Half-yearly Report
BLACKROCK WORLD MINING TRUST plc
Half yearly financial results for the six months ended 30 June 2011
Performance to 30 June 2011 Six months Five years
Net asset value per share:
- capital only -4.6% +97.2%
- with income reinvested -4.0% +106.0%
Ordinary share price:
- capital only -6.7% +86.3%
- with income reinvested -6.0% +94.9%
HSBC Global Mining Index*:
- capital only -7.8% +96.7%
- with income reinvested -7.1% +116.1%
* Adjusted for exchange rates relative to sterling.
A dividend of 6.00p per share went ex-dividend on 30 March 2011. Where
performance has income included, it is re-invested on the ex-dividend date.
Sources: BlackRock and DataStream.
Chairman's Statement
Overview
In the six month period to 30 June 2011, volatility continued to rule financial
markets and in turn mining equities. Ongoing civil unrest in the Middle East
and North Africa, flooding caused by heavy rainfall in Australia and the
effects of the Japanese earthquake and tsunami contributed to uncertainty in
the market and diminishing investor sentiment. In addition, global growth has
clearly slowed, with concerns over US economic growth, a slow down in the
Chinese economy and the continuing sovereign debt crisis in peripheral Europe.
Against this backdrop, in the first six months of the year, the Company's net
asset value declined by 4.0% and the share price fell 6.0% (both with income
reinvested). By comparison, the Company's benchmark, the HSBC Global Mining
Index, decreased by 7.1%. Further information on the Company's performance is
included in the Investment Manager's Report.
Since the period end, the Company's net asset value has decreased by 14.7%
compared to a fall of 16.1% in the benchmark index.
Award
I am pleased to report that the Company won the Investment Trusts magazine Best
Large Trust award for the year ended 2010. To be eligible, the Company had to
be ranked among the industry's top ten trusts.
Brokers
Oriel Securities Limited was appointed as joint broker to the Company in mid
June to work alongside JPMorgan Cazenove Limited. The Company had joint brokers
until 2008 and the Board agreed to reinstate these arrangements. It is
anticipated that Oriel will complement the existing broker in providing a
comprehensive broking service.
Subsidiary company
The Company's subsidiary, BlackRock Gold Limited, which was no longer trading,
was struck off the register on 29 March 2011 and dissolved on 5 April 2011.
Outlook
Whilst we are optimistic for the mining sector as the fundamentals continue to
look supportive, we are also aware of the increased risk to world growth from
debt issues in the OECD. Should these events lead to downgrades to global GDP
then mining companies, on the back of their strong balance sheets, are well
placed to ride out such a storm. We are also cognisant of the fact that your
Company has done well in the past from using its long term capital structure
to take advantage of dislocations between commodity market fundamentals and
share prices such as those we are seeing today.
A W Lea
10 August 2011
Interim Management Report and Responsibility Statement
The Chairman's Statement and the Investment Manager's Report give details of
the important events which have occurred during the period and their impact on
the financial statements.
Principal risks and uncertainties
The principal risks faced by the Company can be divided into various areas as
follows:
- Performance;
- Income/dividend;
- Regulatory;
- Operational;
- Resource; and
- Financial
The Board reported on the principal risks and uncertainties faced by the
Company in the Annual Report and Accounts for the year ended 31 December 2010.
A detailed explanation can be found on pages 18 and 19 of the Annual Report and
Accounts which is available on the website maintained by the Investment
Manager, BlackRock Investment Management (UK) Limited, at www.blackrock.co.uk/
brwm.
In the view of the Board, there have not been any changes to the fundamental
nature of these risks since the previous report and these principal risks and
uncertainties are equally applicable to the remaining six months of the
financial year as they were to the six months under review.
Related party transactions
The Investment Manager is regarded as a related party and details of the
management fees payable are set out in note 3. The related party transactions
with the Directors are set out in note 8.
Directors' responsibility statement
The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority
require the Directors to confirm their responsibilities in relation to the
preparation and publication of the Interim Management Report and Financial
Statements.
The Directors confirm to the best of their knowledge that:
- the condensed set of financial statements contained within the half yearly
financial report has been prepared in accordance with International
Accounting Standard 34 "Interim Financial Reporting"; and
- the Interim Management Report, together with the Chairman's Statement and
Investment Manager's Report, include a fair review of the information
required by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency
Rules.
The half yearly financial report was approved by the Board on 10 August 2011
and the above responsibility statement was signed on its behalf by the
Chairman.
A W Lea
For and on behalf of the Board
10 August 2011
Investment Manager's Report
As we set out to write this report it was with incredulity that we looked back
over the last six months and saw just how similar this year has been compared
to the first half of last year. In both cases, the mining sector started the
year on a wave of optimism only to be buffeted by the macro headwinds of
tightening monetary policy in China leading to fears of a "hard-landing" for
their economy and slower than expected OECD growth leading to concerns of a
"double-dip". The Japanese earthquake and subsequent tsunami in March further
added to fears over the strength of the global economy as the extent of the
damage and the longer term impact of the Fukushima nuclear disaster became
fully understood.
Europe and the US have been struggling to deal with the aftermath of the 2008
financial crisis and this has weighed heavily on investor sentiment just as it
did last year. Greece and other economies in Europe are facing severe
structural issues that have no immediate resolution. The fear of contagion, were
one of these countries to default, dominated market sentiment during May and
June and whilst the bail out of Greece by the European Central Bank in June
provided some relief, the fragile state of the global financial system is likely
to continue to be a concern for some time to come.
