Final Results

BLACKROCK WORLD MINING TRUST plc ANNUAL RESULTS ANNOUNCEMENT for the year ended 31 December 2010 Performance to 31 December 2010 One year Five years Net asset value per share: - capital only +45.3% +142.3% - with income and 1⁄5 warrant reinvested ** +46.3% +156.6% Ordinary share price: - capital only +47.5% +130.7% - with income and 1⁄5 warrant reinvested ** +48.6% +146.6% HSBC Global Mining Index*: - capital only +33.6% +145.5% - with income reinvested +35.6% +170.4% * Adjusted for exchange rates relative to sterling. ** 1 warrant for every 5 ordinary shares. Sources: BlackRock and DataStream. Chairman's Statement Overview and performance As reported in my interim statement, the first half of the Company's financial year was weak as market volatility continued due to the uncertainties in global markets. In the second part of the year commodity prices rallied, driven by improved demand fundamentals, which contributed to stronger company balance sheets. As a result of this increased cash flow, merger and acquisition activity returned with vigour, the mining sector accounting for nearly a third of all deals in 2010. Against this backdrop, at the end of the financial year, the Company had recouped the losses that transpired during the global economic downturn. In the year ended 31 December 2010, the Company's net asset value ("NAV") increased by 46.3% and the share price rose by 48.6% (both percentages calculated in sterling terms with income reinvested). By comparison your Company's benchmark index, the HSBC Global Mining Index, grew by 35.6%. Since the year end, the Company's NAV has fallen by 7.6% compared with a decrease of 7.0% in the benchmark index. Earnings and dividends The earnings per share for the year amounted to 6.57p, compared to 4.90p for the previous year. The Directors are recommending a final dividend of 6.00p per share (2009: 4.75p), which represents an increase of 26.3% on the previous year. The dividend is payable on 11 May 2011 to shareholders on the Company's register on 1 April 2011. Discount to net asset value The Board recognises the importance to investors of the relationship between the discount of the Company's share price and its underlying NAV. Accordingly, the Directors monitor the discount closely and regularly consider the desirability of share repurchases, taking into account shareholder views. The Company's current discount is 13.0%. During the year and up to the date of this report, 225,000 shares were bought back and subsequently placed in treasury. The Directors have the authority from shareholders to buy back up to 14.99% of the Company's issued share capital. This authority will expire on the conclusion of the 2011 Annual General Meeting, when a resolution will be put to shareholders to renew it. Subsidiary company The Company's subsidiary, BlackRock Gold Limited, has not traded for a number of years. Accordingly, an application has been made to the Registrar of Companies for the company to be struck off the register and dissolved in due course. Alternative Investment Fund Managers ("AIFM") Directive 2010 has seen a number of developments surrounding the AIFM Directive, which effectively introduces a regulatory framework for investment companies. The sum total of these developments have broadly reduced many of the potentially adverse consequences which threatened the investment company structure and the legislation adopted by the European Parliament represents a much better outcome than first envisaged. However, the legislative process is still ongoing and the Association of Investment Companies will be working with the UK authorities over the next two years to determine precisely how the rules will apply in the UK. Outlook Whilst we anticipate continuing economic difficulties within the peripheral countries of Europe and political instability, we remain positive longer term. We expect mining companies to outperform on the back of strong commodity prices supported by a demand for basic resources from emerging markets. Ratings in the sector also have the opportunity to improve. Key risks The key risks faced by the Company are set out below. The Board regularly reviews and agrees policies for managing each risk, as summarised below. - Performance risk - The Board is responsible for deciding the investment strategy to fulfil the Company's objectives and monitoring the performance of the Investment Manager. An inappropriate strategy may lead to underperformance against the benchmark index. To manage this risk the Investment Manager provides an explanation of significant stock selection decisions and the rationale for the composition of the investment portfolio. The Board monitors and mandates an adequate spread of investments, in order to minimise the risks associated with particular countries or factors specific to particular sectors, based on the diversification requirements inherent in the Company's investment policy. The Board also receives and reviews regular reports showing an analysis of the Company's performance against the HSBC Global Mining Index and other similar indices, including the performance of major companies in the sector. - Income/dividend risk - The amount of dividends and future dividend growth will depend on the Company's underlying portfolio. Any change in the tax treatment of the dividends or interest received by the Company (including as a result of withholding taxes or exchange controls imposed by jurisdictions in which the Company invests) may reduce the level of dividends received by shareholders. The Board monitors this risk through the receipt of detailed income forecasts and considers the level of income at each meeting. - Regulatory risk - The Company operates as an investment trust in accordance with Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company is exempt from capital gains tax on the sale of its investments. The Investment Manager monitors investment movements, the level and type of forecast income and expenditure and the amount of proposed dividends to ensure that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not breached and the results are reported to the Board. - Operational risk - In common with most other investment trust companies, the Company has no employees. The Company therefore relies upon the services provided by third parties and is dependent on the control systems of the Investment Manager and the Company's service providers. The security, for example, of the Company's assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depend on the effective operation of these systems. These are regularly tested and monitored and an internal control report, which includes an assessment of risks together with procedures to mitigate such risks, is prepared by the Investment Manager and reviewed by the Audit & Management Engagement Committee twice a year. The custodian, (The Bank of New York Mellon (International) Ltd ("BNYM"), a subsidiary of The Bank of New York Mellon) and the Investment Manager also produce annual internal control reports which are reviewed by their respective auditors and give assurance regarding the effective operation of controls and are also reviewed by the Audit & Management Engagement Committee. - Resource risk - The quality of the investment management team employed by BlackRock Investment Management (UK) Limited is a crucial factor in delivering good performance and the loss by the management of key staff could affect investment returns. The Investment Manager has training and development programs in place for its employees and its recruitment and remuneration packages are developed in order to retain key staff. - Market risk - Market risk arises from volatility in the prices of the Company's investments. It represents the potential loss the Company might suffer through holding investments in the face of negative market movements. In addition, it should be noted that the location of the companies in which the Company invests and shares in the mining sector can prove to be volatile and therefore present a greater degree of risk. The Board considers asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Investment Manager. The Board monitors the implementation and results of the investment process with the Investment Manager. - Financial risks - The Company's investment activities expose it to a variety of financial risks that include market price risk, foreign currency risk, interest rate risk and liquidity and credit risk. Related party transactions The Investment Manager is regarded as a related party and details of the investment management fees payable are set out in note 4. Statement of Directors' Responsibilities In accordance with Disclosure and Transparency Rule 4.1.12, the Directors confirm to the best of their knowledge and belief that: - the financial statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and net return of the Company and Group; and - the annual report includes a fair review of the development and performance of the business and the position of the Company and the Group, together with a description of the principal risks and uncertainties that it faces. For and on behalf of the Board of Directors A W Lea Chairman 24 February 2011 Investment Manager's Report Portfolio performance After a difficult first six months, impacted by macro events such as the Australian Resources Tax and fears of a Chinese hard landing, we are happy to report a strong finish to 2010. In fact it would be remiss of us not to highlight that at the end of 2010 the share price had recovered