BlackRock World Mining Trust plc
LEI: LNFFPBEUZJBOSR6PW155
Condensed Half Yearly Financial Report 30
June 2024
Performance record
|
|
As at
30 June
2024
|
As at
31 December
2023
|
|
|
Net assets (£’000)1
|
1,093,972
|
1,160,051
|
|
|
Net asset value per ordinary share (NAV) (pence)
|
572.21
|
606.78
|
|
|
Ordinary share price (mid-market) (pence)
|
569.00
|
587.00
|
|
|
Reference index2
– net total return
|
6,041.29
|
6,002.54
|
|
|
Discount to net asset value3
|
(0.6)%
|
(3.3)%
|
|
|
|
=========
|
=========
|
|
|
|
For the
six months
ended
30 June
2024
|
For the
year
ended
31 December
2023
|
|
|
Performance (with dividends reinvested)
|
|
|
|
|
Net asset value per share3
|
-1.9%
|
-6.2%
|
|
|
Ordinary share price3
|
+1.1%
|
-10.4%
|
|
|
Reference index2
|
+0.6%
|
+2.4%
|
|
|
|
---------------
|
---------------
|
|
|
Performance since inception (with dividends
reinvested)
|
|
|
|
|
Net asset value per share3
|
+1,291.6%
|
+1,319.4%
|
|
|
Ordinary share price3
|
+1,381.5%
|
+1,365.9%
|
|
|
Reference index2
|
+1,012.4%
|
+1,005.2%
|
|
|
|
=========
|
=========
|
|
|
|
For the
six months
ended
30 June 2024
|
For the
six months
ended
30 June 2023
|
Change
%
|
|
Revenue
|
|
|
|
|
Net revenue profit after taxation (£’000)
|
22,848
|
31,767
|
-28.1
|
|
Revenue return per ordinary share (pence)3
|
11.95
|
16.73
|
-28.6
|
|
|
---------------
|
---------------
|
---------------
|
|
Dividend per ordinary share (pence)
|
|
|
|
|
– 1st interim
|
5.50
|
5.50
|
–
|
|
– 2nd interim
|
5.50
|
5.50
|
–
|
|
|
---------------
|
---------------
|
---------------
|
|
Total dividends paid and payable
|
11.00
|
11.00
|
–
|
|
|
=========
|
=========
|
=========
|
1 The
change in net assets reflects portfolio movements, dividends paid
and the reissue of ordinary shares from treasury during the
period.
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 contained within the Half Yearly
Financial Report.
Chairman’s Statement
Following the Annual General Meeting in May, I assumed the role as
Chairman of your Company. I am delighted to present the Half Yearly
Financial Report to shareholders.
Market overview
Markets have experienced heightened volatility shaped by continued
geopolitical and macroeconomic drivers. Interest rate policy and
inflation have remained top of mind amid elevated public debt and
weaker growth relative to the pre-pandemic era. The US-China trade
war and geopolitical tensions, including the Russia/Ukraine war and the conflict in the
Middle East, have also increased
the supply chain risk.
It was a mixed period for the mining sector with a new all-time
high price set for copper and gold and a pick-up in merger and
acquisition (M&A) activity. This was offset by weakness across
the bulk commodities as property related demand in China continued to soften. Despite a number of
positive drivers during the first half, concerns over the outlook
for China’s economy negatively impacted the sector and the six
month reporting period ended on a weak note as momentum faltered
and most commodity prices declined.
Performance
Against this backdrop, for the six month period ending 30 June 2024, the Company’s net asset value per
share (NAV) returned -1.9% and the share price returned +1.1%. The
Company’s reference index, the MSCI ACWI Metals & Mining 30%
Buffer 10/40 Index, returned +0.6% (all percentages calculated in
Sterling terms with dividends reinvested).
Since the period end and up to the close of business on
21 August 2024, the Company’s NAV has
decreased by 2.9% compared to a fall of 3.2% (on a net return
basis) for the reference index (in Sterling terms with dividends
reinvested). Further information on the Company’s performance and
the factors that contributed to, or detracted from, performance
during the six months is set out in the Investment Manager’s
Report.
Revenue return and dividends
Over the six month period to 30 June
2024, the Company’s revenue return amounted to 11.95p per
share, compared to 16.73p per share for the corresponding period in
2023. This represents a decrease of 28.6% and reflects reductions
in dividends from many mining companies.
The first quarterly dividend of 5.50p per share was paid on
31 May 2024. Today, the Board has
announced a second quarterly dividend of 5.50p per share which will
be paid on 30 September 2024 to
shareholders on the register on 6 September
2024 with the ex-dividend date being 5 September 2024. It remains the Board’s
intention to distribute substantially all of the Company’s
available income in the future.
Management of share rating
For the period under review, the Company’s ordinary shares have
traded at an average discount to NAV of 4.6% and were trading at a
discount of 3.1% on a cum income basis as at 21 August 2024, the latest practicable date prior
to the issue of this report. The Company did not buy back or
reissue any shares during the six month period ended 30 June 2024. Since the period end and up to the
date of this report, no ordinary shares have been reissued or
bought back.
The Directors recognise the importance to investors that the
Company’s share price does not trade at a significant premium or
discount to NAV. Accordingly, the Directors monitor the share price
closely and, in the context of wider market conditions, with
investor sentiment and premiums/discounts being influenced by
various external factors, will consider the issue of shares at a
premium or the repurchase at a discount to help balance demand and
supply in the market.
Gearing
One of the advantages of the investment trust structure is that the
Company can use gearing with the objective of increasing portfolio
returns over the longer term. The Company operates a flexible
gearing policy which depends on prevailing market conditions. It is
not intended that gearing will exceed 25% of the net assets of the
Company and its subsidiary. Gearing at 30
June 2024 was 10.5% and maximum gearing during the period
was 14.7%.
Board composition
I am delighted to welcome Elisabeth
Scott to the Board. She was appointed following the Annual
General Meeting held on 9 May 2024.
Elisabeth possesses a great deal of investment trust specific
expertise and asset management experience, both through her
executive career as an investment manager and in her current
involvement with a number of complementary boards. Elisabeth also
chaired the Association of Investment Companies from January 2021 until January
2024. Further information on her background and experience
can be found on page 48 of the Half Yearly Financial
Report.
As previously advised in last year’s Annual Report, David Cheyne, having completed nearly 12 years
on the Board, retired following the 2024 Annual General Meeting. On
behalf of the Board, I want to thank David for his many years of
excellent service to the Company and its shareholders and we wish
him the best for the future.
I am pleased to report that the Board is compliant with the
recommendations of the Parker Review and the FTSE Women Leaders
Review. In accordance with the Listing Rules, we have also
disclosed the ethnicity of the Board and our policy on matters of
diversity. This disclosure can be found on pages 70 and 71 of the
Company’s Annual Report.
Market outlook
Looking ahead, market volatility is unlikely to abate. 2024 marks a significant year for elections
worldwide bringing uncertainty on the policy and geopolitical
front. China, one of the most
important economies for commodity demand, has also fueled concerns
for the growth outlook and there is the potential for mounting
geopolitical risk, primarily in the Middle East. Although inflationary pressures
are easing, a measured approach by each central bank would indicate
potential interest rate cuts in Europe and Asia and an increasing likelihood of a rate
cut in the US.
However, there are reasons for optimism for the commodities sector.
The mining industry is key to delivering the materials required for
infrastructure investment, including the investment required to
support the transition to a low carbon energy environment. This
transition is expected to drive materials demand for many years to
come. Artificial intelligence (AI) systems depend on minerals and
metals in several ways and the investment in AI data centres and
power grids is also set to bolster metals demand. Despite the
pick-up in M&A activity, we are pleased to see mining companies
continue to show strong capital discipline, which should ensure
that there is an appropriate split of available cash flow between
shareholder distributions and growth.
CHARLES
GOODYEAR
Chairman
23 August 2024
Investment Manager’s Report
The first half of 2024 has been frustrating as the generally
positive tone to the sector was not reflected in a more positive
total return for the period. During the period, base and precious
metal prices were buoyant with some breaking out to new all-time
highs. On the other hand, the prices of iron ore, lithium and
thermal coal moved lower on weaker demand or supply threats (in the
lithium market) that threatened long-term price assumptions. On the
whole, the blend of factors should have been supportive for share
prices, particularly when combined with increased merger and
acquisition (M&A) activity. It seems that rising interest
rates, ongoing economic challenges in China and a slower move to decarbonise the
global economy overwhelmed the positives and derated valuations,
most notably the large cap diversified companies. These factors had
a negative impact on the net asset value (NAV) of the
Company.
Looking deeper into the fundamentals, the outlook remains positive.
Companies are cautious on committing to large scale projects and,
as such, the supply picture for most commodities is as constrained
as in prior years. In fact, the pick-up in M&A suggests that
companies see more value in buying assets rather than building them
even after having to pay premiums for control. Tightness in
commodity markets persists and despite Chinese weakness, the
overall demand picture is robust, especially in the US.
Over the period the NAV of the Company returned -1.9% and the share
price returned +1.1%. This compares to the FTSE 100 Index which was
up by 7.9%, the Consumer Price Index was up by 2.0% and the
reference index (MSCI ACWI Metals & Mining Index 30% Buffer
10/40 Index (net total return)) increased by 0.6% (all performance
data numbers based in Sterling terms with dividends
reinvested).
Tug of war
The global battle against inflation continued during the first half
of the year. In most countries economic data moved in the right
direction with large falls in the rate of inflation, but as yet not
sufficient to trigger easing by the leading central banks. As a
result of this markets have gyrated back and forth like a tug of
war between interest rate expectations and the ongoing dominance of
everything technology related, in particular the boom in artificial
intelligence (AI) related equities. The AI theme within stock
markets has grown to levels similar to that in previous tech booms
so it will be interesting to see how this plays out especially when
so much of the growth requires huge investment in basic
infrastructure for it to be delivered.
