Half-year Report
BlackRock World Mining Trust plc
LEI: LNFFPBEUZJBOSR6PW155
Condensed Half Yearly Financial Report 30 June 2024
Performance record
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| As at | As at |
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| Net assets (£’000)1 | 1,093,972 | 1,160,051 |
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| Net asset value per ordinary share (NAV) (pence) | 572.21 | 606.78 |
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| Ordinary share price (mid-market) (pence) | 569.00 | 587.00 |
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| Reference index2 – net total return | 6,041.29 | 6,002.54 |
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| Discount to net asset value3 | (0.6)% | (3.3)% |
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| ========= | ========= |
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| For the | For the |
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| Performance (with dividends reinvested) |
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| Net asset value per share3 | -1.9% | -6.2% |
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| Ordinary share price3 | +1.1% | -10.4% |
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| Reference index2 | +0.6% | +2.4% |
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| --------------- | --------------- |
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| Performance since inception (with dividends reinvested) |
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| Net asset value per share3 | +1,291.6% | +1,319.4% |
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| Ordinary share price3 | +1,381.5% | +1,365.9% |
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| Reference index2 | +1,012.4% | +1,005.2% |
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| ========= | ========= |
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| For the | For the |
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| Revenue |
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| Net revenue profit after taxation (£’000) | 22,848 | 31,767 | -28.1 |
| Revenue return per ordinary share (pence)3 | 11.95 | 16.73 | -28.6 |
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| --------------- | --------------- | --------------- |
| Dividend per ordinary share (pence) |
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| – 1st interim | 5.50 | 5.50 | – |
| – 2nd interim | 5.50 | 5.50 | – |
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| --------------- | --------------- | --------------- |
| Total dividends paid and payable | 11.00 | 11.00 | – |
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| ========= | ========= | ========= |
1 The change in net assets reflects portfolio movements, dividends paid and the reissue of ordinary shares from treasury during the period.
2 MSCI ACWI Metals & Mining 30% Buffer 10/40 Index (net total return). With effect from 31 December 2019, the reference index changed to the MSCI ACWI Metals & Mining 30% Buffer 10/40 Index (net total return). Prior to 31 December 2019, the reference index was the EMIX Global Mining Index (net total return). The performance returns of the reference index since inception have been blended to reflect this change.
3 Alternative Performance Measures, see Glossary contained within the Half Yearly Financial Report.
Chairman’s Statement
Following the Annual General Meeting in May, I assumed the role as Chairman of your Company. I am delighted to present the Half Yearly Financial Report to shareholders.
Market overview
Markets have experienced heightened volatility shaped by continued geopolitical and macroeconomic drivers. Interest rate policy and inflation have remained top of mind amid elevated public debt and weaker growth relative to the pre-pandemic era. The US-China trade war and geopolitical tensions, including the Russia/Ukraine war and the conflict in the Middle East, have also increased the supply chain risk.
It was a mixed period for the mining sector with a new all-time high price set for copper and gold and a pick-up in merger and acquisition (M&A) activity. This was offset by weakness across the bulk commodities as property related demand in China continued to soften. Despite a number of positive drivers during the first half, concerns over the outlook for China’s economy negatively impacted the sector and the six month reporting period ended on a weak note as momentum faltered and most commodity prices declined.
Performance
Against this backdrop, for the six month period ending 30 June 2024, the Company’s net asset value per share (NAV) returned -1.9% and the share price returned +1.1%. The Company’s reference index, the MSCI ACWI Metals & Mining 30% Buffer 10/40 Index, returned +0.6% (all percentages calculated in Sterling terms with dividends reinvested).
Since the period end and up to the close of business on 21 August 2024, the Company’s NAV has decreased by 2.9% compared to a fall of 3.2% (on a net return basis) for the reference index (in Sterling terms with dividends reinvested). Further information on the Company’s performance and the factors that contributed to, or detracted from, performance during the six months is set out in the Investment Manager’s Report.
Revenue return and dividends
Over the six month period to 30 June 2024, the Company’s revenue return amounted to 11.95p per share, compared to 16.73p per share for the corresponding period in 2023. This represents a decrease of 28.6% and reflects reductions in dividends from many mining companies.
The first quarterly dividend of 5.50p per share was paid on 31 May 2024. Today, the Board has announced a second quarterly dividend of 5.50p per share which will be paid on 30 September 2024 to shareholders on the register on 6 September 2024 with the ex-dividend date being 5 September 2024. It remains the Board’s intention to distribute substantially all of the Company’s available income in the future.
Management of share rating
For the period under review, the Company’s ordinary shares have traded at an average discount to NAV of 4.6% and were trading at a discount of 3.1% on a cum income basis as at 21 August 2024, the latest practicable date prior to the issue of this report. The Company did not buy back or reissue any shares during the six month period ended 30 June 2024. Since the period end and up to the date of this report, no ordinary shares have been reissued or bought back.
The Directors recognise the importance to investors that the Company’s share price does not trade at a significant premium or discount to NAV. Accordingly, the Directors monitor the share price closely and, in the context of wider market conditions, with investor sentiment and premiums/discounts being influenced by various external factors, will consider the issue of shares at a premium or the repurchase at a discount to help balance demand and supply in the market.
Gearing
One of the advantages of the investment trust structure is that the Company can use gearing with the objective of increasing portfolio returns over the longer term. The Company operates a flexible gearing policy which depends on prevailing market conditions. It is not intended that gearing will exceed 25% of the net assets of the Company and its subsidiary. Gearing at 30 June 2024 was 10.5% and maximum gearing during the period was 14.7%.
Board composition
I am delighted to welcome Elisabeth Scott to the Board. She was appointed following the Annual General Meeting held on 9 May 2024. Elisabeth possesses a great deal of investment trust specific expertise and asset management experience, both through her executive career as an investment manager and in her current involvement with a number of complementary boards. Elisabeth also chaired the Association of Investment Companies from January 2021 until January 2024. Further information on her background and experience can be found on page 48 of the Half Yearly Financial Report.
As previously advised in last year’s Annual Report, David Cheyne, having completed nearly 12 years on the Board, retired following the 2024 Annual General Meeting. On behalf of the Board, I want to thank David for his many years of excellent service to the Company and its shareholders and we wish him the best for the future.
I am pleased to report that the Board is compliant with the recommendations of the Parker Review and the FTSE Women Leaders Review. In accordance with the Listing Rules, we have also disclosed the ethnicity of the Board and our policy on matters of diversity. This disclosure can be found on pages 70 and 71 of the Company’s Annual Report.
Market outlook
Looking ahead, market volatility is unlikely to abate. 2024 marks a significant year for elections worldwide bringing uncertainty on the policy and geopolitical front. China, one of the most important economies for commodity demand, has also fueled concerns for the growth outlook and there is the potential for mounting geopolitical risk, primarily in the Middle East. Although inflationary pressures are easing, a measured approach by each central bank would indicate potential interest rate cuts in Europe and Asia and an increasing likelihood of a rate cut in the US.
However, there are reasons for optimism for the commodities sector. The mining industry is key to delivering the materials required for infrastructure investment, including the investment required to support the transition to a low carbon energy environment. This transition is expected to drive materials demand for many years to come. Artificial intelligence (AI) systems depend on minerals and metals in several ways and the investment in AI data centres and power grids is also set to bolster metals demand. Despite the pick-up in M&A activity, we are pleased to see mining companies continue to show strong capital discipline, which should ensure that there is an appropriate split of available cash flow between shareholder distributions and growth.
CHARLES GOODYEAR
Chairman
23 August 2024
Investment Manager’s Report
The first half of 2024 has been frustrating as the generally positive tone to the sector was not reflected in a more positive total return for the period. During the period, base and precious metal prices were buoyant with some breaking out to new all-time highs. On the other hand, the prices of iron ore, lithium and thermal coal moved lower on weaker demand or supply threats (in the lithium market) that threatened long-term price assumptions. On the whole, the blend of factors should have been supportive for share prices, particularly when combined with increased merger and acquisition (M&A) activity. It seems that rising interest rates, ongoing economic challenges in China and a slower move to decarbonise the global economy overwhelmed the positives and derated valuations, most notably the large cap diversified companies. These factors had a negative impact on the net asset value (NAV) of the Company.
Looking deeper into the fundamentals, the outlook remains positive. Companies are cautious on committing to large scale projects and, as such, the supply picture for most commodities is as constrained as in prior years. In fact, the pick-up in M&A suggests that companies see more value in buying assets rather than building them even after having to pay premiums for control. Tightness in commodity markets persists and despite Chinese weakness, the overall demand picture is robust, especially in the US.
Over the period the NAV of the Company returned -1.9% and the share price returned +1.1%. This compares to the FTSE 100 Index which was up by 7.9%, the Consumer Price Index was up by 2.0% and the reference index (MSCI ACWI Metals & Mining Index 30% Buffer 10/40 Index (net total return)) increased by 0.6% (all performance data numbers based in Sterling terms with dividends reinvested).
Tug of war
The global battle against inflation continued during the first half of the year. In most countries economic data moved in the right direction with large falls in the rate of inflation, but as yet not sufficient to trigger easing by the leading central banks. As a result of this markets have gyrated back and forth like a tug of war between interest rate expectations and the ongoing dominance of everything technology related, in particular the boom in artificial intelligence (AI) related equities. The AI theme within stock markets has grown to levels similar to that in previous tech booms so it will be interesting to see how this plays out especially when so much of the growth requires huge investment in basic infrastructure for it to be delivered.
Geopolitics has, sadly, not improved. The ongoing battle in Ukraine has continued and it seems unlikely that common ground will be found for it to end in the near term. The tragic situation in Israel and Gaza rages on with little prospect for it to ease. Elsewhere elections have taken place across Europe with large swings playing into the hands of some of the more extreme parts of the political spectrum. The end outcome of this is still to reach a conclusion but the probability of political stalemate or worse has risen. Lastly the forthcoming US Presidential election continues to be too difficult to call.
ESG and the social license to operate
For the last few years this report has continued to emphasise the importance of ESG when managing risk within mining related investments.
ESG (Environmental, Social and Governance) is highly relevant to the mining sector and we seek to understand the ESG risks and opportunities facing companies and industries in the portfolio. As an extractive industry, the mining sector naturally faces a number of ESG challenges given its dependence on water, carbon emissions and geographical location of assets. However, we consider that the sector can provide critical infrastructure, taxes and employment to local communities, as well as materials essential to technological development that will enable the carbon transition.
We consider ESG insights and data within the total set of information in our research process and make a determination as to the materiality of such information as part of the investment process used to build and manage the portfolio. ESG insights are not the sole consideration when making investment decisions but, in most cases, the Company will not invest in companies which have high ESG risks (risks that affect a company’s financial position or operating performance) and which have no plans to address existing deficiencies or controversies in an appropriate way.
- We take a long-term approach, focused on engaging with portfolio company boards and executive leadership to understand the drivers of risk and financial value creation in companies’ business models, including material sustainability-related risks and opportunities, as appropriate.
- There will be cases where a serious event has occurred, for example an accident at a mine site and, in that case, we will assess whether the relevant portfolio company is taking appropriate action to resolve matters before deciding what to do.
- There will be companies which have derated (the downward adjustment of multiples) as a result of an adverse ESG event or generally due to poor ESG practices where there may be opportunities to invest at a discounted price. However, the Company will only invest in these value-based opportunities if we are satisfied that there is real evidence that the relevant company’s culture has changed and that better operating practices have been put in place.
The main areas of engagement during the period have been on M&A, corporate decarbonisation plans and capital allocation. The latter two are somewhat interlinked given the healthy debate on how companies should allocate the cash generated by their operations. In the past, spending on decarbonisation was seen more as a choice but now this seems to have moved into a more core part of corporate strategy. In part we believe this is due to a need to do this but also the return on these investments seems to have improved. Although not at the same levels of brown field capacity growth, it does seem to compare favourably with greenfield growth investments. Another feature of this area has been to try and explore with executives the role that outside capital could play in helping to improve returns. The growth in infrastructure investing by financial markets seems to have opened up a range of new opportunities for companies to consider and these might easily challenge the long-term view that mining companies need to wholly own their own infrastructure.
When it comes to M&A, we stand by the view that companies should always seek to explore what might be in the best interests of all stakeholders. If value can be generated from combinations or sharing opportunities it is essential that these are discussed so that all parties can benefit, especially when synergies within the sector are so rare. Obviously, this does not mean that a company should not try to maximise its takeout share price, but, it should not be at the expense of losing out on a deal entirely. Given the high cost and risk of developing new assets, combined with the small size of the sector in the context of global markets, it is important that companies do not lose sight of remaining relevant when it comes to capital markets and M&A might help to deal with this threat.
Weaker prices
During the first half of the year there has been a significant dispersion of returns within the commodity sector. As can be seen in the table that follows the prices of gold, silver and tin were sharply higher year to date but also when compared to the same period last year. On the other side of the pricing for nickel, platinum and lithium were meaningfully lower. Within the overall moves there were a number of takeaways: gold and copper moved to new all time price highs during the period.
