REG-BlackRock World Mng: Final Results
08/03/2022 07:15
BlackRock World Mining Trust plc LEI - LNFFPBEUZJBOSR6PW155
Annual Results Announcement (Article 4 Transparency Directive, DTR 4.1)
for the year ended 31 December 2021
PERFORMANCE RECORD
31 December 2021 31 December 2020
Net assets (£’000)¹ 1,142,874 930,825
Net asset value per ordinary share (NAV) (pence) 622.21 536.34
Ordinary share price (mid-market) (pence) 589.00 522.00
Reference Index (2)– net total return 5,258.16 4,566.93
Discount to net asset value (3) 5.3% 2.7%
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Performance (with dividends reinvested)
Net asset value per share (3) +20.7% +31.8%
Ordinary share price (3) +17.5% +46.7%
Reference Index (2) +15.1% +20.6%
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Year ended 31 December 2021 Year ended 31 December 2020 Change %
Revenue
Net revenue profit after taxation (£’000) 78,910 35,451 +122.6
Revenue return per ordinary share (pence) (4) 43.59 20.40 +113.7
--------------- --------------- ---------------
Dividends per ordinary share (pence)
– 1st interim 4.50 4.00 +12.5
– 2nd interim 5.50 4.00 +37.5
– 3rd interim 5.50 4.00 +37.5
– Final 27.00 8.30 +225.3
Total dividends paid and payable 42.50 20.30 +109.4
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(1) The change in net assets reflects market
movements, dividends paid and the buyback and reissue of ordinary shares
during the year.
(2) MSCI ACWI Metals & Mining 30% Buffer 10/40
Index (net total return).
(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
· Record total dividend +109.4%
· NAV per share total return +20.7%(1)
· Share price total return +17.5%(1)
PERFORMANCE
I am delighted to be able to report on another excellent year for your
Company.
Over the twelve months to 31 December 2021, the Company’s net asset value
per share (NAV) returned +20.7%(1) (31 December 2020: 31.8%(1)) and the share
price +17.5%(1) (31 December 2020: 46.7%(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 +15.1%, the FTSE All-Share
Index returned +18.3% and the UK Consumer Price Index (CPI) increased by 5.4%.
The average prices achieved for almost all commodities during the year, and
base metals in particular, were substantially ahead of 2020’s levels and
these helped drive this year’s exceptional growth in revenue. This was the
standout feature of the year and has resulted in total dividends increasing by
176.3% compared to last year.
NAV growth, after a strong first half, was more subdued in the final two
quarters, largely reflecting a deceleration in economic growth in China and
concerns surrounding elements of the property development sector there.
A detailed commentary on the portfolio’s performance, its positioning, and
how Environmental Social and Governance (ESG) factors impact on investment
selection, can be found in the Investment Manager’s Report, alongside the
investment outlook for the forthcoming year. Since the year end and up until
the close of business on 2 March 2022, the Company’s NAV has increased by
20.2% and the share price has increased by 28.7%.
OVERVIEW
The themes which have characterised the sector in recent years continue to
apply. Strong capital discipline has limited new supply at a time when
government stimulus, including through infrastructure spending in the US and
Europe, has boosted demand. In many sectors of the economy, increased demand
has been met with bottlenecks, as post lockdown activity has picked up,
leading to disruptions in supply chains and, often, higher prices.
In the mining sector the dynamic looks more structural. The obstacles to
bringing on new supply have increased, with greater focus on the environmental
and social impact of new mining activity, including factors such as water
availability and usage. These increase the return hurdles required to justify
new investment. In addition, the grades from existing mines have often
continued to decline as the mines mature and forecasts of production output in
recent years have also generally been too optimistic. On the demand side, the
pressing need to decarbonise economic activity in forthcoming decades will
create further pressure on all commodities associated with the electrification
of energy production and transportation, such as copper, nickel, lithium and
cobalt.
Progress has also been made this year in how leading mining companies have
responded to the challenge of improving their ESG credentials and your
Investment Manager addresses this in their report.
REVENUE RETURN AND DIVIDENDS
The Company’s revenue return per share for the year amounted to 43.59p
compared with 20.40p for the previous year, representing an increase of
113.7%.
During the year, three quarterly interim dividends of 4.50p, 5.50p and 5.50p
per share were paid on 25 June 2021, 24 September 2021 and 24 December 2021.
The Board is proposing a final dividend payment of 27.00p per share for the
year ended 31 December 2021. This, together with the quarterly interim
dividends, makes a total of 42.50p per share (2020: 20.30p per share)
representing an increase of 109.4% on payments made in the previous financial
year and, 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 19 May 2022 to shareholders on the Company’s register on 18 March
2022, the ex-dividend date being 17 March 2022.
It has been an exceptional year for dividend receipts. The Company’s income
is highly dependent on the dividends paid by the companies it invests in. It
should not be assumed that the very high level of these dividends will
continue this year or that the Company’s revenue return, and accordingly the
Company’s total dividends, will be at the same level as last year. It
remains the Board’s intention to seek to distribute substantially all of the
Company’s available income in the future.
DISCOUNT CONTROL
The Board recognises the importance to investors that the market price of the
Company’s shares should not trade at a significant discount to the
underlying NAV. Accordingly, the Board monitors the Company’s discount to
NAV and will look to buy back shares in normal market conditions if it is
deemed to be in shareholders’ interests. During the year, a total of 69,698
shares were purchased at a price of 560.76p per share for a total cost of
£393,000. All shares have been placed in treasury.
I am pleased to report that in the first half of the year the Company’s
shares were trading at a premium and the Company was able to reissue
10,200,000 ordinary shares from treasury for a net consideration of
£63,187,000 at an average price of 619.48p per share and an average 0.9%
premium to NAV. Since the year end and up to 2 March 2022, a further 875,000
ordinary shares have been reissued from treasury for a total consideration net
of costs of £6,281,000. As at 2 March 2022 the premium stood at 1.4%.
Resolutions to renew the authorities to issue and buy back shares will be put
to shareholders at the forthcoming Annual General Meeting.
ESG INTEGRATION AND SOCIALLY RESPONSIBLE INVESTMENT
As a Board we are conscious that ESG criteria are increasingly at the
forefront of investors’ minds. Given the nature of mining as an industry,
your Board has a strong focus on ESG and believes that it is important that
our Company’s investee companies operate in a responsible and sustainable
way having regard to the interests of all their stakeholders, whether these
are shareholders, employees, customers, regulators or suppliers. The Board is
also aware that ESG issues and risks must be considered when investing in the
Natural Resources sector and, as a general approach, the Company will not
invest in companies which the Investment Manager considers to have high ESG
risks and no plans to address existing deficiencies.
Our Manager, BlackRock, has an Investment Stewardship team which is
responsible for protecting and enhancing the value of your Company’s
investments through engagement with companies to encourage business and
management practices that support sustainable financial performance over the
long term. Further information can be found in the Strategic Report below.
ANNUAL GENERAL MEETING
The Company’s Annual General Meeting (AGM) will be held at the offices of
BlackRock at 12 Throgmorton Avenue, London EC2N 2DL on Friday, 6 May 2022 at
11.30 a.m. Details of the business of the meeting are set out in the Notice of
Meeting in the Annual Report and Financial Statements.
At present UK Government restrictions on public gatherings are no longer in
force in connection with COVID-19 and the AGM can be held in the normal way
with physical attendance by shareholders. However, shareholders should be
aware that it is possible that such restrictions could be reimposed prior to
the date of the AGM. In such event, these restrictions could mean that the AGM
is required to be held as a closed meeting as happened last year with physical
attendance limited to only a small number of attendees comprising the required
quorum for the meeting and those persons whose attendance is necessary for the
conduct of the meeting, and that any other persons will be refused entry.
Accordingly, all shareholders are recommended to vote by proxy in advance of
the AGM and to appoint the Chairman of the meeting as their proxy. This will
ensure that shareholders’ votes will be counted even if they (or any
appointed proxy) are not able to attend. All votes will be taken by poll so
that all proxy votes are counted. Appointing a proxy does not prevent a
shareholder attending the AGM in person.
The Company may impose entry restrictions on persons wishing to attend the AGM
(including, if required, refusing entry) in order to secure the orderly
conduct of the AGM and the safety of the attendees. All shareholders intending
to attend should either be fully vaccinated or obtain a negative COVID-19 test
result before entering the venue. Negative test results must be obtained no
earlier than one day before entering the venue and fully vaccinated
shareholders are also strongly encouraged to get tested. Shareholders who have
recovered from COVID-19 for 90 days from the date of their infection are
exempt from the above.
Attendees will also be required to wear a face covering at all times within
the venue except when seated in the relevant meeting room. Shareholders are
also requested not to attend the AGM if they have tested positive for COVID-19
in the 10 days prior to the AGM, are experiencing new or worsening COVID-19
related symptoms, have been in close contact with anyone who is experiencing
symptoms or has contracted COVID-19 during the 10 days prior to the AGM or are
required to self-isolate pursuant to UK Government guidance.
OUTLOOK
In the short term our Investment Manager is optimistic that the Chinese
economy is now accelerating again after the dip seen in the second half of
last year and metals and mining stocks have certainly made a strong start to
2022. Although the risk of further disruption from new COVID-19 variants
cannot be ruled out, the most recent news on the milder impact of the Omicron
variant has been encouraging. Last year’s exceptional growth in revenue is
unlikely to be repeated, but our Investment Manager remains optimistic about
the sector’s prospects in the medium term.
Much of the new demand for metals over the last two decades resulted from the
urbanisation of the Chinese economy. It is possible that the drive to
decarbonise economic activity will have a similar long-term structural impact.
It may also be the case that the investment required to supply the raw
materials for this transformation will sustain prices for longer than in
previous cycles; higher prices will be needed to provide the incentive to
invest to meet this demand.
Last year’s COP26 climate conference in Glasgow brought home the urgency of
the need for radical action to tackle global warming. As your Investment
Manager points out, the holdings in your Company will play a huge part in
supplying the raw materials necessary for the world to transition to net zero
by 2050. This imperative, and a return to sustainable economic growth
following the pandemic, provide strong underpinning for your Company’s
prospects.
At the time of writing geopolitical tensions remain very high following
Russia's invasion of Ukraine. As at 3 March 2022, 0.1% of net assets (with a
value of £1.7 million) was in securities with exposure to companies whose
principal activities are in Russia. BlackRock also announced on Monday, 28
February 2022, that it had suspended the purchase of all Russian securities in
its active and index funds.
The appalling humanitarian consequences of the war are already evident. It is
too early to assess the long-term implications of these events but it seems
inevitable that they will lead to higher volatility in commodity prices and
likely that they will add to short-term concerns on inflation.
DAVID CHEYNE
Chairman
7 March 2022
(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
PORTFOLIO PERFORMANCE
The last few years have been tremendous for the resources sector and in turn
for the Company. We are pleased to report that 2021 was another year of
positive returns but sadly not as much as expected given the stark difference
between the first half of the year and the second. It really was a year of two
halves as seen in the chart on page 9 of the Annual Report and Financial
Statements. During first six months of the year ended 31 December 2021, the
NAV of the Company returned +17.4% with dividends reinvested and the share
price total return was +18.9%. This compares to a NAV and share price total
return of 2.8% and -1.2% for the second half of 2021. There is more detail on
the reasons behind this later in the report but, in summary, the huge moves
early in the year were met with a softening in demand, especially for iron ore
in China, as well as profit taking in other commodities.
2021 was a very eventful year. Ongoing COVID-19 related disruptions were ever
present with waves of, at first, the Delta variant and then the Omicron
variant as the year drew to a close. In addition, the global economy was
impacted by supply chain issues, especially for semi-conductor chips, which
pulled back Gross Domestic Product (GDP) growth from the elevated levels seen
at the start of the year. Despite these challenges, the resources sector
benefited from margin expansion as commodity prices rose faster than
inflation. Capital discipline by and large remained in place, aside from a
handful of new projects, leaving shareholders to benefit from record levels of
dividends and share buy backs.
For the year as a whole, the NAV total return of the Company was up by 20.7%
(31 December 2020: 31.8%) with dividends reinvested and the share price total
return was up by 17.5% (31 December 2020: 46.7%). This compares to the FTSE
100 Index total return which was up by 18.4%, the UK Consumer Price Index
(CPI) increase of 5.4% and the Company’s Reference Index, the MSCI ACWI
Metals & Mining 30% Buffer 10/40 Index (net total return), which was up by
15.1% (all numbers are in British Pound Sterling terms).
ONGOING RECOVERY
Following the COVID-19 related economic impacts seen in 2020, this year was a
reversal from those lows. Economic growth around the world bounced back
sharply on the back of accommodative financial policies put in place by
Governments during the prior year. Business support packages covered
disruption, lowered tax rates and for some people there was wage protection.
These were combined with record low interest rates and increased access to
government backed finance schemes. The end result was a huge increase in
liquidity across the world which muted the worst of the economic downturn
caused by COVID-19.
These measures have played out in a whole range of ways. One has been the
repricing of assets such as property, commodities, equities, art and other
tangible investments that should preserve purchasing power through time. The
shortage of income has led to investors paying higher prices for securities
that offer income as well as premiums for growth businesses. The prospect of
inflation on the back of loose monetary policy also saw a huge rally in index
linked bonds and this even flowed through into the crypto currency space with
bitcoin and other virtual assets moving to record high prices. At the other
end of the scale, government bonds seem to have ended a multi decade bull
market as the prospect of interest rate increases loom in 2022 and beyond.
The moves in financial assets have masked other consequences from COVID-19.
The huge drop in oil demand as economic activity collapsed only added to the
existing Environment Social and Governance (ESG) related pressure for
producers to reduce investment in future supply. This tightened up the market
to such an extent that when demand recovered in 2021 prices soared due to the
lack of spare capacity in the market. Many commodities are now out of balance,
with deficits commonplace across the market and prices reflecting the
situation.
ESG INTEGRATION AND THE SOCIAL LICENCE TO OPERATE
During the last two years we have made specific mention of the way in which
the Company manages risks related to ESG and the social licence to operate.
