BlackRock World Mining Trust plc
LEI: LNFFPBEUZJBOSR6PW155
Annual Report and Financial Statements 31
December 2023
Performance record
|
|
As at
31 December
2023
|
As at
31 December
2022
|
|
|
Net assets (£’000)¹
|
1,160,051
|
1,299,285
|
|
|
Net asset value per ordinary share (NAV) (pence)
|
606.78
|
688.35
|
|
|
Ordinary share price (mid-market) (pence)
|
587.00
|
697.00
|
|
|
Reference index2
– net total return
|
6,002.54
|
5,863.32
|
|
|
(Discount)/premium to net asset value3
|
(3.3)%
|
1.3%
|
|
|
|
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========
|
|
|
|
For the
year ended
31 December
2023
|
For the
year ended
31 December
2022
|
|
|
Performance (with dividends reinvested)
|
|
|
|
|
Net asset value per share3
|
-6.2%
|
+17.7%
|
|
|
Ordinary share price3
|
-10.4%
|
+26.0%
|
|
|
Reference index2
|
+2.4%
|
+11.5%
|
|
|
|
---------------
|
---------------
|
|
|
Performance since inception (with dividends
reinvested)
|
|
|
|
|
Net asset value per share3
|
+1,319.4%
|
+1,413.6%
|
|
|
Ordinary share price3
|
+1,365.9%
|
+1,535.8%
|
|
|
Reference index2
|
+1,005.2%
|
+979.6%
|
|
|
|
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========
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|
|
For the
year ended
31 December
2023
|
For the
year ended
31 December
2022
|
Change
%
|
|
Revenue
|
|
|
|
|
Net revenue profit after taxation (£’000)
|
64,691
|
76,013
|
-14.9
|
|
Revenue return per ordinary share (pence)4
|
33.95
|
40.68
|
-16.6
|
|
|
---------------
|
---------------
|
---------------
|
|
Dividends per ordinary share (pence)
|
|
|
|
|
– 1st interim
|
5.50
|
5.50
|
–
|
|
– 2nd interim
|
5.50
|
5.50
|
–
|
|
– 3rd interim
|
5.50
|
5.50
|
–
|
|
– Final
|
17.00
|
23.50
|
-27.7
|
|
|
---------------
|
---------------
|
---------------
|
|
Total dividends paid and payable
|
33.50
|
40.00
|
-16.3
|
|
|
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1 The
change in net assets reflects portfolio movements, share reissues
and dividends paid during the year.
2 MSCI
ACWI Metals & Mining 30% Buffer 10/40 Index (net total return).
With effect from 31 December 2019,
the reference index changed to the MSCI ACWI Metals & Mining
30% Buffer 10/40 Index (net total return). Prior to 31 December 2019, the reference index was the
EMIX Global Mining Index (net total return). The performance
returns of the reference index since inception have been blended to
reflect this change.
3 Alternative
Performance Measures, see Glossary in the Annual Report and
Financial Statements.
4 Further
details are given in the Glossary in the Annual Report and
Financial Statements.
Chairman’s Statement
Highlights
· NAV
per share -6.2%1
(with dividends reinvested)
· Share
price -10.4%1
(with dividends reinvested)
· Total
dividends of 33.50p per share
Overview
After a solid year of performance in 2022, the last 12 months to
31 December 2023 have proved more
difficult for the mining sector. The sector performed strongly at
the start of the financial year with mined commodity prices up
almost across the board, supported by the pace of China’s reopening
following COVID-19 and expectations for a pick-up in demand.
However, the mining sector soon pulled back as improvements in
Chinese economic data were slower than had been hoped for and, as
we progressed through the year, there were concerns about the
demand outlook in major Western economies as well. Increased
geopolitical tensions in the Middle
East and expectations that higher interest rates would
persist for longer than initially anticipated also contributed to a
challenging time for the sector. As we entered the final part of
the Company’s financial year, signs of moderating inflation and
easing interest rate expectations led to positive market sentiment
for both the mining sector and broader equity markets.
Performance
Over the twelve months to 31 December
2023, the Company’s net asset value per share (NAV) returned
-6.2%1
and the share price returned -10.4%1.
In comparison, over the same period, the Company’s reference index,
the MSCI ACWI Metals & Mining 30% Buffer 10/40 Index (net total
return), returned +2.4%, the FTSE All-Share Index returned +7.9%
and the UK Consumer Price Index increased by 4.0%.
Our portfolio managers provide a more detailed explanation on the
Company’s performance and the factors that contributed to, or
detracted from, performance during the year in their Investment
Manager’s Report that follows. They also provide more insight into
the positioning of the portfolio and their views on the outlook for
the coming year.
Revenue return and dividends
The Company’s revenue return per share for the year amounted to
33.95p, a 16.6% decrease compared with the prior year revenue
return per share of 40.68p. Lower commodity prices, higher all in
costs and a weakening US Dollar (as many commodity company
dividends are paid in US Dollars) contributed to the reduction in
earnings, leading to lower returns for shareholders.
During the year, three quarterly interim dividends of 5.50p per
share were paid on 5 May 2023,
6 October 2023 and 24 November 2023. The Board is proposing a final
dividend payment of 17.00p per share for the year ended
31 December 2023. This, together with
the quarterly interim dividends, makes a total of 33.50p per share
(2022: 40.00p per share) representing a decrease of 16.3% on
payments made in the previous financial year.
As in past years, all dividends are fully covered by income. In
accordance with the Board’s stated policy, the total dividends
represent substantially all of the year’s available
income.
Subject to approval at the Annual General Meeting, the final
dividend will be paid on 14 May 2024
to shareholders on the Company’s register on 22 March 2024, the ex-dividend date being
21 March 2024. It remains the Board’s
intention to seek to distribute substantially all of the Company’s
available income along similar lines in the future.
Gearing
The Company operates a flexible gearing policy which depends on
prevailing market conditions. The Company may borrow up to 25% of
the Group’s net assets. The maximum level of gearing used during
the year was 14.6% and the level of gearing at 31 December 2023 was 11.9%. Average gearing over
the year to 31 December 2023 was
11.9%. For the calculations, please see the Glossary in the Annual
Report and Financial Statements.
Management of share rating
The Directors recognise the importance to investors that the market
price of the Company’s shares should not trade at a significant
premium or discount to the underlying NAV. Accordingly, in normal
market conditions, the Board may use the Company’s share buyback
authority or alternatively re-issue shares from treasury or issue
new shares (at a premium to NAV) to ensure that the share price is
broadly in line with the underlying NAV, if it is deemed to be in
shareholders’ interests.
The Company’s shares started the year under review trading at a
premium and I am pleased to report that during the year the Company
reissued 2,430,000 ordinary shares from treasury for a total gross
consideration of £15,658,000, at an average price of 644.37p per
share and an average 1.4% premium to NAV. The Company did not buy
back any shares and, since the year end, no further shares have
been reissued. The discount at the year end was 3.3% and on
5 March 2024 (the latest date before
approving this Annual Report) was 6.5%.
Resolutions to renew the authorities to issue and buy back shares
will be put to shareholders at the forthcoming Annual General
Meeting.
Board composition
As mentioned in the Half Yearly Financial Report, the Board was
delighted to welcome Charles (Chip)
Goodyear as a non-executive Director. I also advised at that
time that I would be stepping down as Chairman following the
forthcoming Annual General Meeting (AGM) and that Chip would
succeed me as Chairman. It has been a privilege to be Chairman of
the Company for the past five years. I would like to thank all
shareholders for their support, as well as thanking my Board
colleagues and the team at BlackRock for making my tenure as
Chairman as rewarding and enjoyable as it has undoubtedly been.
With Chip’s extensive experience of leading mining companies, I
leave the Company in the capable hands of the Board and Investment
Manager and wish it every success for the future.
The Board commenced a search to identify a new Director in early
2024, assisted by a third-party recruitment firm, Fletcher Jones. The successful candidate will be
appointed as a Director following the conclusion of the AGM on
9 May 2024.
30th anniversary
In celebration of the Company’s 30th anniversary, the Board agreed
to make an annual donation of US$15,000 over three years to the Julian Baring
Scholarship Fund (the Fund). The Fund was established in 2000 in
the name of the Company’s first fund manager, Julian Baring. The advisers to the Fund, with
the support of the industry, endow annual scholarships for
talented, but financially disadvantaged, students in Africa and South
America to continue their studies and to pursue a career in
the mining industry. The Fund has assisted more than 150
individuals since inception in mining related faculties.
Following Chip Goodyear’s appointment last August, he sought
approval to waive his rights to compensation related to his role as
a Director of the Company. This waiver was at his initiative and
request. The Board discussed the matter and decided it was
appropriate to donate annually to the Fund an amount equivalent to
Chip’s Director’s fee, in addition to the US$15,000 discussed above. With our previous
support at the time of the Company’s 25th anniversary, the Fund was
able to broaden its reach from Africa to include South America. The Board receives regular
updates from the Fund trustees about students past and present and
their progress and Justin Baring,
the chair of the Fund, will provide a brief introduction to
shareholders at the forthcoming AGM.
Annual General Meeting arrangements
The Company’s AGM will be held at the offices of BlackRock at 12
Throgmorton Avenue, London EC2N
2DL on Thursday, 9 May 2024 at
11.30 a.m. Details of the business of
the meeting are set out in the Notice of Meeting on pages 156 to
159 in the Annual Report and Financial Statements. The Board very
much looks forward to meeting shareholders and answering any
questions you may have on the day.
For the benefit of shareholders who are unable to attend this
year’s AGM in person, we have arranged for the proceedings to be
viewed via a webinar. You can register to watch the AGM by scanning
the QR Code inside the cover of the Annual Report or by visiting
our website at www.blackrock.com/uk/brwm and clicking on the
registration banner.
Please note that it is not possible to speak or vote at the AGM via
this medium and joining the webinar does not constitute attendance
at the AGM. Shareholders wishing to exercise their right to attend,
speak and vote at the AGM should either attend in person or
exercise their right to appoint a proxy to do so on their
behalf.
Outlook
Higher interest rates and greater volatility have resulted in a
high level of uncertainty for markets and a remarkable dispersion
in commodity price returns during 2023. There has also been a
challenging geopolitical backdrop with little end in sight for the
conflicts in both Eastern Europe
and the Middle East, as well as
structural competition between US and China. The number of volatile situations
worldwide is the highest in decades and 2024 is set to be the
biggest election year, with more than half the world’s population
voting.
However, against this backdrop, inflationary pressures are easing
in the US and UK and inflation is expected to return towards target
in 2024. Remaining COVID-19 pandemic era supply disruptions are
also fading and the Chinese government has moved forward with a
series of stimulus measures to turn round its ailing economy which
should support commodity demand. The energy transition to a low
carbon economy is also set to increase demand for materials in the
supply chain for low carbon technologies, including copper, steel
and lithium, which is a positive tailwind for selective parts of
the mining sector.
DAVID
CHEYNE
Chairman
7 March 2024
1
Alternative Performance Measures. All percentages calculated in
Sterling terms with dividends reinvested. Further details of the
calculation of performance with dividends reinvested are given in
the Glossary in the Annual Report and Financial
Statements.
Investment Manager’s Report
Overview
2023 was a year of huge swings in performance for the sector as a
whole and markets more broadly. While 2022 as a year finished with
strong gains across the sector but much of this came from the rally
in the fourth quarter of 2022 on the expectation that the reopening
of China, post its zero COVID-19
policy, would drive further growth in 2023. Sadly, this was not to
be as momentum stalled as January ended due to the complex array of
headwinds that drove moves in 2023. Financial factors such as
interest rates and inflation, combined with lower-than-expected
growth in China and geo-political
events, created uncertainty amongst investors leading to a
significant dispersion in returns.
Commodity price returns were similarly diverse across the suite.
These ranged from iron ore prices massively exceeding estimates by
failing to move lower, whilst lithium fell sharply finishing the
year well below even the most cautious of forecasts. Copper prices,
despite tight market conditions, did not react to large production
downgrades and surprise disruptions. Precious metals also moved in
different directions with gold moving higher, whilst the platinum
group metals fell. Mining company share prices generally derated
during the year as investors, fearful of China demand weakness, moved out of the sector
into either higher yielding cash or to gain exposure to the
“magnificent 7” (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia
and Tesla) opportunity. This left the sector trading on multi
decade low multiples, presenting an opportunity for the
Company.
However, overall the year was disappointing for the Company as a
number of key holdings failed to generate returns for a variety of
factors. Examples include: First Quantum Minerals where the Panama
Government enforced the closure of the company’s largest asset due
to a populist agenda; Chalice Mining set unrealistic project
parameters; weakness in lithium prices impacted valuations of
holdings in the Company, but the opposite for South Korean steel
company POSCO with shares rerated on their exposure; and mid-sized
copper growth holdings heavily derated during the year. The
cumulative impact of this caused the Company’s NAV to underperform
the reference index (MSCI ACWI Metals & Mining 30% Buffer 10/40
Index (net total return)) for only the second time in the last 9
years.
For the year as a whole, the NAV of the Company was down by 6.2%
with income reinvested and share price total return was -10.4% as
the discount widened slightly over the year. This compares to the
FTSE 100 rising by 7.7%, Consumer Price Index (CPI) up by 4.0% and
the reference index up by 2.4% (all numbers based in Sterling
terms). Despite this poor one-year performance the Company’s track
record over three and five years remains firmly intact.
Seismic shifts
2023 arrived with a huge spread of expectations. How much further
would interest rates rise? Would inflation be sticky or start to
fade? Would companies be able to manage margins? These questions
were then mixed in with slower growth, bank rescues (Silicon Valley
Bank, First Republic and Credit Suisse), conflict in the
Middle East and a far slower
reopening trade in China. Given
the above, it is amazing to have finished the year with such
positive returns for equity markets (S&P 500 Index up 18.6% in
Sterling terms) and without widespread recession across the
world.
For the mining sector the fundamentals of the medium term have
remained firmly in place. Energy transition related commodity
demand growth remains robust. Sales of electric vehicles (EVs)
broke new records in both total numbers and market share levels.
Installation of renewable power infrastructure also broke records
with huge amounts built during the year and an industry sales
pipeline for future projects as full as can be expected.
On the supply side, copper production numbers both for 2023 and
beyond look to be less than expected as mines have been unable to
ramp-up on time or to expected levels. Capital expenditure for new
projects continues to exceed expectations, making project
development less likely. Metal inventories generally declined
during the year leaving them at multi year lows, again keeping
markets tight. Resource nationalism remains an ever-present threat
with risks in many countries around the world and some mines have
been forced to close, including Cobre de Panama. With supply looking increasingly price
inelastic in the near to medium term there seems little room to
manoeuvre should disruptions escalate in 2024.
Despite these supportive factors the sector was unable to generate
enough momentum to create widespread investor interest and the
alternative, such as money market deposits at 5%, captured much of
the flow of savings. Mining shares significantly underperformed the
broader markets as valuations moved to multi decade lows. This is
in stark contrast to 2022 when the sector, alongside oil, was one
of the best places to be exposed.
Merger and acquisition (M&A) activity was elevated versus
recent years, but most was characterised by failing to complete.
Lithium companies in Australia
were the focus of deals during the year. Despite a number of
suitors being able to announce terms the deals were eventually
thwarted by domestic interest, for example Liontown and Azure. In
Canada, Teck Resources (Teck)
announced plans to separate into an energy metals company by
divesting its metallurgical coal mines. Soon after being announced,
Teck received a bid from Glencore for the whole company which was
rebuffed by management. Eventually Teck announced a joint plan to
sell the coal business to Glencore for cash.
In the United States (US), Newmont
Corporation agreed terms to buy Newcrest Mining and this deal was
completed in the final quarter of the year. Also, US Steel
announced terms of a deal that could see it sold to Nippon Steel if
the deal is approved by US regulators, the unions and of course
shareholders.
ESG and the social license to operate
ESG (Environmental, Social and Governance) issues are highly
relevant to the mining sector and we seek to understand the ESG
risks and possible related opportunities facing companies and
industries in the portfolio. As an extractive industry, the mining
sector naturally faces a number of ESG challenges given its
dependence on water, carbon emissions and geographical location of
assets. However, we consider that the sector can provide critical
infrastructure, taxes and employment to local communities, as well
as materials essential to technological development, enabling the
carbon transition through the production of the metals required for
the technology underpinning that transition.
We consider ESG insights and data, including sustainability risks,
within the total set of information in our research process and
make a determination as to the materiality of such information as
part of the investment process used to build and manage the
portfolio. ESG insights are not the sole consideration when making
investment decisions but, in most cases, the Company will not
invest in companies which have high ESG risks (risks that affect a
company’s financial position or operating performance) and which
have no plans to address existing deficiencies or controversies in
an appropriate way.
· We
take a long-term approach, focused on engaging with portfolio
company boards and executive leadership to understand the drivers
of risk and financial value creation in companies’ business models,
including material sustainability-related risks and opportunities,
as appropriate.
· There
will be cases where a serious event has occurred, for example an
accident at mine site and, in that case, we will assess whether the
relevant portfolio company is taking appropriate action to resolve
matters before deciding what to do.
· There
will be companies which have derated (the downward adjustment of
multiples) as a result of an adverse ESG event or generally due to
poor ESG practices where there may be opportunities to invest at a
discounted price. However, the Company will only invest in these
value-based opportunities if we are satisfied that there is real
evidence that the relevant company’s culture has changed and that
better operating practices have been put in place.
Given the activities that mining companies undertake, it is no
surprise that there are always events that unfold during any
calendar year. 2023 was a year where there were fewer events for
the Company and this meant that engagement once again focused
mainly on our holdings’ approach to the energy transition and how
they plan to not only benefit from the opportunities, but also how
they are planning to decarbonise their own operations.
During the year the main areas of focus were prior ESG issues
relating to Vale and governance in relation to the board’s
fiduciary responsibilities. Vale has continued to make further
progress on its journey to raise its ESG profile following the
tragic tailings related events from the last decade. The company
paid US$55.9 million in March 2023 to settle charges related to
misleading disclosures in relation to the Brumadinho dam. On the
governance front, changes have been made to the board with new
international independent directors being added. Vale also
announced plans to separate its base metals division and raised
capital to support this process. Analysts from BlackRock visited
Brazil to review restoration work
done around the tailings failures and engaged with local
communities impacted by these initiatives. It was pleasing to see
ESG ratings agencies reflect the work the company has done in
improved rating scores.
General price weakness
Similar to last year, average prices were generally lower across
the suite aside from gold and silver. This, however, hides the
intra year volatility which was more elevated than in recent times.
For example, the price of copper over the year was basically flat
but this hides the fact that at one point it had fallen 17% from
peak to trough. This pattern played out across the metals universe
and, were it not for the year end rally, most would have finished
2023 well below levels seen at the start of the year.
Despite the overall negative tone to price moves, the standout
performer was iron ore which over the year was up by 20.3%. Even
more importantly, the average price was flat which might not sound
like a win but with estimates forecasting it to decline sharply the
impact on margins of it being flat was significant.
Commodity price moves
|
|
31 December 2023
|
% Change in 2023
|
% Change average
prices 2023 vs 2022
|
|
Commodity
|
|
|
|
|
Gold US$/ounce (oz)
|
2,065
|
13.8%
|
7.8%
|
|
Silver US$/oz
|
24.25
|
2.1%
|
7.3%
|
|
Platinum US$/oz
|
1,006
|
-2.4%
|
0.6%
|
|
Palladium US$/oz
|
1,119
|
-37.0%
|
-36.4%
|
|
Copper US$/pound (lb)
|
3.84
|
1.2%
|
-3.9%
|
|
Nickel US$/lb
|
7.43
|
-45.2%
|
-17.9%
|
|
Aluminium US$/lb
|
1.06
|
-0.2%
|
-16.6%
|
|
Zinc US$/lb
|
1.2
|
-12.1%
|
-23.9%
|
|
Lead US$/lb
|
0.92
|
-12.9%
|
-0.7%
|
|
Tin US$/lb
|
11.42
|
1.7%
|
-17.3%
|
|
Baltic Freight Rate
|
2,094
|
38.2%
|
-27.9%
|
|
West Texas Intermediate Oil (Cushing) US$/barrel
|
71.9
|
-10.4%
|
-18.2%
|
|
Iron Ore (China 62% fines) US$/tonne
|
142
|
20.3%
|
-0.9%
|
|
Thermal Coal US$/tonne
|
146.4
|
-62.4%
|
-47.7%
|
|
Coking Coal US$/tonne
|
323.8
|
9.9%
|
-19.1%
|
|
Lithium US$/lb
|
108.7
|
-43.2%
|
-32.9%
|
|
|
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|
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|
Sources: Datastream and Bloomberg, December 2023.
Income
As highlighted in last year’s report, income received by the
Company has exceeded expectations for several years in a row. This
has been driven by higher absolute pay out levels for ordinary
dividends, a greater number of holdings in the portfolio paying
dividends, improved capital discipline by companies and generally
stronger balance sheets. Looking back, the peak seems to have been
in 2021 with last year a close second.
This year has seen income fall due to lower commodity prices and
higher all in costs reducing profitability, meaning less to return
to shareholders. In addition, as highlighted in last year’s report,
companies allocated more surplus cash to share buy backs which
bodes well for the future but in the short term further reduced
dividend payments. It is noticeable just how rapidly share counts
have declined on the back of these buy backs. For example, the
shares in issue for ArcelorMittal and Glencore have declined by 8%
and 5% respectively with a combined total of US$2.9 billion used to buy the shares
back.
Looking forward, we see no reason for companies not to honour their
capital allocation plans and as such with commodity prices lower
than in 2023 payments could in turn be below that of last year.
However, at the time of writing, the commodity most important for
dividends, iron ore, is well in excess of market forecasts meaning
there is room for upgrades to dividend estimates.
The energy transition
As alluded to earlier, the energy transition continues to gather
pace. EVs are taking market share away from combustion engine
vehicles at levels well in excess of expectations. The roll out of
renewable power projects and related infrastructure is happening
far quicker than planned. This has, in part, been driven by a
desire by European countries to diversify away from Russian
supplied fossil fuels and the fact that with fossil fuel prices so
high, renewable power is substantially more cost effective, not to
mention helping countries/companies to meet their net zero
commitments.
It is clear that we remain very close to the start of the energy
transition cycle given the enormous scale of investment that is
going to be needed over the coming decades. Looking at the data for
renewable power, it is increasingly obvious how much more resource
intensive it is. On top of this there will also be commodity demand
from battery storage needs and the buildout of the hydrogen
economy.
It is also essential for mining companies to embrace the need to
decarbonise their own operations as future demand is likely to seek
out supply from companies that do not just meet quality but also
have green credentials. This move from “Brown to Green” presents a
range of investment opportunities for the Company both in trying to
reduce the heavy discount rates applied to carbon intensive
production techniques, as well as new technologies that could solve
some of the more damaging historical processes.
Base metals
It was a difficult year for the base metals with average prices
down across the board as concerns around global growth, higher
interest rates and China’s property sector saw significant
destocking of metals which depressed prices. With prices moving
lower and costs increasing (albeit at a slower rate than in 2022)
margins for the producers also declined reducing cash generation
and dividends. Encouragingly, as we approached the end of the year,
expectations of US interest rate cuts and signs of demand
stabilisation and stimulus in China buoyed prices.