all of the ground lost during the financial crisis. For the year to 31 December 2010, the Company's net asset value ("NAV") and share price rose by 46.3% and 48.6% respectively (both percentages calculated in sterling terms with income reinvested). In "capital" only terms, the NAV rose by 45.3% and the share price by 47.5%. By comparison, the HSBC Global Mining Index, in sterling terms, rose by 33.6% (capital only) and 35.6% (total return). Mining share overview After the massive rebound in valuations seen in 2009, we started this year confident of further recovery in commodity demand and company valuations but nonetheless cautious given how fresh the memories were of the rollercoaster moves of the previous two years. As such, the portfolio started 2010 with only £42 million of gearing, which was offset against the high yield resource debt portfolio accumulated during the mining company re-financings of the previous year, and commodity exposure was focused on copper, precious metals and the bulks. In hindsight this strategy served the Company well, as it was not long before the unbroken run of six consecutive months of positive gains for the sector ended in the first month of the year. January was marked by fears that Chinese financial tightening would result in a hard landing for the economy. This prompted a rapid sell off in metal prices and a de-rating of equity valuations. However, confidence soon returned and by the end of April the sector was back into positive territory for the year. What happened next can only be described as one of the most ill considered political adventures to impact the mining sector in recent times. In April, the Australian Government revealed plans to place a new heavy tax burden on the domestic mining sector via a proposed Resource Super Profit Tax ("RSPT"). This levy was filled with many contentious points and would have penalised efficient operations that had already paid back the original capital investment. This would have made Australia one of the least attractive places in the world for mining companies to operate and invest notwithstanding the fact that it has one of the greatest mineral endowments! The prospect of this tax coming into effect caused significant falls in the valuations of all mining assets. The Company was caught up in this move due to the high exposure to growth orientated companies, especially in the iron ore and coal sectors in Australia. However, as a result of combined pressure from the voting public and the mining sector, an amended proposal was eventually agreed between the industry and the new Prime Minister. The revised version of this tax, the Mineral Resources Rent Tax ("MRRT"), overcomes most of the controversial aspects of the RSPT and results in a more manageable increase in taxation. Nevertheless, the spectre of the original proposal is fresh in investors' minds and there remains some uncertainty around the ability of companies to offset State level royalties against the Federal MRRT. We hope for clarity on this as soon as possible. Despite the volatility in share prices, supply and demand fundamentals in the sector were robust. Commodity demand remained strong throughout the year driven by continued growth in the emerging nations. In addition, the actions to cut supply taken by the producers during 2008/2009, accelerated inventory depletion and in return helped markets back into balance (or deficits in some cases) sooner than most anticipated. Metal prices started to reflect this early on in the year but it was not until the second half that prices really started to make new ground on the back of the second phase of quantitative easing. The price of copper reached the previous all time high, set in 2008, at the end of September and then promptly surged higher finishing the year up 31.4% and some 8% higher than the level reached in 2008. Merger & acquisition ("M&A") activity As forecast in last year's annual report, M&A took centre stage in 2010. According to analysis by Citigroup, it was a record year for M&A in the mining sector with over 186 successful deals worth a total of US$134 billion. This number does not include deals that failed but only those which were either completed or still in progress at the year end. The gold sector topped the leader-board with over US$40 billion of deals announced, followed by coal and iron ore. What these sectors have in common is a strong commodity price that is translating into robust cash flows today, coupled with a supply/demand outlook that should support elevated prices for a number of years hence. It would therefore not surprise us to see further M&A in these sectors in 2011. Other sectors with similar characteristics and where we would also expect to see further corporate activity would be copper, platinum (although opportunities are limited due to the high level of consolidation) and possibly mineral sands where demand has significantly improved in recent months. One of the larger transactions in the gold sector and the one that impacted the portfolio most significantly was Newcrest Mining's takeover of Lihir Gold for US$8.8 billion in May 2010. The combined entity is the largest gold producer in the Asia-Pacific region and the third largest gold company by market capitalisation. Newcrest, as it now stands, has the benefit of strong, high quality growth from its existing production assets, as well as significant upside potential at its exploration/development projects in Papua New Guinea. Whilst the market did not initially recognise the value creation in the takeover, Newcrest outperformed the gold sector in the second half of 2010 as the transaction became better understood and the potential of its key exploration asset (Wafi Golpu) was outlined. The one company that was conspicuous in its failure to acquire assets was BHP Billiton and the irony of this is that throughout the financial crisis BHP was the best positioned to conduct M&A activity as it had the strongest balance sheet! It was not for want of effort however; BHP Billiton saw both its proposed iron ore joint venture with Rio Tinto and its US$40 billion hostile bid for PotashCorp thwarted by the regulators. In the case of the joint venture with Rio, it seems that the European regulators could not be persuaded that the two companies would not exert undue pricing-power in the iron ore market even with separate marketing divisions. The effective rejection of the Potash bid in November by the Canadian Government appeared to have more to do with the groundswell of nationalistic sentiment towards natural resources that is occurring globally, albeit in different forms. In this case, the Canadian Minister of Industry declared it would not be in the country's interest for BHP Billiton to acquire PotashCorp, premised on the potential loss of tax revenue to the state of Saskatchewan; however, it was clear from the rhetoric that the loss of a "strategic" world-class resource to a foreign company was a major issue for the Canadian Government. BHP, probably more than others, has what some would call a quality problem - what to do with the cash. As cash generation more than covers spending on growth projects, dividends and share buyback plans, and with recent M&A plans thwarted, maybe it is time for the company to further increase the level of cash returned to shareholders and broaden the narrow focus of its M&A strategy. Other major diversified mining companies have also been active in the M&A space although on a smaller scale. Having rebuilt its balance sheet through 2009, Rio Tinto switched attention to its organic growth pipeline announcing a US$13 billion capital expenditure spend for 2010 and 2011. By the second half of 2010, as cash flow generation returned to pre-crisis levels, M&A moved back onto its radar. In December, Rio Tinto announced it had reached a new financial agreement with Ivanhoe under which Rio Tinto will assume management control of the Oyu Tolgoi copper-gold development project and which secures the right for Rio Tinto to take its ownership of Ivanhoe up to 49% by 2012. Also in December, Rio Tinto announced a US$3.9 billion cash offer for Riversdale Mining, a junior coal developer with coking coal assets in Mozambique. Whilst we recognise the logic of increasing exposure to coking coal, a commodity where growth in supply is severely constrained and new projects are limited, we are keen to understand how Rio Tinto propose to overcome the significant infrastructure issues within Mozambique and also how it will deal with the other parties that hold minority stakes in Riversdale's assets. Xstrata have been quietly building an iron ore division through M&A. Having hogged the limelight for much of the last commodity cycle through its M&A activity, Xstrata has put considerably more emphasis on its organic growth in 2010. However, behind the scenes it has been building a portfolio of early stage iron ore assets in Africa. The Company has benefited directly from this through its stake in Jumelles, which has an iron ore joint venture with Xstrata in the Republic of Congo (Congo-Brazzaville). Jumelles successfully listed at almost a 300% premium to our initial investment in December 2010 under the name Zanaga Iron Ore (1.2% of the portfolio at the year end). In August, Xstrata announced a takeover offer for Sphere Minerals, a junior iron ore developer with iron ore assets in Mauritania. Base metals The year started positively for base metals, but the advance was hindered first by fears over Chinese monetary tightening and the impact this would