BlackRock World Mining 01 June 2022
Disclosure – Non-Independent Marketing Communication
This is a non-independent marketing communication commissioned by BlackRock World Mining. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
To maximise total real returns to shareholders through a worldwide portfolio of mining and metal securities
BlackRock World Mining
Evy Hambro, Olivia Markham
Association of Investment Companies (AIC) Sector
Commodities & Natural Resources
12 Month Yield
Dividend Distribution Frequency
Latest Market Capitalisation
Latest Net Gearing (Cum Fair)
Latest Ongoing Charge Ex Perf Fee
(Discount)/ Premium (Cum Fair)
Daily Closing Price
BlackRock World Mining (BRWM) is a specialist trust offering exposure to mining and metals companies globally. A number of themes have coalesced in the last couple of years to provide a strong tailwind to the sector. Despite short term volatility, profitability, dividends and sentiment towards mining companies and BRWM have all improved significantly. In our recent meeting with the managers, they expressed their firm opinion that the tailwinds are still entrenched and gave a positive outlook.
Underpinning the positive outlook is the fact that mining and metals groups have exercised strong discipline on their cost structure and capital expenditure programmes. As a result, constrained supply capacity facing up against structural demand has led to elevated commodity prices. This has resulted in improved corporate balance sheets, profitability and impressive dividend pay-outs. In turn, this has resulted in BRWM’s revenues more than doubling over the last financial year and enabled its own annual dividend to surge up by 109%, with a historic dividend yield in excess of 6%.
The increased attention and sentiment that BRWM has gathered has seen its discount to NAV narrow and has occasionally traded at a premium over the last year. BRWM’s Gearing currently stands at 12.1%, according to Morningstar (30/04/2022), and this is within its normal range.
In essence, BRWM offers an actively managed ‘one stop shop’ for investors looking for exposure the global mining and metals industry. In some ways, the managers offer a diversified and nimble ‘virtual’ mining company, with flexibility to quickly shift allocations between commodities depending on their view at the time. This is unlike a standalone mining company which needs to invest significant capex and resources to execute a strategy.
There are strong long-term structural drivers and market dynamics that potentially underpin the investment case for the mining sector and BRWM, and we share the managers enthusiasm for the outlook. These include the global goal towards decarbonisation and the need to replenish creaking infrastructure in the US, infrastructure projects in Europe to help stimulate economies out of the pandemic effects, and the ongoing development needs of emerging markets such as China.
There is a strong argument that commodities and mining are not just the latest ‘hot’ sector, but one where the long-term upside potential more than counterbalances the downside risks. Going forward, there is a chance the commodity market will be more globally balanced and not as reliant on China. At the same time, mining company balance sheets are in good health, and valuations are far from stretched despite recent strength.
BRWM is a concentrated high conviction Portfolio, and its short-term volatility will be higher than the wider market. However, we believe BRWM is a compelling proposition for investors aligning their portfolios to what we view as long-term growth themes. It also has a strong appeal to investors seeking income. In these times of concern over the cost of living, we are reminded that commodities and mining and stocks have traditionally proven as a good hedge against inflation. We would view a pullback in the sector as an attractive opportunity for a longer-term investment.
- Large liquid trust in a specialist sector, using the structure’s flexibility to the full
- Prospects for attractive dividend yield
- Structural tailwinds to the investment case look entrenched
- Single sector portfolio that is highly cyclical in nature adds volatility
- Dividend yield (both underlying, and that of the trust) is not progressive
- Discount has historically been wide, and could quickly return if market sentiment drops