Final Results
BLACKROCK WORLD MINING TRUST plc
ANNUAL RESULTS ANNOUNCEMENT
for the year ended 31 December 2008
Performance to 31 December 2008 One year Five years
Net asset value per share:
- capital only -58.8% 38.6%
- with income and 1/5 warrant reinvested ** -58.5% 46.6%
Ordinary share price:
- capital only -61.5% 16.6%
- with income and 1/5 warrant reinvested ** -61.1% 25.2%
HSBC Global Mining Index*:
- capital only -43.3% 62.9%
- with income reinvested -42.1% 80.2%
* Adjusted for exchange rates relative to sterling.
** One warrant for every five ordinary shares.
Sources: BlackRock, Datastream.
MANAGEMENT REPORT
Chairman's Statement
Performance
2008 was a year of two very distinct halves. In the first, the mining sector
performed well and was resilient amid the turbulence in global equity markets.
The second half of your Company's trading year was dominated by the global
economic downturn, with the lack of liquidity in credit markets impacting very
negatively on global growth expectations in general and the mining sector in
particular.
After seven consecutive years of growth, the Company experienced a strong
decline in its net asset value ("NAV"). The NAV fell by 58.5% and the share
price by 61.1% (both percentages calculated in sterling terms with income
and warrant proceeds reinvested). By comparison, the Company's benchmark
index decreased by 42.1%. Since the year end, the Company's NAV has increased
by 3.6% and the share price increased by 13.4% (both with income and warrant
proceeds reinvested). The Board is mindful of the Company's objectives and,
having reviewed the strategy, looks forward to the resumption of outperformance
as financial markets regain their composure.
Earnings and dividends
The undiluted earnings per share for the year amounted to 5.64p compared to
8.25p for the previous year, a decrease of 31.6%. The Directors have declared a
final dividend of 5.50p per share, which is equivalent to the dividend paid
last year. The 2007 dividends comprised an ordinary dividend of 2.50p per share
and a special dividend of 3.00p per share. The decision not to declare any of
the current year distribution as a special dividend reflects the changing mixture
of the revenues being received by the Company, with special distributions no
longer being a significant feature of the income received. The Company does not
maintain a progressive dividend policy but seeks to distribute available revenue
on an annual basis subject to maintaining prudent reserves. The dividend is
payable on 30 April 2009 to shareholders on the Company's register on
20 February 2009.
Discount to net asset value
The Board recognises the importance to investors of ensuring that any discount
of the Company's share price to its underlying NAV is actively monitored and
managed and endeavours to work with the Investment Manager in order to restrain
this. Unfortunately, during the year, investment trust discounts, including the
Company's, had generally widened reflecting the extremely difficult market
conditions. In addition, heightened price volatility caused uncertainty over
intraday discount levels and the Board believed that the use of share buy
backs could prove to be ineffective whilst market turbulence persisted.
During the year, and to the date of this report, 806,800 shares were bought
back. It is very important that the Company retains the ability to
repurchase shares and, accordingly, a resolution to renew the authority to buy
back shares will be put to shareholders at the forthcoming Annual General
Meeting.
New Articles of Association
At the forthcoming Annual General Meeting, the Directors will be proposing that
the Company should adopt New Articles of Association in substitution for the
existing Articles of Association in order to reflect the changes in UK company
law which have been brought into force by the Companies Act 2006 (the "2006
Act"). The 2006 Act is being introduced in stages and is expected to be fully
in force by 1 October 2009.
Outlook
The effects of the stimulus being provided to markets by monetary authorities
across the world have yet to make themselves evident. Until banks begin to lend
more freely it is impossible to make predictions with any confidence, and
market volatility looks set to continue at high levels. Once a recovery has
been detected we would anticipate a significant response within the mining
sector and a resumption of outperformance from the portfolio.
Key risks
The key risks faced by the Company are set out below. The Board regularly
reviews and agrees policies for managing each risk, as summarised below.
- Performance risk - The Board is responsible for deciding the investment
strategy to fulfil the Company's objective and monitoring the performance of
the Investment Manager. An inappropriate strategy may lead to underperformance
against the benchmark index. To manage this risk the Investment Manager
provides an explanation of significant stock selection decisions and the
rationale for the composition of the investment portfolio. The Board monitors
and mandates an adequate spread of investments, in order to minimise the risks
associated with particular countries or factors specific to particular sectors,
based on the diversification requirements inherent in the Company's investment
policy. The Board also receives and reviews regular reports showing an analysis
of the Company's performance against the HSBC Global Mining Index and other
similar indices, including the performance of major companies in the sector.
- Income/dividend risk - The amount of dividends and future dividend growth
will depend on the Company's underlying portfolio. Any change in the tax
treatment of the dividends or interest received by the Company (including as a
result of withholding taxes or exchange controls imposed by jurisdictions in
which the Company invests) may reduce the level of dividends received by
shareholders. The Board monitors this risk through the receipt of detailed
income forecasts and considers the level of income at each meeting.
- Regulatory risk - The Company operates as an investment trust in accordance
with section 842 of the Income and Corporation Taxes Act 1988. As such the
Company is exempt from capital gains tax on the sale of its investments. The
Investment Manager monitors investment movements, the level and type of
forecast income and expenditure and the amount of proposed dividends to ensure
that the provisions of section 842 are not breached and the results are
reported to the Board.
- Operational risk - Like most other investment trust companies, the Company
has no employees. The Company therefore relies upon the services provided by
third parties and is dependent on the control systems of the Investment Manager
and the Company's service providers. The security, for example, of the
Company's assets, dealing procedures, accounting records and maintenance of
regulatory and legal requirements, depend on the effective operation of these
systems. These are regularly tested and monitored and an internal control
report, which includes an assessment of risks together with procedures to
mitigate such risks, is prepared by the Investment Manager and reviewed by the
Audit & Management Engagement Committee twice a year. The custodian, (The Bank
of New York Europe ("BNYE"), a subsidiary of the Bank of New York Mellon) and
the Investment Manager also produce annual internal control reports which are
reviewed by their respective auditors and give assurance regarding the
effective operation of controls.
- Resource risk - The quality of the investment management team employed by
BlackRock Investment Management (UK) Limited is a crucial factor in delivering
good performance and the loss by the management of key staff could affect
investment returns. The Investment Manager has training and development
programs in place for its employees and its recruitment and remuneration
packages are developed in order to retain key staff.
- Financial risks - The Company's investment activities expose it to a variety
of financial risks that include market price risk, foreign currency risk,
interest rate risk, liquidity risk and credit risk. In addition, it should be
noted that the location of the companies in which the Company invests and
shares of companies in the mining sector can prove to be more volatile and
therefore present a greater degree of risk. Any unquoted investments in the
Company's portfolio are also subject to additional liquidity risk.
Related party transactions
The Investment Manager is regarded as a related party and details of the
investment management fees payable are set out in note 4.
Statement of Directors' Responsibilities
In accordance with Disclosure and Transparency Rule 4.1.12, the Directors
confirm to the best of their knowledge and belief that:
- the financial statements, prepared in accordance with applicable accounting
standards, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company; and
- the annual report includes a fair view of the development and performance of
the business and the position of the Company, together with a description of
the principal risks and uncertainties that the Company faces.
For and on behalf of the Board of Directors
A W Lea
Chairman
12 February 2009
Investment Manager's Report
Portfolio performance
After a satisfactory start to the year in which mining shares reached new
highs, market conditions deteriorated sharply. From late May through to late
November the HSBC Global Mining Index declined by 68.5% (-76.1% in US dollar
terms), one of the worst periods ever for the sector. Against this background,
the Company's net asset value ("NAV") declined significantly, bringing to an
end a run of seven consecutive years of growth. For the year ended 31 December
2008, the Company's undiluted NAV and share price (both with income and warrant
proceeds invested) fell by 58.5% and 61.1% respectively. In capital only terms
the NAV fell by 58.8% and the share price by 61.5%. These figures compare with
the HSBC Global Mining Index (sterling terms) which declined by 43.3% (capital
only) and 42.1% (with income reinvested).