have on commodity demand, and then by fears over a double-dip recession hitting the OECD countries. As the northern hemisphere summer drew to a close, it became clear that commodity consumption from China, the largest single consumer of base metals globally, was not as severely impacted by a tighter monetary policy as some had predicted and the US and Europe did not fall back into recession but continued to post quarterly growth numbers, albeit at a very subdued level. As we moved into the fourth quarter, a second round of quantitative easing in the US, market concern over potential inflation and the launch of physically-backed commodity ETFs acted to further boost metal prices. Selected commodity price changes during 2010 % change over % change Price 12 months to average 31 December 2010 31 December 2010 2010 vs. 2009 Silver (US$/troy oz) 30.63 80.3 38.0 Coking coal - hard (US$/tonne) 225 75.8 51.0 Tin (US$/tonne) 26,920 59.6 50.5 Iron ore - lump (US$/tonne - CIF China) 171.2 50.2 83.3 Thermal coal (US$/tonne) 124 44.2 36.3 Uranium (US$/lb) 62.5 40.5 -0.1 Nickel (US$/tonne) 24,708 33.9 48.9 Copper (US$/tonne) 9,650 31.4 46.5 Gold (US$/troy oz) 1,418 29.4 26.0 Platinum (US$/troy oz) 1,755 20.1 33.8 Aluminium (US$/tonne) 2,461 12.0 30.5 Lead (US$/tonne) 2,564 6.7 25.0 Potash (US$/tonne) 468 5.2 -31.4 Zinc (US$/tonne) 2,444 -3.4 30.5 Sources: DataStream and Bloomberg. Tin was the best performing base metal in 2010, up 59.6% for the year (in US$ terms). Nickel and copper were also strong performers, rising 33.9% and 31.4% respectively. All three commodities experienced significant draw-downs in global inventories, as demand outstripped supply. Zinc was the only base metal to end the year in negative territory, down 3.4%, owing to a supply surplus which saw LME inventories rise by over 43%. However, for the producers, the key was that all of the metal prices averaged materially higher than the previous year. Copper ended the year at an all time high of US$4.38/lb. The fundamentals for copper are compelling; emerging market demand for copper driven by the rapid rates of urbanisation and industrialisation, coupled with an increasing focus on energy efficiency globally, means the demand outlook for copper over the coming years is positive. The supply side is struggling to grow owing to declining grades and rising costs at existing mines and a lack of significant new discoveries to replace depleting assets. In addition, the countries where new projects are available to be developed tend to be associated with other risks such as political interference, title uncertainty and in some cases unstable fiscal policies. All of this is hampering the rate at which these deposits can be developed and further constraining supply growth. As a result of these supply/demand dynamics, the market has become increasingly focused on the outlook for copper, with significant investment flows into the copper futures markets and now, with the launch of a physically-backed copper Exchange Traded Fund ("ETF"), increasingly into the spot market. In this supply-constrained environment, the price of copper is the only mechanism that can limit demand and keep the market in balance and therefore most analysts are predicting copper prices averaging higher this coming year than in 2010, with some market commentators predicting a peak of US$6/lb in 2011. The Company maintained its significant exposure to copper throughout 2010 and at year end had 19.7% of the portfolio exposed to copper producers compared to 16.1% at the end of 2009. We are aware that the increase in investment demand may lead to heightened copper price volatility which in turn may have a negative impact on end-user demand and we will be watching market developments closely. Of the Company's core copper holdings, the strongest performer was Cerro Verde (3.3% of the portfolio) which delivered a gain of over 139% (in sterling terms) for the year. Freeport McMoRan owns 53.6% of the company and is the operator of the Cerro Verde mine, a high quality, low cost copper-molybdenum open pit operation. First Quantum Minerals, the largest copper holding within the portfolio at 3.9% (both equity and convertible bond), had what could be described as an "annus horribilus". Following the confiscation of the Kolwezi development project in 2009, in 2010 First Quantum's Frontier mine was also expropriated by the Government of the Democratic Republic of Congo. Throughout this period of uncertainty, the company's share price experienced a significant derating relative to its peers. However, with the loss of these assets, the company has now been able to focus the market's attention on its other high quality, low cost assets and compelling development pipeline. With a strong copper price leading to even stronger cash flows, the stock ended the year up over 46%. Two small positions in Discovery Metals and Rex Minerals were added during the year; these are earlier stage explorer-developers with interesting deposits in Botswana and Australia respectively. The Company remains underweight with regard to aluminium producers in the portfolio owing to the less robust supply-side fundamentals. Global inventory levels are high on a historical basis; production capacity that was shut down during the financial crisis remains off-line waiting to be switched back on once prices strengthen and new capacity in China continues to be built, albeit at a slower rate than over the previous five years. We see the combination of these factors acting as a drag on the aluminium price in the short to medium term, although we are cognisant that strong demand from emerging markets and the pressure of rising power prices suggest the longer term outlook for the aluminium price is increasingly positive. The Company exited its position in Alcoa in the first half of the year, replacing it with a position in Rusal (0.3% of the portfolio). Owing to its financial gearing, Rusal is highly leveraged to any increase in the aluminium price, whilst also having a captive low cost power base giving it a competitive advantage in an environment in which energy costs are rising globally. The only other aluminium-related holding in the portfolio is Alumina (1.2% of the portfolio) which performed strongly in the second half of the year, up 88.6%. In our view this was due to the weakening of the pricing relationship between alumina and aluminium which has meant that the more positive fundamentals for alumina could translate into better margins. This is a theme that is expected to continue in 2011 with the likely effect being that more of the value in the aluminium supply chain will accrue to producers of alumina. The strong performance of nickel in 2010 came as somewhat of a surprise. A greater degree than expected of restocking in the stainless steel market, strikes at existing operations and delays in new production coming online pushed the market into deficit. The Company has little exposure to pure nickel producers, but has significant exposure to nickel production through its holdings in the diversified producers. The Company's zinc exposure is predominantly in Nyrstar (0.8% of the portfolio), a zinc smelting company that is seeking to increase its vertical integration upstream. The company made significant progress with this strategy in 2010 having signed a supply agreement with Talvivaara, the Finnish nickel producer, for its bi-product zinc concentrate; acquired the Coricancha, the Contonga and Pucarrajo mines in Peru; and agreeing to a friendly takeover with the Canadian listed Farallon Resources. Towards the end of the year, the Company also began to rebuild a position in Volcan, a Peruvian listed zinc/silver producer. Gold & precious metals The supportive trends of the last few years continued in the gold market throughout the year. The gold price reached new highs in US dollars and most importantly it has now risen in most other major currencies as well. Production growth has failed to match the more than 350% rise in the gold price from when production last peaked in 2001. In fact, mined gold supply only managed to edge higher this year and might finally match the peak achieved in 2001. ETF demand continued to grow as investors, looking to shelter capital from the ravages of currency debasement and the prospect of inflation, increased exposure to gold via these funds. At the end of the year combined ETF holdings of gold reached 2,138 tonnes, which would place it sixth on the list of Central Bank gold holdings. Official sector activity continued to be supportive for the price: the IMF completed its well publicised divestment of part of its gold reserves and it appears that this gold was predominantly acquired by other governments, making 2010 the third year in a row in which Central Banks have accumulated gold for their reserves. We believe that with no planned sales of any size lined up for 2011, if Central Banks continue to acquire gold at the same rate, then this could be very positive for the market. For the Company, the most important factor in 2010 was that gold miners' profit margins continued to grow as limited cost inflation allowed them to capture most of the rise in the gold price. This increase in profitability is leading some gold producers to raise the level of dividends paid to shareholders. Given the poor track record of returns on M&A within the gold sector, we hope that more producers follow this trend of returning capital. The focus of the Company's gold investments is in companies that have production growth, the ability to grow