Copper, our favoured base metal, finished the year flat as macro
concerns offset improving fundamentals particularly on the supply
side. Despite headwinds from China’s property market, China’s
copper demand was healthy with apparent demand +12% year-on-year.
China’s focus on “green” related investments in renewables, EVs and
the grid, offset the drag on copper demand from the property
sector.
The most interesting feature in the copper market this year has
been the escalation in copper supply disruptions as we approached
the end of the year. It was widely expected that 2024 would see
notable supply growth as assets recovered post COVID-19 and new
assets such as Anglo American’s Quelleveco mine and Teck’s Quebrada
Blanca Phase 2 (QB2) project in Chile began ramping-up. However, we now expect
copper concentrate supply to be lower in 2024 versus
2023.
The most impactful supply shock is the closure of First Quantum
Minerals’ Cobre Panama mine, which is now on care and maintenance.
Cobre Panama has capacity to produce about 400ktpa of copper and
there is a high degree of uncertainty when this mine will be
restarted. We have also seen meaningful production downgrades from
Anglo American, which lowered its
copper production guidance by 180-210kt in 2024; Southern Copper,
Vale and Rio Tinto all lowered their copper supply forecast in 2024
and we see ramp-up risk for Teck QB2 in 2024. Given the low level
of copper inventories, the lack of investment in new mine capacity
and structural operating challenges for many copper mines, prices
are poised to rebase higher once the demand outlook
improves.
With the long-term fundamentals of the copper market remaining
robust, in particular copper’s role in enabling the energy
transition, we continue to remain positively exposed to copper
producers within the Company. It was a mixed performance result
among the companies with strong share price performance, including
Foran Mining (0.9% of the portfolio). Foran Mining also delivered
exciting exploration results at McIlvenna Bay and its Tesla
Discovery site in Canada which has
potential to increase production rates in the future. Lundin Mining
(1.2% of the portfolio) also performed well, delivering improved
operational performance and acquiring a 51% stake in the
Casserone’s copper mine in Chile.
Ivanhoe Mines (1.9% of the
portfolio) continues to deliver as their Komoa-Kakula asset in the
Democratic Republic of the Congo
ramps-up and they also announced exciting exploration results at
their earlier stage Western Forelands land package. The key
disappointment during the year was the performance of First Quantum
Minerals (1.5% of the portfolio) which saw its share price decline
by approximately 60% as the government of Panama requested the closure of the Cobre
Panama mine.
The aluminium price finished the year flat compared with 2022.
However, this masks the 17% decline in average prices year-on-year.
Aluminium prices have declined significantly over the last two
years as energy prices have fallen which is the largest cost
component of producing aluminium. China’s demand for aluminium has
been strongly boosted by its solar rollout, but so too has its
production levels which has left the Chinese market largely
balanced. Demand ex-China declined
by circa 1% in 2023 largely due to inventory de-stocking with
limited new supply coming into the market ex-China. Longer term we see upside to aluminium
prices as carbon costs begin to be incorporated into prices. The
demand for “green” or “low-carbon” aluminium continues to grow with
these products sold at a premium to traditional London Metals
Exchange grade aluminium. The Company’s largest exposure to
aluminium is via Hydro (2.6% of the portfolio) which is one of the
lowest-carbon producers of aluminium by virtue of its access to
hydro power in Norway. Hydro
continues to pursue its strategy of growing its low-carbon product
mix via recycling and investing into renewable energy, with the
company announcing an investment into its renewable energy company
Hydro Rein by Macquarie Asset Management which acquired a 49.9%
stake for US$332 million during the
year.
The nickel market was particularly challenging in 2023 with the
nickel price finishing the year down 45% and average prices
declining 18% year-on-year. Significant growth in Indonesian nickel
supply has structurally changed the nickel market in recent years
and with nickel pig iron (NPI) producers rapidly growing production
and adapting their facilities to allow the production of nickel
matte and other intermediary products. This allows them to sell
into the market for class 1 battery grade nickel which is expected
to see increasing demand alongside the growth in EVs. A key
question for the nickel market is whether or not we see
differential pricing for nickel based on the carbon intensity of
production which is significant for many of the Indonesian
producers given their reliance on thermal coal. The Company has two
pure play exposures to nickel – the first Nickel Industries (0.5%
of the portfolio) today a NPI producer which is transitioning
towards LME grade nickel production which will improve earnings and
margins. The second investment was done via a “PIPE” deal in 2022
into Lifezone Metals which has traded as a public company since the
end of June 2023. Lifezone Metals, in
conjunction with BHP, owns the Kabanga project in Tanzania which is one of the world’s largest
undeveloped nickel sulphide deposits.
Bulks and steel
The iron ore market was an area of strength in 2023 with the price
finishing 20% higher and average prices flat year-on-year. Given
the depressed outlook for China’s property sector, the broad
expectation from commodity analysts was for prices to decline in
2023 alongside falling steel production in China. The iron ore market benefited from
better-than-expected Chinese steel production in 2023, rising blast
furnace production at the expense of lower scrap-fed electric arc
furnace production and higher steel exports from China which were up 40% year-on-year. With
steel margins in China under
pressure, the premium for higher grade material declined. However,
we remain positive on the outlook for higher grade iron ore longer
term, particularly as the steel industry looks to reduce its carbon
intensity.
The iron ore market remains highly concentrated with the four
largest producers accounting for circa 70% of the seaborne market.
We have seen the industry remain disciplined from a supply
perspective with limited supply growth from the major producers,
despite strong cash generation from their existing iron ore assets.
We expect this to remain the case over the next few years as
producers continue to focus on value over volume and decarbonising
their operations.
The Company’s exposure to iron ore is primarily via the diversified
majors BHP, Vale and Rio Tinto. These companies tend to generate
strong margins and free cash flow from the iron ore businesses
which underpins the attractive dividend yield they trade on. Given
better than expected iron ore prices in 2023, we see scope for
dividends from the iron ore producers to surprise to the upside. In
addition, the Company has exposure to two pure play high grade iron
ore producers, Champion Iron and Labrador Iron. Champion Iron is
ramping-up its Bloom Lake operation in Canada and targeting the production of high
grade (69% Fe) iron ore which is a key component of low carbon
steel production.
During 2023 we saw notable differences in the performance of steel
margins and equity prices for each of the key steel producing
regions. The US has remained an area of strength in the global
steel market, supported by higher infrastructure and re-shoring
investment, alongside supply discipline from the producers. In
Europe, steel prices and margins
have been under pressure as industrial production in areas such as
Germany have remained depressed
and higher Chinese exports have weakened prices. Steel margins in
China have remained around
breakeven levels for much of the year, with steel prices largely
tracking moves in its key cost inputs iron ore and coking coal. Our
expectation was for steel production in China to moderate in the second half of 2023
in line with the government’s target of reducing steel production
year-on-year. However, this did not eventuate supporting iron ore
prices.
From an equity perspective, the Asian (ex-China) steel producers outperformed in 2023, a
detraction from relative performance for the Company given its lack
of exposure. Korean listed POSCO performed strongly in 2023 on the
announcement of its battery material plans, with Japanese listed
Nippon Steel also performing well with renewed interest in Japanese
listed equities. The Company’s exposure to steel is focused on
companies with a track record of capital returns through share
buybacks and dividends, as well as disciplined growth and an
industry leading approach to decarbonisation. Our preference in the
Company is to have exposure to low carbon producers such as the US
Electric Arc Furnace producers Nucor and Steel Dynamics, or to be
invested in those producers which might be carbon intensive today
but have credible plans to decarbonise their production as is the
case with Arcelor Mittal.
Stronger than expected steel demand and rising blast furnace
utilisation also benefited coking coal prices which averaged
US$295.5/tonne during the year.
China’s coking coal imports remained healthy with domestic supply
impacted by accidents and rising safety inspections. India, the world’s fastest growing steel
market, continued to increase its imports of coking coal and is set
to increase its coking coal demand by circa 50Mt by the end of the
decade, equivalent in size to Japan’s coking coal demand today.
Combined with limited supply growth we expect a “stronger for
longer” price environment over the medium term to persist. During
the year we saw M&A in the space with Glencore acquiring a 77%
interest in Teck’s coking coal business for US$6.9 billion with the deal expected to complete
in Q3 of 2024. BHP sold its Blackwater and Daunia coking coal mines
in Queensland to Whitehaven for a cash consideration of up to
US$4.1 billion. The Company’s
exposure to metallurgical coal remains in the two leading
producers, BHP and Teck Resources, which have been able to generate
very strong levels of free cash flow from their coking coal
businesses to support returns to shareholders in recent
years.
After record-high thermal coal prices in 2022 following the
European energy crisis, prices declined meaningfully in 2023 but
finished modestly above market expectations. China has dominated coal demand growth in 2023
with thermal power generation higher in 2023, with both coal
imports and domestic coal production in China higher year-on-year. This higher level
of demand was largely met by rising Indonesian coal exports, along
with higher Australian supply which has been hampered in recent
years by heavy rainfall. We have seen less supply disruption in
Australia during 2023 which has
helped stabilise demand.
The Company’s thermal coal exposure is via our 8.3% position in
Glencore which has used elevated thermal coal prices in recent
years to deleverage the business and buyback shares. During the
year, Glencore made a proposal to Teck to merge their two
businesses and subsequently demerger the combined coal business to
create two separate companies – a metals business and a coal
business. This proposal was not accepted by the Teck board and
instead they chose to sell their coking coal business which
Glencore acquired. Glencore has indicated that it will separate
coal from the rest of the business over time. As a reminder, the
Company has no exposure to pure play thermal coal
producers.
Precious metals
Precious metals were an area of strength during 2023 with the gold
price up by 14% and the average price 8% higher year-on-year. The
gold price benefited from elevated geopolitical issues during the
year, strong central bank purchases and as we approached the end of
the year and the expectation of Federal Reserve interest rate cuts
which would see real yields fall. Central bank net purchases of
gold in 2023 of 1,037 tonnes almost matched the 2022 record,
falling just 45 tonnes short. Central bank purchases have been
dominated by China which continues
to build gold reserves.
Another interesting feature of the gold market in recent years has
been the disconnect between the gold price and real yields.
Historically, gold has performed well in an environment of low real
yields, as gold is a non-yielding asset. Conversely, in an
environment of rising real yields, the attractiveness of other
“safe haven” assets such as cash and government bonds improves,
which typically acts as a headwind to gold. Rising physical demand
for gold from central banks alongside elevated geopolitical risk
partly explains the strong performance of gold despite elevated
real yields in 2023. As we approached the end of 2023 and the
market began to price in rate cuts, we did see the gold price
rally, more in line with the traditional correlation between gold
and rates.
The silver price has modestly underperformed gold when looking at
average prices during 2023 versus the same period last year.
Industrial demand for silver was strong during 2023 with solar
installations globally exceeding expectations. With silver
inventories declining over the last two years and supply challenges
in the world’s largest producer of silver, Mexico, the physical market for silver is set
to tighten further particularly if solar installations continue to
supply to the upside.
The Company has increased its exposure to gold producers during the
year given the improved gold price outlook. However, we have
maintained our strategy of focusing on high quality producers which
have an attractive operating margin and solid production profile
and resource base. Typically, gold royalty companies offer a higher
quality and lower risk exposure to gold as they do not face
operating and capital cost inflation. Disappointingly,
Franco-Nevada’s (1.4% of the portfolio) exposure to First Quantum
Minerals’ Cobre Panama mine which was placed into care and
maintenance towards the end of the year saw the shares finish the
year down by 19% in US Dollar terms. 2023 marked another year of
consolidation in the gold industry with Newmont Corporation (3.6%
of the portfolio) successfully acquiring Australian listed Newcrest
Mining to create the world’s largest gold producer.
Energy transition metals
Battery electric vehicles (BEVs) sales continued to grow in 2023,
with estimates that sales would reach over 14 million battery
electric vehicle units. This growth has been mainly driven by
China, where BEV sales totalled
8.8 million units, +38% year-on-year according to the China
Passenger Car Association. Globally, competition has resulted in EV
price declines supporting volumes. However, this has cost
profitability and led to weakening investor sentiment as some large
equipment manufacturers, particularly in the US, have slowed
investment plans as they prioritise returns.
Legislation continued to evolve and of particular note was the US
looking to exclude Foreign Entity of Concern (FEOC) owned companies
from qualifying for EV incentives under the Inflation Reduction
Act. Beginning in 2024, an eligible clean vehicle may not contain
any battery components that are manufactured by an FEOC and
beginning in 2025 an eligible clean vehicle may not contain any
critical minerals that were extracted, processed or recycled by a
FEOC. This is disruptive as it will exclude many Chinese companies
from the US supply chain.
The Company has exposure to the raw materials that go into EV
batteries and the e-motor. Lithium is a critical component of an EV
battery and, although demand for lithium has been strong this year,
prices have been weak falling by 43% as the sector saw both
destocking and increased supply. The Company’s holdings in lithium
producers such as Albemarle and SQM cost performance. The holding
in Sigma Lithium was an exception, up a modest 6.6% over the year.
The company started producing lithium concentrate from its
Brazilian project during the year, as well as announcing a
Strategic Review was underway.
A critical component of the electric car is also the e-motor, which
most commonly uses a Praseodymium-Neodymium (NdPr) magnet, an alloy
of two rare earth elements (REEs). REEs are commonly mined and
processed in China and have been
deemed of strategic importance by both Europe and the US. The Company has exposure to
REEs through Lynas Rare Earths (Lynas), a REE miner and processor
crucially based in Malaysia and
Australia. In 2023 Lynas equity
fell by 13.4% during a period of weaker Rare Earth Mineral pricing.
This year the company successful commissioned their cracking and
leaching plant in Australia, as
well as progressing their US plant securing a site in Texas.
2023 saw a rapid rise in interest around uranium cumulating at the
28th United Nations Climate Change Conference (COP28), which recognised the key role of nuclear
energy in reaching Net Zero with a declaration to triple nuclear
energy capacity by 2050. The uranium price rose sharply during the
year with the Ux Consulting weekly spot price up by 82.3%. The
Company’s holding in uranium producer Cameco rose by 81% in the
year, benefiting from rising prices. They also completed an
acquisition of 49% of Westinghouse, a nuclear reactor technology
original equipment manufacturer and service provider, further
integrating them into the nuclear power supply chain.
Royalty and unquoted investments
During the year the Company evaluated several new private
investment deals but in the end declined to participate for a
variety of reasons. As mentioned in previous reports, the focus of
the unquoted investments is to aim to generate both capital growth
and income to deliver the superior total return goal for the
portfolio.
We continue to actively look for opportunities to grow royalty
exposure given it is a key differentiator of the Company and an
effective mechanism to lock-in long-term income which further
diversifies the Company’s revenues.
2023 saw several of the recently listed shares deliver further
progress at their projects. Bravo Mining reported excellent
drilling results, an updated resource for their Luanga project and
completed a financing which covers them for the next couple of
years. Ivanhoe Electric reported strong drill results and completed
a significant capital raise during the period.
As at the end of 2023, the unquoted investments in the portfolio
amounted to 6.7% of the portfolio and consist of the BHP Brazil
Royalty, the Vale Debentures, Jetti Resources and MCC Mining.
These, and any future investments, will be managed in line with the
guidelines set by the Board as outlined to shareholders in the
Strategic Report of this Annual Report.
BHP Brazil Royalty Contract (1.4% of the
portfolio)
In July 2014 the Company signed a
binding royalty agreement with Avanco Minerals (Avanco). The
Company provided US$12 million in
return for a Net Smelter Return royalty payments (net revenue after
deductions for freight, smelter and refining charges) comprising 2%
on copper, 25% on gold and 2% on all other metals produced from
mines built on Avanco’s Antas North and Pedra Branca licences. In
addition, there is a flat 2% royalty over all metals produced from
any other discoveries within Avanco’s licence area as at the time
of the agreement.
In 2018 we were delighted to report that Avanco Minerals was
acquired by OZ Minerals, an Australian based copper and gold
producer for A$418 million. We were
equally pleased to report that in early 2023 OZ Minerals was
acquired by BHP, the world’s largest mining company and which now
operates the assets underlying the royalty. Since our initial
US$12 million investment was made, we
have received US$27.4 million in
royalty payments with the royalty achieving full payback on the
initial investment in 3½ years. As at the end of December 2023, the royalty was valued at £18.4
million (1.4% of the portfolio) which equates to a 329.6% cash
return on the initial US$12 million
invested.
In August, the Pedra Branca mine experienced a geotechnical event
which suspended operations in line with BHP’s global safety
standards. The mine recommenced operations in October and is
targeting normal production levels in early 2024. This has reduced
2023 production levels and associated royalty payments, but it is
not expected to impact overall reserves and resources or long-term
production rates. BHP has implemented changes to the mine design
and mining method, along with additional monitoring systems to
reduce the risk of future events.
Vale debentures (2.8% of the portfolio)
At the beginning of 2019 the Company completed a significant
transaction to increase its holding in Vale debentures. The
debentures consist of a 1.8% net revenue royalty over Vale’s
Northern System and Southeastern System iron ore assets in
Brazil, as well as a 1.25% royalty
over the Sossego copper mine. The iron ore assets are world class
given their grade, cost position, infrastructure and resource life
which is well in excess of 50 years.
Dividend payments are expected to grow once royalty payments
commence on the Southeastern System in 2025 and volumes from S11D
and Serra Norte improve. At Vale’s Capital Markets Day in December,
the company outlined 50Mt of iron ore growth to 2026 of which S11D
is the largest component and an improved quality mix which the
royalty will benefit from.
The debentures offer a yield in excess of 10% based on the 1H-2023
annualised dividend. This is an attractive yield for a royalty
investment, with this value opportunity recognised by other listed
royalty producers, Franco-Nevada and Sandstorm Gold Royalties,
which have both acquired stakes in the debentures in
2021.
Whilst the Vale debentures are a royalty, they are also a listed
security on the Brazilian National Debentures System. As we have
highlighted in previous reports, shareholders should be aware that
historically there has been a low level of liquidity in the
debentures and price volatility is to be expected, although this is
improving following the sell-down in April
2021.
Jetti Resources (2.1% of the portfolio)
In early 2022, the Company made an investment into mining
technology company Jetti Resources (Jetti) which has developed a
new catalyst that improves copper recovery from primary copper
sulphides (specifically copper contained in chalcopyrite which is
often uneconomic) under conventional leach conditions. Jetti is
currently trialling their technology across a number of mines where
they will look to integrate their catalyst into existing heap leach
SX-EW mines to improve recoveries at a low capital cost. The
technology has been demonstrated to work at scale at Capstone’s
Pinto Valley copper mine, as well as Freeport-McMoRan’s Bagdad and
El Abra operations. If Jetti’s
technology continues to work at scale, we see valuation upside with
Jetti sharing in the economics of additional copper volumes
recovered through the application of their catalyst.
During the second half of 2022 we were pleased to report that Jetti
completed its Series D financing to raise US$100 million at a substantially higher
valuation than when our investment was made at the beginning of
2022. This sees the company fully financed to execute on their
expected growth plans in the years ahead.
MCC Mining (0.4% of the portfolio)
MCC Mining is a private company exploring for copper in Columbia.
It is undertaking early-stage greenfield exploration and has strong
geological potential to host multiple world class porphyry
deposits. Shareholders include other mid- to large-cap copper
miners, which is another indication of the strategic value of the
company. Following new regulations in Colombia which allowed for the exploration
drilling in the forestry reserve, the company commenced drilling at
its Comita and Pantanos deposits in 2023. Initial drilling results
were very encouraging, which confirmed two porphyry deposits at
Comita and Pantanos. The valuation of the Company is based on the
US$170.7 million equity value implied
by the April 2022 equity raise. The
focus for the company is to continue exploration into
2024.
Derivatives activity
The Company from time to time enters into derivatives contracts,
mostly involving the sale of “puts” and “calls”. These are taken to
revenue and are subject to strict Board guidelines which limit
their magnitude to an aggregate 10% of the portfolio. In 2023
income generated from options was £6.0 million, in line with
contributions from prior periods. During the year implied
volatility was generally lower than in prior years making the
opportunity set less attractive. In addition, the cost of the
trades had to be looked at in the context of higher interest rates,
given that the borrowing capacity is generally used for such
transactions. Despite these, enough opportunities were found to
generate revenues almost in line with previous years without having
to take too much risk. At the end of the year the Company had 0.1%
of the net assets exposed to derivatives and the average exposure
to derivatives during the year was less than 5% of net
assets.
Gearing
At 31 December 2023, the Company had
£149.8 million of net debt, with a gearing level of 11.9%. The debt
is held principally in US Dollar rolling short-term loans and
managed against the value of the debt securities and the high
yielding royalty positions in the Company. As in recent years, the
Company sought to maximise the use of gearing against the equity
holdings rather than debt securities. This was driven by the risk
adjusted relative value available in shares where dividend yields
were mostly in excess of the coupons being paid on the bonds. Since
the companies also have strong balance sheets, it was opportune to
gear up the equity portfolio of the Company since we were not
adding debt to holdings that were already heavily leveraged
themselves. However, in 2023 the debt came with a higher cost and
this meant absolute gearing was kept below that of prior years to
minimise the interest cost.
Outlook
The dominant story for 2023 was that of interest rates versus
inflation. The transition to higher rates was far from smooth as
short-term expectations gyrated markets creating a bumpy ride for
investors. However, it now looks likely that inflationary pressures
have more than peaked and there is an increasing consensus that
rates are not moving higher. It is worth remembering that the post
global financial crisis and Covid period of zero rates are an
outlier versus history and as such the new norm should be anchored
around current levels rather than a return to such extreme
lows.
At the time of writing it appears we are seeing a change in China’s
demand for commodities, with investment into renewable
infrastructure, manufacturing and EV’s growing significantly,
against more traditional areas of commodity demand such as property
declining. Energy transition spending globally continues to drive
commodities demand growth and with supply growth across a number of
commodities increasingly constrained markets look set to tighten
further over the next few years which bodes well for
prices.
For mining companies whose balance sheets remain strong and
management teams are anchored to disciplined capital allocation
frameworks, the challenge will be balancing the desire to invest
either for decarbonisation or growth, versus returning capital to
shareholders. Given the high level of capital intensity attached to
building new capacity, those with the flexibility to repurchase
shares should take advantage of the current low equity valuations
given that it generally remains cheaper to buy existing capacity
than to build it.
In summary, the near term as always remains volatile, but with
medium-term demand and supply fundamentals strong, the Company is
well positioned to capture returns from this imbalance. In the
meantime dividend payments, whilst lower than the peak of a few
years ago, remain competitive with alternatives such as bonds and
cash meaning shareholders are paid to wait for the positive outlook
to be reflected in share prices.
EVY HAMBRO AND OLIVIA MARKHAM
BLACKROCK INVESTMENT MANAGEMENT (UK)
LIMITED
7 March 2024
Ten largest investments
Together, the ten largest investments represented 54.8% of total
investments of the Company’s portfolio as at 31 December 2023 (2022: 54.3%).
1
►
BHP1,2
(2022: 1st)
Diversified mining group
Market value: £130,674,000
Share of investments: 10.1% comprising equity of 8.7% and
Mining Royalty of 1.4%
(2022: 9.5%)
The world’s largest diversified mining group by market
capitalisation. The group is an important global player in a number
of commodities including iron ore, copper, thermal and
metallurgical coal, manganese, nickel, silver and
diamonds.