Mining share overview
Mining shares set quite a number of records in 2008, both good and bad. In the
first half of the year mining shares reached all-time high levels spurred on by
high commodity prices, record earnings and eye catching contested M&A battles,
notably the BHP Billiton hostile bid for Rio Tinto. On 19 May 2008, the
Company's NAV and share price reached 963.0p and 791.5p respectively, the
highest levels since the inception of the Company. In the second half, market
conditions could not have been more different with rapid falls in prices to
levels not seen in several years. The key to this shift was the world economy
which, though positive overall in 2008, experienced rapid deceleration in the
second half of the year with Q4 perhaps being the worst quarter for global
growth in 50 years. The catalyst for this deterioration was the worsening
"credit crisis" which was responsible for the demise of several banks during
the year, with the most damaging failure being Lehman Brothers in September
which precipitated the near paralysis of the global banking sector. Many banks
were forced to seek new capital culminating in the virtual nationalisation of
many household name banking institutions in Europe and the US. With the banking
sector stricken, a serious lack of credit availability helped to transmit the
recessionary economic conditions from the developed world to the emerging
economies which had hitherto seemed immune. As the concept of "economic
decoupling" came under increasing pressure, commodity prices crumbled and
mining equities lost almost all investor support, ushering in the worst six
months for the sector since records began. The downward movement of commodity
prices was exacerbated by disinvestment, with many investors dumping commodity
futures positions into the markets seemingly without regard to pricing impact.
Currency movements also affected returns during the year, especially in the
second half when the weakness of sterling flattered the Company's returns. At
the portfolio level, a number of the companies will have benefited from local
currency weakness which is helping to soften the blow of lower US dollar
denominated commodity prices.
In response to the economic crisis, governments called for drastic action and
monetary authorities began to stimulate their economies with policies aimed at
providing liquidity to markets. A range of measures were introduced including
record low interest rates, nationalisation of troubled assets and capital
investment programmes. Towards the end of the year, signs began to emerge that
this unprecedented easing of monetary policy by Central Banks was starting to
have the desired effect on financial markets. Credit spreads narrowed somewhat
and volatility subsided to lower levels, albeit still very high. As a measure
of calm returned to the markets, it seemed that both commodities and the mining
sector might have become "oversold". Investors started to take a fresh look at
the sector as companies began to announce their proposed action to deal with
the new economic environment. This action has involved cutting future capital
expenditure, trimming operating costs and the closure of high cost production
capacity. This, coupled with the fact that the steep mining share price falls
had in some cases pushed valuations far below the replacement cost of the
company assets, refocused attention on the sector.
As sentiment improved from the dismal levels of October, the market witnessed a
strong rally and from the low of the year in November to the end of the year,
the HSBC Global Mining Index rose by 41.6% in sterling terms (37.9% in US
dollars), despite there being little or no significant improvement in
underlying economic activity.
Although powerful, the year end rally was not sufficient to change the overall
characteristics of 2008. The year will be remembered as one of high volatility,
shocking corporate news, dire equity returns generally, with poor absolute and
relative performance from most mining shares.
In such a fast changing and treacherous market, it has not been easy to
optimise the Company's portfolio strategy. We were slow to appreciate the full
magnitude of the economic slowdown and as a result held too much portfolio
exposure in "commodity sensitive" stocks and not enough in the more "defensive"
companies. In particular, during the second half of the year, it became
extraordinarily difficult for companies to refinance debt facilities and our
exposure to companies such as Rio Tinto, Oz Minerals and Teck Corporation (all
of which have financing challenges) impacted our returns. The Company's modest
gearing also proved to be a drag on portfolio returns.
On the positive side, our longstanding focus in the portfolio on those
companies with long life reserves and world class assets has been helpful.
Similarly, the portfolio's relatively low exposure to exploration companies and
to stocks with small market capitalisations has saved a considerable amount of
capital, as these are the areas of the market which performed least well in
2008. Nevertheless, these good decisions were not enough to save the Company's
relative performance against its benchmark index. Almost all of the
underperformance for the year came in the near catastrophic three month period
September, October and November, the like of which we have never seen before.
% change %change
Price year ended average
31 December 2008 31 December 2008 2008/2007
Gold (US$/troy oz) 862.2 +3.1 +25.1
Platinum (US$/troy oz) 898.0 -41.3 +20.5
Nickel (US$/tonne) 10,807.5 -59.0 -43.4
Copper (US$/tonne) 2,901.5 -56.8 -2.6
Aluminium (US$/tonne) 1,454.0 -38.3 -2.8
Zinc (US$/tonne) 1,120.3 -53.0 -42.4
Uranium (US$/lb) 54.0 -40.0 -36.1
Potash (US$/tonne) 775.0 +94.0 +181.0
Iron Ore - lump (US$/tonne)* 201.7 - +96.4
Coking Coal - hard (US$/tonne)* 300.0 - +315.8
Thermal coal (US$/tonne)* 130.0 - +134.2
Sources: Datastream, UBS and Citigroup.
*Annually negotiated price based on Japanese fiscal year.
Gold and precious commodities
Due to a powerful year end rally, gold equities were amongst the best
performing mining equities of 2008 finishing the year up 4.5% in sterling
terms. Gold itself was also one of the best performing commodities and one of
only a handful to be in "positive territory" for the year as a whole. The price
of gold proved to be something of a barometer of financial fear with the peaks
and troughs coinciding with the banking cycle. Investors have been buying
physical bullion either directly or through Exchange Traded Funds ("ETFs") as a
safe haven and in March gold reached an intraday all-time high of US$1,031/oz,
triggered by the collapse of Bear Stearns. Subsequent banking sector problems
also buoyed gold but had a more muted effect on the media "headlines" as dollar
strength was also important. In certain other currencies, such as sterling,
gold reached a succession of new highs.
Although the ebb and flow of financial market demand dictated the short term
trends for gold in 2008, the underlying supply demand balance remained
favourable. Global mine output has been stagnant or falling since 2001 due to a
lack of exploration success while jewellery demand seems to have become less
sensitive to the fluctuating price. Investment demand for gold (as measured by
the success of the ETFs) has surged. Despite the positive tone to the gold
market, investment in gold shares has not been quite so fruitful. For much of
2008, gold equities underperformed the bullion price and it was only in the
last few weeks of the year that this situation changed for the better. The
reason for the early underperformance was the general equity malaise but
additionally gold companies had struggled to control cost inflation. As regards
cost inflation, the news is improving; prices of many consumables have been
falling sharply and this means that industry cost control in the future may
prove to be better than in the past. As a result, we believe that the industry
has restored its "beta" to the gold price making it a much more attractive
opportunity for the portfolio. At the year end, gold exposure in the portfolio
totalled 12.1% compared to 5.9% at the end of 2007.
Buenaventura remained the largest gold investment in the portfolio and is a top
ten holding. Important new gold share positions added during the year include
Newcrest Mining (3.3% of the portfolio) and Lihir Gold (0.5%). These provided a
meaningful relative and small positive absolute return during the year.
Like gold, platinum had a good start to the year, rising to a new all-time high
of over US$2,270/oz. The strength stemmed from some major constraints on the
supply side coupled with buoyant demand from autos and the ETF. South African
supply has been particularly impacted by the slow rate of mine expansions,
together with power shortages. In the second half of the year platinum,
palladium and rhodium prices crashed under the combined influence of slowing
car sales and forced selling by a distressed hedge fund. The low price
environment means that the earnings outlook for the portfolio's four South
African platinum equities, Impala Platinum (6.1% of the portfolio), Anglo
Platinum (2.3%), Aquarius Platinum (0.8%) and Ridge Mining (0.3%) is bleak in
the near term. However, we believe that the platinum metal prices are
unsustainably low at present and we are taking a longer term view on this
subsector. The holding of Lonmin was sold in the strength that surrounded
Xstrata's ill-fated hostile offer for the company in August 2008.