margins and deliver exploration success. This served the portfolio well as the Company's largest gold investment Minas Buenaventura (5.5% of the portfolio), delivered some of the best returns in the sector. However, the portfolio's limited exposure to the world's largest gold producers hurt performance as generalist investors turned to these companies to gain gold exposure. Exposure to silver via holdings in Fresnillo (4.4% of the portfolio) and Industrias Penoles (2.7%) were key contributors to the overall result for the year. The price of silver outperformed gold during the year, rising over 80% versus the 29.4% rise in the price of gold. This appears to have been caused by investors reaching out to silver as the "cheaper" alternative to gold for financial diversification. We are well aware that trends like this can be short lived but we are reassured by the excellent production track record of these two companies and the growth they are forecast to achieve over the coming years. For the year to December 2010, Fresnillo shares finished up by over 110% and Penoles up by 76%. Platinum markets were mixed during the year with the majority of the price rally concentrated in the second half of the year. Palladium on the other hand managed to deliver a stunning result. The combination of apparent reduced exports out of Russia and rejuvenated demand from the automotive sector led to the price rallying 105% during the year, well ahead of its sister metals. For the producers, the shine of the dollar price increases was offset by the continued strength in the Rand, production issues for most companies and local cost inflation in South Africa. During the year, exposure was further concentrated on Impala Platinum (4.2% of the portfolio), as we expect this company to work through these challenges better than its peers. Energy commodities The uranium spot price increased by over 40% in 2010, in US dollar terms. The long term price, which is equivalent to a contract price and which represents over 85% of the uranium market, was up only 4.8%. The improvement in the spot price appears to have been triggered by the combination of a production disappointment from ERA, the world's fourth largest uranium producer, which forced them into the spot market to fulfil contract requirements and increases in Chinese purchases. Uranium equities, which had underperformed the mining sector during 2009 and the first half of 2010, rebounded significantly on the back of improved market sentiment. The only uranium holding in the Company, UEX (0.9% of the portfolio), was up 122.6% for the year. Fundamentals for uranium appear to be improving, particularly over the medium to long term. It is evident that the Chinese build-out of nuclear power has begun in earnest and the World Nuclear Association estimates that the country will have over 70GWe of installed nuclear capacity by 2020, compared to less than 10GWe today. Russia has also committed to significantly increasing its nuclear power capacity. However, offsetting this, demand growth that had been expected to come from the US, Europe and India looks likely to fall short of previous expectations. Therefore over the next two years, given the growth in supply forecast, particularly out of Kazakhstan, the market looks set to remain in surplus. However, with increasing operating and capital costs, we believe the downside to uranium prices is limited. Direct exposure to thermal coal was increased during the year as industry fundamentals continued to improve. The move by China from being exporter to importer, combined with rising demand for coal in many nations, tightened the market throughout the year. Also, the upgrading of high quality thermal coal for use in the steel industry reduced supplies of thermal to existing consumers. This trend has been accentuated by the recent floods in Australia, as consumers have had to enter the lower quality PCI coal market to replace lost supply of coking coal. The Company has benefited from its holding in Coal & Allied, which produces such product from its mines in an area of Australia (the Hunter Valley) that has not been hit by flooding. During the year, the holding in Coal & Allied was increased substantially from circa 0.5% of the portfolio to 1.8%. Diversified mining companies and industrial commodities What a difference a year made for the diversified mining companies. During 2009, the majority of these companies were desperate to repair balance sheets via rights issues, convertible bonds issues and issuing corporate bonds at close to junk bond interest rates. This was done with the experience of 2008 at the forefront of management's minds and the expectation that commodity prices would take a while to recover. The opportunities thrown up by this process were numerous and it allowed the Company to build up a number of very attractive investments at what now look like bargain-basement prices. In addition, these investments were funded using the low cost debt that was available to the Company. With the benefit of hindsight, this approach taken by the mining companies has proved to be overly cautious and it has left many companies with balance sheets now approaching "lazy" status. However, we as shareholders are also very conscious that almost the biggest risk faced by shareholders is poor reinvestment of corporate cash flow. With this in mind, we have been encouraging management to return excess capital. One of the drivers of this rebound in fortunes for the diversified miners has been the continued strength in the prices of raw materials used in steel making; iron ore and coking coal were up 50.2% and 75.8% respectively. Most importantly this year, producers managed to capture an increased share of the industry's economics as the annual contract pricing for iron ore was abandoned and replaced with more frequent price adjustments directly related to spot prices. In addition, iron ore is now able to be sold with a reference to the landed price in China and this allows producers, such as the Australian miners, to capture the freight differential versus their peers. This change in pricing appears to be a good result for the miners and, longer term, we expect the logical conclusion of the process to be that iron ore and other "bulk" commodities will be sold on a spot basis. Looking further out to the future we expect the prices of iron ore and coking coal to be driven by the marginal cost of supply. There are, however, differences between the two. In iron ore the marginal producer is also the largest producer, China, and with domestic mines producing higher cost and lower quality product this should allow producers in other countries to gain market share from these domestic suppliers. With costs of Chinese production substantially higher than those in Australia and Brazil, it looks as though high rates of return could be possible for the next few years. In coking coal the challenge is the limited ability of the miners to grow supply in the future as there is a real lack of high quality exploitable resource and the concentration of production is in only a small number of regions. This latter point has become a very real problem as a result of the catastrophic flooding in Queensland. Queensland accounts for over 50% of world seaborne supply and the floods have impacted the majority of this production, further tightening markets for all types of export coal. Individual exposure to the diversified miners is chosen based on the see-through commodity exposure they offer. During the year, the best performing of these was Teck Resources. Teck is uniquely positioned to deliver roughly equal exposure to North American coking coal mines and copper production, two of our most favoured commodities. At the other end of the scale limited exposure to Anglo American, held via convertible bonds, benefited the Company given the poor relative return in 2010. The Company has also benefited from the strong recovery in prices of less well known metals such as zircon, ilmenite, manganese and ferrochrome. Exposure to these metals has been achieved via holdings in Iluka, Kenmare and African Rainbow Minerals, all of which have enjoyed a buoyant 2010. Iluka and Kenmare, in particular, are major beneficiaries of the mineral sands markets. Both of these companies have been working to grow production during the last two years, bringing projects into production ahead of this price recovery for which they seem set to reap the benefits. Pre-IPO investments Glencore - In December 2009, the Company made an investment in a convertible bond issued by Glencore. This unique investment opportunity gives exposure to the world's largest commodity trader that also owns stakes in a number of other mining companies (e.g. Xstrata, 34%), as well as directly owning and operating mines across a range of commodities. The income element of the bond (5% per annum) has benefited the Company in 2010 in an environment where yield has been at a premium. There has been much media speculation about a potential IPO for Glencore or a possible merger with Xstrata; whichever path is taken, we are hopeful that significant value will be released. Jumelles - At the end of 2009, the Company made an investment in this private company that owns an iron ore project in the Republic of Congo. At the time of investment, the valuation of the company appeared attractive on a number of early stage metrics, especially given the significant potential identified in the license area and the presence of Xstrata as their partner on the pre-feasibility