2021 worked out well for BlackRock World Mining – BlackRock World Mining has published its results for the year ended 31 December 2021 and they are good. The NAV total return for the period was 20.7% and the share price return 17.5% against a return of 15.1% on its benchmark index (the MSCI ACWI Metals & Mining 30% Buffer 10/40 Index). The total dividend for the year was 42.5p, more than double 2020’s 20.3p figure (both were covered by revenue earned in the year).
The chairman highlights that the average prices achieved for almost all commodities during the year, and base metals in particular, were substantially ahead of 2020’s levels and these helped drive the year’s exceptional growth in revenue. The shares traded at a premium for long periods and the trust has been able to re-issue around £70m worth of shares.
Chinese demand ebbed in the second half of the year but the war in Ukraine has triggered spikes in the values of a number of commodities and the trust’s NAV is up 23% so far in 2022 and the share price more than that.
Over 2021, price rises were driven by restricted supply – as strong capital discipline by miners constrained new investment and heightened demand as infrastructure spending in the US and Europe boosted demand. The chairman notes that, in many sectors of the economy, increased demand was met with bottlenecks and disruptions in supply chains. This also fed through into higher prices.
The chairman says “In the mining sector the dynamic looks more structural. The obstacles to bringing on new supply have increased, with greater focus on the environmental and social impact of new mining activity, including factors such as water availability and usage. These increase the return hurdles required to justify new investment. In addition, the grades from existing mines have often continued to decline as the mines mature and forecasts of production output in recent years have also generally been too optimistic. On the demand side, the pressing need to decarbonise economic activity in forthcoming decades will create further pressure on all commodities associated with the electrification of energy production and transportation, such as copper, nickel, lithium and cobalt.”
The manager’s statement explores these themes in more detail and looks into the drivers of returns within the portfolio. It is too long to reproduce here.
BRWM : 2021 worked out well for BlackRock World Mining