This trust is a gem, very well diversified, and will never be in a position where they do not have the quarterly dividend covered..
Commodities are cyclical in price, Copper/Gold are on a rip in 2025, mine operator profits will come in as dividends/streams for distribution to shareholders, a buy at under 500 pence IMO, and I am a buyer, if you hold at 600/700 just keep them for a decade and measure it on a total return basis, trusts are not a short term CG or profit generator, they can be but mostly just plod along cranking out dividends.. :o) |
 MINING07 MAR, 20252Share lag on commodity rises leaves BlackRock mining duo 'frustrated'BlackRock World Mining's Evy Hambro and Olivia Markham are pinning their hopes on a turnaround after a disappointing year for miners despite record jumps for some commodities.BYDANIELLE LevyBlackRock World Mining (BRWM) managers Evy Hambro and Olivia Markham have described a breakdown in the relationship between commodity prices and the share prices of miners as a 'huge frustration' in 2024.'Historically, mining equities have been a very efficient way to capture returns from commodity markets,' they noted in the £888m trust's annual results covering the 12 months to the end of December.However, they said this relationship has been tested over the last few years and had contributed to a disappointing year for the trust. In 2024, its net asset value (NAV) fell 10.7% versus a 9.9% fall by the MSCI ACWI Metals & Mining 30% Buffer 10/40 index. The trust's shares were also down 12.7% over this period.Revenue per share fell 32% year-on-year to 23.09p, driven by dividend cuts from miners. In turn, total dividends paid by BRWM fell to 23p per share over the year, down 31.3% compared to 2023. The trust currently yields a little under 5%.'Revenue from ordinary dividends fell once again as companies were unable to match payments in the prior year due to lower levels of profitability and higher reinvestment to build their assets base,' the managers explained.They expect income levels this year will be similar to 2024, given current commodity prices, but suggest there could be room for upside in gold miners.Hambro and Markham said large miners had simply not performed as they had done historically and had failed to convert higher commodity prices into increased free cashflow, earnings and dividends. For example, copper miner Freeport-McMoRan was down 9.4% during the year, even though the average price of copper was up by approximately 8%.In the gold sector, the duo pointed out the two largest producers, Newmont Corporation and Barrick Gold, were down 7.9% and 12.3%, respectively, compared to a 23% rise in the gold price which consistently hit records highs over the year as geopolitical tensions saw investors rush for the safe-haven asset.'Management teams that can unlock the conversion of higher revenues into free cashflow, earnings and dividends are likely to be the winners in the years to come,' they added.The trust's position in Sigma Lithium also weighed on performance after the lithium producer saw its share price tumble 64% in 2024 after a review process failed to result in a sale.Fortunately, it wasn't all bad news. During the year, BRWM benefited from the acquisition of its holding Filo Mining by BHP, and Lundin Mining, which delivered a 38% return in dollar terms. Meanwhile, AngloGold Ashanti buying Centamin resulted in a 44% return for investors.Time for gold miners to shineHambro and Markham pointed to a significant rise in production costs for gold miners between 2021 and 2024, but looking ahead they believe we are now past peak cost inflation and feel positive about the 'direction of margins at these prices'.'Gold equities still look attractively valued versus their history. M&A activity has increased and we expect further consolidation given the issues the sector faces around declining reserve lives,; said the managers.'We think gold producers delivering on free cashflow and capital discipline could be a catalyst to re-rate the space over the next 12 months.'At the end of December, around 21% of the portfolio was in gold miners.Royalties pay offThe duo said the trust's unquoted investments, which amount to 8.4% of the portfolio, had performed well over the 12-month period.These include a royalty on all metals produced from mines built on Avanco's Antas North and Pedra Branca licences. Since BRWM invested $12m in return for the royalty in 2014, it has received $32m in royalty payments, making back its initial investment after three and a half years.The trust also profited from its derivatives exposure during the year. Income generated from options came in at £10.2m, which was considerably higher than previous years. The managers said factors like spikes in volatility had played a role.Turnaround hopesLooking ahead, Hambro and Markham hope limited supply growth and low valuations can underpin a performance turnaround.'Yet we are also realistic that this upside requires a catalyst,' they noted.'In the near term there are several factors that are likely to hold back the sector, including uncertainty around China.'While the Chinese government has recognised the need to support the economy and drive change, it has not delivered the significant stimulus program the markets have been looking for to catalyse improved economic activity, the duo said.'Uncertainty is also high regarding the scope, scale and timing of tariffs that president [Donald] Trump is willing to use, which could lead to a slowdown in global trade,' they added.Nevertheless, miners are exposed to exciting trends like energy transition and artificial intelligence (AI), where they said the scale of investment in data centres is 'staggering' and the infrastructure requires copper and metals.'2024 failed to meet expectations in terms of [our] share price performance. But with fundamentals intact, low valuations, competitive shareholder returns and a positive outlook currently ignored by the broader market, it feels as though we are well positioned to capture returns when near-term issues fade,' said Hambro and Markham.In January, the trust entered into an agreement with Saba Capital, which saw the activist investor promise not to requisition any resolutions or general meetings, short-sell shares or engage in a takeover offer for the trust until 2027. BlackRock American Income (BRAI), BlackRock Energy and Resources Income (BERI), BlackRock Smaller Companies (BRSC) entered into similar agreements.Over the past three years, shares in BRWM are down 22.5%, which compares to a 12.9% loss by the average trust in the AIC's commodities and natural resources sector.Over five years, the trust has fared better with a share price gain of 95.3%, albeit behind the 100.9% sector average return. |
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