study. The company achieved several key milestones during 2010 - Xstrata provided the funding for the second stage of the pre-feasibility study; engineering studies for the mine and rail links were updated and, importantly, the company successfully listed on the London Stock Exchange in November as Zanaga Iron Ore. The valuation achieved at listing reflected an uplift of almost three times versus the value the Company had invested at, and the market's positive view on the company continued post-listing with the stock up a further 21% by the end of the year. In February 2011, another milestone was achieved when Xstrata exercised their option to acquire a 50% plus one share stake in the project by funding a full bankable feasibility study. Derivatives activity The Company sometimes holds positions in derivatives contracts. These derivative positions, which are small in comparison with the size of the Group, usually have the effect of obliging us to buy or sell stock or futures at levels we believe are attractive. During 2010, we focused on writing short dated calls in order to reduce some of our larger positions. The income generated by such option writing enables us to maximise the potential exit price from a position. At the end of 2010, we had no derivatives positions in the portfolio. Gearing At 31 December 2010, the Company had a small amount of gearing amounting to £41.5 million. This has been drawn down against the higher yielding mining company corporate debt portfolio. Gearing, which can be drawn down or repaid at any time, is used in the portfolio to take tactical advantage of market volatility and investment opportunities. Outlook and strategy for 2011 2010 finished with overall economic growth at a higher level than many had expected, thanks to the continued stimulatory monetary policies in the Western World and the better than expected growth in the BRIC nations. However, investors remain rightly cautious when looking at the resources sector due to the uncertainty that surrounds how the record cash flows will be managed. At the time of writing, Xstrata, Rio Tinto and BHP Billiton have increased their dividends and, in the case of Rio Tinto and BHP Billiton, share buybacks have been announced. Whilst we see this as a positive step, the scale of the return of capital to shareholders seems conservative given the strong cash flows these companies are enjoying. Nevertheless, should investor confidence improve with regard to capital deployment, then we see this as a key catalyst for a reduction in the discount on which we believe the sector is trading. China and other emerging markets should continue to positively support commodities demand given their higher rate of forecast economic growth. In addition, there appears to be a general realisation that emerging markets are likely to account for more than 50% of global GDP by the end of this decade, if not sooner, and with commodities key to meeting that growth profile we plan to run the portfolio with a positive outlook on the future. We are however mindful of the potential for near term shocks caused, for example, by Eurozone debt issues, shifts in sentiment on Chinese economic overheating and most recently political instability in North Africa and the Middle East. In addition, we are cognisant of the potential impact that the increasing prevalence of "resource-nationalism" may have on the mining sector. Another source of potential risk in 2011 is better than expected growth out of Europe and the US. Current expectations for commodity consumption growth in these areas are low, as economic growth forecasts remain muted. Therefore any improvement in demand would lead to upside surprises, particularly for those commodities where we have seen a redirection of supply away from the US and Europe into China and other emerging countries. Finally, in last year's annual report, we highlighted the positive potential for two of the Company's most recent investments, Glencore and Jumelles. As reported, Jumelles successfully listed in 2010 as Zanaga Iron Ore, and at the time of writing it appears likely that, during 2011, the investment in Glencore could move from being a private investment to having a public market quote. We hope that shareholders recognise the potential positive impact this could have on the portfolio. Evy Hambro & Catherine Raw BlackRock Investment Management (UK) Limited 24 February 2011 Ten Largest Investments - 31 December 2010 Set out below is a brief description by the Investment Manager of the Company's ten largest investments. Rio Tinto - 9.4% (2009: 9.1%) is the world's third largest mining company by market capitalisation. It has interests over a broad range of metals and minerals including iron ore, aluminium, copper, coal, industrial minerals, gold and uranium. In October 2007, Rio Tinto acquired Alcan making it a leader in the production of bauxite, alumina and aluminium, but also significantly increasing its debt burden. During much of 2008 the company was the subject of a bid by its major rival BHP Billiton. However, in November 2008, with financial markets in crisis, commodity prices collapsing and onerous conditions required for EU approval for the deal, BHP Billiton withdrew. Rio Tinto was left severely indebted but through 2009 and 2010 has successfully rebuilt its balance sheet through the combination of a rights issue, asset sales and debt refinancing. In October 2010, the proposed iron ore joint venture with BHP Billiton, agreed to in June 2009, was abandoned owing to the stringent conditions required by the European regulators. BHP Billiton - 6.8% (2009: 7.3%) is the world's largest diversified natural resource company, formed in 2001 from the merger of BHP and Billiton. The company is an important global player in a number of commodities including iron ore, copper, coal, manganese, aluminium, diamonds and uranium. In addition, the company is the only sizeable holding in the portfolio with significant oil and gas assets. BHP Billiton approached Rio Tinto in November 2007 about a potential merger but was rebuffed. It subsequently launched a hostile bid in February 2008 but withdrew in November 2008 due to worsening economic conditions and poor financial markets. In June 2009, BHP Billiton and Rio Tinto announced that they had agreed to a 50:50 iron ore joint venture, from which both companies walked away in October 2010. The company was also unsuccessful in its US$40 billion bid for PotashCorp. Vale - 6.7% (2009: 10.8%), formerly known as CVRD, is the world's largest producer of iron ore. Based in Brazil, the company also has significant interests in other commodities such as nickel, copper, gold and coal. In addition, Vale owns and operates transport infrastructure. The company made a transformational acquisition in 2006 by purchasing Inco for cash. This considerably broadened the company's asset mix. More recently, they have ventured into the fertiliser sector acquiring assets from Rio Tinto and Mosaic. In June 2010, Vale announced the acquisition of Simandou iron ore assets in Guinea for US$2.5 billion. These licenses were originally owned by Rio Tinto; however they were forced to give them up by the Guinean Government in 2008. Teck Resources - 6.4% (2009: 5.1%) is a Canadian diversified miner that is a leader in the production of metallurgical coal and zinc, as well as a significant producer of copper. In September 2008 the company acquired Fording Coal Trust, which owned a 60% non-operating interest in Teck's metallurgical coal operations. With the onset of the financial crisis in the second half of 2008, the company looked unable to refinance its short term debt. However, Teck was able to strengthen its balance sheet throughout the course of 2009 and 2010 through the sale of its gold and other non-core assets, the renegotiation and extension of its debt facilities, a bond issuance worth US$4.3 billion, and a private placement of 17.2% of the company to China Investment Corporation. Minas Buenaventura - 5.5% (2009: 5.0%) is Peru's premier precious metals company. Its main asset is a 43.65% stake in the Yanacocha gold mine in Peru, which it jointly owns with Newmont Mining. The company operates seven mines in Peru, has a controlling interest in zinc miner Minera El Brocal, and an 18.5% interest in copper miner Cerro Verde. In addition, the company has a significant exploration portfolio, including the Chucapaca project in southern Peru which it has joint ventured with Gold Fields. Fresnillo - 4.4% (2009: 3.1%) is the world's largest primary silver producer and Mexico's second largest gold producer. The company has four producing operations and a portfolio of high quality development and exploration projects. Industrias Penoles, one of Mexico's leading mining companies, owns 77% of the company; the remainder is publicly listed on the London Stock Exchange. Impala Platinum - 4.2% (2009: 4.7%) is the world's second largest producer of platinum group metals, with mining and refining operations in South Africa. The company also owns a number of substantial assets in Zimbabwe. Impala restructured in 2006, converting the Bafokeng tribe's royalty into an equity stake. In April 2008, the company exited from its position in Aquarius Platinum at a significant premium to its initial investment. First Quantum Minerals - 3.9% (2009: 4.2%) is an integrated copper producer whose principal operating assets are in Africa, but also with nickel development projects in Australia and Finland. In September 2009, its Kolwezi mine was confiscated by the Government