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| % Change | % Change average price |
| Gold US$/ounce (oz) | 2,326.3 | 12.6% | 14.1% |
| Silver US$/oz | 29.3 | 20.7% | 11.6% |
| Platinum US$/oz | 1,012 | 0.6% | -6.3% |
| Palladium US$/oz | 972 | -13.1% | -35.2% |
| Copper US$/pound (lb) | 4.29 | 11.7% | 4.5% |
| Nickel US$/lb | 7.73 | 4.1% | -27.7% |
| Aluminium US$/lb | 1.13 | 6.1% | 1.3% |
| Zinc US$/lb | 1.30 | 9.0% | -6.8% |
| Lead US$/lb | 0.99 | 7.0% | -0.5% |
| Tin US$/lb | 14.74 | 29.0% | 11.4% |
| Uranium US$/lb | 238 | -17.6% | 77.4% |
| Iron Ore (China 62% fines) US$/tonne (t) | 106 | -25.4% | -0.3% |
| Thermal Coal (Newcastle) US$/t | 133.65 | 1.2% | -22.6% |
| Met Coal US$/t | 238 | -17.6% | -0.6% |
| Lithium (Battery Grade China) US$/kilogram | 12.59 | -7.3% | -68.9% |
| WTI (Cushing) US$/barrel | 82.8 | 15.2% | 6.3% |
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1H24 – six months ended 30 June 2024.
1H23 – six months ended 30 June 2023.
Sources: LSEG Datastream and Bloomberg, June 2024.
Within the portfolio the key commodity exposure is to copper on the base metals side and gold within precious metals. Prices for both of these commodities have been strong and key for performance will be how these translate into earnings for the companies. Too often higher prices end up being lost to the pressures of poor operating performance, inflation, taxation or consumed in reinvestment by the companies. It is our expectation that the management teams have the processes and skills to mitigate these negative impacts.
Animal spirits
The last 12 months have certainly seen a pick-up in M&A activity within the sector. This sudden surge in animal spirits seems to have been driven by a realisation that producing assets traded in the equity market were trading at a low valuation versus the replacement cost (which has risen as shown in the chart contained on page 10 of the Half Yearly Financial Report) even including the premiums required for a change of control. In 2023 Glencore moved to gain control of Teck Resources when it announced plans to transform itself into a metals business by divesting its coal assets. This process concluded with Glencore agreeing to buy the coal assets leaving Teck Resources to follow a strategy of metals related growth. The deal finally received the necessary regulatory approvals in early July.
Capital intensity of new assets rising in real terms
In April 2024, BHP surprised the market by making a hostile offer for Anglo American. This process continued for a month during which time multiple attempts were made by BHP to try and conclude a combination of the two businesses. Despite numerous higher offers the two parties were unable to reach agreement leaving Anglo American to pursue its own strategy of simplification. BHP is unable to make another offer for six months. It will be interesting to see how successful Anglo American is on its organic plans as many of the challenges they highlighted in relation to the bid by BHP might delay their own plans leaving room for others to take another look at the business.
As the period drew to an end a number of media outlets reported that further transactions were being considered but as yet nothing tangible has come from these rumours. It is certainly the case that M&A is back and it is essential that companies remain disciplined when looking at opportunities given the poor historic industry track record in this space.
Base metals
It was a strong first half for the base metals with prices rising on improved demand, expected decline in interest rates, Chinese stimulus and financial interest as investors look to gain exposure to the AI data-centre theme. The copper price set a new all-time high in May and finished the first half up by 11.7%, with aluminium +6.1%, nickel +4.1% and zinc +9.0%.
Our favoured base metal, copper, saw positive demand growth in the first half of the year driven by investments into the grid, electric vehicles (EV), wind and solar power. We are increasingly seeing a change in China’s traditional demand drivers with property linked commodity demand declining, whilst investment into low carbon infrastructure and manufacturing is accelerating. Copper supply continues to remain tight with limited new tonnes entering the market. Smelters’ treatment and refining charges (TC/RC’s) an indication of tightness in the concentrate market, are at record low levels which benefit producer margins. A key near-term focus for the market is copper inventories which have not meaningfully decreased in China which points to some softness in the physical market near term.
Global copper inventories
We see a tight supply picture for copper. Power availability in Zambia and the Democratic Republic of the Congo (DRC), along with some specific asset production downgrades in Chile and Peru has further reduced supply expectations this year. The key delta to supply over the next one-to-two years is First Quantum’s Cobre Panama mine, which was placed on care and maintenance at the end of last year. This asset has the potential to produce up to 400ktpa copper over time and will have a big impact to the forecast deficit in the market. At present the market is broadly assuming that the asset will resume production at the end of 2025, but there remains a lot of uncertainty around the timing of the restart. With the market forecast to be 500kt deficit this year, the timing of the return of Cobre Panama will have a significant impact on market balances in 2025 and 2026.
Following our due diligence site visit to Chile last year to see a range of copper projects, a clear takeaway is the increase in capital costs to develop and build new copper mines. Part of this is due to higher inflation for steel, equipment and labour, but there are structural increases to costs due to more challenging permitting requirements for desalinated water, higher altitudes, deeper orebodies and lower grades. As highlighted in the chart contained within the Half Yearly Financial Report, recent greenfield copper developments have had a capital intensity around US$30,000/t and this has risen considerably over the last decade. Our analysis suggests that in order for companies to generate a 15% post-tax internal rate of return on these investments they would require an incentive copper price of US$12,000/t. This, in our view, is an important structural driver for the copper price due to the need to incentivise new supply going forward.
The Company’s copper exposure was a key source of positive returns during the first half of the year. BHP’s approach for Anglo American highlighted the value in copper equity values, given the cost to develop and build new copper supply. Ivanhoe Mines (2.4% of the portfolio) continues to set the standard for operational performance with the ramp-up of Kamoa-Kakula in the DRC, with phase 1 and 2 of the mine delivered ahead of schedule and the phase 3 expansion completed in June nearly two quarters ahead of schedule. With the smelter completion before the end of the year, unit costs are expected to fall by 20%. With free cash flow increasing, we expect to see shareholder loans decline and increasing cash returns to Ivanhoe Mines, positioning them well to start paying dividends. Another notable copper outperformer includes Capstone which is currently ramping up its Manto Verde copper project in Chile. During the quarter Lundin Mining announced that it will exercise their option to acquire an additional 19% stake in the Caserones copper mine for US$350 million.
The aluminium price finished the first half up by 6%, with the average price up 1.3% versus the corresponding period last year. Aluminium prices have been pressured over the last two years as energy prices have fallen which has deflated the cost curve. However, with alumina, a key input for producing aluminium, up over 40% year-to-date, rising cost pressure has pushed up the aluminium price as well. Aluminium demand has benefited from investments into solar power and the grid in recent years and we see it as a longer-term beneficiary of energy transition spend. With aluminium and copper substitutable for certain applications, they typically trade within a ratio of one another. It has been interesting to see the copper price to aluminium price ratio move up from a historical level of circa 3:1 to now circa 4:1. Longer term we see upside to aluminium prices as carbon costs begin to be incorporated into prices. The Company’s largest exposure to aluminium is via Hydro (3.6% of the portfolio) which is one of the lowest-carbon producers of aluminium by virtue of its access to hydro power in Norway.
It has been a difficult year for the nickel industry with the average nickel price down by 27.7% in the first half of 2024 versus the same period last year. While there was a modest rebound (+4%) in prices during the half, the industry is struggling to generate competitive margins at this price level. Significant growth in Indonesian nickel supply has structurally changed the market, with nickel pig iron producers rapidly growing production and adapting their facilities to allow the production of nickel matte and other intermediary products. This material is typically more carbon intensive and, should carbon pricing be incorporated into the cost curve, we would expect Indonesian supply to decline over time. The Company has two pure play exposures to nickel – the first Nickel Industries (0.6% of the portfolio) today a nickel pig iron producer which is transitioning towards LME grade nickel production which will improve earnings and margins. During the half, Nickel Industries increased its equity interest in the ENC Project by 16.5% to 44%. This high-pressure acid leach project will see them produce battery grade nickel and cobalt and will also reduce the company’s carbon footprint. The second investment was done via a “PIPE” deal in 2022 into Lifezone Metals which has traded as a public company since the end of June 2023. Lifezone Metals, in conjunction with BHP, owns the Kabanga project in Tanzania which is one of the world’s largest undeveloped nickel sulphide deposits.
Bulks and steel
It was a weak period for the bulk commodities, with iron ore prices down by 25.4%, metallurgical coal down by 17.6% and thermal coal prices up by 1.2%. Chinese steel production has remained at a similar level to last year of circa 1 billion tonnes. However, domestic demand has softened primarily due to property-linked weakness. As a result, China has returned to a high level of steel exports which annualised more than 100 million tonnes per annum (mtpa). This has put significant pressure on European steel prices, with production curtailed to protect margins during the six month period. With China looking to re-impose steel production caps to reduce carbon emissions and improve the profitability of the steel industry, we would expect to see exports decline and prices to stabilise. The other notable steel market that the Company has exposure to is the US. Steel prices have returned to a more normalised level versus two to three years ago. We remain positive on the outlook for the US steel industry as the Government looks to commence its infrastructure rebuilding programs.
Iron ore has been a key area of strength in recent years supporting free cash flow and dividends for the large producers. While the spot price finished down by 25% during the half, average prices were actually flat versus the corresponding period in 2023 and are at a healthy level of US$118/t. Iron ore has benefited from China’s high blast furnace utilisation rates, with electric arc furnaces (EAF’s), which rely on scrap, struggling to grow market share given the lack of available steel scrap supply and high electricity prices. Longer term, as China looks to reduce the carbon intensity of its steel industry, we would expect to see growth in EAF supply and also higher demand for high grade iron ore.
Over the last five years, the iron ore price has been well supported at US$90/t which appears to be the breakeven price for high-cost producers and has provided a floor to the price. Supply discipline from the iron ore producers has kept the iron ore market tight as they have pursued a “value over volume” strategy. From 2025/2026 we see meaningful new supply entering the market, primarily via the China controlled Simandou project being built in conjunction with Rio Tinto. This is a high-grade ore body which has the potential to reach 150mtpa which is expected to have a material impact on overall iron ore supply.
The Company’s exposure to iron ore is primarily via the diversified majors BHP, Vale and Rio Tinto. These companies generate strong margins and free cash flow from their iron ore businesses with that cash flow being returned to shareholders, or being reinvested into future facing commodities such as copper. In addition, the Company has exposure to two pure play high grade iron ore producers, Champion Iron and Labrador Iron. Champion Iron is ramping-up its Bloom Lake operation in Canada and targeting the production of high grade (69% Fe) iron ore which is a key component of low carbon steel production.
The coking coal market remains one of the more interesting commodity markets. Western world producers have been hesitant to add new supply, whilst demand continues to increase driven by steel producing countries such as India. Having banned the import of Australian coking coal, we are seeing China reverse the ban and return to imports again. Supply appears much more inelastic, with limited new supply growth hitting the market ex-China. On the corporate front, Glencore made an offer to Teck Resources to acquire its coking coal business which was subsequently approved and completed in July 2024.
The thermal coal market has returned to a more balanced position this year with prices holding between $120-140/t. India remains a significant force on the import market, in line with the rapid economic growth within the country. As we have seen in recent years, many western world thermal coal producers have reduced growth spending and have committed to responsibly reduce production over time. This has left the thermal coal market generally tight and vulnerable to price spikes associated with spikes in energy demand. The Company’s thermal coal exposure is via our 8.2% position in Glencore which has used elevated thermal coal prices in recent years to deleverage the business and buy back shares. Shortly after the end of the first six month period, Glencore completed the acquisition of the Teck Resources coking coal business which gives them a leading position in the Atlantic basin for coking coal. Glencore announced at their results on 7 August 2024 that they will retain the coal business and maintain their strategy of responsible run-off for the thermal coal business. Should they decide to retain the business, we would expect to see Glencore lift their net debt target back to their previous level of US$10 billion which paves the way for additional shareholder returns in the second half of the year. After the reporting period Glencore confirmed at its half year results that they will retain the coal business following engagement with its shareholders.
Precious metals
A new record all-time high price was set for gold at US$2,427/oz during the first half of 2024 with the price finishing the period at US$2,326/oz, up by 12.6%. This is a notable step change from the US$1,800/oz trading range that gold has largely held over recent years and leaves gold companies in a good position to translate the higher gold price into stronger returns. A notable feature of the gold market in 2024 has been central bank purchases of gold, particularly from China. Whilst central banks have shown appetite for gold, retail investors appear more cautious with gold exchange-traded fund (ETF) holdings declining over the period. We find this perplexing. Gold has delivered its role as a safe haven asset and portfolio diversifier and we see a number of reasons for investors to continue to allocate to gold.
Silver performed particularly well during the period, rising by 20.7% with the market recognising its relative price attractiveness versus gold, along with its industrial demand. Silver’s key industrial end market is solar which saw record installations in 2023 and continues to grow (albeit at a slower pace). Interestingly, we are seeing a rising silver usage in solar as installers move to TOPCon solar modules which have higher efficiency and importantly higher silver intensity.