These have been covered in other parts of the Annual Report but for reference
the text below sets the framework for how this is done:
“As part of BlackRock’s structured investment process, ESG risks and
opportunities (including sustainability/climate risk) are considered within
our fundamental analysis of companies and industries and we work closely with
BlackRock’s Investment Stewardship team (BIS) to assess the governance
quality of companies and investigate any potential issues, risks or
opportunities.
As part of our approach to ESG integration, we use ESG information when
conducting research and due diligence on new investments and again when
monitoring investments in the portfolio.
As an extractive industry the mining sector naturally faces a number of ESG
challenges. However, we feel the sector can also provide benefits to society
through the provision of critical infrastructure, taxes and employment to
local communities, and enabling the carbon transition through the production
of sustainable metals.”
As part of our commitment to consideration of ESG information and risks as
being integral to our investment process to build and manage the portfolio:
· As a general approach, the Company will not invest in
companies which have high ESG risks and which we consider to have no plans to
address existing deficiencies.
· We are also challenging the executives of the portfolio
companies in which we invest to set out how their current business plans are
compatible with achieving a net zero carbon emissions economy by 2050.
· There will be cases where a serious event has occurred and,
in that case, we will assess whether the investee company is taking
appropriate action to resolve matters before deciding what to do.
· There will be companies which have derated on the back of an
ESG event or generally poor ESG practices and there may be opportunities to
invest at a discounted price. However, we will only invest in these
value-based opportunities if we are satisfied that there is evidence that the
company’s culture has changed and that better operating practices have been
put in place.
During the year the main areas of focus remained on ESG issues relating to Rio
Tinto, Norilsk Nickel and Vale. The Investment Manager engages with these
portfolio companies and the Board receives regular updates at its meetings. By
way of an update:
Rio Tinto – during the year the company made progress on announcing new CEO
and CFO positions, as well as adding heritage expertise to the board. In
December 2021, Dominic Barton was appointed as Chairman and he is expected to
start in the second quarter of 2022. The company also published a
comprehensive external review of its workplace culture, commissioned as part
of its commitment to ensure sustained cultural change across its global
operations.
Norilsk Nickel – the company had a number of new environmental issues and
fatalities. The Company exited its holding in March 2021 despite the strong
outlook for the commodities that the company produces.
Vale – the company has continued its journey to raise its ESG profile
following the tragic tailings related events from the last decade. On the
Governance front, a new Board was elected including the appointment of Ollie
Olivera who left the Board of the Company to join Vale as a non-executive
director.
31 December 2021 % Change in 2021 % Change average prices 2021 vs 2020
Commodity
Gold US$/ounce 1,822 -4.0 1.7
Silver US$/ounce 23 -11.8 22.5
Platinum US$/ounce 959 -10.8 23.3
Palladium US$/ounce 1,973 -16.8 9.4
Copper US$/pound 4.42 25.7 50.6
Nickel US$/pound 9.47 26.1 33.7
Aluminium US$/pound 1.27 42.2 45.1
Zinc US$/pound 1.63 31.5 32.5
Lead US$/pound 1.06 18.3 20.5
Tin US$/pound 17.86 91.6 88.9
Iron Ore (China 62% fines) US$/tonne 215.5 -23.9 47.7
Thermal Coal (fob Newcastle) US$/tonne 176.6 101.3 127.3
Metallurgical Coal US$/tonne 342.0 237.0 76.2
Lithium (Battery Grade China) US$/kilogram 35.95 453.1 107.7
West Texas Intermediate Oil (Cushing) US$/barrel 75.21 55.8 72.1
========= ========= =========
Sources: Datastream and Bloomberg.
STAND OUT YEAR
At the half year stage we wrote about the clean sweep of price rises and,
despite some falls in the second half, the average prices for the year, the
most important thing for earnings, have been stunning across the board. This
year we have seen new highs in nine commodities: iron ore US$233/tonne,
thermal coal US$270/tonne fob Newcastle, copper US$11,300/tonne, tin
US$41,118/tonne, bauxite US$63/tonne, palladium US$2,985/ounce, lithium
spodumene US$1,525/tonne, hard coking coal US$346/tonne fob and U.S.
hot-rolled coil steel US$1,960/tonne. Iron ore has subsequently fallen back
and is now lower than in 2020.
Within the commodities suite, base metals have seen huge rises with copper the
standout for the Company’s portfolio given the large weighting to companies
like Freeport-McMoRan, First Quantum Minerals and Sociedad Minera Cerro Verde.
However, other commodities have been equally strong, such as zinc and nickel.
Even the more unexciting metals such as aluminium delivered significant
increases. All of these moves should feed through into the full year earnings
and, as mentioned earlier, if they hold up in 2022 should help to mitigate the
impact of lower iron ore prices when it comes to dividends.
Precious metals were generally a lot weaker in the second half of 2021,
continuing the downtrend from the peaks that were reached during the prior
twelve months. In particular, gold has failed to regain ground despite the
supportive macro backdrop of rising inflation and low interest rates. In the
Platinum Group Metals (PGM) space, prices softened as automotive producers had
to cut output on the back of the semi-conductor chip shortages.
As mentioned in the Interim Report, steel is a key exposure for the Company
with large holdings in European and US steel producers. Record prices were
reached over the summer months and the associated huge margins caused share
prices to move higher. It is pleasing to see most of the steel manufacturing
companies in the portfolio continue to be disciplined in allocating capital
despite some peers reverting back to old ways. It is our hope that this trend
continues, as the value accretion from share buybacks is enormous given where
the shares are trading.
INCOME, INCOME AND MORE INCOME
In last year’s Annual Report and again in the Interim Report we flagged the
prospect that the Company was well placed to receive record levels of income
given the excellent pay-outs being made by the underlying holdings. We are
delighted to report that this has played out even better than expected. The
chart on page 12 of the Annual Report and Financial Statements highlights the
121.5% growth in income received this year versus prior years, as well as
showing how it has changed by each source. Not only has there been tremendous
growth in ordinary dividends, but special dividends also increased
substantially.
The key reason for the income growth has been dividends from the large
diversified mining companies which benefited from much higher iron ore prices
than expected. Given that prices today are lower than the average realisations
received during 2021, it is likely that they will not be able to match the
dividends paid last year. However, the outlook is bright for other parts of
the portfolio such as copper names. Copper miners who have spent years paying
down debt or spending on new mines now seem to have dealt with these cash
consuming constraints leaving them free to boost shareholder returns in 2022.
One example is Freeport-McMoRan which restarted dividends in 2021, raised them
at the end of the year and announced a new policy which gives it flexibility
to boost them should prices remain at levels in excess of its needs. We hope
that other base metal producers which have historically shied away from
dividends follow this lead and reward their shareholders now that producers
are benefiting from these windfalls.
DECARBONISATION, A MULTI DECADE DRIVER FOR THE SECTOR
Decarbonising power, industrial manufacturing, transportation and food is a
key structural trend that will persist for decades to come. Over the twelve
months in the lead up to COP26 we saw announcements from major economies, most
notably China and the United States of America (USA), regarding their
commitment to reach net zero. The scale of investment required to meet this
goal is enormous, with commodities playing a key role in this transition.
From a mining sector perspective, we look at decarbonisation from two angles.
The first looks at the impact on demand for the various commodities and which
commodity markets will see significant change once carbon is appropriately
priced. The second area is how the mining sector is reducing emissions from
their own operations (scope 1 & 2 emissions), as well as their customers’
emissions (scope 3).
In our view, the market is underestimating the impact that the energy
transition will have on commodity markets, particularly on the supply side.
Copper, battery related materials (lithium, cobalt, nickel) and rare earths
are key beneficiaries. Each of these commodities will see significant demand
growth as renewable energy investment is increased, the grid is upgraded,
electric vehicle penetration grows and the requirement for battery storage
increases. Another interesting dynamic is the structural change we expect to
see in various commodity markets once carbon is appropriately priced. This is
most prevalent for the aluminium and steel industries given their energy
intensity. China’s steel industry alone accounts for 5% of global greenhouse
gas (GHG) emissions so it is imperative for these upstream sectors to be
addressed. As part of this transition, we expect older more pollutive capacity
to be curtailed which should improve industry structure and margins. As carbon
taxes are rolled out globally there will be clear winners and losers where
those companies with existing access to low carbon power such as Norsk Hydro
(1.6% of the portfolio)* or companies with superior decarbonisation technology
will benefit. Not only will these companies face less carbon taxes, but they
may also be able to charge premiums for their products given the demand for
low energy and sustainable materials by customers.
Over the last year we have seen mining companies articulate how they will
reduce their own emissions, with companies generally looking to reduce
emissions by 30% by 2030, with many targeting net zero by 2050. Over the next
decade, the reduction of emissions will be largely achieved by switching to a
renewable power source for mining fleets, transportation and parts of the
processing circuit. Beyond this it becomes more challenging to achieve net
zero emissions and will require advancement in technology in areas such as
green hydrogen for the hard to abate emissions. We are actively engaged with
management teams on these goals and the capital and returns associated with
it. Amongst the Company’s holdings, we view Australian based iron ore
producer Fortescue Metals Group and diversified miner Anglo American as
leading in this area.
BASE METALS
It was an exceptional year for the base metal complex with average prices
increasing by 20% to 50% and a new all-time high set for the copper price.
This year saw the strongest metal demand increase in history as global
industrial activity recovered, broad based supply issues, energy shortages and
low inventories kept physical markets tight with each of the base metals
finishing the year in a deficit market position. This is a feature of the
market not seen for a number of years and supports our conviction that
commodity prices will remain above market expectations for many years to come
due to structural supply constraints and global decarbonisation spending.
The first half of the year saw a very rapid increase in prices as China’s
COVID-19 related stimulus fed into the real economy via the property market
and broad-based infrastructure spending. The acceleration in Chinese demand
was not sustainable and during the second half of the year, the Chinese
Government put in a number of measures linked to the property sector, carbon
emissions and energy usage to slow activity down. As discussed further below,
this had a significant impact on the steel industry and in turn the iron ore
price. However, the base metal prices proved largely resilient with average
prices further increasing in the second half of the year. Part of this
resilience has been due to a pick-up in demand from the rest of the world,
namely the USA and Europe, creating a more diversified and robust demand
outlook in our view. Given the dominance of China on commodity markets for
much of the last two decades, as we look forwards towards the multi
trillion-dollar spending required to achieve net zero targets, we expect to
see more stable and resilient commodity demand which has the potential to
create a global capex cycle akin to what we saw in the early 2000s.
Copper was the standout commodity for the Company in 2021 finishing the year
up by 25.7%, with the average price 50% higher. After a very strong first
half, the copper price proved largely resilient despite weakness in China’s
property market highlighting tightness in the physical market with London
Metal Exchange (LME) inventories dropping to the lowest level on record
towards the end of the year. Copper is a clear beneficiary of the energy
transition with more than 65% of copper used for applications that deliver
electricity, whilst at the same time the industry is facing mine supply
challenges resulting in a material deficit in the market longer term. We have
consistently seen mine supply disappoint relative to market expectations and
to the best of our knowledge there were no new major greenfield copper
developments sanctioned in 2021 despite record high prices. The challenges to
mine supply are further exacerbated by increased resource nationalism, ESG
issues and permit requirements. Whilst we expect to see some mine supply
growth in 2022 through projects that the Company has exposure to, including
Ivanhoe Mines’ Kamoa-Kakula project in the Democratic Republic of Congo
(DRC), Anglo American’s Quellaveco project and Teck Resources Quebrada
Blanca Phase 2 (QB2) project, both in Chile, looking beyond that it is
challenging for us to see how future supply meets anticipated growth.
As at 31 December 2021, the Company had 21.4% of the portfolio exposed to
copper producing companies which significantly aided performance for the year.
The Company’s largest copper exposure, Freeport-McMoRan (6.2% of the
portfolio), continued to deliver operationally at Grasberg. This combined with
high copper prices has allowed Freeport-McMoRan to deleverage faster than
anticipated with the company increasing dividends and announcing a US$3
billion buyback in November. Among our other copper producers, Sociedad Minera
Cerro Verde (1.7% of the portfolio) was the Company’s largest contributor to
performance in 2021 with the shares up by 77% in US Dollar terms. Both volumes
and earnings at Sociedad Minera Cerro Verde recovered during the year leaving
it in a strong position to pay higher dividends going forward. We continue to
be impressed with the operational performance of Ivanhoe Mines (2.4% of the
portfolio), which has surpassed the market’s expectation of both the timing
and production level of its Kamoa-Kakula asset in the DRC. This underpins our
confidence in the management team’s ability to deliver value from its other
assets including the Western Forelands in the future. Among our smaller
holdings, Solaris Resources (1.5% of the portfolio) had an exceptional year
increasing by 178.6% where it continues to report exceptional drilling results
at its Warintza deposit in Ecuador which we believe has the potential to
attract significant mergers and acquisition (M&A) interest from the majors if
it starts to show Tier 1 characteristics.
Amongst the other base metals, the aluminium price was up by 42.2% benefiting
from strong demand, production caps in China and global smelter curtailments
due to rising energy costs. Aluminium, long regarded as the laggard amongst
the base metals, is going through a period of structural change we believe
with China reducing exports due to its greater focus on emissions and the
incorporation of carbon prices benefiting producers with renewable power
sources. The Company has direct exposure to this theme via its holding in
Norsk Hydro (1.6% of the portfolio), Alcoa (1.7% of the portfolio) and Rio
Tinto (4.2% of the portfolio) which all have hydro based aluminium production
and are poised to benefit in an environment of market-based carbon pricing.
The nickel market continued to tighten driven by strong stainless-steel demand
which (accounts for 70% of primary nickel demand), as well as improving
Electric Vehicle (EV) battery demand. We continue to see a tight market for
battery grade nickel given increasing EV demand and persistent supply
challenges to bring on battery grade nickel. Finally, zinc, which the Company
has exposure to via Teck Resources and Glencore, is likely to see the largest
metal deficit in 2022 as inventories have further declined on energy-linked
European smelter cuts.