of the Democratic Republic of Congo ("DRC"); in August 2010 they subsequently confiscated First Quantum's Frontier copper operation. The Kolwezi project has since been sold with ENRC, the London listed diversified miner, subsequently purchasing a majority stake. First Quantum has commenced legal proceedings both against the DRC Government and ENRC's subsidiary. In December 2009, the company acquired the Ravensthorpe nickel mine from BHP Billiton for US$340 million, significantly less than BHP Billiton had spent to develop the operation. This is due to come into production in H2 2011. Glencore - 3.6% (2009: 5.1%) is a leading, privately held, diversified natural resources group with activities in mining, smelting, refining, processing and marketing of metals and minerals, energy products and agricultural products globally. It provides financing, logistics, marketing and purchasing services to producers and consumers of commodities. These activities are supported by investments in industrial assets operating in Glencore's core commodity areas, including a 34% stake in Xstrata. The company has been operating for thirty-five years and is one of the world's largest privately owned companies (as measured by revenues). Freeport McMoRan - 3.5% (2009: 2.9%) is one of the largest copper producers in the world. It is also a significant producer of molybdenum and gold. The company has a large portfolio of assets including the Grasberg mining complex in Indonesia, the world's largest copper and gold mine. In 2007, the company merged with Phelps Dodge, an Americas-focused copper and molybdenum miner. In October 2010, Freeport successfully came through a review by the Government of the DRC of the mining license for its Tenke Fungurume operation. This allows the company to proceed with an intended expansion of the operation. All percentages reflect the value of the holding as a percentage of total investments. Percentages in brackets represent the value of the holding as at 31 December 2009. Investments 31 December 2010 Main Market geographical value % of exposure £'000 investments Diversified Rio Tinto* Global 164,760 9.4 BHP Billiton Global 119,897 6.8 Vale Global 117,604 6.7 Teck Resources* Global 112,851 6.4 Glencore*# Global 63,871 3.6 African Rainbow Minerals South Africa 40,568 2.3 Anglo American Global 36,923 2.1 Xstrata Global 30,110 1.7 Vedanta India 19,236 1.1 Eurasian Natural Resources Kazakhstan 5,240 0.3 RTZ Zimbabwe Zimbabwe 2,166 0.1 Grafton Resources# Global 324 0.0 ------- ---- 713,550 40.5 ------- ---- Copper First Quantum Minerals Zambia 69,285 3.9 Freeport McMoRan Global 61,357 3.5 Cerro Verde Peru 58,634 3.3 Antofagasta Chile 40,300 2.3 Equinox Minerals Zambia 39,275 2.2 Oz Minerals Australia 38,287 2.2 Kazakhmys Kazakhstan 16,140 0.9 Katanga Mining DRC 6,904 0.4 Grupo Mexico Mexico 5,261 0.3 Rex Minerals Australia 4,924 0.3 Anvil Mining DRC 3,831 0.2 Discovery Metals Botswana 1,418 0.1 Southern Copper Peru 845 0.1 Ivanhoe Mines Mongolia 775 0.0 ------- ---- 347,236 19.7 ------- ---- Gold Minas Buenaventura Peru 96,705 5.5 Newcrest Mining Australia 50,584 2.9 IAMGOLD Canada 17,114 1.0 Newmont Mining USA 11,767 0.7 G Resources Indonesia 5,423 0.3 Gold Fields South Africa 4,218 0.2 Minera IRL Peru 2,883 0.2 ------- ---- 188,694 10.8 ------- ---- Silver & Diamonds Fresnillo Mexico 76,942 4.4 Industrias Penoles Mexico 46,918 2.7 Gem Diamonds Lesotho 8,107 0.5 Harry Winston Diamond Canada 5,945 0.3 Lucara Diamond Botswana 1,740 0.1 ------- --- 139,652 8.0 ------- --- Platinum Impala Platinum South Africa 74,080 4.2 Anglo Platinum South Africa 17,986 1.0 Aquarius Platinum South Africa 10,515 0.6 Platmin Mining South Africa 1,275 0.1 ------- --- 103,856 5.9 ------- --- Coal Peabody Energy USA 32,692 1.9 Coal & Allied Australia 31,295 1.8 Aquila Resources Australia 12,704 0.7 Australian Energy# Australia 3,503 0.2 Petmin South Africa 1,659 0.1 Coal of Africa South Africa 1,466 0.1 Straits Asia Resources Indonesia 931 0.0 ------ --- 84,250 4.8 ------ --- Aluminium Alumina Australia 20,296 1.2 Rusal Russia 6,398 0.3 ------ --- 26,694 1.5 ------ --- Zinc Nyrstar Belgium 13,818 0.8 Soc Min El Brocal Peru 2,497 0.2 Volcan Peru 595 0.0 ------ --- 16,910 1.0 ------ --- Other Iluka Resources Australia 34,333 1.9 Minsur Peru 24,404 1.4 Zanaga Iron Ore Republic of Congo 21,600 1.2 Atlas Iron Australia 20,280 1.2 UEX Canada 15,527 0.9 Kenmare Resources Mozambique 7,371 0.4 Stirling Minerals Republic of Congo 3,535 0.2 IRC Russia 3,083 0.2 Metals X Australia 3,000 0.2 African Minerals Sierra Leone 1,888 0.1 Noventa Mozambique 1,320 0.1 London Mining Sierra Leone 830 0.0 Bindura Nickel Zimbabwe 261 0.0 ------- --- 137,432 7.8 --------- ----- Portfolio 1,758,274 100.0 ========= ===== * Includes fixed interest securities. # Investment held at Directors' valuation. All investments are in ordinary shares unless otherwise stated. The total number of investments held at 31 December 2010 was 67 (31 December 2009: 60). Portfolio Analysis 31 December 2010 Commodity Exposure* BlackRock World Mining Trust plc HSBC Global Mining Index 2010 2009 2010 % % % Zinc 1.0 1.1 0.7 Aluminium 1.5 2.5 3.0 Coal 4.8 3.1 7.9 Platinum 5.9 7.6 3.0 Silver & Diamonds 8.0 6.5 3.3 Gold 10.8 12.0 20.0 Copper 19.7 16.1 8.6 Diversified 40.5 46.9 48.7 Other 7.8 4.2 4.8 Geographical Exposure* 2010 2009 % % Global 40 36 Latin America 20 18 Australia 13 10 Other 12*** 13** South Africa 9 10 USA 3 4 Canada 2 8 Europe 1 1 * Based on the principal commodity exposure and place of operation of each investment. ** Consists of Africa, Botswana, Republic of Congo, DRC, India, Indonesia, Kazakhstan, Lesotho, Mozambique, Zambia and Zimbabwe. *** Consists of Botswana, Republic of Congo, DRC, India, Indonesia, Kazakhstan, Lesotho, Mozambique, Russia, Sierra Leone, Zambia and Zimbabwe. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2010 Notes 2010 2009 2010 2009 2010 2009 Revenue Revenue Capital Capital Total Total £'000 £'000 £'000 £'000 £'000 £'000 Income from investments held at fair value through profit or loss 3 29,517 16,397 - - 29,517 16,397 Interest on prior years' VAT 3 - 658 - - - 658 Other income 3 2,822 1,110 - - 2,822 1,110 ------ ------ ------- ------- ------- ------- Total revenue 32,339 18,165 - - 32,339 18,165 ------ ------ ------- ------- ------- ------- Gains on investments held at fair value through profit or loss - - 535,332 589,000 535,332 589,000 Realised losses on foreign exchange - - (1,914) (579) (1,914) (579) ------ ------ ------- ------- ------- ------- 32,339 18,165 533,418 588,421 565,757 606,586 ------ ------ ------- ------- ------- ------- Expenses Investment management fees 4 (18,026) (11,864) - - (18,026) (11,864) VAT recovered from prior years 4 - 3,559 - - - 3,559 Other expenses 5 (999) (680) - - (999) (680) ------- ------ ------- ------- ------- ------- Total operating expenses (19,025) (8,985) - - (19,025) (8,985) ------- ------ ------- ------- ------- ------- Net return before finance costs and taxation 13,314 9,180 533,418 588,421 546,732 597,601 Finance costs 6 (516) (23) - - (516) (23) ------ ----- ------- ------- ------- ------- Net return on ordinary activities before taxation 12,798 9,157 533,418 588,421 546,216 597,578 Taxation (1,131) (443) (4,063) - (5,194) (443) ------ ----- ------- ------- ------- ------- Net return for the year 11,667 8,714 529,355 588,421 541,022 597,135 ------ ----- ------- ------- ------- ------- Earnings per ordinary share 8 6.57p 4.90p 297.90p 330.94p 304.47p 335.84p ===== ===== ======= ======= ======= ======= The total column of this statement represents the Consolidated Statement of Comprehensive Income, prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies ("AIC"). All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. All income is attributable to the equity holders of BlackRock World Mining Trust plc. There were no minority interests. The net return of the Company for the year was £541,022,000 (2009: £597,135,000). The Group does not have any other recognised gains or losses. The net return for the year disclosed above represents the Group's comprehensive income. STATEMENTS OF CHANGES IN EQUITY for the year ended 31 December 2010 Ordinary Share Capital share premium Special redemption Capital Revenue capital account reserve reserve reserves reserve Total Group £'000 £'000 £'000 £'000 £'000 £'000 £'000 For the year ended 31 December 2009 At 31 December 2008 9,651 127,147 121,058 22,779 281,187 29,105 590,927 Total Comprehensive Income: Return for the year - - - - 588,421 8,714 597,135 Transactions with owners: Exercise of warrants - 8 - - - - 8 Shares purchased during the year* - - (1,480) - - - (1,480) Dividend paid# - - - - - (9,777) (9,777) ----- ------- ------- ------ -------- ------ --------- At 31 December 2009 9,651 127,155 119,578 22,779 869,608 28,042 1,176,813 ----- ------- ------- ------ -------- ------ --------- For the year ended 31 December 2010 At 31 December 2009 9,651 127,155 119,578 22,779 869,608 28,042 1,176,813 Total Comprehensive Income: Return for the year - - - - 529,355 11,667 541,022 Transactions with owners: Shares purchased during the year* - - (1,368) - - - (1,368) Dividend paid# - - - - - (8,444) (8,444) ----- ------- ------- ------ --------- ------ --------- At 31 December 2010 9,651 127,155 118,210 22,779 1,398,963 31,265 1,708,023 ----- ------- ------- ------ --------- ------ --------- Company For the year ended 31 December 2009 At 31 December 2008 9,651 127,147 121,058 22,779 291,375 18,917 590,927 Total Comprehensive Income: Return for the year - - - - 588,749 