Against this backdrop, metal prices have in general proven to be remarkably
resilient as demand has remained robust, particularly from the emerging
markets, and supply side issues have kept the market tight for many
commodities. In our view, cash flow generation in the mining sector should be
at record levels and, with minimal balance sheet debt, returning surplus cash to
shareholders is becoming fashionable. Companies are choosing a variety of tools
such as dividend increases, special dividends and share buybacks and we applaud
the increasing transparency with which they are conducting this process. Despite
this, the mining sector has underperformed equity markets as a whole as macro
concerns have outweighed the strong underlying fundamentals for the industry.
Déjà vu
This year the gyrations of macro events around the globe appear to have been
the most significant drivers of share price moves. Market attention has been
focused on the uncertainties surrounding US, European and Chinese economic
growth. Monetary tightening in China has continued unabated. In the US, the
Government has moved from declaring an end to quantitative easing earlier in
the year to most recently reopening the door to a similar policy but under a
different name. In Europe, the continued debt default saga has raged but with
attention shifting from Ireland to Greece to Portugal to Spain and, more
recently, Italy. With the benefit of hindsight it is easy to see why equity
valuations have been challenged given the high level of uncertainty around the
world.
In addition, 2011 has seen a repeat of the resource nationalism trend impacting
the mining sector. Throughout the world the resources sector is increasingly
being seen as a soft target from which governments can raise tax revenues.
Proposals to increase taxes have been common place with Brazil, Tanzania,
Western Australia, Mauritania and even the UK (North Sea Oil) seeking to do so.
In Peru, the election of President Humala, whose manifesto included
increases in taxes for the mining industry, led to material falls in the value
of mining companies with assets in the country. The Company has always had a
high exposure to Peru given its large endowment of natural resources,
especially copper. At the height of speculation around the election result,
this led to severe volatility in share prices and the Company was not able to
shelter from this.
Other countries have raised the prospect of more extreme measures such as
nationalisation in South Africa and indigenisation in Zimbabwe. The new Prime
Minister of Australia, apparently not having learnt anything from last year's
Minerals Resource Rent Tax debacle, has proposed a deeply unpopular Carbon Tax.
All of these moves around the world should only serve to increase the chance
that investments into new mines are delayed and this in turn is likely to push
out supply growth. For markets where the supply and demand balance is already
precarious, such as copper, this could lead to spikes in prices should short
term disruptions occur.
Merger and acquisition ("M&A") activity continued the trend set last year with
many deals either started or consummated during the period. Rio Tinto returned
to the market with the purchase of Riversdale Mining whose main assets are high
energy coal projects in Mozambique. Lundin Mining was the subject of a hostile
approach which was eventually thwarted as the aggressor, Equinox Minerals, was
purchased by Barrick Gold. In the gold sector, Newmont Mining made an all cash
offer for Frontier and Newcrest Mining announced the formation of a new
intermediate gold company by merging two of its non core assets with those of
two other smaller gold producers.
Selected commodity price changes
% change % change
Price over six months average
Commodity 30 June 2011 to 30 June 2011 H1 2011/H1 2010
Zinc US$/lb 1.06 -4.2 7.5
Platinum US$/oz 1,722.00 -1.9 12.1
Aluminium US$/lb 1.14 1.7 19.9
Nickel US$/lb 10.61 -5.3 20.3
Iron Ore 62.5% Fines US$/t 133.50 -22.0 23.0
Lead US$/lb 1.21 4.2 23.5
Gold Bullion US$/oz 1,510.78 6.6 25.7
Thermal Coal (Newcastle) US$/t 97.31 -22.0 28.2
Copper US$/lb 4.27 -2.5 31.6
Coking Coal US$/t 211.00 -15.2 47.4
Uranium US$/t 54.25 -13.2 47.9
Tin US$/lb 11.78 -3.5 67.4
Silver US$/oz 35.02 14.3 99.7
Sources: DataStream and Macquarie. All spot prices.
Base metals
Despite the volatility seen during the first half of the year, the suite of
base metal prices have remained at very healthy levels and this is obviously
key for company earnings. Prices measured from the end of 2010 to the end of
the first half of the year are marginally down as a group, with the exceptions
being aluminium and lead. However, when looked at on average for the first half
of 2010 versus the first half of 2011, the prices are up markedly. The most
important move for the portfolio is the 32% increase in the average price of
copper. Significant disruptions to copper production as a result of weather,
strikes and most importantly grade decline at large mature mines, has seen
overall supply undershoot forecasts by at least half a million tonnes year to
date. With the copper market already in deficit these lost tonnes further
support current price levels.
Outside of the metal price moves, we have also seen a pick up in the corporate
activity in the copper sector. This year, two major hostile bidding battles
have taken place with the Barrick Gold purchase of Equinox Minerals and
Jinchuan's bid for Metorex. Your Company was a major beneficiary of the first
deal given the large holding in Equinox, which for the most part was purchased
during the financial crisis. One of the likely outcomes of these deals should
be a revision to market expectations for long term copper prices, as both
transactions seem to have used price assumptions well above the current
consensus.
The rest of the base metal suite is of limited importance to the portfolio due
to the low level of exposure to pure producers of these metals, with the
exception of tin. The Company has maintained a holding in Minsur, a Peruvian
in producer, for many years and with the gains made in the price of tin in
prior years and supply constraints starting to restrict existing producers
the outlook is bright. We also have a small holding in Metals X initiated in
November 2010, whose main asset is the Renison tin mine in Tasmania.
Gold and precious metals
The bull market in precious metal prices continued unabated this year with gold
moving to a new all time high and silver almost breaching the historic high of
US$50/oz set in 1980. Gold continues to benefit from market concerns over the
levels of European and US sovereign debt as both face challenges in meeting
debt obligations during the year. Emerging market Central Banks remain keen to
increase exposure to gold as they seek to diversify risk away from holdings of
US dollars and Euros. The leading name this year has been Mexico who announced
the purchase of just less than 100 tonnes of gold during the first few months
of 2011.
