.
The principal activity of the subsidiary, BlackRock World Mining Investment
Company Limited, is investment dealing.
2. Material accounting policies
The material accounting policies adopted by the Group and Company have been
applied consistently, other than where new policies have been adopted and are
set out below.
(a) Basis of preparation
On 31 December 2020, International Financial Reporting Standards (IFRS) as
adopted by the European Union at that date were brought into UK law and became
UK-adopted International Accounting Standards (IAS), with future changes being
subject to endorsement by the UK Endorsement Board and with the requirements
of the Companies Act 2006 as applicable to companies reporting under those
standards.
The Group and Company financial statements have been prepared under the
historic cost convention modified by the revaluation of certain financial
assets and financial liabilities held at fair value through profit or loss and
in accordance with UK-adopted IAS. The Company has taken advantage of the
exemption provided under Section 408 of the Companies Act 2006 not to publish
its individual Statement of Comprehensive Income and related notes. All of the
Group’s operations are of a continuing nature.
Insofar as the Statement of Recommended Practice (SORP) for investment trust
companies and venture capital trusts, issued by the Association of Investment
Companies (AIC) in October 2019 and updated in July 2022, is compatible with
UK-adopted IAS, the financial statements have been prepared in accordance with
guidance set out in the SORP.
Substantially all of the assets of the Group consist of securities that are
readily realisable and, accordingly, the Directors believe that the Group has
adequate resources to continue in operational existence for the foreseeable
future for the period to 31 March 2024, being a period of at least twelve
months from the date of approval of the financial statements and therefore
consider the going concern assumption to be appropriate. The Directors have
reviewed compliance with the covenants associated with the bank overdraft
facility, loan facility, income and expense projections and the liquidity of
the investment portfolio in making their assessment.
The Directors have considered the impact of climate change on the value of the
investments included in the financial statements and have concluded that:
· there was no further impact of climate change to be considered as the
investments are valued based on market pricing as required by IFRS 13; and
· the risk is adequately captured in the assumptions and inputs used in
measurement of Level 3 assets, as noted in note 18 of the Financial
Statements.
None of the Group's other assets and liabilities were considered to be
potentially impacted by climate change.
The Group’s financial statements are presented in Sterling, which is the
currency of the primary economic environment in which the Group operates. All
values are rounded to the nearest thousand pounds (£’000) except where
otherwise indicated.
Adoption of new and amended International Accounting Standards and
interpretations:
IFRS 9 – Fees in the ’10 per cent’ Test for Derecognition of Financial
Liabilities (effective 1 January 2022). The International Accounting Standards
Board (IASB) has amended IFRS 9 Financial Instruments to clarify the fees that
a company includes when assessing whether the terms of a new or modified
financial liability are substantially different from the terms of the original
financial liability.
IFRS 17 – Insurance contracts (effective 1 January 2023). This standard
replaces IFRS 4, which currently permits a wide range of accounting practices
in accounting for insurance contracts. IFRS 17 will fundamentally change the
accounting by all entities that issue insurance contracts and investment
contracts with discretionary participation features.
IAS 12 – Deferred tax related to assets and liabilities arising from a
single transaction (effective 1 January 2023). The IASB has amended IAS 12
Income Taxes to require companies to recognise deferred tax on particular
transactions that, on initial recognition, give rise to equal amounts of
taxable and deductible temporary differences. According to the amended
guidance, a temporary difference that arises on initial recognition of an
asset or liability is not subject to the initial recognition exemption if that
transaction gave rise to equal amounts of taxable and deductible temporary
differences. These amendments might have a significant impact on the
preparation of financial statements by companies that have substantial
balances of right-of-use assets, lease liabilities, decommissioning,
restoration and similar liabilities. The impact for those affected would be
the recognition of additional deferred tax assets and liabilities.
IAS 8 – Definition of accounting estimates (effective 1 January 2023). The
IASB has amended IAS 8 Accounting Policies, Changes in Accounting Estimates
and Errors to help distinguish between accounting policies and accounting
estimates, replacing the definition of accounting estimates.
IAS 1 and IFRS Practice Statement 2 – Disclosure of accounting policies
(effective 1 January 2023). The IASB has amended IAS 1 Presentation of
Financial Statements to help preparers in deciding which accounting policies
to disclose in their financial statements by stating that an entity is now
required to disclose material accounting policies instead of significant
accounting policies.
IAS 12 – International Tax Reform Pillar Two Model Rules (effective 1
January 2023). The IASB has published amendments to IAS 12 Income Taxes to
respond to stakeholders’ concerns about the potential implications of the
imminent implementation of the OECD pillar two rules on the accounting for
income taxes. The amendment is an exception to the requirements in IAS 12 that
an entity does not recognise and does not disclose information about deferred
tax assets as liabilities related to the OECD pillar two income taxes and a
requirement that current tax expenses must be disclosed separately to pillar
two income taxes.
Relevant International Accounting Standards that have yet to be adopted:
IAS 1 – Classification of liabilities as current or non-current (effective 1
January 2024). The IASB has amended IAS 1 Presentation of Financial Statements
to clarify its requirement for the presentation of liabilities depending on
the rights that exist at the end of the reporting period. The amendment
requires liabilities to be classified as non current if the entity has a
substantive right to defer settlement for at least 12 months at the end of the
reporting period. The amendment no longer refers to unconditional rights.
IAS 1 – Non-current liabilities with covenants (effective 1 January 2024).
The IASB has amended IAS 1 Presentation of Financial Statements to introduce
additional disclosures for liabilities with covenants within 12 months of the
reporting period. The additional disclosures include the nature of covenants,
when the entity is required to comply with covenants, the carrying amount of
related liabilities and circumstances that may indicate that the entity will
have difficulty complying with the covenants.
None of the standards that have been issued, but are not yet effective, are
expected to have a material impact on the Group.
(b) Basis of consolidation
The Group’s financial statements are made up to 31 December each year and
consolidate the financial statements of the Company and its wholly owned
subsidiary, which is registered and operates in England and Wales, BlackRock
World Mining Investment Company Limited (together ‘the Group’). The
subsidiary company is not considered an investment entity. In the financial
statements of the Parent Company, the investment in the subsidiary company is
held at fair value.
Subsidiaries are consolidated from the date of their acquisition, being the
date on which the Company obtains control, and continue to be consolidated
until the date that such control ceases. The financial statements of
subsidiaries used in the preparation of the consolidated financial statements
are based on consistent accounting policies. All intra-group balances and
transactions, including unrealised profits arising therefrom, are eliminated.
