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BlackRock World Mng (BRWM)

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Wednesday 19 December, 2018

BlackRock World Mng

Portfolio Update

All information is at 30 November 2018 and unaudited.
Performance at month end with net income reinvested
One Three One Three Five
Month Months Year Years Years
Net asset value -4.4% -4.2% -2.6% 104.2% 0.9%
Share price -2.8% -6.6% -7.1% 100.0% -2.2%
EMIX Global Mining Index (Net)* -2.7% -1.9% 0.4% 106.5% 14.7%
(Total return)
Sources: BlackRock, EMIX Global Mining Index, Datastream
* The Company’s performance benchmark (the EMIX Global Mining Total Return Index) may be calculated on either a Gross or a Net return basis. Net return (NR) indices calculate the reinvestment of dividends net of withholding taxes using the tax rates applicable to non-resident institutional investors, and hence give a lower total return than indices where calculations are on a Gross basis. As the Company is subject to the same withholding tax rates for the countries in which it invests, the NR basis is felt to be the most accurate, appropriate, consistent and fair comparison for the Company.
At month end
Net asset value including income1: 383.88p
Net asset value capital only: 375.67p
1 Includes net revenue of 8.21p
Share price: 331.00p
Discount to NAV2: 13.8%
Total assets: £791.0m
Net yield3: 4.7%
Net gearing: 12.1%
Ordinary shares in issue: 176,330,242
Ordinary shares held in treasury: 16,681,600
Ongoing charges4: 1.00%
2 Discount to NAV including income.
3 Based on quarterly interim dividends of 3.00p per share declared on 25 April 2018, 16 August 2018 and 8 November 2018 in respect of the year ending 31 December 2018 and a final dividend of 6.60p per share in respect of the year ended 31 December 2017.
4 Calculated as a percentage of average net assets and using expenses, excluding finance costs, for the year ended 31 December 2017.
Sector % Total Country Analysis % Total
Assets Assets
Diversified 44.0 Global 57.2
Copper 18.9 Latin America 12.0
Gold 14.0 Australasia 10.7
Silver & Diamonds 7.8 Canada 6.8
Industrial Minerals 6.8 Other Africa 4.3
Mining 1.0 USA 1.8
Aluminium 1.0 South Africa 1.1
Steel 0.8 Kazakhstan 0.7
Zinc 0.7 Russia 0.5
Nickel 0.4 Indonesia 0.4
Materials 0.4 Peru 0.2
Iron Ore 0.1 Argentina 0.1
Current Assets 4.1 Mexico 0.1
Current Assets 4.1
----- -----
100.0 100.0
===== =====
Ten Largest Investments 

% Total
Rio Tinto 9.4
BHP 9.4
Vale 8.9
Glencore 7.8
First Quantum Minerals 6.8
Teck Resources 4.5
Sociedad Minera Cerro Verde 3.3
Avanco Resources - royalty 2.7
Mountain Province Diamonds 2.7
Newmont Mining 2.4


Commenting on the markets, Evy Hambro and Olivia Markham, representing the Investment Manager noted:
The Company’s NAV decreased by 4.4% in November, underperforming its benchmark, the EMIX Global Mining Index (net return), which decreased by 2.7%.
November was a negative month for the mining sector as trade war concerns continued to weigh on global economic growth expectations. The US Treasury yield curve inverted during the month, with yields for some shorter-dated treasuries rising above those of some longer-dated ones. Importantly, however, the 10-year yield remained just above that of the 2-year. Inverting of the yield curve has been a reasonable predictor of an impending recession in the future. Market concerns also heightened around a potential faster-than-expected slowdown in China as economic indicators, such as manufacturing PMIs and loans data, continued to soften. Our base case is that China will successfully manage a gradual slowdown and it has been encouraging to see increased infrastructure spending coming through.
Amidst this macroeconomic backdrop, mined commodity performance was relatively resilient. We believe this reflects supply and demand in the physical markets for mined commodities still being reasonably healthy. Base metals performed well, with copper, zinc and aluminium up by 3.2%, 4.1% and 1.2% respectively. The precious metals also performed positively, with gold rising by 0.3%, as broader equity market weakness in the first half of the month stoked ‘safe-haven’ buying. Having held up well so far in 2018, the bulk commodities were weak in November, with the iron ore (62% fe) price falling by 13.9% for example. This appeared to reflect destocking by steel companies in response to declining margins and lower-than-expected winter production cuts. Whilst the move in iron ore was a sharp one, it is worth noting that the iron ore (62% fe) price has averaged $70/tonne this year which, for diversified miners with average costs of delivery of iron ore (62% fe) into China below $30/tonne, still indicates very strong margins. (Commodity returns in USD.)
The Company’s holdings in companies exposed to steel and iron ore were the main drag on relative performance during the month. Positions in BHP and Rio Tinto were among the largest detractors, for example.
On the positive side, our position in copper miner, Lundin Mining, was among the top performers. During the month, the company announced an increase to the life of mine at its Candelaria copper asset in Chile, as well as a share buyback.
Strategy and Outlook
After strong years in 2016 and 2017, this year has been more challenging for the mining sector so far. Sentiment has deteriorated on trade tensions and mined commodity prices have fallen across the board as a result. It has been interesting to see financially-traded commodities (e.g. copper, zinc and aluminium) underperforming the physically-traded ones (e.g. iron ore and steel), where investors are unable to speculate as much. This suggests to us that underlying fundamentals remain strong and weakness has been mainly driven by speculation. Meanwhile, underlying demand conditions in China appear to be stable, whilst we are seeing early signs of stimulus coming through. We believe we could be at peak pessimism around trade wars and are looking to add risk in the Company. Meanwhile, mining shares are trading on attractive multiples versus history and relative to broader equities. The sector is trading on close to its highest ever free cash flow yield, whilst relative price-to-book is close to a historic low. Finally, we believe the capital discipline story remains intact, as management teams remain focused on capital discipline and shareholder returns.
All data points are in GBP terms unless stated otherwise.
19 December 2018
Latest information is available by typing on the internet. 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.

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