BlackRock BRWM expect ‘Brown to Green’ to emerge as a key theme

BlackRock

BlackRock World Mining Trust plc (LON:BRWM) has announced its latest portfolio update.

All information is at 31 December 2022 and unaudited.

For more information on the Blackrock World Mining Trust and how to access the opportunities presented by mining, please visit www.blackrock.com/uk/brwm

Performance at month end with net income reinvested

One
Month
Three
Months
One
Year
Three
Years
Five
Years
Net asset value-1.7%15.1%17.5%86.9%94.4%
Share price0.6%23.5%26.0%117.1%131.4%
MSCI ACWI Metals & Mining 30% Buffer 10/40 Index (Net)*-1.5%14.5%11.5%54.9%57.6%

* (Total return)
Sources: BlackRock, MSCI ACWI Metals & Mining 30% Buffer 10/40 Index, Datastream

At month end

Net asset value (including income)1:687.86p
Net asset value (capital only):663.91p
1 Includes net revenue of 23.95p
Share price:697.00p
Premium to NAV2:1.3%
Total assets:£1,457.1m
Net yield3:6.2%
Net gearing:10.2%
Ordinary shares in issue:188,753,036
Ordinary shares held in Treasury:4,258,806
Ongoing charges4:0.9%
Ongoing charges5:0.8%

2 Premium to NAV including income.
3 Based on a final dividend of 27.00p per share declared on 8 March 2022 in respect of the year ended 31 December 2021, and a first, second and third interim dividend of 5.50p per share declared on 6 May 2022, 23 August 2022 and 16 November 2022 respectively, in respect of the year ending 31 December 2022.
4 The Company’s ongoing charges are 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 other non-recurring items for the year ended 31 December 2021.
5 The Company’s ongoing charges are 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 other non-recurring items for the year ended 31 December 2021.

Ten largest investments

CompanyTotal Assets %
BHP9.3
Vale:
    Equity6.4
    Debenture2.6
Glencore7.5
Anglo American5.1
Rio Tinto4.4
First Quantum Minerals:
    Equity2.3
    Bond1.7
ArcelorMittal3.9
Freeport-McMoRan3.9
Teck Resources3.5
Franco-Nevada2.6
Asset AnalysisTotal Assets (%)
Equity91.5
Bonds3.8
Preferred Stock3.0
Options-0.1
Net Current Assets1.8
—–
100.0
=====

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

Performance

The Company’s NAV fell by 1.7% in December, underperforming its reference index, the MSCI ACWI Metals and Mining 30% Buffer 10/40 Index (net return), which returned -1.5% (performance figures in GBP).

The mining sector outperformed broader equity markets during the month, with the MSCI ACWI TR Index falling by 3.8%. The main news was the Chinese administration confirming the removal of most Covid-related restrictions. The reaction from mining equities was muted, however, having moved higher in October and November on expectations that China was about to re-open. Meanwhile, economic data from China remained weak, with its manufacturing PMI reading for December falling to 47.0, albeit this is now expected to improve.

Mined commodity prices generally performed well, aided by a weakening US dollar. For reference, iron ore (62% fe.) and copper prices were up by 15.7% and 1.7% respectively over the month. Meanwhile, warmer-than-expected weather during the month led to falling gas prices which reduced cost pressures for the miners.

Strategy and Outlook

We do not expect the mining sector to be immune to deteriorating global economic growth. However, whilst recession looms for developed markets, the most important economy for mining, China, is moving in the opposite direction, re-opening following a year of lockdowns and a strict zero-Covid policy.

Meanwhile, mined commodity markets are generally tight, with inventories for many commodities at historic lows. At the same time, mined supply is being constrained by the underinvestment of recent years and continued capital discipline. Mining companies are in an excellent financial position, in our view, with high levels of free cash flow, rock-solid balance sheets and a continued focus on returning capital to shareholders.

Last year, we saw greater appreciation of the role mining companies will need to play in supplying the materials required for lower carbon technologies like wind turbines, solar panels and electric vehicles. In 2023, we expect Brown to Green to emerge as a key theme, where mining companies focus on reducing the greenhouse gas emissions intensity associated with their production. We expect to see a re-rating for the mining companies able to best navigate this and are playing this in the portfolio.

All data points are in USD terms unless stated otherwise.

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