(c) Presentation of the Statement of Comprehensive Income
In order to better reflect the activities of an investment trust company and
in accordance with guidance issued by the AIC, supplementary information which
analyses the Consolidated Statement of Comprehensive Income between items of a
revenue and a capital nature has been presented alongside the Consolidated
Statement of Comprehensive Income.
(d) Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business being investment business.
(e) Income
Dividends receivable on equity shares are recognised as revenue for the year
on an ex-dividend basis. Where no ex-dividend date is available, dividends
receivable on or before the year end are treated as revenue for the year.
Provision is made for any dividends and interest income not expected to be
received. Special dividends, if any, are treated as a capital or a revenue
receipt depending on the facts or circumstances of each particular case. The
return on a debt security is recognised on a time apportionment basis so as to
reflect the effective yield on the debt security. Interest income and deposit
interest is accounted for on an accruals basis.
Options may be purchased or written over securities held in the portfolio for
generating or protecting capital returns, or for generating or maintaining
revenue returns. Where the purpose of the option is the generation of income,
the premium is treated as a revenue item. Where the purpose of the option is
the maintenance of capital, the premium is treated as a capital item.
Option premium income is recognised as revenue evenly over the life of the
option contract and included in the revenue account of the Consolidated
Statement of Comprehensive Income unless the option has been written for the
maintenance and enhancement of the Group’s investment portfolio and
represents an incidental part of a larger capital transaction, in which case
any premia arising are allocated to the capital account of the Consolidated
Statement of Comprehensive Income.
Royalty income from contractual rights is measured at the fair value of the
consideration received or receivable where the Investment Manager can reliably
estimate the amount, pursuant to the terms of the agreement. Royalty income
from contractual rights received comprises of a return of income and a return
of capital based on the underlying cost of the contract and, accordingly, the
return of income element is taken to the revenue account and the return of
capital element is taken to the capital account. These amounts are disclosed
in the Consolidated Statement of Comprehensive Income within income from
investments and net profit on investments held at fair value through profit or
loss, respectively.
The useful life of the contractual rights will be determined by reference to
the contractual arrangements, the planned mine life on commencement of mining
and the underlying cost of the contractual rights will be revalued on a
systematic basis using the units of production method over the life of the
contractual rights which is estimated using available estimated proved and
probable reserves specifically associated with the mine. The Investment
Manager relies on public disclosures for information on proven and probable
reserves from the operators of the mine. Amortisation rates are adjusted on a
prospective basis for all changes to estimates of the life of contractual
rights and iron ore reserves. These are disclosed in the Consolidated
Statement of Comprehensive Income within net profit on investments held at
fair value through profit or loss.
Where the Group has elected to receive its dividends in the form of additional
shares rather than in cash, the cash equivalent of the dividend is recognised
as income. Any excess in the value of the shares received over the amount of
the cash dividend is recognised in capital.
Underwriting commission receivable is taken into account on an accruals basis.
(f) Expenses
All expenses, including finance costs, are accounted for on an accruals basis.
Expenses have been charged wholly to the revenue account of the Consolidated
Statement of Comprehensive Income, except as follows:
· expenses which are incidental to the acquisition or sale of an investment
are charged to the capital account of the Consolidated Statement of
Comprehensive Income. Details of transaction costs on the purchases and sales
of investments are disclosed within note 10 to the financial statements on in
the Annual Report and Financial Statements;
· expenses are treated as capital where a connection with the maintenance or
enhancement of the value of the investments can be demonstrated; and
· the investment management fee and finance costs have been allocated 75% to
the capital account and 25% to the revenue account of the Consolidated
Statement of Comprehensive Income in line with the Board’s expectations of
the long-term split of returns, in the form of capital gains and income,
respectively, from the investment portfolio.
(g) Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax. The tax currently payable is based on the taxable profit for the year.
Taxable profit differs from net profit as reported in the Consolidated
Statement of Comprehensive Income because it excludes items of income or
expenses that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group’s liability for
current tax is calculated using tax rates that were applicable at the balance
sheet date.
Where expenses are allocated between capital and revenue accounts, any tax
relief in respect of the expenses is allocated between capital and revenue
returns on the marginal basis using the Company’s effective rate of
corporation tax for the accounting period.
Deferred taxation is recognised in respect of all temporary differences that
have originated but not reversed at the financial reporting date, where
transactions or events that result in an obligation to pay more taxation in
the future or right to pay less taxation in the future have occurred at the
financial reporting date. This is subject to deferred taxation assets only
being recognised if it is considered more likely than not that there will be
suitable profits from which the future reversal of the temporary differences
can be deducted. Deferred taxation assets and liabilities are measured at the
rates applicable to the legal jurisdictions in which they arise.
(h) Investments held at fair value through profit or loss
In accordance with IFRS 9, the Group classifies its investments at initial
recognition as held at fair value through profit or loss and are managed and
evaluated on a fair value basis in accordance with its investment strategy and
business model.
All investments, including contractual rights, are measured initially and
subsequently at fair value through profit or loss. Purchases of investments
are recognised on a trade date basis. Contractual rights are recognised on the
completion date, where a purchase of the rights is under a contract, and are
initially measured at fair value excluding transaction costs. Sales of
investments are recognised at the trade date of the disposal.
The fair value of the financial investments is based on their quoted bid price
at the financial reporting date, without deduction for the estimated future
selling costs. This policy applies to all current and non-current asset
investments held by the Group.
The gains and losses from changes in fair value of contractual rights are
taken to the Consolidated Statement of Comprehensive Income and arise as a
result of the revaluation of the underlying cost of the contractual rights,
changes in commodity prices and changes in estimates of proven and probable
reserves specifically associated with the mine.
Under IAS, the investment in the subsidiary in the Company’s Statement of
Financial Position is fair valued which is deemed to be the net asset value of
the subsidiary.
Changes in the value of investments held at fair value through profit or loss
and gains and losses on disposal are recognised in the Consolidated Statement
of Comprehensive Income as ‘Net profit on investments held at fair value
through profit or loss’. Also included within the heading are transaction
costs in relation to the purchase or sale of investments.
For all financial instruments not traded in an active market, the fair value
is determined by using various valuation techniques. Valuation techniques
include market approach (i.e., using recent arm’s length market transactions
adjusted as necessary and reference to the current market value of another
instrument that is substantially the same) and the income approach (i.e.,
discounted cash flow analysis and option pricing models making as much use of
available and supportable market data where possible). See note 2(q) below.