The Company increased its exposure to precious metals companies during the first half of the year. This is a reflection of our positive outlook on gold and the expected improvement in earnings from the gold companies. The Company has maintained its preference for higher quality gold producers which have low operating costs and a strong resource base which improves their ability to generate stronger free cash flow through the cycle. Among our gold holdings, Agnico Eagle Mines (4.3% of the portfolio) a Canadian listed producer focused on operating in lower risk jurisdictions provided an update on its Detour Lake operation which is on track to become a 1 million ounce gold producer by the end of the decade making it a top five gold mine. Newmont Corporation (Newmont) which has underperformed gold peers following the acquisition of Newcrest Mining in 2023, provided an update on its strategy to create a Focused Tier 1 Portfolio of assets to produce 6.7 million oz of gold by 2028. Newmont has a series of non-core assets to sell as part of this process and will also buy back US$1 billion in shares outstanding over the next 24 months. The Company took the opportunity to increase its exposure to Newmont on the expectation that it claws back its underperformance as it executes on its strategy.
In the platinum group metals (PGMs) platinum has performed better during the first half of 2024, increasing by 0.6%, compared to palladium which saw a 13.1% decrease over the first half of the year. A significant demand for PGMs comes from catalytic converters, which are used in internal combustion engine (ICE) vehicles to reduce carbon monoxide and nitrogen oxide emissions. However, this demand is facing a long-term structural challenge due to the declining demand for ICE vehicles due to the rise in popularity of EVs. While platinum has various applications in industry, for instance jewellery, and as an investment, palladium is particularly vulnerable to a lack of demand from ICE vehicles and has not yet found a stable price point. A key question going forward is PGMs use in hybrid electric vehicles and range extenders for EVs. As the metals are often mined together their supply can be less responsive to price decreases in just one of the PGMs.
The Company’s exposure to PGM producers slightly increased in the period to 2.2%, due to the positive performance from Bravo Mining. Bravo Mining, 1.6% of the portfolio, is a PGM and nickel exploration company in Brazil, developing the Luanga PGM deposit. The company’s value increased by 19.5% during the first half of 2024 following the discovery of copper-gold mineralisation east of its Luanga deposit. Although it is still in the early stages of this exploration program, the drill results so far suggest a promising opportunity for Bravo. The Company invested in a pre-IPO in April 2022 at C$0.50/share due our belief in the assets and management’s potential. Since our initial investment, the company has successfully had an IPO and as at 30 June 2024 was trading at C$3.80/share.
Energy transition metals
Battery electric vehicle (BEV) sales continued to grow in 2024 and the International Energy Agency (IEA) expects global electric car sales to remain robust in 2024, reaching around 17 million by the end of the year, from around 14 million in 2023. BloombergNEF’s (BNEF) Long-Term Electric Vehicle Outlook indicated that rapidly falling battery prices, advancements in next-generation battery technology and improving economics of EVs continue to underpin long-term EV growth globally. Passenger EV sales are expected to exceed 30 million in 2027 in BNEF’s base case scenario and grow to 73 million per year in 2040.
We continue to see a focus on geopolitics with efforts from Western politicians to decouple supply chains from China. The US announced an increase in import tariffs for Chinese produced goods across strategic sectors, including EVs and batteries. The European Commission notified carmakers that it would provisionally apply additional duties of between 17 and 38 per cent on imported Chinese EVs.
After lithium prices fell by 43% in 2023, the first half of 2024 has seen a tough market continue with the price down by another 69%. Despite growing strongly, demand for lithium from batteries did not meet optimistic expectations. China has seen a greater penetration of plug-in hybrid electric vehicles (PHEV) which often have smaller batteries containing less lithium. Sales also disappointed in the smaller markets of the US and Europe. The Company reduced its exposure to lithium and exited its position in Albemarle, a lithium producer, in the first half of the year. The Company’s position in Sigma Lithium negatively impacted performance during the six months after the strategic review process the company was undertaking failed to result in a sale of the company. The company is now focusing on its near-term expansion plans which include doubling production in 2025.
A critical component of the electric car is also the e-motor, which most commonly uses a Praseodymium-Neodymium (NdPr) magnet, an alloy of two rare earth elements (REE) which are commonly mined and processed in China and have been deemed of strategic importance by both Europe and the US. The Company has exposure to REEs through Lynas Rare Earths (Lynas), a REE miner and processor based in Malaysia and Australia. In the first half, Lynas’ equity fell by 17.2% during a period of weaker rare earth mineral pricing. In the six month period Lynas announced they would start selling separated heavy rare earths, widening their product offering from the mixed concentrate they currently produce.
2023 saw an increased recognition in the key role of nuclear energy in reaching net zero with a declaration at the 28th Conference of the Parties to triple nuclear energy capacity by 2050. The strategic importance of uranium was again highlighted in the first half of 2024 with the US Congress moving to prohibit Russian uranium imports. The Company’s holding in uranium producer Cameco rose by 14% in the six months, as the market continued to reward their position as a western supplier of nuclear fuel and engineering through their ownership interest in Westinghouse.
Royalty and unquoted investments
Over the last three years the Company has generated significant returns from the unquoted section of the portfolio. This includes the IPOs of two private investments, Ivanhoe Electric and Bravo Mining, at substantial premiums to their purchase price.
As mentioned in previous reports, the focus of the unquoted investments is to generate both capital growth and income to deliver the superior total return goal for the portfolio. The Company continues to evaluate new opportunities as it believes that they can provide an opportunity to generate superior returns and maximise the return opportunities available in the mining sector.
As of 30 June 2024, the unquoted investments in the portfolio amounted to 7.2% of the portfolio and consist of the BHP Brazil Royalty, the Vale Debentures, Jetti Resources, MCC Mining and Polyus ADRs. These, and any future investments, will be managed in line with the guidelines set by the Board as outlined to shareholders in the Strategic Report of the Company’s 2023 Annual Report.
BHP Brazil Royalty Contract (1.7% of the portfolio)
In July 2014 the Company signed a binding royalty agreement with Avanco Minerals. The Company provided US$12 million in return for a Net Smelter Return (net revenue after deductions for freight, smelter and refining charges) royalty payments comprising 2% on copper, 25% on gold and 2% on all other metals produced from mines built on Avanco’s Antas North and Pedra Branca licences. In addition, there is a flat 2% royalty over all metals produced from any other discoveries within Avanco’s licence area as at the time of the agreement.
In 2018 we were delighted to report that Avanco Minerals was acquired by OZ Minerals, an Australian based copper and gold producer for A$418 million. We were equally pleased to report that in early 2023 OZ Minerals was acquired by BHP, the world’s largest mining company and now operating the assets underlying the royalty. Since our initial US$12 million investment was made, we have received US$28.6 in royalty payments with the royalty achieving full payback on the initial investment in 3½ years. As at the end of June 2024, the royalty was valued at £19.9 million (1.7% of the portfolio) which equates to a 365.3% cash return on the initial US$12 million invested.
We are pleased to report that production at Pedra Branca has normalised following a geotechnical event in the second half of 2023. Recent results have confirmed the asset is producing at steady state levels and after a successful technical review from BHP we have confidence that the operational issues have been resolved.
Vale Debentures (2.6% of the portfolio)
At the beginning of 2019, the Company completed a significant transaction to increase its holding in Vale Debentures. The Debentures consist of a 1.8% net revenue royalty over Vale’s Northern System and Southeastern System iron ore assets in Brazil, as well as a 1.25% royalty over the Sossego copper mine. The iron ore assets are world class given their grade, cost position, infrastructure and resource life which is well in excess of 50 years.
Dividend payments are expected to grow once royalty payments commence on the Southeastern System in 2025 and volumes from S11D and Serra Norte improve. At Vale’s Capital Markets Day in December, the company outlined 50Mt of iron ore growth to 2026 of which S11D is the largest component and an improved quality mix from which the royalty will benefit.
The Debentures offer an attractive yield in excess of 10% based on the 2023 dividend. This is an appealing yield for a royalty investment, with this value opportunity recognised by other listed royalty producers, Franco Nevada and Sandstorm Gold Royalties, which have both acquired stakes in the Debentures since the sell-down occurred in 2021.
Whilst the Vale Debentures are a royalty, they are also a listed security on the Brazilian National Debentures System. As we have highlighted in previous reports, shareholders should be aware that historically there has been a low level of liquidity in the Debentures and price volatility is to be expected. We continue to actively look for opportunities to grow royalty exposure given it provides an effective mechanism to lock-in long-term income which further diversifies the Company’s revenues.
Jetti Resources (2.1% of the portfolio)
In early 2022, the Company made an investment into mining technology company Jetti Resources (Jetti) which has developed a new catalyst that improves copper recovery from primary copper sulphides (specifically copper contained in chalcopyrite, which is often uneconomic) under conventional leach conditions. Jetti is currently in negotiation with a number of mining companies to trial their technology where they will look to integrate their catalyst into existing help leach SX-EW mines to improve recoveries at a low capital cost. The technology has been demonstrated to work at Capstone’s Pinto Valley copper mine and has been trialled at some of Freeport McMoRan’s copper operations. If Jetti’s technology is proven to work at scale, we see valuation upside with Jetti sharing in the economics of additional copper volumes recovered through the application of their catalyst.
During the second half of 2022 Jetti completed its Series D financing to raise US$100 million at a substantially higher valuation than when our investment was made at the beginning of 2022. Since then, we have seen a number of competing leaching technology companies enter the market placing pressure on economics and the share of profits Jetti would receive from recovering additional copper. Along with a more challenging market and slower roll out of its leaching technology across targeted assets, the Company has chosen to reduce the holding value of the asset by 7.3%. This remains 106.2% above the price when the Company initially purchased its holding in 2022. We continue to remain positive on the longer-term outlook for Jetti as it looks to deploy its copper leaching technology across a range of world class existing copper assets.
MCC Mining (0.8% of the portfolio)
MCC Mining (MCC) is a private company exploring for copper in Colombia. It is undertaking early-stage greenfield exploration and has strong geological potential to host multiple world class porphyry deposits. Shareholders include other mid-to large-cap copper miners, which is an indication of the strategic value of the company. Following new regulations in Colombia which allowed for the exploration drilling in the forestry reserve, the company commenced drilling at its Comita and Pantanos deposits in 2023. Drilling to date has been very encouraging. Over the last 18 months, MCC has drilled 38% of the Top-40 open-pit copper holes globally, with two porphyry deposits confirmed at Comita and Pantanos. The company successfully completed a US$50 million funding round at a 50% premium to our initial investment and we have been encouraged by the calibre of investors invested in the company.
Derivatives activity
The Company from time to time enters into derivatives contracts, mostly involving the sale of “puts” and “calls”. These are taken to revenue and are subject to strict Board guidelines which limit their magnitude to an aggregate 10% of the portfolio. In the first half of 2024 income generated from options was £4.3 million. During the period the Company was able to take advantage of a number of specific events where volatility seemed to be mis-priced versus the underlying risks. This was a key driver behind the overall performance for the first half of the year. At the end of the period the Company had 0.1% of net assets exposed to derivatives and the average exposure to derivatives during the period was less than 5% of net assets.
Gearing
At 30 June 2024, the Company had £134.5 million of net debt, with a gearing level of 10.5%. The debt is held principally in US Dollar rolling short-term loans and managed against the value of the portfolio as a whole. During the period the Company once again reviewed the use of gearing on the back of interest rates remaining higher than generally expected. Less debt was used during the period than in prior years but, with share prices generally flat to lower over the period as a whole, debt was a drag on returns during the six months. Looking back at the report from last year the outlook remains similar with a view that as macro risks fade opportunities will present themselves for gearing levels to rise back to normal levels even though the debt will have a higher cost. On the back of this, facilities were refreshed with our lenders and remain at £200 million for loans and £30 million for the overdraft.
Outlook
After a frustrating first half to the year where much of the positive news did not translate into a more optimistic outcome, it is easy to think that things will improve for the remainder of the year. As things stand, it certainly looks that way with copper, gold and silver prices moving higher once again and iron ore remaining resolutely above the psychological $100/t level. However, the macro picture is not without risk. The world’s largest commodity consumer, China, remains weak and until its domestic challenges are fixed it seems unlikely that it will drive commodity prices higher. Elsewhere, geopolitics remain an ever present threat. Tensions in the Middle East and Ukraine persist. Elections in Europe have raised the prospect of a shift in the political landscape and with the US Presidential election due in November it will be far from easy sailing ahead.
Despite these risks, shareholders should expect the portfolio to remain fully invested with a focus on stock specific outcomes rather than just market related factors such as commodity price sensitivity. This approach has delivered excellent results over the last few years and the current mix of holdings has a high degree of exposure to similar dynamics boding well for the future.
In addition, the Company will continue to seek out opportunities to maximise income during the balance of the year in order to try and offset what looks to be the lagged impact of dividend cuts from the results in the second half of 2023. Achieving this remains integral to the goal of delivering a superior total return for shareholders through the cycle.