BULK COMMODITIES AND STEEL
It was very much a year of two halves for the iron ore market with record
demand and prices translating into a new all-time high price for iron ore of
US$239/tonne in the first half as steel producers scrambled to access
material. However, it was a very different picture in the second half, as the
Chinese Government put in place a number of measures ranging from direct
output caps, emissions controls and energy restrictions to cool the economy
and ensure that steel production did not exceed 2020 levels. Weakness in the
Chinese property market and fears around the fallout from Evergrande
exacerbated the situation which ultimately saw the iron ore price fall by
US$120/tonne in the third quarter of 2021, with steel production finishing the
year at levels not seen since the lows of 2016. In response, major producer
Vale cut production of higher cost material which helped to stabilise the
market which, combined with weaker production from Rio Tinto, saw the iron ore
market finish in a less than feared surplus.
Recent commentary, focused on stabilising steel demand via property,
infrastructure and credit availability, is encouraging and our expectation is
that we will see a pick-up in steel demand post Chinese New Year and the
Beijing Winter Olympics. We believe the steel industry is on the cusp of
structural change with increased focus on carbon emissions from which, over
the next two decades, we expect to see reduced production from pollutive blast
furnace capacity transitioning towards lower carbon production (electric arc
furnaces and hydrogen-based production) which will reduce overcapacity,
improve margins and better position the industry once carbon taxes are
introduced. The Company is invested in those steel companies that are already
well positioned for this shift such as Nucor Corp (0.9% of the portfolio) and
Steel Dynamics (1.6% of the portfolio). The Company is also invested in
companies which have a first mover advantage such as ArcelorMittal (5.2% of
the portfolio) through its investment in decarbonisation technology over
recent years.
Coal markets have been some of the most interesting commodity markets over the
last couple of years, with record prices being achieved for both metallurgical
and thermal coal during the year. Tightness across coal markets has been
driven by significant supply side distortion with China banning imports of
Australian metallurgical and thermal coal, along with the spike in energy
prices which saw the benchmark Australian thermal coal price reach
US$270/tonne in October. Whilst coal (in particular thermal coal) faces
longer-term demand headwinds linked to decarbonisation of steel and power in
the near term, both markets face supply side shortages and a lack of
investment particularly for thermal coal, and with producers focused on
responsible run-off, may very well see the price exceed market expectations
for a period of time. The Company has no exposure to pure play thermal coal
producers, with thermal coal exposure limited to Glencore (7.7% of the
portfolio) which is focused on a managed decline of their thermal coal asset
base over time. Teck Resources (3.6% of the portfolio) is the Company’s
primary exposure to metallurgical coal, which has been able to take advantage
of the higher Chinese coking coal prices during the year given their Canadian
asset base.
PRECIOUS METALS
Unlike the recovery fuelled performance of the industrial metals, the precious
metals have remained largely rangebound in 2021, with the average gold price
1.7% higher than last year. The gold price continues to be driven by two
opposing forces: concerns over rising inflation and excessive government debt,
and on the other hand the impact of rate hikes with the US Federal Reserve
indicating in December that it will begin raising rates in March 2022 in an
effort to stem rising inflation. This is likely to see a strengthening US$
headwind to gold, but the key determinant of the gold price this year will be
whether rate hikes prove sufficient to cool inflation. If this is not the case
and inflation is more “persistent” and less “transitory”, we would
expect real rates to decline further creating a constructive backdrop for
gold. Typically, gold underperforms equities and the US Dollar heading into a
rate hike cycle, but outperforms thereafter giving us confidence in the
medium-term outlook for gold. While the silver price underperformed gold on a
year-to-date basis, declining by 11.8%, the average price year-on-year was
higher by 22.5% versus gold at +1.7%. We have seen a solid recovery in
silver’s industrial demand over the last year, with longer-term upside
potential from greater solar penetration and increasing usage of
semi-conductors.
An encouraging feature of the gold equity market over recent years has been
the increased focus on shareholder returns, with higher gold prices
translating into higher margins, free cash flow and dividends. This trend has
generally continued through 2021, albeit margins have been compressed through
rising cost inflation. The portfolio finished the year with 16.4% exposure to
gold equities, roughly half the peak exposure to gold equities in the first
half of 2020. The underperformance of the gold equities has been notable over
the last 18 months where we have maintained our strategy of focusing on
high-quality producers which we see as best positioned to weather cost
inflation and maintain production levels. Amongst our gold companies, Newmont
Corporation’s (3.5% of the portfolio) performance continues to stand out in
the sector, a reflection of its solid operational performance and cash return.
It has been a volatile year for the Platinum Group Metals (PGMs) with record
pricing for the PGM basket during the first half, to then face a downturn in
demand as the global chip shortage hit auto production towards the end of the
year. With 40% to 80% of PGM end-use linked to the auto industry, prices came
under significant pressure with the platinum price finishing the year -11%,
palladium -17% and rhodium -20%. We expect to see improved demand for PGMs
during the first half of 2022 as chip shortages ease and auto producers begin
re-stocking raw materials. Whilst a lack of supply growth and increased PGM
loadings on auto catalysts to meet rising emissions standards bodes well for
the PGMs, the industry faces the structural headwind of the shift in demand
from internal combustion engine vehicles to electric vehicles. The Company’s
exposure to PGMs is via Impala Platinum (1.1% of the portfolio), Northam
Platinum (1.2% of the portfolio), Sibanye Stillwater (0.8% of the portfolio)
and Anglo American (7.5% of the portfolio) through its 78.5% ownership of
Anglo Platinum. During the second half of the year, we saw a step-up in
mergers & acquisitions (M&A) activity amongst the group with Sibanye
Stillwater looking to further move into the battery materials space with the
acquisition of a historically challenged Brazilian copper and nickel asset,
whilst Northam Platinum and Impala Platinum entered into a bidding war for
Royal Bafokeng Platinum. These are worrying trends as investors had hoped that
strengthened balance sheets and improved free cash flow across the sector
would allow the producers to deliver on their commitment to return cash to
shareholders.
SUSTAINABLE METALS
The shift towards electric vehicles (EVs) continues to be one of the strongest
trends in global markets. The market is anticipated to grow more than ten-fold
by 2030 from 2020 levels, which creates opportunities for those companies
supplying the materials that enable the transition. The Company is well placed
to benefit from this given its exposure to the raw materials that go into EV
batteries and the e-motor.
Transportation was significantly impacted by the COVID-19 pandemic with global
passenger car sales falling 17% year-on-year in 2020. In 2021 car sales have
been constrained by supply chain semiconductor shortages, although there is
evidence of significant demand with price increases and shortages seen in the
second-hand market.
The level of demand and price action in lithium surprised even the most
optimistic of forecasters in 2021, with the Chinese Lithium Carbonate price
ending the year at US$43.7/kilogram, up by 429% year-on-year. 2021 saw 153%
growth in China for Battery and Plug-In EVs sales, up by 64% in Europe. We
ended 2021 with the EV share of new car sales standing at 19.3% in China and
31.1% in Europe. The US market remains a significant growth opportunity, with
sales lagging other markets like Europe and China and penetration rates at
6.2%. The Company has exposure to lithium via its holding in Sociedad Química
y Minera de Chile ADR (SQM) (1.0% of the portfolio) which is expected to
achieve higher pricing in 2022 due to the lagged nature of its contract
pricing structure, along with Sigma Lithium (0.4% of the portfolio), which is
developing a spodumene project in Brazil and has several supply agreements
including to LG Chem, the world’s no. 2 battery maker.
A critical component of the electric car is the e-motor, which most commonly
uses a Praseodymium-Neodymium (NdPr) magnet, an alloy of two rare earth
elements (REE). The increased demand for EVs has resulted in increasing demand
for NdPr, with the price up by 101% during 2021. REEs are commonly mined and
processed in China and have been deemed of strategic importance by both Europe
and the USA. The Company has exposure to REE through Lynas Corporation (1.4%
of the portfolio), a REE miner and processor crucially based in Malaysia and
Australia. In 2021 Lynas Corporation's equity returned 154%.
EV battery raw materials include cobalt, where LME prices were up by 119% in
2021 as demand recovered driven by battery demand, particularly EV batteries.
Significantly, Glencore announced the 2022 restart of the Mutanda mine in the
DRC, which will most likely be ramped-up in a way that keeps the market
balanced. Glencore (7.7% of the portfolio) rose by 66.9% during 2021, and is
a globally significant cobalt producer which produced 22% of mine production
in 2020 which is set to increase with Mutanda’s ramp-up.
2021 has seen growing excitement about the potential for hydrogen to disrupt
the commercial vehicle market. Compared to batteries, hydrogen and fuel cells
offer better energy density, improved range and faster refuelling, giving them
an inherent advantage in efforts to decarbonise high utilisation transport
like industrial trucks. That said, there are substantial hurdles to overcome,
with costs needing to fall dramatically for the switch to be economic. We see
the technology’s long-term potential but believe that we are still in the
early stages of its development. Technologies involving platinum are crucial
to the adoption of the hydrogen fuel cell; the Company has exposure to this
theme via its PGM exposure.
ROYALTY AND UNQUOTED INVESTMENTS
At 31 December 2021 the Company has two unquoted investments, the OZ Minerals
Brazil Royalty (1.5% of the portfolio), as well as an investment in Ivanhoe
Electric/I-Pulse (1.2% of the portfolio). The Company has an additional quoted
royalty investment, Vale Debentures (3.3% of the portfolio), with total
royalty investments amounting to 4.8% of the Company’s portfolio. 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.
OZ Minerals Brazil royalty contract (1.5%)
In July 2014 the Company signed a binding royalty agreement with Avanco
Minerals. The Company provided US$12 million in return for a Net Smelter
Return (net revenue after deductions for freight, smelter and refining
charges) royalty payments 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 licenses. 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 Avanco was acquired by OZ Minerals, an Australian based copper and
gold producer, for A$418 million, with the royalty now assumed by OZ Minerals.
Since our initial US$12 million investment was made, we have received US$19.2
million in royalty payments with the royalty achieving full payback on the
initial investment. As at 31 December 2021, the royalty was valued at £18.2
million (1.5% of NAV) which equates to a 265.3% total return since our
investment.
It has been a challenging operating environment in Brazil over the last 18
months primarily due to COVID-19. As expected, the Antas Mine ceased
production in the middle of the year, with Pedra Branca steadily ramping-up
during the second half with ore processed through the Antas processing
facility. OZ Minerals had flagged the risk of not meeting the 10-15kt copper
guidance during this year due to COVID-19, with production downgraded to
7kt-10kt copper and 5koz-8koz gold. Given the better-than-expected copper
price and our conservative production assumption this year, it has had minimal
impact on income, and we have confidence in production returning to planned
levels during 2022. We continue to remain optimistic on the longer-term
optionality provided by the royalty via the development of Pedra Branca West,
as well as greenfield exploration over the licence area.
Vale debentures (3.3% 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. As at 31
December 2021 the Company’s exposure to the Vale Debentures was 3.3%.
It has been a remarkable environment for the iron ore market since the Company
acquired the Debentures at the beginning of 2019. From a supply perspective,
the iron ore market was significantly tightened following Vale’s tragic
tailings dam collapse at the beginning of 2019 which has been further
intensified as Vale has failed to meet its annual production guidance in 2020
and 2021. These supply issues combined with record steel demand in China has
seen the iron ore price average at US$117/tonne since the beginning of 2019, a
notable increase from the US$70/tonne iron ore price at the beginning of 2019
when the Company acquired the Debentures.
Despite the strong rally in the Debentures, we continue to see value with the
current yield on the investment in excess of 10% which is attractive for a
royalty instrument. This value opportunity has been recognised by other listed
royalty producers Franco-Nevada and Sandstorm Gold royalties which have both
acquired stakes in the Debentures since the sell-down occurred 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.
However, we expect this to be improved following the recent sell-down in April
2021.
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.
Ivanhoe Electric/I-Pulse (1.2% of the portfolio)
In early August the Company made a US$20 million investment into Ivanhoe
Electric/I-Pulse, an exploration and mining business focused on identifying
and developing “electric metals” (copper, nickel, gold and silver)
required for the energy transition. The exploration portfolio is focused in
the USA where it has developed a proprietary exploration technology that has
the ability to identify mineral resources at greater depths than existing
methods. The team is led by Robert Friedland who has a successful track record
of identifying and developing world class mineral deposits such as Voisey’s
Bay, Oyu Tolgoi and Kamoa-Kukula.
The Company’s investment consists of an investment into the common shares of
Ivanhoe Electric/I-Pulse, as well as convertible notes which convert at a
discount to the initial public offering (IPO) price into Ivanhoe Electric
shares. The company is targeting an IPO over the next six to twelve months and
the exploration potential of this asset base is encouraging. Since making the
investment, Ivanhoe Electric has successfully secured an option to acquire
100% of the Santa Cruz deposit, a historic high-grade copper oxide resource in
Arizona. Earn-in spend is approximately US$100 million over the next three
years with the management team focused on verifying the historic drilling to
produce a 43-101 resource statement ahead of IPO in 2022. We believe this has
potential to add significant value to our August 2021 entry price.
Jetti Resources
We are pleased to report that subsequent to the year-end the Company has made
an investment into copper technology company Jetti Resources. Jetti Resources,
alongside the University of British Colombia, has developed a new catalyst
that improves copper recovery from primary copper sulphides (specifically
from chalcopyrite, which is often uneconomic under conventional leach
conditions). Jetti is currently testing at 23 projects at various stages,
including five active pilots 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 the Pinto
Valley copper mine, with further deployments at different copper assets
planned for this year. If industry adoption of Jetti’s technology continues
to accelerate and is proven to work at scale, we see material valuation
upside, with Jetti sharing in the economics of additional copper volumes
recovered through the application of their catalyst.
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 on the use of derivatives which
limit the exposure to an aggregate 10% of gross assets of the Group. In 2021
income generated from options was £7.1 million. This was lower than in the
prior year as volatility levels made option writing less value accretive to
the Company but nonetheless a number of opportunities presented themselves
allowing healthy levels of income to be earned. At the end of the period the
Company had 2.4% of net assets exposed to derivatives and the average exposure
to derivatives during the period was once again less than 5%.
GEARING
At 31 December 2021, the Company had £113.3 million of net debt, with a
gearing level of 9.9% of net assets. 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 held by the Company. During the year,
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 investee 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.