In May 2008, the Mexican miner Industrias Penoles (4.3% of the portfolio) spun
out its precious metals division into a new company called Fresnillo, listed in
London. Our combined holding in the two companies stands at 6.3%.
The diamond market was weak again in 2008. Our two diamond equity holdings
remain unchanged and both were disappointing investments. Harry Winston Diamond
Corp. (0.5% of the portfolio), formerly known as Aber Diamonds, and which owns
a 40% stake in the Diavik mine in Canada, with Rio Tinto holding 60%, saw its
share price fall by 80.8% over the year (in sterling terms). Our other main
investment is Gem Diamonds (0.8% of the portfolio) which continued to recover
exceptional quality diamonds from the Letseng mine in Lesotho. In September
2008, Gem sold the "Leseli La Letseng" diamond to Graff for US$18.4 million,
but despite this suffered a 73.6% fall in its share price over the year.
Base metals
Some spectacular price strength early in the year, underpinned by growth in
China's demand, gave way to severe price weakness in the second half as
investors lost faith in the concept of economic decoupling and focused on awful
global economic data. Overall, the MG Base Metals Index fell 53.5% during the
year (in US dollar terms). Inventories in London Metal Exchange ("LME")
warehouses rose significantly in the second half of the year, especially
aluminium, indicating some oversupply despite hefty production cuts.
Nickel continued to be the most volatile of the base metals in 2008, falling to
a low of US$8,807/t in response to declining stainless steel demand. This is
down 84% from the all-time high of US$54,150/t seen in 2007. During the year we
cut the holding in Eramet, the portfolio's only "pure play" producer, to 0.9%
of the portfolio.
Like most commodities, copper's early strength gave way to extreme weakness in
the second half of the year. Between July and December the copper price fell by
some 70%, necessitating some big earnings downgrades for the copper stocks in
the portfolio. Interestingly though, unlike aluminium, copper inventories
remain below the levels seen in previous recessions. This is probably due to
the perennial supply disruptions which have plagued the copper industry. It is
also worth noting that the new supply from the Democratic Republic of Congo
("DRC"), which some commentators were expecting to have become a reality by
now, is unlikely to come on-stream in the foreseeable future. This is due to
lack of availability of capital, together with ongoing title issues and
political risk. With prospective earnings declining sharply, copper shares have
been under severe pressure with second half share price falls of 49.1%, 71.1%
and 71.5% respectively from our largest positions Cerro Verde, Freeport McMoran
Copper & Gold and First Quantum Minerals. The best performer was Antofagasta
(1.8% of the portfolio) which "only" declined by 35.3% in the second half,
helped by its US$3 billion cash mountain.
In our view, copper's role as an emerging market infrastructure metal will mean
that it will be one of the most sensitive to economic recovery and could be one
of the commodities to be first out of the slump. We see the weakness of equity
valuations as a long term investment opportunity and have been adding to
positions such as Equinox Minerals which has a brand new long life, low cost
mine. Copper remains an important part of the portfolio at 8.2% of the
portfolio (9.8% at the end of 2007).
Aluminium continued to disappoint, with overproduction in China the biggest
problem. Aluminium has major uses in every segment of the world economy and
demand is therefore completely synchronised with the business cycle. As a
result of the combination of oversupply and depressed demand, prices weakened
dramatically in the second half of the year with a fall of 52.7% over 2008 (in
US dollar terms). Some analysts believe that over 70% of the world's productive
capacity is now cash flow negative; clearly this is unsustainable in the long
term. In the meantime though, with demand at a low ebb, inventories have built
substantially and the low price has now led to some major closures of capacity
around the world. These closures of capacity in our view should now start to
rebalance the market and we would be surprised if prices fell materially from
here. In this environment our aluminium investments delivered very poor
returns. Alcoa embarked on a major restructuring of its business but this was
not enough to prevent the shares falling by 57.3% over the year and Alumina by
74.4%. In mid year we participated in the Alumina rights issue which
recapitalised its balance sheet. At the year end, aluminium stocks make up 4.5%
of the portfolio (6.3% at the end of 2007).
Zinc and lead proved to be very weak in 2008, with zinc now trading well below
the marginal cost of production. This has caused severe problems for the world
zinc mining and smelting industry, which is "unsustainable" at current levels.
None of the zinc related equities in the portfolio did well. The world's
largest zinc producer - Teck Cominco (1.6% of the portfolio) endured an 87.3%
drop from its 2008 peak of C$52/share. This was due partly to weak commodity
prices but was also due to its decision to buy out the minorities of its
Canadian metallurgical coal division, "Fording". The Fording acquisition led to
a substantial debt burden which will need to be refinanced later this year.
Another zinc producer to run into financial difficulties was Oz Minerals
(formed from a merger of Oxiana and Zinifex). Oz Minerals' (0.5% of the
portfolio) problems stemmed from a combination of low commodity prices and too
much debt, the debt having been incurred in the acquisition of the nickel
company Allegiance. At the time of writing, Oz Minerals is suspended pending an
attempt at refinancing its debt.
Energy commodities
As expected, 2008 proved to be a consolidation year for uranium with the price
steady for much of the period. Uranium equities were dismal investments and are
now beginning to look good value. The portfolio currently holds only one
uranium stock, UEX (0.7% of the portfolio). UEX is one of the best exploration
stocks and continues to progress its projects satisfactorily. We have increased
the holding in this company, taking advantage of some extreme share price
weakness.
As mentioned elsewhere, coal enjoyed a strong start to the year with buoyant
energy prices a feature of the market. The situation was much worse in the
second half with demand faltering and oil prices suffering record falls. This
led to share price weakness and Peabody Energy (2.0% of the portfolio) finished
the year down by 48.9%. One of our largest coal investments was the Indonesian
stock Bumi Resources (1.3% of the portfolio), one of the world's largest coal
exporters. This stock had a reasonable year from an operational perspective but
was particularly hard hit following the financial difficulties of its largest
shareholder, the Bakrie Brothers. By the year end, Bumi's share price had
fallen by over 81.9%.
Diversified mining companies and industrial commodities
As was the case with other subsectors of the mining industry, the year started
off rather promisingly and then slumped. Bulk commodity prices were very strong
in the early part of the year with contract prices for thermal, and met coal
reaching record high levels. Iron ore negotiations also ended favourably with a
record high price and an increase of over 90%. These prices boded well for the
cash flows and earnings of the diversified miners, helping to propel share
prices to record levels early in the year. These buoyant market conditions
ended abruptly in October and November with steel companies cutting production
dramatically (up to 30%) to cope with the sharp slowdown of world demand for
metals. Almost overnight, demand for bulk commodities evaporated and this led
to drastic cutbacks of mining production as steel customers refused shipments.
The implications of this for future earnings are clear with possible falls of
at least 40% in 2009/2010 contract prices looming - and analysts have made some
big cuts to 2009 forecasts - a factor which sparked off some steep share price
falls with only BHP Billiton outperforming the HSBC Global Mining Index.
Currency movements have offset the negative price news to some degree with the
Brazilian real falling by 33% against the US dollar from its peak in August and
the Australian dollar falling by 28% from its peak. We believe that these
favourable currency movements will absorb about one third of the falls in
commodity prices, potentially suggesting that investors might be too bearish
about the diversified resources shares.