One of the largest gold holdings in the Company's portfolio, Newcrest Mining,
had significant exploration success at its Wafi-Golpu project in Papua New
Guinea. This is a joint venture with South African gold miner Harmony and
drilling results released over the course of the last six months have revealed
this to be a world class copper-gold ore body, both in terms of size and grade.
Drilling continues and a pre-feasibility study for the project is due early
next year.
In silver, the price volatility has been extreme with a high of just under
US$50/oz reached on 28 April, only for prices to fall sharply a few days later.
The Company's holdings in silver producers have done well this year despite the
volatility in the silver price itself. Fresnillo and its parent company,
Penoles, continue to report excellent results from both developed mines and
exploration projects.
Exposure to platinum producers has been cut significantly during the period as
the difficulties of mining platinum group metals in South Africa continue to
worsen. The pressure on margins from union wage demands, higher power prices,
the strong currency and Government interference have reduced the likely rate of
return for these companies to levels well below other mining companies.
Nonetheless, we continue to hold shares in specific companies that should be
able to ride out these difficult conditions.
Diversified mining and industrial metals
The general derating of mining shares has been led by the large diversified
mining companies. Most diversified mining companies now trade on multiples
close to the bottom of a new range which itself is substantially below historic
levels. Without a concrete reason for this shift, we have to believe that the
combination of the prevailing macro uncertainties and a lack of confidence that
the companies will share the high margins with investors have led to the
current situation.
One of the key drivers behind the financial performance of the diversified
mining companies has been the continued strength of the price of iron ore.
Price levels surged to new highs during the last six months and, despite
forecasts for significant supply growth in the next few years, prices have
remained close to record levels. It appears that restrictions on Indian iron
ore exports, combined with delays to supply from new projects, have reined in
supply whilst demand has remained high. In addition, the shape of the iron ore
cash cost curve has not only become elongated but also steepened considerably
during the last two years. This latter fact is key when thinking about how long
the low cost producers will be able to enjoy above average margins.
In the portfolio, the decision to reduce exposure to Vale last year and
reinvest the proceeds in a portfolio of iron ore companies has paid significant
dividends. The breadth of the Company's exposure has now expanded to include a
range of mid cap emerging producers whose projects should come into production
prior to the end of 2011. Normally, moving from a developer to a producer is
accompanied by a rerating of the share price and we are confident that these
investments should enjoy the same outcome.
Coking and thermal coal prices have been supported by significant disruptions
to global supply following extreme weather events earlier this year. Record
levels of flooding in Queensland impacted over half of the world's sea-borne
coking coal production as damage from the heavy rains closed mines. The price
of hard coking coal surged in February to levels not seen since early 2008 and
this in turn lifted prices of semi-soft and lower quality coking coal. The
tightness in the market has been driven by a shift in seaborne markets with
China and India moving from net exporters to net importers in recent years. If
this trend remains intact then coal markets could go through a similar shift in
pricing to that which we have seen in iron ore. Recent additions to the
portfolio in the coal sector are likely to benefit from such a shift.
A key event for the Company this year was the Initial Public Offering ("IPO")
of Glencore. In December 2009, the Company established a significant position
in bonds that are convertible into Glencore ordinary shares. As a result of the
IPO in May 2011, these bonds are now priced with reference to moves in the
underlying shares. This resulted in an over 40% uplift in value for the bonds as
at the end of the period adding considerable value to what was already a large
part of the overall portfolio. We have maintained the investment in the bonds
for the time being, as we expect Glencore to be able to capitalise on the new
financial freedom it has as a result of being listed.
One area of severe weakness this year has been the uranium sector. The terrible
events that accompanied the Japanese tsunami have led to a number of countries
placing nuclear power investment decisions either on hold or, in the case of
Germany, announcing its intention to close down its nuclear capacity altogether.
The uncertainty this places on the outlook for uranium demand led to a fall in
the price of the commodity and even bigger falls in the value of uranium producers.
The industrial minerals sector has enjoyed a renaissance during the last year
or so and this has led to a revival of two key long term holdings, Iluka
Resources and Kenmare Resources. The former has been a holding in the Company
for many years and it is only now that the combined effect of surging demand
for mineral sands and limited new supply has led to a major upwards move in the
price of these commodities. The share price of Iluka this year has risen by 87%
(in sterling terms) and we are hopeful for further strong performance as the
company starts to harvest gains from investments made several years ago.
Kenmare is a slightly different story as their mine only reached full capacity
this year after many challenges to get it to full production. However, timing
could not have been better and they appear set to enjoy selling their
production into a market with increasingly supportive fundamentals.
Derivatives activity
The Company from time to time enters into derivatives contracts, mostly
involving the sale of "puts" and "calls". The option premia are taken to
revenue, unless the option represents a part of a larger capital transaction,
and are subject to strict Board guidelines which limit their magnitude to an
aggregate 10% of the portfolio.
Gearing
At 30 June 2011, the Company had £49.5 million of net debt (3.0%). At
30 June 2010 and 31 December 2010, gearing amounted to £27.3 million and
£30.8 million respectively.
Outlook
In the absence of macro driven demand destruction, continued supply side
constraints, coupled with low levels of above ground stocks, look set to
keep commodity prices that are key for companies held in the Company, at
attractive levels. At the same time, it is important to recognise that
macro risks have risen, especially in recent days. Risk appetite amongst
investors has rapidly deteriorated on the back of troubles in the
European Sovereign debt market and the problems this might cause for
European Bank balance sheets. In addition, the last minute increase to
the US debt ceiling and the S&P downgrade to US debt have compounded
concerns for growth in the OECD nations.