2
►
Vale2,3,4
(2022: 2nd)
Diversified mining group
Market value: £124,601,000
Share of investments: 9.6% comprising equity of 6.9%,
debentures of 2.8% and option of (0.1)%
(2022: 9.1%)
One of the largest mining groups in the world, with operations in
30 countries. Vale is the world’s largest producer of iron ore and
iron ore pellets and the world’s largest producer of nickel. The
group also produces manganese ore, ferroalloys, metallurgical and
thermal coal, copper, platinum group metals, gold, silver and
cobalt.
3
►
Glencore
(2022: 3rd)
Diversified mining group
Market value: £108,173,000
Share of investments: 8.3%
(2022: 7.7%)
One of the world’s largest globally diversified natural resources
groups. The group’s operations include approximately 150 mining and
metallurgical sites and oil production assets. Glencore’s mined
commodity exposure includes copper, cobalt, nickel, zinc, lead,
ferroalloys, aluminium, thermal coal, iron ore, gold and
silver.
4
▲
Rio Tinto
(2022: 5th)
Diversified mining group
Market value: £94,600,000
Share of investments: 7.3%
(2022: 4.5%)
One of the world’s leading mining groups. The group’s primary
product is iron ore, but it also produces aluminium, copper,
diamonds, gold, industrial minerals and energy products.
5
▲
Freeport-McMoRan
(2022: 8th)
Copper producer
Market value: £65,125,000
Share of investments: 5.0%
(2022: 4.0%)
A global mining group which operates large, long-lived,
geographically diverse assets with significant proven and probable
reserves of copper, gold and molybdenum.
6
▲
Newmont Corporation4
(2022: 18th)
Gold producer
Market value: £44,450,000
Share of investments: 3.6%
(2022: 1.9%)
Following the acquisition of Goldcorp in the first half of 2019,
Newmont Corporation is the world’s largest gold producer by market
capitalisation. The group has gold and copper operations on five
continents, with active gold mines in Nevada, Australia, Ghana, Peru
and Suriname.
7
▲
Barrick Gold
(2022: 13th)
Gold producer
Market value: £41,299,000
Share of investments: 3.2%
(2022: 2.3%)
Barrick Gold is the second largest
gold producer by market capitalisation and has operations and
projects in 15 countries across the world. In 2019 the group
successfully established a joint venture with Newmont across their
Nevada assets to maximize the
synergies across both sets of assets.
8
▲
Wheaton Precious Metals
(2022: 14th)
Gold producer
Market value: £38,795,000
Share of investments: 3.0%
(2022: 2.3%)
Wheaton Precious Metals is one of the world’s largest precious
metals streaming companies, offering investors cost predictability,
direct leverage to increasing precious metals prices and a
high-quality asset base consisting of 18 operating mines and 26
development assets.
9
▲
Hydro
(2022: 15th)
Aluminium producer
Market value: £34,264,000
Share of investments: 2.6%
(2022: 2.1%)
Hydro is a Norwegian aluminium and renewable energy company,
headquartered in Oslo. It is one
of the largest aluminium companies worldwide. It has operations in
some 50 countries around the world. The company is present
throughout the aluminium value chain, from energy to bauxite mining
and alumina refining, primary aluminium, aluminium extrusions and
aluminium recycling.
10 ▼ Teck Resources
(2022: 9th)
Diversified mining group
Market value: £30,282,000
Share of investments: 2.3%
(2022: 3.6%)
A diversified mining group headquartered in Canada. The company is engaged in mining and
mineral development with operations and projects in Canada, the US, Chile and Peru. The group has exposure to copper, zinc,
metallurgical coal and energy.
1 Includes
mining royalty contract.
2 Includes
investments held at Directors’ valuation.
3 Includes
fixed income securities.
4 Includes
options.
All percentages reflect the value of the holding as a percentage of
total investments. For this purpose, where more than one class of
securities is held, these have been aggregated.
Arrows indicate the change in relative ranking of the position in
the portfolio compared to its ranking as at 31 December 2022.
Investments as at 31 December
2023
|
|
Main
geographical
exposure
|
Market
value
£’000
|
|
% of
investments
|
|
Diversified
|
|
|
|
|
|
Vale
|
Global
|
88,855
|
}
|
9.6
|
|
Vale Debentures*#^
|
Global
|
36,516
|
|
Vale Call Option Jan 24 BRL15.5
|
Global
|
(770)
|
|
BHP
|
Global
|
112,240
|
|
8.7
|
|
Glencore
|
Global
|
108,173
|
|
8.3
|
|
Rio Tinto
|
Global
|
94,600
|
|
7.3
|
|
Teck Resources
|
Global
|
30,282
|
|
2.3
|
|
Anglo American
|
Global
|
24,081
|
}
|
1.9
|
|
Anglo American Put Option 19/01/24 GBP£18.00
|
Global
|
(99)
|
|
Trident
|
Global
|
3,708
|
|
0.3
|
|
|
|
---------------
|
|
---------------
|
|
|
|
497,586
|
|
38.4
|
|
|
|
=========
|
|
=========
|
|
Copper
|
|
|
|
|
|
Freeport-McMoRan
|
Global
|
65,125
|
|
5.0
|
|
Ivanhoe Electric
|
United States
|
27,443
|
|
2.1
|
|
Jetti Resources#
|
Global
|
27,204
|
|
2.1
|
|
Ivanhoe Mines
|
Other Africa
|
24,627
|
|
1.9
|
|
Sociedad Minera Cerro Verde
|
Latin America
|
20,142
|
|
1.6
|
|
First Quantum Minerals*
|
Global
|
19,942
|
|
1.5
|
|
BHP Brazil Royalty#~
|
Latin America
|
18,316
|
|
1.4
|
|
Lundin Mining
|
Global
|
15,672
|
|
1.2
|
|
Develop Global
|
Australasia
|
14,145
|
|
1.1
|
|
Foran Mining
|
Canada
|
11,225
|
|
0.9
|
|
CSA Cobar Mine
|
Australasia
|
8,739
|
|
0.7
|
|
Ero Copper
|
Latin America
|
6,890
|
|
0.6
|
|
MCC Mining#
|
Latin America
|
5,491
|
|
0.4
|
|
Solaris Resources
|
Latin America
|
5,473
|
|
0.4
|
|
Filo Mining
|
Latin America
|
3,528
|
|
0.3
|
|
Aurubis
|
Global
|
3,219
|
|
0.3
|
|
Antofagasta
|
Latin America
|
2,627
|
|
0.2
|
|
MTAL Founders Shares
|
Australasia
|
611
|
|
0.1
|
|
Metals Acquisition
|
Australasia
|
339
|
|
–
|
|
|
|
---------------
|
|
---------------
|
|
|
|
280,758
|
|
21.8
|
|
|
|
=========
|
|
=========
|
|
Gold
|
|
|
|
|
|
Newmont Corporation
|
Global
|
44,982
|
}
|
3.6
|
|
Newmont Corporation Call Option 19/01/24 US$41.50
|
Global
|
(532)
|
|
Barrick Gold
|
Global
|
41,299
|
|
3.2
|
|
Wheaton Precious Metals
|
Global
|
38,795
|
|
3.0
|
|
Agnico Eagle Mines
|
Canada
|
20,729
|
|
1.6
|
|
Franco-Nevada
|
Global
|
18,661
|
|
1.4
|
|
Northern Star Resources
|
Australasia
|
14,040
|
|
1.1
|
|
Endeavour Mining
|
Other Africa
|
9,090
|
|
0.7
|
|
Allied Gold*
|
Other Africa
|
7,770
|
|
0.6
|
|
Polymetal International
|
Russia
|
–
|
|
–
|
|
Polyus
|
Russia
|
–
|
|
–
|
|
|
|
---------------
|
|
---------------
|
|
|
|
194,834
|
|
15.2
|
|
|
|
=========
|
|
=========
|
|
Steel
|
|
|
|
|
|
Steel Dynamics
|
United States
|
28,799
|
|
2.2
|
|
Nucor
|
United States
|
27,629
|
|
2.1
|
|
ArcelorMittal
|
Global
|
23,207
|
|
1.8
|
|
Stelco Holdings
|
Canada
|
8,172
|
|
0.6
|
|
SSAB
|
Global
|
7,977
|
|
0.6
|
|
|
|
---------------
|
|
---------------
|
|
|
|
95,784
|
|
7.3
|
|
|
|
=========
|
|
=========
|
|
Industrial Minerals
|
|
|
|
|
|
Sigma Lithium
|
Latin America
|
17,100
|
|
1.3
|
|
Mineral Resources
|
Australasia
|
16,266
|
|
1.3
|
|
Albemarle
|
Global
|
10,963
|
|
0.8
|
|
Iluka Resources
|
Australasia
|
9,280
|
|
0.7
|
|
Lynas Rare Earths
|
Australasia
|
8,825
|
|
0.7
|
|
Sheffield Resources
|
Australasia
|
6,951
|
|
0.5
|
|
Chalice Mining
|
Australasia
|
2,297
|
|
0.2
|
|
|
|
---------------
|
|
---------------
|
|
|
|
71,682
|
|
5.5
|
|
|
|
=========
|
|
=========
|
|
Aluminium
|
|
|
|
|
|
Hydro
|
Global
|
34,264
|
|
2.6
|
|
Alcoa
|
Global
|
9,019
|
|
0.7
|
|
|
|
---------------
|
|
---------------
|
|
|
|
43,283
|
|
3.3
|
|
|
|
=========
|
|
=========
|
|
Iron Ore
|
|
|
|
|
|
Champion Iron
|
Canada
|
14,425
|
|
1.1
|
|
Labrador Iron
|
Canada
|
13,301
|
|
1.0
|
|
Deterra Royalties
|
Australasia
|
5,672
|
|
0.4
|
|
Equatorial Resources
|
Other Africa
|
201
|
|
–
|
|
|
|
---------------
|
|
---------------
|
|
|
|
33,599
|
|
2.5
|
|
|
|
=========
|
|
=========
|
|
Uranium
|
|
|
|
|
|
Cameco
|
Canada
|
30,264
|
|
2.3
|
|
|
|
---------------
|
|
---------------
|
|
|
|
30,264
|
|
2.3
|
|
|
|
=========
|
|
=========
|
|
Platinum Group Metals
|
|
|
|
|
|
Bravo Mining
|
Latin America
|
15,945
|
|
1.2
|
|
Northam Platinum
|
Global
|
2,610
|
|
0.2
|
|
Impala Platinum
|
South Africa
|
1,598
|
|
0.1
|
|
Sibanye Stillwater
|
South Africa
|
1,029
|
|
0.1
|
|
|
|
---------------
|
|
---------------
|
|
|
|
21,182
|
|
1.6
|
|
|
|
=========
|
|
=========
|
|
Mining Services
|
|
|
|
|
|
Woodside Energy Group
|
Australasia
|
7,209
|
|
0.5
|
|
Epiroc
|
Global
|
6,421
|
|
0.5
|
|
|
|
---------------
|
|
---------------
|
|
|
|
13,630
|
|
1.0
|
|
|
|
=========
|
|
=========
|
|
Nickel
|
|
|
|
|
|
Lifezone Metals
|
Global
|
7,091
|
|
0.5
|
|
Nickel Industries
|
Indonesia
|
5,923
|
|
0.5
|
|
Bindura Nickel
|
Global
|
28
|
|
–
|
|
|
|
---------------
|
|
---------------
|
|
|
|
13,042
|
|
1.0
|
|
|
|
=========
|
|
=========
|
|
Zinc
|
|
|
|
|
|
Titan Mining
|
United States
|
1,375
|
|
0.1
|
|
|
|
---------------
|
|
---------------
|
|
|
|
1,375
|
|
0.1
|
|
|
|
=========
|
|
=========
|
|
Comprising:
|
|
1,297,019
|
|
100.0
|
|
|
|
=========
|
|
=========
|
|
– Investments
|
|
1,298,420
|
|
100.1
|
|
– Options
|
|
(1,401)
|
|
(0.1)
|
|
|
|
---------------
|
|
---------------
|
|
|
|
1,297,019
|
|
100.0
|
|
|
|
=========
|
|
=========
|
* Includes
fixed income securities.
# Includes
investments held at Directors’ valuation.
~ Mining
royalty contract.
^ The
investment in the Vale debentures is illiquid and has been valued
using secondary market pricing information provided by the
Brazilian Financial and Capital Markets Association
(ANBIMA).
All investments are in equity shares unless otherwise
stated.
The total number of investments as at 31
December 2023 (including options classified as liabilities
on the balance sheet) was 69 (31 December
2022: 68).
As at 31 December 2023 the Company
did not hold any equity interests in companies comprising more than
3% of a company’s share capital.
Commodity Exposure1
|
|
2023 portfolio
|
2022 portfolio#
|
2023 reference index*
|
|
Diversified
|
38.4%
|
40.0%
|
35.6%
|
|
Copper
|
21.8%
|
22.0%
|
9.9%
|
|
Gold
|
15.2%
|
13.0%
|
21.0%
|
|
Steel
|
7.3%
|
8.1%
|
20.7%
|
|
Industrial Minerals
|
5.5%
|
6.5%
|
1.8%
|
|
Aluminium
|
3.3%
|
3.3%
|
2.8%
|
|
Iron Ore
|
2.5%
|
3.1%
|
5.0%
|
|
Uranium
|
2.3%
|
0.4%
|
0.0%
|
|
Platinum Group Metals
|
1.6%
|
2.0%
|
1.4%
|
|
Mining Services
|
1.0%
|
0.4%
|
0.0%
|
|
Nickel
|
1.0%
|
0.8%
|
0.0%
|
|
Zinc
|
0.1%
|
0.1%
|
0.4%
|
|
Other&
|
0.0%
|
0.3%
|
1.4%
|
1
Based on index classifications.
#
Represents exposure at 31 December
2022.
* MSCI ACWI Metals & Mining 30% Buffer 10/40 Index (net total
return).
&
Represents a very small exposure.
Geographic Exposure1
|
|
2023
|
|
Global
|
67.4%
|
|
Canada
|
7.5%
|
|
Latin America
|
7.4%
|
|
Australasia
|
7.3%
|
|
Other2
|
7.0%
|
|
Other Africa (ex South Africa)
|
3.2%
|
|
South Africa
|
0.2%
|
|
|
2022
|
|
Global
|
69.2%
|
|
Australasia
|
9.0%
|
|
Latin America
|
7.5%
|
|
Other3
|
7.1%
|
|
Canada
|
4.1%
|
|
Other Africa (ex South Africa)
|
2.4%
|
|
South Africa
|
0.7%
|
1
Based on the principal commodity exposure and place of operation of
each investment.
2
Consists of Indonesia and
United States.
3
Consists of Indonesia,
Russia, United Kingdom and United States.
Strategic Report
The Directors present the Strategic Report of BlackRock World
Mining Trust plc for the year ended 31
December 2023. The aim of the Strategic Report is to provide
shareholders with the information to assess how the Directors have
performed their duty to promote the success of the Company for the
collective benefit of shareholders.
The Chairman’s Statement together with the Investment Manager’s
Report form part of this Strategic Report. The Strategic Report was
approved by the Board at its meeting on 7
March 2024.
Principal activities
The Company carries on business as an investment trust and has a
premium listing on the London Stock Exchange. Its principal
activity is portfolio investment and that of its subsidiary,
BlackRock World Mining Investment Company Limited (together the
Group), is investment dealing. The Company was incorporated in
England on 28 October 1993 and this is the thirtieth Annual
Report.
Investment trusts are pooled investment vehicles which allow
exposure to a diversified range of assets through a single
investment, thus spreading investment risk.
Objective
The Company’s objective is to maximise total returns to
shareholders through a worldwide portfolio of mining and metal
securities.
The Board recognises the importance of dividends to shareholders in
achieving that objective, in addition to capital
returns.
Strategy, business model and investment
policy
Strategy
The Company invests in accordance with the objective given above.
The Board is collectively responsible to shareholders for the
long-term success of the Company and is its governing body. There
is a clear division of responsibility between the Board and
BlackRock Fund Managers Limited (the Manager). Matters reserved for
the Board include setting the Company’s strategy, including its
investment objective and policy, setting limits on gearing (both
bank borrowings and the effect of derivatives), capital structure,
governance and appointing and monitoring of the performance of
service providers, including the Manager.
Business model
The Company’s business model follows that of an externally managed
investment trust. Therefore, the Company does not have any
employees and outsources its activities to third party service
providers including the Manager who is the principal service
provider. In accordance with the Alternative Investment Fund
Managers’ Directive (AIFMD), as implemented, retained and onshored
in the UK, the Company is an Alternative Investment Fund (AIF).
BlackRock Fund Managers Limited is the Company’s Alternative
Investment Fund Manager.
The management of the investment portfolio and the administration
of the Company have been contractually delegated to the Manager who
in turn (with the permission of the Company) has delegated certain
investment management and other ancillary services to BlackRock
Investment Management (UK) Limited (the Investment Manager). The
Manager, operating under guidelines determined by the Board, has
direct responsibility for the decisions relating to the day-to-day
running of the Company and is accountable to the Board for the
investment, financial and operating performance of the
Company.
The Company delegates fund accounting services to the Manager,
which in turn sub-delegates these services to The Bank of New York
Mellon (International) Limited (BNYM). Other service providers
include the Depositary (also BNYM) and the Registrar, Computershare
Investor Services PLC. Details of the contractual terms with the
Manager and the Depositary and more details of the arrangements in
place governing custody services are set out in the Directors’
Report.
Investment policy
The Company’s investment policy is to provide a diversified
investment in mining and metal securities worldwide actively
managed with the objective of maximising total returns. While the
policy is to invest principally in quoted securities, the Company’s
investment policy includes investing in royalties derived from the
production of metals and minerals as well as physical metals. Up to
10% of gross assets may be held in physical metals.
In order to achieve its objective, it is intended that the Group
will normally be fully invested, which means at least 90% of the
gross assets of the Company and its subsidiary will be invested in
stocks, shares, royalties and physical metals. However, if such
investments are deemed to be overvalued, or if the Manager finds it
difficult to identify attractively priced opportunities
for investment, then up to 25% of the Group’s assets may be held in
cash or cash equivalents. Risk is spread by investing in a number
of holdings, many of which themselves are diversified
businesses.
The Group may occasionally utilise derivative instruments such as
options, futures and contracts for difference, if it is deemed that
these will, at a particular time or for a particular period,
enhance the performance of the Group in the pursuit of its
objectives. The Company is also permitted to enter into stock
lending arrangements.
As approved by shareholders in August
2013, the Group may invest in any single holding of quoted
or unquoted investments that would represent up to 20% of gross
assets at the time of acquisition. Although investments are
principally in companies listed on recognised stock exchanges, the
Company may invest up to 20% of the Group’s gross assets in
investments other than quoted securities. Such investments include
unquoted royalties, equities or bonds. In order to afford the
Company the flexibility of obtaining exposure to metal and mining
related royalties, it is possible that, in order to diversify risk,
all or part of such exposure may be obtained directly or indirectly
through a holding company, a fund or another investment or special
purpose vehicle, which may be quoted or unquoted. The Board will
seek the prior approval of shareholders to any unquoted investment
in a single company, fund or special purpose vehicle or any single
royalty which represents more than 10% of the Group’s assets at the
time of acquisition.
In March 2015 the Board refined the
guidelines associated with the Company’s royalty strategy and
proposed to maintain the 20% maximum exposure to royalties but the
royalty/unquoted portfolio should itself deliver diversification
across operator, country and commodity. To this end, new
investments into individual royalties/unquoted investments should
not exceed circa 3% of gross assets at the time of investment.
Total exposure to any single operator, including other issued
securities such as debt and/or equity, where greater than 30% of
that operator’s revenues come from the mine over which the royalty
lies, must also not be greater than 3% at the time of investment.
In addition, the guidelines require that the Investment Manager
must, at the time of investment, manage total exposure to a single
operator, via reducing exposure to listed securities if they are
also held in the portfolio, in a timely manner where
royalties/unquoted investments are revalued upwards. In the
jurisdictions where statutory royalties are possible (in countries
where mineral rights are privately owned) these will be preferred
and in respect of contractual royalties (a contractual obligation
entered into by the operator and typically unsecured) the valuation
must take into account the higher credit risk involved. Board
approval will continue to be required for all royalty/unquoted
investments.
While the Company may hold shares in other listed investment
companies (including investment trusts), the Board has agreed that
the Company will not invest more than 15% of the Group’s gross
assets in other UK listed investment companies. In order to comply
with the current Listing Rules, the Company will also not invest
more than 10% of its gross asset value in other listed closed-ended
investment funds which themselves may invest more than 15% of their
gross assets in other listed closed-ended investment funds. This
restriction does not form part of the Company’s investment
policy.
The Group’s financial statements are maintained in Sterling.
Although many investments are denominated and quoted in currencies
other than Sterling, the Board does not intend to employ a hedging
strategy against fluctuations in exchange rates.
No material change will be made to the investment policy without
shareholder approval.
Gearing
The Investment Manager believes that tactical use of gearing can
add value from time to time. This gearing is typically in the form
of an overdraft or short-term loan facility, which can be repaid at
any time or matched by cash. The level and benefit of gearing is
discussed and agreed with the Board regularly. The Company may
borrow up to 25% of the Group’s net assets. The maximum level of
gearing used during the year was 14.6% and, at the financial
reporting date, net gearing (calculated as borrowings less cash and
cash equivalents as a percentage of net assets) stood at 11.9% of
shareholders’ funds (2022: 9.6%). For further details on borrowings
refer to note 14 in the Financial Statements and the Alternative
Performance Measure in the Glossary in the Annual Report and
Financial Statements.
Portfolio analysis
Information regarding the Company’s investment exposures is
contained within Section 2 (Portfolio) of the Annual Report and
Financial Statements, with information on the ten largest
investments, the investments listed and portfolio analysis above.
Further information regarding investment risk and activity
throughout the year can be found in the Investment Manager’s
Report.
As at 31 December 2023, the Level 3
unquoted investments (see note 18 in the Financial Statements) in
the BHP Brazil Royalty Contract and preferred shares and equity
shares of Jetti Resources and MCC Mining were held at Directors’
valuation, representing a total of £51,129,000 (US$65,178,000) (2022: £56,891,000 (US$67,269,000)). Unquoted investments can prove
to be more risky than listed investments.
Continuation vote
As agreed by shareholders in 1998, an ordinary resolution for the
continuation of the Company is proposed at each Annual General
Meeting. The Directors remain confident on the value available in
the mining sector and therefore recommend that shareholders vote in
support of the Company’s continuation.
Performance
Details of the Company’s performance for the year are given in the
Chairman’s Statement. The Investment Manager’s Report includes a
review of the main developments during the year, together with
information on investment activity within the Company’s
portfolio.
Results and dividends
The results for the Company are set out in the Consolidated
Statement of Comprehensive Income. The total loss for the year,
after taxation, was £78,985,000 (2022: profit of £202,420,000) of
which £64,691,000 (2022: £76,013,000) is revenue profit.
It is the Board’s intention to distribute substantially all of the
Company’s available income. The Directors recommend the payment of
a final dividend as set out in the Chairman’s Statement. Dividend
payments/payable for the year ended 31
December 2023 amounted to £64,016,000 (2022:
£75,405,000).