BHP Billiton's hostile bid for Rio Tinto dominated the news headlines for much
of 2008. The slow pace at which the regulatory authorities move however, meant
that by the time clearance was achieved business conditions had changed
significantly and BHP Billiton no longer wished to proceed. Rio Tinto's share
price reacted very negatively to the collapse of the bid and the stock finished
the year down 72%, one of the biggest single losses to affect the portfolio.
Key to BHP Billiton's decision to withdraw the bid was the sharp deterioration
in both commodity prices and credit availability. Rio Tinto has a significant
refinancing of debt in 2009 and as credit conditions deteriorated this began to
weigh on sentiment, making Rio Tinto seem overly leveraged. In the aftermath of
the failed bid, Rio Tinto sought to stabilise its business announcing a 50% cut
in global capex and a large round of retrenchments. In addition, Rio Tinto will
have to press ahead with asset disposals that will go well beyond "non core"
businesses. Teck and Xstrata were two other companies that found themselves in
the midst of investor concerns regarding balance sheet strength. In Xstrata's
case the problem was self inflicted with the company embarking on a hostile
all-cash bid for Lonmin just as credit availability for the mining sector
turned down. In the event, Xstrata elected to withdraw its bid having
accumulated a stake of 24.6% in its target. Xstrata also suffered from
persistent rumours about the financial health of its major shareholder
Glencore. At the year end, the Company did not have a holding in Xstrata.
The most disappointing investment in 2007 proved to be one of our best this
year - Iluka Resources, the Australian titanium mineral and zircon
producer (2.5% of the portfolio). Iluka benefited from the weaker Australian
dollar and its dominant position in the minerals sands sector. Iluka's shares
rose by some 24% during the year, one of the only stocks to finish the year in
positive territory.
The fertilizer stocks in the portfolio, Potash Corp., Agrium, Mosaic and Sunkar
Resources, struggled during the second half of the year as product prices
deteriorated and farmers reacted to lower crop prices by deferring
applications. In aggregate, our four holdings comprise 4.0% of the portfolio.
Derivatives activity
The Group sometimes holds positions in derivatives contracts, with virtually
all of the activity focused on selling either puts or calls in order to
increase or decrease position sizes. These positions, which are small in
comparison with the size of the Group, usually have the effect of obliging us
to buy or sell stock or futures at levels we believe are attractive. The
volatility of the market during 2008 provided some good opportunities for
option writing. However, at the end of December, all of the positions had
matured or expired.
Gearing
At 31 December 2008, the Company had virtually no net gearing. Gearing, which
can be drawn down or repaid at any time, is used in the portfolio to take
tactical advantage of market volatility and opportunities.
Outlook and strategy for 2009
The year end rally in both mining shares and commodities which took shape in
December 2008 has faltered as we enter 2009. Plenty of uncertainty exists with
regard to future macro economic trends and this is likely to mean that
volatility is set to remain high for the moment. With the notable exception of
gold, commodity prices are on track to average much lower levels in 2009
compared with 2008 which suggests that the sector will lose all positive
earnings momentum.
The companies that are most likely to do best in this environment are the same
ones that were outperforming in the third and fourth quarters of 2008;
specifically those with balance sheet flexibility and low operating costs. A
good example would be a stock like BHP Billiton. Companies with urgent need of
refinancing will continue to struggle until credit conditions improve.
Given the magnitude of the share price falls that have already been witnessed
we would argue that much of this bad news is now "in the price "of the shares.
Aggressive investors will be on the lookout for early signs that the
recessionary conditions are bottoming out. The stocks that will lead us out of
the downturn will be the more geared businesses with good quality assets.
We expect to see a continuation of the uptrend in the gold price. Mine supply
is likely to remain constrained while investment demand has grown and net
Central Bank sales (of gold) remains on a declining path. This is a good
environment for precious metals, especially as the dollar looks expensive at
the moment.
Our overall strategy therefore will be to maintain a fully invested fund with
the majority of the portfolio in stocks that should be able to survive the
downturn. A somewhat smaller amount of the portfolio will be allocated to those
riskier companies that will eventually be in the vanguard of recovery.
Graham Birch & Evy Hambro
BlackRock Investment Management (UK) Limited
12 February 2009
Ten Largest Investments - 31 December 2008
Set out below is a brief description by the Investment Manager of the Company's
ten largest investments
Vale - (formerly known as CVRD) 15.6% (2007: 14.7%) is the world's largest
producer of iron ore. Based in Brazil, the company also has significant
interests in other commodities such as nickel, aluminium, copper, gold and
coal. In addition, Vale owns and operates transport infrastructure. The company
made a "transformational" acquisition in 2006 by purchasing Inco for cash. This
considerably broadened the company's asset mix and made it a formidable
competitor in the global mining industry. In January 2008, Vale announced they
were in discussions with Xstrata over a potential takeover; however these ended
unsuccessfully in March 2008.
BHP Billiton - 14.0% (2007: 6.1%) is the world's largest diversified natural
resource company, formed in 2001 from the merger of BHP and Billiton. The
company is an important global player in a number of commodities including iron
ore, copper, coal, manganese, aluminium, diamonds and uranium. In addition, the
company is the only sizeable holding in the portfolio with significant oil and
gas assets. BHP Billiton approached Rio Tinto in November 2007 about a
potential merger but was rebuffed. It subsequently launched a hostile bid in
February 2008 but withdrew this offer in November 2008 following sharp falls in
commodity prices and a worsening economic climate.
Minas Buenaventura - 7.5% (2007: 3.5%) is South America's premier precious
metals company. Its main asset is a stake in the Yanacocha gold mine in Peru,
which it jointly owns with Newmont. Buenaventura also has interests in a number
of other mines and exploration projects throughout Peru.
Impala Platinum - 6.1% (2007: 4.1%) is the world's second largest producer of
platinum group metals, with mining and refining operations in South Africa. The
company also owns a number of substantial assets in Zimbabwe and is a major
shareholder in Aquarius Platinum. Impala restructured in 2006, converting the
Bafokeng tribe's royalty into an equity stake. In October 2008, Impala
announced a friendly takeover bid for Northam Platinum and Mvelaphanda
Resources. Following a sharp decline in platinum prices and a worsening
economic climate, the original terms of the takeover are currently being
renegotiated.
Rio Tinto - 5.9% (2007: 12.2%) is the world's third largest mining company. The
company has interests over a broad range of metals and minerals including iron
ore, aluminium, copper, coal, industrial minerals, gold and uranium. In October
2007 Rio Tinto acquired Alcan making it the world's largest bauxite and
aluminium producer. In November 2007, BHP Billiton approached the company with
regards to a potential merger; a hostile bid was launched in February 2008 but
subsequently withdrawn in November 2008. Following the collapse of the bid,
with falling commodity prices and an increased market focus on Rio Tinto's high
gearing, the company committed to reducing its US$38.9 billion debt position by
US$10 billion by the end of 2009 through asset sales, capital expenditure cuts
and a reduction in operating costs.
Industrias Penoles - 4.3% (2007: 2.4%) is Mexico's leading precious metals
producer with operations in silver, gold, lead and zinc. In June 2008, the
company restructured its assets, de-merging its precious metals and base metal
operations and listing the precious metals business, called Fresnillo, on the
London Stock Exchange. Industrias Penoles retains a 77% stake in Fresnillo.
Alcoa - 3.4% (2007: 4.4%) is the world's second largest alumina producer and a
leader in aluminium production. In downstream activities, Alcoa serves the
aerospace, automotive, packaging, building and construction, commercial
transportation, and industrial markets. In February 2008, Alcoa, in partnership
with Chinalco (Aluminium Corporation of China) acquired a 12% interest in the
UK-listed shares of Rio Tinto following BHP Billiton's bid. In the second half
of 2008, Alcoa has been quick to react to the deteriorating aluminium price by
cutting aluminium production, reducing head count and cutting costs.
