REG-BlackRock World Mng: Portfolio Update
16/08/2018 17:15
BLACKROCK WORLD MINING TRUST plc (LEI - LNFFPBEUZJBOSR6PW155)
All information is at 31 July 2018 and unaudited.
Performance at month end with net income reinvested
One Three One Three Five
Month Months Year Years Years
Net asset value 1.2% 4.7% 13.7% 94.0% 14.4%
Share price 0.0% 2.5% 9.4% 88.2% 9.9%
EMIX Global Mining Index (Gross) 0.2% 3.9% 11.9% 89.7% 28.6%
EMIX Global Mining Index (Net)* 0.2% 3.8% 11.3% 87.0% 25.3%
(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): 451.02p
Net asset value capital only: 444.41p
(1)Includes net revenue of 6.61p
Share price: 386.50p
Discount to NAV (2): 14.3%
Total assets: £911.5m
Net yield (3): 4.0%
Net gearing: 15.1%
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 48.9 Global 62.8
Copper 20.9 Australasia 10.6
Gold 13.7 Latin America 10.6
Silver & Diamonds 7.7 Canada 6.6
Industrial Minerals 6.8 Other Africa 6.3
Steel 0.9 USA 1.2
Zinc 0.8 South Africa 0.7
Nickel 0.4 Russia 0.4
Aluminium 0.3 Indonesia 0.4
Iron Ore 0.1 Kazakhstan 0.4
Net current liabilities (0.5) Peru 0.2
Argentina 0.2
Mexico 0.1
Net current liabilities (0.5)
----- -----
100.0 100.0
===== =====
Ten Largest Investments
Company % Total
Assets
Rio Tinto 10.6
BHP Billiton 10.2
Vale 8.9
Glencore 7.8
First Quantum Minerals 7.3
Teck Resources 5.8
Sociedad Minera Cerro Verde 3.3
Mountain Province Diamonds 2.8
Oz Minerals 2.3
Avanco Resources - royalty 2.3
Commenting on the markets, Evy Hambro and Olivia Markham, representing the Investment Manager noted:
Performance The Company’s NAV increased by 1.2% in July, outperforming its benchmark, the EMIX Global Mining Index (net return), which returned 0.2%. July was a weak month for the mined commodities, which were down almost across the board. Within the base metals, copper, nickel and zinc prices fell by 5.2%, 6.0% and 7.9% respectively. Within precious metals, gold, silver and platinum prices declined by 2.3%, 3.5% and 2.4% respectively. The bulk commodities remained relatively stable, however, with iron
ore (62% fe) up by 2.2% over the month. Against this backdrop, mining shares were relatively resilient which, in our view, reflects the fact that they still appear to be pricing in commodity prices well below current spot prices (returns in USD). During the month, the market focused on news flow surrounding trade tensions between the US and China. At the time of writing, the latest development was China threatening US$60bn of new tariffs if the US was to go ahead with its threat of US$200bn of new tariffs
on imports from China. For now, despite the markets concern that trade wars may impact global demand, economic data leads us to believe that the outlook for economic growth remains healthy and the market is potentially overly concerned about rising protectionism. In addition, news emerged during the month that China was planning more proactive fiscal stimulus, which has historically been successful in supporting its economy. Turning to the companies, we began to see some of the miners reporting their
interim results. We saw earnings growth, rising dividends, balance sheet strength and modest cost inflation emerge as some common themes. Outperformance over the month was primarily driven by stock selection within the diversified mining sub-sector. Our top performer was our position in Vale, which pleased the market with better-than-expected results, an increase to its dividend and an initiation of a buyback. In addition, on 9 July, OZ Minerals confirmed that it had successfully closed its takeover offer
for Avanco Resources. As a result of the transaction, the Company’s holding in OZ Minerals has increased to 2.6% of NAV, with the royalty now assumed by OZ Minerals. OZ Minerals has indicated that they will provide a detailed Brazil Strategy later in the year following optimisation planning. 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.
16 August 2018
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