This is a non-independent marketing communication commissioned by BlackRock. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

 

mining

The fortunes of the mining sector are often associated with economic growth but on the BlackRock World Mining Trust plc, we believe the inherent strength of mining companies has been widely underestimated

 

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

The mining sector has not escaped the widespread sell-off in markets. The sector has long been associated with the fortunes of the global economy and the coronavirus lockdowns constitute a real threat to economic growth.

However, we believe the mining sector may be more resilient than current share prices suggest.

Mining shares have already discounted a meaningful economic impact from the coronavirus and have continued to fall in the recent market sell-off. However, unlike retail or some other hard-hit sectors, we believe this impact for the mining sector may be relatively short-lived.

 

Robust health

 

In contrast to other major sectors, the mining sector entered the crisis in relatively good shape.

The major diversified mining companies have dramatically improved their balance sheets in recent years and today hold less debt and more cash. This means they are in a better position to weather disruption from COVID-19.

This has important implications: in general, they don’t have to go back to financial markets or governments to ask for more money to stay afloat.

That leaves them as masters of their own destinies and it also means they have the wherewithal to continue paying dividends.

This may prove to be particularly important as other sectors such as banks come under pressure to cut dividends, creating greater scarcity.

Pension funds and other major investors need to generate income and the mining sector might find greater favour as other sectors reduce their payouts.

 

Compelling value

 

These are shorter-term advantages specifically related to the COVID-19 crisis, but there are others: after seeing significant falls, mining companies are also benefitting from currency moves and the fall in oil prices.

These factors have been beneficial to cost savings – freight costs have fallen, for example.

Equally, valuations look more compelling. While global growth will certainly be lower in 2020, we believe that economic stimulus measures in China will disproportionately benefit the mined commodity sector.

Equally, there are early signs that the Chinese economy is starting to bounce back as life gets back to normal. The Asian Development Bank predicts growth of 2.2% across Asian economies in 2020, rebounding to 6.2% in 20211.

Gold

 

The Trust also includes a weighting in gold companies. Gold has been a beneficiary of the recent turmoil in markets, as investors have worried about the impact of their stimulus measures on the value of currencies and financial assets.

Gold has preserved its value over the long term, which is an attractive quality in today’s uncertain environment. The opportunity cost of holding gold – because it pays no income – is also greatly diminished at times of lower interest rates. Around 40% of the portfolio is currently exposed to companies in precious metals, of which 90% is gold.

 

De-carbonisation

 

There are also broad thematic trends that will continue to drive investment, which – we believe – will endure long beyond the impact of COVID-19 on the economy.

De-carbonisation is one of the most significant. The desire of societies to reduce their carbon impact is unabated and we have built a part of the BlackRock World Mining Trust that stands to benefit from this trend.

This crisis may even accelerate the change; as automakers restructure to cope with the crisis, they may be less willing to cut the areas, such as electric vehicles, which underpin their future growth.

We have exposure to mining companies that produce many of the key metals for electric cars, such as lithium.

We would urge investors to set aside long-held notions about the mining sector. With investors increasingly looking for alternative and resilient income streams in the current environment, it holds considerable appeal.

We believe the mining sector may be among the first to bounce back into a post coronavirus economic recovery as the miners continue to generate robust free cash flow and return capital to shareholders through dividends and buybacks.

 

For more information on this Trust and the opportunities presented by mining click here

 

Evy Hambro Co-Manager, BlackRock World Mining Trust plc

Unless otherwise stated all data is sourced from BlackRock as at April 2020.

[1] Asian Development Bank, April 2020

 

Risk warnings
Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.

Trust Specific Risks
Exchange rate risk: The return of your investment may increase or decrease as a result of currency fluctuations.

Emerging markets risk: Emerging market investments are usually associated with higher investment risk than developed market investments.

Therefore, the value of these investments may be unpredictable and subject to greater variation.

Gold/Mining funds risk: Mining shares typically experience above average volatility when compared to other investments. Trends which occur within the general equity market may not be mirrored within mining securities.

Gearing risk: Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.

Important Information
Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock.

The Company is managed by BlackRock Fund Managers Limited (BFM) as the AIFM. BFM has delegated certain investment management and other ancillary services to BlackRock Investment Management (UK) Limited. The Company’s shares are traded on the London Stock Exchange and dealing may only be through a member of the Exchange. The Company will not invest more than 15% of its gross assets in other listed investment trusts. SEDOL™ is a trademark of the London Stock Exchange plc and is used under licence.

Net Asset Value (NAV) performance is not the same as share price performance, and shareholders may realise returns that are lower or higher than NAV performance.

The BlackRock World Mining Trust plc currently conducts its affairs so that its securities can be recommended by IFAs to ordinary retail investors in accordance with the Financial Conduct Authority’s rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. The securities are excluded from the Financial Conduct Authority’s restrictions which apply to non-mainstream investment products because they are shares in an investment trust.

BlackRock has not considered the suitability of this investment against your individual needs and risk tolerance. To ensure you understand whether our product is suitable, please read the fund specific risks in the Key Investor Document (KID) which gives more information about the risk profile of the investment. The KID and other documentation are available on the relevant product pages at www.blackrock.co.uk/its. We recommend you seek independent professional advice prior to investing.

Any research in this material has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy.

This material is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer.

© 2020 BlackRock, Inc. All Rights reserved. ID: MKTGH0420E-1163082-4/4

 

investment trusts income

 

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm’s internal rules. A copy of the firm’s Conflict of Interest policy is available on request.





Leave a Reply