Newcrest - 3.3% (2007: nil) is Australia's largest gold producer and was formed
by the merger of Newmont Australia and BHP Gold Ltd in 1990. In September 2008,
the company closed out its hedge-book. It has a strong growth profile, low
gearing and is now fully exposed to the gold price.
African Rainbow Minerals - 2.9% (2007: 1.2%) is a diversified South African
mining company, producing nickel, chromite, manganese, platinum and coal. In
addition, it has a 16% equity stake in Harmony Gold Mining, South Africa's
third largest gold producer, and a 65% stake in Teal Exploration, an
exploration company with assets in the Democratic Republic of Congo.
Iluka Resources - 2.5% (2007: 0.7%) is the world's largest producer of zircon
and the second largest producer of titanium dioxide minerals. Following a
difficult year in 2007 where the company faced a number of operational
challenges, the resilience of the zircon price, high quality assets and a
strong balance sheet have shielded the company from the collapse in the equity
markets over the second half of 2008.
Investments
31 December 2008
Main Market
geographical value % of
exposure £'000 investments
Diversified
Vale Latin America 90,862 15.6
BHP Billiton Global 81,522 14.0
Rio Tinto Global 34,270 5.9
African Rainbow Minerals South Africa 16,702 2.9
Teck Cominco Canada 9,450 1.6
Anglo American Global 7,730 1.3
Sterlite Industries India 7,665 1.3
Vedanta Resources India 4,892 0.8
Oz Minerals* Australia 2,841 0.5
PanAust Laos 886 0.2
------- ----
256,820 44.1
------- ----
Gold
Minas Buenaventura "B" shares Latin America 43,610 7.5
Newcrest Mining Australia 19,203 3.3
Lihir Gold Australia 2,909 0.5
Minera IRL Latin America 2,374 0.4
Gold Fields South Africa 2,326 0.4
AngloGold Ashanti South Africa 14 0.0
------ ----
70,436 12.1
------ ----
Platinum
Impala Platinum South Africa 35,548 6.1
Anglo Platinum South Africa 13,629 2.3
Aquarius Platinum South Africa 4,711 0.8
Ridge Mining South Africa 1,600 0.3
------ ---
55,488 9.5
------ ---
Copper
Freeport McMoran Copper & Gold Indonesia 10,837 1.9
Antofagasta Latin America 10,638 1.8
Soc Min Cerro Verde Latin America 10,285 1.7
First Quantum Minerals Zambia 8,032 1.4
Equinox Minerals Zambia 5,245 0.9
Kazakhmys Kazakhstan 2,310 0.4
South Peru Copper Latin America 445 0.1
------ ---
47,792 8.2
------ ---
Silver & Diamonds
Industrias Penoles Latin America 24,891 4.3
Fresnillo Latin America 11,500 2.0
Gem Diamonds Lesotho 4,603 0.8
Harry Winston Diamond Corp. Canada 3,127 0.5
------ ---
44,121 7.6
------ ---
Aluminium
Alcoa USA 19,562 3.4
Alumina Australia 6,595 1.1
------ ---
26,157 4.5
------ ---
Coal
Peabody Energy USA 11,836 2.0
Bumi Resources Indonesia 7,466 1.3
Homeland Energy Group South Africa 73 0.0
------ ---
19,375 3.3
------ ---
Zinc
Nyrstar Belgium 2,647 0.4
Griffin Mining Australia 502 0.1
Soc Min El Brocal Latin America 312 0.1
----- ---
3,461 0.6
----- ---
Other
Iluka Resources Australia 14,468 2.5
Potash Corp. Canada 10,087 1.7
Agrium USA 8,052 1.4
Minsur Latin America 7,656 1.3
Mosaic USA 5,415 0.9
Eramet France 5,241 0.9
UEX Canada 3,949 0.7
Australian Energy# Australia 2,594 0.5
Noventa Mozambique 456 0.1
Sunkar Resources Kazakhstan 280 0.1
Ivanhoe Nickel & Platinum Warrants# Canada 130 0.0
------ ----
58,328 10.1
------- -----
Portfolio 581,978 100.0
======= =====
* Held at Directors' valuation.
# Unquoted investments at Directors' valuation.
All investments are in ordinary shares unless otherwise stated.
The number of investments held at 31 December 2008 was 50 (31 December 2007: 58).
Portfolio Analysis
31 December 2008
Commodity Exposure*
BlackRock World Mining Trust plc HSBC Global Mining Index
2008 2007 2008
% % %
Zinc 0.6 5.2 0.6
Coal 3.3 3.2 6.1
Aluminium 4.5 6.3 2.8
Silver & Diamonds 7.6 5.1 1.8
Copper 8.2 9.8 7.0
Platinum 9.5 7.7 4.3
Gold 12.1 5.9 24.8
Diversified 44.1 48.0 45.1
Other 10.1 8.8 7.5
Geographic Exposure*
2008 2007
% %
Latin America 35 25
Global 21 21
South Africa 13 14
Australia 8 8
USA 8 7
Canada 5 7
Europe 1 3
Other 9 *** 15 **
* Based on the principal commodity exposure and place of operation of each
investment.
** Consists of Congo, India, Indonesia, Kazakhstan, Laos, Lesotho and Zambia.
*** Consists of India, Indonesia, Kazakhstan, Laos, Lesotho, Mozambique and
Zambia.
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2008
2008 2007 2008 2007 2008 2007
Revenue Revenue Capital Capital Total Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Income from
investments held at
fair value through
profit or loss 3 30,295 26,123 - - 30,295 26,123
Other income 3 (2,867) 8,668 - - (2,867) 8,668
------ ------ -------- -------- ------- -------
Total revenue 27,428 34,791 - - 27,428 34,791
------ ------ -------- -------- ------- -------
(Losses)/gains on
investments held at
fair value
through profit or loss - - (776,959) 457,306 (776,959) 457,306
Realised gains on
foreign exchange - - 269 361 269 361
------ ------ -------- ------- -------- -------
27,428 34,791 (776,690) 457,667 (749,262) 492,458
------ ------ -------- ------- -------- -------
Expenses
Management fees 4 (13,969) (14,864) - - (13,969) (14,864)
Other expenses 5 (1,269) (1,274) - - (1,269) (1,274)
------- ------- -------- ------- ------- -------
Total operating
expenses (15,238) (16,138) - - (15,238) (16,138)
------- ------- -------- ------- ------- -------
Profit/(loss) before
finance costs and
taxation 12,190 18,653 (776,690) 457,667 (764,500) 476,320
Finance costs 6 (976) (1,547) - - (976) (1,547)
------- ------- -------- ------- -------- -------
Profit/(loss) before
taxation 11,214 17,106 (776,690) 457,667 (765,476) 474,773
Taxation 7 (1,383) (3,715) - - (1,383) (3,715)
------- ------- -------- ------- -------- -------
Profit/(loss) for the
year 9,831 13,391 (776,690) 457,667 (766,859) 471,058
------- ------- -------- ------- -------- -------
Earnings/(loss) per
ordinary share -
undiluted 9 5.64p 8.25p (445.65p) 281.94p (440.01p) 290.19p
Earnings/(loss) per
ordinary share -
diluted 9 5.64p 8.01p (445.65p) 273.64p (440.01p) 281.65p
===== ===== ======== ======= ======== =======
The total column of this statement represents the Group's Consolidated Income
Statement, prepared in accordance with International Financial Reporting
Standards ("IFRS"). The supplementary revenue and capital columns are both
prepared under guidance published by the Association of Investment Companies
("AIC"). All items in the above statement derive from continuing operations. No
operations were acquired or disposed of during the year. All income is
attributable to the equity holders of BlackRock World Mining Trust plc. There
are no minority interests.