Geopolitics has, sadly, not improved. The ongoing battle in
Ukraine has continued and it seems
unlikely that common ground will be found for it to end in the near
term. The tragic situation in Israel and Gaza rages on with little prospect for it to
ease. Elsewhere elections have taken place across Europe with large swings playing into the
hands of some of the more extreme parts of the political spectrum.
The end outcome of this is still to reach a conclusion but the
probability of political stalemate or worse has risen. Lastly the
forthcoming US Presidential election continues to be too difficult
to call.
ESG and the social license to operate
For the last few years this report has continued to emphasise the
importance of ESG when managing risk within mining related
investments.
ESG (Environmental, Social and Governance) is highly relevant to
the mining sector and we seek to understand the ESG risks and
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 that will enable the carbon transition.
We consider ESG insights and data 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 a 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.
The main areas of engagement during the period have been on
M&A, corporate decarbonisation plans and capital allocation.
The latter two are somewhat interlinked given the healthy debate on
how companies should allocate the cash generated by their
operations. In the past, spending on decarbonisation was seen more
as a choice but now this seems to have moved into a more core part
of corporate strategy. In part we believe this is due to a need to
do this but also the return on these investments seems to have
improved. Although not at the same levels of brown field capacity
growth, it does seem to compare favourably with greenfield growth
investments. Another feature of this area has been to try and
explore with executives the role that outside capital could play in
helping to improve returns. The growth in infrastructure investing
by financial markets seems to have opened up a range of new
opportunities for companies to consider and these might easily
challenge the long-term view that mining companies need to wholly
own their own infrastructure.
When it comes to M&A, we stand by the view that companies
should always seek to explore what might be in the best interests
of all stakeholders. If value can be generated from combinations or
sharing opportunities it is essential that these are discussed so
that all parties can benefit, especially when synergies within the
sector are so rare. Obviously, this does not mean that a company
should not try to maximise its takeout share price, but, it should
not be at the expense of losing out on a deal entirely. Given the
high cost and risk of developing new assets, combined with the
small size of the sector in the context of global markets, it is
important that companies do not lose sight of remaining relevant
when it comes to capital markets and M&A might help to deal
with this threat.
Weaker prices
During the first half of the year there has been a significant
dispersion of returns within the commodity sector. As can be seen
in the table that follows the prices of gold, silver and tin were
sharply higher year to date but also when compared to the same
period last year. On the other side of the pricing for nickel,
platinum and lithium were meaningfully lower. Within the overall
moves there were a number of takeaways: gold and copper moved to
new all time price highs during the period.
|
Commodity
|
30 June 2024
|
% Change
year to date 1H24
|
% Change average price
1H24 vs 1H23
|
|
Gold US$/ounce (oz)
|
2,326.3
|
12.6%
|
14.1%
|
|
Silver US$/oz
|
29.3
|
20.7%
|
11.6%
|
|
Platinum US$/oz
|
1,012
|
0.6%
|
-6.3%
|
|
Palladium US$/oz
|
972
|
-13.1%
|
-35.2%
|
|
Copper US$/pound (lb)
|
4.29
|
11.7%
|
4.5%
|
|
Nickel US$/lb
|
7.73
|
4.1%
|
-27.7%
|
|
Aluminium US$/lb
|
1.13
|
6.1%
|
1.3%
|
|
Zinc US$/lb
|
1.30
|
9.0%
|
-6.8%
|
|
Lead US$/lb
|
0.99
|
7.0%
|
-0.5%
|
|
Tin US$/lb
|
14.74
|
29.0%
|
11.4%
|
|
Uranium US$/lb
|
238
|
-17.6%
|
77.4%
|
|
Iron Ore (China 62% fines) US$/tonne (t)
|
106
|
-25.4%
|
-0.3%
|
|
Thermal Coal (Newcastle) US$/t
|
133.65
|
1.2%
|
-22.6%
|
|
Met Coal US$/t
|
238
|
-17.6%
|
-0.6%
|
|
Lithium (Battery Grade China) US$/kilogram
|
12.59
|
-7.3%
|
-68.9%
|
|
WTI (Cushing) US$/barrel
|
82.8
|
15.2%
|
6.3%
|
|
|
=========
|
=========
|
=========
|
1H24 – six months ended 30 June
2024.
1H23 – six months ended 30 June
2023.
Sources: LSEG Datastream and Bloomberg, June
2024.
Within the portfolio the key commodity exposure is to copper on the
base metals side and gold within precious metals. Prices for both
of these commodities have been strong and key for performance will
be how these translate into earnings for the companies. Too often
higher prices end up being lost to the pressures of poor operating
performance, inflation, taxation or consumed in reinvestment by the
companies. It is our expectation that the management teams have the
processes and skills to mitigate these negative impacts.
Animal spirits
The last 12 months have certainly seen a pick-up in M&A
activity within the sector. This sudden surge in animal spirits
seems to have been driven by a realisation that producing assets
traded in the equity market were trading at a low valuation versus
the replacement cost (which has risen as shown in the chart
contained on page 10 of the Half Yearly Financial Report) even
including the premiums required for a change of control. In 2023
Glencore moved to gain control of Teck Resources when it announced
plans to transform itself into a metals business by divesting its
coal assets. This process concluded with Glencore agreeing to buy
the coal assets leaving Teck Resources to follow a strategy of
metals related growth. The deal finally received the necessary
regulatory approvals in early July.
Capital intensity of new assets rising in real
terms
In April 2024, BHP surprised the
market by making a hostile offer for Anglo
American. This process continued for a month during which
time multiple attempts were made by BHP to try and conclude a
combination of the two businesses. Despite numerous higher offers
the two parties were unable to reach agreement leaving Anglo American to pursue its own strategy of
simplification. BHP is unable to make another offer for six months.
It will be interesting to see how successful Anglo American is on its organic plans as many
of the challenges they highlighted in relation to the bid by BHP
might delay their own plans leaving room for others to take another
look at the business.
As the period drew to an end a number of media outlets reported
that further transactions were being considered but as yet nothing
tangible has come from these rumours. It is certainly the case that
M&A is back and it is essential that companies remain
disciplined when looking at opportunities given the poor historic
industry track record in this space.
Base metals
It was a strong first half for the base metals with prices rising
on improved demand, expected decline in interest rates, Chinese
stimulus and financial interest as investors look to gain exposure
to the AI data-centre theme. The copper price set a new all-time
high in May and finished the first half up by 11.7%, with aluminium
+6.1%, nickel +4.1% and zinc +9.0%.
Our favoured base metal, copper, saw positive demand growth in the
first half of the year driven by investments into the grid,
electric vehicles (EV), wind and solar power. We are increasingly
seeing a change in China’s traditional demand drivers with property
linked commodity demand declining, whilst investment into low
carbon infrastructure and manufacturing is accelerating. Copper
supply continues to remain tight with limited new tonnes entering
the market. Smelters’ treatment and refining charges (TC/RC’s) an
indication of tightness in the concentrate market, are at record
low levels which benefit producer margins. A key near-term focus
for the market is copper inventories which have not meaningfully
decreased in China which points to
some softness in the physical market near term.
Global copper inventories
We see a tight supply picture for copper. Power availability in
Zambia and the Democratic Republic of the Congo (DRC), along
with some specific asset production downgrades in Chile and Peru has further reduced supply expectations
this year. The key delta to supply over the next one-to-two years
is First Quantum’s Cobre Panama mine, which was placed on care and
maintenance at the end of last year. This asset has the potential
to produce up to 400ktpa copper over time and will have a big
impact to the forecast deficit in the market. At present the market
is broadly assuming that the asset will resume production at the
end of 2025, but there remains a lot of uncertainty around the
timing of the restart. With the market forecast to be 500kt deficit
this year, the timing of the return of Cobre Panama will have a
significant impact on market balances in 2025 and 2026.
Following our due diligence site visit to Chile last year to see a range of copper
projects, a clear takeaway is the increase in capital costs to
develop and build new copper mines. Part of this is due to higher
inflation for steel, equipment and labour, but there are structural
increases to costs due to more challenging permitting requirements
for desalinated water, higher altitudes, deeper orebodies and lower
grades. As highlighted in the chart contained within the Half
Yearly Financial Report, recent greenfield copper developments have
had a capital intensity around US$30,000/t and this has risen considerably over
the last decade. Our analysis suggests that in order for companies
to generate a 15% post-tax internal rate of return on these
investments they would require an incentive copper price of
US$12,000/t. This, in our view, is an
important structural driver for the copper price due to the need to
incentivise new supply going forward.
The Company’s copper exposure was a key source of positive returns
during the first half of the year. BHP’s approach for Anglo American highlighted the value in copper
equity values, given the cost to develop and build new copper
supply. Ivanhoe Mines (2.4% of the
portfolio) continues to set the standard for operational
performance with the ramp-up of Kamoa-Kakula in the DRC, with phase
1 and 2 of the mine delivered ahead of schedule and the phase 3
expansion completed in June nearly two quarters ahead of schedule.
With the smelter completion before the end of the year, unit costs
are expected to fall by 20%. With free cash flow increasing, we
expect to see shareholder loans decline and increasing cash returns
to Ivanhoe Mines, positioning them
well to start paying dividends. Another notable copper outperformer
includes Capstone which is currently ramping up its Manto Verde
copper project in Chile. During
the quarter Lundin Mining announced that it will exercise their
option to acquire an additional 19% stake in the Caserones copper
mine for US$350 million.
The aluminium price finished the first half up by 6%, with the
average price up 1.3% versus the corresponding period last year.
Aluminium prices have been pressured over the last two years as
energy prices have fallen which has deflated the cost curve.