These events are likely to lead to the US Government changing tack towards
some sort of third phase of quantitative easing (“QEâ€) and the recent
unprecedented commitment from the FOMC to keep interest rates low until
2013 could be the start of this process. Last year the actions surrounding
QEII resulted in both metal prices and share prices moving higher. Another
important catalyst would be if China begins to soften its stance on monetary
tightening as inflation pressures begin to ease. If monetary policy around
the world moves to prevent the stalling of the global economic recovery
then we would expect mining sector valuations to improve. In addition,
given mining companies’ strong balance sheets, the risk to valuations from
a worse than expected economic environment is significantly lower than in
previous years.
At the time of writing, the large mining companies have delivered record
earnings despite cost pressures from raw material inputs and labour wage
inflation. We expect commodity prices that are important to the portfolio
to be well supported by supply side constraints and the resilience of
these prices during the recent bout of stock market falls gives us
confidence that margins should remain robust. Mining companies have also
continued to accrue cash during the year and we are hopeful that this
will be shared with investors either by higher dividends or further
share buybacks.
Evy Hambro and Catherine Raw
BlackRock Investment Management (UK) Limited
10 August 2011
Ten Largest Investments
30 June 2011
Rio Tinto* - 9.8% (2010: 9.4%) is the world's third largest mining company by
market capitalisation. It has interests over a broad range of metals and
minerals including iron ore, aluminium, copper, coal, industrial minerals, gold
and uranium. The company faced a challenging period following the financial
crisis in which it was compelled to hold a rights issue in order to fund its
short term debt requirements. With the recovery in commodity prices and strong
operational performance, the company's balance sheet is now on a much stronger
footing. In June 2011, Rio Tinto completed the acquisition of Riversdale Mining
for US$4 billion; this provides Rio with a strategic foothold in the Moatize
coking coal basin in Mozambique. Also in June 2011, the company announced it
had increased its ownership to 46.5% of Ivanhoe Mines, whose main asset is the
Oyu Tolgoi copper-gold development project in Mongolia.
BHP Billiton - 7.0% (2010: 6.8%) 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. In the past few years, its M&A ambitions have been thwarted by the
European regulators with regards to its attempted takeover and then proposed
joint venture with Rio Tinto, as well as the Canadian Government's rejection of
its bid for Potash Corp. In 2011, the company has changed strategic tack,
moving into US onshore shale gas through the successful acquisition of
Chesapeake Energy's Fayetteville Shale assets for US$4.75 billion and most
recently through a friendly bid for Petrohawk worth US$12.1 billion.
Vale - 6.7% (2010: 6.7%), formerly known as CVRD, 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 which considerably broadened the
company's asset mix. More recently they have ventured into the fertiliser
sector, Zambian copper and Guinean iron ore. In April 2011, the CEO resigned
amid media speculation that he was pressured to do so by the new Brazilian
Government.
Glencore+ - 5.8% (2010: 3.6%) is a leading, diversified natural resources group
with activities in mining, smelting, refining, processing and marketing of
metals and minerals, energy products and agricultural products globally. It
provides financing, logistics, marketing and purchasing services to producers
and consumers of commodities. These activities are supported by investments in
industrial assets operating in Glencore's core commodity areas, including a 35%
stake in Xstrata. The company successfully listed on the London Stock Exchange
in May 2011.
Teck Resources* - 5.2% (2010: 6.4%) is a Canadian diversified miner that is a
leader in the production of metallurgical coal and zinc, as well as a
significant producer of copper. In September 2008 the company acquired Fording
Coal Trust, which owned a 60% non-operating interest in Teck's metallurgical
coal operations. With the onset of the financial crisis in the second half of
2008, the company looked unable to refinance its short term debt. However, Teck
was able to strengthen its balance sheet through the course of 2009 and 2010
through the sale of its gold and other non-core assets, the renegotiation and
extension of its debt facilities, a bond issuance worth US$4.3 billion, and a
private placement of 17.2% of the company to China Investment Corporation.
First Quantum Minerals - 4.9% (2010: 3.9%) is an integrated copper producer
whose principal operating assets are in Africa, but which also has nickel
development projects in Australia and Finland. In September 2009, its Kolwezi
mine was confiscated by the Government of the Democratic Republic of Congo
("DRC"); in August 2010 they subsequently confiscated First Quantum's Frontier
copper operation. The Kolwezi project has since been sold and Eurasian Natural
Resources Corp. ("ENRC"), the London listed diversified miner, subsequently
purchased a majority stake. First Quantum has commenced legal proceedings both
against the DRC Government and ENRC's subsidiary. In December 2009, the company
acquired the Ravensthorpe nickel mine from BHP Billiton for US$340 million,
significantly less than BHP Billiton had spent to develop the operation. This
is due to come into production in the second half of 2011.
Minas Buenaventura - 4.2% (2010: 5.5%) is Peru's premier precious metals
company. Its main asset is a 43.65% stake in the Yanacocha gold mine in Peru,
which it jointly owns with Newmont Mining. The company operates seven mines in
Peru, has a controlling interest in zinc miner Minera El Brocal, and an 18.5%
interest in copper miner Cerro Verde. In addition, the company has a
significant exploration portfolio, including the Chucapaca project in southern
Peru which it has joint ventured with Gold Fields Limited.
Freeport McMoRan - 3.9% (2010: 3.5%) is one of the largest copper producers in
the world. It is also a significant producer of molybdenum and gold. The
company has a large portfolio of assets including the Grasberg mining complex
in Indonesia, the world's largest copper and gold mine. In 2007, the company
merged with Phelps Dodge, an Americas-focused copper and molybdenum miner. In
October 2010, Freeport successfully came through a review by the Government of
the Democratic Republic of Congo of the mining license for its Tenke Fungurume
operation. This allows the company to proceed with an intended expansion of the
operation.