(i) Options
Options are held at fair value through profit or loss based on the bid/offer
prices of the options written to which the Group is exposed. The value of the
option is subsequently marked-to-market to reflect the fair value through
profit or loss of the option based on traded prices. Where the premium is
taken to the revenue account, an appropriate amount is shown as capital return
such that the total return reflects the overall change in the fair value of
the option. When an option is exercised, the gain or loss is accounted for as
a capital gain or loss. Any cost on closing out an option is transferred to
the revenue account along with any remaining unamortised premium.
(j) Other receivables and other payables
Other receivables and other payables do not carry any interest and are
short-term in nature and are accordingly stated on an amortised cost basis.
(k) Dividends payable
Under IAS, final dividends should not be accrued in the financial statements
unless they have been approved by shareholders before the financial reporting
date. Interim dividends should not be recognised in the financial statements
unless they have been paid.
Dividends payable to equity shareholders are recognised in the Consolidated
and Parent Company Statements of Changes in Equity.
(l) Foreign currency translation
Transactions involving foreign currencies are converted at the rate ruling at
the date of the transaction. Foreign currency monetary assets and liabilities
and non-monetary assets held at fair value are translated into Sterling at the
rate ruling on the financial reporting date. Foreign exchange differences
arising on translation are recognised in the Consolidated Statement of
Comprehensive Income as a revenue or capital item depending on the income or
expense to which they relate. For investment transactions and investments held
at the year end, denominated in a foreign currency, the resulting gains or
losses are included in the profit/(loss) on investments held at fair value
through profit or loss in the Consolidated Statement of Comprehensive Income.
(m) Cash and cash equivalents
Cash comprises cash in hand, bank overdrafts and on demand deposits. Cash
equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash and that are subject to an insignificant
risk of changes in value. Bank overdrafts are shown separately on the
Consolidated and Parent Company Statements of Financial Position.
(n) Bank borrowings
Bank overdrafts and loans are recorded at the net proceeds received. Finance
charges, including any premium payable on settlement or redemption and direct
issue costs, are accounted for on an accruals basis in the Consolidated
Statement of Comprehensive Income using the effective interest rate method and
are added to the carrying amount of the instrument to the extent that they are
not settled in the period in which they arise.
(o) Offsetting
Financial assets and financial liabilities are offset and the net amount
reported in the Consolidated and Parent Company Statements of Financial
Position if there is a currently enforceable legal right to offset the
recognised amounts and there is an intention to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
(p) Share repurchases, share reissues and new share issues
Shares repurchased and subsequently cancelled – share capital is reduced by
the nominal value of the shares repurchased and the capital redemption reserve
is correspondingly increased in accordance with Section 733 of the Companies
Act 2006. The full cost of the repurchase is charged to the special reserve.
Shares repurchased and held in treasury – the full cost of the repurchase is
charged to the special reserve.
Where treasury shares are subsequently reissued:
· amounts received to the extent of the repurchase price are credited to the
special reserve and capital reserves based on a weighted average basis of
amounts utilised from these reserves on repurchases; and
· any surplus received in excess of the repurchase price is taken to the
share premium account.
Where new shares are issued, amounts received to the extent of any surplus
received in excess of the par value are taken to the share premium account.
Share issue costs are charged to the share premium account. Costs on share
reissues are charged to the special reserve and capital reserves.
(q) Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates and assumptions will, by definition, seldom equal the
related actual results. Estimates and judgements are regularly evaluated and
are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.
The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year are addressed below.
Fair value of unquoted financial instruments
When the fair values of financial assets and financial liabilities recorded in
the Consolidated and Parent Company Statements of Financial Position cannot be
derived from active markets, their fair value is determined using a variety of
valuation techniques that include the use of valuation models.
(a) The fair value of the BHP Brazil contractual rights was assessed by an
independent valuer with a recognised and relevant professional qualification.
The inputs to these models are taken from observable markets where possible,
but where this is not feasible, estimation is required in establishing fair
values. The estimates include considerations of production profiles, commodity
prices, cash flows and discount rates. Changes in assumptions about these
factors could affect the reported fair value of financial instruments in the
Consolidated and Parent Company Statements of Financial Position and the level
where the instruments are disclosed in the fair value hierarchy. To assess the
significance of a particular input to the entire measurement, the external
valuer performs sensitivity analysis.
(b) The fair value of the investment in equity shares of Jetti Resources and
MCC Mining were assessed by an independent valuer with a recognised and
relevant professional qualification.
The valuation is carried out based on market approach using earnings multiple
and price of recent transactions. Changes in assumptions about these factors
could affect the reported fair value of financial instruments in the
Consolidated and Parent Company Statements of Financial Position and the level
where the instruments are disclosed in the fair value hierarchy. To assess the
significance of a particular input to the entire measurement, the external
valuer performs sensitivity analysis.
(c) The investment in the subsidiary company was valued based on the net
assets of the subsidiary company, which is considered appropriate based on the
nature and volume of transactions in the subsidiary company.
The key assumptions used to determine the fair value of the unquoted financial
instruments and sensitivity analyses are provided in note 18(d).
3. Income
2023 2022
£’000 £’000
Investment income:
UK dividends 8,647 17,536
UK special dividends – 2,167
Overseas dividends 33,457 45,094
Overseas special dividends 17,736 3,808
Income from contractual rights (BHP Brazil Royalty) 4,186 3,096
Income from Vale debentures 2,608 3,863
Income from fixed income investments 1,683 2,523
--------------- ---------------
Total investment income 68,317 78,087
========= =========
Other income:
Option premium income 5,964 7,297
Deposit interest 678 513
Broker interest received 104 18
Stock lending income 81 81
--------------- ---------------
6,827 7,909
========= =========
Total income 75,144 85,996
========= =========
During the year, the Group received option premium income in cash totalling
£6,724,000 (2022: £7,541,000) for writing put and covered call options for
the purposes of revenue generation.
Option premium income is amortised evenly over the life of the option contract
and, accordingly, during the year, option premiums of £5,964,000 (2022:
£7,297,000) were amortised to revenue.
At 31 December 2023, there were three open positions (2022: three) with an
associated liability of £1,401,000 (2022: £1,227,000).
Dividends and interest received in cash during the year amounted to
£59,542,000 and £5,159,000 (2022: £68,630,000 and £5,918,000).
Special dividends of £630,000 have been recognised in capital during the year
(2022: £811,000).