Shareholders should note that the total gearing available to the Company has
increased during the year due to the rise in net assets but remains within the
25% of net assets limit set by the Board. On the back of this, facilities were
refreshed with our lenders and now stand at £138.9 million for loans and
£0.4 million for the overdraft. The cost of debt for the Company remains very
low at 1.10% for US Dollar loans and 0.97% for Sterling loans and these are
now linked to SOFR/SONIA following the demise of LIBOR.
OUTLOOK
2022 seems to have started well for the global economy with fears around the
Omicron variant starting to wane as its impact seems to be less damaging than
initially feared. With global growth still strong and inflation numbers higher
than desired, it is likely that Central Banks will become less accommodative
and start raising rates. Transitions such as this are always associated with
higher periods of volatility as investors rotate portfolios to reflect the new
environment.
Looking more closely at the commodity sector, the outlook remains as bright as
it has been for the last few years. Prices for almost all metals are well
supported by ongoing demand strength and limited new supply growth. In
addition, current price levels generate margins that are high by historical
standards meaning that the companies should continue to enjoy excellent levels
of cash flow generation. If current capital allocation trends and tighter cost
containment measures continue, shareholders should see further years of strong
income but probably not the records seen in 2021, especially if the focus
moves to share buy backs rather than dividends.
EVY HAMBRO AND OLIVIA MARKHAM
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
7 March 2022
* Portfolio positions are shown as at 31 December 2021.
TEN LARGEST INVESTMENTS
1 = Vale(1,2,3) (2020: 1st)
Diversified mining group
Market value: £106,625,000
Share of investments: 8.5% (2020: 10.9%)
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.
2 = BHP(3) (2020: 2nd)
Diversified mining group
Market value: £96,883,000
Share of investments: 7.7% (2020: 7.6%)
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. The group also has significant interests in oil, gas and liquefied
natural gas but has signed a binding share sale agreement for the merger of
the oil and gas business with Woodside.
3 + Glencore (2020: 18th)
Diversified mining group
Market value: £96,651,000
Share of investments: 7.7% (2020: 1.7%)
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, coal,
gold and silver.
4 = Anglo American (2020: 4th)
Diversified mining group
Market value: £93,608,000
Share of investments: 7.5% (2020: 7.2%)
A global mining group. The group’s mining portfolio includes bulk
commodities including iron ore, manganese and metallurgical coal, base metals
including copper and nickel and precious metals and minerals including
platinum and diamonds. Anglo American has mining operations globally, with
significant assets in Africa and South America.
5 = Freeport-McMoRan (2020: 5th)
Copper producer
Market value: £77,970,000
Share of investments: 6.2% (2020: 5.2%)
A global mining group which operates large, long-lived, geographically diverse
assets with significant proven and probable reserves of copper, gold and
molybdenum.
6 + ArcelorMittal(1) (2020: 13th)
Steel producer
Market value: £65,024,000
Share of investments: 5.2% (2020: 2.5%)
A multinational steel manufacturing group, with a focus on producing safe
sustainable steel. The company has operations across the world and is the
largest steel manufacturer in North America, South America and Europe.
7 - Rio Tinto (2020: 3rd)
Diversified mining group
Market value: £52,315,000
Share of investments: 4.2% (2020: 7.5%)
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.
8 + Teck Resources (2020: 15th)
Diversified mining group
Market value: £45,543,000
Share of investments: 3.6% (2020: 2.2%)
A diversified mining group headquartered in Canada. The group 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, steelmaking, coal and
energy.
9 - Newmont Corporation (2020: 6th)
Gold producer
Market value: £43,489,000
Share of investments: 3.5% (2020: 4.5%)
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.
10 = First Quantum Minerals(1) (2020: 10th)
Copper producer
Market value: £36,575,000
Share of investments: 2.9% (2020: 4.2%)
An established growing copper mining company operating seven mines including
the ramp-up of their newest mine, Cobre Panama, which declared commercial
production in September 2019. The company is a significant copper producer
and also produces nickel, gold and zinc.
(1) Includes fixed income securities.
(2) Includes investments held at Directors’ valuation.
(3) 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.
Together, the ten largest investments represented 57.0% of total investments
of the Company’s portfolio as at 31 December 2021 (ten largest investments
as at 31 December 2020: 56.4%).
INVESTMENTS AS AT 31 DECEMBER 2021
Main geographical exposure Market value £’000 % of investments
Diversified
Vale Global 66,106 5.3
Vale Debentures (*#^) Global 40,895 3.3
Vale Put Option 21/01/22 $13.84 Global (376) (0.1)
BHP Global 97,174 7.7
BHP Put Option 20/01/22 $40.99 Global (291) –
Glencore Global 96,651 7.7
Anglo American Global 93,608 7.5
Rio Tinto Global 52,315 4.2
Teck Resources Global 45,543 3.6
Trident Global 4,055 0.3
--------------- ---------------
495,680 39.5
========= =========
Copper
Freeport-McMoRan Global 77,970 6.2
First Quantum Minerals (*) Global 36,575 2.9
Ivanhoe Mines Other Africa 30,108 2.4
OZ Minerals Brazil Royalty (#~) Latin America 18,162 1.5
OZ Minerals Australasia 16,358 1.3
Sociedad Minera Cerro Verde Latin America 21,895 1.7
Solaris Resources (#) Latin America 19,046 1.5
Ivanhoe Electric/I-Pulse (*#) United States 15,250 1.2
Antofagasta Latin America 12,207 1.0
Ero Copper Latin America 6,231 0.5
HudBay Global 5,611 0.5
Lundin Mining Global 3,945 0.3
SolGold Latin America 3,777 0.3
Nevada Copper United States 1,254 0.1
Sierra Metals Latin America 706 0.1
--------------- ---------------
269,095 21.5
========= =========
Gold
Newmont Corporation Global 43,489 3.5
Barrick Gold Global 35,042 2.8
Wheaton Precious Metals Global 34,285 2.7
Franco-Nevada Global 27,824 2.2
Northern Star Resources Australasia 15,146 1.2
Polyus Russia 14,567 1.2
Kinross Gold Global 10,376 0.8
Polymetal International Russia 9,929 0.8
Endeavour Mining Other Africa 8,293 0.7
Kirkland Lake Gold Australasia 5,942 0.5
--------------- ---------------
204,893 16.4
========= =========
Steel
ArcelorMittal (*) Global 65,024 5.2
Steel Dynamics United States 20,377 1.6
Nucor Corp United States 10,934 0.9
--------------- ---------------
96,335 7.7
========= =========
Industrial Minerals
Lynas Corporation Australasia 18,268 1.4
Iluka Resources Australasia 13,004 1.0
Sociedad Química y Minera de Chile ADR Latin America 12,924 1.0
Sigma Lithium (#) Latin America 5,610 0.4
Sheffield Resources Australasia 3,756 0.3
--------------- ---------------
53,562 4.1
========= =========
Aluminium
Alcoa Global 21,096 1.7
Norsk Hydro Global 20,040 1.6
--------------- ---------------
41,136 3.3
========= =========
Platinum Group Metals
Northam Platinum South Africa 15,182 1.2
Impala Platinum South Africa 14,257 1.1
Sibanye Stillwater South Africa 10,255 0.8
--------------- ---------------
39,694 3.1
========= =========
Iron Ore
Labrador Iron Canada 27,768 2.2
Deterra Royalties Australasia 4,650 0.4
Fortescue Metals Group Australasia 2,576 0.2
Equatorial Resources Other Africa 306 –
Champion Iron Canada 112 –
--------------- ---------------
35,412 2.8
========= =========
Nickel
Nickel Mines Indonesia 17,679 1.4
Bindura Nickel Other Africa 128 –
--------------- ---------------
17,807 1.4
========= =========
Zinc
Titan Mining (+#) United States 2,520 0.2
--------------- ---------------
2,520 0.2
========= =========
1,256,134 100.0
========= =========
Comprising
– Investments 1,256,801 100.1
– Options (667) (0.1)
--------------- ---------------
1,256,134 100.0
========= =========
(*) Includes fixed income securities.
(#) Includes investments held at Directors’ valuation.
(~) Mining royalty contract.
(^) The investment in the Vale debenture 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 2021 (including options classified as
liabilities on the balance sheet) was 56 (31 December 2020: 56).
As at 31 December 2021 the Company did not hold any equity interests in
companies comprising more than 3% of a company’s share capital.
PORTFOLIO ANALYSIS AS AT 31 DECEMBER 2021
COMMODITY EXPOSURE(1)
2021 portfolio 2020 (#)portfolio 2021 Reference Index*
Diversified 39.5% 37.2% 34.3%
Copper 21.5% 19.2% 11.1%
Gold 16.4% 24.3% 21.7%
Steel 7.7% 3.4% 18.6%
Industrial Minerals 4.1% 1.8% 1.0%
Aluminium 3.3% 0.1% 3.5%
Platinum Group Metals 3.1% 4.7% 3.0%
Iron Ore 2.8% 6.0% 3.0%
Nickel 1.4% 2.7% 1.9%
Zinc 0.2% 0.3% 0.4%
Silver & Diamonds 0.0% 0.3% 1.1%
Other (&) 0.0% 0.0% 0.4%
(1) Based on index classifications.
(#) Represents exposure at 31 December 2020.
(*) MSCI ACWI Metals & Mining 30% Buffer 10/40 Index (net total
return).
(&) Represents a very small exposure.
GEOGRAPHIC EXPOSURE(1)
2021
Global 69.9%
Latin America 8.0%
Other (2) 7.4%
Australasia 6.3%
South Africa 3.1%
Other Africa (ex South Africa) 3.1%
Canada 2.2%
2020
Global 64.9%
Australasia 9.4%
Latin America 7.3%
Other (3) 6.5%
South Africa 5.2%
Canada 5.1%
Other Africa (ex South Africa) 1.6%
(1) Based on the principal commodity exposure and place of operation
of each investment.
(2) Consists of Indonesia, Russia and United States.
(3 ) Consists of Indonesia, Russia, United Kingdom and United States.
STRATEGIC REPORT
The Directors present the Strategic Report of the Company for the year ended
31 December 2021. 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 2022.
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 28th 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) (the Fund Accountant) and also sub-delegates registration
services to the Registrar, Computershare Investor Services PLC. Other service
providers include the Depositary (also BNYM). Details of the contractual terms
with these service providers and more details of sub-delegation 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 Company will not invest more than 15% of
the Group’s gross assets in other UK listed investment companies.
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 14.2% and, at the financial
reporting date, net gearing (calculated as borrowings less cash and cash
equivalents as a percentage of net assets) stood at 9.9% of shareholders’
funds (2020: 12.3%). 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) in the Annual Report and Financial Statements, with
information on the ten largest investments above, the investments listed above
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 2021, the Level 3 unquoted investments (see note 18 in the
Annual Report and Financial Statements) in the OZ Minerals Brazil Royalty and
convertible bonds and equity shares of Ivanhoe Electric/I-Pulse were held at
Directors’ valuation, representing a total of £33,412,000 (US$45,255,000)
(2020: £19,753,000 (US$27,002,000)). 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. 2021 was another
solid year with mining companies continuing down the path of capital
discipline, balance sheets in strong shape and earnings and dividends rising.
The Directors remain confident on the value available in the 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 profit for the year, after taxation, was
£192,470,000 (2020: £216,515,000) of which £78,910,000 (2020: £35,451,000)
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 2021 amounted to £78,263,000 (2020:
£35,612,000).
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.
EMPLOYEES, SOCIAL, COMMUNITY AND HUMAN RIGHTS ISSUES
As an investment trust with no employees, 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
Company believes that it is in shareholders’ interests to consider human
rights issues and environmental, social and governance factors when selecting
and retaining investments. Details of the Board's approach to ESG and details
of the Manager’s approach to ESG integration are 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. 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 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 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 31 December 2021 Year ended 31 December 2020
Net asset value total return (1,2) 20.7% 31.8%
Share price total return (1,2) 17.5% 46.7%
Discount to net asset value (2) 5.3% 2.7%
Revenue earnings per share 43.59p 20.40p
Total dividends per share 42.50p 20.30p
Ongoing charges (2,3) 0.95% 0.99%
Ongoing charges on gross assets (2,4) 0.84% 0.87%
========= =========
(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 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 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 only in the event of an increase in NAV on a quarter-on-quarter
basis.
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. 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 other 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 has given rise to unprecedented challenges for businesses across the
globe and the Board has taken into consideration the risks posed to the
Company by the crisis 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.
Principal Risk Mitigation/Control
Counterparty The potential loss that the Company could incur if a counterparty is unable (or unwilling) to perform on its commitments. Due diligence is undertaken before contracts are entered into and exposures are diversified across a number of counterparties. The Depositary is liable for restitution for the loss of financial instruments held in custody unless able to demonstrate the
loss was a result of an event beyond its reasonable control.
Investment performance 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 policy may lead to: · underperformance compared to the reference index; · a reduction or permanent loss of capital; and · dissatisfied shareholders and reputational damage. 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; · monitors and maintains 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; · 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; and · has been assured that the Investment Manager has training and development programmes in place for its employees and its recruitment and remuneration
packages are developed in order to retain key staff.
Legal and regulatory compliance 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 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. Any 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). 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.
Market 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, such as the COVID-19 pandemic. 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. 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 with the COVID-19 pandemic.
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 considers the Environmental, Social and Governance (ESG) risks and opportunities facing companies and industries in the portfolio. They use 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.
Operational 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 and BNYM (the Depositary, Custodian 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. 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 internal control 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. In respect of the risks posed by the COVID-19 pandemic in terms of the ability of service providers to function effectively, the Board has received
reports from key service providers setting out the measures that they have put in place to address the crisis, in addition to their existing business continuity framework. Having considered these arrangements and reviewed service levels since the crisis
has evolved, the Board is confident that a good level of service has been and will be maintained.
Financial 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. 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 2025. 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 mainly comprises readily realisable assets
which can be sold to meet funding requirements if necessary. As at 2 March
2022, 82.8% of the portfolio was estimated as being capable of being
liquidated within three days;
· 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.