EVY HAMBRO AND OLIVIA MARKHAM
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
23 August 2024
Ten largest investments
Together, the ten largest investments represented 53.8% of total investments of the Company’s portfolio as at 30 June 2024 (31 December 2023: 54.8%).
1 ▲ Glencore (2023: 3rd)
Diversified mining group
Market value: £98,576,000
Share of investments: 8.2% (2023: 8.3%)
One of the world’s largest globally diversified natural resources groups. The group’s operations include approximately 150 mining and metallurgical sites and oil production assets. Glencore’s mined commodity exposure includes copper, cobalt, nickel, zinc, lead, ferroalloys, aluminium, thermal coal, iron ore, gold and silver.
2 ▼ BHP1,2 (2023: 1st)
Diversified mining group
Market value: £93,667,000
Share of investments: 7.8% comprising equity of 6.1% and mining royalty of 1.7% (2023: 10.1%)
The world’s largest diversified mining group by market capitalisation. The group is an important global player in a number of commodities including iron ore, copper, thermal and metallurgical coal, manganese, nickel and silver.
3 ▲ Rio Tinto3 (2023: 4th)
Diversified mining group
Market value: £74,688,000
Share of investments: 6.2% (2023: 7.3%)
One of the world’s leading mining groups. The group’s primary product is iron ore, but it also produces aluminium, copper, diamonds, gold, industrial minerals and energy products.
4 ▲ Anglo American3 (2023: 17th)
Diversified mining group
Market value: £67,258,000
Share of investments: 5.6% (2023: 1.9%)
A global diversified mining company with a portfolio that includes diamonds, platinum, copper and iron ore. The company operates mines in Canada, Peru, Chile, Australia and a number of countries in Africa.
5 ► Freeport-McMoRan3 (2023: 5th)
Copper producer
Market value: £60,582,000
Share of investments: 5.0% (2023: 5.0%)
A global mining group which operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum.
6 ► Newmont Corporation (2023: 6th)
Gold producer
Market value: £57,491,000
Share of investments: 4.8% (2023: 3.6%)
The world’s largest gold producer by market capitalisation. The group has gold and copper operations on five continents, with active gold mines in Nevada, Australia, Ghana, Peru and Suriname.
7 ▼ Vale2,3,4 (2023: 2nd)
Diversified mining group
Market value: £55,473,000
Share of investments: 4.6% comprising equity of 2.0% and debentures of 2.6% (2023: 9.6%)
One of the largest mining groups in the world, with operations in 30 countries. Vale is the world’s largest producer of iron ore and iron ore pellets and the world’s largest producer of nickel. The group also produces manganese ore, ferroalloys, metallurgical and thermal coal, copper, platinum group metals, gold, silver and cobalt.
8 ▲ Agnico Eagle Mines (2023: 19th)
Gold producer
Market value: £51,568,000
Share of investments: 4.3% (2023: 1.6%)
A Canadian-based senior gold producer with operations in Canada, Finland, Australia and Mexico. The company also has exploration and development assets in the US.
9 ▲ Teck Resources (2023: 10th)
Diversified mining group
Market value: £45,179,000
Share of investments: 3.7% (2023: 2.3%)
A diversified mining group headquartered in Canada. The company is engaged in mining and mineral development with operations and projects in Canada, the US, Chile and Peru. The group has exposure to copper and zinc.
10 ▼ Hydro (2023: 9th)
Aluminium producer
Market value: £43,887,000
Share of investments: 3.6% (2023: 2.6%)
A Norwegian aluminium and renewable energy company, headquartered in Oslo. It is one of the largest aluminium companies worldwide. It has operations in some 50 countries around the world. The company is present throughout the aluminium value chain, from energy to bauxite mining and alumina refining, primary aluminium, aluminium extrusions and aluminium recycling.
1 Includes mining royalty contract.
2 Includes investments held at Directors’ valuation.
3 Includes options.
4 Includes fixed income securities.
All percentages reflect the value of the holding as a percentage of total investments. For this purpose, where more than one class of securities is held, these have been aggregated.
Arrows indicate the change in relative ranking of the position in the portfolio compared to its ranking as at 31 December 2023.
Percentages in brackets represent the value of the holding as at 31 December 2023.
Investments as at 30 June 2024
|
| Main | Market |
|
|
| Diversified |
|
|
|
|
| Glencore | Global | 98,576 |
| 8.2 |
| Rio Tinto | Global | 75,020 | } | 6.2 |
| Rio Tinto Put Option 19/07/24 £52.00 | Global | (332) | ||
| BHP | Global | 73,732 |
| 6.1 |
| Anglo American | Global | 67,750 | } | 5.6 |
| Anglo American Call Option 19/07/24 £25.00 | Global | (492) | ||
| Vale Debentures1, 2, 4 | Global | 31,295 | } | 4.6 |
| Vale | Global | 24,343 | ||
| Vale Call Option July 24 BRL11.5 | Global | (165) | ||
| Teck Resources | Global | 45,179 |
| 3.7 |
|
|
| --------------- |
| --------------- |
|
|
| 414,906 |
| 34.4 |
|
|
| ========= |
| ========= |
| Copper |
|
|
|
|
| Freeport-McMoRan | Global | 60,989 | } | 5.0 |
| Freeport-McMoRan Put Option 19/07/24 US$49.00 | Global | (407) | ||
| Ivanhoe Mines | Other Africa | 29,363 |
| 2.4 |
| Jetti Resources2 | Global | 25,207 |
| 2.1 |
| Ivanhoe Electric | United States | 24,449 |
| 2.0 |
| Sociedad Minera Cerro Verde | Latin America | 21,321 |
| 1.8 |
| Lundin Mining | Global | 20,441 |
| 1.7 |
| BHP Brazil Royalty2, 3 | Latin America | 19,935 |
| 1.7 |
| Southern Copper Corporation | Latin America | 19,668 |
| 1.6 |
| Metals Acquisition | Australasia | 13,193 |
| 1.1 |
| Capstone Mining | United States | 12,904 |
| 1.1 |
| Foran Mining | Canada | 10,937 |
| 0.9 |
| Develop Global | Australasia | 10,705 |
| 0.9 |
| First Quantum Minerals | Global | 10,089 |
| 0.8 |
| MCC Mining2 | Latin America | 10,011 |
| 0.8 |
| Filo Corp | Latin America | 4,070 |
| 0.3 |
| Hudbay | Global | 3,631 |
| 0.3 |
| Solaris Resources | Latin America | 3,557 |
| 0.3 |
| Antofagasta | Latin America | 3,297 |
| 0.3 |
|
|
| --------------- |
| --------------- |
|
|
| 303,360 |
| 25.1 |
|
|
| ========= |
| ========= |
| Gold |
|
|
|
|
| Newmont Corporation | Global | 57,491 |
| 4.8 |
| Agnico Eagle Mines | Canada | 51,568 |
| 4.3 |
| Wheaton Precious Metals | Global | 39,307 |
| 3.2 |
| Barrick Gold | Global | 31,011 |
| 2.6 |
| Franco-Nevada | Global | 19,095 |
| 1.6 |
| Northern Star Resources | Australasia | 12,967 |
| 1.1 |
| Kinross Gold | Global | 12,057 |
| 1.0 |
| Endeavour Mining | Other Africa | 8,566 |
| 0.7 |
| Allied Gold1 | Other Africa | 7,900 |
| 0.6 |
| AngloGold Ashanti | Global | 3,702 |
| 0.3 |
| Firefly Metals | Canada | 3,595 |
| 0.3 |
| Polyus | Russia | – |
| – |
|
|
| --------------- |
| --------------- |
|
|
| 247,259 |
| 20.5 |
|
|
| ========= |
| ========= |
| Steel |
|
|
|
|
| Nucor | United States | 28,052 |
| 2.3 |
| Steel Dynamics | United States | 13,571 |
| 1.1 |
| ArcelorMittal | Global | 13,092 |
| 1.1 |
| Stelco Holdings | Canada | 5,898 |
| 0.5 |
|
|
| --------------- |
| --------------- |
|
|
| 60,613 |
| 5.0 |
|
|
| ========= |
| ========= |
| Industrial Minerals |
|
|
|
|
| Albemarle | Global | 9,431 |
| 0.8 |
| Iluka Resources | Australasia | 9,090 |
| 0.8 |
| Lynas Rare Earths | Australasia | 7,214 |
| 0.6 |
| Sigma Lithium | Latin America | 6,408 |
| 0.5 |
| Mineral Resources | Australasia | 6,173 |
| 0.5 |
| Sheffield Resources | Australasia | 4,046 |
| 0.3 |
| Pilbara Minerals | Australasia | 4,017 |
| 0.3 |
| Chalice Mining | Australasia | 1,900 |
| 0.2 |
|
|
| --------------- |
| --------------- |
|
|
| 48,279 |
| 4.0 |
|
|
| ========= |
| ========= |
| Aluminium |
|
|
|
|
| Hydro | Global | 43,887 |
| 3.6 |
|
|
| --------------- |
| --------------- |
|
|
| 43,887 |
| 3.6 |
|
|
| ========= |
| ========= |
| Iron Ore |
|
|
|
|
| Labrador Iron | Canada | 11,816 |
| 1.0 |
| Champion Iron | Canada | 10,683 |
| 0.9 |
| Deterra Royalties | Australasia | 3,265 |
| 0.3 |
| Equatorial Resources | Other Africa | 214 |
| – |
|
|
| --------------- |
| --------------- |
|
|
| 25,978 |
| 2.2 |
|
|
| ========= |
| ========= |
| Platinum Group Metals |
|
|
|
|
| Bravo Mining | Latin America | 19,811 |
| 1.6 |
| Northam Platinum | Global | 2,392 |
| 0.2 |
| Impala Platinum | South Africa | 1,635 |
| 0.1 |
|
|
| --------------- |
| --------------- |
|
|
| 23,838 |
| 1.9 |
|
|
| ========= |
| ========= |
| Uranium |
|
|
|
|
| Cameco | Canada | 19,466 |
| 1.6 |
|
|
| --------------- |
| --------------- |
|
|
| 19,466 |
| 1.6 |
|
|
| ========= |
| ========= |
| Nickel |
|
|
|
|
| Nickel Industries | Indonesia | 6,778 |
| 0.6 |
| Lifezone Metals | Global | 6,068 |
| 0.5 |
| Bindura Nickel | Global | 31 |
| – |
|
|
| --------------- |
| --------------- |
|
|
| 12,877 |
| 1.1 |
|
|
| ========= |
| ========= |
| Mining Services |
|
|
|
|
| Woodside Energy Group | Australasia | 6,463 |
| 0.5 |
|
|
| --------------- |
| --------------- |
|
|
| 6,463 |
| 0.5 |
|
|
| ========= |
| ========= |
| Zinc |
|
|
|
|
| Titan Mining | United States | 911 |
| 0.1 |
|
|
| --------------- |
| --------------- |
|
|
| 911 |
| 0.1 |
|
|
| ========= |
| ========= |
| Comprising: |
| 1,207,837 |
| 100.0 |
|
|
| ========= |
| ========= |
| – Investments |
| 1,209,233 |
| 100.1 |
| – Options |
| (1,396) |
| (0.1) |
|
|
| --------------- |
| --------------- |
|
|
| 1,207,837 |
| 100.0 |
|
|
| ========= |
| ========= |
1 Includes fixed income securities.
2 Includes investments held at Directors’ valuation.
3 Includes mining royalty contract.
4 The investment in the Vale Debentures is illiquid and has been valued using secondary market pricing information provided by the Brazilian Financial and Capital Markets Association (ANBIMA).
All investments are in equity shares unless otherwise stated.
The total number of investments as at 30 June 2024 (including options classified as liabilities on the balance sheet) was 67 (31 December 2023: 69).
As at 30 June 2024 the Company did not hold any equity interests in companies comprising more than 3% of a company’s share capital.
Portfolio analysis as at 30 June 2024
Commodity Exposure1
|
| 2024 | 2023 | 2024 |
| Diversified | 34.4 | 38.4 | 33.1 |
| Copper | 25.1 | 21.8 | 14.3 |
| Gold | 20.5 | 15.2 | 21.9 |
| Steel | 5.0 | 7.3 | 18.9 |
| Industrial Minerals | 4.0 | 5.5 | 1.3 |
| Aluminium | 3.6 | 3.3 | 3.2 |
| Iron Ore | 2.2 | 2.5 | 4.2 |
| Platinum Group Metals | 1.9 | 1.6 | 1.2 |
| Uranium | 1.6 | 2.3 | 0 |
| Nickel | 1.1 | 1.0 | 0 |
| Mining Services | 0.5 | 1.0 | 0 |
| Zinc | 0.1 | 0.1 | 0.3 |
| Energy Minerals | 0 | 0 | 0 |
| Other4 | 0 | 0 | 1.6 |
1 Based on index classifications
2 Represents exposure at 31 December 2023.
3 MSCI ACWI Metals & Mining 30% Buffer 10/40 Index (net total return).
4 Represents a very small exposure.
Geographic Exposure1
|
| 2024 |
| Global | 64.0% |
| Canada | 9.5% |
| Latin America | 8.9% |
| Other2 | 7.2% |
| Australasia | 6.6% |
| Other Africa (ex South Africa) | 3.7% |
| South Africa | 0.1% |
|
| 2023 |
| Global | 67.4% |
| Canada | 7.5% |
| Latin America | 7.4% |
| Australasia | 7.3% |
| Other2 | 7.0% |
| Other Africa (ex South Africa) | 3.2% |
| South Africa | 0.2% |
1 Based on the principal commodity exposure and place of operation of each investment.
2 Consists of Indonesia, Russia and United States.
Interim Management Report and Responsibility Statement
The Chairman’s Statement and the Investment Manager’s Report above give details of the important events which have occurred during the period and their impact on the financial statements.
