The mining-focused investment trust has generated impressive absolute and relative returns ever since the end of the COVID induced sell-off with performance fuelled by the economic recovery.
In its interim accounts for the six months to the end of June, the £1 billion pound BlackRock World Mining (LON: BRWM) made a healthy NAV total return of 17.4%, marginally ahead of the 16.5% benchmark level. This followed a profitable 2020 when the NAV was up 32% versus 22% for the index.
Average commodity prices in the first half of the year were substantially higher year-on-year with iron ore (+99%), tin (+75%), copper (+65%) and silver (+59%) being notable examples. It’s a volatile area though and pays to have a diversified exposure as gold, silver and platinum all lost value in the six months to the end of June.
Even with this diversification, it has still been a roller coaster of a ride for longer term investors with BRWM shares plunging more than 40% peak to trough in the first quarter of 2020 when the pandemic took hold. Shares bounced back, but prices have been weakening in the last few months as doubts grow about the strength of the economic recovery and the impact of the delta variant around the world.
Portfolio and dividends
At the end of June there were 49 separate holdings with the largest being the diversified miners Vale (11.8%), BHP (7.6%), Anglo American (7.2%) and Rio Tinto (6.7%). Outside of the diversified holdings, the main exposures by commodity were copper at 19.7% and gold at 18.3%.
Copper is the biggest overweight (9.7%) relative to the index with the managers seeing it as a clear beneficiary from decarbonisation spending, which is a key multi-decade theme for the sector. The proportion invested in gold miners has fallen due to the comparatively weak price performance relative to other commodities.
Revenue per share has been volatile because of the impact of the pandemic on the underlying company dividends, but was 18.64 pence in the latest six month reporting period. The board intends to distribute substantially all of the available income with two interim dividends totalling 10 pence per share having been declared to date and it looks like the company will beat last year’s total of 20.3p giving it a prospective yield in excess of 3.6%.
The managers are optimistic about the prospects for the sector due to the economic recovery and supply constraints, with few “shovel ready” projects. They also believe that the drive towards net zero carbon emissions will be positive for the demand for commodities such as copper.
Many mining companies have become stronger in recent years with more robust balance sheets, healthier margins and better discipline when it comes to returns for shareholders. However, a lot will depend on whether the global economy can continue to grow.
Concerns have been increasing in recent months about whether the recovery is sustainable with the delta variant causing particular concern. BRWM shares have fallen back from a recent high of 691p to 567p at time of writing, a fall of 18%, so they are not for the faint-hearted, but if you believe that the economy is on the mend then this would be a good way to benefit.