Iluka Resources - 3.8% (2010: 1.9%) is a mineral sands producer. It is the
world's largest producer of zircon, representing approximately one third of
global production, and a significant producer of the titanium minerals:
ilmenite, rutile and synthetic rutile. Zircon is predominantly used in the
production of ceramics, including tiles, sanitary ware and tableware. Titanium
dioxide is the principal feedstock for pigment production for paints. Both
commodities have seen particularly strong price performance over the last
twelve months as demand out of Asia has recovered post financial crisis but
supply growth has been limited.
Fresnillo - 3.4% (2010: 4.4%) is the world's largest primary silver producer
and Mexico's second largest gold producer. The company has three producing
operations and a portfolio of high quality development and exploration
projects. Industrias Penoles, one of Mexico's leading mining companies, owns
77% of the company; the remainder is publicly listed on the London Stock
Exchange.
*Includes fixed interest securities.
+Convertible bond.
All percentages reflect the value of the holding as a percentage of total
investments. Percentages in brackets represent the value of the holding as at
31 December 2010.
Portfolio Analysis
30 June 2011
Commodity Exposure*
BlackRock World Mining Trust plc HSBC Global Mining Index
30 June 2011 31 December 2010 30 June 2011
% % %
Aluminium 1.3 1.5 3.2
Zinc 1.6 1.0 0.9
Platinum 4.1 5.9 2.3
Coal 4.6 4.8 8.1
Silver & Diamonds 7.1 8.0 3.2
Gold 8.9 10.8 19.5
Copper 17.8 19.7 8.3
Diversified 41.7 40.5 49.0
Other 12.9 7.8 5.5
Geographical Exposure*
30 June 2011 31 December 2010
% %
Global 45 40
Latin America 17 20
Australia 13 13
South Africa 7 9
USA 2 3
Canada 2 2
Europe - 1
Other 14*** 12**
* Based on the principal commodity exposure and place of operation of each
investment.
** Consists of Botswana, Republic of Congo, DRC, India, Indonesia, Kazakhstan,
Lesotho, Mozambique, Russia, Sierre Leone, Zambia and Zimbabwe.
*** Consists of Botswana, Republic of Congo, DRC, Eritrea, Indonesia,
Kazakhstan, Lesotho, Mongolia, Mozambique, Oman, Russia, Senegal, Sierre Leone,
Zambia and Zimbabwe.
Source: BlackRock.
Investments
30 June 2011
Main Market
geographical value % of
exposure £'000 investments
Diversified
Rio Tinto* Global 164,647 9.8
BHP Billiton Global 117,696 7.0
Vale Global 111,693 6.7
Glencore+ Global 96,935 5.8
Teck Resources* Global 87,402 5.2
Anglo American Global 42,448 2.5
African Rainbow Minerals South Africa 34,436 2.0
Xstrata Global 27,430 1.6
Vedanta Global 13,944 0.8
Eurasian Natural Resources Kazakhstan 3,908 0.2
RTZ Zimbabwe Zimbabwe 1,334 0.1
Grafton Resources# Global 234 0.0
------- ----
702,107 41.7
------- ----
Copper
First Quantum Minerals Zambia 83,020 4.9
Freeport McMoRan Global 65,876 3.9
Antofagasta Chile 41,820 2.5
Cerro Verde Peru 36,532 2.2
Oz Minerals Australia 29,620 1.8
Kazakhmys Kazakhstan 13,800 0.8
Katanga Mining Democratic Republic of Congo 8,047 0.5
Anvil Mining Democratic Republic of Congo 5,906 0.4
Grupo Mexico Mexico 4,107 0.2
Rex Minerals Australia 3,964 0.2
Ivanhoe Mines Mongolia 3,144 0.2
Gentor Resources# Oman 2,076 0.1
Mawson West Democratic Republic of Congo 1,239 0.1
Southern Copper Peru 807 0.0
Discovery Metals Botswana 800 0.0
------- ----
300,758 17.8
------- ----
Gold
Minas Buenaventura Peru 70,682 4.2
Newcrest Mining Australia 47,779 2.8
IAMGOLD Canada 17,523 1.1
Kinross Gold Global 6,377 0.4
G Resources Indonesia 5,295 0.3
Minera IRL Peru 1,807 0.1
Sunridge Gold Eritrea 478 0.0
------- ---
149,941 8.9
------- ---
Silver & Diamonds
Fresnillo Mexico 57,482 3.4
Industrias Penoles Mexico 41,940 2.5
Gem Diamonds Lesotho 6,879 0.5
Harry Winston Diamond Canada 6,049 0.4
Petra Diamonds South Africa 2,244 0.1
Dia Bras Exploration Peru 2,164 0.1
Lucara Diamond Botswana 2,152 0.1
------- ---
118,910 7.1
------- ---
Coal
Peabody Energy USA 29,345 1.8
Coal & Allied Australia 28,130 1.7
Aquila Resources Australia 8,594 0.5
Australian Energy# Australia 3,568 0.2
Bumi Resources Indonesia 3,187 0.2
Coal of Africa South Africa 2,250 0.1
Petmin South Africa 1,579 0.1
Ncondezi Mozambique 469 0.0
Cokal Australia 250 0.0
------ ---
77,372 4.6
------ ---
Platinum
Impala Platinum South Africa 55,200 3.3
Aquarius Platinum South Africa 11,276 0.7
Anglo American South Africa 1,435 0.1
Platmin Mining South Africa 875 0.0
------ ---
68,786 4.1
------ ---
Zinc
Nyrstar Global 21,147 1.3
Volcan Peru 2,865 0.2
Soc Min El Brocal Peru 2,518 0.1
------ ---
26,530 1.6
------ ---
Aluminium
Alumina Australia 15,477 0.9
Rusal Russia 6,775 0.4
------ ---
22,252 1.3
------ ---
Other
Iluka Resources Australia 63,629 3.8
African Minerals*# Sierra Leone 29,098 1.7
Atlas Iron Australia 24,740 1.5
London Mining Sierra Leone 20,247 1.2
Zanaga Iron Ore Republic of Congo 18,093 1.1
Minsur Peru 17,233 1.0
Kenmare Resources Mozambique 13,681 0.8
Ivanhoe Nickel & Platinum# South Africa 9,217 0.6
UEX Canada 6,131 0.4
IRC Russia 3,826 0.2
Mineral Deposits Senegal 3,434 0.2
African Iron Republic of Congo 2,821 0.2
Equatorial Resources Republic of Congo 2,761 0.1
Metals X Australia 2,350 0.1
Bindura Nickel Zimbabwe 137 0.0
------- ----
217,398 12.9
--------- -----
Portfolio 1,684,054 100.0
========= =====
* Includes fixed interest securities.
