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BlackRock World Mng (BRWM)

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Tuesday 17 April, 2018

BlackRock World Mng

Portfolio Update

All information is at 31 March 2018 and unaudited.
Performance at month end with net income reinvested
One Three One Three Five
Month Months Year Years Years
Net asset value -5.1% -7.8% 5.6% 44.1% -13.3%
Share price -4.4% -5.2% 11.7% 50.3% -6.6%
Euromoney Global Mining Index -5.4% -6.9% 5.2% 39.0% -2.4%
(Total return)
Sources: BlackRock, Euromoney Global Mining Index, Datastream
At month end
Net asset value including income1: 407.61p
Net asset value capital only: 413.33p
1 Includes net revenue of 5.72p
Share price: 370.50p
Discount to NAV2: 10.4%
Total assets: £842.8m
Net yield3: 4.2%
Net gearing: 15.4%
Ordinary shares in issue: 176,455,242
Ordinary shares held in treasury: 16,556,600
Ongoing charges4: 1.00%
2 Discount to NAV including income.
3 Based on quarterly interim dividends of 3.00p per share declared on 4 May 2017, 10 August 2017 and 10 November 2017 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 48.6  Global 62.4 
Copper 21.4  Latin America 13.9 
Gold 13.3  Australasia 9.9 
Silver & Diamonds 7.9  Other Africa 5.9 
Industrial Minerals 7.7  Canada 5.2 
Zinc 1.5  USA 1.4 
Steel 0.4  South Africa 0.7 
Aluminium 0.3  India 0.6 
Iron Ore 0.1  Russia 0.4 
Net Current liabilities (1.2) Kazakhstan 0.4 
-----  Argentina 0.2 
100.0  Mexico 0.2 
=====  Net current liabilities (1.2)
Ten Largest Investments

% Total
Rio Tinto 9.9
BHP Billiton 8.8
Glencore 8.5
Vale 7.9
First Quantum Minerals 7.3
Teck Resources 5.8
Sociedad Minera Cerro Verde 3.7
Lundin Mining 2.6
Avanco Resources 2.4
Avanco Resources - Royalty Contract 2.3


Commenting on the markets, Evy Hambro and Olivia Markham, representing the Investment Manager noted:
The Company’s NAV decreased by 5.1% in March, outperforming its benchmark, the Euromoney Global Mining Index, which decreased by 5.4%.
At a macroeconomic level, the US reported a large increase in monthly jobs growth and the US Federal Reserve raised rates as expected and signalled two further increases for 2018. The US Administration announced personnel changes that were perceived as increasing market risk, due to the high levels of turnover in the Administration. President Trump replaced Rex Tillerson with Mike Pompeo as Secretary of State, and John Bolton was appointed as National Security Advisor. The US announced proposals for further tariffs that targeted Chinese exports and China responded with proposed tariffs on US goods. Whilst the outlook for global economic growth remains positive, these events created significant market volatility and the mining sector came under pressure as the broader stock market fell over the month, with the global MSCI World Index falling by 2.2% and giving back some of the strong gains of 2017.
Within the mining sector, bulk commodity prices fell, with coking coal prices down approximately 17% and iron ore down 19% over the month. Chinese steel inventories have built more than expected over the winter shutdown period, although we are now seeing these draw down. Headline demand for steel appears to have reduced, seen through falling steel margins and softness in Chinese house prices. Base metal prices also weakened and the copper price fell by 3%. Within precious metals, gold rose 0.3% and silver fell by 0.7% as both displayed resilience and outperformed other metals.
Elsewhere in sector news, during the month, Oz Minerals announced a take-over offer for all the shares of Avanco.  This valued Avanco Resources at a total of A$418million on the 26 March 2018, representing approximately 16% of Oz Minerals market capitalisation.
Strategy and Outlook
Despite recent market volatility, we remain positive on the outlook for global economic growth. After two strong years, investors that have not been exposed to mining may now be questioning if they have missed the opportunity. We are, however, still a long way below the peak in 2011 and the sector continues to trade at a valuation discount to broader equity markets. Meanwhile, the miners are trading on very attractive cash flow multiples with Glencore, BHP Billiton and Rio Tinto all currently trading at forward free cash flow yields of around 10%, for example. For the mined commodities, in most cases, we believe they look reasonably fairly priced and so our base case is that they remain relatively range-bound at current levels which sees healthy profitability for the sector. Crucially, however, mining equities are still pricing in commodity prices well below current spot prices and, as such, we are constructive on the shares but neutral the commodities themselves. Many still distrust the miners, expecting them to make the same mistakes of the past in terms of poor capital discipline. Our view though is that the pain of the recent down-cycle is still too fresh in the minds of management teams for this to become a widespread issue in the near-term. We have begun to see moderate increases in sustaining capex announced but we believe for the most part these have been necessary increases rather than indicative of a widespread return to poor capital discipline.
All data points are in US dollar terms unless stated otherwise.
17 April 2018
Latest information is available by typing on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal).  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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