4. Investment management fee
2023 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment management fee 2,374 7,317 9,691 2,615 8,031 10,646
--------------- --------------- --------------- --------------- --------------- ---------------
Total 2,374 7,317 9,691 2,615 8,031 10,646
========= ========= ========= ========= ========= =========
The investment management fee (which includes all services provided by
BlackRock) is 0.80% of the Company’s gross assets (subject to certain
adjustments). During the year, £9,421,000 (2022: £9,848,000) of the
investment management fee was generated from net assets and £270,000 (2022:
£798,000) from the gearing effect on gross assets due to the quarter–on–
quarter increase in the NAV per share for the year as set out below:
Quarter end Cum income Quarterly Gearing effect
NAV per share increase/ on management
(pence) (decrease) % fees (£’000)
31 December 2021 622.21 – –
31 March 2022 769.58 +23.7 267
30 June 2022 584.86 -24.0 –
30 September 2022 602.65 +3.0 294
31 December 2022 688.35 +14.2 237
31 March 2023 664.51 -3.5 –
30 June 2023 612.72 -7.8 –
30 September 2023 601.47 -1.8 –
31 December 2023 606.78 +0.9 270
========= ========= =========
The daily average of the net assets under management during the year ended 31
December 2023 was £1,203,977,000 (2022: £1,232,043,000).
The fee is allocated 25% to the revenue account and 75% to the capital account
of the Consolidated Statement of Comprehensive Income.
There is no additional fee for company secretarial and administration
services.
5. Other operating expenses
2023 2022
£’000 £’000
Allocated to revenue:
Custody fee 109 101
Auditors’ remuneration:
– audit services 55 51
– non-audit services 1 9 9
Registrar’s fee 86 86
Directors’ emoluments 2 179 197
AIC fees 21 21
Broker fees 25 24
Depositary fees 116 116
FCA fee 40 30
Directors’ insurance 22 23
Marketing fees 144 132
Stock exchange fees 52 37
Legal and professional fees 147 35
Bank facility fees 3 85 97
Printing and postage fees 55 47
Directors’ search fees 25 –
Write back of prior year expenses 4 – (55)
Other administrative costs 108 86
--------------- ---------------
1,278 1,037
========= =========
Allocated to capital:
Transaction charges 5 15 28
--------------- ---------------
1,293 1,065
========= =========
2023 2022
The Company’s ongoing charges 6 , calculated as a percentage of average daily net assets and using the management fee and all other operating expenses, excluding finance costs, direct transaction costs, transaction charges, VAT recovered, taxation, prior year expenses written back and certain non-recurring items were: 0.91% 0.95%
========= =========
The Company’s ongoing charges 6 , calculated as a percentage of average daily gross assets and using the management fee and all other operating expenses, excluding finance costs, direct transaction costs, transaction charges, VAT recovered, taxation, prior year expenses written back and certain non-recurring items were: 0.81% 0.84%
========= =========
1 Fees paid to the auditors for non-audit services of £9,350 excluding VAT
(2022: £8,925) relate to the review of the Condensed Half Yearly Financial
Report.
2 Details of the Directors’ emoluments can be found in the Directors’
Remuneration Report in the Annual Report and Financial Statements. The Company
has no employees.
3 There is a 4 basis point facility fee chargeable on the full loan facility
whether drawn or undrawn.
4 No expenses have been written back during the year (2022: Directors'
expenses, miscellaneous fees, legal fees and professional services fees).
5 For the year ended 31 December 2023, expenses of £15,000 (2022: £28,000)
were charged to the capital account of the Consolidated Statement of
Comprehensive Income. These include transaction costs charged by the custodian
on sale and purchase trades.
6 Alternative Performance Measure, see Glossary in the Annual Report and
Financial Statements.
6. Finance costs
2023 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Interest paid on bank loans 2,370 7,151 9,521 1,177 3,505 4,682
Interest paid on bank overdraft 5 15 20 5 15 20
--------------- --------------- --------------- --------------- --------------- ---------------
Total 2,375 7,166 9,541 1,182 3,520 4,702
========= ========= ========= ========= ========= =========
7. Dividends
Dividends paid on equity shares:
Record date Payment date 2023 2022
£’000 £’000
Final dividend of 23.50p per share for the year ended 31 December 2022 (2021: 27.00p) 10 March 2023 26 April 2023 44,392 49,898
1st interim dividend of 5.50p per share for the year ended 31 December 2023 (2022: 5.50p) 5 May 2023 31 May 2023 10,485 10,251
2nd interim dividend of 5.50p per share for the year ended 31 December 2023 (2022: 5.50p) 8 September 2023 6 October 2023 10,515 10,381
3rd interim dividend of 5.50p per share for the year ended 31 December 2023 (2022: 5.50p) 24 November 2023 22 December 2023 10,515 10,381
--------------- ---------------
75,907 80,911
========= =========
The total dividends payable in respect of the year ended 31 December 2023
which form the basis of Section 1158 of the Corporation Tax Act 2010 and
Section 833 of the Companies Act 2006, and the amounts declared, meet the
relevant requirements as set out in this legislation.
Dividends paid or declared on equity shares:
2023 2022
£’000 £’000
1st quarterly interim dividend of 5.50p per share for the year ended 31 December 2023 (2022: 5.50p) 10,485 10,251
2nd quarterly interim dividend of 5.50p per share for the year ended 31 December 2023 (2022: 5.50p) 10,515 10,381
3rd quarterly interim dividend of 5.50p per share for the year ended 31 December 2023 (2022: 5.50p) 10,515 10,381
Final dividend of 17.00p per share for the year ended 31 December 2023 (2022: 23.50p) 32,501 44,392