Principal risks and uncertainties
The principal risks faced by the Group can be divided into various areas as follows:
- Market;
- Investment performance;
- Operational;
- Legal and regulatory compliance; and
- Financial.
The Board reported on the principal risks and uncertainties faced by the Group in the Annual Report and Financial Statements for the year ended 31 December 2023. A detailed explanation can be found in the Strategic Report on pages 42 to 45 and note 18 on pages 116 to 133 of the Annual Report and Financial Statements which is available on the website maintained by BlackRock at www.blackrock.com/uk/brwm.
In the view of the Board, there have not been any changes to the fundamental nature of the principal risks and uncertainties since the previous report and these are equally applicable to the remaining six months of the financial year as they were to the six months under review.
Going concern
The Directors, having considered the nature and liquidity of the portfolio, the Group’s investment objective and the Group’s projected income and expenditure, are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future and is financially sound. The Board is mindful of the continuing uncertainty surrounding the current environment of heightened geopolitical risk given the war in Ukraine and conflict in the Middle East. The Board believes that the Group and its key third-party service providers have in place appropriate business continuity plans and these services have continued to be supplied without interruption.
The Group has a portfolio of investments which are predominantly readily realisable and is able to meet all of its liabilities from its assets and income generated from these assets. Accounting revenue and expense forecasts are maintained and reported to the Board regularly and it is expected that the Group will be able to meet all its obligations. Borrowings under the overdraft and revolving credit facilities shall at no time exceed £230 million or 25% of the Group’s net asset value (whichever is the lower) and this covenant was complied with during the period.
Ongoing charges for the year ended 31 December 2023 were approximately 0.91% of net assets and this is unlikely to change significantly going forward. Based on the above, the Board is satisfied that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.
Related party disclosure and transactions with the Manager
BlackRock Fund Managers Limited (BFM) was appointed as the Company’s Alternative Investment Fund Manager (AIFM) with effect from 2 July 2014. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Both BFM and BIM (UK) are regarded as related parties under the Listing Rules. Details of the management and marketing fees payable are set out in notes 4 and 5 respectively and note 13 below.
The related party transactions with the Directors are set out in note 14 below.
Directors’ responsibility statement
The Disclosure Guidance and Transparency Rules (DTR) of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.
The Directors confirm to the best of their knowledge that:
- the condensed set of financial statements contained within the Condensed Half Yearly Financial Report has been prepared in accordance with UK-adopted International Accounting Standard 34 Interim Financial Reporting; and
- the Interim Management Report, together with the Chairman’s Statement and Investment Manager’s Report, include a fair review of the information required by 4.2.7R and 4.2.8R of the Financial Conduct Authority Disclosure Guidance and Transparency Rules.
The Condensed Half Yearly Financial Report was approved by the Board on 23 August 2024 and the above responsibility statement was signed on its behalf by the Chairman.
CHARLES GOODYEAR
FOR AND ON BEHALF OF THE BOARD
23 August 2024
Consolidated Statement of Comprehensive Income for the six months ended 30 June 2024
|
|
| Six months ended | Six months ended | Year ended | ||||||
|
|
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| Income from investments held at fair value through profit or loss | 3 | 23,198 | – | 23,198 | 34,111 | 630 | 34,741 | 68,317 | 630 | 68,947 |
| Other income | 3 | 4,821 | – | 4,821 | 2,891 | – | 2,891 | 6,827 | – | 6,827 |
|
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
| Total revenue |
| 28,019 | – | 28,019 | 37,002 | 630 | 37,632 | 75,144 | 630 | 75,774 |
|
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= |
| Net loss on investments and options held at fair value through profit or loss |
| – | (40,360) | (40,360) | – | (123,495) | (123,495) | – | (140,576) | (140,576) |
| Net gains on foreign exchange |
| – | 424 | 424 | – | 8,301 | 8,301 | – | 9,018 | 9,018 |
|
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
| Total |
| 28,019 | (39,936) | (11,917) | 37,002 | (114,564) | (77,562) | 75,144 | (130,928) | (55,784) |
|
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= |
| Expenses |
|
|
|
|
|
|
|
|
|
|
| Investment management fees | 4 | (1,116) | (3,446) | (4,562) | (1,171) | (3,622) | (4,793) | (2,374) | (7,317) | (9,691) |
| Other operating expenses | 5 | (611) | (6) | (617) | (644) | (11) | (655) | (1,278) | (15) | (1,293) |
|
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
| Total operating expenses |
| (1,727) | (3,452) | (5,179) | (1,815) | (3,633) | (5,448) | (3,652) | (7,332) | (10,984) |
|
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= |
| Net profit/(loss) on ordinary activities before finance costs and taxation |
| 26,292 | (43,388) | (17,096) | 35,187 | (118,197) | (83,010) | 71,492 | (138,260) | (66,768) |
| Finance costs | 6 | (1,148) | (3,446) | (4,594) | (1,121) | (3,432) | (4,553) | (2,375) | (7,166) | (9,541) |
|
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
| Net profit/(loss) on ordinary activities before taxation |
| 25,144 | (46,834) | (21,690) | 34,066 | (121,629) | (87,563) | 69,117 | (145,426) | (76,309) |
| Taxation (charge)/credit |
| (2,296) | 923 | (1,373) | (2,299) | 1,212 | (1,087) | (4,426) | 1,750 | (2,676) |
|
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
| Net profit/(loss) on ordinary activities after taxation |
| 22,848 | (45,911) | (23,063) | 31,767 | (120,417) | (88,650) | 64,691 | (143,676) | (78,985) |
|
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= |
| Earnings/(loss) per ordinary share (pence) – basic and diluted | 8 | 11.95 | (24.01) | (12.06) | 16.73 | (63.40) | (46.67) | 33.95 | (75.40) | (41.45) |
|
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= |
The total columns of this statement represent the Group’s Statement of Comprehensive Income, prepared in accordance with UK-adopted International Accounting Standards (IAS). The supplementary revenue and capital accounts 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 period. All income is attributable to the equity holders of the Group.
The Group does not have any other comprehensive income/(loss) (30 June 2023: £nil; 31 December 2023: £nil). The net profit/(loss) for the period disclosed above represents the Group’s total comprehensive income/(loss).
Consolidated Statement of Changes in Equity for the six months ended 30 June 2024
|
|
| Called | Share | Capital |
|
|
|
|
| For the six months ended 30 June 2024 (unaudited) |
|
|
|
|
|
|
|
|
| At 31 December 2023 |
| 9,651 | 151,493 | 22,779 | 193,008 | 725,161 | 57,959 | 1,160,051 |
| Total comprehensive (loss)/income: |
|
|
|
|
|
|
|
|
| Net (loss)/profit for the period |
| – | – | – | – | (45,911) | 22,848 | (23,063) |
| Dividends paid1 | 7 | – | – | – | – | – | (43,016) | (43,016) |
|
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
| At 30 June 2024 |
| 9,651 | 151,493 | 22,779 | 193,008 | 679,250 | 37,791 | 1,093,972 |
|
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= |
| For the six months ended 30 June 2023 (unaudited) |
|
|
|
|
|
|
|
|
| At 31 December 2022 |
| 9,651 | 148,107 | 22,779 | 180,736 | 868,837 | 69,175 | 1,299,285 |
| Total comprehensive (loss)/income: |
|
|
|
|
|
|
|
|
| Net (loss)/profit for the period |
| – | – | – | – | (120,417) | 31,767 | (88,650) |
| Transactions with owners, recorded directly to equity: |
|
|
|
|
|
|
|
|
| Ordinary shares reissued from treasury |
| – | 3,386 | – | 12,305 | – | – | 15,691 |
| Share reissue costs |
| – | – | – | (31) | – | – | (31) |
| Dividends paid2 | 7 | – | – | – | – | – | (54,877) | (54,877) |
|
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
| At 30 June 2023 |
| 9,651 | 151,493 | 22,779 | 193,010 | 748,420 | 46,065 | 1,171,418 |
|
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= |
| For the year ended 31 December 2023 (audited) |
|
|
|
|
|
|
|
|
| At 31 December 2022 |
| 9,651 | 148,107 | 22,779 | 180,736 | 868,837 | 69,175 | 1,299,285 |
| Total comprehensive (loss)/income: |
|
|
|
|
|
|
|
|
| Net (loss)/profit for the year |
| – | – | – | – | (143,676) | 64,691 | (78,985) |
| Transactions with owners, recorded directly to equity: |
|
|
|
|
|
|
|
|
| Ordinary shares reissued from treasury |
| – | 3,386 | – | 12,305 | – | – | 15,691 |
| Share reissue costs |
| – | – | – | (33) | – | – | (33) |
| Dividends paid3 | 7 | – | – | – | – | – | (75,907) | (75,907) |
|
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
| At 31 December 2023 |
| 9,651 | 151,493 | 22,779 | 193,008 | 725,161 | 57,959 | 1,160,051 |
|
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= |
1 The final dividend for the year ended 31 December 2023 of 17.00p per share, declared on 7 March 2024 and paid on 14 May 2024, and 1st quarterly interim dividend for the year ended 31 December 2024 of 5.50p per share, declared on 10 May 2024 and paid on 28 June 2024.
2 The final dividend for the year ended 31 December 2022 of 23.50p per share, declared on 3 March 2023 and paid on 26 April 2023, and 1st quarterly interim dividend for the year ended 31 December 2023 of 5.50p per share, declared on 18 April 2023 and paid on 31 May 2023.
3 The final dividend of 23.50p per share for the year ended 31 December 2022, declared on 3 March 2023 and paid on 26 April 2023; 1st interim dividend of 5.50p per share for the year ended 31 December 2023, declared on 18 April 2023 and paid on 31 May 2023; 2nd interim dividend of 5.50p per share for the year ended 31 December 2023, declared on 24 August 2023 and paid on 6 October 2023 and 3rd interim dividend of 5.50p per share for the year ended 31 December 2023, declared on 11 October 2023 and paid on 22 December 2023.
For information on the Company’s distributable reserves, please refer to note 11 below.