However, with alumina, a key input for producing aluminium, up over
40% year-to-date, rising cost pressure has pushed up the aluminium
price as well. Aluminium demand has benefited from investments into
solar power and the grid in recent years and we see it as a
longer-term beneficiary of energy transition spend. With aluminium
and copper substitutable for certain applications, they typically
trade within a ratio of one another. It has been interesting to see
the copper price to aluminium price ratio move up from a historical
level of circa 3:1 to now circa 4:1. Longer term we see upside to
aluminium prices as carbon costs begin to be incorporated into
prices. The Company’s largest exposure to aluminium is via Hydro
(3.6% of the portfolio) which is one of the lowest-carbon producers
of aluminium by virtue of its access to hydro power in Norway.
It has been a difficult year for the nickel industry with the
average nickel price down by 27.7% in the first half of 2024 versus
the same period last year. While there was a modest rebound (+4%)
in prices during the half, the industry is struggling to generate
competitive margins at this price level. Significant growth in
Indonesian nickel supply has structurally changed the market, with
nickel pig iron producers rapidly growing production and adapting
their facilities to allow the production of nickel matte and other
intermediary products. This material is typically more carbon
intensive and, should carbon pricing be incorporated into the cost
curve, we would expect Indonesian supply to decline over time. The
Company has two pure play exposures to nickel – the first Nickel
Industries (0.6% of the portfolio) today a nickel pig iron producer
which is transitioning towards LME grade nickel production which
will improve earnings and margins. During the half, Nickel
Industries increased its equity interest in the ENC Project by
16.5% to 44%. This high-pressure acid leach project will see them
produce battery grade nickel and cobalt and will also reduce the
company’s carbon footprint. 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
It was a weak period for the bulk commodities, with iron ore prices
down by 25.4%, metallurgical coal down by 17.6% and thermal coal
prices up by 1.2%. Chinese steel production has remained at a
similar level to last year of circa 1 billion tonnes. However,
domestic demand has softened primarily due to property-linked
weakness. As a result, China has
returned to a high level of steel exports which annualised more
than 100 million tonnes per annum (mtpa). This has put significant
pressure on European steel prices, with production curtailed to
protect margins during the six month period. With China looking to re-impose steel production
caps to reduce carbon emissions and improve the profitability of
the steel industry, we would expect to see exports decline and
prices to stabilise. The other notable steel market that the
Company has exposure to is the US. Steel prices have returned to a
more normalised level versus two to three years ago. We remain
positive on the outlook for the US steel industry as the Government
looks to commence its infrastructure rebuilding
programs.
Iron ore has been a key area of strength in recent years supporting
free cash flow and dividends for the large producers. While the
spot price finished down by 25% during the half, average prices
were actually flat versus the corresponding period in 2023 and are
at a healthy level of US$118/t. Iron
ore has benefited from China’s high blast furnace utilisation
rates, with electric arc furnaces (EAF’s), which rely on scrap,
struggling to grow market share given the lack of available steel
scrap supply and high electricity prices. Longer term, as
China looks to reduce the carbon
intensity of its steel industry, we would expect to see growth in
EAF supply and also higher demand for high grade iron
ore.
Over the last five years, the iron ore price has been well
supported at US$90/t which appears to
be the breakeven price for high-cost producers and has provided a
floor to the price. Supply discipline from the iron ore producers
has kept the iron ore market tight as they have pursued a “value
over volume” strategy. From 2025/2026 we see meaningful new supply
entering the market, primarily via the China controlled Simandou project being built
in conjunction with Rio Tinto. This is a high-grade ore body which
has the potential to reach 150mtpa which is expected to have a
material impact on overall iron ore supply.
The Company’s exposure to iron ore is primarily via the diversified
majors BHP, Vale and Rio Tinto. These companies generate strong
margins and free cash flow from their iron ore businesses with that
cash flow being returned to shareholders, or being reinvested into
future facing commodities such as copper. 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.
The coking coal market remains one of the more interesting
commodity markets. Western world producers have been hesitant to
add new supply, whilst demand continues to increase driven by steel
producing countries such as India.
Having banned the import of Australian coking coal, we are seeing
China reverse the ban and return
to imports again. Supply appears much more inelastic, with limited
new supply growth hitting the market ex-China. On the corporate front, Glencore made
an offer to Teck Resources to acquire its coking coal business
which was subsequently approved and completed in July 2024.
The thermal coal market has returned to a more balanced position
this year with prices holding between $120-140/t. India remains a significant force on the
import market, in line with the rapid economic growth within the
country. As we have seen in recent years, many western world
thermal coal producers have reduced growth spending and have
committed to responsibly reduce production over time. This has left
the thermal coal market generally tight and vulnerable to price
spikes associated with spikes in energy demand. The Company’s
thermal coal exposure is via our 8.2% position in Glencore which
has used elevated thermal coal prices in recent years to deleverage
the business and buy back shares. Shortly after the end of the
first six month period, Glencore completed the acquisition of the
Teck Resources coking coal business which gives them a leading
position in the Atlantic basin for coking coal. Glencore announced
at their results on 7 August 2024
that they will retain the coal business and maintain their strategy
of responsible run-off for the thermal coal business. Should they
decide to retain the business, we would expect to see Glencore lift
their net debt target back to their previous level of US$10 billion which paves the way for additional
shareholder returns in the second half of the year. After the
reporting period Glencore confirmed at its half year results that
they will retain the coal business following engagement with its
shareholders.
Precious metals
A new record all-time high price was set for gold at US$2,427/oz during the first half of 2024 with
the price finishing the period at US$2,326/oz, up by 12.6%. This is a notable step
change from the US$1,800/oz trading
range that gold has largely held over recent years and leaves gold
companies in a good position to translate the higher gold price
into stronger returns. A notable feature of the gold market in 2024
has been central bank purchases of gold, particularly from
China. Whilst central banks have
shown appetite for gold, retail investors appear more cautious with
gold exchange-traded fund (ETF) holdings declining over the period.
We find this perplexing. Gold has delivered its role as a safe
haven asset and portfolio diversifier and we see a number of
reasons for investors to continue to allocate to gold.
Silver performed particularly well during the period, rising by
20.7% with the market recognising its relative price attractiveness
versus gold, along with its industrial demand. Silver’s key
industrial end market is solar which saw record installations in
2023 and continues to grow (albeit at a slower pace).
Interestingly, we are seeing a rising silver usage in solar as
installers move to TOPCon solar modules which have higher
efficiency and importantly higher silver intensity.
The Company increased its exposure to precious metals companies
during the first half of the year. This is a reflection of our
positive outlook on gold and the expected improvement in earnings
from the gold companies. The Company has maintained its preference
for higher quality gold producers which have low operating costs
and a strong resource base which improves their ability to generate
stronger free cash flow through the cycle. Among our gold holdings,
Agnico Eagle Mines (4.3% of the portfolio) a Canadian listed
producer focused on operating in lower risk jurisdictions provided
an update on its Detour Lake operation which is on track to become
a 1 million ounce gold producer by the end of the decade making it
a top five gold mine. Newmont Corporation (Newmont) which has
underperformed gold peers following the acquisition of Newcrest
Mining in 2023, provided an update on its strategy to create a
Focused Tier 1 Portfolio of assets to produce 6.7 million oz of
gold by 2028. Newmont has a series of non-core assets to sell as
part of this process and will also buy back US$1 billion in shares outstanding over the next
24 months. The Company took the opportunity to increase its
exposure to Newmont on the expectation that it claws back its
underperformance as it executes on its strategy.
In the platinum group metals (PGMs) platinum has performed better
during the first half of 2024, increasing by 0.6%, compared to
palladium which saw a 13.1% decrease over the first half of the
year. A significant demand for PGMs comes from catalytic
converters, which are used in internal combustion engine (ICE)
vehicles to reduce carbon monoxide and nitrogen oxide emissions.
However, this demand is facing a long-term structural challenge due
to the declining demand for ICE vehicles due to the rise in
popularity of EVs. While platinum has various applications in
industry, for instance jewellery, and as an investment, palladium
is particularly vulnerable to a lack of demand from ICE vehicles
and has not yet found a stable price point. A key question going
forward is PGMs use in hybrid electric vehicles and range extenders
for EVs. As the metals are often mined together their supply can be
less responsive to price decreases in just one of the
PGMs.
The Company’s exposure to PGM producers slightly increased in the
period to 2.2%, due to the positive performance from Bravo Mining.
Bravo Mining, 1.6% of the portfolio, is a PGM and nickel
exploration company in Brazil,
developing the Luanga PGM deposit. The company’s value increased by
19.5% during the first half of 2024 following the discovery of
copper-gold mineralisation east of its Luanga deposit. Although it
is still in the early stages of this exploration program, the drill
results so far suggest a promising opportunity for Bravo. The
Company invested in a pre-IPO in April
2022 at C$0.50/share due our
belief in the assets and management’s potential. Since our initial
investment, the company has successfully had an IPO and as at
30 June 2024 was trading at
C$3.80/share.
Energy transition metals
Battery electric vehicle (BEV) sales continued to grow in 2024 and
the International Energy Agency (IEA) expects global electric car
sales to remain robust in 2024, reaching around 17 million by the
end of the year, from around 14 million in 2023. BloombergNEF’s
(BNEF) Long-Term Electric Vehicle Outlook indicated that rapidly
falling battery prices, advancements in next-generation battery
technology and improving economics of EVs continue to underpin
long-term EV growth globally. Passenger EV sales are expected to
exceed 30 million in 2027 in BNEF’s base case scenario and grow to
73 million per year in 2040.
We continue to see a focus on geopolitics with efforts from Western
politicians to decouple supply chains from China. The US announced an increase in import
tariffs for Chinese produced goods across strategic sectors,
including EVs and batteries. The European Commission notified
carmakers that it would provisionally apply additional duties of
between 17 and 38 per cent on imported Chinese EVs.
