Portfolio Update

BLACKROCK WORLD MINING TRUST plc
All information is at 31 January 2016 and unaudited.
Performance at month end with net income reinvested
		One			Three				One	Three		Five
		Month			Months				Year	Years		Years
Net asset value		-6.0%			-17.6%				-37.5%	-66.4%		-73.2%
Share price		-5.5%			-24.1%				-38.6%	-67.0%		-72.4%
Euromoney Global Mining Index		-5.0%			-17.1%				-40.0%	-60.9%		-69.5%
(Total return)
Sources: BlackRock, Euromoney Global Mining Index, Datastream
At month end
Net asset value including income*:								200.00p
Net asset value capital only:								187.97p
*Includes net revenue of 12.03p
Share price:								171.00p
Discount to NAV**:								14.5%
Total assets:								£396.9m
Net yield***:								12.3%
Net gearing:								10.5%
Ordinary shares in issue:								177,287,242
Ordinary shares held in treasury:								15,724,600
Ongoing charges****:								1.4%
** Discount to NAV including income. *** Based on an interim dividend of 7.00p per share in respect of the year ended 31 December 2015 and a final dividend of 14.00p per share in respect of the year ended 31 December 2014. **** Calculated as a percentage of average net assets and using expenses, excluding finance costs for the year ended 31 December 2014.
Sector	% Total					Country Analysis					% Total
	Assets										Assets
Diversified	37.5
Gold	20.3					Global					44.2
Base Metals	16.4					Latin America					17.1
Silver & Diamonds	13.9					Other Africa					10.6
Industrial Minerals	5.9					Australasia					9.2
Other	4.3					Canada					7.7
Zinc	0.2					Emerging Europe					5.6
Copper	0.2					South Africa					3.6
Net current assets	1.3					Indonesia					0.7
						Net current assets					1.3
	-----										-----
	100.0										100.0
	=====										=====
Ten Largest Investments
Company				% Total Assets
BHP Billiton				10.8
Rio Tinto				9.7
Lundin Mining				5.2
First Quantum Minerals				5.2
Norilsk Nickel				5.1
Fresnillo				5.0
Cerro Verde				4.0
Glencore				4.0
Rangold Resources				3.2
Banro Barbados				2.9

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

Performance

It was a volatile start to the year for the mining sector, with the Euromoney Global Mining Index down over -18% at one point in the month.  Global equity markets suffered their worst start to a year since 2009, with the MSCI World TR Index declining -6.0% on heightened concerns over global economic growth.  China’s manufacturing PMI came in below expectations at 49.4, signalling a sixth consecutive month of contraction, whilst soft US GDP data raised questions over the US Federal Reserve’s decision to increase interest rates.  Chinese equity markets were particularly lacklustre, with trading on China’s main stock exchanges halted twice during the month, as the country’s ‘circuit-breaker’ mechanism was triggered by -7% falls.  China removed its ‘circuit-breaker’ mechanism later in the month in a bid to restore some market stability.

Against this backdrop, mined commodity price performance was mixed.  Zinc and aluminium prices edged up +2.2% and +1.2% respectively, whilst copper and aluminium prices declined -2.9% and -2.2% respectively.  Meanwhile, the gold price performed strongly, rising +5.2% on the back of safe-haven buying amidst the turmoil in equity markets.

Concerns mounted around debt in the mining and energy sectors during the month as credit rating agency Moody’s placed 55 mining companies and 120 oil and gas companies on review for downgrades.  This environment led to underperformance from some of the more levered mining companies.

Gold equities significantly outperformed the broader mining space on the back of the gold price strength.  South African miners also performed strongly as they benefited from weakness in the Rand caused by continued US dollar strength and heightened concerns around the South African economy.  During the month, the Company added to its gold exposure and also wrote puts in Barrick Gold at an attractive level with the stock finishing +34% during the month.

Within the Company’s unquoted investments, Banro, where the Company has exposure via a gold-linked preference share, announced that they had signed a financing agreement with a Chinese mining investment fund, Resource FinanceWorks, for US$98.75m.  The deal is subject to regulatory approval, with the company targeting close in January 2016.  The funds are intended to be used to meet the remaining coupon payments on the bond that matures in 2017, to expand crushing capacity at Twangiza and for general corporate purposes.

Strategy and Outlook

The performance of mining equities has been torrid in recent years.  However, it is important to remember that the sector is cyclical and will not stay out of favour forever.  In the near term, sentiment towards China is likely to remain the primary driver of the sector’s performance.  Looking ahead, we believe that the Chinese administration has the levers to pull to effectively manage China’s economic transition to more normalised growth rates.  However, the administration has work to do to reassure investors and the country’s situation is uncertain, which contributes to our expectation for commodity prices to remain subdued in the near term.

Today, many mined commodities’ prices sit well below marginal costs, which should mean that downside for prices is limited.  However, importantly the sector as a whole has been able to meaningfully cut costs, whilst weakening commodity currencies and lower oil prices have provided additional cost benefits which have compressed commodity cost curves.  Fundamentally, whilst supply can be sticky for a number of reasons, a cash negative operation cannot persist indefinitely.  We have just begun to see the first of the long-awaited supply cuts announced but mined commodity prices will need to remain at current levels for a few months or move lower before we see real momentum in cuts.  In light of this, we believe dividends in the sector will remain under pressure and we expect to see companies further reduce capital spending and operating costs this year in order to bolster their balance sheets.

All data points are in US dollar terms unless stated otherwise.

11 February 2016

ENDS

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