Consolidated Statement of Financial Position as at 30 June 2024
|
|
| 30 June | 30 June | 31 December |
| Non current assets |
|
|
|
|
| Investments held at fair value through profit or loss | 12 | 1,209,233 | 1,283,858 | 1,298,420 |
| Current assets |
|
|
|
|
| Current tax asset |
| 1,515 | 1,036 | 1,276 |
| Other receivables |
| 6,827 | 3,512 | 3,592 |
| Cash collateral held with brokers |
| 9,492 | – | 6,269 |
| Cash and cash equivalents |
| 16,032 | 42,207 | 10,612 |
|
|
| --------------- | --------------- | --------------- |
| Total current assets |
| 33,866 | 46,755 | 21,749 |
|
|
| ========= | ========= | ========= |
| Total assets |
| 1,243,099 | 1,330,613 | 1,320,169 |
|
|
| ========= | ========= | ========= |
| Current liabilities |
|
|
|
|
| Current tax liability |
| (367) | (353) | (352) |
| Other payables |
| (12,322) | (8,326) | (8,052) |
| Derivative financial liabilities held at fair value through profit or loss | 12 | (1,396) | – | (1,401) |
| Bank loans | 10 | (134,483) | (150,234) | (149,828) |
|
|
| --------------- | --------------- | --------------- |
| Total current liabilities |
| (148,568) | (158,913) | (159,633) |
|
|
| ========= | ========= | ========= |
| Total assets less current liabilities |
| 1,094,531 | 1,171,700 | 1,160,536 |
|
|
| ========= | ========= | ========= |
| Non current liabilities |
|
|
|
|
| Deferred taxation liability |
| (559) | (282) | (485) |
|
|
| --------------- | --------------- | --------------- |
| Net assets |
| 1,093,972 | 1,171,418 | 1,160,051 |
|
|
| ========= | ========= | ========= |
| Equity attributable to equity holders |
|
|
|
|
| Called up share capital | 9 | 9,651 | 9,651 | 9,651 |
| Share premium account |
| 151,493 | 151,493 | 151,493 |
| Capital redemption reserve |
| 22,779 | 22,779 | 22,779 |
| Special reserve |
| 193,008 | 193,010 | 193,008 |
| Capital reserve |
| 679,250 | 748,420 | 725,161 |
| Revenue reserve |
| 37,791 | 46,065 | 57,959 |
|
|
| --------------- | --------------- | --------------- |
| Total equity |
| 1,093,972 | 1,171,418 | 1,160,051 |
|
|
| ========= | ========= | ========= |
| Net asset value per ordinary share (pence) | 8 | 572.21 | 612.72 | 606.78 |
|
|
| ========= | ========= | ========= |
Consolidated Cash Flow Statement for the six months ended 30 June 2024
|
| Six months | Six months | Year ended |
| Operating activities |
|
|
|
| Net loss on ordinary activities after taxation | (21,690) | (87,563) | (76,309) |
| Add back finance costs | 4,594 | 4,553 | 9,541 |
| Net loss on investments and options held at fair value through profit or loss (including transaction costs) | 40,360 | 123,495 | 140,576 |
| Net gains on foreign exchange | (424) | (8,301) | (9,018) |
| Sales of investments held at fair value through profit or loss | 360,569 | 342,903 | 648,272 |
| Purchases of investments held at fair value through profit or loss | (309,667) | (326,545) | (662,250) |
| (Increase)/decrease in other receivables | (719) | 918 | 1,069 |
| Increase in other payables | 66 | 2,026 | 1,556 |
| (Increase)/decrease in amounts due from brokers | (2,755) | 1 | (409) |
| Increase in amounts due to brokers | 4,216 | – | – |
| Net movement in cash collateral held with brokers | (3,223) | 6,795 | 526 |
|
| --------------- | --------------- | --------------- |
| Net cash inflow from operating activities before taxation | 71,327 | 58,282 | 53,554 |
|
| ========= | ========= | ========= |
| Taxation paid | – | – | (12) |
| Taxation on investment income included within gross income | (1,373) | (1,437) | (2,664) |
|
| --------------- | --------------- | --------------- |
| Net cash inflow from operating activities | 69,954 | 56,845 | 50,878 |
|
| ========= | ========= | ========= |
| Financing activities |
|
|
|
| Repayment of loans | (14,599) | – | – |
| Interest paid | (4,532) | (4,665) | (9,571) |
| Net proceeds from ordinary shares reissued from treasury | – | 15,660 | 15,658 |
| Dividends paid | (43,016) | (54,877) | (75,907) |
|
| --------------- | --------------- | --------------- |
| Net cash outflow from financing activities | (62,147) | (43,882) | (69,820) |
|
| ========= | ========= | ========= |
| Increase/(decrease) in cash and cash equivalents | 7,807 | 12,963 | (18,942) |
| Effect of foreign exchange rate changes | (2,387) | (248) | 62 |
|
| --------------- | --------------- | --------------- |
| Change in cash and cash equivalents | 5,420 | 12,715 | (18,880) |
| Cash and cash equivalents at start of period/year | 10,612 | 29,492 | 29,492 |
|
| --------------- | --------------- | --------------- |
| Cash and cash equivalents at end of period/year | 16,032 | 42,207 | 10,612 |
|
| ========= | ========= | ========= |
| Comprised of: |
|
|
|
| Cash at bank | 16,032 | 42,207 | 10,612 |
|
| --------------- | --------------- | --------------- |
|
| 16,032 | 42,207 | 10,612 |
|
| ========= | ========= | ========= |
Notes to the financial statements for the six months ended 30 June 2024
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.
2. Basis of preparation
The Half Yearly Financial Statements for the six month period ended 30 June 2024 have been prepared in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct Authority and with the UK-adopted International Accounting Standard 34 (IAS 34) Interim Financial Reporting. The Half Yearly Financial Statements should be read in conjunction with the Group’s Annual Report and Financial Statements for the year ended 31 December 2023, which have been prepared in accordance with UK-adopted International Accounting Standards (IAS) in conformity with the requirements of the Companies Act 2006.
Insofar as the Statement of Recommended Practice (SORP) for investment trust companies and venture capital trusts, issued by the Association of Investment Companies (AIC) in October 2019 and updated in July 2022, is compatible with UK-adopted IAS, the financial statements have been prepared in accordance with guidance set out in the SORP.
Adoption of new and amended International Accounting Standards and interpretations:
IFRS 17 – Insurance contracts (effective 1 January 2023). This standard replaced IFRS 4 and applies to all types of insurance contracts. IFRS 17 provides a consistent and comprehensive model for insurance contracts covering all relevant accounting aspects.
This standard did not have any impact on the Company as it has no insurance contracts.
IAS 12 – Deferred tax related to assets and liabilities arising from a single transaction (effective 1 January 2023). The IASB has amended IAS 12 Income Taxes to require companies to recognise deferred tax on particular transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. According to the amended guidance, a temporary difference that arises on initial recognition of an asset or liability is not subject to the initial recognition exemption if that transaction gave rise to equal amounts of taxable and deductible temporary differences. These amendments might have a significant impact on the preparation of financial statements by companies that have substantial balances of right-of-use assets, lease liabilities, decommissioning, restoration and similar liabilities. The impact for those affected would be the recognition of additional deferred tax assets and liabilities.
IAS 8 – Definition of accounting estimates (effective 1 January 2023). The IASB has amended IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to help distinguish between accounting policies and accounting estimates, replacing the definition of accounting estimates.
IAS 1 and IFRS Practice Statement 2 – Disclosure of accounting policies (effective 1 January 2023). The IASB has amended IAS 1 Presentation of Financial Statements to help preparers in deciding which accounting policies to disclose in their financial statements by stating that an entity is now required to disclose material accounting policies instead of significant accounting policies.
IAS 12 – International Tax Reform Pillar Two Model Rules (effective 1 January 2023). The IASB has published amendments to IAS 12 Income Taxes to respond to stakeholders’ concerns about the potential implications of the imminent implementation of the OECD pillar two rules on the accounting for income taxes. The amendment is an exception to the requirements in IAS 12 that an entity does not recognise and does not disclose information about deferred tax assets as liabilities related to the OECD pillar two income taxes and a requirement that current tax expenses must be disclosed separately to pillar two income taxes.
The amendment of these standards did not have any significant impact on the Company.
Relevant International Accounting Standards that have yet to be adopted:
IAS 1 – Classification of liabilities as current or non current (effective 1 January 2024). The IASB has amended IAS 1 Presentation of Financial Statements to clarify its requirement for the presentation of liabilities depending on the rights that exist at the end of the reporting period. The amendment requires liabilities to be classified as non current if the entity has a substantive right to defer settlement for at least 12 months at the end of the reporting period. The amendment no longer refers to unconditional rights.
IAS 1 – Non current liabilities with covenants (effective 1 January 2024). The IASB has amended IAS 1 Presentation of Financial Statements to introduce additional disclosures for liabilities with covenants within 12 months of the reporting period. The additional disclosures include the nature of covenants, when the entity is required to comply with covenants, the carrying amount of related liabilities and circumstances that may indicate that the entity will have difficulty complying with the covenants.
None of the standards that have been issued, but are not yet effective, are expected to have a material impact on the Company.
3. Income
|
| Six months | Six months | Year ended |
| Investment income: |
|
|
|
| UK dividends | 5,469 | 5,150 | 8,647 |
| Overseas dividends | 12,616 | 17,281 | 33,457 |
| Overseas special dividends | 1,480 | 6,269 | 17,736 |
| Income from contractual rights (BHP Brazil Royalty) | 756 | 2,760 | 4,186 |
| Income from Vale Debentures | 2,399 | 1,498 | 2,608 |
| Income from fixed income investments | 478 | 1,153 | 1,683 |
|
| --------------- | --------------- | --------------- |
| Total investment income | 23,198 | 34,111 | 68,317 |
|
| ========= | ========= | ========= |
| Other income: |
|
|
|
| Option premium income | 4,336 | 2,483 | 5,964 |
| Deposit interest | 323 | 305 | 678 |
| Broker interest received | 79 | 49 | 104 |
| Stock lending income | 83 | 54 | 81 |
|
| --------------- | --------------- | --------------- |
|
| 4,821 | 2,891 | 6,827 |
|
| ========= | ========= | ========= |
| Total income | 28,019 | 37,002 | 75,144 |
|
| ========= | ========= | ========= |
During the period, the Group received option premium income in cash totalling £5,184,000 (six months ended 30 June 2023: £2,525,000; year ended 31 December 2023: £6,724,000) for writing put and covered call options for the purposes of revenue generation.
Option premium income is amortised evenly over the life of the option contract and, accordingly, during the period, option premiums of £4,336,000 (six months ended 30 June 2023: £2,483,000; year ended 31 December 2023: £5,964,000) were amortised to revenue.
At 30 June 2024 there were four open positions (30 June 2023: none; 31 December 2023: three) with an associated liability of £1,396,000 (30 June 2023: £nil; 31 December 2023: £1,401,000).
Dividends and interest received in cash in the six months ended 30 June 2024 amounted to £19,507,000 and £2,746,000 (six months ended 30 June 2023: £27,716,000 and £3,080,000; year ended 31 December 2023: £59,542,000 and £5,159,000).
Special dividends of £nil (six months ended 30 June 2023: £630,000; year ended 31 December 2023: £630,000) have been recognised in capital for the six months ended 30 June 2024.
4. Investment management fee
|
| Six months ended | Six months ended | Year ended | ||||||
|
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| Investment management fee | 1,116 | 3,446 | 4,562 | 1,171 | 3,622 | 4,793 | 2,374 | 7,317 | 9,691 |
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
| Total | 1,116 | 3,446 | 4,562 | 1,171 | 3,622 | 4,793 | 2,374 | 7,317 | 9,691 |
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= |
The investment management fee (which includes all services provided by BlackRock) is 0.80% of the Company’s gross assets (subject to certain adjustments). During the period, £4,303,000 (six months ended 30 June 2023: £4,793,000; year ended 31 December 2023: £9,421,000) of the investment management fee was generated from net assets and £259,000 (six months ended 30 June 2023: £nil; year ended 31 December 2023: £270,000) from the gearing effect on gross assets due to the quarter-on-quarter increase in the NAV per share for the period as set out below:
|
| Cum income | Quarterly | Gearing effect |
| 31 December 2022 | 688.35 |
|
|
| 31 March 2023 | 664.51 | -3.5 | – |
| 30 June 2023 | 612.72 | -7.8 | – |
| 30 September 2023 | 601.47 | -1.8 | – |
| 31 December 2023 | 606.78 | +0.9 | 270 |
| 31 March 2024 | 568.07 | -6.4 | – |
| 30 June 2024 | 572.21 | +0.7 | 259 |
|
| ========= | ========= | ========= |
The daily average of the net assets under management during the period ended 30 June 2024 was £1,100,397,000 (six months ended 30 June 2023: £1,276,151,000; year ended 31 December 2023: £1,203,977,000).
The fee is allocated 25% to the revenue account and 75% to the capital account of the Consolidated Statement of Comprehensive Income.
There is no additional fee for company secretarial and administration services.
5. Other operating expenses
|
| Six months | Six months | Year ended |
| Allocated to revenue: |
|
|
|
| Custody fee | 53 | 55 | 109 |
| Auditors’ remuneration: |
|
|
|
| – audit services | 33 | 25 | 55 |
| – non-audit services1 | – | 5 | 9 |
| Registrar’s fee | 42 | 41 | 86 |
| Directors’ emoluments | 81 | 94 | 179 |
| AIC fees | 10 | 10 | 21 |
| Broker fees | 12 | 12 | 25 |
| Depositary fees | 52 | 61 | 116 |
| FCA fee | 21 | 16 | 40 |
| Directors’ insurance | 10 | 11 | 22 |
| Marketing fees | 61 | 65 | 144 |
| Stock exchange fees | 25 | 26 | 52 |
| Legal and professional fees | 67 | 82 | 147 |
| Bank facility fees2 | 45 | 39 | 85 |
| Printing and postage fees | 22 | 29 | 55 |
| Directors' search fees | – | – | 25 |
| Write back of prior year expenses3 | (7) | – | – |
| Other administrative costs | 84 | 73 | 108 |
|
| --------------- | --------------- | --------------- |
|
| 611 | 644 | 1,278 |
|
| ========= | ========= | ========= |
| Allocated to capital: |
|
|
|
| Transaction charges4 | 6 | 11 | 15 |
|
| --------------- | --------------- | --------------- |
|
| 617 | 655 | 1,293 |
|
| ========= | ========= | ========= |
1 Fees paid to the auditors for non-audit services of £nil excluding VAT (six months ended 30 June 2023: £4,675; year ended 31 December 2023: £9,350) relate to the review of the Condensed Half Yearly Financial Report.
2 There is a 4 basis point facility fee chargeable on the full loan facilities whether drawn or undrawn.
3 Relates to legal and professional fees written back during the six months ended 30 June 2024 (six months ended 30 June 2023: none; year ended 31 December 2023: none).
4 For the six months ended 30 June 2024, expenses of £6,000 (six months ended 30 June 2023: £11,000; year ended 31 December 2023: £15,000) were charged to the capital account of the Statement of Comprehensive Income. These relate to transaction costs charged by the custodian on sale and purchase trades.
