2014 was not a great year for BlackRock World Mining. The net asset value total return fell by 26.4% and the share price fell by 30.4% both of which do not compare well to a fall in the Euromoney Global Mining Index of 13.0%. The larger fall in the share price reflects a widening of their discount to 11.9%.
One of the principal culprits for their underperformance was the need to write off their exposure to London Mining, including the royalty they had on production of its iron ore mine and the writing down of the value of their Banro gold royalty. the Board has issued an apology, saying “The Board is fully aware of the resultant effect on shareholders and, on behalf of my fellow Directors, I should like to offer our most sincere regret. Our responsibility to your Company is one we take most seriously. Accordingly, we are working closely with BlackRock to ensure that the Company continues to employ, and refine on an ongoing basis, robust diligence and supervisory processes designed to minimise the risk of such issues arising in the future, so far as it is within the power of the Board and the Investment Manager to do so. In this way, we hope to continue to capture the very significant opportunities that we believe exist in this sector with appropriate diversification of risk.” The plan is to increase the diversification of the royalty portfolio. New investments into individual royalties/unquoted investments should not exceed circa 3% of gross assets at the time of investment. Total exposure to any single operator, including other issued securities such as debt and/or equity, where greater than 30% of that operator’s revenues come from the mine over which the royalty lies, must also not be greater than 3% at the time of investment.
Catherine Raw, co-manager of the fund, has got new job working with a mining company. She is going to be replaced by Olivia Markham who joined BlackRock’s Natural Resources team in 2011. She has 11 years of industry experience, having formerly been the head of European mining research at UBS, a mining analyst at Merrill Lynch in Sydney and a member of the Mergers & Acquisitions
team at BHP Billiton in Melbourne.
The fees are being cut. Currently they are 1.3% on gross assets but between 1 April 2015 and 30 June 2015 the annual fee, chargeable on the gross assets under management, will be 110bps on the first £500m of assets, 70bps on the next £500m and 40bps on assets above £1bn. Then, from 1 July 2015, the annual fee will be 120bp on the first £500m, 100bp on the next £500m and 85bp thereafter. It seems quite odd to us to cut the fee aggressively and then raise it three months later but it might reflect either some contrition on the part of the managers or the Board thinking some punitive action is needed.
BRWM : BlackRock World Mining apologises for royalty losses