BlackRock World Mng Portfolio Update
September 14 2017 - 7:34AM
UK Regulatory
TIDMBRWM
BLACKROCK WORLD MINING TRUST plc (LEI - LNFFPBEUZJBOSR6PW155)
All information is at 31 August 2017 and unaudited.
Performance at month end with net income reinvested
One Three One Three Five
Month Months Year Years Years
Net asset value 8.3% 18.8% 41.9% 7.1% -8.1%
Share price 6.4% 17.3% 44.1% 0.1% -3.8%
Euromoney Global Mining Index 8.9% 20.1% 37.9% 17.3% 5.9%
(Total return)
Sources: BlackRock, Euromoney Global Mining Index, Datastream
At month end
Net asset value including income1: 442.72p
Net asset value capital only: 437.80p
1 Includes net revenue of 4.92p
Share price: 388.50p
Discount to NAV2: 12.2%
Total assets: GBP895.0m
Net yield3: 3.9%
Net gearing: 15.0%
Ordinary shares in issue: 176,455,242
Ordinary shares held in treasury: 16,556,600
Ongoing charges4: 1.10%
2 Discount to NAV including income.
3 Based on quarterly interim dividends of 3.00p per share declared on
4 May 2017 and 10 August 2017 in respect of the year ending 31 December 2017
and a final dividend of 9.00p per share in respect of the year ended
31 December 2016.
4 Calculated as a percentage of average net assets and using expenses,
excluding finance costs, for the year ended 31 December 2016.
Sector % Total Country Analysis % Total
Assets Assets
Diversified 49.4 Global 65.8
Copper 19.6 Latin America 11.1
Gold 17.3 Australasia 10.7
Silver & Diamonds 7.1 Other Africa 6.4
Industrial Minerals 4.9 Canada 4.2
Iron Ore 1.1 South Africa 0.8
Zinc 0.8 Russia 0.5
Aluminium 0.2 Kazakhstan 0.4
Net current liabilities (0.4) USA 0.2
----- India 0.2
100.0 Emerging Europe 0.1
===== Net current liabilities (0.4)
-----
100.0
=====
Ten Largest Investments
% Total
Company Assets
BHP 10.6
Rio Tinto 9.4
First Quantum Minerals 8.2
Glencore 8.1
Vale 7.0
Teck Resources 4.4
Lundin Mining 4.0
Sociedad Minera Cerro Verde 3.2
Newmont Mining 3.2
South32 2.6
Commenting on the markets, Evy Hambro and Olivia Markham, representing the
Investment Manager noted:
Performance
Macroeconomic data points were mixed during the period with a confluence of
factors keeping equity markets broadly flat (as displayed by a 0.1%
increase in the MSCI World Index). China's Purchasing Manager's Index (PMI)
recorded a reading of 51.7, up from 51.4 in July, whilst elsewhere, it was
announced that US domestic inflation increased at its slowest pace since
2015, boosting expectations that the Federal Reserve will delay increasing
interest rates. These supportive factors were offset by rising political
tensions around North Korea's nuclear program and negative investor
sentiment around the upcoming European Central Bank meeting and speed of
tapering of bond purchases. For the mining sector, performance was positive
for the base metals during the month, with nickel, zinc, copper and
aluminium increasing by 15.5%, 12.8%, 6.7% and 10.7% respectively. Iron
ore also saw positive performance, increasing by 4.5% during the month.
The mining sector finished H1 2017 reporting during the month, and the
strong results announced evidenced a remarkable turnaround in the financial
health of mining companies since the start of 2016. Within 18 months, the
mining sector has gone from the market believing it was on the brink of
bankruptcy, back to strong profits, robust free cash flow and rising
dividends having returned +99% over that period, as measured by the
Euromoney Global Mining Index. The key themes that emerged from the H1
reporting season were rising free cash flow, deleveraging and returning
capital to shareholders, all fuelled by the significant improvement we have
seen in mined commodity prices and costs of production.
Strategy and Outlook
The latest round of reporting highlights the remarkable turnaround in the
financial health of the mining sector. For some time, we have been
confident that January 2016 marked the bottom of the mining cycle as, back
then, the market was concerned about a 'hard-landing' in China as well as
mining companies' stretched balance sheets. Today, balance sheets are in
much better shape and given current commodity prices, we are optimistic
about a continued recovery in share prices. The mining sector has among the
highest free cash flow yield out of any global sector and given the
improvement in balance sheets, we expect lower earnings volatility relative
to the previous three years to help drive a re-rating.
Whilst the mining sector has performed strongly, we are only back at July
2014 levels and still a very long way below the peak in 2011. Mined
commodity prices have surged above analyst expectations, with copper and
iron ore at 3-year highs and zinc at a 10-year high for example, sparking
fears of a pull back. However, importantly, mining shares are still pricing
in commodity prices well below current spot prices.
We recognise that China remains the key risk for investors in the mining
sector but believe that the Chinese administration has shown itself willing
and able to step in with support to avoid a 'hard-landing' type event.
Reform measures put in place by the government across a range of
industries, including steel, coal and aluminium, to tackle pollution and
excess capacity have been more effective than many expected and improved
the profitability across a number of sectors, which we see as a key benefit
in the longer-term. China should also benefit from a spillover effect from
the wider improvements we have seen in global economic growth in recent
months. Concerns mounted in Q2 2017 of this year that tighter credit
conditions in the country could lead to a slowdown. However, economic data
has continued to defy the sceptics and exceed expectations with, for
example, China's steel PMI data coming in at a 16-month high.
Meanwhile, commodity prices should also be supported by constraints on the
supply side resulting from the underinvestment we have seen in the mining
sector in recent years, with global mining sector capex down 66% since the
peak in 2012. The key question for investors today is whether the mining
companies can maintain the same level of capital discipline or will they
slip back into bad habits? For now, we feel the pain of the recent
down-cycle is still too fresh and rhetoric from management teams gives us
optimism that the sector's focus remains on shareholder returns.
All data points are in US dollar terms unless stated otherwise.
14 September 2017
ENDS
Latest information is available by typing www.brwmplc.co.uk on the
internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3
(ICV terminal). Neither the contents of the Manager's website nor the
contents of any website accessible from hyperlinks on the Manager's website
(or any other website) is incorporated into, or forms part of, this
announcement.
END
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