Portfolio Update

BLACKROCK WORLD MINING TRUST plc  (LEI - LNFFPBEUZJBOSR6PW155)
All information is at 30 September 2017 and unaudited.
Performance at month end with net income reinvested
		One			Three				One	Three		Five
		Month			Months				Year	Years		Years
Net asset value		-7.7%			10.7%				20.1%	10.2%		-20.8%
Share price		-6.6%			9.7%				25.2%	2.9%		-17.3%
Euromoney Global Mining Index		-7.9%			10.4%				16.6%	19.7%		-8.9%
(Total return)
Sources: BlackRock, Euromoney Global Mining Index, Datastream
At month end
Net asset value including income1:								408.55p
Net asset value capital only:								401.10p
1 Includes net revenue of 7.45p
Share price:								363.00p
Discount to NAV2:								11.1%
Total assets:								£819.6m
Net yield3:								4.1%
Net gearing:								13.4%
Ordinary shares in issue:								176,455,242
Ordinary shares held in treasury:								16,556,600
Ongoing charges4:								1.10%
2 Discount to NAV including income. 3 Based on quarterly interim dividends of 3.00p per share declared on 4 May 2017 and 10 August 2017 in respect of the year ending 31 December 2017 and a final dividend of 9.00p per share in respect of the year ended 31 December 2016. 4 Calculated as a percentage of average net assets and using expenses, excluding finance costs, for the year ended 31 December 2016.
Sector	% Total					Country Analysis					% Total
	Assets										Assets
Diversified	48.4					Global					65.4
Copper	20.3					Latin America					11.3
Gold	17.3					Australasia					9.9
Silver & Diamonds	7.0					Other Africa					6.6
Industrial Minerals	5.6					Canada					4.3
Zinc	0.8					South Africa					0.8
Aluminium	0.2					Russia					0.4
Iron Ore	0.1					Kazakhstan					0.4
Net current assets	0.3					India					0.3
	-----					USA					0.2
	100.0					Emerging Europe					0.1
	=====					Net current assets					0.3
											-----
											100.0
											=====
Ten Largest Investments
Company				% Total Assets
BHP				9.7
Rio Tinto				9.5
Glencore				8.4
First Quantum Minerals				8.3
Vale				6.7
Lundin Mining				3.9
Teck Resources				3.9
Sociedad Minera Cerro Verde				3.4
Newmont Mining				3.2
South32				3.0

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

Performance

The Company’s NAV declined by 7.7% in September, whilst its benchmark, the Euromoney Global Mining Index, declined by 7.9% (performance in GBP terms). Sterling strengthened over the month with, for reference, the UK Pound Sterling Currency Index gaining 3.9%.

The mining sector saw some profit taking during the month and gave back some of its strong year-to-date performance. For reference, at the end of the month, the sector (as measured by the Company’s benchmark) remained up 18.5% year-to-date (in USD terms). Chinese economic data during the month was robust with the manufacturing PMI remaining above 50, indicating continued expansion. Mined commodity prices came under pressure almost across the board, having been at relatively elevated levels at the end of August. The bulk commodities were the worst performing, with the iron ore (62% fe) price down 20.0% to $62/tonne and the coking coal price down 13.2% to $164/tonne. This follows a strong run for iron ore in recent months as steel companies looked to restock and run mills hard in anticipation of winter curtailments. The gold price was also weak in September, falling 2.5%, on US dollar strength and geopolitical tensions easing somewhat between the US and North Korea.

Battery materials were the bright spot of the mining sector during the month. News flow was particularly supportive as Volkswagen doubled its commitment to electric vehicles, whilst China announced plans to ban internal combustion engines (although no timeline was given) and China’s electric vehicle sales came in at a record high. The Company’s battery material exposed names were key contributors to performance during the month.

Strategy and Outlook

Over the past 18 months we have seen a remarkable turnaround in the financial health of the mining sector. For some time we have been confident that January 2016 marked the bottom of the mining cycle as, back then, the market was concerned about a ‘hard-landing’ in China as well as mining companies’ stretched balance sheets. Today, balance sheets are in much better shape and, given current commodity prices, we are optimistic about a continued recovery in share prices. The mining sector has among the highest free cash flow yield out of any global sector and, given the improvement in balance sheets, we expect lower earnings volatility relative to the previous three years to help drive a re-rating.

Whilst the mining sector has performed strongly, we are only back at 2014 levels and still a very long way below the peak in 2011. Mined commodity prices still look elevated in some cases but, importantly, mining shares are still pricing in commodity prices well below current spot prices.

We recognize that China remains the key risk for investors in the mining sector but believe that the Chinese administration has shown itself willing and able to step in with support to avoid a ‘hard-landing’ type event. Reform measures put in place by the government across a range of industries, including steel, coal and aluminium, to tackle pollution and excess capacity has been more effective than many expected and have improved the profitability across a number of sectors, which we see as a key benefit in the longer-term. China should also benefit from a spillover effect from the wider improvements we have seen in global economic growth in recent months. Concerns mounted in Q2 2017 of this year that tighter credit conditions in the country could lead to a slowdown. However, economic data has continued to defy the sceptics and exceed expectations.

Meanwhile, commodity prices should also be supported by constraints on the supply side resulting from the underinvestment we have seen in the mining sector in recent years, with global mining sector capex down 66% since the peak in 2012. The key question for investors today is whether the mining companies can maintain the same level of capital discipline or will they slip back into bad habits? For now, we feel the pain of the recent down-cycle is still too fresh and rhetoric from management teams gives us optimism that the sector’s focus remains on shareholder returns.

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

16 October 2017

ENDS

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