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 Manager and Investment Other key service providers Investee companies
Manager
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. The Board’s main working relationship is with the Manager, who is responsible for the Company’s portfolio management (including 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 advisors 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 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 arrangements and receives regular feedback from the Manager in respect of meetings with the management of investee companies.
asset allocation, stock and sector selection) and risk management, as well as ancillary functions such as administration, meeting cycle.
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 successfully deliver 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.
Area of Engagement Issue Engagement Impact
Investment mandate and objective The Board 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. The Board worked closely with the Investment Manager throughout the year in further developing investment strategy and 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.
underlying policies, not simply for the purpose of achieving the Company’s investment objective but in the interests of
shareholders and future investors.
Responsible ownership 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. The Board believes that responsible investment and sustainability are integral to the longer-term delivery of the Company’s 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 (when circumstances permit) provide valuable insights into their ESG practices. The Investment Manager has continued to engage with investee companies virtually and has, where necessary, conducted virtual site visits. BlackRock has stated that, as part of its commitment to sustainability, it will divest any investment in companies that derive more than 25% of revenues from thermal coal production from all discretionary active investment portfolios. 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 demand for ‘green’ materials. It is likely that this area will become a more significant part of the portfolio.
success. The Board works closely with the Investment Manager to regularly review the Company’s performance, investment policy
and strategy 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 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 the
adoption of sustainable business practices which support long-term value creation, 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.
Environmental issues were prominent in the engagement, as was executive pay and the re-election of directors in portfolio
companies. 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.
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 committed to maintaining open channels of communication and to engage with shareholders. The Company welcomes and 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. 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 arrangements and receives regular feedback from the Investment Manager in respect of meetings with the management of portfolio companies.
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. 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. 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.
Discount management 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. The Board monitors the Company’s discount on an ongoing basis and receives regular updates from the Manager and the Company’s The Board continues to monitor the Company’s discount to NAV and will look to 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 first quarter the Company’s shares generally traded at a discount but over the year as a whole the Company’s shares traded at an average discount of 2.4%.
Brokers regarding the level of discount. 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.
Service levels of third party providers 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. The Manager reports to the Board on the Company’s performance on a regular basis. The Board carries out a robust annual 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 despite the impact of the COVID-19 pandemic.
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. In light of the challenges
presented by the COVID-19 pandemic to the operation of businesses across the globe, the Board has 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.
Board composition 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. All Directors are subject to a formal evaluation process on an annual basis (more details and the conclusions of the 2021 As at the date of this report, the Board was comprised of three men and two women. Mr Cheyne has a tenure in excess of nine years. Details of each Director’s contribution to the success and promotion of the Company are set out in the Directors’ Report in the Annual Report and Financial Statements and details of the Directors’ biographies can be found 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. The Board appointed Srinivasan Venkatakrishnan as a Director of the Company with effect from 1 August 2021. Ollie Oliveira retired as a Director on 31 July 2021.
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 in the Annual
Report and Financial Statements with any issues. The Board undertook a review of succession planning arrangements and
identified the need for a new Director following the retirement of Mr Oliveira. The Nomination Committee agreed the selection
criteria and the method of selection, recruitment and appointment, Board diversity, including gender, were carefully considered
when establishing the criteria. The Directors’ range of contacts, were used to identify potential candidates.
Environmental, Social and Governance 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 a 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 a general approach 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 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.
BLACKROCK WORLD MINING TRUST PLC – ENGAGEMENT WITH PORTFOLIO COMPANIES IN
2021
Given the Board’s belief in the importance of engagement and communication
with portfolio companies, they receive regular updates from the Manager in
respect of activity undertaken for the year under review. The Board notes that
over the year to 31 December 2021, 56 total company engagements were held with
the management teams of 27 portfolio companies representing 71% of the
portfolio by value at 31 December 2021. To put this into context, there were
53 companies in the BlackRock World Mining Trust plc portfolio at 31 December
2021. Additional information is set out in the table below and the charts on
page 51 of 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 2021
Number of engagements held 56
Number of companies met 27
% of equity investments covered 71
Shareholder meetings voted at 57
Number of proposals voted on 630
Number of votes against management 39
% of total votes represented by votes against management 6.1
=========
Source: Institutional Shareholder Services as at 19 January 2022.
The importance and challenges of considering ESG when investing in the Natural
Resources Sector and BlackRock’s approach to ESG Integration
Environmental Social Corporate governance
Impact As well as the longer-term contribution to carbon emissions and the impact on the environment, the activities undertaken by many companies in the portfolio such as digging mines will inevitably have an impact on local surroundings. It is important how companies manage this process and ensure that an appropriate risk oversight framework is in place, with consideration given to all stakeholders. The significant fall in the market cap of companies like Vale, after the Brumadinho dam collapse, highlights the key role that ESG has on share price performance. Climate change and other sustainability factors pose some of the greatest risks to the operating models of companies in the mining sector as the world transitions to a low-carbon economy. How such companies manage these risks and evolve their operating models through this transition will be a defining feature of their ability to generate long-term sustainable value for shareholders. In order to unlock the full potential of the energy transition these companies must be prepared to adapt, innovate and pivot their business models. BlackRock believes it is vital that natural resources companies maintain their social licence to operate. By this, BlackRock As with all companies, good corporate governance is especially critical for natural resources companies. The performance and effectiveness of the board is critical to the success of a company, the protection of shareholders’ interests, and long-term shareholder value creation. Governance issues, including the management of material sustainability issues that have a significant impact for natural resources companies, all require effective leadership and oversight from a company’s board. Companies with engaged, diverse and experienced board directors who actively advise and oversee management have a competitive advantage.
means that companies maintain broad acceptance from their key stakeholders, including business partners (such as suppliers and
distributors), clients and consumers, national governments, and the communities in which they operate. Considering the interests
of key stakeholders recognises the collective nature of long-term value creation and the extent to which each company’s
prospects for growth are tied to its ability to foster strong sustainable relationships with and support from those
stakeholders.
BlackRock BlackRock prefers direct dialogue with companies on complex issues such as climate risk and other environmental risks. Where it has concerns that are not addressed by engagements, BlackRock may vote against management, including against corporate directors (and in favour of certain types of shareholder proposals) should companies fail to demonstrate material progress against specific measures. Specifically, BlackRock asks companies to articulate how their business model is aligned to a scenario in which global warming is limited to well below 2°C, moving towards global net zero emissions by 2050, and to disclose a business plan for how they intend to deliver long-term financial performance through this transition to global net zero, consistent with their business model and sector. More information in respect of how BlackRock assesses how companies are delivering on these plans can be found at https://www.blackrock.com/ corporate/literature/publication/ blk-commentary-climate-risk-and-energy- transition.pdf Where corporate disclosures are insufficient to make a thorough assessment, or a company has not provided a credible plan to transition its business model to a low-carbon economy, the BlackRock Investment Stewardship (BIS) team may vote against the directors it considers responsible for climate risk oversight. BIS may also support shareholder proposals that it believes address gaps in a company’s approach to climate risk and the energy transition. In normal operating conditions (and when not prevented by travel restrictions imposed by COVID-19) the portfolio management In conjunction with BIS, the portfolio management team actively engages with companies on a wide range of governance issues including board independence, executive compensation, shareholder protection and timely and adequate disclosure. BIS may also vote against the re-election of directors when they do not seem to be acting in the economic interests of long-term shareholders. The effectiveness of voting against directors is well documented in BlackRock’s, as well as independent third party, research which indicated that across the FTSE 350 companies where BIS voted against directors over remuneration concerns, 83% made revisions to their pay policies within twelve months (1,2).
Approach team’s site visits to companies’ assets provide them with valuable insight into these issues which often cannot be properly
understood from company reports. BIS advocates for improved disclosures to understand how companies are making prudent
decisions considering their stakeholders’ interests. BIS also asks companies to demonstrate how they have put in place
appropriate board oversight, due diligence, and remediation mechanisms relating to adverse impacts on people arising from their
business operations – including those indirectly employed or communities that could be harmed or displaced by a company’s
expanding operations. BIS considers the Sustainability Accounting Standards Board (SASB) standards materiality framework to be a
helpful tool for companies considering enhancing their disclosures on industry-specific human capital metrics. Given continuing
advances in sustainability reporting standards, in addition to BlackRock’s request that all companies report in alignment with
the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), BlackRock is evolving its perspective on
sustainability reporting to recognise that companies may use standards other than those of the SASB, and reiterate its request
for metrics that are industry or company-specific. More information on BlackRock’s approach can be found at
https://www.blackrock.com/ corporate/literature/fact-sheet/blk- responsible-investment-engprinciples- global.pdf
(1)
https://www.blackrock.com/corporate/literature/publication/2021-voting-spotlight-full-report.pdf
(page 22).
(2) The data in this table applies to BIS’s engagements globally
across all BlackRock-managed portfolios.
Environmental Social Corporate governance
BIS – examples of approach to voting and engagement across ESG categories (year ended 30 June 2021) (1,2) BIS has created a climate focus universe of over 1,000 carbon-intensive public companies that represent 90% of the global scope BIS held 1,350 engagements related to engaging and voting on company impacts on people. This year, BIS supported 35 out of 100 social-related shareholder proposals. During the 2021 proxy year, BIS did not support 2,222 directors at 1,327 unique companies globally over concerns about independence. BIS voted against 1,862 directors at 975 unique companies globally for concerns related to board diversity. BIS voted against 758 directors globally at 639 unique companies for being overcommitted. BIS voted against the re-election of 931 directors at 453 companies due to concerns over remuneration.
1 and 2 GHG emissions of its clients’ public equity holdings with BlackRock. This 2021 climate focus universe represents
companies where climate change and other sustainability factors pose the greatest risk to clients’ investments. More detail can
be found at https://www.blackrock.com/ corporate/literature/publication/blk-climate-focus-universe.pdf. BIS held over 1,300
engagements with nearly 670 of the companies in this climate focus universe between 1 July 2020 and 30 June 2021. BIS held
2,330 company engagements on climate related proposals overall. BIS voted against management on climate risk concerns at
approximately 2% of the nearly 11,000 proposals it voted on at energy/utilities companies globally. BIS voted against 255
directors and against management at 319 companies for climate risk related concerns.
(1) Source: BlackRock’s 2021 voting spotlight report which can be
found at
https://www.blackrock.com/corporate/literature/publication/2021-voting-spotlight-full-report.pdf
(2) The data in this table applies to BIS’s engagements globally
across all BlackRock-managed portfolios.
BLACKROCK’S APPROACH TO ESG INTEGRATION
BlackRock believes that sustainability risk – and climate risk in particular
– now equates to investment risk, and this will drive a profound
reassessment of risk and asset values as investors seek to react to the impact
of climate policy changes. 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
BlackRock’s Investment Stewardship team (BIS) to assess the governance
quality of companies and investigate any potential issues, risks or
opportunities.
As part of their approach to ESG integration, 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 scale and unparalleled access to company management allows it to
engage on issues that are identified through questioning management teams and
conducting site visits. In conjunction with the portfolio management team, BIS
meets with boards of companies frequently to evaluate how they are
strategically managing their longer-term issues, including those surrounding
ESG and the potential impact these may have on company financials. BIS’s and
the portfolio management team’s understanding of ESG issues is further
supported by BlackRock’s Sustainable Investment Team (BSI). BSI looks to
advance ESG research and integration, active engagement and the development of
sustainable investment solutions across the firm.
INVESTMENT STEWARDSHIP
As a fiduciary to its clients, BlackRock has built its business to protect and
grow the value of clients’ assets. As part of this fiduciary duty to its
clients, BIS is committed to promoting sound corporate governance through
engagement with investee companies, development of proxy voting policies that
support best governance practices and also through wider engagement on public
policy issues.
Global Principles
BlackRock’s approach to corporate governance and stewardship is explained in
its Global Principles. These high-level Principles are the framework for
BlackRock’s more detailed, market-specific voting guidelines, all of which
are published on the BlackRock website. The Principles describe BlackRock’s
philosophy on stewardship (including how it monitors and engages with
companies), its policy on voting, its integrated approach to stewardship
matters and how it deals with conflicts of interest. These apply across
relevant asset classes and products as permitted by investment strategies.
BlackRock reviews its Global Principles annually and updates them as necessary
to reflect market standards, evolving governance practice and insights gained
from engagement over the prior year. BlackRock’s Global Principles are
available on its website at
https://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-engprinciples-global.pdf
Market-specific proxy voting guidelines
BlackRock’s 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 the shareholder meeting. BlackRock
applies its guidelines pragmatically, taking into account a company’s unique
circumstances where relevant. BlackRock informs voting decisions through
research and engages as necessary. BlackRock reviews its voting guidelines
annually and updates them as necessary to reflect changes in market standards,
evolving governance practice and insights gained from engagement over the
prior year.
BlackRock’s market-specific voting guidelines are available on its website
at
https://www.blackrock.com/corporate/about-us/investment-stewardship#principles-and-guidelines
In 2021, BIS explicitly asked that all companies disclose a business plan
aligned with the goal of limiting global warming to well below 2ºC,
consistent with achieving net zero global greenhouse gas (GHG) emissions by
2050. BlackRock viewed these disclosures as essential to helping investors
assess a company’s ability to transition its business to a low carbon world
and to capture value-creation opportunities created by the climate transition.