--------------- ---------------
64,016 75,405
========= =========
1 Based on 191,183,036 ordinary shares in issue on 7 March 2024.
8. Consolidated earnings and net asset value per ordinary share
Total revenue, capital (loss)/earnings and net asset value per ordinary share
are shown below and have been calculated using the following:
2023 2022
Net revenue profit attributable to ordinary shareholders (£’000) 64,691 76,013
Net capital (loss)/profit attributable to ordinary shareholders (£’000) (143,676) 126,407
----------------- -----------------
Total (loss)/profit attributable to ordinary shareholders (£’000) (78,985) 202,420
========== ==========
Equity shareholders’ funds (£’000) 1,160,051 1,299,285
The weighted average number of ordinary shares in issue during the year on which the earnings per ordinary share was calculated was: 190,564,324 186,868,187
The actual number of ordinary shares in issue at the year end on which the net asset value per ordinary share was calculated was: 191,183,036 188,753,036
Earnings per ordinary share
Revenue earnings per share (pence) – basic and diluted 33.95 40.68
Capital (loss)/earnings per share (pence) – basic and diluted (75.40) 67.64
----------------- -----------------
Total (loss)/earnings per share (pence) – basic and diluted (41.45) 108.32
========== ==========
As at As at
31 December 31 December
2023 2022
Net asset value per ordinary share (pence) 606.78 688.35
Ordinary share price (pence) 587.00 697.00
========= =========
9. Called up share capital
Ordinary shares Treasury shares Total shares Nominal
in issue number number value
number £’000
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 5p each
At 31 December 2022 188,753,036 4,258,806 193,011,842 9,651
Ordinary shares reissued from treasury 2,430,000 (2,430,000) – –
----------------- ----------------- ----------------- -----------------
At 31 December 2023 191,183,036 1,828,806 193,011,842 9,651
========== ========== ========== ==========
During the year ended 31 December 2023 the Company:
– did not buy back shares into treasury (2022: none);
– reissued 2,430,000 shares (2022: 5,071,920 shares) from treasury for a
net consideration after costs of £15,658,000 (2022: £34,902,000).
Since the year end and up to 7 March 2024, the Company has not reissued or
bought back any shares.
10. Reserves
Group Share Capital Special Capital Capital Revenue
premium redemption reserve reserve reserve reserve
account reserve £’000 arising on arising on £’000
£’000 £’000 investments revaluation
sold of
£’000 investments
held
£’000
At 31 December 2022 148,107 22,779 180,736 428,323 440,514 69,175
Movement during the year:
Total comprehensive income/(loss):
Net profit/(loss) for the year – – – 82,077 (225,753) 64,691
Transactions with owners, recorded directly to equity:
Ordinary shares reissued from treasury 3,386 – 12,305 – – –
Share reissue costs – – (33) – – –
Dividends paid – – – – – (75,907)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2023 151,493 22,779 193,008 510,400 214,761 57,959
========= ========= ========= ========= ========= =========
Distributable reserves
Company Share Capital Special Capital Capital Revenue
premium redemption reserve reserve reserve reserve
account reserve £’000 arising on arising on £’000
£’000 £’000 investments revaluation
sold of
£’000 investments
held
£’000
At 31 December 2022 148,107 22,779 180,736 426,822 447,745 63,445
Movement during the year:
Total comprehensive income/(loss):
Net profit/(loss) for the year – – – 82,077 (225,577) 64,515
Transactions with owners, recorded directly to equity:
Ordinary shares reissued from treasury 3,386 – 12,305 – – –
Share reissue costs – – (33) – – –
Dividends paid – – – – – (75,907)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2023 151,493 22,779 193,008 508,899 222,168 52,053
========= ========= ========= ========= ========= =========
Group Share Capital Special Capital Capital Revenue
premium redemption reserve reserve reserve reserve
account reserve £’000 arising on arising on £’000
£’000 £’000 investments revaluation
sold of
£’000 investments
held
£’000
At 31 December 2021 138,818 22,779 155,123 345,594 396,836 74,073
Movement during the year:
Total comprehensive income:
Net profit for the year – – – 82,729 43,678 76,013
Transactions with owners, recorded directly to equity:
Ordinary shares reissued from treasury 9,289 – 25,683 – – –
Share reissue costs – – (70) – – –
Dividends paid – – – – – (80,911)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2022 148,107 22,779 180,736 428,323 440,514 69,175
========= ========= ========= ========= ========= =========
Distributable reserves
Company Share Capital Special Capital Capital Revenue
premium redemption reserve reserve reserve reserve
account reserve £’000 arising on arising on £’000
£’000 £’000 investments revaluation
sold of
£’000 investments
held
£’000
At 31 December 2021 138,818 22,779 155,123 344,093 404,014 68,396
Movement during the year:
Total comprehensive income:
Net profit for the year – – – 82,729 43,731 75,960
Transactions with owners, recorded directly to equity:
Ordinary shares reissued from treasury 9,289 – 25,683 – – –
Share reissue costs – – (70) – – –
Dividends paid – – – – – (80,911)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2022 148,107 22,779 180,736 426,822 447,745 63,445
========= ========= ========= ========= ========= =========
Pursuant to a resolution of the Company passed at an Extraordinary General
Meeting on 13 January 1998 and following the Company’s application to the
Court for cancellation of its share premium account, the Court approval was
received on 27 January 1999 and £157,633,000 was transferred from the share
premium account to a special reserve which is a distributable reserve.
The share premium account and capital redemption reserve are not distributable
reserves under the Companies Act 2006. In accordance with ICAEW Technical
Release 02/17BL on Guidance on Realised and Distributable Profits under the
Companies Act 2006, the special reserve and capital reserves of the Parent
Company may be used as distributable reserves for all purposes and, in
particular, the repurchase by the Parent Company of its ordinary shares and
for payments such as dividends. In accordance with the Company’s Articles of
Association, the special reserve, capital reserves and the revenue reserve may
be distributed by way of dividend. The Parent Company’s capital gains of
£731,067,000 (2022: £874,567,000) comprise a gain on the capital reserve
arising on investments sold of £508,899,000 (2022: £426,822,000), a gain on
the capital reserve arising on revaluation of listed investments of
£189,283,000 (2022: £409,037,000) revaluation gains on unquoted investments
of £25,478,000 (2022: £31,477,000) and a revaluation gain on the investment
in the subsidiary of £7,407,000 (2022: gain of £7,231,000). The capital
reserve arising on the revaluation of listed investments of £189,165,000
(2022: £409,037,000) is subject to fair value movements and may not be
readily realisable at short notice; as such it may not be entirely
distributable. The investments are subject to financial risks, as such capital
reserves (arising on investments sold) and the revenue reserve may not be
entirely distributable if a loss occurred during the realisation of these
investments. The reserves of the subsidiary company are not distributable
until distributed as a dividend to the Parent Company.
11. Valuation of financial instruments
Financial assets and financial liabilities are either carried in the
Consolidated and Parent Company Statements of Financial Position at their fair
value (investment and derivatives) or at amortised cost (due from brokers,
dividends and interest receivable, due to brokers, accruals, cash at bank and
bank overdrafts). IFRS 13 requires the Group to classify fair value
measurements using a fair value hierarchy that reflects the significance of
inputs used in making the measurements. The valuation techniques used by the
Group are explained in the accounting policies note 2(h) to the Financial
Statements above.
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset.