Future prospects
The Board’s main focus is to maximise total returns over the longer
term through investment in mining and metal assets. The outlook for
the Company is discussed in both the Chairman’s Statement and the
Investment Manager’s Report.
Social, community and human rights
issues
As an investment trust, the Company has no direct social or
community responsibilities or impact on the environment and the
Company has not adopted an ESG investment strategy or exclusionary
screens. However, the Directors believe that it is important and in
shareholders’ interests to consider human rights issues and
environmental, social and governance factors when selecting and
retaining investments. Details of the Company’s approach to ESG and
the Manager’s approach to ESG integration are also set out in the
Annual Report and Financial Statements.
Modern Slavery Act
As an investment vehicle, the Company does not provide goods or
services in the normal course of business and does not have
customers. The Investment Manager considers modern slavery as part
of supply chains and labour management within the investment
process. Accordingly, the Directors consider that the Company is
not required to make any slavery or human trafficking statement
under the Modern Slavery Act 2015. In any event, the Board
considers the Company’s supply chains, dealing predominantly with
professional advisers and service providers in the financial
services industry, to be low risk in relation to this
matter.
Directors, gender representation and
employees
The Directors of the Company on 31 December
2023 are set out in the Directors’ Biographies in the Annual
Report and Financial Statements. The Board consists of three male
Directors and two female Directors. The Company’s policy on
diversity is set out in the Annual Report and Financial Statements.
The Company does not have any executive employees.
Key performance indicators
At each Board meeting, the Directors consider a number of
performance measures to assess the Company’s success in achieving
its objectives. The key performance indicators (KPIs) used to
measure the progress and performance of the Company over time and
which are comparable to other investment trusts are set out below.
As indicated in the footnote to the table, some of these KPIs fall
within the definition of ‘Alternative Performance Measures’ under
guidance issued by the European Securities and Markets Authority
(ESMA) and additional information explaining how these are
calculated is set out in the Glossary in the Annual Report and
Financial Statements. Additionally, the Board regularly reviews the
performance of the portfolio, as well as the net asset value and
share price of the Company and compares this against various
companies and indices. Information on the Company’s performance is
given in the Chairman’s Statement.
|
|
Year ended
31 December
2023
|
Year ended
31 December
2022
|
|
Net asset value total return1,2
|
-6.2%
|
17.7%
|
|
Share price total return1,2
|
-10.4%
|
26.0%
|
|
(Discount)/premium to net asset value2
|
(3.3)%
|
1.3%
|
|
Revenue earnings per share
|
33.95p
|
40.68p
|
|
Total dividends per share
|
33.50p
|
40.00p
|
|
Ongoing charges2, 3
|
0.91%
|
0.95%
|
|
Ongoing charges on gross assets2, 4
|
0.81%
|
0.84%
|
|
|
=========
|
=========
|
1 This
measures the Company’s NAV and share price total return, which
assumes dividends paid by the Company have been
reinvested.
2 Alternative
Performance Measures, see Glossary in the Annual Report and
Financial Statements.
3 Ongoing
charges represent the management fee and all other operating
expenses, excluding finance costs, direct transaction costs,
custody transaction charges, VAT recovered, taxation, prior year
expenses written back and certain non-recurring items, as a % of
average daily net assets.
4 Ongoing
charges based on gross assets represent the management fee and all
other operating expenses, excluding finance costs, direct
transaction costs, custody transaction charges, VAT recovered,
taxation, prior year expenses written back and certain
non-recurring items, as a % of average daily gross assets. Gross
assets are calculated based on net assets during the year before
the deduction of the bank overdraft and loans. Ongoing charges
based on gross assets are considered to be an appropriate
performance measure as management fees are payable on gross assets
(subject to certain adjustments and deductions).
Principal risks
The Company is exposed to a variety of risks and uncertainties. As
required by the 2018 UK Corporate Governance Code (the UK Code),
the Board has put in place a robust ongoing process to identify,
assess and monitor the principal risks and emerging risks facing
the Company including those that would threaten its business model.
A core element of this process is the Company’s risk register which
identifies the risks facing the Company and assesses the likelihood
and potential impact of each risk and the quality of controls
operating to mitigate it. A residual risk rating is then calculated
for each risk based on the outcome of the assessment.
The risk register, its method of preparation and the operation of
key controls in BlackRock’s and third-party service providers’
systems of internal control, are reviewed on a regular basis by the
Audit Committee. In order to gain a more comprehensive
understanding of BlackRock’s and other third party service
providers’ risk management processes and how these apply to the
Company’s business, BlackRock’s internal audit department provides
an annual presentation to the Audit Committee chairs of the
BlackRock investment trusts setting out the results of testing
performed in relation to BlackRock’s internal control processes.
The Audit Committee also periodically receives and reviews internal
control reports from BlackRock and the Company’s service
providers.
The Board has undertaken a robust assessment of both the principal
and emerging risks facing the Company, including those that would
threaten its business model, future performance, solvency or
liquidity. The COVID-19 pandemic gave rise to unprecedented
challenges for businesses across the globe. Additionally, the risk
that unforeseen or unprecedented events including (but not limited
to) heightened geo-political tensions such as the war in
Ukraine and the conflict in the
Middle East, high inflation and
the current cost of living crisis has had a significant impact on
global markets. The Board has taken into consideration the risks
posed to the Company by these events and incorporated these into
the Company’s risk register. The threat of climate change has also
reinforced the importance of more sustainable practices and
environmental responsibility for investee companies.
Emerging risks are considered by the Board as they come into view
and are incorporated into the existing review of the Company’s risk
register. They were also considered as part of the annual
evaluation process. Additionally, the Manager considers emerging
risks in numerous forums and the BlackRock Risk and Quantitative
Analysis team produces an annual risk survey. Any material risks of
relevance to the Company through the annual risk survey will be
communicated to the Board.
The Board will continue to assess these risks on an ongoing basis.
In relation to the UK Code, the Board is confident that the
procedures that the Company has put in place are sufficient to
ensure that the necessary monitoring of risks and controls has been
carried out throughout the reporting period.
The principal risks and uncertainties faced by the Company during
the financial year, together with the potential effects, controls
and mitigating factors, are set out in the following
table.
Market
Principal risk
Market risk arises from volatility in the prices of the Company’s
investments. It represents the potential loss the Company might
suffer through realising investments in the face of negative market
movements.
Changes in general economic and market conditions, such as currency
exchange rates, interest rates, rates of inflation, industry
conditions, tax laws, political events and trends, can also
substantially and adversely affect the securities and, as a
consequence, the Company’s prospects and share price.
Market risk includes the potential impact of events which are
outside the Company’s control, including (but not limited to)
heightened geo-political tensions and military conflict, a global
pandemic and high inflation.
Companies operating in the sectors in which the Company invests may
be impacted by new legislation governing climate change and
environmental issues, which may have a negative impact on their
valuation and share price.
Mitigation/Control
The Board considers the diversification of the portfolio, asset
allocation, stock selection and levels of gearing on a regular
basis and has set investment restrictions and guidelines which are
monitored and reported on by the Investment Manager.
The Board monitors the implementation and results of the investment
process with the Investment Manager.
The Board also recognises the benefits of a closed-end fund
structure in extremely volatile markets such as those experienced
as a consequence of the COVID-19 pandemic and the war in
Ukraine and conflict in the
Middle East. Unlike open-ended
counterparts, closed-end funds are not obliged to sell-down
portfolio holdings at low valuations to meet liquidity requirements
for redemptions. During times of elevated volatility and market
stress, the ability of a closed-end fund structure to remain
invested for the long term enables the Investment Manager to adhere
to disciplined fundamental analysis from a bottom-up perspective
and be ready to respond to dislocations in the market as
opportunities present themselves.
The Investment Manager seeks to understand the Environmental,
Social and Governance (ESG) risks and opportunities facing
companies and industries in the portfolio. The Company has not
adopted an ESG investment strategy and does not exclude investment
in stocks based on ESG criteria, but the Investment Manager
considers ESG information when conducting research and due
diligence on new investments and again when monitoring investments
in the portfolio. Further information on BlackRock’s approach to
ESG integration can be found in the Annual Report and Financial
Statements.
Investment performance
Principal risk
The returns achieved are reliant primarily upon the performance of
the portfolio.
The Board is responsible for:
· deciding
the investment strategy to fulfil the Company’s objective;
and
· monitoring
the performance of the Investment Manager and the implementation of
the investment strategy.
An inappropriate investment strategy may lead to:
· underperformance
compared to the reference index;
· a
reduction or permanent loss of capital; and
· dissatisfied
shareholders and reputational damage.
The Board is also cognisant of the long-term risk to performance
from inadequate attention to ESG issues and in particular the
impact of climate change.
Mitigation/Control
To manage this risk the Board:
· regularly
reviews the Company’s investment mandate and long-term
strategy;
· has
set investment restrictions and guidelines which the Investment
Manager monitors and regularly reports on;
· receives
from the Investment Manager a regular explanation of stock
selection decisions, portfolio exposure, gearing and any changes in
gearing, and the rationale for the composition of the investment
portfolio;
· oversees
the maintenance of an adequate spread of investments in order to
minimise the risks associated with particular countries or factors
specific to particular sectors, based on the diversification
requirements inherent in the investment policy; and
· receives
and reviews regular reports showing an analysis of the Company’s
performance against other indices, including the performance of
major companies in the sector.
ESG analysis is integrated into the Investment Manager’s investment
process as set out in the Annual Report and Financial Statements.
This is monitored by the Board. As the world works toward a
transition to a low-carbon economy, the Investment Manager is
interested in hearing from companies about their strategies and
plans for responding to the challenges and capturing the
opportunities that this transition creates. When companies consider
climate-related risks, it is likely they will also assess their
impact and dependence on natural capital.
Operational
Principal risk
In common with most other investment trust companies, the Company
has no employees. The Company therefore relies on the services
provided by third parties and is dependent on the control systems
of the Manager, the Depositary and Fund Accountant which maintain
the Company’s assets, dealing procedures and accounting
records.
The security of the Company’s assets, dealing procedures,
accounting records and adherence to regulatory and legal
requirements depend on the effective operation of the systems of
these third party service providers. There is a risk that a major
disaster, such as floods, fire, a global pandemic, or terrorist
activity, renders the Company’s service providers unable to conduct
business at normal operating effectiveness.
Failure by any service provider to carry out its obligations to the
Company could have a material adverse effect on the Company’s
performance. Disruption to the accounting, payment systems or
custody records (including cyber security risk) could prevent the
accurate reporting and monitoring of the Company’s financial
position.
Mitigation/Control
Due diligence is undertaken before contracts are entered into with
third-party service providers. Thereafter, the performance of the
provider is subject to regular review and reported to the
Board.
The Board reviews on a regular basis an assessment of the fraud
risks that the Company could potentially be exposed to and also a
summary of the controls put in place by the Manager, Depositary,
Custodian, Fund Accountant and Registrar specifically to mitigate
these risks.
Most third-party service providers produce Service Organisation
Control (SOC 1) reports to provide assurance regarding the
effective operation of internal controls as reported on by their
reporting accountants. These reports are provided to the Audit
Committee for review. The Committee would seek further
representations from service providers if not satisfied with the
effectiveness of their control environment.
The Company’s financial instruments held in custody are subject to
a strict liability regime and, in the event of a loss of such
financial instruments, the Depositary must return financial assets
of an identical type or the corresponding amount, unless able to
demonstrate the loss was a result of an event beyond its reasonable
control.
The Board reviews the overall performance of the Manager,
Investment Manager and all other third-party service providers on a
regular basis and compliance with the Investment Management
Agreement annually.
The Board also considers the business continuity arrangements of
the Company’s key service providers on an ongoing basis and reviews
these as part of its review of the Company’s risk
register.
Legal and regulatory compliance
Principal risk
The Company has been approved by HM Revenue & Customs as an
investment trust, subject to continuing to meet the relevant
eligibility conditions, and operates as an investment trust in
accordance with Chapter 4 of Part 24 of the Corporation Tax Act
2010. As such, the Company is exempt from corporation tax on
capital gains tax on the profits realised from the sale of its
investments.
Any breach of the relevant eligibility conditions could lead to the
Company losing investment trust status and being subject to
corporation tax on capital gains realised within the Company’s
portfolio. In such event, the investment returns of the Company may
be adversely affected.
A serious breach could result in the Company and/or the Directors
being fined or the subject of criminal proceedings or the
suspension of the Company’s shares which would in turn lead to a
breach of the Corporation Tax Act 2010.
Amongst other relevant laws, the Company is required to comply with
the provisions of the Companies Act 2006, the Alternative
Investment Fund Managers’ Directive as implemented, retained and
onshored in the UK (AIFMD), the UK Listing Rules, Disclosure
Guidance and Transparency Rules and the Market Abuse Regulation (as
retained and onshored in the UK).
Mitigation/Control
The Investment Manager monitors investment movements, the level and
type of forecast income and expenditure and the amount of proposed
dividends to ensure that the provisions of Chapter 4 of Part 24 of
the Corporation Tax Act 2010 are not breached. The results are
reported to the Board at each meeting.
Compliance with the accounting rules affecting investment trusts is
also carefully and regularly monitored.
The Company Secretary, Manager and the Company’s professional
advisers provide regular reports to the Board in respect of
compliance with all applicable rules and regulations. The Board and
the Manager also monitor changes in government policy and
legislation which may have an impact on the Company.
The Company’s Investment Manager at all times complies with the
sanctions administered by the UK Office of Financial Sanctions
Implementation, the United States Treasury’s Office of Foreign
Assets Control, the United Nations, European Union member states
and any other applicable regimes.
Financial
Principal risk
The Company’s investment activities expose it to a variety of
financial risks which include market risk, counterparty credit
risk, liquidity risk and the valuation of financial
instruments.
Mitigation/Control
Details of these risks are disclosed in note 18 to the Financial
Statements, together with a summary of the policies for managing
these risks.
In the view of the Board, there have not been any changes to the
fundamental nature of these risks and these principal risks and
uncertainties are equally applicable for the current financial
year.
Viability statement
In accordance with provision 31 of the 2018 UK Corporate Governance
Code, the Directors have assessed the prospects of the Company over
a longer period than the twelve months referred to by the ‘Going
Concern’ guidelines. The Company is an investment trust with the
objective of providing an attractive level of income return
together with capital appreciation over the long term.
The Directors expect the Company to continue for the foreseeable
future and have therefore conducted this review for a period up to
the Annual General Meeting in 2027. The Directors assess viability
over a rolling three-year period as they believe it best balances
the Company’s long-term objective, its financial flexibility and
scope, with the difficulty in forecasting economic conditions which
could affect both the Company and its shareholders. The Company
also undertakes a continuation vote every year with the next one
taking place at the forthcoming Annual General Meeting.
In making an assessment on the viability of the Company, the Board
has considered the following:
· the
impact of a significant fall in commodity markets on the value of
the Company’s investment portfolio;
· the
ongoing relevance of the Company’s investment objective, business
model and investment policy in the prevailing market;
· the
principal and emerging risks and uncertainties, as set out above,
and their potential impact;
· the
level of ongoing demand for the Company’s shares;
· the
Company’s share price discount/premium to NAV;
· the
liquidity of the Company’s portfolio; and
· the
level of income generated by the Company and future income and
expenditure forecasts.
The Directors have concluded that there is a reasonable expectation
that the Company will continue in operation and meet its
liabilities as they fall due over the period of their assessment
based on the following considerations:
· the
Investment Manager’s compliance with the investment objective and
policy, its investment strategy and asset allocation;
· the
portfolio is liquid and mainly comprises readily realisable assets
which continue to offer a range of investment opportunities for
shareholders as part of a balanced investment portfolio;
· the
operational resilience of the Company and its key service providers
and their ability to continue to provide a good level of service
for the foreseeable future;
· the
effectiveness of business continuity plans in place for the Company
and its key service providers;
· the
ongoing processes for monitoring operating costs and income which
are considered to be reasonable in comparison to the Company’s
total assets;
· the
Board’s discount management policy; and
· the
Company is a closed-end investment company and therefore does not
suffer from the liquidity issues arising from unexpected
redemptions.
In addition, the Board’s assessment of the Company’s ability to
operate in the foreseeable future is included in the Going Concern
Statement which can be found in the Directors’ Report in the Annual
Report and Financial Statements.
Section 172 statement: Promoting the success of the
Company
The Companies (Miscellaneous Reporting) Regulations 2018 require
directors of large companies to explain more fully how they have
discharged their duties under Section 172(1) of the Companies Act
2006 in promoting the success of their companies for the benefit of
members as a whole. This includes the likely consequences of their
decisions in the longer term and how they have taken wider
stakeholders’ needs into account.
The disclosure that follows covers how the Board has engaged with
and understands the views of stakeholders and how stakeholders’
needs have been taken into account, the outcome of this engagement
and the impact that it has had on the Board’s decisions. The Board
considers the main stakeholders in the Company to be the Manager,
Investment Manager and the shareholders. In addition to this, the
Board considers investee companies and key service providers of the
Company to be stakeholders; the latter comprise the Company’s
Depositary, Registrar, Fund Accountants and Brokers.
Stakeholders
Shareholders
Continued shareholder support and engagement are critical to the
continued existence of the Company and the successful delivery of
its long-term strategy. The Board is focused on fostering good
working relationships with shareholders and on understanding the
views of shareholders in order to incorporate them into the Board’s
strategy and objective in maximising total returns to shareholders
through a worldwide portfolio of mining and metal
securities.
Manager and Investment Manager
The Board’s main working relationship is with the Manager, who is
responsible for the Company’s portfolio management (including asset
allocation, stock and sector selection) and risk management, as
well as ancillary functions such as administration, secretarial,
accounting and marketing services. The Manager has sub-delegated
portfolio management to the Investment Manager. Successful
management of shareholders’ assets by the Investment Manager is
critical for the Company to deliver successfully its investment
strategy and meet its objective. The Company is also reliant on the
Manager as AIFM to provide support in meeting relevant regulatory
obligations under the AIFMD and other relevant
legislation.
Other key service providers
In order for the Company to function as an investment trust with a
listing on the premium segment of the official list of the
Financial Conduct Authority (FCA) and trade on the London Stock
Exchange’s (LSE) main market for listed securities, the Board
relies on a diverse range of advisers for support in meeting
relevant obligations and safeguarding the Company’s assets. For
this reason, the Board considers the Company’s Depositary,
Registrar, Fund Accountants and Brokers to be stakeholders. The
Board maintains regular contact with its key external service
providers and receives regular reporting from them through the
Board and Committee meetings, as well as outside of the regular
meeting cycle.
Investee companies
Portfolio holdings are ultimately shareholders’ assets and the
Board recognises the importance of good stewardship and
communication with investee companies in meeting the Company’s
investment objective and strategy. The Board monitors the Manager’s
stewardship activities and receives regular feedback from the
Manager in respect of meetings with the management of investee
companies.
A summary of the key areas of engagement undertaken by the Board
with its key stakeholders in the year under review and how
Directors have acted upon this to promote the long-term success of
the Company are set out in the table below.
Area of Engagement
Investment mandate and objective
Issue
The Board is committed to promoting the role and success of the
Company in delivering on its investment mandate to shareholders
over the long term.
The Board also has responsibility to shareholders to ensure that
the Company’s portfolio of assets is invested in line with the
stated investment objective and in a way that ensures an
appropriate balance between spread of risk and portfolio
returns.
Engagement
The Board worked closely with the Investment Manager throughout the
year in further developing investment strategy and underlying
policies, not simply for the purpose of achieving the Company’s
investment objective but in the interests of shareholders and
future investors. In addition the Company continues to seek out new
unquoted investments which could add long-term value.
Impact
The portfolio activities undertaken by the Investment Manager can
be found in their Report. The Investment Manager continues to
actively look for opportunities to grow royalty exposure given it
is a key differentiator of the Company and an effective mechanism
to lock-in long-term income which further diversifies the Company’s
revenues.
Details regarding the Company’s NAV and share price performance can
be found in the Chairman’s Statement and in this Strategic
Report.
Responsible investing
Issue
More than ever, the importance of good governance and
sustainability practices are key factors in making investment
decisions. Climate change is becoming a defining factor in
companies’ long-term prospects across the investment spectrum with
significant and lasting implications for economic growth and
prosperity. The mining industries in which the Company’s investment
universe operate are facing ethical and sustainability issues that
cannot be ignored by asset managers and investment companies
alike.
Engagement
The Board works closely with the Investment Manager to review
regularly and challenge the Company’s performance, investment
policy and strategy to seek to ensure that the Company’s investment
objective continues to be met in an effective and responsible way
in the interests of shareholders and future investors. The Company
has not adopted an ESG investment strategy and does not exclude
investment in stocks based on ESG criteria, but the Board believes
that responsible investment and sustainability are integral to the
longer-term delivery of the Company’s success.
The Investment Manager’s approach to the consideration of ESG
factors in respect of the Company’s portfolio, as well as the
Investment Manager’s engagement with investee companies to
encourage sound corporate governance practices, are kept under
review by the Board. The Board also expects to be informed by the
Investment Manager of any sensitive voting issues involving the
Company’s investments.
The Investment Manager reports to the Board in respect of its
approach to ESG integration; a summary of BlackRock’s approach to
ESG integration is set out in the Annual Report and Financial
Statements. The Investment Manager’s approach to engagement with
investee companies and voting guidelines is summarised in the
Annual Report and Financial Statements and further detail is
available on the BlackRock website.
Impact
The Board and the Investment Manager believe there is likely to be
a positive correlation between strong ESG practices and investment
performance over time. This is especially important in mining given
the long investment cycle and the impact of ESG practices on the
ability of a mining company to maintain its social licence to
operate. ESG is one of the many factors that we look at and site
visits to companies’ operations provide valuable insights into
their ESG practices. The Investment Manager has continued to engage
with investee companies.
In 2020 BlackRock exited its active public debt and equity
investment in businesses generating greater than 25% of their
revenue from thermal coal production due to the heightened risks
associated with their economic activity. During the year under
review, the Company has had no exposure to companies whose
principal activity is the extraction of thermal coal.
Within the parameters of the Company’s existing investment policy,
the Investment Manager is continuing to look for opportunities to
deploy capital in growth investments that should benefit from the
energy transition. It is likely that this area will become a more
significant part of the portfolio.
Shareholders
Issue
Continued shareholder support and engagement are critical to the
continued existence of the Company and the successful delivery of
its long-term strategy.
Engagement
The Board is committed to maintaining open channels of
communication and to engage with shareholders. The Company welcomes
and encourages attendance and participation from shareholders at
its Annual General Meetings. Shareholders will have the opportunity
to meet the Directors and Investment Manager and to address
questions to them directly. The Investment Manager will also
provide a presentation on the Company’s performance and the outlook
for the mining sector.
The Annual Report and Half Yearly Financial Report are available on
the BlackRock website and are also circulated to shareholders
either in printed copy or via electronic communications. In
addition, regular updates on performance, monthly factsheets, the
daily NAV and other information are also published on the website
at www.blackrock.com/uk/brwm.
The Company’s website and marketing initiatives are geared to
providing a breadth and depth of informative and engaging
content.
The Board also works closely with the Manager to develop the
Company’s marketing strategy with the aim of ensuring effective
communication with shareholders.