BlackRock also asked that companies align their disclosures to the Task Force
on Climate-related Financial Disclosures (TCFD) framework and the SASB
standards. For 2022, BIS is evolving its perspective on sustainability
reporting to recognise that companies may use standards other than that of the
SASB and reiterates its request for metrics that are industry- or
company-specific. BIS is also encouraging companies to demonstrate that their
plans are resilient under likely decarbonisation pathways, and the global
aspiration to limit warming to 1.5°C. BIS is also asking companies to
disclose how considerations related to having a reliable energy supply and
just transition affect their plans. More information in respect of
BlackRock’s investment stewardship approach to sustainable investing can be
found at
https://www.blackrock.com/corporate/literature/publication/blk-commentary-climate-risk-and-energy-transition.pdf
BlackRock has been a member of Climate Action 100+ since 2020 and has aligned
its engagement and stewardship priorities to UN Sustainable Development Goals
(including Gender Equality and Affordable and Clean Energy). A map of how
BIS’s engagement priorities align to the UN Sustainable Development Goals
(SDGs) can be found at
https://www.blackrock.com/corporate/literature/publication/blk-engagement-priorities-aligned-to-sdgs.pdf
BlackRock is committed to transparency in terms of disclosure on its
engagement with companies and voting rationales and is committed to voting
against management to the extent that they have not demonstrated sufficient
progress on ESG issues. This year, BlackRock voted against or withheld votes
from 6,560 directors globally at 3,400 different companies driven by concerns
regarding director independence, executive compensation, insufficient progress
on board diversity and overcommitted directors, reflecting our intensified
focus on sustainability risks. In the 2020-2021 proxy year, BlackRock voted
against 255 directors and against 319 companies for climate-related concerns
that could negatively affect long-term shareholder value. More detail in
respect of BIS’s engagement and voting history can be found at
https://www.blackrock.com/corporate/literature/publication/2021-voting-spotlight-full-report.pdf
BIS also publishes voting bulletins explaining its vote decision and the
engagement and analysis underpinning it, on certain high-profile proposals at
company shareholder meetings. Vote bulletins for 2021 can be found at
https://www.blackrock.com/corporate/about-us/investment-stewardship#vote-bulletins
BLACKROCK’S REPORTING AND DISCLOSURES
In terms of its own reporting, BlackRock believes that the SASB 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 TCFD provides a
valuable framework. BlackRock recognises that reporting to these standards
requires significant time, analysis, and effort. BlackRock’s 2021 TCFD
report can be found at
https://www.blackrock.com/corporate/literature/continuous-disclosure-and-important-information/tcfd-report-2021-blkinc.pdf
By order of the Board
CAROLINE DRISCOLL
FOR AND ON BEHALF OF
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
Company Secretary
7 March 2022
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 2021 amounted
to £9,230,000 (2020: £6,405,000). At the year end, £4,587,000 (2020:
£2,064,000) was outstanding in respect of management fees.
In addition to the above services, BlackRock has provided the Group with
marketing services. The total fees paid or payable for these services for the
year ended 31 December 2021 amounted to £140,000 excluding VAT (2020:
£152,000 excluding VAT). Marketing fees of £55,000 were outstanding as at 31
December 2021 (2020: £55,000).
The ultimate holding company of the Manager and the Investment Manager is
BlackRock, Inc., a company incorporated in Delaware USA.
RELATED PARTY TRANSACTIONS
The Board consists of five non-executive Directors all of whom are considered
to be independent by the Board. None of the Directors has a service contract
with the Company. The Chairman receives an annual fee of £47,000, the
Chairman of the Audit Committee/Senior Independent Director receives an annual
fee of £39,500, and each other Director receives an annual fee of £32,000.
All five members of the Board hold shares in the Company. Mr Cheyne 35,000
ordinary shares, Mr Edey 20,000 ordinary shares, Ms Lewis 5,362 ordinary
shares, Ms Mosely 7,400 ordinary shares and Mr Venkatakrishnan 1,000 ordinary
shares. The amount of Directors’ fees outstanding at 31 December 2021 was
£14,375 (2020: £14,375).
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, whose names are listed in the Annual Report and
Financial Statements, 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 2021, 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 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER
2021
Revenue Capital Total
Notes 2021 £’000 2020 (Restated) (1) £’000 2021 £’000 2020 £’000 2021 £’000 2020 (Restated) (1) £’000
Income from investments held at fair value through profit or loss 3 80,558 31,613 – – 80,558 31,613
Other income 3 7,118 7,964 – – 7,118 7,964
--------------- --------------- --------------- --------------- --------------- ---------------
Total revenue 87,676 39,577 – – 87,676 39,577
========= ========= ========= ========= ========= =========
Net profit on investments held at fair value through profit or loss – – 122,374 183,667 122,374 183,667
Net (loss)/profit on foreign exchange – – (1,696) 2,431 (1,696) 2,431
--------------- --------------- --------------- --------------- --------------- ---------------
Total 87,676 39,577 120,678 186,098 208,354 225,675
========= ========= ========= ========= ========= =========
Expenses
Investment management fee 4 (2,252) (1,546) (6,978) (4,859) (9,230) (6,405)
Other operating expenses 5 (1,034) (1,103) (9) (18) (1,043) (1,121)
--------------- --------------- --------------- --------------- --------------- ---------------
Total operating expenses (3,286) (2,649) (6,987) (4,877) (10,273) (7,526)
========= ========= ========= ========= ========= =========
Net profit on ordinary activities before finance costs and taxation 84,390 36,928 113,691 181,221 198,081 218,149
Finance costs 6 (374) (424) (1,117) (1,272) (1,491) (1,696)
--------------- --------------- --------------- --------------- --------------- ---------------
Net profit on ordinary activities before taxation 84,016 36,504 112,574 179,949 196,590 216,453
Taxation (charge)/credit (5,106) (1,053) 986 1,115 (4,120) 62
--------------- --------------- --------------- --------------- --------------- ---------------
Net profit on ordinary activities after taxation 78,910 35,451 113,560 181,064 192,470 216,515
========= ========= ========= ========= ========= =========
Earnings per ordinary share (pence) – basic and diluted 8 43.59 20.40 62.73 104.22 106.32 124.62
========= ========= ========= ========= ========= =========
(1) Please refer to note 2 “Restatement of 2020 comparatives”
below for further details.
The total column of this statement represents the Group’s Statement of
Comprehensive Income, prepared in accordance with UK-adopted International
Accounting Standards. 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. The net profit for the
year disclosed above represents the Group’s total comprehensive income.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER
2021
Group Notes Called up share capital £’000 Share premium account £’000 Capital redemption reserve £’000 Special reserve £’000 Capital reserves £’000 Revenue reserve £’000 Total £’000
For the year ended 31 December 2021
At 31 December 2020 9,651 127,155 22,779 103,992 628,870 38,378 930,825
Total comprehensive income:
Net profit for the year – – – – 113,560 78,910 192,470
Transactions with owners, recorded directly to equity:
Ordinary shares reissued from treasury 9,10 – 11,663 – 51,651 – – 63,314
Share reissue costs 9,10 – – – (127) – – (127)
Ordinary shares purchased into treasury 9,10 – – – (390) – – (390)
Share purchase costs 9,10 – – – (3) – – (3)
Dividends paid (1) 7 – – – – – (43,215) (43,215)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2021 9,651 138,818 22,779 155,123 742,430 74,073 1,142,874
========= ========= ========= ========= ========= ========= =========
For the year ended 31 December 2020
At 31 December 2019 9,651 127,155 22,779 108,601 447,806 41,118 757,110
Total comprehensive income:
Net profit for the year – – – – 181,064 35,451 216,515
Transactions with owners, recorded directly to equity:
Ordinary shares purchased into treasury – – – (4,573) – – (4,573)
Share purchase costs – – – (36) – – (36)
Dividends paid (2) 7 – – – – – (38,191) (38,191)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2020 9,651 127,155 22,779 103,992 628,870 38,378 930,825
========= ========= ========= ========= ========= ========= =========
(1) The final dividend of 8.30p per share for the year ended 31
December 2020, declared on 4 March 2021 and paid on 6 May 2021; 1st interim
dividend of 4.50p per share for the year ended 31 December 2021, declared on
29 April 2021 and paid on 25 June 2021; 2nd interim dividend of 5.50p per
share for the year ended 31 December 2021, declared on 19 August 2021 and
paid on 24 September 2021 and 3rd interim dividend of 5.50p per share for the
year ended 31 December 2021, declared on 18 November 2021 and paid on 24
December 2021.
(2) The final dividend of 10.00p per share for the year ended 31
December 2019, declared on 27 February 2020 and paid on 7 May 2020; 1st
interim dividend of 4.00p per share for the year ended 31 December 2020,
declared on 30 April 2020 and paid on 26 June 2020; 2nd interim dividend of
4.00p per share for the year ended 31 December 2020, declared on 19 August
2020 and paid on 25 September 2020 and 3rd interim dividend of 4.00p per share
for the year ended 31 December 2020, declared on 12 November 2020 and paid on
18 December 2020.
For information on the Company’s distributable reserves please refer to note
17 in the Annual Report and Financial Statements.
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER
2021
Company Notes Called up share capital £’000 Share premium account £’000 Capital redemption reserve £’000 Special reserve £’000 Capital reserves £’000 Revenue reserve £’000 Total £’000
For the year ended 31 December 2021
At 31 December 2020 9,651 127,155 22,779 103,992 634,547 32,701 930,825
Total comprehensive income:
Net profit for the year – – – – 113,560 78,910 192,470
Transactions with owners, recorded directly to equity:
Ordinary shares reissued from treasury 9,10 – 11,663 – 51,651 – – 63,314
Share reissue costs 9,10 – – – (127) – – (127)
Ordinary shares purchased into treasury 9,10 – – – (390) – – (390)
Share purchase costs 9,10 – – – (3) – – (3)
Dividends paid (1) 7 – – – – – (43,215) (43,215)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2021 9,651 138,818 22,779 155,123 748,107 68,396 1,142,874
========= ========= ========= ========= ========= ========= =========
For the year ended 31 December 2020
At 31 December 2019 9,651 127,155 22,779 108,601 454,613 34,311 757,110
Total comprehensive income:
Net profit for the year – – – – 179,934 36,581 216,515
Transactions with owners, recorded directly to equity:
Ordinary shares purchased into treasury – – – (4,573) – – (4,573)
Share purchase costs – – – (36) – – (36)
Dividends paid (2) 7 – – – – – (38,191) (38,191)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2020 9,651 127,155 22,779 103,992 634,547 32,701 930,825
========= ========= ========= ========= ========= ========= =========
(1) The final dividend of 8.30p per share for the year ended 31
December 2020, declared on 4 March 2021 and paid on 6 May 2021; 1st interim
dividend of 4.50p per share for the year ended 31 December 2021, declared on
29 April 2021 and paid on 25 June 2021; 2nd interim dividend of 5.50p per
share for the year ended 31 December 2021, declared on 19 August 2021 and paid
on 24 September 2021 and 3rd interim dividend of 5.50p per share for the year
ended 31 December 2021, declared on 18 November 2021 and paid on 24 December
2021.
(2) The final dividend of 10.00p per share for the year ended 31
December 2019, declared on 27 February 2020 and paid on 7 May 2020; 1st
interim dividend of 4.00p per share for the year ended 31 December 2020,
declared on 30 April 2020 and paid on 26 June 2020; 2nd interim dividend of
4.00p per share for the year ended 31 December 2020, declared on 19 August
2020 and paid on 25 September 2020 and 3rd interim dividend of 4.00p per share
for the year ended 31 December 2020, declared on 12 November 2020 and paid on
18 December 2020.
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 2021
31 December 2021 31 December 2020
Notes Group £’000 Company £’000 Group (Restated) (1) £’000 Company £’000
Non current assets
Investments held at fair value through profit or loss 1,256,801 1,263,979 1,045,818 1,052,996
Current assets
Current tax asset 85 85 114 114
Other receivables 5,209 5,209 6,723 6,723
Cash collateral held with brokers 580 580 2,943 2,943
Cash and cash equivalents 26,332 20,222 6,419 309
--------------- --------------- --------------- ---------------
Total current assets 32,206 26,096 16,199 10,089
========= ========= ========= =========
Total assets 1,289,007 1,290,075 1,062,017 1,063,085
Current liabilities
Current tax liability (427) (427) (511) (511)
Other payables (5,183) (6,251) (5,034) (6,102)
Derivative financial liabilities held at fair value through profit or loss (667) (667) (587) (587)
Bank overdraft (356) (356) (22,427) (22,427)
Bank loans (138,867) (138,867) (102,418) (102,418)
--------------- --------------- --------------- ---------------
Total current liabilities (145,500) (146,568) (130,977) (132,045)
--------------- --------------- --------------- ---------------
Total assets less current liabilities 1,143,507 1,143,507 931,040 931,040
========= ========= ========= =========
Non current liabilities
Deferred taxation liability (633) (633) (215) (215)
--------------- --------------- --------------- ---------------
Net assets 1,142,874 1,142,874 930,825 930,825
========= ========= ========= =========
Equity attributable to equity holders
Called up share capital 9 9,651 9,651 9,651 9,651
Share premium account 10 138,818 138,818 127,155 127,155
Capital redemption reserve 10 22,779 22,779 22,779 22,779
Special reserve 10 155,123 155,123 103,992 103,992
Capital reserves:
At 1 January 628,870 634,547 447,806 454,613
Net profit for the year 113,560 113,560 181,064 179,934
--------------- --------------- --------------- ---------------
At 31 December 10 742,430 748,107 628,870 634,547
========= ========= ========= =========
Revenue reserve:
At 1 January 38,378 32,701 41,118 34,311
Net profit for the year 78,910 78,910 35,451 36,581
Dividends paid (43,215) (43,215) (38,191) (38,191)
--------------- --------------- --------------- ---------------
At 31 December 10 74,073 68,396 38,378 32,701
========= ========= ========= =========
Total equity 1,142,874 1,142,874 930,825 930,825
========= ========= ========= =========
Net asset value per ordinary share (pence) 8 622.21 622.21 536.34 536.34
========= ========= ========= =========
(1) Please refer to note 2 “Restatement of 2020 comparatives”
below for further details.