The fair value hierarchy has the following levels:
Level 1 – Quoted market price for identical instruments in active markets
A financial instrument is regarded as quoted in an active market if quoted
prices are readily available from an exchange, dealer, broker, industry group,
pricing service or regulatory agency and those prices represent actual and
regularly occurring market transactions on an arm’s length basis. The Group
does not adjust the quoted price for these instruments.
Level 2 – Valuation techniques using observable inputs
This category includes instruments valued using quoted prices for similar
instruments in markets that are considered less than active, or other
valuation techniques where all significant inputs are directly or indirectly
observable from market data.
Valuation techniques used for non-standardised financial instruments such as
options, currency swaps and other over-the-counter derivatives include the use
of comparable recent arm’s length transactions, reference to other
instruments that are substantially the same, discounted cash flow analysis,
option pricing models and other valuation techniques commonly used by market
participants making the maximum use of market inputs and relying as little as
possible on entity specific inputs.
Over-the-counter derivative option contracts have been classified as Level 2
investments as their valuation has been based on market observable inputs
represented by the underlying quoted securities to which these contracts
expose the Group.
Level 3 – Valuation techniques using significant unobservable inputs
This category includes all instruments where the valuation technique includes
inputs not based on market data and these inputs could have a significant
impact on the instrument’s valuation.
This category also includes instruments that are valued based on quoted prices
for similar instruments where significant entity determined adjustments or
assumptions are required to reflect differences between the instruments and
instruments for which there is no active market. The Investment Manager
considers observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not proprietary,
and provided by independent sources that are actively involved in the relevant
market.
The level in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the lowest level
input that is significant to the fair value measurement. If a fair value
measurement uses observable inputs that require significant adjustment based
on unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value measurement
requires judgement, considering factors specific to the asset or liability
including an assessment of the relevant risks including but not limited to
credit risk, market risk, liquidity risk, business risk and sustainability
risk. The determination of what constitutes ‘observable’ inputs requires
significant judgement by the Investment Manager and these risks are adequately
captured in the assumptions and inputs used in measurement of Level 3 assets
or liabilities.
Valuation process and techniques for Level 3 valuations
(a) BHP Brazil Royalty
The Directors engage a mining consultant, an independent valuer with a
recognised and relevant professional qualification, to conduct a periodic
valuation of the contractual rights and the fair value of the contractual
rights is assessed with reference to relevant factors. At the reporting date
the income streams from contractual rights have been valued on the net present
value of the pre-tax cash flows discounted at a rate the external valuer
considers reflects the risk associated with the project. The valuation model
uses discounted cash flow analysis which incorporates both observable and
non-observable data. Observable inputs include assumptions regarding current
rates of interest and commodity prices. Unobservable inputs include
assumptions regarding production profiles, price realisations, cost of capital
and discount rates. In determining the discount rate to be applied, the
external valuer considers the country and sovereign risk associated with the
project, together with the time horizon to the commencement of production and
the success or failure of projects of a similar nature. To assess the
significance of a particular input to the entire measurement, the external
valuer performs a sensitivity analysis. The external valuer has undertaken an
analysis of the impact of using alternative discount rates on the fair value
of contractual rights.
This investment in contractual rights is reviewed regularly to ensure that the
initial classification remains correct given the asset’s characteristics and
the Group’s investment policies. The contractual rights are initially
recognised using the transaction price as it was indicative of the best
evidence of fair value at acquisition and are subsequently measured at fair
value, taking into consideration the relevant IFRS 13 requirements. In
arriving at their estimates of market values, the valuers have used their
market knowledge and professional judgement. The Group classifies the fair
value of this investment as Level 3.
Valuations are the responsibility of the Directors of the Company. In arriving
at a final valuation, the Directors consider the independent valuer’s
report, the significant assumptions used in the fair valuation and the review
process undertaken by BlackRock’s Pricing Committee. The valuation of
unquoted investments is performed on a quarterly basis by the Investment
Manager and reviewed by the Pricing Committee of the Manager. On a quarterly
basis the Investment Manager will review the valuation of the contractual
rights and inputs for significant changes. A valuation of contractual rights
is performed annually by an external valuer, SRK Consulting (UK) Limited, and
reviewed by the Pricing Committee of the Manager. The valuations are also
subject to quality assurance procedures performed within the Pricing
Committee. On a semi-annual basis, after the checks above have been performed,
the Investment Manager presents the valuation results to the Directors. This
includes a discussion of the major assumptions used in the valuations. There
were no changes in valuation techniques during the year.
(b) Jetti Resources and MCC Mining equity shares
The fair value of the investment equity shares of Jetti Resources and MCC
Mining were assessed by an independent valuer with a recognised and relevant
professional qualification. The valuation is carried out based on market
approach using earnings multiple and price of recent transactions. Changes in
assumptions about these factors could affect the reported fair value of
financial instruments in the Consolidated and Parent Company Statements of
Financial Position and the level where the instruments are disclosed in the
fair value hierarchy. To assess the significance of a particular input to the
entire measurement, the external valuer performs a sensitivity analysis.
Fair values of financial assets and financial liabilities
The table below sets out fair value measurements using the IFRS 13 fair value
hierarchy.