Unlike trading companies, one-to-one shareholder meetings normally
take the form of a meeting with the Investment Manager as opposed
to members of the Board. The Company’s willingness to enter into
discussions with institutional shareholders is also demonstrated by
the programmes of institutional presentations by the Investment
Manager. Additionally, the Investment Manager regularly presents at
professional and private investor events to help explain and
promote the Company’s strategy.
If shareholders wish to raise issues or concerns with the Board,
they are welcome to do so at any time. The Chairman is available to
meet directly with shareholders periodically to understand their
views on governance and the Company’s performance where they wish
to do so. He may be contacted via the Company Secretary whose
details are given in the Annual Report and Financial
Statements.
Impact
The Board values any feedback and questions from shareholders ahead
of and during Annual General Meetings in order to gain an
understanding of their views and will take action when and as
appropriate. Feedback and questions will also help the Company
evolve its reporting, aiming to make reports more transparent and
understandable.
Feedback from all substantive meetings between the Investment
Manager and shareholders will be shared with the Board. The
Directors will also receive updates from the Company’s broker and
Kepler, marketing consultants, on any feedback from shareholders,
as well as share trading activity, share price performance and an
update from the Investment Manager.
The portfolio management team attended a number of professional
investor meetings (many by video conference) and held discussions
with a number of wealth management desks and offices in respect of
the Company during the year under review.
Portfolio holdings are ultimately shareholders’ assets and the
Board recognises the importance of good stewardship and
communication with investee companies in meeting the Company’s
investment objective and strategy. The Board monitors the Manager’s
stewardship activities and receives regular feedback from the
Investment Manager in respect of meetings with the management of
portfolio companies.
Management of share rating
Issue
The Board recognises the importance to shareholders that the market
price of the Company’s shares should not trade at either a
significant discount or premium to their prevailing NAV. The Board
believes this may be achieved by the use of share buyback powers
and the issue of shares.
Engagement
The Board monitors the Company’s share rating on an ongoing basis
and receives regular updates from the Manager and the Company’s
Brokers regarding the level of discount/premium. The Board believes
that the best way of maintaining the share rating at an optimal
level over the long term is to create demand for the shares in the
secondary market. To this end, the Investment Manager is devoting
considerable effort to broadening the awareness of the Company,
particularly to wealth managers and to the wider retail
market.
In addition, the Board has worked closely with the Manager to
develop the Company’s marketing strategy, with the aim of ensuring
effective communication with existing shareholders and to attract
new shareholders to the Company in order to improve liquidity in
the Company’s shares and to sustain the share rating of the
Company.
Impact
The Board continues to monitor the Company’s premium/discount to
NAV and will look to issue or buy back shares if it is deemed to be
in the interests of shareholders as a whole. The Company
participates in a focused investment trust sales and marketing
initiative operated by the Manager on behalf of the investment
trusts under its management. Further details are set out in the
Annual Report and Financial Statements.
During the financial year the Company reissued 2,430,000 shares
from treasury. As at 5 March 2024 the
Company’s shares were trading at a discount of 6.5% to the cum
income NAV.
Service levels of third-party providers
Issue
The Board acknowledges the importance of ensuring that the
Company’s principal suppliers are providing a suitable level of
service, including the Investment Manager in respect of investment
performance and delivering on the Company’s investment mandate; the
Custodian and Depositary in respect of their duties towards
safeguarding the Company’s assets; the Registrar in its maintenance
of the Company’s share register and dealing with investor queries;
and the Company’s Brokers in respect of the provision of advice and
acting as a market maker for the Company’s shares.
Engagement
The Manager reports to the Board on the Company’s performance on a
regular basis. The Board carries out a robust annual evaluation of
the Manager’s performance, their commitment and available
resources.
The Board performs an annual review of the service levels of all
third-party service providers and concludes on their suitability to
continue in their role. The Board receives regular updates from the
AIFM, Depositary, Registrar and Brokers on an ongoing
basis.
The Board has also worked closely with the Manager to gain comfort
that relevant business continuity plans are operating effectively
for all of the Company’s key service providers.
Impact
All performance evaluations were performed on a timely basis and
the Board concluded that all third-party service providers,
including the Manager and Investment Manager, were operating
effectively and providing a good level of service.
The Board has received updates in respect of business continuity
planning from the Company’s Manager, Custodian, Depositary, Fund
Accountant, Registrar and Printer and is confident that
arrangements are in place to ensure a good level of service will
continue to be provided.
Board composition
Issue
The Board is committed to ensuring that its own composition brings
an appropriate balance of knowledge, experience and skills, and
that it is compliant with best corporate governance practice under
the UK Code, including guidance on tenure and the composition of
the Board’s committees.
Engagement
The Board has engaged the services of an external search
consultant, Fletcher Jones, to
identify potential candidates to replace Mr Cheyne who retires as a
Director and Chairman following the forthcoming Annual General
Meeting. The Nomination Committee has agreed the selection criteria
and the method of selection, recruitment and
appointment.
All Directors are subject to a formal evaluation process on an
annual basis (more details and the conclusions of the 2023
evaluation process are given in the Annual Report and Financial
Statements). All Directors stand for re-election by shareholders
annually.
Shareholders may attend the Annual General Meeting and raise any
queries in respect of Board composition or individual Directors in
person or may contact the Company Secretary or the Chairman using
the details provided with any issues.
Impact
As at the date of this report, the Board was comprised of three men
and two women. Under the AIC Code the tenure of a director who is
elevated to Chairman may be extended by three years. The Board
decided that this extension should apply to Mr Cheyne’s tenure
which was therefore extended until the Annual General Meeting in
May 2024. Mr Cheyne will not be
seeking re-election at the forthcoming Annual General Meeting.
During the year, the Directors identified Mr Goodyear as a suitable
replacement to fill the vacancy following Mr Edey’s retirement and
he will succeed Mr Cheyne as Chairman. Following the recruitment
process, the successful candidate will be appointed as a Director
following the Annual General Meeting being held on 9 May 2024. Details of each Director’s
contribution to the success and promotion of the Company are set
out in the Directors’ Report and details of the Directors’
biographies in the Annual Report and Financial
Statements.
The Directors are not aware of any issues that have been raised
directly by shareholders in respect of Board composition in the
year under review. Details for the proxy voting results in favour
and against individual Directors’ re-election at the 2023 Annual
General Meeting are given on the Manager’s website at
www.blackrock.com/uk/brwm.
Environmental, Social and Governance issues and
approach
The Board’s approach
Environmental, Social and Governance (ESG) issues can present both
opportunities and threats to long-term investment performance. The
Company’s investment universe comprises sectors that are undergoing
significant structural change and are likely to be highly impacted
by increasing regulation as a result of climate change and other
social and governance factors. Your Board is committed to ensuring
that we have appointed an Investment Manager that integrates ESG
considerations into its investment process and has the skill to
navigate the structural transition that the Company’s investment
universe is undergoing. The Board believes effective engagement
with company management is, in most cases, the most effective way
of driving meaningful change in the behaviour of investee company
management. While the Company does not have an ESG or impact
focused investment strategy or apply exclusionary screens, as in
most cases the Company will not invest in companies which have high
ESG risks and no plans to address existing deficiencies. Where the
Board is not satisfied that an investee company is taking steps to
address matters of an ESG nature, it may discuss with the
Investment Manager how this situation might be resolved, including
potentially by a full disposal of shares.
ESG integration does not change the Company’s investment objective
or constrain the Investment Manager’s investable universe, and does
not mean that an ESG or impact focused investment strategy or any
exclusionary screens have been or will be adopted by the Company.
Similarly, ESG integration does not determine the extent to which
the Company may be impacted by sustainability risks. More
information on BlackRock’s global approach to ESG integration, as
well as activity specific to the BlackRock World Mining Trust plc
portfolio, is set out below.
The Company does not meet the criteria for Article 8 or 9 products
under the EU Sustainable Finance Disclosure Regulation (SFDR) and
the investments underlying this financial product do not take into
account the EU criteria for environmentally sustainable economic
activities. The Investment Manager has access to a range of data
sources, including principal adverse indicator (PAI) data, when
making decisions on the selection of investments. However, whilst
BlackRock considers ESG risks for all portfolios and these risks
may coincide with environmental or social themes associated with
the PAIs, the Company does not commit to considering PAIs in
driving the selection of its investments. Additional information on
ESG integration, sustainability risk and SFDR is set out in the
AIFMD Fund Disclosures available on the Company’s
website.
BlackRock’s approach to ESG integration
BlackRock believes that sustainability risk, including climate risk
are investment risks. As a fiduciary, we manage material risks and
opportunities that could impact portfolios. Sustainability can be a
driver of investment risks and opportunities and we incorporate
them in our firm wide processes when they are material. This in
turn (in BlackRock’s view) is likely to drive a significant
reallocation of capital away from traditional carbon-intensive
industries over the next decade. BlackRock believes that
carbon-intensive companies will play an integral role in unlocking
the full potential of the energy transition, and to do this, they
must be prepared to adapt, innovate and pivot their strategies
towards a low carbon economy.
As part of BlackRock’s structured investment process, ESG risks and
opportunities (including sustainability/climate risk) are
considered within the portfolio management team’s fundamental
analysis of companies and industries and the Company’s portfolio
managers work closely with the BIS team to assess the governance
quality of companies and understand any potential issues, risks or
opportunities.
As part of their approach to ESG integration, the portfolio
managers use ESG information when conducting research and due
diligence on new investments and again when monitoring investments
in the portfolio. In particular, portfolio managers now have access
to 1,200 key ESG performance indicators in Aladdin (BlackRock’s
proprietary trading system) from third-party data providers.
BlackRock’s internal sustainability research framework scoring is
also available alongside third-party ESG scores in core portfolio
management tools. BlackRock’s analysts’ sector expertise and local
market knowledge allows it to engage with companies through direct
interaction with management teams and conducting site visits. BIS
engages with company leadership to understand how they are
identifying and managing material business risks and opportunities,
including sustainability related risks and the potential impacts
these may have on long-term financial performance. BIS and the
portfolio management team’s understanding of material
sustainability risks and opportunities is further supported by
BlackRock’s Sustainable and Transition Solutions (STS) function.
STS looks to advance ESG research and integration, active
engagement and the development of sustainable investment solutions
across the firm.
BlackRock World Mining Trust plc – BlackRock Investment
Stewardship engagement with portfolio companies for the year ended
31 December 2023
Given the Board’s belief in the importance of engagement and
communication with portfolio companies, they receive regular
updates from the Investment Manager in respect of activity
undertaken for the year under review. The Investment Manager
engages with company management teams and undertakes company
meetings to identify the best management teams with the ability to
create value for shareholders over the long term. In addition,
BlackRock also has a separate BlackRock Investment Stewardship
(BIS) team. Investment stewardship is one of the ways in which
BlackRock fulfils its fiduciary responsibilities as an asset
manager to its clients. BIS serves as a link between them and the
companies BlackRock invests in. BIS engages with investee companies
to build its understanding of these companies’ approach to
addressing material business risks and opportunities. Additional
information is set out in the table and charts in the Annual Report
and Financial Statements, as well as the key engagement themes for
the meetings held in respect of the Company’s portfolio
holdings.
|
|
Year ended
31 December
2023
|
|
Number of engagements held
|
48
|
|
Number of companies met
|
22
|
|
% of equity investments covered
|
33
|
|
Shareholder meetings voted at
|
60
|
|
Number of proposals voted on
|
651
|
|
Number of votes against management
|
39
|
|
% of total items voted represented by votes against
management
|
6.0
|
|
|
=========
|
Sources: BlackRock, Institutional Shareholder
Services.
Investment stewardship
Consistent with BlackRock’s fiduciary duty as an asset manager, BIS
seeks to support investee companies in their efforts to deliver
long-term financial value on behalf of their clients. These clients
include public and private pension plans, governments, insurance
companies, endowments, universities, charities and, ultimately,
individual investors, among others. BIS serves as a link between
BlackRock’s clients and the companies they invest in. Clients
depend on BlackRock to help them meet their investment goals; the
business and governance decisions that companies make may have a
direct impact on BlackRock’s clients’ long-term investment outcomes
and financial well being.
From BlackRock’s perspective, business relevant sustainability
issues can contribute to a company’s long-term financial
performance, and thus further incorporating these considerations
into the investment research, portfolio construction, and
stewardship process can enhance long-term risk adjusted returns.
The Company’s Investment Manager works closely with BIS to assess
the governance quality of companies and business practices, and
better understand any potential issues, risks or opportunities. The
Investment Manager uses this information when conducting research
and due diligence on new investments and again when monitoring
investments in the portfolio.
Global principles
The
BIS Global Principles,
regional voting guidelines,
and
engagement priorities
(collectively, the ‘BIS policies’) set out the core elements of
corporate governance that guide BIS’ efforts globally and within
each regional market, including when engaging with companies and
voting at shareholder meetings when authorised to do so on behalf
of clients. Each year, BIS reviews its policies and updates them as
necessary to reflect changes in market standards and regulations,
insights gained over the year through third-party and its own
research, and feedback from clients and companies.
Regional proxy voting guidelines
BIS’ regional voting guidelines are intended to help clients and
companies understand its thinking on key governance matters. They
are the benchmark against which it assesses a company’s approach to
corporate governance and the items on the agenda to be voted on at
a shareholder meeting. BIS applies its guidelines pragmatically,
taking into account a company’s unique circumstances where
relevant. BlackRock informs voting decisions through research and
engages as necessary. BIS reviews its voting guidelines annually
and updates them as necessary to reflect changes in market
standards, evolving governance practices and insights gained from
engagement over the prior year. BIS’ market-specific voting
guidelines are available on its website at
www.blackrock.com/corporate/about-us/investment-stewardship#stewardship-policies.
BlackRock is committed to transparency in terms of disclosure on
its stewardship activities on behalf of clients. The BIS policies
help BlackRock’s clients understand its work to advance their
interests as long-term investors in public companies. Additionally,
BIS publishes both
annual
and
quarterly
reports detailing its stewardship activities, as well as
vote bulletins
that describe its rationale for certain votes at high profile
shareholder meetings.
BlackRock’s reporting and disclosures
In terms of its own reporting, BlackRock believes that the
Sustainability Accounting Standards Board provides a clear set of
standards for reporting sustainability information across a wide
range of issues, from labour practices to data privacy to business
ethics. For evaluating and reporting climate-related risks, as well
as the related governance issues that are essential to managing
them, the Task Force on Climate-related Financial Disclosures
(TCFD) provides a valuable framework. BlackRock recognises that
reporting to these standards requires significant time, analysis,
and effort. BlackRock’s 2022 TCFD report can be found at
www.blackrock.com/corporate/literature/continuous-disclosure-and-important-information/tcfd-report-2022-blkinc.pdf.
BY ORDER OF THE BOARD
CAROLINE
DRISCOLL
FOR AND ON BEHALF OF
BLACKROCK INVESTMENT MANAGEMENT (UK)
LIMITED
Company Secretary
7 March 2024
RELATED PARTY TRANSACTIONS
At the date of this report, the Board consists of five
non-executive Directors, all of whom are considered to be
independent of the Manager by the Board. Following the conclusion
of the Annual General Meeting on 9 May
2024, the Board will consist of five non-executive
Directors. None of the Directors has a service contract with the
Company. The Chairman receives an annual fee of £52,500, the
Chairman of the Audit Committee receives an annual fee of £43,750,
and each other Director receives an annual fee of £35,000. The
Senior Independent Director receives an additional fee of £3,500.
All five members of the Board hold shares in the Company. Mr Cheyne
holds 35,000 ordinary shares, Mr Goodyear holds 60,000 ordinary
shares, Ms Lewis holds 5,362 ordinary shares, Ms Mosely holds 7,400
ordinary shares and Mr Venkatakrishnan holds 2,000 ordinary shares.
As at 31 December 2023, £17,000
(2022: £16,000) was outstanding in respect of Directors’
fees.
Statement of Directors’ Responsibilities in respect of the
Annual Report and Financial Statements
The Directors are responsible for preparing the Annual Report and
Financial Statements in accordance with applicable law and
regulations. Company law requires the Directors to prepare
financial statements for each financial year. Under that law, the
Directors are required to prepare the financial statements in
accordance with UK-adopted International Accounting Standards
(IAS).
Under Company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the Group for that period. In preparing those
financial statements, the Directors are required to:
· present
fairly the financial position, financial performance and cash flows
of the Group and Company;
· select
suitable accounting policies in accordance with IAS 8: Accounting
Policies, Changes in Accounting Estimates and Errors and then apply
them consistently;
· present
information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable
information;
· make
judgements and estimates that are reasonable and
prudent;
· state
whether the financial statements have been prepared in accordance
with UK-adopted IAS, subject to any material departures disclosed
and explained in the financial statements;
· provide
additional disclosures when compliance with the specific
requirements in accordance with UK-adopted IAS is insufficient to
enable users to understand the impact of particular transactions,
other events and conditions on the Group’s and Company’s financial
position and financial performance; and
· prepare
the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and Company will continue
in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s and
Company’s transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that the financial statements comply with the
Companies Act 2006.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are also responsible for preparing the Strategic
Report, Directors’ Report, the Directors’ Remuneration Report, the
Corporate Governance Statement and the Report of the Audit
Committee in accordance with the Companies Act 2006 and applicable
regulations, including the requirements of the Listing Rules and
the Disclosure Guidance and Transparency Rules. The Directors have
delegated responsibility to the Manager for the maintenance and
integrity of the Company’s corporate and financial information
included on the BlackRock website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Each of the Directors, confirm to the best of their knowledge
that:
· the
financial statements, which have been prepared in accordance with
UK-adopted IAS, give a true and fair view of the assets,
liabilities, financial position and net return of the Group and
Company; and
· the
Strategic Report contained in the Annual Report and Financial
Statements includes a fair review of the development and
performance of the business and the position of the Group and
Company, together with a description of the principal risks and
uncertainties that it faces.
The 2018 UK Corporate Governance Code also requires Directors to
ensure that the Annual Report and Financial Statements are fair,
balanced and understandable. In order to reach a conclusion on this
matter, the Board has requested that the Audit Committee advise on
whether it considers that the Annual Report and Financial
Statements fulfil these requirements. The process by which the
Committee has reached these conclusions is set out in the Audit
Committee’s Report in the Annual Report and Financial
Statements.
As a result, the Board has concluded that the Annual Report and
Financial Statements for the year ended 31
December 2023, taken as a whole, are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Group’s and Company’s position,
performance, business model and strategy.
FOR AND ON BEHALF OF THE BOARD
DAVID
CHEYNE
Chairman
7 March 2024
Consolidated Statement of Comprehensive Income for the year
ended 31 December
2023
|
|
|
2023
|
2022
|
|
|
Notes
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
|
Income from investments held at fair value through profit or
loss
|
3
|
68,317
|
630
|
68,947
|
78,087
|
811
|
78,898
|
|
Other income
|
3
|
6,827
|
–
|
6,827
|
7,909
|
–
|
7,909
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total revenue
|
|
75,144
|
630
|
75,774
|
85,996
|
811
|
86,807
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
Net (loss)/profit on investments and options held at fair value
through profit or loss
|
|
–
|
(140,576)
|
(140,576)
|
–
|
152,937
|
152,937
|
|
Net profit/(loss) on foreign exchange
|
|
–
|
9,018
|
9,018
|
–
|
(17,645)
|
(17,645)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total
|
|
75,144
|
(130,928)
|
(55,784)
|
85,996
|
136,103
|
222,099
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
Expenses
|
|
|
|
|
|
|
|
|
Investment management fee
|
4
|
(2,374)
|
(7,317)
|
(9,691)
|
(2,615)
|
(8,031)
|
(10,646)
|
|
Other operating expenses
|
5
|
(1,278)
|
(15)
|
(1,293)
|
(1,037)
|
(28)
|
(1,065)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total operating expenses
|
|
(3,652)
|
(7,332)
|
(10,984)
|
(3,652)
|
(8,059)
|
(11,711)
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
Net profit/(loss) on ordinary activities before finance
costs and taxation
|
|
71,492
|
(138,260)
|
(66,768)
|
82,344
|
128,044
|
210,388
|
|
Finance costs
|
6
|
(2,375)
|
(7,166)
|
(9,541)
|
(1,182)
|
(3,520)
|
(4,702)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Net profit/(loss) on ordinary activities before
taxation
|
|
69,117
|
(145,426)
|
(76,309)
|
81,162
|
124,524
|
205,686
|
|
Taxation (charge)/credit
|
|
(4,426)
|
1,750
|
(2,676)
|
(5,149)
|
1,883
|
(3,266)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Net profit/(loss) on ordinary activities after
taxation
|
|
64,691
|
(143,676)
|
(78,985)
|
76,013
|
126,407
|
202,420
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
Earnings/(loss) per ordinary share (pence) – basic and
diluted
|
8
|
33.95
|
(75.40)
|
(41.45)
|
40.68
|
67.64
|
108.32
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
The total columns of this statement represent the Group’s Statement
of Comprehensive Income, prepared in accordance with UK-adopted
International Accounting Standards (IAS). The supplementary revenue
and capital accounts are both prepared under guidance published by
the Association of Investment Companies (AIC). All items in the
above statement derive from continuing operations. No operations
were acquired or discontinued during the year. All income is
attributable to the equity holders of the Group.
The Group does not have any other comprehensive income/(loss)
(2022: £nil). The net profit/(loss) for the year disclosed above
represents the Group’s total comprehensive income.
Consolidated Statement of Changes in Equity for the year
ended 31 December
2023
|
Group
|
Notes
|
Called
up share
capital
£’000
|
Share
premium
account
£’000
|
Capital
redemption
reserve
£’000
|
Special
reserve
£’000
|
Capital
reserves
£’000
|
Revenue
reserve
£’000
|
Total
£’000
|
|
For the year ended 31 December 2023
|
|
|
|
|
|
|
|
|
|
At 31 December 2022
|
|
9,651
|
148,107
|
22,779
|
180,736
|
868,837
|
69,175
|
1,299,285
|
|
Total comprehensive (loss)/income:
|
|
|
|
|
|
|
|
|
|
Net (loss)/profit for the year
|
|
–
|
–
|
–
|
–
|
(143,676)
|
64,691
|
(78,985)
|
|
Transactions with owners, recorded directly to equity:
|
|
|
|
|
|
|
|
|
|
Ordinary shares reissued from treasury
|
9,10
|
–
|
3,386
|
–
|
12,305
|
–
|
–
|
15,691
|
|
Share reissue costs
|
9,10
|
–
|
–
|
–
|
(33)
|
–
|
–
|
(33)
|
|
Dividends paid1
|
7
|
–
|
–
|
–
|
–
|
–
|
(75,907)
|
(75,907)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
At 31 December 2023
|
|
9,651
|
151,493
|
22,779
|
193,008
|
725,161
|
57,959
|
1,160,051
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
For the year ended 31 December 2022
|
|
|
|
|
|
|
|
|
|
At 31 December 2021
|
|
9,651
|
138,818
|
22,779
|
155,123
|
742,430
|
74,073
|
1,142,874
|
|
Total comprehensive income:
|
|
|
|
|
|
|
|
|
|
Net profit for the year
|
|
–
|
–
|
–
|
–
|
126,407
|
76,013
|
202,420
|
|
Transactions with owners, recorded directly to equity:
|
|
|
|
|
|
|
|
|
|
Ordinary shares reissued from treasury
|
|
–
|
9,289
|
–
|
25,683
|
–
|
–
|
34,972
|
|
Share reissue costs
|
|
–
|
–
|
–
|
(70)
|
–
|
–
|
(70)
|
|
Dividends paid2
|
7
|
–
|
–
|
–
|
–
|
–
|
(80,911)
|
(80,911)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
At 31 December 2022
|
|
9,651
|
148,107
|
22,779
|
180,736
|
868,837
|
69,175
|
1,299,285
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
1 The
final dividend of 23.50p per share for the year ended 31 December 2022, declared on 3 March 2023 and paid on 26 April 2023; 1st interim dividend of 5.50p per
share for the year ended 31 December
2023, declared on 18 April
2023 and paid on 31 May 2023;
2nd interim dividend of 5.50p per share for the year ended
31 December 2023, declared on
24 August 2023 and paid on
6 October 2023 and 3rd interim
dividend of 5.50p per share for the year ended 31 December 2023, declared on 11 October 2023 and paid on 22 December 2023.