# Investments held at Directors' valuation.
+ Convertible bond.
All investments are in equity shares unless otherwise stated.
The total number of investments as at 30 June 2011 was 74 (31 December 2010:
67).
Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2011
Revenue £'000 Capital £'000 Total £'000
Six months Six months Year Six months Six months Year Six months Six months Year
ended ended ended ended ended ended ended ended ended
30.06.11 30.06.10 31.12.10 30.06.11 30.06.10 31.12.10 30.06.11 30.06.10 31.12.10
Notes (unaudited)(unaudited)(audited) (unaudited)(unaudited)(audited) (unaudited) (unaudited) (audited)
Income from
investments
held at
fair value
through
profit
or loss 2 19,665 14,593 29,517 - - - 19,665 14,593 29,517
Other
income 2 1,649 2,029 2,822 - - - 1,649 2,029 2,822
------ ------ ------ ------ ------ ------ ------ ------ ------
Total
revenue 21,314 16,622 32,339 - - - 21,314 16,622 32,339
------ ------ ------ ------ ------ ------ ------ ------ ------
(Losses)/
gains on
investments
held at
fair value
through
profit or
loss - - - (80,536) (51,205) 535,332 (80,536) (51,205) 535,332
Realised
losses
on foreign
exchange - - - (2) (3,937) (1,914) (2) (3,937) (1,914)
------ ------ ------ ------ ------ ------- ------ ------ -------
21,314 16,622 32,339 (80,538) (55,142) 533,418 (59,224) (38,520) 565,757
------ ------ ------ ------ ------ ------- ------ ------ -------
Expenses
Investment
management
fee 3 (10,513) (7,936) (18,026) - - - (10,513) (7,936) (18,026)
Other
expenses 4 (494) (468) (999) - - - (494) (468) (999)
------ ----- ------ ------ ------ ------ ------ ----- ------
Total
operating
expenses (11,007) (8,404) (19,025) - - - (11,007) (8,404) (19,025)
------ ----- ------ ------ ------ ------ ------ ----- ------
Profit/
(loss)
before
finance
costs and
taxation 10,307 8,218 13,314 (80,538) (55,142) 533,418 (70,231) (46,924) 546,732
------ ----- ------ ------ ------ ------- ------ ------ -------
Finance
costs (287) (329) (516) - - - (287) (329) (516)
------ ----- ------ ------ ------ ------- ------ ------ -------
Profit/
(loss)
before
taxation 10,020 7,889 12,798 (80,538) (55,142) 533,418 (70,518) (47,253) 546,216
------ ----- ------ ------ ------ ------- ------ ------ -------
Taxation (779) (593) (1,131) 2,838 - (4,063) 2,059 (593) (5,194)
------ ----- ------ ------ ------ ------- ------ ------ -------
Profit/
(loss)
for the
period 6 9,241 7,296 11,667 (77,700) (55,142) 529,355 (68,459) (47,846) 541,022
------ ----- ------ ------ ------ ------- ------ ------ -------
Earnings
per
ordinary
share 6 5.21p 4.10p 6.57p (43.77p) (31.02p) 297.90p (38.56p) (26.92p) 304.47p
------ ----- ----- ------ ------ ------- ------ ------ -------
The total column of this statement represents the Consolidated Statement of
Comprehensive Income, prepared in accordance with International Financial
Reporting Standards ("IFRS"), as adopted by the European Union ("EU"). 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 period. All income is attributable to the equity
holders of BlackRock World Mining Trust plc. There were no minority interests.
The final dividend of 6.00p per share in respect of the year ended
31 December 2010 was declared on 24 February 2011 and paid on 11 May 2011. This
can be found in the Consolidated Statement of Changes in Equity for the six
months ended 30 June 2011. The net loss for the Company for the period was
£68,459,000 (six months ended 30 June 2010: loss of £47,846,000; year ended
31 December 2010: profit of £541,022,000). The Group does not have any other
recognised gains or losses. The net return for the period disclosed above
represents the Group's total comprehensive income.