Financial assets/(liabilities) at fair value through profit or loss Level 1 Level 2 Level 3 Total
at 31 December 2023 – Group £’000 £’000 £’000 £’000
Assets:
Equity investments 1,193,969 – 32,695 1,226,664
Fixed income securities 16,924 36,516 – 53,440
Investment in contractual rights – – 18,316 18,316
--------------- --------------- --------------- ---------------
Total assets 1,210,893 36,516 51,011 1,298,420
========= ========= ========= =========
Liabilities:
Derivative financial instruments – written options – (1,401) – (1,401)
--------------- --------------- --------------- ---------------
Total 1,210,893 35,115 51,011 1,297,019
========= ========= ========= =========
Financial assets/(liabilities) at fair value through profit or loss Level 1 Level 2 Level 3 Total
at 31 December 2022 – Group £’000 £’000 £’000 £’000
Assets:
Equity investments 1,250,984 9 35,692 1,286,685
Fixed income securities 68,894 48,066 – 116,960
Investment in contractual rights – – 21,199 21,199
--------------- --------------- --------------- ---------------
Total assets 1,319,878 48,075 56,891 1,424,844
========= ========= ========= =========
Liabilities:
Derivative financial instruments – written options – (1,227) – (1,227)
--------------- --------------- --------------- ---------------
Total 1,319,878 46,848 56,891 1,423,617
========= ========= ========= =========
Financial assets/(liabilities) at fair value through profit or loss Level 1 Level 2 Level 3 Total
at 31 December 2023 – Company £’000 £’000 £’000 £’000
Assets:
Equity investments 1,193,969 – 40,102 1,234,071
Fixed income securities 16,924 36,516 – 53,440
Investment in contractual rights – – 18,316 18,316
--------------- --------------- --------------- ---------------
Total assets 1,210,893 36,516 58,418 1,305,827
========= ========= ========= =========
Liabilities:
Derivative financial instruments – written options – (1,401) – (1,401)
--------------- --------------- --------------- ---------------
Total 1,210,893 35,115 58,418 1,304,426
========= ========= ========= =========
Financial assets/(liabilities) at fair value through profit or loss Level 1 Level 2 Level 3 Total
at 31 December 2022 – Company £’000 £’000 £’000 £’000
Assets:
Equity investments 1,250,984 9 42,923 1,293,916
Fixed income securities 68,894 48,066 – 116,960
Investment in contractual rights – – 21,199 21,199
--------------- --------------- --------------- ---------------
Total assets 1,319,878 48,075 64,122 1,432,075
========= ========= ========= =========
Liabilities:
Derivative financial instruments – written options – (1,227) – (1,227)
--------------- --------------- --------------- ---------------
Total 1,319,878 46,848 64,122 1,430,848
========= ========= ========= =========
A reconciliation of fair value measurement in Level 3 is set out below.
Level 3 Financial assets at fair value through profit or loss Group Company
at 31 December
2023 2022 2023 2022
£’000 £’000 £’000 £’000
Opening fair value 56,891 33,413 64,122 40,591
Return of capital – royalty (497) (267) (497) (267)
Additions at cost – 20,106 – 20,106
Transfer of equities from Level 1 to Level 3 – 2 – 2
Conversion of equity and transfer to Level 1 – (2,546) – (2,546)
Conversion of convertible bonds to equity and transfer to Level 2 – (10,160) – (10,160)
Transfer of equities and convertible bonds to Level 2 – (19,305) – (19,305)
Total profit or loss included in net profit on investments in the Consolidated Statement of Comprehensive Income:
– assets transferred to Level 1 during the period – 169 – 169
– assets transferred to Level 2 during the period – 14,212 – 14,212
– assets held at the end of the period (5,383) 21,267 (5,207) 21,320
--------------- --------------- --------------- ---------------
Closing balance 51,011 56,891 58,418 64,122
========= ========= ========= =========
The Level 3 valuation process and techniques used are explained in the
accounting policies in note 2(h). A more detailed description of the
techniques is found under ‘Valuation process and techniques’ for Level 3
valuations.
The Level 3 investments as at 31 December 2023 in the table that follows
relate to the BHP Brazil Royalty, convertible bonds and equity shares of Jetti
Resources and MCC Mining. In accordance with IFRS 13, these investments were
categorised as Level 3.
In arriving at the fair value of the BHP Brazil Royalty, the key inputs are
the underlying commodity prices and illiquidity discount. In arriving at the
fair value of Jetti Resources and MCC Mining securities, the key inputs are
shown in the Annual Report and Financial Statements.
The Level 3 valuation process and techniques used by the Company are explained
in the accounting policies in notes 2(h) and 2(q) and a detailed explanation
of the techniques is also available under ‘Valuation process and
techniques’.
The Lifezone SPAC Pipe commitment held at nil value as at 31 December 2022 was
transferred to Level 1 on completion of the merger transaction and the
successful initial public offering during the year.
Quantitative information of significant unobservable inputs – Level 3 –
Group and Company
The significant unobservable inputs used in the fair value measurement
categorised within Level 3 of the fair value hierarchy, together with an
estimated quantitative sensitivity analysis, as at 31 December 2023 and 31
December 2022 are as shown below.
Description As at Valuation Unobservable Range of Reasonable Impact on
31 December technique input weighted possible fair value
2023 average shift 1 +/-
£’000 inputs
BHP Brazil Royalty 18,316 Discounted Discounted rate– 5.0% – 8.0% 1.0% £1.0m
cash flows weighted average
cost
of capital
Average US$1,706– 10.0% £1.8m
gold prices US$1,780
per ounce
Average US$8,397– 10.0% £1.2m
copper prices US$8,469
per tonne
Jetti Resources 27,204 Market Earnings multiple 6.00x 5.0% £1.4m
approach
MCC Mining 5,491 Market Price of recent 5.0% £0.3m
approach transaction
Polyus – Listing
suspended
– valued
at nominal
US$0.01
Polymetal International – Delisted –
valued at
nominal
US$0.01
---------------
Total 51,011
=========
1 The sensitivity analysis refers to a percentage amount added or deducted
from the input and the effect this has on the fair value.
Description As at Valuation Unobservable Range of Reasonable Impact on
31 December technique input weighted possible fair value
2022 average shift 1 +/-
£’000 inputs
OZ Minerals Brazil Royalty 21,199 Discounted Discounted rate– 5.0% – 8.0% 1.0% £1.0m
cash flows weighted average
cost
of capital
Average US$1,400– 10.0% £1.5m
gold prices US$1,600
per ounce
Average US$7,209– 10.0% £1.0m
copper prices US$8,510
per tonne
Jetti Resources 29,873 Market Earnings multiple 5.93x 5.0% £0.6m
approach
MCC Mining 5,819 Market Price of recent 5.0% £0.3m
approach transaction
Lifezone commitment (see Note 21) –
Polyus – Listing
suspended
– valued
at nominal
US$0.01
---------------
Total 56,891
=========
1 The sensitivity analysis refers to a percentage amount added or deducted
from the input and the effect this has on the fair value.
The sensitivity impact on fair value is calculated based on the sensitivity
estimates set out by the independent valuer in its report on the valuation of
contractual rights. Significant increases/(decreases) in estimated commodity
prices and discount rates in isolation would result in a significantly
higher/(lower) fair value measurement. Generally, a change in the assumption
made for the estimated value is accompanied by a directionally similar change
in the commodity prices and discount rates.
For exchange listed equity investments, the quoted price is the bid price.
Substantially, all investments are valued based on unadjusted quoted market
prices. Where such quoted prices are readily available in an active market,
such prices are not required to be assessed or adjusted for any price related
risks, including climate risk, in accordance with the fair value related
requirements of the Company’s financial reporting framework.