2 The
final dividend of 27.00p per share for the year ended 31 December 2021, declared on 8 March 2022 and paid on 19 May 2022; 1st interim dividend of 5.50p per
share for the year ended 31 December
2022, declared on 6 May 2022
and paid on 30 June 2022; 2nd interim
dividend of 5.50p per share for the year ended 31 December 2022, declared on 23 August 2022 and paid on 30 September 2022 and 3rd interim dividend of
5.50p per share for the year ended 31
December 2022, declared on 16
November 2022 and paid on 22 December
2022.
Parent Company Statement of Changes in Equity for the year
ended 31 December
2023
|
Company
|
Notes
|
Called
up share
capital
£’000
|
Share
premium
account
£’000
|
Capital
redemption
reserve
£’000
|
Special
reserve
£’000
|
Capital
reserves
£’000
|
Revenue
reserve
£’000
|
Total
£’000
|
|
For the year ended 31 December 2023
|
|
|
|
|
|
|
|
|
|
At 31 December 2022
|
|
9,651
|
148,107
|
22,779
|
180,736
|
874,567
|
63,445
|
1,299,285
|
|
Total comprehensive (loss)/income:
|
|
|
|
|
|
|
|
|
|
Net (loss)/profit for the year
|
|
–
|
–
|
–
|
–
|
(143,500)
|
64,515
|
(78,985)
|
|
Transactions with owners, recorded directly to equity:
|
|
|
|
|
|
|
|
|
|
Ordinary shares reissued from treasury
|
9,10
|
–
|
3,386
|
–
|
12,305
|
–
|
–
|
15,691
|
|
Share reissue costs
|
9,10
|
–
|
–
|
–
|
(33)
|
–
|
–
|
(33)
|
|
Dividends paid1
|
7
|
–
|
–
|
–
|
–
|
–
|
(75,907)
|
(75,907)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
At 31 December 2023
|
|
9,651
|
151,493
|
22,779
|
193,008
|
731,067
|
52,053
|
1,160,051
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
For the year ended 31 December 2022
|
|
|
|
|
|
|
|
|
|
At 31 December 2021
|
|
9,651
|
138,818
|
22,779
|
155,123
|
748,107
|
68,396
|
1,142,874
|
|
Total comprehensive income:
|
|
|
|
|
|
|
|
|
|
Net profit for the year
|
|
–
|
–
|
–
|
–
|
126,460
|
75,960
|
202,420
|
|
Transactions with owners, recorded directly to equity:
|
|
|
|
|
|
|
|
|
|
Ordinary shares reissued from treasury
|
|
–
|
9,289
|
–
|
25,683
|
–
|
–
|
34,972
|
|
Share reissue costs
|
|
–
|
–
|
–
|
(70)
|
–
|
–
|
(70)
|
|
Dividends paid1
|
7
|
–
|
–
|
–
|
–
|
–
|
(80,911)
|
(80,911)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
At 31 December 2022
|
|
9,651
|
148,107
|
22,779
|
180,736
|
874,567
|
63,445
|
1,299,285
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
1 The
final dividend of 23.50p per share for the year ended 31 December 2022, declared on 3 March 2023 and paid on 26 April 2023; 1st interim dividend of 5.50p per
share for the year ended 31 December
2023, declared on 18 April
2023 and paid on 31 May 2023;
2nd interim dividend of 5.50p per share for the year ended
31 December 2023, declared on
24 August 2023 and paid on
6 October 2023 and 3rd interim
dividend of 5.50p per share for the year ended 31 December 2023, declared on 11 October 2023 and paid on 22 December 2023.
2 The
final dividend of 27.00p per share for the year ended 31 December 2021, declared on 8 March 2022 and paid on 19 May 2022; 1st interim dividend of 5.50p per
share for the year ended 31 December
2022, declared on 6 May 2022
and paid on 30 June 2022; 2nd interim
dividend of 5.50p per share for the year ended 31 December 2022, declared on 23 August 2022 and paid on 30 September 2022 and 3rd interim dividend of
5.50p per share for the year ended 31
December 2022, declared on 16
November 2022 and paid on 22 December
2022.
For information on the Company’s distributable reserves please
refer to note 17 in the Annual Report and Financial
Statements.
Consolidated and Parent Company Statements of Financial
Position as at 31 December
2023
|
|
|
31 December 2023
|
31 December 2022
|
|
|
Notes
|
Group
£’000
|
Company
£’000
|
Group
£’000
|
Company
£’000
|
|
Non current assets
|
|
|
|
|
|
|
Investments held at fair value through profit or loss
|
|
1,298,420
|
1,305,827
|
1,424,844
|
1,432,075
|
|
Current assets
|
|
|
|
|
|
|
Current tax asset
|
|
1,276
|
1,276
|
821
|
821
|
|
Other receivables
|
|
3,592
|
3,592
|
4,431
|
4,431
|
|
Cash collateral held with brokers
|
|
6,269
|
6,269
|
6,795
|
6,795
|
|
Cash and cash equivalents
|
|
10,612
|
4,261
|
29,492
|
23,317
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total current assets
|
|
21,749
|
15,398
|
41,539
|
35,364
|
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Total assets
|
|
1,320,169
|
1,321,225
|
1,466,383
|
1,467,439
|
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Current liabilities
|
|
|
|
|
|
|
Current tax liability
|
|
(352)
|
(352)
|
(373)
|
(361)
|
|
Other payables
|
|
(8,052)
|
(9,108)
|
(6,155)
|
(7,223)
|
|
Derivative financial liabilities held at fair value through profit
or loss
|
|
(1,401)
|
(1,401)
|
(1,227)
|
(1,227)
|
|
Bank loans
|
|
(149,828)
|
(149,828)
|
(158,783)
|
(158,783)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total current liabilities
|
|
(159,633)
|
(160,689)
|
(166,538)
|
(167,594)
|
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Total assets less current liabilities
|
|
1,160,536
|
1,160,536
|
1,299,845
|
1,299,845
|
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Non current liabilities
|
|
|
|
|
|
|
Deferred taxation liability
|
|
(485)
|
(485)
|
(560)
|
(560)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Net assets
|
|
1,160,051
|
1,160,051
|
1,299,285
|
1,299,285
|
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Equity attributable to equity holders
|
|
|
|
|
|
|
Called up share capital
|
9
|
9,651
|
9,651
|
9,651
|
9,651
|
|
Share premium account
|
10
|
151,493
|
151,493
|
148,107
|
148,107
|
|
Capital redemption reserve
|
10
|
22,779
|
22,779
|
22,779
|
22,779
|
|
Special reserve
|
10
|
193,008
|
193,008
|
180,736
|
180,736
|
|
Capital reserves:
|
|
|
|
|
|
|
At 1 January
|
|
868,837
|
874,567
|
742,430
|
748,107
|
|
Net (loss)/profit for the year
|
|
(143,676)
|
(143,500)
|
126,407
|
126,460
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
At 31 December
|
10
|
725,161
|
731,067
|
868,837
|
874,567
|
|
Revenue reserve:
|
|
|
|
|
|
|
At 1 January
|
|
69,175
|
63,445
|
74,073
|
68,396
|
|
Net profit for the year
|
|
64,691
|
64,515
|
76,013
|
75,960
|
|
Dividends paid
|
|
(75,907)
|
(75,907)
|
(80,911)
|
(80,911)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
At 31 December
|
10
|
57,959
|
52,053
|
69,175
|
63,445
|
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Total equity
|
|
1,160,051
|
1,160,051
|
1,299,285
|
1,299,285
|
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Net asset value per ordinary share
(pence)
|
8
|
606.78
|
606.78
|
688.35
|
688.35
|
|
|
|
=========
|
=========
|
=========
|
=========
|
Consolidated and Parent Company Cash Flow Statements for
the year ended 31 December
2023
|
|
31 December 2023
|
31 December 2022
|
|
|
Group
£’000
|
Company
£’000
|
Group
£’000
|
Company
£’000
|
|
Operating activities
|
|
|
|
|
|
Net (loss)/profit on ordinary activities before taxation
|
(76,309)
|
(76,309)
|
205,686
|
205,686
|
|
Add back finance costs
|
9,541
|
9,541
|
4,702
|
4,702
|
|
Net loss/(profit) on investments and options held at fair value
through profit or loss (including transaction costs)
|
140,576
|
140,400
|
(152,937)
|
(152,990)
|
|
Net (profit)/loss on foreign exchange
|
(9,018)
|
(9,018)
|
17,645
|
17,645
|
|
Sale of investments and return of capital on contractual
rights
|
648,272
|
648,272
|
489,236
|
489,236
|
|
Purchase of investments and options held at fair value through
profit or loss
|
(662,250)
|
(662,250)
|
(503,782)
|
(503,782)
|
|
Decrease in other receivables
|
1,069
|
1,069
|
13
|
13
|
|
Increase in other payables
|
1,556
|
1,556
|
1,025
|
1,013
|
|
(Increase)/decrease in amounts due from brokers
|
(409)
|
(409)
|
243
|
243
|
|
Net movement in cash collateral held with brokers
|
526
|
526
|
(6,215)
|
(6,215)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Net cash inflow from operating activities before
taxation
|
53,554
|
53,378
|
55,616
|
55,551
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Taxation paid
|
(12)
|
(12)
|
(432)
|
(432)
|
|
Taxation on investment income included within gross
income
|
(2,664)
|
(2,664)
|
(3,210)
|
(3,210)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Net cash inflow from operating
activities
|
50,878
|
50,702
|
51,974
|
51,909
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Financing activities
|
|
|
|
|
|
Drawdown of loans
|
–
|
–
|
2,359
|
2,359
|
|
Interest paid
|
(9,571)
|
(9,571)
|
(4,720)
|
(4,720)
|
|
Net proceeds from ordinary shares reissued from treasury
|
15,658
|
15,658
|
34,902
|
34,902
|
|
Dividends paid
|
(75,907)
|
(75,907)
|
(80,911)
|
(80,911)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Net cash outflow from financing
activities
|
(69,820)
|
(69,820)
|
(48,370)
|
(48,370)
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Decrease/(increase) in cash and cash
equivalents
|
(18,942)
|
(19,118)
|
3,604
|
3,539
|
|
Cash and cash equivalents at start of the year
|
29,492
|
23,317
|
25,976
|
19,866
|
|
Effect of foreign exchange rate changes
|
62
|
62
|
(88)
|
(88)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Cash and cash equivalents at end of
year
|
10,612
|
4,261
|
29,492
|
23,317
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Comprised of:
|
|
|
|
|
|
Cash and cash equivalents
|
10,612
|
4,261
|
29,492
|
23,317
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
|
10,612
|
4,261
|
29,492
|
23,317
|
|
|
=========
|
=========
|
=========
|
=========
|
Notes to the financial statements for the year ended
31 December 2023
1. Principal activity
The principal activity of the Company is that of an investment
trust company within the meaning of Section 1158 of the Corporation
Tax Act 2010. The Company was incorporated in England on 28 October
1993 and this is the 30th Annual Report.
The principal activity of the subsidiary, BlackRock World Mining
Investment Company Limited, is investment dealing.
2. Material accounting policies
The material accounting policies adopted by the Group and Company
have been applied consistently, other than where new policies have
been adopted and are set out below.
(a) Basis of preparation
On 31 December 2020, International
Financial Reporting Standards (IFRS) as adopted by the European
Union at that date were brought into UK law and became UK-adopted
International Accounting Standards (IAS), with future changes being
subject to endorsement by the UK Endorsement Board and with the
requirements of the Companies Act 2006 as applicable to companies
reporting under those standards.
The Group and Company financial statements have been prepared under
the historic cost convention modified by the revaluation of certain
financial assets and financial liabilities held at fair value
through profit or loss and in accordance with UK-adopted IAS. The
Company has taken advantage of the exemption provided under Section
408 of the Companies Act 2006 not to publish its individual
Statement of Comprehensive Income and related notes. All of the
Group’s operations are of a continuing nature.
Insofar as the Statement of Recommended Practice (SORP) for
investment trust companies and venture capital trusts, issued by
the Association of Investment Companies (AIC) in October 2019 and updated in July 2022, is compatible with UK-adopted IAS, the
financial statements have been prepared in accordance with guidance
set out in the SORP.
Substantially all of the assets of the Group consist of securities
that are readily realisable and, accordingly, the Directors believe
that the Group has adequate resources to continue in operational
existence for the foreseeable future for the period to 31 March 2024, being a period of at least twelve
months from the date of approval of the financial statements and
therefore consider the going concern assumption to be appropriate.
The Directors have reviewed compliance with the covenants
associated with the bank overdraft facility, loan facility, income
and expense projections and the liquidity of the investment
portfolio in making their assessment.
The Directors have considered the impact of climate change on the
value of the investments included in the financial statements and
have concluded that:
· there
was no further impact of climate change to be considered as the
investments are valued based on market pricing as required by IFRS
13; and
· the
risk is adequately captured in the assumptions and inputs used in
measurement of Level 3 assets, as noted in note 18 of the Financial
Statements.
None of the Group's other assets and liabilities were considered to
be potentially impacted by climate change.
The Group’s financial statements are presented in Sterling, which
is the currency of the primary economic environment in which the
Group operates. All values are rounded to the nearest thousand
pounds (£’000) except where otherwise indicated.
Adoption of new and amended International Accounting
Standards and interpretations:
IFRS 9 – Fees in the ’10 per cent’ Test for Derecognition
of Financial Liabilities
(effective 1 January 2022). The
International
Accounting Standards Board (IASB) has amended IFRS 9 Financial
Instruments to clarify the fees that a company includes when
assessing whether the terms of a new or modified financial
liability are substantially different from the terms of the
original financial liability.
IFRS 17
–
Insurance contracts
(effective 1 January 2023). This
standard replaces IFRS 4, which currently permits a wide
range of accounting practices in accounting for insurance
contracts. IFRS 17 will fundamentally change the accounting by all
entities that issue insurance contracts and investment contracts
with discretionary participation features.
IAS 12 – Deferred tax related to assets and liabilities
arising from a single transaction
(effective 1 January 2023). The
IASB
has amended IAS 12 Income Taxes to require companies to recognise
deferred tax on particular transactions that, on initial
recognition, give rise to equal amounts of taxable and deductible
temporary differences. According to the amended guidance, a
temporary difference that arises on initial recognition of an asset
or liability is not subject to the initial recognition exemption if
that transaction gave rise to equal amounts of taxable and
deductible temporary differences. These amendments might have a
significant impact on the preparation of financial statements by
companies that have substantial balances of right-of-use assets,
lease liabilities, decommissioning, restoration and similar
liabilities. The impact for those affected would be the recognition
of additional deferred tax assets and liabilities.
IAS 8 – Definition of accounting estimates
(effective 1 January 2023). The IASB
has amended IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors to help distinguish
between accounting policies and accounting estimates, replacing the
definition of accounting estimates.
IAS 1 and IFRS Practice Statement 2 – Disclosure of
accounting policies
(effective 1 January 2023). The IASB
has amended
IAS 1 Presentation of Financial Statements to help preparers in
deciding which accounting policies to disclose in their financial
statements by stating that an entity is now required to disclose
material accounting policies instead of significant accounting
policies.
IAS 12 – International Tax Reform Pillar Two Model
Rules
(effective 1 January 2023). The IASB
has published amendments
to IAS 12 Income Taxes to respond to stakeholders’ concerns about
the potential implications of the imminent implementation of the
OECD pillar two rules on the accounting for income taxes. The
amendment is an exception to the requirements in IAS 12 that an
entity does not recognise and does not disclose information about
deferred tax assets as liabilities related to the OECD pillar two
income taxes and a requirement that current tax expenses must be
disclosed separately to pillar two income taxes.
Relevant International Accounting Standards that have yet
to be adopted:
IAS 1 – Classification of liabilities as current or
non-current
(effective 1 January 2024). The IASB
has amended IAS 1
Presentation of Financial Statements to clarify its requirement for
the presentation of liabilities depending on the rights that exist
at the end of the reporting period. The amendment requires
liabilities to be classified as non current if the entity has a
substantive right to defer settlement for at least 12 months at the
end of the reporting period. The amendment no longer refers to
unconditional rights.
IAS 1 – Non-current liabilities with
covenants
(effective 1 January 2024). The IASB
has amended IAS 1 Presentation of
Financial Statements to introduce additional disclosures for
liabilities with covenants within 12 months of the reporting
period. The additional disclosures include the nature of covenants,
when the entity is required to comply with covenants, the carrying
amount of related liabilities and circumstances that may indicate
that the entity will have difficulty complying with the
covenants.
None of the standards that have been issued, but are not yet
effective, are expected to have a material impact on the
Group.
(b) Basis of consolidation
The Group’s financial statements are made up to 31 December each
year and consolidate the financial statements of the Company and
its wholly owned subsidiary, which is registered and operates in
England and Wales, BlackRock World Mining Investment
Company Limited (together ‘the Group’). The subsidiary company is
not considered an investment entity. In the financial statements of
the Parent Company, the investment in the subsidiary company is
held at fair value.
Subsidiaries are consolidated from the date of their acquisition,
being the date on which the Company obtains control, and continue
to be consolidated until the date that such control ceases. The
financial statements of subsidiaries used in the preparation of the
consolidated financial statements are based on consistent
accounting policies. All intra-group balances and transactions,
including unrealised profits arising therefrom, are
eliminated.
(c) Presentation of the Statement of Comprehensive
Income
In order to better reflect the activities of an investment trust
company and in accordance with guidance issued by the AIC,
supplementary information which analyses the Consolidated Statement
of Comprehensive Income between items of a revenue and a capital
nature has been presented alongside the Consolidated Statement of
Comprehensive Income.
(d) Segmental reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business being investment business.
(e) Income
Dividends receivable on equity shares are recognised as revenue for
the year on an ex-dividend basis. Where no ex-dividend date is
available, dividends receivable on or before the year end are
treated as revenue for the year. Provision is made for any
dividends and interest income not expected to be received. Special
dividends, if any, are treated as a capital or a revenue receipt
depending on the facts or circumstances of each particular case.
The return on a debt security is recognised on a time apportionment
basis so as to reflect the effective yield on the debt security.
Interest income and deposit interest is accounted for on an
accruals basis.
Options may be purchased or written over securities held in the
portfolio for generating or protecting capital returns, or for
generating or maintaining revenue returns. Where the purpose of the
option is the generation of income, the premium is treated as a
revenue item. Where the purpose of the option is the maintenance of
capital, the premium is treated as a capital item.
Option premium income is recognised as revenue evenly over the life
of the option contract and included in the revenue account of the
Consolidated Statement of Comprehensive Income unless the option
has been written for the maintenance and enhancement of the Group’s
investment portfolio and represents an incidental part of a larger
capital transaction, in which case any premia arising are allocated
to the capital account of the Consolidated Statement of
Comprehensive Income.
Royalty income from contractual rights is measured at the fair
value of the consideration received or receivable where the
Investment Manager can reliably estimate the amount, pursuant to
the terms of the agreement. Royalty income from contractual rights
received comprises of a return of income and a return of capital
based on the underlying cost of the contract and, accordingly, the
return of income element is taken to the revenue account and the
return of capital element is taken to the capital account. These
amounts are disclosed in the Consolidated Statement of
Comprehensive Income within income from investments and net profit
on investments held at fair value through profit or loss,
respectively.
The useful life of the contractual rights will be determined by
reference to the contractual arrangements, the planned mine life on
commencement of mining and the underlying cost of the contractual
rights will be revalued on a systematic basis using the units of
production method over the life of the contractual rights which is
estimated using available estimated proved and probable reserves
specifically associated with the mine. The Investment Manager
relies on public disclosures for information on proven and probable
reserves from the operators of the mine. Amortisation rates are
adjusted on a prospective basis for all changes to estimates of the
life of contractual rights and iron ore reserves. These are
disclosed in the Consolidated Statement of Comprehensive Income
within net profit on investments held at fair value through profit
or loss.
Where the Group has elected to receive its dividends in the form of
additional shares rather than in cash, the cash equivalent of the
dividend is recognised as income. Any excess in the value of the
shares received over the amount of the cash dividend is recognised
in capital.
Underwriting commission receivable is taken into account on an
accruals basis.
(f) Expenses
All expenses, including finance costs, are accounted for on an
accruals basis. Expenses have been charged wholly to the revenue
account of the Consolidated Statement of Comprehensive Income,
except as follows:
· expenses
which are incidental to the acquisition or sale of an investment
are charged to the capital account of the Consolidated Statement of
Comprehensive Income. Details of transaction costs on the purchases
and sales of investments are disclosed within note 10 to the
financial statements on in the Annual Report and Financial
Statements;
· expenses
are treated as capital where a connection with the maintenance or
enhancement of the value of the investments can be demonstrated;
and
· the
investment management fee and finance costs have been allocated 75%
to the capital account and 25% to the revenue account of the
Consolidated Statement of Comprehensive Income in line with the
Board’s expectations of the long-term split of returns, in the form
of capital gains and income, respectively, from the investment
portfolio.
(g) Taxation
The tax expense represents the sum of the tax currently payable and
deferred tax. The tax currently payable is based on the taxable
profit for the year. Taxable profit differs from net profit as
reported in the Consolidated Statement of Comprehensive Income
because it excludes items of income or expenses that are taxable or
deductible in other years and it further excludes items that are
never taxable or deductible. The Group’s liability for current tax
is calculated using tax rates that were applicable at the balance
sheet date.
Where expenses are allocated between capital and revenue accounts,
any tax relief in respect of the expenses is allocated between
capital and revenue returns on the marginal basis using the
Company’s effective rate of corporation tax for the accounting
period.
Deferred taxation is recognised in respect of all temporary
differences that have originated but not reversed at the financial
reporting date, where transactions or events that result in an
obligation to pay more taxation in the future or right to pay less
taxation in the future have occurred at the financial reporting
date. This is subject to deferred taxation assets only being
recognised if it is considered more likely than not that there will
be suitable profits from which the future reversal of the temporary
differences can be deducted. Deferred taxation assets and
liabilities are measured at the rates applicable to the legal
jurisdictions in which they arise.
(h) Investments held at fair value through profit or
loss
In accordance with IFRS 9, the Group classifies its investments at
initial recognition as held at fair value through profit or loss
and are managed and evaluated on a fair value basis in accordance
with its investment strategy and business model.
