BlackRock World Mining experienced a strong recovery in its net asset value during H1 2016 yet lagged its benchmark index by 4.4%. The first six months saw the mining sector rebound, shrugging off a difficult start to the year when world equity markets took fright on heightened concerns over global economic growth. The Euromoney Global Mining Index was down by over 18% at one point during January but, over the next six months, the mining sector performed strongly. The reversal was driven by a combination of an improved outlook for China, a weaker US dollar and a better than expected reporting season, all of which prompted renewed investor interest in the sector. As a result of this, and post Brexit related weakness in sterling, BlackRock World Mining was one of the best performing trusts in the first half of 2016.
Over the six months to 30 June 2016, the net asset value increased by 57.0% and the share price by 59.0% (both calculated in sterling terms with income reinvested). During the same period, the benchmark, the Euromoney Global Mining Index, rose by 61.4%. The Board has declared an interim dividend of 4.00p per share (2015: 7.00p per share) – the cut was flagged in earlier statements. The Board has decided that, commencing at the start of the next financial year, dividends will be paid quarterly. Further guidance will be given in February, at the time of the announcement of the results for the current financial year. It remains the Board’s intention to distribute substantially all of the income available.
Holdings in Nyrstar, Boliden, Teck and Glencore all benefited on the back of the zinc price rally. The copper price (+2.9%) lagged the other base metals during the period. Across the board, copper equities tended to outperform the underlying copper price move, with the portfolio’s holdings in Cerro Verde, OZ Minerals and First Quantum being key contributors to performance during the period. Gold and silver were up by 24.4% and 33.9% respectively, during the period and the FTSE gold mines index (sterling terms) rose by 134%. The Company’s holding in Fresnillo was the largest
contributor to performance during the first half of the year, with silver producers Tahoe and Penoles also contributing strongly.
Rio Tinto announced a 10-20mt reduction to 2017 iron ore guidance and BHP reduced its 2016 full year guidance by 10mts hinting at a slower ramp to the forecast 290mt capacity. Vale, the world’s largest iron ore producer, also gave tighter guidance for its iron ore division where it now anticipates production at the lower range of its last guidance of 340-350mts for 2016. The hope this is positive for the iron ore price in the medium term.
Amongst the fund’s royalty investments, during the first half of 2016, Avanco successfully ramped-up its Antas Copper Project, producing 3,720t of copper and 2,611oz of gold, with the Company earning royalty revenue of GBP478,000 during the period. Avanco subsequently declared commercial production on 1 July 2016, targeting production of 12,000t of copper in concentrate and 7,000oz of gold in 2016. Despite the buoyancy of precious metals’ prices, the Board in conjunction with a recommendation from the BlackRock Pricing Committee, has applied a 30% discount to the
valuation of their Banro gold-linked preference share. This discount is consistent with the level of the discount to par value that the senior secured notes have traded at during the first half of 2016 and reflective of Banro’s ongoing tight liquidity position
BRWM : Strong recovery for BlackRock World Mining