BLACKROCK WORLD MINING TRUST PLC - Portfolio Update

BLACKROCK WORLD MINING TRUST plc
All information is at 30 September 2016 and unaudited.
Performance at month end with net income reinvested
		One			Three				One	Three		Five
		Month			Months				Year	Years		Years
Net asset value		9.1%			13.0%				69.4%	-18.4%		-35.2%
Share price		7.6%			13.4%				58.5%	-23.9%		-34.4%
Euromoney Global Mining Index		8.9%			13.0%				69.7%	-2.7%		-24.6%
(Total return)
Sources: BlackRock, Euromoney Global Mining Index, Datastream
At month end
Net asset value including income*:								352.86p
Net asset value capital only:								346.65p
*Includes net revenue of 6.21p
Share price:								302.25p
Discount to NAV**:								14.3%
Total assets:								£703.5m
Net yield***:								6.0%
Net gearing:								12.8%
Ordinary shares in issue:								176,455,242
Ordinary shares held in treasury:								16,556,600
Ongoing charges****:								1.2%
** Discount to NAV including income. *** Based on an interim dividend of 4.00p in respect of the year ending 31 December 2016 and a final dividend of 14.00p in respect of the year ended 31 December 2015. **** Calculated as a percentage of average net assets and using expenses, excluding finance costs for the year ended 31 December 2015.
Sector	% Total					Country Analysis					% Total
	Assets										Assets
Diversified	37.2					Global	54.8
Gold	22.2					Latin America					14.0
Copper	18.5					Australasia					9.3
Silver & Diamonds	14.3					Other Africa					8.0
Industrial Minerals	3.9					Canada					7.8
Nickel	3.2					Emerging Europe					3.4
Zinc	0.4					South Africa					1.9
Iron ore	0.1					Indonesia					0.3
Other	0.0					Tanzania					0.3
Net current assets	0.2					Net current assets					0.2
	-----										-----
	100.0										100.0
	=====										=====
Ten Largest Investments
Company				% Total Assets
Rio Tinto				8.6
BHP Billiton				8.3
First Quantum Minerals				8.0
Glencore				5.6
Lundin Mining				4.3
Fresnillo				4.1
Teck Resources				3.4
Newmont Mining				3.3
Norilsk Nickel				3.3
Sociedad Minera Cerro Verde				3.3

   

Commenting on the markets, Evy Hambro and Hannah Gray, representing the Investment Manager noted:

Performance

After a difficult August, the mining sector returned to trending upwards buoyed by rising commodity prices on the back of better-than-expected Chinese economic data and US dollar weakness after the US Fed confirmed there would be no interest rate rise. Whilst the market had been widely expecting no US rate hike, confirmation of this was nonetheless moderately supportive for commodity prices. Positive data points from China included new bank loans rising to Rmb949bn, up 17.1% year-on-year, and the country’s steel production remaining robust at 68.6 million tonnes, reflecting a 2.5% increase.

Most mined commodities were up over the month with gold, copper and nickel prices gaining 1.0%, 5.3% and 8.5% respectively. The nickel price was supported by news that the Philippine government had suspended half of the country’s mining operations for failing to meet social and environmental standards. For reference, last year the country produced approximately 465,000 tonnes of nickel, representing over 20% of the world’s mined output. However, it was coking coal which was the star performer, rising an extraordinary 54.4% over the month as China’s coal industry reform programme, which has constrained domestic output to the equivalent of 276 days of production, forced Chinese steel producers to turn to the import market.

Good stock selection in the gold sector helped the Company outperform this month, with quality names such as Fresnillo and Avanco Resources showing good performance. The Company continues to have a quality bias in gold through exposure to companies with tier 1 assets, as well as management teams with strong track records.

During the month, the Company increased its exposure to iron ore producer Vale on the back of strengthening iron ore prices and the potential for further asset sales to be announced. The Company also topped up its coal producer exposure on the back of an increasing coal price and a more supportive longer term outlook which should lead to earnings upgrades. The Company reduced its debt holdings after strong performance in these bonds year-to-date on the back of company action and rising commodity prices strengthening balance sheets.

Amongst the Company’s unquoted investments the Company received its first royalty payment from Avanco Resources on 2 September. This payment was equivalent to 25% of the gold revenue and 2% of the copper revenue in the quarter ended 30 June 2016.

Strategy and Outlook

After an extended down-cycle, January 2016 appears to have marked the bottom for the mining sector. The sector has performed very strongly this year driven by commodity prices bouncing off the multi-year lows we saw at the end of 2015. Nonetheless, positioning surveys suggest investors remain cautious of the sector, given several years of severe underperformance, and the sector continues to be under-owned relative to history. Sentiment towards China has improved since the lows of Q3 2015 following stimulus at the beginning of 2016, lending support to commodities as fears over a ‘hard landing’ in the country have eased. The Chinese government’s stimulus package early this year has fed through into improved economic data points such as PMI figures above 50 and increases in property prices. At the same time, we have seen mining companies focus on cutting costs, reducing debt and improving balance sheets.

Looking ahead, we expect the mining sector’s performance to remain somewhat volatile in the near-term but we see the medium to long-term outlook as positive. The situation in China has improved but overall global economic growth is likely to remain low for some time. The impact of the mining sector slashing capital expenditure and underinvesting over the past few years is beginning to be felt by global production. Finally, whilst the sector has performed well this year, it has only returned to July 2015 levels and, with many of the miners trading at attractive free cash flow yields, valuations still at relative lows and commodity prices surprising to the upside, the risk of being underweight the sector remains significant.

All data points are in US dollar terms unless stated otherwise

18 October 2016

ENDS

Latest information is available by typing www.brwmplc.co.uk 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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