All investments, including contractual rights, are measured
initially and subsequently at fair value through profit or loss.
Purchases of investments are recognised on a trade date basis.
Contractual rights are recognised on the completion date, where a
purchase of the rights is under a contract, and are initially
measured at fair value excluding transaction costs. Sales of
investments are recognised at the trade date of the
disposal.
The fair value of the financial investments is based on their
quoted bid price at the financial reporting date, without deduction
for the estimated future selling costs. This policy applies to all
current and non-current asset investments held by the
Group.
The gains and losses from changes in fair value of contractual
rights are taken to the Consolidated Statement of Comprehensive
Income and arise as a result of the revaluation of the underlying
cost of the contractual rights, changes in commodity prices and
changes in estimates of proven and probable reserves specifically
associated with the mine.
Under IAS, the investment in the subsidiary in the Company’s
Statement of Financial Position is fair valued which is deemed to
be the net asset value of the subsidiary.
Changes in the value of investments held at fair value through
profit or loss and gains and losses on disposal are recognised in
the Consolidated Statement of Comprehensive Income as ‘Net profit
on investments held at fair value through profit or loss’. Also
included within the heading are transaction costs in relation to
the purchase or sale of investments.
For all financial instruments not traded in an active market, the
fair value is determined by using various valuation techniques.
Valuation techniques include market approach (i.e., using recent
arm’s length market transactions adjusted as necessary and
reference to the current market value of another instrument that is
substantially the same) and the income approach (i.e., discounted
cash flow analysis and option pricing models making as much use of
available and supportable market data where possible). See note
2(q) below.
(i) Options
Options are held at fair value through profit or loss based on the
bid/offer prices of the options written to which the Group is
exposed. The value of the option is subsequently marked-to-market
to reflect the fair value through profit or loss of the option
based on traded prices. Where the premium is taken to the revenue
account, an appropriate amount is shown as capital return such that
the total return reflects the overall change in the fair value of
the option. When an option is exercised, the gain or loss is
accounted for as a capital gain or loss. Any cost on closing out an
option is transferred to the revenue account along with any
remaining unamortised premium.
(j) Other receivables and other
payables
Other receivables and other payables do not carry any interest and
are short-term in nature and are accordingly stated on an amortised
cost basis.
(k) Dividends payable
Under IAS, final dividends should not be accrued in the financial
statements unless they have been approved by shareholders before
the financial reporting date. Interim dividends should not be
recognised in the financial statements unless they have been
paid.
Dividends payable to equity shareholders are recognised in the
Consolidated and Parent Company Statements of Changes in
Equity.
(l) Foreign currency translation
Transactions involving foreign currencies are converted at the rate
ruling at the date of the transaction. Foreign currency monetary
assets and liabilities and non-monetary assets held at fair value
are translated into Sterling at the rate ruling on the financial
reporting date. Foreign exchange differences arising on translation
are recognised in the Consolidated Statement of Comprehensive
Income as a revenue or capital item depending on the income or
expense to which they relate. For investment transactions and
investments held at the year end, denominated in a foreign
currency, the resulting gains or losses are included in the
profit/(loss) on investments held at fair value through profit or
loss in the Consolidated Statement of Comprehensive
Income.
(m) Cash and cash equivalents
Cash comprises cash in hand, bank overdrafts and on demand
deposits. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash
and that are subject to an insignificant risk of changes in value.
Bank overdrafts are shown separately on the Consolidated and Parent
Company Statements of Financial Position.
(n) Bank borrowings
Bank overdrafts and loans are recorded at the net proceeds
received. Finance charges, including any premium payable on
settlement or redemption and direct issue costs, are accounted for
on an accruals basis in the Consolidated Statement of Comprehensive
Income using the effective interest rate method and are added to
the carrying amount of the instrument to the extent that they are
not settled in the period in which they arise.
(o) Offsetting
Financial assets and financial liabilities are offset and the net
amount reported in the Consolidated and Parent Company Statements
of Financial Position if there is a currently enforceable legal
right to offset the recognised amounts and there is an intention to
settle on a net basis, or to realise the asset and settle the
liability simultaneously.
(p) Share repurchases, share reissues and new share
issues
Shares repurchased and subsequently cancelled – share capital is
reduced by the nominal value of the shares repurchased and the
capital redemption reserve is correspondingly increased in
accordance with Section 733 of the Companies Act 2006. The full
cost of the repurchase is charged to the special
reserve.
Shares repurchased and held in treasury – the full cost of the
repurchase is charged to the special reserve.
Where treasury shares are subsequently reissued:
· amounts
received to the extent of the repurchase price are credited to the
special reserve and capital reserves based on a weighted average
basis of amounts utilised from these reserves on repurchases;
and
· any
surplus received in excess of the repurchase price is taken to the
share premium account.
Where new shares are issued, amounts received to the extent of any
surplus received in excess of the par value are taken to the share
premium account.
Share issue costs are charged to the share premium account. Costs
on share reissues are charged to the special reserve and capital
reserves.
(q) Critical accounting estimates and
judgements
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates and assumptions will, by
definition, seldom equal the related actual results. Estimates and
judgements are regularly evaluated and are based on historical
experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are addressed
below.
Fair value of unquoted financial
instruments
When the fair values of financial assets and financial liabilities
recorded in the Consolidated and Parent Company Statements of
Financial Position cannot be derived from active markets, their
fair value is determined using a variety of valuation techniques
that include the use of valuation models.
(a) The
fair value of the BHP Brazil contractual rights was assessed by an
independent valuer with a recognised and relevant professional
qualification. The inputs to these models are taken from observable
markets where possible, but where this is not feasible, estimation
is required in establishing fair values. The estimates include
considerations of production profiles, commodity prices, cash flows
and discount rates. Changes in assumptions about these factors
could affect the reported fair value of financial instruments in
the Consolidated and Parent Company Statements of Financial
Position and the level where the instruments are disclosed in the
fair value hierarchy. To assess the significance of a particular
input to the entire measurement, the external valuer performs
sensitivity analysis.
(b) The
fair value of the investment in equity shares of Jetti Resources
and MCC Mining were assessed by an independent valuer with a
recognised and relevant professional qualification.
The valuation is carried out based on market approach using
earnings multiple and price of recent transactions. Changes in
assumptions about these factors could affect the reported fair
value of financial instruments in the Consolidated and Parent
Company Statements of Financial Position and the level where the
instruments are disclosed in the fair value hierarchy. To assess
the significance of a particular input to the entire measurement,
the external valuer performs sensitivity analysis.
(c) The
investment in the subsidiary company was valued based on the net
assets of the subsidiary company, which is considered appropriate
based on the nature and volume of transactions in the subsidiary
company.
The key assumptions used to determine the fair value of the
unquoted financial instruments and sensitivity analyses are
provided in note 18(d).
3. Income
|
|
2023
£’000
|
2022
£’000
|
|
Investment income:
|
|
|
|
UK dividends
|
8,647
|
17,536
|
|
UK special dividends
|
–
|
2,167
|
|
Overseas dividends
|
33,457
|
45,094
|
|
Overseas special dividends
|
17,736
|
3,808
|
|
Income from contractual rights (BHP Brazil Royalty)
|
4,186
|
3,096
|
|
Income from Vale debentures
|
2,608
|
3,863
|
|
Income from fixed income investments
|
1,683
|
2,523
|
|
|
---------------
|
---------------
|
|
Total investment income
|
68,317
|
78,087
|
|
|
=========
|
=========
|
|
Other income:
|
|
|
|
Option premium income
|
5,964
|
7,297
|
|
Deposit interest
|
678
|
513
|
|
Broker interest received
|
104
|
18
|
|
Stock lending income
|
81
|
81
|
|
|
---------------
|
---------------
|
|
|
6,827
|
7,909
|
|
|
=========
|
=========
|
|
Total income
|
75,144
|
85,996
|
|
|
=========
|
=========
|
During the year, the Group received option premium income in cash
totalling £6,724,000 (2022: £7,541,000) for writing put and covered
call options for the purposes of revenue generation.
Option premium income is amortised evenly over the life of the
option contract and, accordingly, during the year, option premiums
of £5,964,000 (2022: £7,297,000) were amortised to
revenue.
At 31 December 2023, there were three open positions (2022: three)
with an associated liability of £1,401,000 (2022:
£1,227,000).
Dividends and interest received in cash during the year amounted to
£59,542,000 and £5,159,000 (2022: £68,630,000 and
£5,918,000).
Special dividends of £630,000 have been recognised in capital
during the year (2022: £811,000).
4. Investment management fee
|
|
2023
|
2022
|
|
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
|
Investment management fee
|
2,374
|
7,317
|
9,691
|
2,615
|
8,031
|
10,646
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total
|
2,374
|
7,317
|
9,691
|
2,615
|
8,031
|
10,646
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
The investment management fee (which includes all services provided
by BlackRock) is 0.80% of the Company’s gross assets (subject to
certain adjustments). During the year, £9,421,000 (2022:
£9,848,000) of the investment management fee was generated from net
assets and £270,000 (2022: £798,000) from the gearing effect on
gross assets due to the quarter–on– quarter increase in the NAV per
share for the year as set out below:
|
Quarter end
|
Cum income
NAV per share
(pence)
|
Quarterly
increase/
(decrease) %
|
Gearing effect
on management
fees (£’000)
|
|
31 December 2021
|
622.21
|
–
|
–
|
|
31 March 2022
|
769.58
|
+23.7
|
267
|
|
30 June 2022
|
584.86
|
-24.0
|
–
|
|
30 September 2022
|
602.65
|
+3.0
|
294
|
|
31 December 2022
|
688.35
|
+14.2
|
237
|
|
31 March 2023
|
664.51
|
-3.5
|
–
|
|
30 June 2023
|
612.72
|
-7.8
|
–
|
|
30 September 2023
|
601.47
|
-1.8
|
–
|
|
31 December 2023
|
606.78
|
+0.9
|
270
|
|
|
=========
|
=========
|
=========
|
The daily average of the net assets under management during the
year ended 31 December 2023 was £1,203,977,000 (2022:
£1,232,043,000).
The fee is allocated 25% to the revenue account and 75% to the
capital account of the Consolidated Statement of Comprehensive
Income.
There is no additional fee for company secretarial and
administration services.
5. Other operating expenses
|
|
2023
£’000
|
2022
£’000
|
|
Allocated to revenue:
|
|
|
|
Custody fee
|
109
|
101
|
|
Auditors’ remuneration:
|
|
|
|
– audit services
|
55
|
51
|
|
– non-audit services1
|
9
|
9
|
|
Registrar’s fee
|
86
|
86
|
|
Directors’ emoluments2
|
179
|
197
|
|
AIC fees
|
21
|
21
|
|
Broker fees
|
25
|
24
|
|
Depositary fees
|
116
|
116
|
|
FCA fee
|
40
|
30
|
|
Directors’ insurance
|
22
|
23
|
|
Marketing fees
|
144
|
132
|
|
Stock exchange fees
|
52
|
37
|
|
Legal and professional fees
|
147
|
35
|
|
Bank facility fees3
|
85
|
97
|
|
Printing and postage fees
|
55
|
47
|
|
Directors’ search fees
|
25
|
–
|
|
Write back of prior year expenses4
|
–
|
(55)
|
|
Other administrative costs
|
108
|
86
|
|
|
---------------
|
---------------
|
|
|
1,278
|
1,037
|
|
|
=========
|
=========
|
|
Allocated to capital:
|
|
|
|
Transaction charges5
|
15
|
28
|
|
|
---------------
|
---------------
|
|
|
1,293
|
1,065
|
|
|
=========
|
=========
|
|
|
2023
|
2022
|
|
The Company’s ongoing charges6,
calculated as a percentage of average daily net assets and using
the management fee and all other operating expenses, excluding
finance costs, direct transaction costs, transaction charges, VAT
recovered, taxation, prior year expenses written back and certain
non-recurring items were:
|
0.91%
|
0.95%
|
|
|
=========
|
=========
|
|
The Company’s ongoing charges6,
calculated as a percentage of average daily gross assets and using
the management fee and all other operating expenses, excluding
finance costs, direct transaction costs, transaction charges, VAT
recovered, taxation, prior year expenses written back and certain
non-recurring items were:
|
0.81%
|
0.84%
|
|
|
=========
|
=========
|
1 Fees
paid to the auditors for non-audit services of £9,350 excluding VAT
(2022: £8,925) relate to the review of the Condensed Half Yearly
Financial Report.
2 Details
of the Directors’ emoluments can be found in the Directors’
Remuneration Report in the Annual Report and Financial Statements.
The Company has no employees.
3 There
is a 4 basis point facility fee chargeable on the full loan
facility whether drawn or undrawn.
4 No
expenses have been written back during the year (2022: Directors'
expenses, miscellaneous fees, legal fees and professional services
fees).
5 For
the year ended 31 December 2023, expenses of £15,000 (2022:
£28,000) were charged to the capital account of the Consolidated
Statement of Comprehensive Income. These include transaction costs
charged by the custodian on sale and purchase trades.
6 Alternative
Performance Measure, see Glossary in the Annual Report and
Financial Statements.
6. Finance costs
|
|
2023
|
2022
|
|
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
|
Interest paid on bank loans
|
2,370
|
7,151
|
9,521
|
1,177
|
3,505
|
4,682
|
|
Interest paid on bank overdraft
|
5
|
15
|
20
|
5
|
15
|
20
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total
|
2,375
|
7,166
|
9,541
|
1,182
|
3,520
|
4,702
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
7. Dividends
Dividends paid on equity shares:
|
|
Record date
|
Payment date
|
2023
£’000
|
2022
£’000
|
|
Final dividend of 23.50p per share for the year ended 31 December
2022 (2021: 27.00p)
|
10 March 2023
|
26 April 2023
|
44,392
|
49,898
|
|
1st interim dividend of 5.50p per share for the year ended 31
December 2023 (2022: 5.50p)
|
5 May 2023
|
31 May 2023
|
10,485
|
10,251
|
|
2nd interim dividend of 5.50p per share for the year ended 31
December 2023 (2022: 5.50p)
|
8 September 2023
|
6 October 2023
|
10,515
|
10,381
|
|
3rd interim dividend of 5.50p per share for the year ended 31
December 2023 (2022: 5.50p)
|
24 November 2023
|
22 December 2023
|
10,515
|
10,381
|
|
|
|
|
---------------
|
---------------
|
|
|
|
|
75,907
|
80,911
|
|
|
|
|
=========
|
=========
|
The total dividends payable in respect of the year ended 31
December 2023 which form the basis of Section 1158 of the
Corporation Tax Act 2010 and Section 833 of the Companies Act 2006,
and the amounts declared, meet the relevant requirements as set out
in this legislation.
Dividends paid or declared on equity
shares:
|
|
2023
£’000
|
2022
£’000
|
|
1st quarterly interim dividend of 5.50p per share for the year
ended 31 December 2023 (2022: 5.50p)
|
10,485
|
10,251
|
|
2nd quarterly interim dividend of 5.50p per share for the year
ended 31 December 2023 (2022: 5.50p)
|
10,515
|
10,381
|
|
3rd quarterly interim dividend of 5.50p per share for the year
ended 31 December 2023 (2022: 5.50p)
|
10,515
|
10,381
|
|
Final dividend of 17.00p per share for the year ended 31 December
2023 (2022: 23.50p)
|
32,501
|
44,392
|
|
|
---------------
|
---------------
|
|
|
64,016
|
75,405
|
|
|
=========
|
=========
|
1 Based
on 191,183,036 ordinary shares in issue on 7 March 2024.
8. Consolidated earnings and net asset value per ordinary
share
Total revenue, capital (loss)/earnings and net asset value per
ordinary share are shown below and have been calculated using the
following:
|
|
2023
|
2022
|
|
Net revenue profit attributable to ordinary shareholders
(£’000)
|
64,691
|
76,013
|
|
Net capital (loss)/profit attributable to ordinary shareholders
(£’000)
|
(143,676)
|
126,407
|
|
|
-----------------
|
-----------------
|
|
Total (loss)/profit attributable to ordinary shareholders
(£’000)
|
(78,985)
|
202,420
|
|
|
==========
|
==========
|
|
Equity shareholders’ funds (£’000)
|
1,160,051
|
1,299,285
|
|
The weighted average number of ordinary shares in issue during the
year on which the earnings per ordinary share was calculated
was:
|
190,564,324
|
186,868,187
|
|
The actual number of ordinary shares in issue at the year end on
which the net asset value per ordinary share was calculated
was:
|
191,183,036
|
188,753,036
|
|
Earnings per ordinary share
|
|
|
|
Revenue earnings per share (pence) – basic and diluted
|
33.95
|
40.68
|
|
Capital (loss)/earnings per share (pence) – basic and
diluted
|
(75.40)
|
67.64
|
|
|
-----------------
|
-----------------
|
|
Total (loss)/earnings per share (pence) – basic and
diluted
|
(41.45)
|
108.32
|
|
|
==========
|
==========
|
|
|
As at
31 December
2023
|
As at
31 December
2022
|
|
Net asset value per ordinary share (pence)
|
606.78
|
688.35
|
|
Ordinary share price (pence)
|
587.00
|
697.00
|
|
|
=========
|
=========
|
9. Called up share capital
|
|
Ordinary shares
in issue
number
|
Treasury shares
number
|
Total shares
number
|
Nominal
value
£’000
|
|
Allotted, called up and fully paid share capital
comprised:
|
|
|
|
|
|
Ordinary shares of 5p each
|
|
|
|
|
|
At 31 December 2022
|
188,753,036
|
4,258,806
|
193,011,842
|
9,651
|
|
Ordinary shares reissued from treasury
|
2,430,000
|
(2,430,000)
|
–
|
–
|
|
|
-----------------
|
-----------------
|
-----------------
|
-----------------
|
|
At 31 December 2023
|
191,183,036
|
1,828,806
|
193,011,842
|
9,651
|
|
|
==========
|
==========
|
==========
|
==========
|
During the year ended 31 December 2023 the Company:
– did
not buy back shares into treasury (2022: none);
– reissued
2,430,000 shares (2022: 5,071,920 shares) from treasury for a net
consideration after costs of £15,658,000 (2022:
£34,902,000).
Since the year end and up to 7 March 2024, the Company has not
reissued or bought back any shares.
10. Reserves
|
Group
|
Share
premium
account
£’000
|
Capital
redemption
reserve
£’000
|
Special
reserve
£’000
|
Capital
reserve
arising on
investments
sold
£’000
|
Capital
reserve
arising on
revaluation
of
investments
held
£’000
|
Revenue
reserve
£’000
|
|
At 31 December 2022
|
148,107
|
22,779
|
180,736
|
428,323
|
440,514
|
69,175
|
|
Movement during the year:
|
|
|
|
|
|
|
|
Total comprehensive income/(loss):
|
|
|
|
|
|
|
|
Net profit/(loss) for the year
|
–
|
–
|
–
|
82,077
|
(225,753)
|
64,691
|
|
Transactions with owners, recorded directly to equity:
|
|
|
|
|
|
|
|
Ordinary shares reissued from treasury
|
3,386
|
–
|
12,305
|
–
|
–
|
–
|
|
Share reissue costs
|
–
|
–
|
(33)
|
–
|
–
|
–
|
|
Dividends paid
|
–
|
–
|
–
|
–
|
–
|
(75,907)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
At 31 December 2023
|
151,493
|
22,779
|
193,008
|
510,400
|
214,761
|
57,959
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
|
|
|
Distributable reserves
|
|
Company
|
Share
premium
account
£’000
|
Capital
redemption
reserve
£’000
|
Special
reserve
£’000
|
Capital
reserve
arising on
investments
sold
£’000
|
Capital
reserve
arising on
revaluation
of
investments
held
£’000
|
Revenue
reserve
£’000
|
|
At 31 December 2022
|
148,107
|
22,779
|
180,736
|
426,822
|
447,745
|
63,445
|
|
Movement during the year:
|
|
|
|
|
|
|
|
Total comprehensive income/(loss):
|
|
|
|
|
|
|
|
Net profit/(loss) for the year
|
–
|
–
|
–
|
82,077
|
(225,577)
|
64,515
|
|
Transactions with owners, recorded directly to equity:
|
|
|
|
|
|
|
|
Ordinary shares reissued from treasury
|
3,386
|
–
|
12,305
|
–
|
–
|
–
|
|
Share reissue costs
|
–
|
–
|
(33)
|
–
|
–
|
–
|
|
Dividends paid
|
–
|
–
|
–
|
–
|
–
|
(75,907)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
At 31 December 2023
|
151,493
|
22,779
|
193,008
|
508,899
|
222,168
|
52,053
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
Group
|
Share
premium
account
£’000
|
Capital
redemption
reserve
£’000
|
Special
reserve
£’000
|
Capital
reserve
arising on
investments
sold
£’000
|
Capital
reserve
arising on
revaluation
of
investments
held
£’000
|
Revenue
reserve
£’000
|
|
At 31 December 2021
|
138,818
|
22,779
|
155,123
|
345,594
|
396,836
|
74,073
|
|
Movement during the year:
|
|
|
|
|
|
|
|
Total comprehensive income:
|
|
|
|
|
|
|
|
Net profit for the year
|
–
|
–
|
–
|
82,729
|
43,678
|
76,013
|
|
Transactions with owners, recorded directly to equity:
|
|
|
|
|
|
|
|
Ordinary shares reissued from treasury
|
9,289
|
–
|
25,683
|
–
|
–
|
–
|
|
Share reissue costs
|
–
|
–
|
(70)
|
–
|
–
|
–
|
|
Dividends paid
|
–
|
–
|
–
|
–
|
–
|
(80,911)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
At 31 December 2022
|
148,107
|
22,779
|
180,736
|
428,323
|
440,514
|
69,175
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
|
|
|
Distributable reserves
|
|
Company
|
Share
premium
account
£’000
|
Capital
redemption
reserve
£’000
|
Special
reserve
£’000
|
Capital
reserve
arising on
investments
sold
£’000
|
Capital
reserve
arising on
revaluation
of
investments
held
£’000
|
Revenue
reserve
£’000
|
|
At 31 December 2021
|
138,818
|
22,779
|
155,123
|
344,093
|
404,014
|
68,396
|
|
Movement during the year:
|
|
|
|
|
|
|
|
Total comprehensive income:
|
|
|
|
|
|
|
|
Net profit for the year
|
–
|
–
|
–
|
82,729
|
43,731
|
75,960
|
|
Transactions with owners, recorded directly to equity:
|
|
|
|
|
|
|
|
Ordinary shares reissued from treasury
|
9,289
|
–
|
25,683
|
–
|
–
|
–
|
|
Share reissue costs
|
–
|
–
|
(70)
|
–
|
–
|
–
|
|
Dividends paid
|
–
|
–
|
–
|
–
|
–
|
(80,911)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
At 31 December 2022
|
148,107
|
22,779
|
180,736
|
426,822
|
447,745
|
63,445
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
Pursuant to a resolution of the Company passed at an Extraordinary
General Meeting on 13 January 1998 and following the Company’s
application to the Court for cancellation of its share premium
account, the Court approval was received on 27 January 1999 and
£157,633,000 was transferred from the share premium account to a
special reserve which is a distributable reserve.