After lithium prices fell by 43% in 2023, the first half of 2024
has seen a tough market continue with the price down by another
69%. Despite growing strongly, demand for lithium from batteries
did not meet optimistic expectations. China has seen a greater penetration of
plug-in hybrid electric vehicles (PHEV) which often have smaller
batteries containing less lithium. Sales also disappointed in the
smaller markets of the US and Europe. The Company reduced its exposure to
lithium and exited its position in Albemarle, a lithium producer,
in the first half of the year. The Company’s position in Sigma
Lithium negatively impacted performance during the six months after
the strategic review process the company was undertaking failed to
result in a sale of the company. The company is now focusing on its
near-term expansion plans which include doubling production in
2025.
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 (REE) which 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
based in Malaysia and Australia. In the first half, Lynas’ equity
fell by 17.2% during a period of weaker rare earth mineral pricing.
In the six month period Lynas announced they would start selling
separated heavy rare earths, widening their product offering from
the mixed concentrate they currently produce.
2023 saw an increased recognition in the key role of nuclear energy
in reaching net zero with a declaration at the 28th Conference of
the Parties to triple nuclear energy capacity by 2050. The
strategic importance of uranium was again highlighted in the first
half of 2024 with the US Congress moving to prohibit Russian
uranium imports. The Company’s holding in uranium producer Cameco
rose by 14% in the six months, as the market continued to reward
their position as a western supplier of nuclear fuel and
engineering through their ownership interest in
Westinghouse.
Royalty and unquoted investments
Over the last three years the Company has generated significant
returns from the unquoted section of the portfolio. This includes
the IPOs of two private investments, Ivanhoe Electric and Bravo
Mining, at substantial premiums to their purchase price.
As mentioned in previous reports, the focus of the unquoted
investments is to generate both capital growth and income to
deliver the superior total return goal for the portfolio. The
Company continues to evaluate new opportunities as it believes that
they can provide an opportunity to generate superior returns and
maximise the return opportunities available in the mining
sector.
As of 30 June 2024, the unquoted
investments in the portfolio amounted to 7.2% of the portfolio and
consist of the BHP Brazil Royalty, the Vale Debentures, Jetti
Resources, MCC Mining and Polyus ADRs. 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 the
Company’s 2023 Annual Report.
BHP Brazil Royalty Contract (1.7% of the
portfolio)
In July 2014 the Company signed a
binding royalty agreement with Avanco Minerals. The Company
provided US$12 million in return for
a Net Smelter Return (net revenue after deductions for freight,
smelter and refining charges) royalty payments 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 now
operating the assets underlying the royalty. Since our initial
US$12 million investment was made, we
have received US$28.6 in royalty
payments with the royalty achieving full payback on the initial
investment in 3½ years. As at the end of June 2024, the royalty was valued at £19.9
million (1.7% of the portfolio) which equates to a 365.3% cash
return on the initial US$12 million
invested.
We are pleased to report that production at Pedra Branca has
normalised following a geotechnical event in the second half of
2023. Recent results have confirmed the asset is producing at
steady state levels and after a successful technical review from
BHP we have confidence that the operational issues have been
resolved.
Vale Debentures (2.6% 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 from which the
royalty will benefit.
The Debentures offer an attractive yield in excess of 10% based on
the 2023 dividend. This is an appealing 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 since the
sell-down occurred 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. We continue to
actively look for opportunities to grow royalty exposure given it
provides an effective mechanism to lock-in long-term income which
further diversifies the Company’s revenues.
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 in negotiation with a number of mining companies to trial
their technology where they will look to integrate their catalyst
into existing help leach SX-EW mines to improve recoveries at a low
capital cost. The technology has been demonstrated to work at
Capstone’s Pinto Valley copper mine and has been trialled at some
of Freeport McMoRan’s copper operations. If Jetti’s technology is
proven 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 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. Since then, we have seen a number of
competing leaching technology companies enter the market placing
pressure on economics and the share of profits Jetti would receive
from recovering additional copper. Along with a more challenging
market and slower roll out of its leaching technology across
targeted assets, the Company has chosen to reduce the holding value
of the asset by 7.3%. This remains 106.2% above the price when the
Company initially purchased its holding in 2022. We continue to
remain positive on the longer-term outlook for Jetti as it looks to
deploy its copper leaching technology across a range of world class
existing copper assets.
MCC Mining (0.8% of the portfolio)
MCC Mining (MCC) is a private company exploring for copper in
Colombia. 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
an 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. Drilling to date has been very encouraging. Over the last 18
months, MCC has drilled 38% of the Top-40 open-pit copper holes
globally, with two porphyry deposits confirmed at Comita and
Pantanos. The company successfully completed a US$50 million funding round at a 50% premium to
our initial investment and we have been encouraged by the calibre
of investors invested in the company.
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 the first
half of 2024 income generated from options was £4.3 million. During
the period the Company was able to take advantage of a number of
specific events where volatility seemed to be mis-priced versus the
underlying risks. This was a key driver behind the overall
performance for the first half of the year. At the end of the
period the Company had 0.1% of net assets exposed to derivatives
and the average exposure to derivatives during the period was less
than 5% of net assets.
Gearing
At 30 June 2024, the Company had
£134.5 million of net debt, with a gearing level of 10.5%. The debt
is held principally in US Dollar rolling short-term loans and
managed against the value of the portfolio as a whole. During the
period the Company once again reviewed the use of gearing on the
back of interest rates remaining higher than generally expected.
Less debt was used during the period than in prior years but, with
share prices generally flat to lower over the period as a whole,
debt was a drag on returns during the six months. Looking back at
the report from last year the outlook remains similar with a view
that as macro risks fade opportunities will present themselves for
gearing levels to rise back to normal levels even though the debt
will have a higher cost. On the back of this, facilities were
refreshed with our lenders and remain at £200 million for loans and
£30 million for the overdraft.
Outlook
After a frustrating first half to the year where much of the
positive news did not translate into a more optimistic outcome, it
is easy to think that things will improve for the remainder of the
year. As things stand, it certainly looks that way with copper,
gold and silver prices moving higher once again and iron ore
remaining resolutely above the psychological $100/t level. However, the macro picture is not
without risk. The world’s largest commodity consumer, China, remains weak and until its domestic
challenges are fixed it seems unlikely that it will drive commodity
prices higher. Elsewhere, geopolitics remain an ever present
threat. Tensions in the Middle
East and Ukraine persist.
Elections in Europe have raised
the prospect of a shift in the political landscape and with the US
Presidential election due in November it will be far from easy
sailing ahead.
Despite these risks, shareholders should expect the portfolio to
remain fully invested with a focus on stock specific outcomes
rather than just market related factors such as commodity price
sensitivity. This approach has delivered excellent results over the
last few years and the current mix of holdings has a high degree of
exposure to similar dynamics boding well for the future.
In addition, the Company will continue to seek out opportunities to
maximise income during the balance of the year in order to try and
offset what looks to be the lagged impact of dividend cuts from the
results in the second half of 2023. Achieving this remains integral
to the goal of delivering a superior total return for shareholders
through the cycle.
EVY HAMBRO AND OLIVIA MARKHAM
BLACKROCK INVESTMENT MANAGEMENT (UK)
LIMITED
23 August 2024
Ten largest investments
Together, the ten largest investments represented 53.8% of
total investments of the Company’s portfolio as at 30 June 2024 (31 December
2023: 54.8%).
1
▲
Glencore
(2023: 3rd)
Diversified mining group
Market value: £98,576,000
Share of investments: 8.2%
(2023: 8.3%)
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.
2
▼
BHP1,2
(2023: 1st)
Diversified mining group
Market value: £93,667,000
Share of investments: 7.8% comprising equity of 6.1% and
mining royalty of 1.7%
(2023: 10.1%)
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 and silver.
3
▲
Rio Tinto3
(2023: 4th)
Diversified mining group
Market value: £74,688,000
Share of investments: 6.2%
(2023: 7.3%)
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.
4
▲
Anglo
American3
(2023: 17th)
Diversified mining group
Market value: £67,258,000
Share of investments: 5.6%
(2023: 1.9%)
A global diversified mining company with a portfolio that includes
diamonds, platinum, copper and iron ore. The company operates mines
in Canada, Peru, Chile,
Australia and a number of
countries in Africa.
5
►
Freeport-McMoRan3
(2023: 5th)
Copper producer
Market value: £60,582,000
Share of investments: 5.0%
(2023: 5.0%)
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 Corporation
(2023: 6th)
Gold producer
Market value: £57,491,000
Share of investments: 4.8%
(2023: 3.6%)
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
▼
Vale2,3,4
(2023: 2nd)
Diversified mining group
Market value: £55,473,000
Share of investments: 4.6% comprising equity of 2.0% and
debentures of 2.6%
(2023: 9.6%)
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.
8
▲
Agnico Eagle Mines
(2023: 19th)
Gold producer
Market value: £51,568,000
Share of investments: 4.3%
(2023: 1.6%)
A Canadian-based senior gold producer with operations in
Canada, Finland, Australia and Mexico. The company also has exploration and
development assets in the US.
9
▲
Teck Resources
(2023: 10th)
Diversified mining group
Market value: £45,179,000
Share of investments: 3.7%
(2023: 2.3%)
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 and
zinc.
10
▼
Hydro
(2023: 9th)
Aluminium producer
Market value: £43,887,000
Share of investments: 3.6%
(2023: 2.6%)
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.
1 Includes
mining royalty contract.
2 Includes
investments held at Directors’ valuation.
3 Includes
options.
4 Includes
fixed income securities.
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 2023.