STATEMENTS OF CHANGES IN EQUITY
for the year ended 31 December 2008
Ordinary Share Capital
share premium Special redemption Capital Revenue
capital account reserve reserve reserve reserve Total
Group £'000 £'000 £'000 £'000 £'000 £'000 £'000
-----
For year ended 31
December 2007
At 31 December 2006 8,415 11,767 203,244 22,779 600,210 22,130 868,545
Net profit for the
year after taxation - - - - 457,667 13,391 471,058
Exercise of warrants 192 16,685 - - - - 16,877
Shares purchased
during the year * - - (80,787) - - - (80,787)
Dividend paid and
declared # - - - - - (4,207) (4,207)
Special dividend
paid # - - - - - (3,366) (3,366)
----- ------ ------- ------ --------- ------ ---------
At 31 December 2007 8,607 28,452 122,457 22,779 1,057,877 27,948 1,268,120
----- ------ ------- ------ --------- ------ ---------
For year ended 31
December 2008
At 31 December 2007 8,607 28,452 122,457 22,779 1,057,877 27,948 1,268,120
Net (loss)/profit
for the year after
taxation - - - - (776,690) 9,831 (766,859)
Exercise of warrants 1,044 98,695 - - - - 99,739
Shares purchased
during the year * - - (1,399) - - - (1,399)
Dividend paid and
declared # - - - - - (4,731) (4,731)
Special dividend
paid # - - - - - (3,943) (3,943)
----- ------- ------- ------ ------- ------ -------
At 31 December 2008 9,651 127,147 121,058 22,779 281,187 29,105 590,927
----- ------- ------- ------ ------- ------ -------
Company
-------
For year ended
31 December 2007
At 31 December 2006 8,415 11,767 203,244 22,779 609,794 12,546 868,545
Net profit for the
year after taxation - - - - 460,798 10,260 471,058
Exercise of warrants 192 16,685 - - - - 16,877
Shares purchased
during the year * - - (80,787) - - - (80,787)
Dividend paid and
declared # - - - - - (4,207) (4,207)
Special dividend
paid # - - - - - (3,366) (3,366)
----- ------ ------- ------ --------- ------ ---------
At 31 December 2007 8,607 28,452 122,457 22,779 1,070,592 15,233 1,268,120
----- ------ ------- ------ --------- ------ ---------
For year ended 31
December 2008
At 31 December 2007 8,607 28,452 122,457 22,779 1,070,592 15,233 1,268,120
Net (loss)/profit
for the year after
taxation - - - - (779,217) 12,358 (766,859)
Exercise of warrants 1,044 98,695 - - - - 99,739
Shares purchased
during the year * - - (1,399) - - - (1,399)
Dividend paid and
declared # - - - - - (4,731) (4,731)
Special dividend
paid # - - - - - (3,943) (3,943)
----- ------- ------- ------ ------- ------ -------
At 31 December 2008 9,651 127,147 121,058 22,779 291,375 18,917 590,927
----- ------- ------- ------ ------- ------ -------
* Held in treasury.
# See note 8.
BALANCE SHEETS
as at 31 December 2008
2008 2007
-------------------------------------------------------
Group Company Group Company
Notes £'000 £'000 £'000 £'000
Non current assets
Investments held at fair
value through profit or
loss 581,698 593,386 1,266,714 1,280,929
------- ------- --------- ---------
Current assets
Investments 280 - 5,508 -
Other receivables 14,801 14,454 1,772 1,952
------- ------- --------- ---------
15,081 14,454 7,280 1,952
------- ------- --------- ---------
Total assets 596,779 607,840 1,273,994 1,282,881
------- ------- --------- ---------
Current liabilities
Other payables (2,706) (3,522) (5,235) (4,930)
Bank overdrafts (3,104) (13,349) (543) (9,735)
------- ------- --------- ---------
(5,810) (16,871) (5,778) (14,665)
------- ------- --------- ---------
Total assets less current
liabilities 590,969 590,969 1,268,216 1,268,216
Non current liabilities
Deferred tax (42) (42) (96) (96)
------- ------- --------- ---------
Net assets 590,927 590,927 1,268,120 1,268,120
======= ======= ========= =========
Equity attributable to
equity holders
Ordinary share capital 10 9,651 9,651 8,607 8,607
Share premium account 127,147 127,147 28,452 28,452
Special reserve 121,058 121,058 122,457 122,457
Capital redemption reserve 22,779 22,779 22,779 22,779
Capital reserve 281,187 291,375 1,057,877 1,070,592
Revenue reserve 29,105 18,917 27,948 15,233
------- ------- --------- ---------
Total equity 590,927 590,927 1,268,120 1,268,120
======= ======= ========= =========
Net asset value per
ordinary share - undiluted 11 331.39p 331.39p 804.13p 804.13p
======= ======= ======= =======
Net asset value per
ordinary share - diluted 11 331.39p 331.39p 752.28p 752.28p
======= ======= ======= =======
CASH FLOW STATEMENTS
for the year ended 31 December 2008
2008 2007
-----------------------------------------
Group Company Group Company
£'000 £'000 £'000 £'000
Operating activities
(Loss)/profit before tax (765,476) (764,467) 474,773 473,433
Add back interest paid 976 976 1,547 1,444
Losses/(gains) on investments held
at fair value through profit
or loss 776,959 779,486 (457,306) (460,437)
Net gains on foreign exchange (269) (269) (361) (361)
Net movement in investments by
subsidiaries 1,373 - 12,327 -
Sales of investments held at fair
value through profit or loss 317,377 317,377 262,398 262,398
Purchases of investments held at
fair value through profit
or loss (409,320) (409,320) (203,847) (203,847)
Decrease/(increase) in other
receivables 1,332 1,339 (596) (683)
(Increase)/decrease in amounts due
from brokers (13,911) (13,911) 307 307
(Decrease)/increase in other
payables (2,225) (2,225) 1,317 1,317
Dealing losses/(profits) 3,855 - (4,228) -
-------- -------- -------- --------
Net cash (outflow)/inflow from
operating activities before
interest and taxation (89,329) (91,014) 86,331 73,571
-------- -------- -------- --------
Interest paid (976) (976) (1,547) (1,444)
Tax paid (609) (456) (4,830) (1,267)
Tax on overseas income (1,588) (1,109) (1,219) (1,219)
-------- -------- -------- --------
Net cash (outflow)/inflow from
operating activities (92,502) (93,555) 78,735 69,641
-------- -------- -------- --------
Financing activities
Purchase of ordinary shares (1,393) (1,393) (80,787) (80,787)
Exercise of warrants 99,739 99,739 16,877 16,877
Dividends paid (8,674) (8,674) (7,573) (7,573)
-------- -------- -------- --------
Net cash inflow/(outflow) from
financing activities 89,672 89,672 (71,483) (71,483)
-------- -------- -------- --------
(Decrease)/increase in cash and cash
equivalents (2,830) (3,883) 7,252 (1,842)
Cash and cash equivalents at start
of the year (543) (9,735) (8,156) (8,254)
Effect of foreign exchange rate
changes 269 269 361 361
-------- -------- ------ -------
Cash and cash equivalents at the end
of the year (3,104) (13,349) (543) (9,735)
====== ======= ==== ======
Comprised of:
Bank overdrafts (3,104) (13,349) (543) (9,735)
------ ------- ---- ------
Total (3,104) (13,349) (543) (9,735)
====== ======= ==== ======
NOTES TO THE ANNUAL RESULTS ANNOUNCEMENT
1. Principal activity
The principal activity of the Company is that of an investment trust company
within the meaning of section 842 of the Income and Corporation Taxes Act 1988
("ICTA").
The principal activity of the subsidiary, BlackRock World Mining Investment
Company Limited, is investment dealing. The other subsidiary, BlackRock Gold
Limited, is no longer trading.