The transaction costs incurred on the acquisition of investments amounted to £586,000 for the six months ended 30 June 2024 (six months ended 30 June 2023: £504,000; year ended 31 December 2023: £1,055,000). Costs relating to the disposal of investments amounted to £137,000 for the six months ended 30 June 2024 (six months ended 30 June 2023: £67,000; year ended 31 December 2023: £182,000). All transaction costs have been included within the capital reserves.
6. Finance costs
|
| Six months ended | Six months ended | Year ended | ||||||
|
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| Interest paid on bank loans | 1,134 | 3,404 | 4,538 | 1,118 | 3,423 | 4,541 | 2,370 | 7,151 | 9,521 |
| Interest paid on bank overdraft | 14 | 42 | 56 | 3 | 9 | 12 | 5 | 15 | 20 |
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
| Total | 1,148 | 3,446 | 4,594 | 1,121 | 3,432 | 4,553 | 2,375 | 7,166 | 9,541 |
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= |
Finance costs are charged 25% to the revenue account and 75% to the capital account of the Consolidated Statement of Comprehensive Income.
7. Dividends
The final dividend of 17.00p per share for the year ended 31 December 2023 was paid on 14 May 2024. The Board has declared a first quarterly interim dividend of 5.50p per share for the quarter ended 31 March 2024, paid on 28 June 2024 to shareholders on the register on 31 May 2024.
The Board has declared a second quarterly interim dividend of 5.50p per share for the quarter ended 30 June 2024 which will be paid on 30 September 2024 to shareholders on the register on 6 September 2024. This dividend has not been accrued in the financial statements for the six months ended 30 June 2024 as, under IAS, interim dividends are not recognised until paid. Dividends are debited directly to reserves.
Dividends on equity shares paid during the period were:
|
| Six months | Six months | Year ended |
| Final dividend for the year ended 31 December 2023 of 17.00p per share (2022: 23.50p) | 32,501 | 44,392 | 44,392 |
| 1st quarterly interim dividend for the year ending 31 December 2024 of 5.50p per share (2023: 5.50p) | 10,515 | 10,485 | 10,485 |
| 2nd quarterly interim dividend for the year ended 31 December 2023 of 5.50p per share (2022: 5.50p) | – | – | 10,515 |
| 3rd quarterly interim dividend for the year ended 31 December 2023 of 5.50p per share (2022: 5.50p) | – | – | 10,515 |
|
| --------------- | --------------- | --------------- |
|
| 43,016 | 54,877 | 75,907 |
|
| ========= | ========= | ========= |
8. Consolidated earnings and net asset value per ordinary share
Total revenue, capital loss and net asset value per ordinary share are shown below and have been calculated using the following:
|
| Six months | Six months | Year ended |
| Net revenue profit attributable to ordinary shareholders (£’000) | 22,848 | 31,767 | 64,691 |
| Net capital loss attributable to ordinary shareholders (£’000) | (45,911) | (120,417) | (143,676) |
|
| ----------------- | ----------------- | ----------------- |
| Total loss attributable to ordinary shareholders (£’000) | (23,063) | (88,650) | (78,985) |
|
| ========== | ========== | ========== |
| Equity shareholders’ funds (£’000) | 1,093,972 | 1,171,418 | 1,160,051 |
| The weighted average number of ordinary shares in issue during the period on which the earnings per ordinary share was calculated was: | 191,183,036 | 189,935,356 | 190,564,324 |
| The actual number of ordinary shares in issue at the end of the period on which the net asset value per ordinary share was calculated was: | 191,183,036 | 191,183,036 | 191,183,036 |
|
| ----------------- | ----------------- | ----------------- |
| Earnings per ordinary share |
|
|
|
| Revenue earnings per share (pence) – basic and diluted | 11.95 | 16.73 | 33.95 |
| Capital loss per share (pence) – basic and diluted | (24.01) | (63.40) | (75.40) |
|
| ----------------- | ----------------- | ----------------- |
| Total loss per share (pence) – basic and diluted | (12.06) | (46.67) | (41.45) |
|
| ========== | ========== | ========== |
|
| As at | As at | As at |
| Net asset value per ordinary share (pence) | 572.21 | 612.72 | 606.78 |
| Ordinary share price (pence) | 569.00 | 599.00 | 587.00 |
|
| ========= | ========= | ========= |
There were no dilutive securities at the period end.
9. Called up share capital
|
| Ordinary |
|
|
|
| Allotted, called up and fully paid share capital comprised: |
|
|
|
|
| Ordinary shares of 5 pence each: |
|
|
|
|
| At 31 December 2023 | 191,183,036 | 1,828,806 | 193,011,842 | 9,651 |
|
| ----------------- | ----------------- | ----------------- | ----------------- |
| At 30 June 2024 | 191,183,036 | 1,828,806 | 193,011,842 | 9,651 |
|
| ========== | ========== | ========== | ========== |
During the six months ended 30 June 2024, the Company
– did not buy back any shares into treasury (six months ended 30 June 2023: none; year ended 31 December 2023: none).
– did not reissue any shares (six months ended 30 June 2023: 2,430,000 shares; year ended 31 December 2023: 2,430,000 shares) from treasury for a net consideration after costs of £nil (six months ended 30 June 2023: £15,660,000; year ended 31 December 2023: £15,658,000).
Since the period end and up to 23 August 2024, the Company has not reissued or bought back any ordinary shares.
10. Reconciliation of liabilities arising from financing activities
|
| Six months | Six months | Year ended |
| Bank loan and overdraft at beginning of the period/year | 149,828 | 158,783 | 158,783 |
| Cash flows: |
|
|
|
| Net drawdown of loan | (14,599) | – | – |
| Non-cash flows: |
|
|
|
| Effects of foreign exchange gains | (746) | (8,549) | (8,955) |
|
| --------------- | --------------- | --------------- |
| Bank loan and overdraft at end of the period/year | 134,483 | 150,234 | 149,828 |
|
| ========= | ========= | ========= |
11. Reserves
Pursuant to a resolution of the Company passed at an Extraordinary General Meeting on 13 January 1998 and following the Company’s application to the Court for cancellation of its share premium account, Court approval was received on 27 January 1999 and £157,633,000 was transferred from the share premium account to a special reserve which is a distributable reserve.
The share premium account and capital redemption reserve are not distributable reserves under the Companies Act 2006. In accordance with ICAEW Technical Release 02/17BL on Guidance on Realised and Distributable Profits under the Companies Act 2006, the special reserve and capital reserve of the Parent Company may be used as distributable reserves for all purposes and, in particular, the repurchase by the Parent Company of its ordinary shares and for payments such as dividends. In accordance with the Company’s Articles of Association, the special reserve, capital reserve and revenue reserve may be distributed by way of dividend. The Parent Company’s capital gains of £685,258,000 (30 June 2023: £754,209,000; 31 December 2023: £731,067,000) comprise a gain on capital reserve arising on investments sold of £512,782,000 (30 June 2023: £494,063,000; 31 December 2023: £508,899,000), a gain on capital reserve arising on revaluation of listed investments of £149,772,000 (30 June 2023: £225,150,000; 31 December 2023: £189,283,000), revaluation gains on unquoted investments of £15,195,000 (30 June 2023: £27,706,000; 31 December 2023: £25,478,000) and a revaluation gain on the investment in the subsidiary of £7,509,000 (30 June 2023: £7,290,000; 31 December 2023: £7,407,000). The capital reserve arising on the revaluation of listed investments of £149,772,000 (30 June 2023: £225,150,000; 31 December 2023: £189,283,000) is subject to fair value movements and may not be readily realisable at short notice; as such it may not be entirely distributable. The reserves of the subsidiary company are not distributable until distributed as a dividend to the Parent Company. The investments are subject to financial risks, as such capital reserves (arising on investments sold) and the revenue reserve may not be entirely distributable if a loss occurred during the realisation of these investments.
12. Financial risks and valuation of financial instruments
The Company’s investment activities expose it to the various types of risk which are associated with the financial instruments and markets in which it invests. The risks are substantially consistent with those disclosed in the previous annual financial statements with the exception of those outlined below.
Market risk arising from price risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting similar financial instruments traded in the market. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, climate change or other events could have a significant impact on the Group and the market price of its investments and could result in increased premiums or discounts to the Company’s net asset value.
Liquidity risk
The Group has an overdraft facility of £30 million (30 June 2023: £30 million; 31 December 2023: £30 million) and a multi-currency loan facility of £200 million (30 June 2023: £200 million; 31 December 2023: £200 million) which are updated and renewed on an annual basis. Under the loan facility, the individual loan drawdowns are taken with a three month maturity period.
At 30 June 2024, the Group had a US Dollar loan outstanding of US$170,000,000 which matures on 12 September 2024 (30 June 2023: US Dollar loan of US$191,000,000 which matured on 22 September 2023; 31 December 2023: US Dollar loan of US$191,000,000 which matured on 22 March 2024). The Group had no outstanding Sterling loan at 30 June 2024 (30 June 2023: £nil; year ended 31 December 2023: £nil).
As per the borrowing agreements, borrowings under the overdraft and loan facilities shall at no time exceed £230 million or 25% of the Group’s net asset value (whichever is the lower) (30 June 2023 and 31 December 2023: £230 million or 25% of the Group’s net asset value (whichever is the lower)) and this covenant was complied with during the respective periods.
Valuation of financial instruments
Financial assets and financial liabilities are either carried in the Consolidated Statement of Financial Position at their fair value (investments and derivatives) or at an amount which is considered to be the fair value (due from brokers, dividends and interest receivable, due to brokers, accruals, cash at bank and bank overdrafts). IFRS 13 requires the Group to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Group are explained in the accounting policies note 2(h), as set out in the Group's Annual Report and Financial Statements for the year ended 31 December 2023. All investments are held at fair value through profit or loss. The amortised cost amounts of due from brokers, dividends and interest receivable, due to brokers, accruals, cash at bank, bank loans and bank overdrafts approximate their fair value.
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.
The fair value hierarchy has the following levels:
Level 1 – Quoted market price for identical instruments in active markets
A financial instrument is regarded as quoted in an active market if quoted prices are readily available from an exchange, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The Group does not adjust the quoted price for these instruments.
Level 2 – Valuation techniques using observable inputs
This category includes instruments valued using quoted prices for similar instruments in markets that are considered less active, or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
Valuation techniques used for non-standardised financial instruments such as options, currency swaps and other over-the-counter derivatives include the use of comparable recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity specific inputs.
Over-the-counter derivative option contracts have been classified as Level 2 investments as their valuation has been based on market observable inputs represented by the underlying quoted securities to which these contracts expose the Group.
Level 3 – Valuation techniques using significant unobservable inputs
This category includes all instruments where the valuation technique includes inputs not based on market data and these inputs could have a significant impact on the instrument’s valuation.
This category includes instruments that are valued based on quoted prices for similar instruments where significant entity determined adjustments or assumptions are required to reflect differences between the instruments and instruments for which there is no active market. The Investment Manager considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement.
Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability including an assessment of the relevant risks including but not limited to credit risk, market risk, liquidity risk, business risk and sustainability risk. The determination of what constitutes ‘observable’ inputs requires significant judgement by the Investment Manager and these risks are adequately captured in the assumptions and inputs used in measurement of Level 3 assets or liabilities.
Valuation process and techniques for Level 3 valuations
BHP Brazil Royalty
The Directors engage a mining consultant, an independent valuer with a recognised and relevant professional qualification, to conduct a periodic valuation of the contractual rights and the fair value of the contractual rights is assessed with reference to relevant factors. At the reporting date the income streams from contractual rights have been valued on the net present value of the pre-tax cash flows discounted at a rate the external valuer considers reflects the risk associated with the project. The valuation model uses discounted cash flow analysis which incorporates both observable and non-observable data. Observable inputs include assumptions regarding current rates of interest and commodity prices. Unobservable inputs include assumptions regarding production profiles, price realisations, cost of capital and discount rates. In determining the discount rate to be applied, the external valuer considers the country and sovereign risk associated with the project, together with the time horizon to the commencement of production and the success or failure of projects of a similar nature. To assess the significance of a particular input to the entire measurement, the external valuer performs a sensitivity analysis. The external valuer has undertaken an analysis of the impact of using alternative discount rates on the fair value of contractual rights.
This investment in contractual rights is reviewed regularly to ensure that the initial classification remains correct given the asset’s characteristics and the Group’s investment policies. The contractual rights are initially recognised using the transaction price as it was indicative in this instance of the best evidence of fair value at acquisition and are subsequently measured at fair value, taking into consideration the relevant IFRS 13 requirements. In arriving at their estimates of market values, the valuers have used their market knowledge and professional judgement. The Group classifies the fair value of this investment as Level 3.