Percentages in brackets represent the value of the holding as at
31 December 2023.
Investments as at 30 June
2024
|
|
Main
geographical
exposure
|
Market
value
£’000
|
|
% of
investments
|
|
Diversified
|
|
|
|
|
|
Glencore
|
Global
|
98,576
|
|
8.2
|
|
Rio Tinto
|
Global
|
75,020
|
}
|
6.2
|
|
Rio Tinto Put Option 19/07/24 £52.00
|
Global
|
(332)
|
|
BHP
|
Global
|
73,732
|
|
6.1
|
|
Anglo American
|
Global
|
67,750
|
}
|
5.6
|
|
Anglo American Call Option 19/07/24 £25.00
|
Global
|
(492)
|
|
Vale Debentures1,
2, 4
|
Global
|
31,295
|
}
|
4.6
|
|
Vale
|
Global
|
24,343
|
|
Vale Call Option July 24 BRL11.5
|
Global
|
(165)
|
|
Teck Resources
|
Global
|
45,179
|
|
3.7
|
|
|
|
---------------
|
|
---------------
|
|
|
|
414,906
|
|
34.4
|
|
|
|
=========
|
|
=========
|
|
Copper
|
|
|
|
|
|
Freeport-McMoRan
|
Global
|
60,989
|
}
|
5.0
|
|
Freeport-McMoRan Put Option 19/07/24 US$49.00
|
Global
|
(407)
|
|
Ivanhoe Mines
|
Other Africa
|
29,363
|
|
2.4
|
|
Jetti Resources2
|
Global
|
25,207
|
|
2.1
|
|
Ivanhoe Electric
|
United States
|
24,449
|
|
2.0
|
|
Sociedad Minera Cerro Verde
|
Latin America
|
21,321
|
|
1.8
|
|
Lundin Mining
|
Global
|
20,441
|
|
1.7
|
|
BHP Brazil Royalty2,
3
|
Latin America
|
19,935
|
|
1.7
|
|
Southern Copper Corporation
|
Latin America
|
19,668
|
|
1.6
|
|
Metals Acquisition
|
Australasia
|
13,193
|
|
1.1
|
|
Capstone Mining
|
United States
|
12,904
|
|
1.1
|
|
Foran Mining
|
Canada
|
10,937
|
|
0.9
|
|
Develop Global
|
Australasia
|
10,705
|
|
0.9
|
|
First Quantum Minerals
|
Global
|
10,089
|
|
0.8
|
|
MCC Mining2
|
Latin America
|
10,011
|
|
0.8
|
|
Filo Corp
|
Latin America
|
4,070
|
|
0.3
|
|
Hudbay
|
Global
|
3,631
|
|
0.3
|
|
Solaris Resources
|
Latin America
|
3,557
|
|
0.3
|
|
Antofagasta
|
Latin America
|
3,297
|
|
0.3
|
|
|
|
---------------
|
|
---------------
|
|
|
|
303,360
|
|
25.1
|
|
|
|
=========
|
|
=========
|
|
Gold
|
|
|
|
|
|
Newmont Corporation
|
Global
|
57,491
|
|
4.8
|
|
Agnico Eagle Mines
|
Canada
|
51,568
|
|
4.3
|
|
Wheaton Precious Metals
|
Global
|
39,307
|
|
3.2
|
|
Barrick Gold
|
Global
|
31,011
|
|
2.6
|
|
Franco-Nevada
|
Global
|
19,095
|
|
1.6
|
|
Northern Star Resources
|
Australasia
|
12,967
|
|
1.1
|
|
Kinross Gold
|
Global
|
12,057
|
|
1.0
|
|
Endeavour Mining
|
Other Africa
|
8,566
|
|
0.7
|
|
Allied Gold1
|
Other Africa
|
7,900
|
|
0.6
|
|
AngloGold Ashanti
|
Global
|
3,702
|
|
0.3
|
|
Firefly Metals
|
Canada
|
3,595
|
|
0.3
|
|
Polyus
|
Russia
|
–
|
|
–
|
|
|
|
---------------
|
|
---------------
|
|
|
|
247,259
|
|
20.5
|
|
|
|
=========
|
|
=========
|
|
Steel
|
|
|
|
|
|
Nucor
|
United States
|
28,052
|
|
2.3
|
|
Steel Dynamics
|
United States
|
13,571
|
|
1.1
|
|
ArcelorMittal
|
Global
|
13,092
|
|
1.1
|
|
Stelco Holdings
|
Canada
|
5,898
|
|
0.5
|
|
|
|
---------------
|
|
---------------
|
|
|
|
60,613
|
|
5.0
|
|
|
|
=========
|
|
=========
|
|
Industrial Minerals
|
|
|
|
|
|
Albemarle
|
Global
|
9,431
|
|
0.8
|
|
Iluka Resources
|
Australasia
|
9,090
|
|
0.8
|
|
Lynas Rare Earths
|
Australasia
|
7,214
|
|
0.6
|
|
Sigma Lithium
|
Latin America
|
6,408
|
|
0.5
|
|
Mineral Resources
|
Australasia
|
6,173
|
|
0.5
|
|
Sheffield Resources
|
Australasia
|
4,046
|
|
0.3
|
|
Pilbara Minerals
|
Australasia
|
4,017
|
|
0.3
|
|
Chalice Mining
|
Australasia
|
1,900
|
|
0.2
|
|
|
|
---------------
|
|
---------------
|
|
|
|
48,279
|
|
4.0
|
|
|
|
=========
|
|
=========
|
|
Aluminium
|
|
|
|
|
|
Hydro
|
Global
|
43,887
|
|
3.6
|
|
|
|
---------------
|
|
---------------
|
|
|
|
43,887
|
|
3.6
|
|
|
|
=========
|
|
=========
|
|
Iron Ore
|
|
|
|
|
|
Labrador Iron
|
Canada
|
11,816
|
|
1.0
|
|
Champion Iron
|
Canada
|
10,683
|
|
0.9
|
|
Deterra Royalties
|
Australasia
|
3,265
|
|
0.3
|
|
Equatorial Resources
|
Other Africa
|
214
|
|
–
|
|
|
|
---------------
|
|
---------------
|
|
|
|
25,978
|
|
2.2
|
|
|
|
=========
|
|
=========
|
|
Platinum Group Metals
|
|
|
|
|
|
Bravo Mining
|
Latin America
|
19,811
|
|
1.6
|
|
Northam Platinum
|
Global
|
2,392
|
|
0.2
|
|
Impala Platinum
|
South Africa
|
1,635
|
|
0.1
|
|
|
|
---------------
|
|
---------------
|
|
|
|
23,838
|
|
1.9
|
|
|
|
=========
|
|
=========
|
|
Uranium
|
|
|
|
|
|
Cameco
|
Canada
|
19,466
|
|
1.6
|
|
|
|
---------------
|
|
---------------
|
|
|
|
19,466
|
|
1.6
|
|
|
|
=========
|
|
=========
|
|
Nickel
|
|
|
|
|
|
Nickel Industries
|
Indonesia
|
6,778
|
|
0.6
|
|
Lifezone Metals
|
Global
|
6,068
|
|
0.5
|
|
Bindura Nickel
|
Global
|
31
|
|
–
|
|
|
|
---------------
|
|
---------------
|
|
|
|
12,877
|
|
1.1
|
|
|
|
=========
|
|
=========
|
|
Mining Services
|
|
|
|
|
|
Woodside Energy Group
|
Australasia
|
6,463
|
|
0.5
|
|
|
|
---------------
|
|
---------------
|
|
|
|
6,463
|
|
0.5
|
|
|
|
=========
|
|
=========
|
|
Zinc
|
|
|
|
|
|
Titan Mining
|
United States
|
911
|
|
0.1
|
|
|
|
---------------
|
|
---------------
|
|
|
|
911
|
|
0.1
|
|
|
|
=========
|
|
=========
|
|
Comprising:
|
|
1,207,837
|
|
100.0
|
|
|
|
=========
|
|
=========
|
|
– Investments
|
|
1,209,233
|
|
100.1
|
|
– Options
|
|
(1,396)
|
|
(0.1)
|
|
|
|
---------------
|
|
---------------
|
|
|
|
1,207,837
|
|
100.0
|
|
|
|
=========
|
|
=========
|
1 Includes
fixed income securities.
2 Includes
investments held at Directors’ valuation.
3 Includes
mining royalty contract.
4 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 30
June 2024 (including options classified as liabilities on
the balance sheet) was 67 (31 December
2023: 69).
As at 30 June 2024 the Company did
not hold any equity interests in companies comprising more than 3%
of a company’s share capital.
Portfolio analysis as at 30 June
2024
Commodity Exposure1
|
|
2024
portfolio (%)
|
2023
portfolio (%)2
|
2024
reference index (%)3
|
|
Diversified
|
34.4
|
38.4
|
33.1
|
|
Copper
|
25.1
|
21.8
|
14.3
|
|
Gold
|
20.5
|
15.2
|
21.9
|
|
Steel
|
5.0
|
7.3
|
18.9
|
|
Industrial Minerals
|
4.0
|
5.5
|
1.3
|
|
Aluminium
|
3.6
|
3.3
|
3.2
|
|
Iron Ore
|
2.2
|
2.5
|
4.2
|
|
Platinum Group Metals
|
1.9
|
1.6
|
1.2
|
|
Uranium
|
1.6
|
2.3
|
0
|
|
Nickel
|
1.1
|
1.0
|
0
|
|
Mining Services
|
0.5
|
1.0
|
0
|
|
Zinc
|
0.1
|
0.1
|
0.3
|
|
Energy Minerals
|
0
|
0
|
0
|
|
Other4
|
0
|
0
|
1.6
|
1
Based on index classifications
2
Represents exposure at 31 December
2023.
3
MSCI ACWI Metals & Mining 30% Buffer 10/40 Index (net total
return).
4
Represents a very small exposure.
Geographic Exposure1
|
|
2024
|
|
Global
|
64.0%
|
|
Canada
|
9.5%
|
|
Latin America
|
8.9%
|
|
Other2
|
7.2%
|
|
Australasia
|
6.6%
|
|
Other Africa (ex South Africa)
|
3.7%
|
|
South Africa
|
0.1%
|
|
|
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%
|
1
Based on the principal commodity exposure and place of operation of
each investment.
2
Consists of Indonesia,
Russia and United States.
