REG-BlackRock World Mng: Portfolio Update
17/07/2018 17:10
BLACKROCK WORLD MINING TRUST plc (LEI - LNFFPBEUZJBOSR6PW155)
All information is at 30 June 2018 and unaudited.
Performance at month end with net income reinvested
One Three One Three Five
Month Months Year Years Years
Net asset value -2.5% 8.6% 24.3% 66.4% 20.7%
Share price -4.0% 5.1% 20.8% 61.0% 20.5%
EMIX Global Mining Index (Gross) -1.2% 8.5% 22.9% 64.6% 37.1%
EMIX Global Mining Index (Net)* -1.2% 8.4% 22.3% 62.2% 33.6%
(Total return)
Sources: BlackRock, EMIX Global Mining Index, Datastream
* The Company’s performance benchmark (the EMIX Global Mining Total Return Index) may be calculated on either a Gross or a Net return basis. Net return (NR) indices calculate the reinvestment of dividends net of withholding taxes using the tax rates applicable to non-resident institutional investors, and hence give a lower total return than indices where calculations are on a Gross basis. As the Company is subject to the same withholding tax rates for the countries in which it invests, the NR basis is felt to be the most accurate, appropriate, consistent and fair comparison for the Company. Historically the benchmark data for the Company has always been stated on a Gross basis, and therefore for transparency both sets of benchmark data are provided in the table above. Going forward it is the Board’s intention to monitor the Company’s performance with reference
to the NR version of the benchmark.
At month end
Net asset value including income (1): 445.77p
Net asset value capital only: 439.60p
(1)Includes net revenue of 5.40p
Share price: 386.50p
Discount to NAV (2): 13.3%
Total assets: £897.5m
Net yield (3): 4.0%
Net gearing: 14.1%
Ordinary shares in issue: 176,455,242
Ordinary shares held in treasury: 16,556,600
Ongoing charges (4): 1.00%
(2)Discount to NAV including income. (3)Based on a quarterly interim dividend of 3.00p per share declared on 25 April 2018 in respect of the year ending 31 December 2018 and quarterly interim dividends of 3.00p per share declared on 10 August 2017 and 10 November 2017 and a final dividend of 6.60p per share in respect of the year ended 31 December 2017. (4)Calculated as a percentage of average net assets and using expenses, excluding finance costs, for the year ended 31 December 2017.
Sector % Total Country Analysis % Total
Assets Assets
Diversified 48.4 Global 62.4
Copper 20.1 Latin America 10.7
Gold 14.0 Australasia 10.7
Silver & Diamonds 8.0 Canada 6.7
Industrial Minerals 7.2 Other Africa 6.3
Zinc 0.9 South Africa 0.7
Steel 0.4 USA 0.6
Aluminium 0.3 Kazakhstan 0.4
Iron Ore 0.1 Russia 0.4
Net current assets 0.6 Peru 0.2
----- Argentina 0.2
100.0 Mexico 0.1
Net current assets 0.6
===== -----
100.0
=====
Ten Largest Investments
Company % Total
Assets
Rio Tinto 10.7
BHP Billiton 10.0
Glencore 8.1
Vale 7.9
First Quantum Minerals 7.5
Teck Resources 5.7
Sociedad Minera Cerro Verde 3.2
Mountain Province Diamonds 2.8
Avanco Resources – Royalty Contract 2.3
Oz Minerals 2.2
Commenting on the markets, Evy Hambro and Olivia Markham, representing the Investment Manager noted:
Performance
The Company’s NAV decreased by 2.5% in June, underperforming its benchmark, the EMIX Global Mining Index (net return), which returned -1.2%.
June was a difficult month for the mining sector, which took it into negative territory overall for 2018. The month saw more noise around potential trade wars as President Donald Trump approved tariffs worth $50bn on China, leading Beijing to counter with $50bn of tariffs of its own. Concerns heightened around the potential for this to derail the global economic growth story and mined commodities suffered as a result. However, whilst the market focused on the risks surrounding rising protectionism, global
economic data remained healthy, with global manufacturing PMI increasing to 53.0.
The US dollar strengthened over the month, providing another headwind for commodity prices and precious metals in particular. Gold, silver and platinum prices were off -4.1%, -2.2% and -6.2% respectively. The base metals were also weak, with zinc, copper and nickel down -6.2%, -3.2% and -2.2% respectively. The bulk commodities were relatively stable, however, with the iron ore (62% fe) price up +2.3% over the month to $67/tonne. (Commodity returns in USD)
During the month, underperformance was mainly stock specific. Our position in Vale, which has been a strong source of relative returns over the past 18 months, was a notable detractor on the back of deteriorating sentiment towards Brazil and emerging markets in general.
Among the Company’s smaller positions, Arizona Mining received a bid from South32 during the month, at a ~50% premium to last close. In addition, the bid for Avanco Resources from Oz Minerals was declared unconditional during the month, with Oz Minerals to commence compulsory acquisition.
Strategy and Outlook
After two strong years, investors that have not been exposed to mining may now be questioning if they have missed the opportunity. We are, however, still a long way below the peak in 2011 and the sector continues to trade at a valuation discount to broader equity markets. Meanwhile, free cash flow in the sector is close to the highest it has ever been. That said, we believe most mined commodities look reasonably fairly priced and so our base case is that they remain range-bound at current levels. Crucially,
however, mining equities are still pricing in commodity prices well below current spot prices and, as such, we are constructive on the shares but fairly neutral on the commodities themselves. Many still distrust the miners, expecting them to make the same mistakes of the past in terms of poor capital discipline. Our view though is that the pain of the recent down-cycle is still too fresh in the minds of management teams for this to become a widespread issue in the near-term. We have begun to see moderate
increases in sustaining capex announced but we believe for the most part these have been necessary increases rather than indicative of a widespread return to poor capital discipline.
All data points are in GBP terms unless stated otherwise.
17 July 2018
ENDS
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