CONSOLIDATED AND PARENT COMPANY CASH FLOW STATEMENTS FOR THE YEAR ENDED 31
DECEMBER 2021
31 December 2021 31 December 2020
Group £’000 Company £’000 Group (Restated) (1) £’000 Company £’000
Operating activities
Net profit before taxation 196,590 196,590 216,453 216,453
Add back finance costs 1,491 1,491 1,696 1,696
Net profit on investments held at fair value through profit or loss (including transaction costs) (122,374) (122,374) (183,667) (182,536)
Loss on investment dealing in the subsidiary – – 1,128 –
Net loss/(profit) on foreign exchange 1,696 1,696 (2,431) (2,431)
Sales of investments held at fair value through profit or loss 354,182 354,182 360,288 359,062
Purchases of investments held at fair value through profit or loss (442,711) (442,711) (377,517) (377,517)
(Increase)/decrease in other receivables (1,233) (1,233) 618 618
Increase in other payables 2,571 2,571 268 268
Decrease/(increase) in amounts due from brokers 2,776 2,776 (2,902) (2,902)
(Decrease)/increase in amounts due to brokers (2,473) (2,473) 2,473 2,473
Net movement in cash collateral held with brokers 2,363 2,363 (2,512) (2,512)
--------------- --------------- --------------- ---------------
Net cash (outflow)/inflow from operating activities before taxation (7,122) (7,122) 13,895 12,672
Taxation paid (484) (484) (1,038) (1,038)
Taxation on investment income included within gross income (3,303) (3,303) (1,664) (1,664)
Prior years corporation tax refund – – 2,687 2,687
--------------- --------------- --------------- ---------------
Net cash (outflow)/inflow from operating activities (10,909) (10,909) 13,880 12,657
========= ========= ========= =========
Financing activities
Drawdown of loans 35,020 35,020 15,016 15,016
Interest paid (1,439) (1,439) (1,772) (1,772)
Shares purchased into treasury (390) (390) (5,455) (5,455)
Share purchase costs paid (3) (3) (36) (36)
Net proceeds from ordinary shares reissued from treasury 63,187 63,187 – –
Dividends paid (43,215) (43,215) (38,191) (38,191)
--------------- --------------- --------------- ---------------
Net cash inflow/(outflow) from financing activities 53,160 53,160 (30,438) (30,438)
========= ========= ========= =========
Increase/(decrease) in cash and cash equivalents 42,251 42,251 (16,558) (17,781)
Cash and cash equivalents at start of the year (16,008) (22,118) 1,300 (3,587)
Effect of foreign exchange rate changes (267) (267) (750) (750)
--------------- --------------- --------------- ---------------
Cash and cash equivalents at end of year 25,976 19,866 (16,008) (22,118)
========= ========= ========= =========
Comprised of:
Cash and cash equivalents 26,332 20,222 6,419 309
Bank overdraft (356) (356) (22,427) (22,427)
--------------- --------------- --------------- ---------------
25,976 19,866 (16,008) (22,118)
========= ========= ========= =========
(1) Please refer to note 2 “Restatement of 2020 comparatives”
below for further details.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
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 28th
Annual Report.
The principal activity of the subsidiary, BlackRock World Mining Investment
Company Limited, is investment dealing.
2. ACCOUNTING POLICIES
The principal 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 was brought into UK law and became
UK-adopted International Accounting Standards, with future changes being
subject to endorsement by the UK Endorsement Board. The Company transitioned
to UK-adopted International Accounting Standards in its consolidated financial
statements with effect from 1 January 2021. There was no impact or changes in
accounting policies from the transition.
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 International Accounting Standards (IASs). 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 April 2021, is compatible with
UK-adopted International Accounting Standards, 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, being a period of at least one year from the date of approval of the
financial statements and therefore consider the going concern assumption to be
appropriate. The Directors have considered the potential impact of the
COVID-19 pandemic, its potential longer-term effects on the global economy and
the mitigation measures which key service providers, including the Manager,
have in place to maintain operational resilience on the going concern of the
Group. 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 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 standards and interpretations:
Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest rate benchmark reform
Phase 2 (effective 1 January 2021). The Phase 2 amendments address issues that
might affect financial reporting during the reform of an interest rate
benchmark, including the effects of changes to contractual cash flows or
hedging relationships arising from the replacement of an interest rate
benchmark with an alternative benchmark rate (replacement issues).
The objectives of the Phase 2 amendments are to assist companies in:
· applying IFRS Standards when changes are made to contractual
cash flows or hedging relationships because of the interest rate benchmark
reform; and
· providing useful information to users of financial
statements.
In Phase 2 of its project, the Board amended requirements in IFRS 9 Financial
Instruments, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7
Financial Instruments: Disclosures, IFRS 4 Insurance Contracts and IFRS 16
Leases relating to:
· changes in the basis for determining contractual cash flows
of financial assets, financial liabilities and lease liabilities;
· hedge accounting; and
· disclosures.
The Phase 2 amendments apply only to changes required by the interest rate
benchmark reform to financial instruments and hedging relationships.
These amendments have been adopted by the UK. The adoption of these amendments
did not have any significant impact on the Group.
Relevant International accounting standards (IASs) that have yet to be
adopted:
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.
The amendment of this standard is unlikely to have any significant impact on
the Group.
Restatement of 2020 comparatives
In May 2021, the Company received correspondence from the FRC’s Corporate
Reporting Review Team who had reviewed the 2020 annual report and financial
statements. The FRC requested further information relating to disclosure of
quantitative information about significant unobservable inputs used in the
valuation of OZ Minerals Brazil royalty, on which the Company was required to
respond to help the FRC Corporate Reporting Review Team understand how the
Company had satisfied the relevant reporting requirements. In addition, the
Company was encouraged to make improvements in relation to a number of
observations made by the FRC on the 2020 annual report and financial
statements, if material and relevant.
Following provision of the information requested, the FRC Corporate Reporting
Review Team closed its enquiry in June 2021. Further disclosure observations
made by the FRC were given full consideration and additional disclosures were
incorporated into the 2021 annual report and financial statements where
material and relevant to do so.
In order to better reflect the requirements of IAS 32, ‘Financial
Instruments: Presentation’, the Parent Company’s bank overdraft has been
presented separately from the subsidiary’s cash balance in the Consolidated
Statement of Financial Position and the Consolidated Cash Flow Statement with
comparatives restated. These balances were previously shown on a net basis for
the Group. This change in presentation has no impact on the Group’s net
assets or the Group’s Statement of Comprehensive Income. The Group’s cash
and cash equivalents balance as at 31 December 2020 has been restated from
£309,000 to £6,419,000 and the Group overdraft balance has been restated
from £16,317,000 to £22,427,000.
The Group has restated separately the presentation of the Curret tax asset of
£114,000 at 31 December 2020 and Current tax liability of £511,000 at 31
December 2020 which were previously included within Other receivables and
Other payables respectively in the Consolidated Statement of Financial
Position.
The Group has restated the presentation of provision for doubtful debts of
£106,000 for the year ended 31 December 2020 which was presented within
income in note 3 and has now been classified as an other operating expense in
note 5. This change in presentation has no impact on the Group’s net revenue
earnings or the Group’s net assets.
(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
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 IFRS, 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 profits or losses 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 IASs, 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 as the 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 and share reissues
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
· any surplus received in excess of the repurchase price is
taken to the share premium account.
(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 OZ Minerals 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 convertible bonds and equity
shares of Ivanhoe Electric and I-Pulse were assessed by an independent valuer
with a recognised and relevant professional qualification. The valuation is
carried out based on market approach using multiples based on total assets.
The valuation of convertible notes is based on a scenario approach, with the
conversion at a discount in an IPO modelled as debt-like payments, and the
conversion option modelled via the Black-Scholes option pricing model. The
estimates include implicit yield based on internal rates of return, implied
volatility and asset multiples. 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 11 below.
3. INCOME
2021 £’000 2020 (Restated) (1) £’000
Investment income:
UK dividends 25,681 12,328
UK special dividends 5,507 –
Overseas dividends 36,624 12,133
Overseas special dividends 1,250 538
Income from contractual rights (OZ Minerals Royalty) 2,562 1,800
Income from Vale debentures 6,971 2,304
Income from fixed income investments 1,963 2,510
--------------- ---------------
80,558 31,613
========= =========
Other income:
Option premium income 7,065 8,765
Deposit interest – 7
Interest on corporation tax refund – 293
Stock lending income 53 27
Loss on investment dealing in the subsidiary – (1,128)
--------------- ---------------
7,118 7,964
========= =========
Total income 87,676 39,577
========= =========
(1) Please refer to note 2 “Restatement of 2020 comparatives”
above for further details.
During the year, the Group received option premium income in cash totalling
£6,745,000 (2020: £8,821,000) 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 £7,065,000 (2020:
£8,765,000) were amortised to revenue.
At 31 December 2021, there were two open positions (2020: two) with an
associated liability of £667,000 (2020: £587,000).
Dividends and interest received in cash during the year amounted to
£68,199,000 and £5,186,000 (2020: £25,363,000 and £3,421,000).
No special dividends have been recognised in capital during the year (2020:
£34,000).
4. INVESTMENT MANAGEMENT FEE
2021 2020
Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
Investment management fee 2,252 6,978 9,230 1,546 4,859 6,405
--------------- --------------- --------------- --------------- --------------- ---------------
Total 2,252 6,978 9,230 1,546 4,859 6,405
========= ========= ========= ========= ========= =========
The investment management fee (which includes all services provided by
BlackRock) is 0.8% of the Company’s net assets. However, in the event that
the NAV per share increases on a quarter–on–quarter basis, the fee will
then be paid on gross assets for the quarter. During the year, £8,537,000
(2020: £5,907,000) of the investment management fee was generated from net
assets and £693,000 (2020: £498,000) 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 NAV per share (pence) Quarterly increase/ (decrease) % Gearing effect on management fees (£’000)
31 December 2020 536.34 – –
31 March 2021 566.62 +5.6 243
30 June 2021 616.20 +8.8 224
30 September 2021 554.49 -10.0 –
31 December 2021 622.21 +12.2 226
========= ========= =========
Quarter end Cum income NAV per share (pence) Quarterly increase/ (decrease) % Gearing effect on management fees (£’000)
31 December 2019 433.17 – –
31 March 2020 307.48 -29.0 –
30 June 2020 428.24 +39.3 –
30 September 2020 456.18 +6.5 –
31 December 2020 536.34 +17.6 –
========= ========= =========
The daily average of the net assets under management during the year ended 31
December 2021 was £1,085,438,000 (2020: £748,853,000).
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
2021 £’000 2020 (Restated) (1) £’000
Allocated to revenue:
Custody fee 103 105
Auditors’ remuneration:
– audit services 41 39
– non-audit services² 9 8
Registrar’s fee 91 86
Directors’ emoluments³ 176 183
AIC fees 21 17
Broker fees 25 24
Depositary fees 101 74
FCA fee 24 20
Directors’ insurance 19 14
Marketing fees 140 152
Stock exchange fees 26 21
Legal and professional fees 52 40
Bank facility fees (4) 73 72
Directors’ search fees – 13
Printing and postage fees 37 41
Write back of prior year expenses (5) – (18)
Provision for doubtful debts – 106
Other administrative costs 96 106
--------------- ---------------
1,034 1,103
========= =========
Allocated to capital:
Custody transaction charges (6) 9 18
--------------- ---------------
1,043 1,121
========= =========
2021 2020
The Company’s ongoing charges (7), 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, custody transaction charges, VAT recovered, taxation and certain non-recurring items were: 0.95% 0.99%
--------------- ---------------
The Company’s ongoing charges (7), 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, custody transaction charges, VAT recovered, taxation and certain non-recurring items were: 0.84% 0.87%
========= =========
(1) Please refer to note 2 “Restatement of 2020 comparatives”
above for further details.
(2) Fees paid to the auditor for non-audit services of £8,500
excluding VAT (2020: £7,540) relate to the review of the Condensed Half
Yearly Financial Report.
(3) 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.
(4) There is a 4 basis point facility fee chargeable on the full loan
facility amount whether drawn or undrawn.
(5) Relates to prior year accrual for broker fees written back during
the year.
(6) For the year ended 31 December 2021, expenses of £9,000 (2020:
£18,000) were charged to the capital account of the Consolidated Statement of
Comprehensive Income. These relate to transaction costs charged by the
Custodian on sale and purchase trades.
(7) Alternative Performance Measures, see Glossary in the Annual
Report and Financial Statements.
6. FINANCE COSTS
2021 2020
Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
Interest payable – bank loans 365 1,097 1,462 409 1,229 1,638
Interest payable – bank overdraft 9 20 29 15 43 58
--------------- --------------- --------------- --------------- --------------- ---------------
Total 374 1,117 1,491 424 1,272 1,696
========= ========= ========= ========= ========= =========
7. DIVIDENDS
Dividends paid on equity shares:
Record date Payment date 2021 £’000 2020 £’000
Final dividend of 8.30p per share for the year ended 31 December 2020 (2019: 10.00p) 19 March 2021 6 May 2021 14,782 17,361
1st interim dividend of 4.50p per share for the year ended 31 December 2021 (2020: 4.00p) 28 May 2021 25 June 2021 8,224 6,944
2nd interim dividend of 5.50p per share for the year ended 31 December 2021 (2020: 4.00p) 27 August 2021 24 September 2021 10,106 6,944
3rd interim dividend of 5.50p per share for the year ended 31 December 2021 (2020: 4.00p) 26 November 2021 24 December 2021 10,103 6,942
--------------- ---------------
43,215 38,191
========= =========
The total dividends payable in respect of the year ended 31 December 2021
which form the basis of Section 1158 of the Corporation Tax Act 2010 and
Section 833 of the Companies Act 2006, and the amounts proposed, meet the
relevant requirements as set out in this legislation.
Dividends paid, proposed or declared on equity shares relating to the year
ended 31 December:
2021 £’000 2020 £’000
1st quarterly interim dividend of 4.50p per share for the year ended 31 December 2021 (2020: 4.00p) 8,224 6,944
2nd quarterly interim dividend of 5.50p per share for the year ended 31 December 2021 (2020: 4.00p) 10,106 6,944
3rd quarterly interim dividend of 5.50p per share for the year ended 31 December 2021 (2020: 4.00p) 10,103 6,942
Final dividend of 27.00p per share for the year ended 31 December 2021 (2020: final dividend 8.30p) (1) 49,830 14,782
--------------- ---------------
78,263 35,612
========= =========
(1) Based on 184,556,116 ordinary shares in issue on 2 March 2022.
