# Mining: resilience in a crisis – BlackRock World Mining Trust plc

- Link: https://www.directorstalkinterviews.com/mining-resilience-in-a-crisis-blackrock-world-mining-trust-plc/412820411
- Published: 2020-05-13T11:08:10+01:00
- Author: Giles Arbor

**_The fortunes of the mining sector are often associated with economic growth but
on the [BlackRock World Mining Trust plc](https://www.blackrock.com/uk/individual/products/investment-trusts/our-range/blackrock-world-mining-investment-trust/trust-information?siteEntryPassthrough=true&cid=aff:investmenttrusts2020:brwm:directorstalk:link)(
[LON:BRWM](https://www.directorstalkinterviews.com/company/blackrock-world-mining-trust-plc/brwm.l)),
we believe the inherent strength of mining companies has been widely underestimated._**

_by Evy Hambro, Co-Manager_

**Capital at risk. **The value of investments and the income from them can fall 
as well as rise and are not guaranteed. Investors may not get back the amount originally
invested.

The mining sector has not escaped the widespread sell-off in markets. The sector
has long been associated with the fortunes of the global economy and the coronavirus
lockdowns constitute a real threat to economic growth. However, we believe the mining
sector may be more resilient than current share prices suggest.

Mining shares have already discounted a meaningful economic impact from the coronavirus
and have continued to fall in the recent market sell-off. However, unlike retail
or some other hard-hit sectors, we believe this impact for the mining sector may
be relatively short-lived.

**Robust health**

In contrast to other major sectors, the mining sector entered the crisis in relatively
good shape. The major diversified mining companies have dramatically improved their
balance sheets in recent years and today hold less debt and more cash. This means
they are in a better position to weather disruption from COVID-19.

This has important implications: in general, they don’t have to go back to financial
markets or governments to ask for more money to stay afloat. That leaves them as
masters of their own destinies and it also means they have the wherewithal to continue
paying dividends.

This may prove to be particularly important as other sectors such as banks come 
under pressure to cut dividends, creating greater scarcity. Pension funds and other
major investors need to generate income and the mining sector might find greater
favour as other sectors reduce their payouts.

**Compelling value**

These are shorter-term advantages specifically related to the COVID-19 crisis, but
there are others: after seeing significant falls, mining companies are also benefitting
from currency moves and the fall in oil prices.  These factors have been beneficial
to cost savings – freight costs have fallen, for example.

Equally, valuations look more compelling. While global growth will certainly be 
lower in 2020, we believe that economic stimulus measures in China will disproportionately
benefit the mined commodity sector. Equally, there are early signs that the Chinese
economy is starting to bounce back as life gets back to normal. The Asian Development
Bank predicts growth of 2.2% across Asian economies in 2020, rebounding to 6.2% 
in 2021^(1).

**Gold**

The Trust also includes a weighting in gold companies. Gold has been a beneficiary
of the recent turmoil in markets, as investors have worried about the impact of 
their stimulus measures on the value of currencies and financial assets. Gold has
preserved its value over the long term, which is an attractive quality in today’s
uncertain environment. The opportunity cost of holding gold – because it pays no
income – is also greatly diminished at times of lower interest rates. Around 40%
of the portfolio is currently exposed to companies in precious metals, of which 
90% is gold. 

**De-carbonisation**

There are also broad thematic trends that will continue to drive investment, which–
we believe – will endure long beyond the impact of COVID-19 on the economy.  De-
carbonisation is one of the most significant. The desire of societies to reduce 
their carbon impact is unabated and we have built a part of the BlackRock World 
Mining Trust that stands to benefit from this trend. This crisis may even accelerate
the change; as automakers restructure to cope with the crisis, they may be less 
willing to cut the areas, such as electric vehicles, which underpin their future
growth. We have exposure to mining companies that produce many of the key metals
for electric cars, such as lithium.

We would urge investors to set aside long-held notions about the mining sector. 
With investors increasingly looking for alternative and resilient income streams
in the current environment, it holds considerable appeal. We believe the mining 
sector may be among the first to bounce back into a post coronavirus economic recovery
as the miners continue to generate robust free cash flow and return capital to shareholders
through dividends and buybacks.

**For more information on this Trust and how to access the opportunities presented
by mining, please visit [www.blackrock.com/uk/brwm](https://www.blackrock.com/uk/individual/products/investment-trusts/our-range/blackrock-world-mining-investment-trust/trust-information?siteEntryPassthrough=true&cid=aff:investmenttrusts2020:brwm:directorstalk:link)**

Unless otherwise stated all data is sourced from BlackRock as at April 2020.

^(1)Asian Development Bank, April 2020

**Risk warnings**

Past performance is not a reliable indicator of current or future results and should
not be the sole factor of consideration when selecting a product or strategy.

Changes in the rates of exchange between currencies may cause the value of investments
to diminish or increase. Fluctuation may be particularly marked in the case of a
higher volatility fund and the value of an investment may fall suddenly and substantially.
Levels and basis of taxation may change from time to time.

**Trust Specific Risks**

Exchange rate risk: The return of your investment may increase or decrease as a 
result of currency fluctuations.

Emerging markets risk: Emerging market investments are usually associated with higher
investment risk than developed market investments.

Therefore, the value of these investments may be unpredictable and subject to greater
variation.

Gold/Mining funds risk: Mining shares typically experience above average volatility
when compared to other investments. Trends which occur within the general equity
market may not be mirrored within mining securities.

Gearing risk: Investment strategies, such as borrowing, used by the Trust can result
in even larger losses suffered when the value of the underlying investments fall.

**Important Information**

Issued by BlackRock Investment Management (UK) Limited, authorised and regulated
by the Financial Conduct Authority. Please refer to the Financial Conduct Authority
website for a list of authorised activities conducted by BlackRock.

The Company is managed by BlackRock Fund Managers Limited (BFM) as the AIFM. BFM
has delegated certain investment management and other ancillary services to BlackRock
Investment Management (UK) Limited. The Company’s shares are traded on the London
Stock Exchange and dealing may only be through a member of the Exchange. The Company
will not invest more than 15% of its gross assets in other listed investment trusts.
SEDOL™ is a trademark of the London Stock Exchange plc and is used under licence.

Net Asset Value (NAV) performance is not the same as share price performance, and
shareholders may realise returns that are lower or higher than NAV performance.

The BlackRock World Mining Trust plc currently conducts its affairs so that its 
securities can be recommended by IFAs to ordinary retail investors in accordance
with the Financial Conduct Authority’s rules in relation to non-mainstream investment
products and intends to continue to do so for the foreseeable future. The securities
are excluded from the Financial Conduct Authority’s restrictions which apply to 
non-mainstream investment products because they are shares in an investment trust.

BlackRock has not considered the suitability of this investment against your individual
needs and risk tolerance. To ensure you understand whether our product is suitable,
please read the fund specific risks in the Key Investor Document (KID) which gives
more information about the risk profile of the investment. The KID and other documentation
are available on the relevant product pages at www.blackrock.co.uk/its. We recommend
you seek independent professional advice prior to investing.

Any research in this material has been procured and may have been acted on by BlackRock
for its own purpose. The results of such research are being made available only 
incidentally. The views expressed do not constitute investment or any other advice
and are subject to change. They do not necessarily reflect the views of any company
in the BlackRock Group or any part thereof and no assurances are made as to their
accuracy.

This material is for information purposes only and does not constitute an offer 
or invitation to anyone to invest in any BlackRock funds and has not been prepared
in connection with any such offer.

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