Consolidated Statement of Changes in Equity
for the six months ended 30 June 2011
Ordinary Share Capital
share premium Special redemption Capital Revenue
capital account reserve reserve reserves reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
For the six
months ended
30 June 2011
(unaudited)
At
31 December 2010 9,651 127,155 118,210 22,779 1,398,963 31,265 1,708,023
Total
comprehensive
income:
Net (loss)/
profit for
the period - - - - (77,700) 9,241 (68,459)
Dividend paid
of 6.00p
per share (a) - - - - - (10,653) (10,653)
----- ------- ------- ------ --------- ------- ---------
At 30 June 2011 9,651 127,155 118,210 22,779 1,321,263 29,853 1,628,911
----- ------- ------- ------ --------- ------- ---------
For the six
months ended
30 June 2010
(unaudited)
At
31 December 2009 9,651 127,155 119,578 22,779 869,608 28,042 1,176,813
Total
comprehensive
income:
Net (loss)/
profit for
the period - - - - (55,142) 7,296 (47,846)
Dividend paid
of 4.75p
per share (b) - - - - - (8,444) (8,444)
----- ------- ------- ------ -------- ------ ---------
At 30 June 2010 9,651 127,155 119,578 22,779 814,466 26,894 1,120,523
----- ------- ------- ------ -------- ------ ---------
For the year
ended
31 December 2010
(audited)
At
31 December 2009 9,651 127,155 119,578 22,779 869,608 28,042 1,176,813
Total
comprehensive
income:
Net profit for
the period - - - - 529,355 11,667 541,022
Shares purchased
during the
year (c) - - (1,368) - - - (1,368)
Dividend paid
of 4.75p
per share (b) - - - - - (8,444) (8,444)
----- ------- ------- ------ --------- ------ ---------
At 31 December 2010 9,651 127,155 118,210 22,779 1,398,963 31,265 1,708,023
----- ------- ------- ------ --------- ------ ---------
(a) The final dividend for the year ended 31 December 2010, declared on
24 February 2011 and paid on 11 May 2011.
(b) The final dividend for the year ended 31 December 2009, declared on
18 February 2010 and paid on 28 April 2010.
(c) Held in treasury.
The transaction costs incurred on the acquisition and disposal of investments
are included within the capital reserves. Purchase and sale costs amounted to
£376,000 and £260,000 respectively for the period ended 30 June 2011 (six
months ended 30 June 2010: £163,000 and £149,000; year ended 31 December 2010:
£413,000 and £226,000).
Consolidated Statement of Financial Position
as at 30 June 2011
30 June 30 June 31 December
2011 2010 2010
£'000 £'000 £'000
Notes (unaudited) (unaudited) (audited)
Non current assets
Investments held at fair
value through profit or
loss 1,684,054 1,144,804 1,758,274
--------- --------- ---------
Current assets
Cash and cash equivalents 11,584 - -
Other receivables 1,810 2,214 1,299
Amounts due from brokers - 5,060 -
--------- --------- ---------
13,394 7,274 1,299
--------- --------- ---------
Total assets 1,697,448 1,152,078 1,759,573
--------- --------- ---------
Current liabilities
Other payables (5,959) (4,218) (6,068)
Amounts due to brokers (312) - (10,599)
Taxation payable (132) - -
Bank loans (61,042) (26,068) (24,910)
Bank overdrafts - (1,269) (5,910)
--------- --------- ---------
(67,445) (31,555) (47,487)
--------- --------- ---------
Total assets less current
liabilities 1,630,003 1,120,523 1,712,086
Non current liabilities
Deferred tax (1,092) - (4,063)
--------- --------- ---------
Net assets 1,628,911 1,120,523 1,708,023
--------- --------- ---------
Equity attributable to
equity holders
Ordinary share capital 7 9,651 9,651 9,651
Share premium account 127,155 127,155 127,155
Special reserve 118,210 119,578 118,210
Capital redemption reserve 22,779 22,779 22,779
Capital reserves 1,321,263 814,466 1,398,963
Revenue reserve 29,853 26,894 31,265
--------- --------- ---------
Total equity 1,628,911 1,120,523 1,708,023
--------- --------- ---------
Net asset value per
ordinary share 6 917.50p 630.35p 962.06p
--------- --------- ---------
Consolidated Cash Flow Statement
for the six months ended 30 June 2011
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Net cash (outflow)/inflow from
operating activities before financing (7,983) 26,994 22,856
------- ------- -------
Financing activities
Purchase of ordinary shares - - (1,368)
Drawdown of loans 36,079 - 519
Dividends paid (10,653) (8,444) (8,444)
------- ------- -------
Net cash inflow/(outflow) from
financing 25,426 (8,444) (9,293)
------ ------- -------
Increase in cash and cash equivalents 17,443 18,550 13,563
Effect of foreign exchange rate changes 51 (2,020) (1,674)
------ ------- -------
Change in cash and cash equivalents 17,494 16,530 11,889
Cash and cash equivalents at start of
period (5,910) (17,799) (17,799)
------ ------- -------
Cash and cash equivalents at end of
period 11,584 (1,269) (5,910)
------ ------ ------
Reconciliation of Net Income before Finance Costs and Taxation to Net Cash Flow
from Operating Activities
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Operating activities
(Loss)/return before taxation (70,518) (47,253) 546,216
Add back interest paid 287 329 516
Losses/(gains) on investments held
at fair value through profit or loss
including transaction costs 80,536 51,205 (535,332)
Net movement on foreign exchange 2 3,937 1,914
Sales of investments held at fair
value through profit or loss 134,289 72,763 133,253
Purchases of investments held at
fair value through profit or loss (140,606) (47,038) (134,461)
Increase in other receivables (494) (998) (89)
Increase in amounts due from brokers - (5,060) -
(Decrease)/increase in amounts due
to brokers (10,287) - 10,599
(Decrease)/increase in other
payables (109) (12) 1,838
------ ------ ------
Net cash (outflow)/inflow from
operating activities before interest
and taxation (6,900) 27,873 24,454
------ ------ ------
Interest paid (287) (329) (516)
Tax on overseas income (796) (550) (1,082)
------ ------ ------
Net cash (outflow)/inflow from
operating activities (7,983) 26,994 22,856
------ ------ ------
Notes to the Half Yearly Financial Statements
1. Principal activity and basis of preparation
The principal activity of the Company is that of an investment trust company
within the meaning of sub-sections 1158-1165 of the Corporation Tax Act 2010.