The share premium account and capital redemption reserve are not
distributable reserves under the Companies Act 2006. In accordance
with ICAEW Technical Release 02/17BL on Guidance on Realised and
Distributable Profits under the Companies Act 2006, the special
reserve and capital reserves of the Parent Company may be used as
distributable reserves for all purposes and, in particular, the
repurchase by the Parent Company of its ordinary shares and for
payments such as dividends. In accordance with the Company’s
Articles of Association, the special reserve, capital reserves and
the revenue reserve may be distributed by way of dividend. The
Parent Company’s capital gains of £731,067,000 (2022: £874,567,000)
comprise a gain on the capital reserve arising on investments sold
of £508,899,000 (2022: £426,822,000), a gain on the capital reserve
arising on revaluation of listed investments of £189,283,000 (2022:
£409,037,000) revaluation gains on unquoted investments of
£25,478,000 (2022: £31,477,000) and a revaluation gain on the
investment in the subsidiary of £7,407,000 (2022: gain of
£7,231,000). The capital reserve arising on the revaluation of
listed investments of £189,165,000 (2022: £409,037,000) is subject
to fair value movements and may not be readily realisable at short
notice; as such it may not be entirely distributable. The
investments are subject to financial risks, as such capital
reserves (arising on investments sold) and the revenue reserve may
not be entirely distributable if a loss occurred during the
realisation of these investments. The reserves of the subsidiary
company are not distributable until distributed as a dividend to
the Parent Company.
11. Valuation of financial instruments
Financial assets and financial liabilities are either carried in
the Consolidated and Parent Company Statements of Financial
Position at their fair value (investment and derivatives) or at
amortised cost (due from brokers, dividends and interest
receivable, due to brokers, accruals, cash at bank and bank
overdrafts). IFRS 13 requires the Group to classify fair value
measurements using a fair value hierarchy that reflects the
significance of inputs used in making the measurements. The
valuation techniques used by the Group are explained in the
accounting policies note 2(h) to the Financial Statements
above.
Categorisation within the hierarchy has been determined on the
basis of the lowest level input that is significant to the fair
value measurement of the relevant asset.
The fair value hierarchy has the following levels:
Level 1 – Quoted market price for identical instruments in
active markets
A financial instrument is regarded as quoted in an active market if
quoted prices are readily available from an exchange, dealer,
broker, industry group, pricing service or regulatory agency and
those prices represent actual and regularly occurring market
transactions on an arm’s length basis. The Group does not adjust
the quoted price for these instruments.
Level 2 – Valuation techniques using observable
inputs
This category includes instruments valued using quoted prices for
similar instruments in markets that are considered less than
active, or other valuation techniques where all significant inputs
are directly or indirectly observable from market data.
Valuation techniques used for non-standardised financial
instruments such as options, currency swaps and other
over-the-counter derivatives include the use of comparable recent
arm’s length transactions, reference to other instruments that are
substantially the same, discounted cash flow analysis, option
pricing models and other valuation techniques commonly used by
market participants making the maximum use of market inputs and
relying as little as possible on entity specific inputs.
Over-the-counter derivative option contracts have been classified
as Level 2 investments as their valuation has been based on market
observable inputs represented by the underlying quoted securities
to which these contracts expose the Group.
Level 3 – Valuation techniques using significant
unobservable inputs
This category includes all instruments where the valuation
technique includes inputs not based on market data and these inputs
could have a significant impact on the instrument’s
valuation.
This category also includes instruments that are valued based on
quoted prices for similar instruments where significant entity
determined adjustments or assumptions are required to reflect
differences between the instruments and instruments for which there
is no active market. The Investment Manager considers observable
data to be that market data that is readily available, regularly
distributed or updated, reliable and verifiable, not proprietary,
and provided by independent sources that are actively involved in
the relevant market.
The level in the fair value hierarchy within which the fair value
measurement is categorised in its entirety is determined on the
basis of the lowest level input that is significant to the fair
value measurement. If a fair value measurement uses observable
inputs that require significant adjustment based on unobservable
inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement requires judgement, considering factors specific to the
asset or liability including an assessment of the relevant risks
including but not limited to credit risk, market risk, liquidity
risk, business risk and sustainability risk. The determination of
what constitutes ‘observable’ inputs requires significant judgement
by the Investment Manager and these risks are adequately captured
in the assumptions and inputs used in measurement of Level 3 assets
or liabilities.
Valuation process and techniques for Level 3
valuations
(a) BHP Brazil Royalty
The Directors engage a mining consultant, an independent valuer
with a recognised and relevant professional qualification, to
conduct a periodic valuation of the contractual rights and the fair
value of the contractual rights is assessed with reference to
relevant factors. At the reporting date the income streams from
contractual rights have been valued on the net present value of the
pre-tax cash flows discounted at a rate the external valuer
considers reflects the risk associated with the project. The
valuation model uses discounted cash flow analysis which
incorporates both observable and non-observable data. Observable
inputs include assumptions regarding current rates of interest and
commodity prices. Unobservable inputs include assumptions regarding
production profiles, price realisations, cost of capital and
discount rates. In determining the discount rate to be applied, the
external valuer considers the country and sovereign risk associated
with the project, together with the time horizon to the
commencement of production and the success or failure of projects
of a similar nature. To assess the significance of a particular
input to the entire measurement, the external valuer performs a
sensitivity analysis. The external valuer has undertaken an
analysis of the impact of using alternative discount rates on the
fair value of contractual rights.
This investment in contractual rights is reviewed regularly to
ensure that the initial classification remains correct given the
asset’s characteristics and the Group’s investment policies. The
contractual rights are initially recognised using the transaction
price as it was indicative of the best evidence of fair value at
acquisition and are subsequently measured at fair value, taking
into consideration the relevant IFRS 13 requirements. In arriving
at their estimates of market values, the valuers have used their
market knowledge and professional judgement. The Group classifies
the fair value of this investment as Level 3.
Valuations are the responsibility of the Directors of the Company.
In arriving at a final valuation, the Directors consider the
independent valuer’s report, the significant assumptions used in
the fair valuation and the review process undertaken by BlackRock’s
Pricing Committee. The valuation of unquoted investments is
performed on a quarterly basis by the Investment Manager and
reviewed by the Pricing Committee of the Manager. On a quarterly
basis the Investment Manager will review the valuation of the
contractual rights and inputs for significant changes. A valuation
of contractual rights is performed annually by an external valuer,
SRK Consulting (UK) Limited, and reviewed by the Pricing Committee
of the Manager. The valuations are also subject to quality
assurance procedures performed within the Pricing Committee. On a
semi-annual basis, after the checks above have been performed, the
Investment Manager presents the valuation results to the Directors.
This includes a discussion of the major assumptions used in the
valuations. There were no changes in valuation techniques during
the year.
(b) Jetti Resources and MCC Mining equity
shares
The fair value of the investment equity shares of Jetti Resources
and MCC Mining were assessed by an independent valuer with a
recognised and relevant professional qualification. The valuation
is carried out based on market approach using earnings multiple and
price of recent transactions. Changes in assumptions about these
factors could affect the reported fair value of financial
instruments in the Consolidated and Parent Company Statements of
Financial Position and the level where the instruments are
disclosed in the fair value hierarchy. To assess the significance
of a particular input to the entire measurement, the external
valuer performs a sensitivity analysis.
Fair values of financial assets and financial
liabilities
The table below sets out fair value measurements using the IFRS 13
fair value hierarchy.
|
Financial assets/(liabilities) at fair value through profit or
loss
at 31 December 2023 – Group
|
Level 1
£’000
|
Level 2
£’000
|
Level 3
£’000
|
Total
£’000
|
|
Assets:
|
|
|
|
|
|
Equity investments
|
1,193,969
|
–
|
32,695
|
1,226,664
|
|
Fixed income securities
|
16,924
|
36,516
|
–
|
53,440
|
|
Investment in contractual rights
|
–
|
–
|
18,316
|
18,316
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total assets
|
1,210,893
|
36,516
|
51,011
|
1,298,420
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Liabilities:
|
|
|
|
|
|
Derivative financial instruments – written options
|
–
|
(1,401)
|
–
|
(1,401)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total
|
1,210,893
|
35,115
|
51,011
|
1,297,019
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Financial assets/(liabilities) at fair value through profit or
loss
at 31 December 2022 – Group
|
Level 1
£’000
|
Level 2
£’000
|
Level 3
£’000
|
Total
£’000
|
|
Assets:
|
|
|
|
|
|
Equity investments
|
1,250,984
|
9
|
35,692
|
1,286,685
|
|
Fixed income securities
|
68,894
|
48,066
|
–
|
116,960
|
|
Investment in contractual rights
|
–
|
–
|
21,199
|
21,199
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total assets
|
1,319,878
|
48,075
|
56,891
|
1,424,844
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Liabilities:
|
|
|
|
|
|
Derivative financial instruments – written options
|
–
|
(1,227)
|
–
|
(1,227)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total
|
1,319,878
|
46,848
|
56,891
|
1,423,617
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Financial assets/(liabilities) at fair value through profit or
loss
at 31 December 2023 – Company
|
Level 1
£’000
|
Level 2
£’000
|
Level 3
£’000
|
Total
£’000
|
|
Assets:
|
|
|
|
|
|
Equity investments
|
1,193,969
|
–
|
40,102
|
1,234,071
|
|
Fixed income securities
|
16,924
|
36,516
|
–
|
53,440
|
|
Investment in contractual rights
|
–
|
–
|
18,316
|
18,316
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total assets
|
1,210,893
|
36,516
|
58,418
|
1,305,827
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Liabilities:
|
|
|
|
|
|
Derivative financial instruments – written options
|
–
|
(1,401)
|
–
|
(1,401)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total
|
1,210,893
|
35,115
|
58,418
|
1,304,426
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Financial assets/(liabilities) at fair value through profit or
loss
at 31 December 2022 – Company
|
Level 1
£’000
|
Level 2
£’000
|
Level 3
£’000
|
Total
£’000
|
|
Assets:
|
|
|
|
|
|
Equity investments
|
1,250,984
|
9
|
42,923
|
1,293,916
|
|
Fixed income securities
|
68,894
|
48,066
|
–
|
116,960
|
|
Investment in contractual rights
|
–
|
–
|
21,199
|
21,199
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total assets
|
1,319,878
|
48,075
|
64,122
|
1,432,075
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Liabilities:
|
|
|
|
|
|
Derivative financial instruments – written options
|
–
|
(1,227)
|
–
|
(1,227)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total
|
1,319,878
|
46,848
|
64,122
|
1,430,848
|
|
|
=========
|
=========
|
=========
|
=========
|
A reconciliation of fair value measurement in Level 3 is set out
below.
|
Level 3 Financial assets at fair value through profit or
loss
at 31 December
|
Group
|
Company
|
|
2023
£’000
|
2022
£’000
|
2023
£’000
|
2022
£’000
|
|
Opening fair value
|
56,891
|
33,413
|
64,122
|
40,591
|
|
Return of capital – royalty
|
(497)
|
(267)
|
(497)
|
(267)
|
|
Additions at cost
|
–
|
20,106
|
–
|
20,106
|
|
Transfer of equities from Level 1 to Level 3
|
–
|
2
|
–
|
2
|
|
Conversion of equity and transfer to Level 1
|
–
|
(2,546)
|
–
|
(2,546)
|
|
Conversion of convertible bonds to equity and transfer to Level
2
|
–
|
(10,160)
|
–
|
(10,160)
|
|
Transfer of equities and convertible bonds to Level 2
|
–
|
(19,305)
|
–
|
(19,305)
|
|
Total profit or loss included in net profit on investments in the
Consolidated Statement of Comprehensive Income:
|
|
|
|
|
|
– assets transferred to Level 1 during the period
|
–
|
169
|
–
|
169
|
|
– assets transferred to Level 2 during the period
|
–
|
14,212
|
–
|
14,212
|
|
– assets held at the end of the period
|
(5,383)
|
21,267
|
(5,207)
|
21,320
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Closing balance
|
51,011
|
56,891
|
58,418
|
64,122
|
|
|
=========
|
=========
|
=========
|
=========
|
The Level 3 valuation process and techniques used are explained in
the accounting policies in note 2(h). A more detailed description
of the techniques is found under ‘Valuation process and techniques’
for Level 3 valuations.
The Level 3 investments as at 31 December 2023 in the table that
follows relate to the BHP Brazil Royalty, convertible bonds and
equity shares of Jetti Resources and MCC Mining. In accordance with
IFRS 13, these investments were categorised as Level 3.
In arriving at the fair value of the BHP Brazil Royalty, the key
inputs are the underlying commodity prices and illiquidity
discount. In arriving at the fair value of Jetti Resources and MCC
Mining securities, the key inputs are shown in the Annual Report
and Financial Statements.
The Level 3 valuation process and techniques used by the Company
are explained in the accounting policies in notes 2(h) and 2(q) and
a detailed explanation of the techniques is also available under
‘Valuation process and techniques’.
The Lifezone SPAC Pipe commitment held at nil value as at 31
December 2022 was transferred to Level 1 on completion of the
merger transaction and the successful initial public offering
during the year.
Quantitative information of significant unobservable inputs
– Level 3 – Group and Company
The significant unobservable inputs used in the fair value
measurement categorised within Level 3 of the fair value hierarchy,
together with an estimated quantitative sensitivity analysis, as at
31 December 2023 and 31 December 2022 are as shown
below.
|
Description
|
As at
31 December
2023
£’000
|
Valuation
technique
|
Unobservable
input
|
Range of
weighted
average
inputs
|
Reasonable
possible
shift1
+/-
|
Impact on
fair value
|
|
BHP Brazil Royalty
|
18,316
|
Discounted
cash flows
|
Discounted rate–
weighted average
cost
of capital
|
5.0% – 8.0%
|
1.0%
|
£1.0m
|
|
|
|
|
Average
gold prices
|
US$1,706–
US$1,780
per ounce
|
10.0%
|
£1.8m
|
|
|
|
|
Average
copper prices
|
US$8,397–
US$8,469
per tonne
|
10.0%
|
£1.2m
|
|
Jetti Resources
|
27,204
|
Market
approach
|
Earnings multiple
|
6.00x
|
5.0%
|
£1.4m
|
|
MCC Mining
|
5,491
|
Market
approach
|
Price of recent
transaction
|
|
5.0%
|
£0.3m
|
|
Polyus
|
–
|
Listing
suspended
– valued
at nominal
US$0.01
|
|
|
|
|
|
Polymetal International
|
–
|
Delisted –
valued at
nominal
US$0.01
|
|
|
|
|
|
|
---------------
|
|
|
|
|
|
|
Total
|
51,011
|
|
|
|
|
|
|
|
=========
|
|
|
|
|
|
1 The
sensitivity analysis refers to a percentage amount added or
deducted from the input and the effect this has on the fair
value.
|
Description
|
As at
31 December
2022
£’000
|
Valuation
technique
|
Unobservable
input
|
Range of
weighted
average
inputs
|
Reasonable
possible
shift1
+/-
|
Impact on
fair value
|
|
OZ Minerals Brazil Royalty
|
21,199
|
Discounted
cash flows
|
Discounted rate–
weighted average
cost
of capital
|
5.0% – 8.0%
|
1.0%
|
£1.0m
|
|
|
|
|
Average
gold prices
|
US$1,400–
US$1,600
per ounce
|
10.0%
|
£1.5m
|
|
|
|
|
Average
copper prices
|
US$7,209–
US$8,510
per tonne
|
10.0%
|
£1.0m
|
|
Jetti Resources
|
29,873
|
Market
approach
|
Earnings multiple
|
5.93x
|
5.0%
|
£0.6m
|
|
MCC Mining
|
5,819
|
Market
approach
|
Price of recent
transaction
|
|
5.0%
|
£0.3m
|
|
Lifezone commitment (see Note 21)
|
–
|
|
|
|
|
|
|
Polyus
|
–
|
Listing
suspended
– valued
at nominal
US$0.01
|
|
|
|
|
|
|
---------------
|
|
|
|
|
|
|
Total
|
56,891
|
|
|
|
|
|
|
|
=========
|
|
|
|
|
|
1 The
sensitivity analysis refers to a percentage amount added or
deducted from the input and the effect this has on the fair
value.
The sensitivity impact on fair value is calculated based on the
sensitivity estimates set out by the independent valuer in its
report on the valuation of contractual rights. Significant
increases/(decreases) in estimated commodity prices and discount
rates in isolation would result in a significantly higher/(lower)
fair value measurement. Generally, a change in the assumption made
for the estimated value is accompanied by a directionally similar
change in the commodity prices and discount rates.
For exchange listed equity investments, the quoted price is the bid
price. Substantially, all investments are valued based on
unadjusted quoted market prices. Where such quoted prices are
readily available in an active market, such prices are not required
to be assessed or adjusted for any price related risks, including
climate risk, in accordance with the fair value related
requirements of the Company’s financial reporting
framework.
(e) Capital management policies and
procedures
The Group’s capital management objectives are:
– to
ensure it will be able to continue as a going concern;
and
– to
achieve a balanced return of dividends and capital growth over the
longer term, by investing primarily in securities of companies in
the mining and metals sectors.
This is to be achieved through an appropriate balance of equity
capital and gearing. The Company operates a flexible gearing policy
which depends on prevailing conditions. The policy is that debt
should not be more than 25% of the Group’s net assets.
The Group’s total invested capital at 31 December 2023 was
£1,309,879,000 (2022: £1,458,068,000) comprising of bank loans and
an overdraft of £149,828,000 (2022: £158,783,000) and equity
shares, capital and reserves of £1,160,051,000 (2022:
£1,299,285,000).
Under the terms of the overdraft and loan facility agreement, the
Group’s total indebtedness shall at no time exceed £230 million or
25% of the Group’s net asset value (whichever is the
lowest).
The cash and bank overdraft accounts of the Company and subsidiary
in the same currency are managed under a compensated group
arrangement and are therefore presented on a net basis in the Group
financial statements.
The Board with the assistance of the Investment Manager monitors
and reviews the broad structure of the Group’s capital on an
ongoing basis. This review includes:
– the
planned level of gearing, which takes into account the Investment
Manager’s view on the market; and
– the
need to buy back equity shares, either for cancellation or to be
held in treasury, which takes account of the difference between the
NAV per share and the share price (i.e. the level of share price
discount or premium).
The Group is subject to externally imposed capital
requirements:
– as
a public company, the Group has a minimum share capital of £50,000;
and
– in
order to be able to pay dividends out of profits available for
distribution, the Group has to be able to meet one of the two
capital restrictions tests imposed on investment companies by
law.
During the year, the Group complied with the externally imposed
capital requirements to which it was subject.
12. Transactions with the Investment Manager and
AIFM
BlackRock Fund Managers Limited (BFM) provides management and
administration services to the Company under a contract which is
terminable on six months’ notice. BFM has (with the Group’s
consent) delegated certain portfolio and risk management services,
and other ancillary services to BlackRock Investment Management
(UK) Limited (BIM (UK)). Further details of the investment
management contract are disclosed in the Directors’ Report in the
Annual Report and Financial Statements.
The investment management fee due for the year ended 31 December
2023 amounted to £9,691,000 (2022: £10,646,000). At the year end,
£7,262,000 was outstanding in respect of the management fee (2022:
£5,443,000).
In addition to the above services, BIM (UK) has provided the Group
with marketing services. The total fees paid or payable for these
services for the year ended 31 December 2023 amounted to £144,000
excluding VAT (2022: £132,000). Marketing fees of £55,000 were
outstanding as at 31 December 2023 (2022: £62,000).
The ultimate holding company of the Manager and the Investment
Manager is BlackRock, Inc., a company incorporated in Delaware,
USA.
13. Related party disclosure
Directors’ emoluments
At the date of this report, the Board consists of five
non-executive Directors, all of whom are considered to be
independent of the Manager by the Board. Following the conclusion
of the Annual General Meeting on 9 May 2024, the Board will consist
of five non-executive Directors.
Disclosures of the Directors’ interests in the ordinary shares of
the Company and fees and expenses payable to the Directors are set
out in the Directors’ Remuneration Report in the Annual Report and
Financial Statements. As at 31 December 2023, £17,000 (2022:
£16,000) was outstanding in respect of Directors’ fees.
Significant holdings
The following investors are:
a. funds
managed by the BlackRock Group or are affiliates of BlackRock Inc.
(Related BlackRock Funds); or
b. investors
(other than those listed in (a) above) who held more than 20% of
the voting shares in issue in the Company and are, as a result,
considered to be related parties to the Company (Significant
Investors).
As at 31 December 2023
|
Total % of shares held by Related
BlackRock Funds
|
Total % of shares held by Significant
Investors who are not affiliates of
BlackRock Group or BlackRock, Inc.
|
Number of Significant Investors who
are not affiliates of BlackRock Group or
BlackRock, Inc.
|
|
1.29
|
n/a
|
n/a
|
As at 31 December 2022
|
Total % of shares held by Related
BlackRock Funds
|
Total % of shares held by Significant
Investors who are not affiliates of
BlackRock Group or BlackRock, Inc.
|
Number of Significant Investors who
are not affiliates of BlackRock Group or
BlackRock, Inc.
|
|
2.27
|
n/a
|
n/a
|
14. Capital commitment
There was no capital commitment at 31 December 2023 (2022: one
commitment for US$10,000,000 in relation to the SPAC PIPE
commitment for investment in Lifezone SPAC).
15. Publication of non statutory
accounts
The financial information contained in this announcement does not
constitute statutory accounts as defined in the Companies Act 2006.
The Annual Report and Financial Statements for the year ended 31
December 2023 will be filed with the Registrar of Companies after
the Annual General Meeting.
The figures set out above have been reported upon by the auditor,
whose report for the year ended 31 December 2023 contains no
qualification or statement under Section 498(2) or (3) of the
Companies Act 2006.
The comparative figures are extracts from the audited financial
statements of BlackRock World Mining Trust plc and its subsidiary
for the year ended 31 December 2022, which have been filed with the
Registrar of Companies. The report of the auditor on those
financial statements contained no qualification or statement under
Section 498 of the Companies Act 2006.
16. Annual Report and Financial
Statements
Copies of the Annual Report and Financial Statements will be
published shortly and will be available from the registered office,
c/o The Secretary, BlackRock World Mining Trust plc, 12 Throgmorton
Avenue, London EC2N 2DL.
17. Annual General Meeting
The Annual General Meeting of the Company will be held at 12
Throgmorton Avenue, London EC2N 2DL on Thursday, 9 May 2024 at
11.30 a.m.
The Annual Report and Financial Statements will also be available
on the BlackRock website at www.blackrock.com/uk/brwm. Neither the
contents of the website nor the contents of any website accessible
from hyperlinks on the website (or any other website) is
incorporated into, or forms part of, this announcement.
For further information, please contact:
Charles Kilner, Director, Closed End Funds, BlackRock Investment
Management (UK) Limited – Tel:
020 7743 3000
Evy Hambro, Fund Manager, BlackRock Investment Management (UK)
Limited – Tel:
020 7743 3000
Emma Phillips, Media & Communications, BlackRock Investment
Management (UK) Limited – Tel:
020 7743 2922
Press enquires:
Ed Hooper, Lansons Communications
Tel:
020 7294 3616
E-mail:
BlackRockInvestmentTrusts@lansons.com or
EdH@lansons.com
7 March 2024
12 Throgmorton Avenue
London EC2N 2DL
ENDS