Valuations are the responsibility of the Directors of the Company. In arriving at a final valuation, the Directors consider the independent valuer’s report, the significant assumptions used in the fair valuation and the review process undertaken by BlackRock’s Pricing Committee. The valuation of unquoted investments is performed on a quarterly basis by the Investment Manager and reviewed by the Pricing Committee of the Manager. On a quarterly basis the Investment Manager will review the valuation of the contractual rights and inputs for significant changes. A valuation of contractual rights is performed annually by an external valuer, SRK Consulting (UK) Limited, and reviewed by the Pricing Committee of the Manager. The valuations are also subject to quality assurance procedures performed within the Pricing Committee. On a semi-annual basis, after the checks above have been performed, the Investment Manager presents the valuation results to the Directors. This includes a discussion of the major assumptions used in the valuations. There were no changes in valuation techniques during the period.
Jetti Resources and MCC Mining
The fair value of the investment equity shares of Jetti Resources and MCC Mining were assessed by an independent valuer with a recognised and relevant professional qualification. The valuation is carried out based on market approach using earnings multiple and price of recent transactions. Changes in assumptions about these factors could affect the reported fair value of financial instruments in the Consolidated and Statements of Financial Position and the level where the instruments are disclosed in the fair value hierarchy. To assess the significance of a particular input to the entire measurement, the external valuer performs a sensitivity analysis.
Fair values of financial assets and financial liabilities
For exchange listed equity investments the quoted price is the bid price. Substantially all investments are valued based on unadjusted quoted market prices. Where such quoted prices are readily available in an active market, such prices are not required to be assessed or adjusted for any business related risks, including climate risk, in accordance with the fair value related requirements of the Group’s financial reporting framework.
The table below sets out fair value measurements using the IFRS 13 fair value hierarchy.
|
| Level 1 | Level 2 | Level 3 | Total |
| Assets: |
|
|
|
|
| Equity investments | 1,114,885 | – | 35,218 | 1,150,103 |
| Fixed income securities | 7,900 | 31,295 | – | 39,195 |
| Investment in contractual rights | – | – | 19,935 | 19,935 |
|
| --------------- | --------------- | --------------- | --------------- |
| Total assets | 1,122,785 | 31,295 | 55,153 | 1,209,233 |
|
| ========= | ========= | ========= | ========= |
| Liabilities: |
|
|
|
|
| Derivative financial instruments – written options | – | (1,396) | – | (1,396) |
|
| --------------- | --------------- | --------------- | --------------- |
| Total | 1,122,785 | 29,899 | 55,153 | 1,207,837 |
|
| ========= | ========= | ========= | ========= |
|
| Level 1 | Level 2 | Level 3 | Total |
| Assets: |
|
|
|
|
| Equity investments | 1,164,070 | 12,860 | 33,770 | 1,210,700 |
| Fixed income securities | 9,558 | 44,250 | – | 53,808 |
| Investment in contractual rights | – | – | 19,350 | 19,350 |
|
| --------------- | --------------- | --------------- | --------------- |
| Total assets | 1,173,628 | 57,110 | 53,120 | 1,283,858 |
|
| ========= | ========= | ========= | ========= |
| Liabilities: |
|
|
|
|
| Derivative financial instruments – written options | – | – | – | – |
|
| --------------- | --------------- | --------------- | --------------- |
| Total | 1,173,628 | 57,110 | 53,120 | 1,283,858 |
|
| ========= | ========= | ========= | ========= |
|
| Level 1 | Level 2 | Level 3 | Total |
| Assets: |
|
|
|
|
| Equity investments | 1,193,969 | – | 32,695 | 1,226,664 |
| Fixed income securities | 16,924 | 36,516 | – | 53,440 |
| Investment in contractual rights | – | – | 18,316 | 18,316 |
|
| --------------- | --------------- | --------------- | --------------- |
| Total assets | 1,210,893 | 36,516 | 51,011 | 1,298,420 |
|
| ========= | ========= | ========= | ========= |
| Liabilities: |
|
|
|
|
| Derivative financial instruments – written options | – | (1,401) | – | (1,401) |
|
| --------------- | --------------- | --------------- | --------------- |
| Total | 1,210,893 | 35,115 | 51,011 | 1,297,019 |
|
| ========= | ========= | ========= | ========= |
A reconciliation of fair value measurement in Level 3 is set out below.
|
| Six months | Six months | Year ended |
| Opening fair value | 51,011 | 56,891 | 56,891 |
| Return of capital – royalty | (203) | (341) | (497) |
| Total profit or loss included in net profit on investments in the Consolidated Statement of Comprehensive Income |
|
|
|
| – assets held at the end of the period/year | 4,345 | (3,430) | (5,383) |
|
| --------------- | --------------- | --------------- |
| Closing balance | 55,153 | 53,120 | 51,011 |
|
| ========= | ========= | ========= |
The Level 3 valuation process and techniques used are explained in the accounting policies in note 2(h) on page 102 of the Company’s Annual Report and Financial Statements for the year ended 31 December 2023. A more detailed description of the techniques is found above under 'Valuation process and techniques’ for Level 3 valuations.
The Level 3 investments as at 30 June 2024 in the table that follows relate to the BHP Brazil Royalty, convertible bonds and equity shares of Jetti Resources, MCC Mining and Polyus ADRs. In accordance with IFRS 13 these investments were categorised as Level 3.
In arriving at the fair value of the BHP Brazil Royalty, the key inputs are the underlying commodity prices and illiquidity discount. In arriving at the fair value of Jetti Resources, MCC Mining and Polyus ADRs, the key inputs are shown below.
Quantitative information of significant unobservable inputs – Level 3 – Group and Company
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy, together with an estimated quantitative sensitivity analysis, as at 30 June 2024, 30 June 2023 and 31 December 2023 are as shown below.
|
| As at |
|
|
|
|
|
| Jetti Resources | 25,207 | Market approach | Earnings multiple | 5.50x | 10.0% | £2.5m |
| BHP Brazil Royalty | 19,935 | Discounted cash flows | Discount rate – weighted average cost of capital | 8.0% – 10.0% | 1.0% | £1.0m |
|
|
|
| Average gold prices | US$1,650 – US$ 2,314 per ounce | 10.0% | £1.5m |
|
|
|
| Average copper prices | US$7,700 – US$10,000 per tonne | 10.0% | £1.0m |
| MCC Mining | 10,011 | Market approach | Price of recent transaction |
| 10.0% | £1.0m |
| Polyus ADRs | – | Listing suspended – valued at nominal US$0.01 |
|
|
|
|
|
| --------------- |
|
|
|
|
|
| Total | 55,153 |
|
|
|
|
|
|
| ========= |
|
|
|
|
|
|
| As at |
|
|
|
|
|
| Jetti Resources | 28,264 | Market approach | Earnings multiple | 6.22x | 5.0% | £1.1m |
| BHP Brazil Royalty | 19,350 | Discounted cash flows | Discount rate – weighted average cost of capital | 5.0% – 8.0% | 1.0% | £1.0m |
|
|
|
| Average gold prices | US$1,400 – US$1,600 per ounce | 10.0% | £1.5m |
|
|
|
| Average copper prices | US$7,209 – US$8,510 per tonne | 10.0% | £1.0m |
| MCC Mining | 5,506 | Market approach | Price of recent transaction |
| 5.0% | £0.3m |
| Polyus ADRs | – | Listing suspended - valued at nominal US$0.01 |
|
|
|
|
|
| --------------- |
|
|
|
|
|
| Total | 53,120 |
|
|
|
|
|
|
| ========= |
|
|
|
|
|
|
| As at |
|
|
|
|
|
| BHP Brazil Royalty | 18,316 | Discounted cash flows | Discount rate–weighted average cost of capital | 5.0% - 8.0% | 1.0% | £1.0m |
|
|
|
| Average gold prices | US$1,706-US$1,780 per ounce | 10.0% | £1.8m |
|
|
|
| Average copper prices | US$8,397-US$8,469 per tonne | 10.0% | £1.2m |
| Jetti Resources | 27,204 | Market approach | Earnings multiple | 6.00x | 5.0% | £1.4m |
| MCC Mining | 5,491 | Market approach | Price of recent transaction |
| 5.0% | £0.3m |
| Polyus | – | Listing suspended – valued at nominal US$0.01 |
|
|
|
|
| Polymetal International | – | Delisted – valued at nominal US$0.01 |
|
|
|
|
|
| --------------- |
|
|
|
|
|
| Total | 51,011 |
|
|
|
|
|
|
| ========= |
|
|
|
|
|
1 The sensitivity analysis refers to a percentage amount added or deducted from the input and the effect this has on the fair value.
The sensitivity impact on fair value is calculated based on the sensitivity estimates set out by the independent valuer in its report on the valuation of contractual rights. Significant increases/(decreases) in estimated commodity prices and discount rates in isolation would result in a significantly higher/(lower) fair value measurement. Generally, a change in the assumption made for the estimated value is accompanied by a directionally similar change in the commodity prices and discount rates.
13. Transactions with the Investment Manager and AIFM
BlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six months’ notice. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Further details of the investment management contract are disclosed in the Directors’ Report on page 56 of the Annual Report and Financial Statements for the year ended 31 December 2023.
The investment management fee due for the six months ended 30 June 2024 amounted to £4,562,000 (six months ended 30 June 2023: £4,793,000; year ended 31 December 2023: £9,691,000). At the period end, £7,169,000 was outstanding in respect of the management fee (30 June 2023: £7,685,000; 31 December 2023: £7,262,000).
In addition to the above services, BIM (UK) has provided the Group with marketing services. The total fees paid or payable for these services for the period ended 30 June 2024 amounted to £61,000 excluding VAT (six months ended 30 June 2023: £65,000; year ended 31 December 2023: £144,000). At the period end, £115,000 was outstanding in respect of the marketing services (30 June 2023: £81,000; 31 December 2023: £55,000).
The ultimate holding company of the Manager and the Investment Manager is BlackRock, Inc., a company incorporated in Delaware, USA.
14. Related party disclosure
During the period ended 30 June 2024, there have been no transactions with related parties which have materially affected the financial position or the performance of the Company.
Directors’ shareholdings
At the period end members of the Board held ordinary shares in the Company as set out below:
|
| 30 June | 30 June | 31 December |
| Charles Goodyear (Chairman)1 | 60,000 | n/a | 60,000 |
| Jane Lewis | 7,000 | 5,362 | 5,362 |
| Judith Mosely | 7,400 | 7,400 | 7,400 |
| Srinivasan Venkatakrishnan | 2,000 | 1,000 | 2,000 |
| Elisabeth Scott2 | – | n/a | n/a |
|
| ========= | ========= | ========= |
1 Appointed as a Director on 24 August 2023.
2 Appointed as a Director on 9 May 2024.
Since the period end and up to the date of this report there have been no changes in Directors’ holdings.
Significant Holdings
The following investors are:
a. funds managed by the BlackRock Group or are affiliates of BlackRock, Inc. (Related BlackRock Funds); or
b. investors (other than those listed in (a) above) who held more than 20% of the voting shares in issue in the Company and are, as a result, considered to be related parties to the Company (Significant Investors).
|
|
| Total % of shares held by | Number of Significant |
| As at 30 June 2024 | 1.32 | n/a | n/a |
| As at 30 June 2023 | 1.25 | n/a | n/a |
| As at 31 December 2023 | 1.29 | n/a | n/a |
|
| ========= | ========= | ========= |
15. Capital commitments and contingent liabilities
There was no capital commitment as at 30 June 2024 (30 June 2023: one commitment for US$10,000,000 in relation to the SPAC PIPE commitment for investment in Lifezone SPAC; 31 December 2023: none).
There were no contingent liabilities at as 30 June 2024 (30 June 2023: none; 31 December 2023: none).
16. Publication of non-statutory accounts
The financial information contained in this Half Yearly Financial Report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The financial information for the six months ended 30 June 2024 has not been audited or reviewed by the Company’s auditors (six months ended June 2023: has been reviewed by the Company's auditors).
The information for the year ended 31 December 2023 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies, unless otherwise stated. The report of the auditors on those accounts contained no qualification or statement under Sections 498(2) or (3) of the Companies Act 2006.
17. Annual results
The Board expects to announce the annual results for the year ending 31 December 2024 in February 2025.
Copies of the results announcement can be obtained from the Secretary on 020 7743 3000 or at cosec@blackrock.com. The Annual Report should be available by the beginning of March 2025, with the Annual General Meeting being held in May 2025.
ENDS
The Condensed Half Yearly Financial Report will also be available on the BlackRock website at www.blackrock.com/uk/brwm. 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:
Charles Kilner, Director - Closed End Funds, BlackRock Investment Management (UK) Limited -
Tel: 020 7743 1869
Evy Hambro, Fund Manager, BlackRock Investment Management (UK) Limited -
Tel: 020 7743 3000
Emma Phillips, Media & Communications, BlackRock Investment Management (UK) Limited - Tel: 020 7743 2922
Press enquires:
Ed Hooper, Lansons Communications
Tel: 020 7294 3620
E-mail: BlackRockInvestmentTrusts@lansons.com or EdH@lansons.com
12 Throgmorton Avenue
London EC2N 2DL
23 August 2024
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