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BlackRock World Mng (BRWM)

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Thursday 11 April, 2019

BlackRock World Mng

Portfolio Update

All information is at 31 March 2019 and unaudited.
Performance at month end with net income reinvested
One Three One Three Five
Month Months Year Years Years
Net asset value 3.5% 10.9% 6.7% 91.2% 13.0%
Share price 4.5% 10.5% 4.0% 91.3% 5.4%
EMIX Global Mining Index (Net) 4.9% 12.5% 13.6% 94.1% 32.2%
(Total return)
Sources: BlackRock, EMIX Global Mining Index, Datastream
At month end
Net asset value including income1: 422.80p
Net asset value capital only: 417.86p
1 Includes net revenue of 4.94p
Share price: 367.00p
Discount to NAV2: 13.2%
Total assets: £857.6m
Net yield3: 4.9%
Net gearing: 11.8%
Ordinary shares in issue: 176,330,242
Ordinary shares held in treasury: 16,681,600
Ongoing charges4: 0.9%
2 Discount to NAV including income.
3 Based on quarterly interim dividends of 3.00p per share declared on 25 April 2018, 17 August 2018 and 8 November 2018 and a final dividend of 9.00p per share announced on 28 February 2019 in respect of the year ended 31 December 2018.
4 Calculated as a percentage of average net assets and using expenses, excluding finance costs, for the year ended 31 December 2018.
Sector % Total Country Analysis % Total
Assets Assets
Diversified 44.9 Global 61.8
Copper 20.1 Latin America 12.7
Gold 15.6 Australasia 9.2
Industrial Minerals 6.6 Canada 6.0
Silver & Diamonds 6.0 Other Africa 2.0
Materials 1.1 South Africa 1.5
Aluminium 0.8 USA 1.4
Coal 0.6 Kazakhstan 1.0
Nickel 0.5 Indonesia 0.5
Zinc 0.5 Russia 0.5
Molybdenum 0.4 China 0.4
Iron Ore 0.1 Argentina 0.1
Current assets 2.8 Emerging Europe              0.1
Current assets 2.8
----- -----
100.0 100.0
===== =====
Ten Largest Investments 

% Total
BHP 10.7
Rio Tinto 9.2
Glencore 7.2
First Quantum Minerals 6.6
Vale 6.1
OZ Minerals Brazil - royalty 4.6
Teck Resources 3.3
Sociedad Minera Cerro Verde 3.3
Newmont Mining 2.9
Barrick Gold 2.5


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

The Company’s NAV increased by 3.5%1 in March, underperforming its reference index, the EMIX Global Mining Index (net return), which increased by 4.9%2

Global equity markets continued to rise in March, as displayed by the MSCI World Index returning 1.1%. The Federal Reserve, however, continued to be dovish, announcing that the US economy was slowing more than had been anticipated and therefore they were leaving interest rates unchanged. They also signalled little appetite for any rises in the near future. Geopolitical tensions also remained elevated throughout the month and the uncertainty surrounding the logistics of Brexit continued. Macroeconomic data was mixed, with noise around the yield curve inverting, combined with weak European PMIs (Purchasing Managers Index). (Figures in USD)

Within the mining sector, having performed strongly in January and February, we saw a degree of profit taking post company results. In terms of the mined commodities, the base metals were somewhat flat during the month, with the exception of zinc which increased by 6.6% on the back of supply side tightness. The iron ore (62% fe) price also remained elevated, finishing the month at a price of $87/tonne, as the market remains tight on the back of Vale’s suspension of production and the cyclone activity impacting production in Western Australia. (Figures in USD)

Within the Company, a number of the copper companies gave up some of their strong year-to-date performance during the month, with our positions in Ero Copper and First Quantum appearing amongst the largest detractors from relative performance.

Strategy and Outlook

We recognise that finding a resolution to the US/China trade war will be difficult. There appears to be bipartisan support in the US for a tough stance on China and it is unclear how the technology transfer issue can be resolved. However, our view is that the market may be overestimating the impact these trade tensions would have on global economic growth. Should we see even gradual improvements in relations between the two countries, we would expect mined commodity prices to improve. Meanwhile, our overall base case for China is that it has the tools to successfully manage a gradual slow-down and we do not anticipate a hard-landing type event.

Supply and demand is tight in most mined commodity markets today and, given the cuts in mining sector spending since 2012 (down 66%), we expect it to remain so. Our base case is therefore, barring an economic slowdown, mined commodity prices to be stable to rising through 2019. Meanwhile, we believe the shares are pricing in a materially worse commodity price environment. We see the risk-reward opportunity in mining as attractive given the improvements in balance sheets over the last 2-3 years and given many of the large diversified miners are trading on free cash flow yields of above 10%.

All data points are in GBP terms unless stated otherwise
1 Source: BlackRock as at 31 March 2019
2 Source: EMIX Global Mining Index as at 31 March 2019
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