2. Accounting policies
The principal accounting policies adopted by the Group and the Company are set
out below.
(a) Basis of preparation
The Group and Parent Company financial statements have been prepared in
accordance with International Financial Reporting Standards ("IFRS") as adopted
by the European Union and as applied in accordance with the provisions of the
Companies Act 1985. The Company has taken advantage of the exemption provided
under section 230 of the Companies Act 1985 not to publish its individual
income statement and related notes.
The Group's financial statements are presented in sterling, which is the
currency of the primary economic environment in which the Group operates. All
values are rounded to the nearest thousand pounds (£'000) except where
otherwise indicated.
Insofar as the Statement of Recommended Practice ("SORP") for investment trusts
issued by the Association of Investment Companies ("AIC"), revised in December
2005 is compatible with IFRS, the financial statements have been prepared in
accordance with guidance set out in the SORP.
(b) Basis of consolidation
The Group financial statements consolidate the financial statements of the
Company and its wholly owned trading subsidiary, BlackRock World Mining
Investment Company Limited, which are registered and operate in England and
Wales.
(c) Presentation of the Consolidated Income Statement
In order to better reflect the activities of an investment trust company and in
accordance with guidance issued by the AIC, supplementary information which
analyses the Consolidated Income Statement between items of a revenue and a
capital nature has been presented alongside the Consolidated Income Statement.
In accordance with the Company's status as a UK investment company under
section 833 of the Companies Act 2006, net capital returns may not be
distributed by way of dividend.
(d) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
segment of business, being investment business.
(e) Income
Dividends receivable on equity shares are treated as revenue for the year on an
ex-dividend basis. Where no ex-dividend date is available, dividends receivable
on or before the year end are treated as revenue for the year. Provision is
made for any dividends not expected to be received. Interest income and
expenses are accounted for on an accruals basis.
Option premium income is recognised as revenue and included in the revenue
column of the Consolidated Income Statement unless the option has been written
for the maintenance and enhancement of the Company’s investment portfolio and
represents an incidental part of a larger capital transaction, in which case
any premia arising are allocated to the capital column of the Consolidated
Income Statement.
(f) Expenses
All expenses, including finance costs, are accounted for on an accruals basis.
Expenses have been treated as revenue except as follows:
- expenses which are incidental to the acquisition of an investment are
included within the cost of the investment.
- expenses are treated as capital where a connection with the maintenance or
enhancement of the value of the investments can be demonstrated.
(g) Taxation
Deferred taxation is recognised in respect of all temporary differences that
have originated but not reversed at the balance sheet date, where transactions
or events that result in an obligation to pay more tax in the future or right
to pay less tax in the future have occurred at the balance sheet date. This is
subject to deferred tax assets only being recognised if it is considered more
likely than not that there will be suitable profits from which the future
reversal of the temporary differences can be deducted. Deferred tax assets and
liabilities are measured at the rates applicable to the legal jurisdictions in
which they arise.
(h) Investments held at fair value through profit or loss
All investments are designated upon initial recognition as held at fair value
through profit or loss. Purchases of investments are recognised on a trade date
basis. The sale of assets are recognised at the trade date of the disposal.
Proceeds are measured at fair value which will be regarded as the proceeds of
sale less any transaction costs.
The fair value of the financial instruments is based on their quoted bid price
at the balance sheet date, without deduction for the estimated future selling
costs. Unquoted investments are valued by the Directors at fair value using
International Private Equity and Venture Capital Association Guidelines. This
policy applies to non current asset investments held by the Group.
Under IFRS, the investments in the subsidiaries are fair valued which is deemed
to be the sum of the balance sheet values of each company. Where fair value
cannot reliably be measured, the investment will be carried at the previous
reporting date value unless there is evidence that the investment has since
been impaired, in which case the value will be reduced.
Changes in the fair value of investments held at fair value through profit or
loss and gains and losses on disposal are recognised in the Consolidated Income
Statement as "Gains or losses on investments held at fair value through profit
or loss". Also included within this heading are transaction costs in relation
to the purchase or sale of investments. The fair value of the subsidiary
approximates to net asset value.
(i) Other receivables and payables
Other receivables and other payables do not carry any interest and are short
term in nature and are accordingly stated at their nominal value.
(j) Dividends payable
Final dividends are only recognised after they have been approved by
shareholders. Special dividends are recognised when paid to shareholders.
(k) Foreign currency translation
Transactions involving foreign currencies are converted at the rate ruling at
the date of the transaction.
Foreign currency monetary assets and liabilities are translated into sterling
at the rate ruling on the balance sheet date. Foreign exchange differences
arising on translation are recognised in the Consolidated Income Statement.
(l) Cash and cash equivalents
Cash comprises cash in hand and on demand deposits. Cash equivalents are short
term, highly liquid investments, that are readily convertible to known amounts
of cash and that are subject to an insignificant risk of changes in value.
(m) Bank borrowings
Bank overdrafts are recorded as the proceeds received. Finance charges,
including any premia payable on settlement or redemption and direct issue
costs, are accounted for on an accruals basis in the Consolidated Income
Statement using the effective interest rate method and are added to the
carrying amount of the instrument to the extent that they are not settled in
the period in which they arise.
(n) New standards and interpretations not applied
The International Accounting Standards Board has issued the following standards
and interpretations to be applied to financial statements with periods
commencing on or after the following dates. The following are considered to be
relevant to the Company:
IFRS 8 Operating Segments 01-Jan-09
IAS 1 Presentation of Financial Statements (Revised) 01-Jan-09
IAS 23 Borrowing Costs (Revised) 01-Jan-09
IAS 27 Amendment - Consolidation and Separate Financial Statements 01-Jul-09
The Directors do not anticipate that the adoption of these standards and
interpretations will have a material impact on the financial statements and
have therefore decided not to early adopt.
3. Income
2008 2007
£'000 £'000
Investment income:
UK listed dividends 6,101 4,504
UK listed special dividends - 276
Overseas listed dividends 19,969 20,806
Overseas listed special dividends 4,225 537
------ ------
30,295 26,123
------ ------
Other operating income:
Deposit interest 653 298
Dealing (losses)/profits (3,855) 4,228
Underwriting commission 117 -
Stock lending income 218 43
Option premium income - 4,099
------ -----
(2,867) 8,668
------ -----
Total income 27,428 34,791
====== ======
Total income comprises:
Dividends 30,295 26,123
Deposit interest 653 298
Other income (3,520) 8,370
------ ------
27,428 34,791
====== ======
Dealing (losses)/profits are presented after deducting transaction costs
incurred on the purchase and sale of investments.
At 31 December 2008, no securities were held out on loan by the Group (2007: £
7,308,842). The maximum aggregate value of securities on loan at any one time
during the year ended 31 December 2008 was £46,788,428 (2007: £38,526,941).
Option premium income of £15.8 million was received by the Company for the year
to 31 December 2008. As all of the related options were written for portfolio
maintenance purposes, all of this premium income has been allocated to capital.
For the year to 31 December 2007, option premiums of £4.1 million were generated
and allocated to revenue.
4. Management fees
2008 2007
£'000 £'000
Investment management fees 13,762 14,371
VAT 207 493
------ ------
13,969 14,864
====== ======
The investment management fee is levied quarterly, based on the value of the
gross assets on the last day of each quarter. All investment management fees
are charged to revenue.
Following the outcome of the JPMorgan Claverhouse case, management fees are now
exempt from VAT.
5. Other expenses
2008 2007
£'000 £'000
Custody fee 389 278
Administration fee 484 676
Auditors' remuneration:
- audit services 21 20
- other* 5 5
Registrar's fee 93 87
Directors' remuneration 99 82
Other administrative costs 178 126
----- -----
1,269 1,274
===== =====
The Company's total expense ratio,
calculated as a percentage of average net
assets and using expenses, excluding
interest costs, after relief for taxation
was: 1.2% 1.1%
==== ====
* Other audit services relate to the review of the half yearly financial
statements.