(e) Capital management policies and procedures
The Group’s capital management objectives are:
– to ensure it will be able to continue as a going concern; and
– to achieve a balanced return of dividends and capital growth over the
longer term, by investing primarily in securities of companies in the mining
and metals sectors.
This is to be achieved through an appropriate balance of equity capital and
gearing. The Company operates a flexible gearing policy which depends on
prevailing conditions. The policy is that debt should not be more than 25% of
the Group’s net assets.
The Group’s total invested capital at 31 December 2023 was £1,309,879,000
(2022: £1,458,068,000) comprising of bank loans and an overdraft of
£149,828,000 (2022: £158,783,000) and equity shares, capital and reserves of
£1,160,051,000 (2022: £1,299,285,000).
Under the terms of the overdraft and loan facility agreement, the Group’s
total indebtedness shall at no time exceed £230 million or 25% of the
Group’s net asset value (whichever is the lowest).
The cash and bank overdraft accounts of the Company and subsidiary in the same
currency are managed under a compensated group arrangement and are therefore
presented on a net basis in the Group financial statements.
The Board with the assistance of the Investment Manager monitors and reviews
the broad structure of the Group’s capital on an ongoing basis. This review
includes:
– the planned level of gearing, which takes into account the Investment
Manager’s view on the market; and
– the need to buy back equity shares, either for cancellation or to be held
in treasury, which takes account of the difference between the NAV per share
and the share price (i.e. the level of share price discount or premium).
The Group is subject to externally imposed capital requirements:
– as a public company, the Group has a minimum share capital of £50,000;
and
– in order to be able to pay dividends out of profits available for
distribution, the Group has to be able to meet one of the two capital
restrictions tests imposed on investment companies by law.
During the year, the Group complied with the externally imposed capital
requirements to which it was subject.
12. Transactions with the Investment Manager and AIFM
BlackRock Fund Managers Limited (BFM) provides management and administration
services to the Company under a contract which is terminable on six months’
notice. BFM has (with the Group’s consent) delegated certain portfolio and
risk management services, and other ancillary services to BlackRock Investment
Management (UK) Limited (BIM (UK)). Further details of the investment
management contract are disclosed in the Directors’ Report in the Annual
Report and Financial Statements.
The investment management fee due for the year ended 31 December 2023 amounted
to £9,691,000 (2022: £10,646,000). At the year end, £7,262,000 was
outstanding in respect of the management fee (2022: £5,443,000).
In addition to the above services, BIM (UK) has provided the Group with
marketing services. The total fees paid or payable for these services for the
year ended 31 December 2023 amounted to £144,000 excluding VAT (2022:
£132,000). Marketing fees of £55,000 were outstanding as at 31 December 2023
(2022: £62,000).
The ultimate holding company of the Manager and the Investment Manager is
BlackRock, Inc., a company incorporated in Delaware, USA.
13. Related party disclosure
Directors’ emoluments
At the date of this report, the Board consists of five non-executive
Directors, all of whom are considered to be independent of the Manager by the
Board. Following the conclusion of the Annual General Meeting on 9 May 2024,
the Board will consist of five non-executive Directors.
Disclosures of the Directors’ interests in the ordinary shares of the
Company and fees and expenses payable to the Directors are set out in the
Directors’ Remuneration Report in the Annual Report and Financial
Statements. As at 31 December 2023, £17,000 (2022: £16,000) was outstanding
in respect of Directors’ fees.
Significant holdings
The following investors are:
a. funds managed by the BlackRock Group or are affiliates of BlackRock Inc.
(Related BlackRock Funds); or
b. investors (other than those listed in (a) above) who held more than 20% of
the voting shares in issue in the Company and are, as a result, considered to
be related parties to the Company (Significant Investors).
As at 31 December 2023
Total % of shares held by Related Total % of shares held by Significant Number of Significant Investors who
BlackRock Funds Investors who are not affiliates of are not affiliates of BlackRock Group or
BlackRock Group or BlackRock, Inc. BlackRock, Inc.
1.29 n/a n/a
As at 31 December 2022
Total % of shares held by Related Total % of shares held by Significant Number of Significant Investors who
BlackRock Funds Investors who are not affiliates of are not affiliates of BlackRock Group or
BlackRock Group or BlackRock, Inc. BlackRock, Inc.
2.27 n/a n/a
14. Capital commitment
There was no capital commitment at 31 December 2023 (2022: one commitment for
US$10,000,000 in relation to the SPAC PIPE commitment for investment in
Lifezone SPAC).
15. Publication of non statutory accounts
The financial information contained in this announcement does not constitute
statutory accounts as defined in the Companies Act 2006. The Annual Report and
Financial Statements for the year ended 31 December 2023 will be filed with
the Registrar of Companies after the Annual General Meeting.
The figures set out above have been reported upon by the auditor, whose report
for the year ended 31 December 2023 contains no qualification or statement
under Section 498(2) or (3) of the Companies Act 2006.
The comparative figures are extracts from the audited financial statements of
BlackRock World Mining Trust plc and its subsidiary for the year ended 31
December 2022, which have been filed with the Registrar of Companies. The
report of the auditor on those financial statements contained no qualification
or statement under Section 498 of the Companies Act 2006.
16. Annual Report and Financial Statements
Copies of the Annual Report and Financial Statements will be published shortly
and will be available from the registered office, c/o The Secretary, BlackRock
World Mining Trust plc, 12 Throgmorton Avenue, London EC2N 2DL.
17. Annual General Meeting
The Annual General Meeting of the Company will be held at 12 Throgmorton
Avenue, London EC2N 2DL on Thursday, 9 May 2024 at 11.30 a.m.
The Annual Report and Financial Statements will also be available on the
BlackRock website at www.blackrock.com/uk/brwm. Neither the contents of the
website nor the contents of any website accessible from hyperlinks on the
website (or any other website) is incorporated into, or forms part of, this
announcement.
For further information, please contact:
Charles Kilner, Director, Closed End Funds, BlackRock Investment Management
(UK) Limited – Tel: 020 7743 3000
Evy Hambro, Fund Manager, BlackRock Investment Management (UK) Limited –
Tel: 020 7743 3000
Emma Phillips, Media & Communications, BlackRock Investment Management (UK)
Limited – Tel: 020 7743 2922
Press enquires:
Ed Hooper, Lansons Communications
Tel: 020 7294 3616
E-mail: BlackRockInvestmentTrusts@lansons.com or EdH@lansons.com
7 March 2024
12 Throgmorton Avenue
London EC2N 2DL
ENDS
Release (https://mb.cision.com/Main/22397/3942649/2655912.pdf)
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