8,386 597,135 Transactions with owners: Exercise of warrants - 8 - - - - 8 Shares purchased during the year* - - (1,480) - - - (1,480) Dividend paid# - - - - - (9,777) (9,777) ----- ------- ------- ------ -------- ------ --------- At 31 December 2009 9,651 127,155 119,578 22,779 880,124 17,526 1,176,813 ----- ------- ------- ------ -------- ------ --------- For the year ended 31 December 2010 At 31 December 2009 9,651 127,155 119,578 22,779 880,124 17,526 1,176,813 Total Comprehensive Income: Return for the year - - - - 529,294 11,728 541,022 Transactions with owners: Shares purchased during the year* - - (1,368) - - - (1,368) Dividend paid# - - - - - (8,444) (8,444) ----- ------- ------- ------ --------- ------ --------- At 31 December 2010 9,651 127,155 118,210 22,779 1,409,418 20,810 1,708,023 ----- ------- ------- ------ --------- ------ --------- * Held in treasury. # See note 7. STATEMENTS OF FINANCIAL POSITION as at 31 December 2010 2010 2009 Group Company Group Company Notes £'000 £'000 £'000 £'000 Non current assets Investments held at fair value through profit or loss 1,758,274 1,770,229 1,221,734 1,233,750 --------- --------- --------- --------- Current assets Other receivables 1,299 1,299 1,259 1,187 --------- --------- --------- --------- 1,299 1,299 1,259 1,187 --------- --------- --------- --------- Total assets 1,759,573 1,771,528 1,222,993 1,234,937 --------- --------- --------- --------- Current liabilities Other payables (16,667) (17,968) (4,230) (5,535) Bank loans and bank overdrafts (30,820) (41,474) (41,950) (52,589) --------- --------- --------- --------- (47,487) (59,442) (46,180) (58,124) --------- --------- --------- --------- Total assets less current liabilities 1,712,086 1,712,086 1,176,813 1,176,813 --------- --------- --------- --------- Non current liabilities Deferred tax (4,063) (4,063) - - --------- --------- --------- --------- Net assets 1,708,023 1,708,023 1,176,813 1,176,813 ========= ========= ========= ========= Equity attributable to equity holders Ordinary share capital 9 9,651 9,651 9,651 9,651 Share premium account 127,155 127,155 127,155 127,155 Special reserve 118,210 118,210 119,578 119,578 Capital redemption reserve 22,779 22,779 22,779 22,779 Capital reserves 1,398,963 1,409,418 869,608 880,124 Revenue reserve 31,265 20,810 28,042 17,526 --------- --------- --------- --------- Total equity 1,708,023 1,708,023 1,176,813 1,176,813 ========= ========= ========= ========= Net asset value per ordinary share 8 962.06p 962.06p 662.02p 662.02p ======= ======= ====== ====== CASH FLOW STATEMENTS for the year ended 31 December 2010 2010 2009 Group Company Group Company £'000 £'000 £'000 £'000 Operating activities Return before taxation 546,216 546,140 597,578 597,450 Add back interest paid 516 516 23 23 Gains on investments held at fair value through profit or loss including transaction costs (535,332) (535,271) (589,000) (589,328) Net gains on foreign exchange 1,914 1,914 579 579 Net movement of current asset investments held by subsidiary - - 316 - Sales of investments held at fair value through profit or loss 133,253 133,253 225,437 225,437 Purchases of investments held at fair value through profit or loss (134,461) (134,461) (276,473) (276,473) Increase in other receivables (89) (89) (626) (644) Decrease in amounts due from brokers - - 13,911 13,911 Increase in amounts due to brokers 10,599 10,599 - - Increase in other payables 1,838 1,838 2,003 2,363 Dealing losses - - (36) - ------- ------- ------- ------- Net cash inflow/(outflow) from operating activities before interest and taxation 24,454 24,439 (26,288) (26,682) ------- ------- ------- ------- Interest paid (516) (516) (23) (23) Taxation paid - - (222) (222) Taxation on overseas income (1,082) (1,082) (485) (485) ------- ------- ------- ------- Net cash inflow/(outflow) from operating activities before financing activities 22,856 22,841 (27,018) (27,412) ------- ------- ------- ------- Financing activities Purchase of ordinary shares (1,368) (1,368) (1,480) (1,480) Exercise of warrants - - 8 8 Drawdown of loan 519 519 24,151 24,151 Dividends paid (8,444) (8,444) (9,777) (9,777) ------- ------- ------- ------- Net cash (outflow)/inflow from financing activities (9,293) (9,293) 12,902 12,902 ------- ------- ------- ------- Increase/(decrease) in cash and cash equivalents 13,563 13,548 (14,116) (14,510) Effect of foreign exchange rate changes (1,674) (1,674) (579) (579) ------- ------- ------- ------- Change in cash and cash equivalents 11,889 11,874 (14,695) (15,089) Cash and cash equivalents at start of year (17,799) (28,438) (3,104) (13,349) ------- ------- ------- ------- Cash and cash equivalents at end of year (5,910) (16,564) (17,799) (28,438) ====== ======= ======= ======= NOTES TO THE ANNUAL RESULTS ANNOUNCEMENT 1. Principal activity The principal activity of the Company is that of an investment trust company within the meaning of section 1158 of the Corporation Tax Act 2010. The principal activity of the subsidiary, BlackRock World Mining Investment Company Limited, is investment dealing. The other subsidiary, BlackRock Gold Limited, is no longer trading. 2. Accounting policies The principal accounting policies adopted by the Group and the Company are set out below. (a) Basis of preparation The Group and Parent Company financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The Group has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual income statement and related notes. The Group's financial statements are presented in sterling, which is the currency of the primary economic environment in which the Group operates. All values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated. Insofar as the Statement of Recommended Practice ("SORP") for investment trusts and venture capital trusts issued by the Association of Investment Companies ("AIC"), revised in January 2009 is compatible with IFRS, the financial statements have been prepared in accordance with guidance set out in the SORP. (b) Basis of consolidation The Group financial statements consolidate the financial statements of the Company and its wholly owned subsidiaries, BlackRock World Mining Investment Company Limited and BlackRock Gold Limited, which are registered and operate in England and Wales. (c) Presentation of the Consolidated Statement of Comprehensive Income In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Consolidated Statement of Comprehensive Income between items of a revenue and a capital nature has been presented alongside the Consolidated Statement of Comprehensive Income. In accordance with the Company's status as a UK investment company under section 833 of the Companies Act 2006 and section 1158 of the Corporation Tax Act 2010, net capital returns may not be distributed by way of dividend. (d) Segmental reporting The Directors are of the opinion that the Group is engaged in a single segment of business being investment business. (e) Income Dividends receivable on equity shares are recognised on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end are treated as revenue for the year. Provision is made for any dividends not expected to be received. Interest income is accounted for on an accruals basis. Option premium income is recognised as revenue and included in the revenue column of the Consolidated Statement of Comprehensive Income unless the option has been written for the maintenance and enhancement of the Company's investment portfolio and represents an incidental part of a larger capital transaction, in which case any premia arising are allocated to the capital column of the Consolidated Statement of Comprehensive Income. (f) Expenses All expenses, including finance costs, are accounted for on an accruals basis. Expenses have been charged wholly to the revenue column of the Consolidated Statement of Comprehensive Income, except as follows: - expenses which are incidental to the acquisition of an investment are included within the cost of the investment. - expenses are treated as capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. (g) Taxation Deferred taxation is recognised in respect of all temporary differences that have originated but not reversed at the financial reporting date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the financial reporting date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise. (h) Investments held at fair value through profit or loss The Company's investments are classified as held at fair value through profit or loss in accordance with IAS 39 - Financial Instruments: Recognition and Measurement and are managed and evaluated on a fair value basis in accordance with its investment strategy. All investments are designated upon initial recognition as held at fair value through profit or loss. Purchases of investments are recognised on a trade date basis. The sale of assets are recognised at the trade date of the disposal. Proceeds are measured at fair value which will be regarded as the proceeds of sale less any transaction costs. The fair value of the financial investments is based on their quoted bid price at the financial reporting date, without deduction for the estimated selling costs. Unquoted investments are valued by the Directors at fair value using International Private Equity and Venture Capital Valuation Guidelines. This policy applies to non current asset investments held by the Group. In order to improve the disclosure of how companies measure the fair value of their financial investments, the disclosure requirements in IFRS 7 have been extended to include a fair value hierarchy. The fair value hierarchy consists of the following three levels: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability Level 3 - inputs for the asset or liability that are not based on observable market data Under IFRS, the investments in the trading subsidiary are fair valued which is deemed to be the sum of the Statements of Financial Position values. Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Consolidated Statement of Comprehensive Income as "Gains or losses on investments held at fair value through profit or loss". Also included within this heading are transaction costs in relation to the purchase or sale of investments. (i) Other receivables and payables Other receivables and other payables do not carry any interest and are short term in nature and are accordingly stated at their nominal value. (j) Dividends payable Under IFRS, final dividends should not be accrued in the financial statements unless they have been approved by shareholders before the financial reporting date. Interim dividends should not be accrued in the financial statements unless they have been paid. Dividends payable to equity shareholders are recognised in the Statements of Changes in Equity when they have been approved by shareholders in the case of a final dividend, or paid in the case of an interim dividend, and have become a liability of the Group. (k) Foreign currency translation Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities are translated into sterling at the rate ruling on the financial reporting date. Foreign exchange differences arising on translation are recognised in the Consolidated Statement of Comprehensive Income. (l) Cash and cash equivalents Cash comprises cash in hand and on demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. (m) Bank borrowings Bank overdrafts are recorded as the proceeds received. Finance charges, including any premia payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the Consolidated Statement of Comprehensive Income using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. 3. Income 2010 2009 £'000 £'000 Investment income: UK listed dividends 5,764 4,041 Overseas listed dividends 17,209 10,003 Overseas listed special dividends 224 762 Fixed interest income 6,320 1,591 ------ ------ 29,517 16,397 ------ ------ Other income: Options premiums 2,555 - Deposit interest 81 61 Dealing profits - 36 Underwriting commission 186 1,013 ------ ------ 2,822 1,110 ------ ------ Interest on VAT refunds - 658 ------ ------ Total income 32,339 18,165 ====== ====== Total income comprises: Dividends 23,197 14,806 Deposit interest 81 61 Options premiums 2,555 - Interest on VAT refunds - 658 Fixed interest income 6,320 1,591 Other income 186 1,049 ------ ------ 32,339 18,165 ====== ====== No securities were held out on loan by the Group during the year. The maximum aggregate value of securities on loan at any one time during the year ended 31 December 2010 was nil (2009: nil). The Company considers the treatment of premium arising on option transactions on a case by case basis. During the year ended 31 December 2010, the option premium income of £2,555,000 received by the Company was from options written for income purposes and has therefore been credited to the revenue column of the Consolidated Statement of Comprehensive Income. In the year ended 31 December 2009, options were written for the maintenance and enhancement of the investment portfolio and therefore were taken to capital. 4. Management fees 2010 2009 £'000 £'000 Investment management fee 18,026 11,864 VAT recovered from prior years - (3,559) ------ ------ 18,026 8,305 ====== ===== The Investment Manager receives an annual management fee of 1.3% of gross assets. The investment management fee is levied quarterly, based on the value of the gross assets on the last day of each quarter, and is charged wholly to the revenue account. 5. Other expenses 2010 2009 £'000 £'000 Custody fee 571 256 Auditors' remuneration: - audit services 22 22 - other audit services* 8 5 Registrar's fee 88 78 Directors' emoluments** 99 99 Other administrative costs 211 220 ---- ---- 999 680 ==== ==== The Company's total expense ratio, calculated as a percentage of average net assets and using expenses, excluding interest costs, was: 1.3% 1.4% ===== ===== * Other audit services relate to the review of the half yearly financial statements and advice on VAT matters. ** The emoluments of the Chairman, who was also the highest paid Director, were £25,000 (2009: £25,000). 6. Finance costs 2010 2009 £'000 £'000 Interest on bank loans 244 3 Interest on bank overdrafts 272 20 --- --- 516 23 === === 7. Dividends Under IFRS, final dividends are not recognised until they are approved by shareholders, and special and interim dividends are not recognised until they are paid. They are also debited directly to reserves. Amounts recognised as distributable to ordinary shareholders for the year to 31 December were as follows: 2010 2009 £'000 £'000 Final ordinary dividend in respect of the year ended 31 December 2008 of 5.50p, approved by shareholders on 23 April 2009 - 9,777 Final ordinary dividend in respect of the year ended 31 December 2009 of 4.75p, approved by shareholders on 21 April 2010 8,444 - ----- ----- 8,444 9,777 ===== ===== The total dividends payable in respect of the year which form the basis of section 1158 of the Corporation Tax Act 2010 and section 833 of the Companies Act 2006, and the amounts proposed, meet the relevant requirements as set out in this legislation. 2010 2009 £'000 £'000 Dividends on equity shares: Proposed final ordinary dividend of 6.00p (2009: 4.75p) 10,652 8,444 ------ ----- 10,652 8,444 ====== ===== 8. Consolidated return and net asset value per ordinary share Revenue and capital returns per share are shown below and have been calculated using the following: 2010 2009 Net revenue attributable to ordinary shareholders (£'000) 11,667 8,714 Net capital return attributable to ordinary shareholders (£'000) 529,355 588,421 ----------- ----------- Total earnings attributable to ordinary shareholders (£'000) 541,022 597,135 ----------- ----------- Total equity attributable to ordinary shareholders (£'000) 1,708,023 1,176,813 The weighted average number of ordinary shares in issue during each year, on which the return per ordinary share was calculated, was: 177,693,132 177,805,471 The number of ordinary shares in issue at the year end, on which the net asset value per ordinary share was calculated, was: 177,537,242 177,762,242 Revenue earnings per share 6.57p 4.90p Capital earnings per share 297.90p 330.94p ------- ------- Total earnings per share 304.47p 335.84p ======= ======= Net asset value per share 962.06p 662.02p ======= ======= Share price 811.00p 550.00p ======= ======= At 31 December 2010, the 15,474,600 (2009: 15,249,600) shares held in treasury were not dilutive, as the share price was below the net asset value. 9. Share capital Ordinary Treasury shares shares number number Total (nominal) (nominal) shares £'000 Allotted, called up and fully paid share capital comprised: Ordinary shares of 5p each At 1 January 2010 177,762,242 15,249,600 193,011,842 9,651 Shares transferred into treasury (225,000) 225,000 - - ----------- ---------- ----------- ----- At 31 December 2010 177,537,242 15,474,600 193,011,842 9,651 =========== ========== =========== ===== During the year, 225,000 ordinary shares (2009: 556,800) were repurchased at a cost of £1,368,000 (2009: £1,480,000) and were held in treasury at 31 December 2010. 10. Publication of non statutory accounts The financial information contained in this announcement does not constitute statutory accounts as defined in the Companies Act 2006. The annual report and financial statements for the year ended 31 December 2010 will be filed with the Registrar of Companies after the Annual General Meeting. The figures set out above have been reported upon by the Auditor, whose report for the year ended 31 December 2010 contains no qualification or statement under section 498(2) or (3) of the Companies Act 2006. The comparative figures are extracts from the audited financial statements of BlackRock World Mining Trust plc and its subsidiaries for the year ended 31 December 2009, which have been filed with the Registrar of Companies. The report of the Auditor on those financial statements contained no qualification or statement under section 498 of the Companies Act 2006. 11. Annual Report Copies of the annual report will be sent to members by no later than 7 March 2011 and will be available from the registered office, c/o The Company Secretary, BlackRock World Mining Trust plc, 33 King William Street, London EC4R 9AS. 12. Annual General Meeting The Annual General Meeting of the Company will be held at 33 King William Street, London EC4R 9AS on Wednesday, 4 May 2011 at 11.30 a.m. ENDS The Annual Report will also be available on the BlackRock Investment Management website at www.blackrock.co.uk/content/groups/uksite/documents/literature/ blk047735.pdf. 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. For further information, please contact: Jonathan Ruck Keene, Managing Director, Investment Companies, BlackRock Investment Management (UK) Limited - Tel: 020 7743 2178 Evy Hambro, Fund Manager, BlackRock Investment Management (UK) Limited - Tel: 020 7743 4511 Emma Phillips, Media & Communications, BlackRock Investment Management (UK) Limited - Tel: 020 7743 2922 24 February 2011 33 King William Street London EC4R 9AS
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