Interim Management Report and Responsibility
Statement
The Chairman’s Statement and the Investment Manager’s Report above
give details of the important events which have occurred during the
period and their impact on the financial statements.
Principal risks and uncertainties
The principal risks faced by the Group can be divided into various
areas as follows:
-
Market;
-
Investment performance;
-
Operational;
-
Legal and regulatory compliance; and
-
Financial.
The Board reported on the principal risks and uncertainties faced
by the Group in the Annual Report and Financial Statements for the
year ended 31 December 2023. A
detailed explanation can be found in the Strategic Report on pages
42 to 45 and note 18 on pages 116 to 133 of the Annual Report and
Financial Statements which is available on the website maintained
by BlackRock at
www.blackrock.com/uk/brwm.
In the view of the Board, there have not been any changes to the
fundamental nature of the principal risks and uncertainties since
the previous report and these are equally applicable to the
remaining six months of the financial year as they were to the six
months under review.
Going concern
The Directors, having considered the nature and liquidity of the
portfolio, the Group’s investment objective and the Group’s
projected income and expenditure, are satisfied that the Group has
adequate resources to continue in operational existence for the
foreseeable future and is financially sound. The Board is mindful
of the continuing uncertainty surrounding the current environment
of heightened geopolitical risk given the war in Ukraine and conflict in the Middle East. The Board believes that the Group
and its key third-party service providers have in place appropriate
business continuity plans and these services have continued to be
supplied without interruption.
The Group has a portfolio of investments which are predominantly
readily realisable and is able to meet all of its liabilities from
its assets and income generated from these assets. Accounting
revenue and expense forecasts are maintained and reported to the
Board regularly and it is expected that the Group will be able to
meet all its obligations. Borrowings under the overdraft and
revolving credit facilities shall at no time exceed £230 million or
25% of the Group’s net asset value (whichever is the lower) and
this covenant was complied with during the period.
Ongoing charges for the year ended 31
December 2023 were approximately 0.91% of net assets and
this is unlikely to change significantly going forward. Based on
the above, the Board is satisfied that it is appropriate to
continue to adopt the going concern basis in preparing the
financial statements.
Related party disclosure and transactions with the
Manager
BlackRock Fund Managers Limited (BFM) was appointed as the
Company’s Alternative Investment Fund Manager (AIFM) with effect
from 2 July 2014. BFM has (with the
Company’s consent) delegated certain portfolio and risk management
services, and other ancillary services, to BlackRock Investment
Management (UK) Limited (BIM (UK)).
Both BFM and BIM (UK) are regarded
as related parties under the Listing Rules. Details of the
management and marketing fees payable are set out in notes 4 and 5
respectively and note 13 below.
The related party transactions with the Directors are set out in
note 14 below.
Directors’ responsibility statement
The Disclosure Guidance and Transparency Rules (DTR) of the UK
Listing Authority require the Directors to confirm their
responsibilities in relation to the preparation and publication of
the Interim Management Report and Financial Statements.
The Directors confirm to the best of their knowledge
that:
-
the condensed set of financial statements contained within the
Condensed Half Yearly Financial Report has been prepared in
accordance with UK-adopted International Accounting Standard 34
Interim Financial Reporting; and
-
the Interim Management Report, together with the Chairman’s
Statement and Investment Manager’s Report, include a fair review of
the information required by 4.2.7R and 4.2.8R of the Financial
Conduct Authority Disclosure Guidance and Transparency
Rules.
The Condensed Half Yearly Financial Report was approved by the
Board on 23 August 2024 and the above
responsibility statement was signed on its behalf by the
Chairman.
CHARLES
GOODYEAR
FOR AND ON BEHALF OF THE BOARD
23 August 2024
Consolidated Statement of Comprehensive Income for the six
months ended 30 June
2024
|
|
|
Six months ended
30 June 2024
(unaudited)
|
Six months ended
30 June 2023
(unaudited)
|
Year ended
31 December 2023
(audited)
|
|
|
Notes
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
|
Income from investments held at fair value through profit or
loss
|
3
|
23,198
|
–
|
23,198
|
34,111
|
630
|
34,741
|
68,317
|
630
|
68,947
|
|
Other income
|
3
|
4,821
|
–
|
4,821
|
2,891
|
–
|
2,891
|
6,827
|
–
|
6,827
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total revenue
|
|
28,019
|
–
|
28,019
|
37,002
|
630
|
37,632
|
75,144
|
630
|
75,774
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
Net loss on investments and options held at fair value through
profit or loss
|
|
–
|
(40,360)
|
(40,360)
|
–
|
(123,495)
|
(123,495)
|
–
|
(140,576)
|
(140,576)
|
|
Net gains on foreign exchange
|
|
–
|
424
|
424
|
–
|
8,301
|
8,301
|
–
|
9,018
|
9,018
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total
|
|
28,019
|
(39,936)
|
(11,917)
|
37,002
|
(114,564)
|
(77,562)
|
75,144
|
(130,928)
|
(55,784)
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees
|
4
|
(1,116)
|
(3,446)
|
(4,562)
|
(1,171)
|
(3,622)
|
(4,793)
|
(2,374)
|
(7,317)
|
(9,691)
|
|
Other operating expenses
|
5
|
(611)
|
(6)
|
(617)
|
(644)
|
(11)
|
(655)
|
(1,278)
|
(15)
|
(1,293)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total operating expenses
|
|
(1,727)
|
(3,452)
|
(5,179)
|
(1,815)
|
(3,633)
|
(5,448)
|
(3,652)
|
(7,332)
|
(10,984)
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
Net profit/(loss) on ordinary activities before finance
costs and taxation
|
|
26,292
|
(43,388)
|
(17,096)
|
35,187
|
(118,197)
|
(83,010)
|
71,492
|
(138,260)
|
(66,768)
|
|
Finance costs
|
6
|
(1,148)
|
(3,446)
|
(4,594)
|
(1,121)
|
(3,432)
|
(4,553)
|
(2,375)
|
(7,166)
|
(9,541)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Net profit/(loss) on ordinary activities before
taxation
|
|
25,144
|
(46,834)
|
(21,690)
|
34,066
|
(121,629)
|
(87,563)
|
69,117
|
(145,426)
|
(76,309)
|
|
Taxation (charge)/credit
|
|
(2,296)
|
923
|
(1,373)
|
(2,299)
|
1,212
|
(1,087)
|
(4,426)
|
1,750
|
(2,676)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Net profit/(loss) on ordinary activities after
taxation
|
|
22,848
|
(45,911)
|
(23,063)
|
31,767
|
(120,417)
|
(88,650)
|
64,691
|
(143,676)
|
(78,985)
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
Earnings/(loss) per ordinary share (pence) – basic and
diluted
|
8
|
11.95
|
(24.01)
|
(12.06)
|
16.73
|
(63.40)
|
(46.67)
|
33.95
|
(75.40)
|
(41.45)
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
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 period. All income is
attributable to the equity holders of the Group.
The Group does not have any other comprehensive income/(loss)
(30 June 2023: £nil; 31 December 2023: £nil). The net profit/(loss)
for the period disclosed above represents the Group’s total
comprehensive income/(loss).
Consolidated Statement of Changes in Equity for the six
months ended 30 June
2024
|
|
Note
|
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 six months ended 30 June 2024
(unaudited)
|
|
|
|
|
|
|
|
|
|
At 31 December 2023
|
|
9,651
|
151,493
|
22,779
|
193,008
|
725,161
|
57,959
|
1,160,051
|
|
Total comprehensive (loss)/income:
|
|
|
|
|
|
|
|
|
|
Net (loss)/profit for the period
|
|
–
|
–
|
–
|
–
|
(45,911)
|
22,848
|
(23,063)
|
|
Dividends paid1
|
7
|
–
|
–
|
–
|
–
|
–
|
(43,016)
|
(43,016)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
At 30 June 2024
|
|
9,651
|
151,493
|
22,779
|
193,008
|
679,250
|
37,791
|
1,093,972
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
For the six months ended 30 June 2023
(unaudited)
|
|
|
|
|
|
|
|
|
|
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 period
|
|
–
|
–
|
–
|
–
|
(120,417)
|
31,767
|
(88,650)
|
|
Transactions with owners, recorded directly to equity:
|
|
|
|
|
|
|
|
|
|
Ordinary shares reissued from treasury
|
|
–
|
3,386
|
–
|
12,305
|
–
|
–
|
15,691
|
|
Share reissue costs
|
|
–
|
–
|
–
|
(31)
|
–
|
–
|
(31)
|
|
Dividends paid2
|
7
|
–
|
–
|
–
|
–
|
–
|
(54,877)
|
(54,877)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
At 30 June 2023
|
|
9,651
|
151,493
|
22,779
|
193,010
|
748,420
|
46,065
|
1,171,418
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
For the year ended 31 December 2023
(audited)
|
|
|
|
|
|
|
|
|
|
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
|
|
–
|
3,386
|
–
|
12,305
|
–
|
–
|
15,691
|
|
Share reissue costs
|
|
–
|
–
|
–
|
(33)
|
–
|
–
|
(33)
|
|
Dividends paid3
|
7
|
–
|
–
|
–
|
–
|
–
|
(75,907)
|
(75,907)
|
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
At 31 December 2023
|
|
9,651
|
151,493
|
22,779
|
193,008
|
725,161
|
57,959
|
1,160,051
|
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
1 The
final dividend for the year ended 31
December 2023 of 17.00p per share, declared on 7 March 2024 and paid on 14 May 2024, and 1st quarterly interim dividend
for the year ended 31 December 2024
of 5.50p per share, declared on 10 May
2024 and paid on 28 June
2024.
2 The
final dividend for the year ended 31
December 2022 of 23.50p per share, declared on 3 March 2023 and paid on 26 April 2023, and 1st quarterly interim dividend
for the year ended 31 December 2023
of 5.50p per share, declared on 18 April
2023 and paid on 31 May
2023.
3 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.