The principal activity of its subsidiary, BlackRock World Mining Investment
Company Limited, is investment dealing. The other subsidiary, BlackRock Gold
Limited, has been struck off the register and dissolved.
The half yearly financial statements have been prepared using the same
accounting policies as set out in the Company's Annual Report and Financial
Statements for the year ended 31 December 2010 (which were prepared in
accordance with International Financial Reporting Standards ("IFRS") as adopted
by the EU and applied in accordance with the provisions of the Companies Act
2006) and in accordance with International Accounting Standard 34. Insofar as
the Statement of Recommended Practice ("SORP") for investment trust companies
and venture capital trusts issued by the Association of Investment Companies
("AIC"), revised in January 2009 is compatible with IFRS, the financial
statements have been prepared in accordance with guidance set out in the SORP.
2. Income
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Income from investments:
UK listed dividends 3,830 2,871 5,764
Overseas listed dividends 7,982 8,439 17,209
Overseas listed special dividends 3,394 - 224
Fixed interest 4,459 3,283 6,320
------ ------ ------
19,665 14,593 29,517
------ ------ ------
Other operating income:
Option premiums 1,438 1,775 2,555
Deposit interest 7 68 81
Underwriting commission 204 186 186
------ ------ ------
1,649 2,029 2,822
------ ------ ------
Total income 21,314 16,622 32,339
====== ====== ======
3. Investment management fee
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Investment management fee 10,513 7,936 18,026
====== ===== ======
The investment management fee is levied quarterly at a rate of 1.3% per annum,
based on the value of the gross assets on the last day of each quarter, and is
charged wholly to the revenue account.
4. Other expenses
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Custody fee 273 266 571
Registrar's fees and other
administrative costs 164 152 329
Directors' emoluments 57 50 99
--- --- ---
494 468 999
=== === ===
5. Dividend
The Board has not declared an interim dividend, as dividends are considered and
paid annually in respect of each accounting period. The final dividend of 6.00p
per share for the year ended 31 December 2010 was paid on 11 May 2011.
6. Consolidated earnings and net asset value per ordinary share
Total revenue and capital returns per share are shown below and have been
calculated using the following:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
(unaudited) (unaudited) (audited)
Net revenue return attributable
to ordinary shareholders (£'000) 9,241 7,296 11,667
Net capital return attributable
to ordinary shareholders (£'000) (77,700) (55,142) 529,355
--------- --------- ---------
Total return attributable to
ordinary shareholders (£'000) (68,459) (47,846) 541,022
========= ========= =========
Equity shareholders' funds (£'000) 1,628,911 1,120,523 1,708,023
========= ========= =========
The weighted average number of
ordinary shares in issue during
each period, on which the return
per ordinary share was
calculated, was: 177,537,242 177,762,242 177,693,132
The actual number of ordinary
shares in issue at the end of
each period, on which the net
asset value was calculated, was: 177,537,242 177,762,242 177,537,242
Revenue earnings per share 5.21p 4.10p 6.57p
Capital earnings per share (43.77p) (31.02p) 297.90p
----------- ----------- -----------
Total earnings per share (38.56p) (26.92p) 304.47p
======= ======= =======
Net asset value per share 917.50p 630.35p 962.06p
Share price 756.50p 549.00p 811.00p
======= ======= =======
There were no dilutive securities during any of the periods.
7. Share capital
Ordinary Treasury
shares shares
number number Total
(nominal) (nominal) shares £'000
Allotted, called up
and fully paid share
capital comprised:
Ordinary shares of 5p
each
----------- ---------- ----------- -----
At 1 January 2011 and
30 June 2011 177,537,242 15,474,600 193,011,842 9,651
=========== ========== =========== =====
8. Related party disclosure
The related party transaction with BlackRock is set out in note 3. The fee due
to the Investment Manager for the six months ended 30 June 2011 amounted to
£10,513,000 (six months ended 30 June 2010: £7,936,000; year ended
31 December 2010: £18,026,000). At the period end, £5,249,000 was outstanding
in respect of management fees (six months ended 30 June 2010: £3,608,000; year
ended 31 December 2010: £5,606,000).
The Board consists of five non-executive Directors all of whom are considered
to be independent by the Board. None of the Directors has a service contract
with the Company. The Chairman receives an annual fee of £30,000, the Chairman
of the Audit and Management Engagement Committee receives an annual fee of
£25,000, and each other Director receives an annual fee of £20,000. Four
members of the Board hold shares in the Company. Mr Lea holds 6,000 shares,
Mr Barby 25,000 shares, Mr Buchan 24,000 shares and Mr Sage 12,000 shares.
Mr Baring does not hold any shares in the Company.
9. Contingent liabilities
There were no contingent liabilities at 30 June 2011 (2010: nil).
10. Publication of non-statutory accounts
The financial information contained in this half yearly financial report does
not constitute statutory accounts, as defined in section 435 of the Companies
Act 2006. The financial information for the six months ended 30 June 2011 and
2010 has not been audited.
The information for the year ended 31 December 2010 has been extracted from the
latest published audited financial statements which have been filed with the
Registrar of Companies. The report of the auditors on those financial
statements contained no qualification or statement under sections 498(2) or (3)
of the Companies Act 2006.
11. Annual results
The Board expects to announce the annual results for the year ended
31 December 2011, in mid February 2012. Copies of the results announcement can
be obtained from the Secretary on 020 7743 3000. The annual report should be
available by the end of February 2012, with the Annual General Meeting being held
in April 2012.
12 Throgmorton Avenue
London
EC2N 2DL
10 August 2011
The Half Yearly Financial Report will also be available on the BlackRock
Investment Management website at www.blackrock.co.uk/brwm. 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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