8. CONSOLIDATED EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE
Total revenue, capital return and net asset value per ordinary share are shown
below and have been calculated using the following:
2021 2020
Net revenue profit attributable to ordinary shareholders (£’000) 78,910 35,451
Net capital profit attributable to ordinary shareholders (£’000) 113,560 181,064
--------------- ---------------
Total profit attributable to ordinary shareholders (£’000) 192,470 216,515
========= =========
Equity shareholders’ funds (£’000) 1,142,874 930,825
The weighted average number of ordinary shares in issue during the year, on which the earnings per ordinary share was calculated was: 181,037,188 173,740,499
The actual number of ordinary shares in issue at the year end, on which the net asset value per ordinary share was calculated was: 183,681,116 173,550,814
Earnings per share
Revenue earnings per share (pence) – basic and diluted 43.59 20.40
Capital earnings per share (pence) – basic and diluted 62.73 104.22
--------------- ---------------
Total earnings per share (pence) – basic and diluted 106.32 124.62
========= =========
As at 31 December 2021 As at 31 December 2020
Net asset value per ordinary share (pence) 622.21 536.34
Ordinary share price (pence) 589.00 522.00
========= =========
There were no dilutive securities at the year end.
9. CALLED UP SHARE CAPITAL
Ordinary shares in issue number Treasury shares number Total shares number Nominal value £’000
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 5p each
At 31 December 2020 173,550,814 19,461,028 193,011,842 9,651
Ordinary shares reissued from treasury 10,200,000 (10,200,000) – –
Ordinary shares bought back into treasury (69,698) 69,698 – –
--------------- --------------- --------------- ---------------
At 31 December 2021 183,681,116 9,330,726 193,011,842 9,651
========= ========= ========= =========
During the year ended 31 December 2021, the Company bought back 69,698 (2020:
1,233,913) shares into treasury for a total consideration including costs of
£393,000 (2020: £4,609,000).
The Company also reissued 10,200,000 (2020: nil) shares from treasury for a
total consideration net of costs of £63,187,000 (2020: nil).
Since the year end and up to 2 March 2022, the Company has reissued 875,000
ordinary shares from treasury net of costs for a total consideration of
£6,281,000.
10. RESERVES
Group Share premium account £’000 Capital redemption reserve £’000 Special reserve £’000 Capital reserve arising on investments sold £’000 Capital reserve arising on revaluation of investments held £’000 Revenue reserve £’000
At 31 December 2020 127,155 22,779 103,992 277,389 351,481 38,378
Movement during the year:
Total comprehensive income:
Net profit for the year – – – 68,205 45,355 78,910
Transactions with owners, recorded directly to equity:
Ordinary shares reissued from treasury 11,663 – 51,651 – – –
Share reissue costs – – (127) – – –
Ordinary shares purchased into treasury – – (390) – – –
Share purchase costs – – (3) – – –
Dividends paid – – – – – (43,215)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2021 138,818 22,779 155,123 345,594 396,836 74,073
========= ========= ========= ========= ========= =========
Distributable reserves
Company Share premium account £’000 Capital redemption reserve £’000 Special reserve £’000 Capital reserve arising on investments sold £’000 Capital reserve arising on revaluation of investments held £’000 Revenue reserve £’000
At 31 December 2020 127,155 22,779 103,992 275,888 358,659 32,701
Movement during the year:
Total comprehensive income:
Net profit for the year – – – 68,205 45,355 78,910
Transactions with owners, recorded directly to equity:
Ordinary shares reissued from treasury 11,663 – 51,651 – – –
Share reissue costs – – (127) – – –
Ordinary shares purchased into treasury – – (390) – – –
Share purchase costs – – (3) – – –
Dividends paid – – – – – (43,215)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2021 138,818 22,779 155,123 344,093 404,014 68,396
========= ========= ========= ========= ========= =========
Group Share premium account £’000 Capital redemption reserve £’000 Special reserve £’000 Capital reserve arising on investments sold £’000 Capital reserve arising on revaluation of investments held £’000 Revenue reserve £’000
At 31 December 2019 127,155 22,779 108,601 281,550 166,256 41,118
Movement during the year:
Total comprehensive income:
Net profit for the year – – – (4,161) 185,225 35,451
Transactions with owners, recorded directly to equity:
Ordinary shares purchased into treasury – – (4,573) – – –
Share purchase costs – – (36) – – –
Dividends paid – – – – – (38,191)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2020 127,155 22,779 103,992 277,389 351,481 38,378
========= ========= ========= ========= ========= =========
Distributable reserves
Company Share premium account £’000 Capital redemption reserve £’000 Special reserve £’000 Capital reserve arising on investments sold £’000 Capital reserve arising on revaluation of investments held £’000 Revenue reserve £’000
At 31 December 2019 127,155 22,779 108,601 280,610 174,003 34,311
Movement during the year:
Total comprehensive income:
Net profit for the year – – – (4,722) 184,656 36,581
Transactions with owners, recorded directly to equity:
Ordinary shares purchased into treasury – – (4,573) – – –
Share purchase costs – – (36) – – –
Dividends paid – – – – – (38,191)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2020 127,155 22,779 103,992 275,888 358,659 32,701
========= ========= ========= ========= ========= =========
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 and capital redemption reserve are not distributable profits
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 reserve of the Parent Company may be
used as distributable profits for all purposes and, in particular, the
repurchase by the Parent Company of its ordinary shares and for payments 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 £748,107,000
(2020: capital gain of £634,547,000) comprise a gain on capital reserve
arising on investments sold of £344,093,000 (2020: gain of £275,888,000), a
gain on capital reserve arising on revaluation of listed investments of
£387,997,000 (2020: gain of £339,413,000), revaluation gains on unquoted
investments of £8,839,000 (2020: gain of £12,068,000) and a revaluation gain
on the investment in the subsidiary of £7,178,000 (2020: gain of
£7,178,000). The capital reserve arising on the revaluation of listed
investments of £387,997,000 (2020: £339,413,000) 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, 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 observable 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.
Assessing the significance of a particular input to the fair value measurement
requires judgement by the Investment Manager, considering factors specific to
the asset or liability.
Valuation process and techniques for Level 3 valuations
(a) OZ Minerals 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) Ivanhoe Electric and I-Pulse convertible bonds and equity shares
The fair value of the investment in convertible bonds and equity shares of
Ivanhoe Electric and I-Pulse were assessed by an independent valuer with a
recognised and relevant professional qualification. The valuation is carried
out based on market approach using multiples based on total assets. The
valuation of convertible notes is based on a scenario approach, with the
conversion at a discount in an IPO modelled as debt-like payments, and the
conversion option modelled via the Black-Scholes option pricing model.
The estimates include implicit yield based on internal rates of return,
implied volatility and asset multiples. 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 at 31 December 2021 – Group Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000
Assets:
Equity investments 1,114,430 8,955 1,846 1,125,231
Fixed income securities 59,108 40,895 13,405 113,408
Investment in contractual rights – – 18,162 18,162
--------------- --------------- --------------- ---------------
Total assets 1,173,538 49,850 33,413 1,256,801
========= ========= ========= =========
Liabilities:
Derivative financial instruments – written options – (667) – (667)
--------------- --------------- --------------- ---------------
Total 1,173,538 49,183 33,413 1,256,134
========= ========= ========= =========
Financial assets/(liabilities) at fair value through profit or loss at 31 December 2020 – Group Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000
Assets:
Equity investments 935,805 2,811 – 938,616
Fixed income securities 42,773 44,676 – 87,449
Investment in contractual rights – – 19,753 19,753
--------------- --------------- --------------- ---------------
Total assets 978,578 47,487 19,753 1,045,818
========= ========= ========= =========
Liabilities:
Derivative financial instruments – written options – (587) – (587)
--------------- --------------- --------------- ---------------
Total 978,578 46,900 19,753 1,045,231
========= ========= ========= =========
Financial assets/(liabilities) at fair value through profit or loss at 31 December 2021 – Company Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000
Assets:
Equity investments 1,114,430 8,955 9,024 1,132,409
Fixed income securities 59,108 40,895 13,405 113,408
Investment in contractual rights – – 18,162 18,162
--------------- --------------- --------------- ---------------
Total assets 1,173,538 49,850 40,591 1,263,979
========= ========= ========= =========
Liabilities:
Derivative financial instruments – written options – (667) – (667)
--------------- --------------- --------------- ---------------
Total 1,173,538 49,183 40,591 1,263,312
========= ========= ========= =========
Financial assets/(liabilities) at fair value through profit or loss 31 December 2020 – Company Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000
Assets:
Equity investments 935,805 2,811 7,178 945,794
Fixed income securities 42,773 44,676 – 87,449
Investment in contractual rights – – 19,753 19,753
--------------- --------------- --------------- ---------------
Total assets 978,578 47,487 26,931 1,052,996
========= ========= ========= =========
Liabilities:
Derivative financial instruments – written options – (587) – (587)
--------------- --------------- --------------- ---------------
Total 978,578 46,900 26,931 1,052,409
========= ========= ========= =========
A reconciliation of fair value measurement in Level 3 is set out below.
Level 3 Financial assets at fair value through profit or loss At 31 December – Group 2021 £’000 2020 £’000
Opening fair value 19,753 15,790
Return of capital – royalty (267) (184)
Additions at cost 14,390 –
Total profit or loss included in net profit on investments in the Consolidated Statement of Comprehensive Income:
– assets held at the end of the year (463) 4,147
--------------- ---------------
Closing balance 33,413 19,753
========= =========
Level 3 Financial assets at fair value through profit or loss At 31 December – Company 2021 £’000 2020 £’000
Opening fair value 26,931 24,098
Return of capital – royalty (267) (184)
Additions at cost 14,390 –
Total profit or loss included in net profit on investments in the Consolidated Statement of Comprehensive Income:
– assets held at the end of the year (463) 3,017
--------------- ---------------
Closing balance 40,591 26,931
========= =========
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 above, under ‘Valuation process and techniques’.
The Level 3 investments as at 31 December 2021 in the table below relate to
the OZ Minerals Brazil Royalty, convertible bonds and equity shares of Ivanhoe
Electric and I-Pulse. In accordance with IFRS 13, these investments were
categorised as Level 3.
In arriving at the fair value of the OZ Minerals Brazil Royalty, the key
inputs are the underlying commodity prices and illiquidity discount. In
arriving at the fair value of Ivanhoe Electric and I-Pulse securities, the key
input is asset multiple.
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 in the Annual Report and Financial
Statements under “valuation process and techniques”.
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 2021 and 31
December 2020 are as shown below.
Description As at 31 December 2021 Valuation technique Unobservable input Range of weighted average inputs Reasonable possible shift¹ +/- Impact on fair value
OZ Minerals Brazil Royalty 18,162 Discounted cash flows Discounted rate – weighted average cost of Capital Average gold prices Average copper prices 5.0% – 8.0% US$1,400-US$1,600 per ounce US$7,209-US$8,510 per tonne 1.0% 10.0% 10.0% £1.0m £1.5m £1.0m
Ivanhoe Electric and I-Pulse – convertible bonds and equity shares 15,251 Market approach and scenario analysis for convertible notes Asset multiple 0.75x – 1.25x 25.0% £0.5m
========= ========= =========
(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 31 December 2020 Valuation technique Unobservable input Range of weighted average inputs Reasonable possible shift¹ +/- Impact on fair value
OZ Minerals Brazil Royalty 19,753 Discounted cash flows Discounted rate – weighted average cost of capital Average gold prices Average copper prices 5.0% – 9.0% US$1,410 – US$1,870 per ounce US$6,305 – US$6,945 per tonne 1.0% 10.0% 10.0% £1.1m £0.9m £0.5m
========= ========= =========
(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.
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 2021 amounted
to £9,230,000 (2020: £6,405,000). At the year end, £4,587,000 (2020:
£2,064,000) was outstanding in respect of management fees.
In addition to the above services, BlackRock has provided the Group with
marketing services. The total fees paid or payable for these services for the
year ended 31 December 2021 amounted to £140,000 excluding VAT (2020:
£152,000 excluding VAT). Marketing fees of £55,000 were outstanding as at 31
December 2021 (2020: £55,000).
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.
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 2021 £14,375 (2020: £14,375) 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 2021
Total % of shares held by Related BlackRock Funds Total % of shares held by Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc. Number of Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc.
1.77 n/a n/a
As at 31 December 2020
Total % of shares held by Related BlackRock Funds Total % of shares held by Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc. Number of Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc.
2.45 n/a n/a
14. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 December 2021 (2020: nil).
15. SUBSEQUENT EVENTS
Since the balance sheet date, the borrowings that matured on 11 February 2022
have been renewed for a further period of three months expiring on 11 May
2022. The overdraft and revolving loan credit facility agreements have been
renewed up to 24 June 2022.
As noted in the Chairman’s Statement, since the financial year end,
financial markets have fallen significantly due primarily to geopolitical
tensions arising from Russia's incursion into Ukraine and the impact of a
subsequent range of sanctions, regulations and other measures which impaired
normal trading in Russian securities. In the light of these events, BlackRock
on Monday, 28 February 2022, suspended the purchase of all Russian securities
in its active and index funds.
As at balance sheet date, 2.1% of net assets (with a value of £24.5 million)
was in securities with exposure to companies whose principal activities are in
Russia. This has since fallen on 3 March 2022 to 0.1% of net assets (with a
value of £1.7 million).
Whilst these investments have experienced downward volatility and trading
suspensions, subsequent to the year end, the share price and the net asset
value of the Company’s shares as at 2 March 2022 has increased by 28.7% and
20.2% (when compared to 31 December 2021), respectively, benefiting from the
performance from the rest of the portfolio. There were no other significant
events affecting the Group since the financial year end.
16. 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 2021 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 2021 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 2020, 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.
17. 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.
18. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at 12 Throgmorton
Avenue, London EC2N 2DL on Friday, 6 May 2022 at 11.30 a.m.
ENDS
The Annual Report and Financial Statements will also be available on the
BlackRock website at www.blackrock.co.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:
Simon White, Managing Director, Closed End Funds, BlackRock Investment
Management (UK) Limited – Tel: 020 7743 5284
Evy Hambro, Fund Manager, BlackRock Investment Management (UK) Limited –
Tel: 020 7743 4511
Emma Phillips, Media & Communications, BlackRock Investment Management (UK)
Limited – Tel: 020 7743 2922
Press enquires:
Ed Hooper, Lansons Communications
Tel: 020 7294 3620
E-mail: BlackRockInvestmentTrusts@lansons.com or EdH@lansons.com
7 March 2022
12 Throgmorton Avenue
London EC2N 2DL
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