For information on the Company’s distributable reserves, please
refer to note 11 below.
Consolidated Statement of Financial Position as at
30 June 2024
|
|
Notes
|
30 June
2024
(unaudited)
£’000
|
30 June
2023
(unaudited)
£’000
|
31 December
2023
(audited)
£’000
|
|
Non current assets
|
|
|
|
|
|
Investments held at fair value through profit or loss
|
12
|
1,209,233
|
1,283,858
|
1,298,420
|
|
Current assets
|
|
|
|
|
|
Current tax asset
|
|
1,515
|
1,036
|
1,276
|
|
Other receivables
|
|
6,827
|
3,512
|
3,592
|
|
Cash collateral held with brokers
|
|
9,492
|
–
|
6,269
|
|
Cash and cash equivalents
|
|
16,032
|
42,207
|
10,612
|
|
|
|
---------------
|
---------------
|
---------------
|
|
Total current assets
|
|
33,866
|
46,755
|
21,749
|
|
|
|
=========
|
=========
|
=========
|
|
Total assets
|
|
1,243,099
|
1,330,613
|
1,320,169
|
|
|
|
=========
|
=========
|
=========
|
|
Current liabilities
|
|
|
|
|
|
Current tax liability
|
|
(367)
|
(353)
|
(352)
|
|
Other payables
|
|
(12,322)
|
(8,326)
|
(8,052)
|
|
Derivative financial liabilities held at fair value through profit
or loss
|
12
|
(1,396)
|
–
|
(1,401)
|
|
Bank loans
|
10
|
(134,483)
|
(150,234)
|
(149,828)
|
|
|
|
---------------
|
---------------
|
---------------
|
|
Total current liabilities
|
|
(148,568)
|
(158,913)
|
(159,633)
|
|
|
|
=========
|
=========
|
=========
|
|
Total assets less current liabilities
|
|
1,094,531
|
1,171,700
|
1,160,536
|
|
|
|
=========
|
=========
|
=========
|
|
Non current liabilities
|
|
|
|
|
|
Deferred taxation liability
|
|
(559)
|
(282)
|
(485)
|
|
|
|
---------------
|
---------------
|
---------------
|
|
Net assets
|
|
1,093,972
|
1,171,418
|
1,160,051
|
|
|
|
=========
|
=========
|
=========
|
|
Equity attributable to equity holders
|
|
|
|
|
|
Called up share capital
|
9
|
9,651
|
9,651
|
9,651
|
|
Share premium account
|
|
151,493
|
151,493
|
151,493
|
|
Capital redemption reserve
|
|
22,779
|
22,779
|
22,779
|
|
Special reserve
|
|
193,008
|
193,010
|
193,008
|
|
Capital reserve
|
|
679,250
|
748,420
|
725,161
|
|
Revenue reserve
|
|
37,791
|
46,065
|
57,959
|
|
|
|
---------------
|
---------------
|
---------------
|
|
Total equity
|
|
1,093,972
|
1,171,418
|
1,160,051
|
|
|
|
=========
|
=========
|
=========
|
|
Net asset value per ordinary share
(pence)
|
8
|
572.21
|
612.72
|
606.78
|
|
|
|
=========
|
=========
|
=========
|
Consolidated Cash Flow Statement for the six months ended
30 June 2024
|
|
Six months
ended
30 June 2024
(unaudited)
£’000
|
Six months
ended
30 June 2023
(unaudited)
£’000
|
Year ended
31 December
2023
(audited)
£’000
|
|
Operating activities
|
|
|
|
|
Net loss on ordinary activities after taxation
|
(21,690)
|
(87,563)
|
(76,309)
|
|
Add back finance costs
|
4,594
|
4,553
|
9,541
|
|
Net loss on investments and options held at fair value through
profit or loss (including transaction costs)
|
40,360
|
123,495
|
140,576
|
|
Net gains on foreign exchange
|
(424)
|
(8,301)
|
(9,018)
|
|
Sales of investments held at fair value through profit or
loss
|
360,569
|
342,903
|
648,272
|
|
Purchases of investments held at fair value through profit or
loss
|
(309,667)
|
(326,545)
|
(662,250)
|
|
(Increase)/decrease in other receivables
|
(719)
|
918
|
1,069
|
|
Increase in other payables
|
66
|
2,026
|
1,556
|
|
(Increase)/decrease in amounts due from brokers
|
(2,755)
|
1
|
(409)
|
|
Increase in amounts due to brokers
|
4,216
|
–
|
–
|
|
Net movement in cash collateral held with brokers
|
(3,223)
|
6,795
|
526
|
|
|
---------------
|
---------------
|
---------------
|
|
Net cash inflow from operating activities before
taxation
|
71,327
|
58,282
|
53,554
|
|
|
=========
|
=========
|
=========
|
|
Taxation paid
|
–
|
–
|
(12)
|
|
Taxation on investment income included within gross
income
|
(1,373)
|
(1,437)
|
(2,664)
|
|
|
---------------
|
---------------
|
---------------
|
|
Net cash inflow from operating
activities
|
69,954
|
56,845
|
50,878
|
|
|
=========
|
=========
|
=========
|
|
Financing activities
|
|
|
|
|
Repayment of loans
|
(14,599)
|
–
|
–
|
|
Interest paid
|
(4,532)
|
(4,665)
|
(9,571)
|
|
Net proceeds from ordinary shares reissued from treasury
|
–
|
15,660
|
15,658
|
|
Dividends paid
|
(43,016)
|
(54,877)
|
(75,907)
|
|
|
---------------
|
---------------
|
---------------
|
|
Net cash outflow from financing
activities
|
(62,147)
|
(43,882)
|
(69,820)
|
|
|
=========
|
=========
|
=========
|
|
Increase/(decrease) in cash and cash
equivalents
|
7,807
|
12,963
|
(18,942)
|
|
Effect of foreign exchange rate changes
|
(2,387)
|
(248)
|
62
|
|
|
---------------
|
---------------
|
---------------
|
|
Change in cash and cash equivalents
|
5,420
|
12,715
|
(18,880)
|
|
Cash and cash equivalents at start of period/year
|
10,612
|
29,492
|
29,492
|
|
|
---------------
|
---------------
|
---------------
|
|
Cash and cash equivalents at end of
period/year
|
16,032
|
42,207
|
10,612
|
|
|
=========
|
=========
|
=========
|
|
Comprised of:
|
|
|
|
|
Cash at bank
|
16,032
|
42,207
|
10,612
|
|
|
---------------
|
---------------
|
---------------
|
|
|
16,032
|
42,207
|
10,612
|
|
|
=========
|
=========
|
=========
|
Notes to the financial statements for the six months ended
30 June 2024
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 principal activity of the subsidiary, BlackRock World Mining
Investment Company Limited, is investment dealing.
2. Basis of preparation
The Half Yearly Financial Statements for the six month period ended
30 June 2024 have been prepared in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the Financial Conduct Authority and with the
UK-adopted International Accounting Standard 34 (IAS 34) Interim
Financial Reporting. The Half Yearly Financial Statements should be
read in conjunction with the Group’s Annual Report and Financial
Statements for the year ended 31 December
2023, which have been prepared in accordance with UK-adopted
International Accounting Standards (IAS) in conformity with the
requirements of the Companies Act 2006.
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.
Adoption of new and amended International Accounting
Standards and interpretations:
IFRS 17 – Insurance contracts
(effective 1 January 2023). This
standard replaced IFRS 4 and applies to all types of
insurance
contracts. IFRS 17 provides a consistent and comprehensive model
for insurance contracts covering all relevant accounting
aspects.
This standard did not have any impact on the Company as it has no
insurance contracts.
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.
The amendment of these standards did not have any significant
impact on the Company.
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
Company.
3. Income
|
|
Six months
ended
30 June 2024
(unaudited)
£’000
|
Six months
ended
30 June 2023
(unaudited)
£’000
|
Year ended
31 December
2023
(audited)
£’000
|
|
Investment income:
|
|
|
|
|
UK dividends
|
5,469
|
5,150
|
8,647
|
|
Overseas dividends
|
12,616
|
17,281
|
33,457
|
|
Overseas special dividends
|
1,480
|
6,269
|
17,736
|
|
Income from contractual rights (BHP Brazil Royalty)
|
756
|
2,760
|
4,186
|
|
Income from Vale Debentures
|
2,399
|
1,498
|
2,608
|
|
Income from fixed income investments
|
478
|
1,153
|
1,683
|
|
|
---------------
|
---------------
|
---------------
|
|
Total investment income
|
23,198
|
34,111
|
68,317
|
|
|
=========
|
=========
|
=========
|
|
Other income:
|
|
|
|
|
Option premium income
|
4,336
|
2,483
|
5,964
|
|
Deposit interest
|
323
|
305
|
678
|
|
Broker interest received
|
79
|
49
|
104
|
|
Stock lending income
|
83
|
54
|
81
|
|
|
---------------
|
---------------
|
---------------
|
|
|
4,821
|
2,891
|
6,827
|
|
|
=========
|
=========
|
=========
|
|
Total income
|
28,019
|
37,002
|
75,144
|
|
|
=========
|
=========
|
=========
|
During the period, the Group received option premium income in cash
totalling £5,184,000 (six months ended 30
June 2023: £2,525,000; year ended 31
December 2023: £6,724,000) 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 period, option
premiums of £4,336,000 (six months ended 30
June 2023: £2,483,000; year ended 31
December 2023: £5,964,000) were amortised to
revenue.
At 30 June 2024 there were four open
positions (30 June 2023: none;
31 December 2023: three) with an
associated liability of £1,396,000 (30 June
2023: £nil; 31 December 2023:
£1,401,000).
Dividends and interest received in cash in the six months ended
30 June 2024 amounted to £19,507,000
and £2,746,000 (six months ended 30 June
2023: £27,716,000 and £3,080,000; year ended 31 December 2023: £59,542,000 and
£5,159,000).