6. Finance costs
2008 2007
£'000 £'000
Interest on bank loans 147 -
Interest on bank overdrafts 829 1,547
--- -----
976 1,547
=== =====
7. Taxation
2008 2007
£'000 £'000
Corporation tax 1,578 3,760
Double taxation relief (1,093) (1,228)
------ ------
485 2,532
Overseas tax 999 1,228
------ ------
1,484 3,760
Overseas tax - prior year (47) -
Deferred tax (54) (45)
------ ------
Total tax 1,383 3,715
====== ======
The tax assessed for the year is higher than the standard rate of corporation
tax of 28.5% (2007: 30%). The differences are explained below:
2008 2007
£'000 £'000
Total (loss)/profit on ordinary
activities before taxation (765,476) 474,773
======== =======
(Loss)/profit on ordinary activities
multiplied by standard rate of
corporation tax (28.5%) (2007: 30%) (218,161) 142,432
Effects of:
Non taxable UK dividends (1,721) (1,409)
Withholding tax suffered 999 1,228
Double taxation relief (1,093) (1,228)
(Losses)/gains on investments held at
fair value through profit or loss 221,357 (137,300)
Prior year withholding tax recovered (47) -
Prior year adjustment relating to expenses (34) -
Income taxable in different periods 137 37
------- --------
1,437 3,760
Deferred tax (54) (45)
------- --------
Total current corporation tax charge for
the year 1,383 3,715
===== =====
Investment trusts are exempt from corporation tax on capital gains provided the
Company obtains agreement from HM Revenue & Customs that section 842 ICTA tests
have been met.
8. Dividends
Under IFRS, final dividends are not recognised until they are approved by
shareholders, and special and interim dividends are not recognised until they
are paid. They are also debited directly to reserves. Amounts recognised as
distributable to ordinary shareholders for the year ended 31 December were as
follows:
2008 2007
£'000 £'000
Final ordinary dividend in respect of the year ended
31 December 2006 of 2.50p, approved by shareholders
on 22 March 2007 - 4,207
Declared special dividend in respect of the year ended
31 December 2006 of 2.00p, paid on 29 March 2007 - 3,366
Final ordinary dividend in respect of the year ended
31 December 2007 of 3.00p, approved by shareholders
on 10 April 2008 4,731 -
Declared special dividend in respect of the year ended
31 December 2007 of 2.50p, paid on 17 April 2008 3,943 -
----- -----
8,674 7,573
===== =====
The total dividends payable for the year which form the basis of section 842 of
the Income and Corporation Taxes Act 1988 are set out below:
2008 2007
£'000 £'000
Dividends on equity shares:
Proposed final ordinary dividend of 5.50p (2007: 3.00p) 9,777 4,731
Special dividend of 2.50p - 3,943
-------- -----
9,777 8,674
-------- -----
9. Consolidated earnings per ordinary share
2008 2007
Net revenue attributable to ordinary shareholders (£'000) 9,831 13,391
Net capital (loss)/gain attributable to ordinary
shareholders (£'000) (776,690) 457,667
-------- -------
Total (loss)/gain attributable to ordinary
shareholders (£'000) (766,859) 471,058
-------- -------
The weighted average number of ordinary shares in
issue during each year, on which the undiluted
return per ordinary share was calculated, was: 174,283,731 162,326,817
The weighted average number of ordinary shares in
issue during each year, on which the diluted
return per ordinary share was calculated, was: 174,283,731 167,248,221
Undiluted
Revenue return per share 5.64p 8.25p
Capital (loss)/earnings per share (445.65p) 281.94p
-------- -------
Total earnings per share (440.01p) 290.19p
======== =======
Diluted
Revenue return per share 5.64p 8.01p
Capital (loss)/earnings per share (445.65p) 273.64p
-------- -------
Total earnings per share (440.01p) 281.65p
======== =======
There was no dilution to returns for the year ended 31 December 2008 as the
average share price was below the warrant exercise price.
10. Share capital
Ordinary Treasury
shares shares
number number Total
(nominal) (nominal) shares £'000
Authorised share capital
comprised:
Ordinary shares of 5p each 750,000,000 - 750,000,000 37,500
-----------------------------------------------------------------------------
Allotted, issued and fully
paid:
At 1 January 2008 157,700,479 14,442,800 172,143,279 8,607
Shares transferred into
treasury (250,000) 250,000 - -
Ordinary shares issued as a
result of warrants exercised 20,867,250 - 20,867,250 1,044
-----------------------------------------------------------------------------
At 31 December 2008 178,317,729 14,692,800 193,010,529 9,651
-----------------------------------------------------------------------------
During the year, 250,000 ordinary shares (2007: 14,442,800) were repurchased at
a cost of £1,399,000 (2007: £80,787,000) and were held in treasury at 31
December 2008.
The number of shares in issue at the year end was 193,010,529 of which
14,692,800 were held in treasury. The number of ordinary shares in issue at the
date of this report was 193,010,529, of which 15,249,600 were held in treasury.
On 29 February 2008, 20,867,250 warrants were exercised at an exercise price of
478p, for a total consideration of £99,745,455. At the year end there were
8,947,605 warrants outstanding, exerciseable at 565p per share.
11. Net asset value per ordinary share
2008 2007
Net assets attributable to ordinary shareholders (£'000) 590,927 1,268,120
The actual number of ordinary shares in issue at the
year end, on which the net asset value per ordinary
share was calculated, was: 178,317,729 157,700,479
Number of ordinary shares in issue for fully
undiluted/diluted net asset value 187,265,334 187,515,334
Net asset value per ordinary share - undiluted 331.39p 804.13p
Net asset value per ordinary share - diluted 331.39p 752.28p
Share price 252.50p 655.00p
Warrant price 2.50p 175.00p
At 31 December 2008, the 14,692,800 treasury shares were not dilutive, as the
share price was below the net asset value.
12. Publication of non statutory accounts
The financial information contained in this announcement does not constitute
statutory accounts within the meaning of section 435 of the Companies Act 2006.
The annual report and financial statements for the year ended 31 December 2008
will be filed with the Registrar of Companies after the Annual General Meeting.
The figures set out above have been reported upon by the Auditor, whose report
for the year ended 31 December 2008 contains no qualification or statement
under section 498(2) or (3) of the Companies Act 2006.
The comparative figures are extracts from the audited financial statements of
BlackRock World Mining Trust plc and its subsidiaries for the year ended 31
December 2007, which have been filed with the Registrar of Companies. The
report of the Auditor on those financial statements contained no qualification
or statement under section 498 of the Companies Act.
13. Annual Report
Copies of the annual report will be sent to members by no later than 23
February 2009 and will be available from the registered office, c/o The Company
Secretary, BlackRock World Mining Trust plc, 33 King William Street, London
EC4R 9AS. This report will also be available on BlackRock Investment
Management's website at www.blackrock.com.uk.
14. Annual General Meeting
The Annual General Meeting of the Company will be held at 33 King William
Street, London EC4R 9AS on Thursday, 23 April 2009 at 11.30 a.m.
For further information, please contact:
Jonathan Ruck Keene, Managing Director, Investment Companies, BlackRock
Investment Management (UK) Limited - Tel: 020 7743 2178
Graham Birch, Fund Manager, BlackRock Investment Management (UK) Limited -
Tel: 020 7743 2690
Emma Phillips, Media & Communication, BlackRock Investment Management (UK)
Limited - Tel: 020 7743 2922
OR
William Clutterbuck, The Maitland Consultancy - Tel: 020 7379 5151
12 February 2009
33 King William Street
London EC4R 9AS
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