REG-BlackRock World Mng: Portfolio Update

BlackRock World Mining TrustAnnouncement

21/03/2019 17:00

BLACKROCK WORLD MINING TRUST plc  (LEI - LNFFPBEUZJBOSR6PW155)

All information is at 28 February 2019 and unaudited.

Performance at month end with net income reinvested

                                                   One   Three    One   Three   Five 
                                                 Month  Months   Year   Years  Years 
                                                                                     
 Net asset value                                  0.2%    8.7%  -2.1%   97.8%   6.2% 
 Share price                                      0.8%    8.8%  -4.8%  111.9%  -4.5% 
 EMIX Global Mining Index (Net) (Total return)    0.8%   10.9%   2.2%  101.2%  23.8% 

Sources: BlackRock, EMIX Global Mining Index, Datastream

 At month end                                        
                                                     
 Net asset value including income (1):       417.16p 
 Net asset value capital only:               407.25p 
 (1)Includes net revenue of 9.91p                    
                                                     
 Share price:                                360.00p 
 Discount to NAV (2):                          13.7% 
 Total assets:                               £845.8m 
 Net yield (3):                                 5.0% 
 Net gearing:                                  14.0% 
                                                     
 Ordinary shares in issue:               176,330,242 
 Ordinary shares held in treasury:        16,681,600 
 Ongoing charges (4):                           0.9% 

(2) Discount to NAV including income.
(3) Based on quarterly interim dividends of 3.00p per share declared on
25 April 2018, 16 August 2018 and 8 November 2018 and a final dividend of
9.00p per share announced on 28 February 2019 in respect of the year ended 31
December 2018.
(4) Calculated as a percentage of average net assets and using expenses,
excluding finance costs, for the year ended 31 December 2018.

 Sector                % Total   Country Analysis   % Total 
                        Assets                       Assets 
                                                            
 Diversified              45.2   Global                62.3 
 Copper                   20.9   Latin America         12.7 
 Gold                     15.2   Australasia           10.0 
 Industrial Minerals       7.4   Canada                 6.1 
 Silver & Diamonds         5.9   Other Africa           2.1 
 Materials                 1.2   South Africa           1.7 
 Aluminium                 0.8   USA                    1.6 
 Coal                      0.7   Kazakhstan             1.1 
 Zinc                      0.6   Indonesia              0.5 
 Nickel                    0.6   Russia                 0.5 
 Molybdenum                0.5   China                  0.5 
 Iron Ore                  0.2   Argentina              0.1 
 Current assets            0.8   Current assets         0.8 
                         -----                        ----- 
                         100.0                        100.0 
                         =====                        ===== 

   

 Ten Largest Investments                       
                                               
 Company                        % Total Assets 
                                               
 BHP                                      10.3 
 Rio Tinto                                 9.2 
 Vale                                      8.9 
 Glencore                                  7.3 
 First Quantum Minerals                    7.2 
 Oz Minerals Brazil - royalty              4.5 
 Teck Resources                            3.6 
 Sociedad Minera Cerro Verde               3.3 
 Newmont Mining                            2.9 
 Unicore                                   2.4 

Commenting on the markets, Evy Hambro and Olivia Markham, representing the
Investment Manager noted:

The Company’s NAV increased by 0.2%(1) in February, underperforming its
reference index, the EMIX Global Mining Index (net return), which increased by
0.8%(2). 

Global equity markets continued to climb in February, as displayed by the MSCI
World Index rising  by 2.8% (in USD terms), following confirmation from the
US that the additional tariffs on Chinese goods would not be implemented. In
addition, Federal Reserve minutes also confirmed a patient approach to further
rate increases, which was viewed as supportive for equity markets.  Economic
data was however mixed, with a positive surprise from the Eurozone Purchasing
Managers’ Index (PMI), whilst US retail sales disappointed and showed a
decline.

Within the mining sector, the iron ore (62% fe) price remained elevated,
finishing the month at a price of $85/tonne on the back of Vale’s suspension
of production. Base metals were also up with copper, zinc and nickel prices
rising by 6.6%, 3.1% and 4.5% respectively. Copper’s strong performance was
based on falling inventories, equating to a speculative perception that there
was a shortage of metal in the market (returns shown in USD).

The Company’s position in Ero Copper was the largest contributor to
performance. The company performed well on the back of the strong copper price
performance, as well as continued exploration success.

On the other hand, our position in Teck Resources detracted from relative
performance. The company issued a fourth quarter profit warning at the
beginning of the month, referencing the very low Canadian oil prices in the
fourth quarter. Later in the month, they announced their 2019 outlook,
disappointing the market by reporting that capex and costs for their
metallurgical coal business will rise.

During the month, we increased our existing holding in the 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 the end of February, the Vale Debentures
represented 2.6% of the Company’s NAV.

Strategy and Outlook

We recognise that finding a resolution to the US/China trade war will be
difficult. There appears to be bipartisan support in the US for a tough stance
on China and it is unclear how the technology transfer issue can be resolved.
However, our view is that the market may be overestimating the impact these
trade tensions would have on global economic growth. Should we see even
gradual improvements in relations between the two countries, we would expect
mined commodity prices to improve. Meanwhile, our overall base case for China
is that it has the tools to successfully manage a gradual slowdown and we do
not anticipate a hard landing type event.

Supply and demand is tight in most mined commodity markets today and, given
the cuts in mining sector spending since 2012 (down ~66%), we expect it to
remain so. Our base case is therefore, barring an economic slowdown, mined
commodity prices to be stable to rising through 2019. Meanwhile, we believe
the shares are pricing in a materially worse commodity price environment. We
see the risk-reward opportunity in mining as attractive given the improvements
in balance sheets over the last 2-3 years and given many of the large
diversified miners are trading on free cash flow yields of above 10%.

All data points are in GBP terms unless stated otherwise.

(1)Source: BlackRock as at 28 February 2019
(2) Source: EMIX Global Mining Index as at 28 February 2019

21 March 2019

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other website) is incorporated into, or forms part of, this announcement.



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