Special dividends of £nil (six months ended 30 June 2023: £630,000; year ended 31 December 2023: £630,000) have been recognised
in capital for the six months ended 30 June
2024.
4. Investment management fee
|
|
Six months ended
30 June 2024
(unaudited)
|
Six months ended
30 June 2023
(unaudited)
|
Year ended
31 December 2023
(audited)
|
|
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
|
Investment management fee
|
1,116
|
3,446
|
4,562
|
1,171
|
3,622
|
4,793
|
2,374
|
7,317
|
9,691
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total
|
1,116
|
3,446
|
4,562
|
1,171
|
3,622
|
4,793
|
2,374
|
7,317
|
9,691
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
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 period, £4,303,000 (six months
ended 30 June 2023: £4,793,000; year
ended 31 December 2023: £9,421,000)
of the investment management fee was generated from net assets and
£259,000 (six months ended 30 June
2023: £nil; year ended 31 December
2023: £270,000) from the gearing effect on gross assets due
to the quarter-on-quarter increase in the NAV per share for the
period as set out below:
|
Quarter end
|
Cum income
NAV per share
(pence)
|
Quarterly
increase/
(decrease) %
|
Gearing effect
on management
fees (£’000)
|
|
31 December 2022
|
688.35
|
|
|
|
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
|
|
31 March 2024
|
568.07
|
-6.4
|
–
|
|
30 June 2024
|
572.21
|
+0.7
|
259
|
|
|
=========
|
=========
|
=========
|
The daily average of the net assets under management during the
period ended 30 June 2024 was
£1,100,397,000 (six months ended 30 June
2023: £1,276,151,000; year ended 31
December 2023: £1,203,977,000).
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
|
|
Six months
ended
30 June 2024
(unaudited)
£’000
|
Six months
ended
30 June 2023
(unaudited)
£’000
|
Year ended
31 December
2023
(audited)
£’000
|
|
Allocated to revenue:
|
|
|
|
|
Custody fee
|
53
|
55
|
109
|
|
Auditors’ remuneration:
|
|
|
|
|
– audit services
|
33
|
25
|
55
|
|
– non-audit services1
|
–
|
5
|
9
|
|
Registrar’s fee
|
42
|
41
|
86
|
|
Directors’ emoluments
|
81
|
94
|
179
|
|
AIC fees
|
10
|
10
|
21
|
|
Broker fees
|
12
|
12
|
25
|
|
Depositary fees
|
52
|
61
|
116
|
|
FCA fee
|
21
|
16
|
40
|
|
Directors’ insurance
|
10
|
11
|
22
|
|
Marketing fees
|
61
|
65
|
144
|
|
Stock exchange fees
|
25
|
26
|
52
|
|
Legal and professional fees
|
67
|
82
|
147
|
|
Bank facility fees2
|
45
|
39
|
85
|
|
Printing and postage fees
|
22
|
29
|
55
|
|
Directors' search fees
|
–
|
–
|
25
|
|
Write back of prior year expenses3
|
(7)
|
–
|
–
|
|
Other administrative costs
|
84
|
73
|
108
|
|
|
---------------
|
---------------
|
---------------
|
|
|
611
|
644
|
1,278
|
|
|
=========
|
=========
|
=========
|
|
Allocated to capital:
|
|
|
|
|
Transaction charges4
|
6
|
11
|
15
|
|
|
---------------
|
---------------
|
---------------
|
|
|
617
|
655
|
1,293
|
|
|
=========
|
=========
|
=========
|
1 Fees
paid to the auditors for non-audit services of £nil excluding VAT
(six months ended 30 June 2023:
£4,675; year ended 31 December 2023:
£9,350) relate to the review of the Condensed Half Yearly Financial
Report.
2 There
is a 4 basis point facility fee chargeable on the full loan
facilities whether drawn or undrawn.
3 Relates
to legal and professional fees written back during the six months
ended 30 June 2024 (six months ended
30 June 2023: none; year ended
31 December 2023: none).
4 For
the six months ended 30 June 2024,
expenses of £6,000 (six months ended 30 June
2023: £11,000; year ended 31 December
2023: £15,000) were charged to the capital account of the
Statement of Comprehensive Income. These relate to transaction
costs charged by the custodian on sale and purchase
trades.
The transaction costs incurred on the acquisition of investments
amounted to £586,000 for the six months ended 30 June 2024 (six months ended 30 June 2023: £504,000; year ended 31 December 2023: £1,055,000). Costs relating to
the disposal of investments amounted to £137,000 for the six months
ended 30 June 2024 (six months ended
30 June 2023: £67,000; year ended
31 December 2023: £182,000). All
transaction costs have been included within the capital
reserves.
6. Finance costs
|
|
Six months ended
30 June 2024
(unaudited)
|
Six months ended
30 June 2023
(unaudited)
|
Year ended
31 December 2023
(audited)
|
|
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
|
Interest paid on bank loans
|
1,134
|
3,404
|
4,538
|
1,118
|
3,423
|
4,541
|
2,370
|
7,151
|
9,521
|
|
Interest paid on bank overdraft
|
14
|
42
|
56
|
3
|
9
|
12
|
5
|
15
|
20
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total
|
1,148
|
3,446
|
4,594
|
1,121
|
3,432
|
4,553
|
2,375
|
7,166
|
9,541
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
Finance costs are charged 25% to the revenue account and 75% to the
capital account of the Consolidated Statement of Comprehensive
Income.
7. Dividends
The final dividend of 17.00p per share for the year ended
31 December 2023 was paid on
14 May 2024. The Board has declared a
first quarterly interim dividend of 5.50p per share for the quarter
ended 31 March 2024, paid on
28 June 2024 to shareholders on the
register on 31 May
2024.
The Board has declared a second quarterly interim dividend of 5.50p
per share for the quarter ended 30 June
2024 which will be paid on 30
September 2024 to shareholders on the register on
6 September 2024. This dividend has
not been accrued in the financial statements for the six months
ended 30 June 2024 as, under IAS,
interim dividends are not recognised until paid. Dividends are
debited directly to reserves.
Dividends on equity shares paid during the period were:
|
|
Six months
ended
30 June 2024
(unaudited)
£’000
|
Six months
ended
30 June 2023
(unaudited)
£’000
|
Year ended
31 December
2023
(audited)
£’000
|
|
Final dividend for the year ended 31 December 2023 of 17.00p per
share (2022: 23.50p)
|
32,501
|
44,392
|
44,392
|
|
1st quarterly interim dividend for the year ending 31 December 2024
of 5.50p per share (2023: 5.50p)
|
10,515
|
10,485
|
10,485
|
|
2nd quarterly interim dividend for the year ended 31 December 2023
of 5.50p per share (2022: 5.50p)
|
–
|
–
|
10,515
|
|
3rd quarterly interim dividend for the year ended 31 December 2023
of 5.50p per share (2022: 5.50p)
|
–
|
–
|
10,515
|
|
|
---------------
|
---------------
|
---------------
|
|
|
43,016
|
54,877
|
75,907
|
|
|
=========
|
=========
|
=========
|
8. Consolidated earnings and net asset value per ordinary
share
Total revenue, capital loss and net asset value per ordinary share
are shown below and have been calculated using the
following:
|
|
Six months
ended
30 June 2024
(unaudited)
|
Six months
ended
30 June 2023
(unaudited)
|
Year ended
31 December
2023
(audited)
|
|
Net revenue profit attributable to ordinary shareholders
(£’000)
|
22,848
|
31,767
|
64,691
|
|
Net capital loss attributable to ordinary shareholders
(£’000)
|
(45,911)
|
(120,417)
|
(143,676)
|
|
|
-----------------
|
-----------------
|
-----------------
|
|
Total loss attributable to ordinary shareholders
(£’000)
|
(23,063)
|
(88,650)
|
(78,985)
|
|
|
==========
|
==========
|
==========
|
|
Equity shareholders’ funds (£’000)
|
1,093,972
|
1,171,418
|
1,160,051
|
|
The weighted average number of ordinary shares in issue during the
period on which the earnings per ordinary share was calculated
was:
|
191,183,036
|
189,935,356
|
190,564,324
|
|
The actual number of ordinary shares in issue at the end of the
period on which the net asset value per ordinary share was
calculated was:
|
191,183,036
|
191,183,036
|
191,183,036
|
|
|
-----------------
|
-----------------
|
-----------------
|
|
Earnings per ordinary share
|
|
|
|
|
Revenue earnings per share (pence) – basic and diluted
|
11.95
|
16.73
|
33.95
|
|
Capital loss per share (pence) – basic and diluted
|
(24.01)
|
(63.40)
|
(75.40)
|
|
|
-----------------
|
-----------------
|
-----------------
|
|
Total loss per share (pence) – basic and
diluted
|
(12.06)
|
(46.67)
|
(41.45)
|
|
|
==========
|
==========
|
==========
|
|
|
As at
30 June
2024
(unaudited)
|
As at
30 June
2023
(unaudited)
|
As at
31 December
2023
(audited)
|
|
Net asset value per ordinary share (pence)
|
572.21
|
612.72
|
606.78
|
|
Ordinary share price (pence)
|
569.00
|
599.00
|
587.00
|
|
|
=========
|
=========
|
=========
|
There were no dilutive securities at the period end.
9. Called up share capital
|
(unaudited)
|
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 5 pence each:
|
|
|
|
|
|
At 31 December 2023
|
191,183,036
|
1,828,806
|
193,011,842
|
9,651
|
|
|
-----------------
|
-----------------
|
-----------------
|
-----------------
|
|
At 30 June 2024
|
191,183,036
|
1,828,806
|
193,011,842
|
9,651
|
|
|
==========
|
==========
|
==========
|
==========
|
During the six months ended 30 June
2024, the Company
– did
not buy back any shares into treasury (six months ended
30 June 2023: none; year ended
31 December 2023: none).
– did
not reissue any shares (six months ended 30
June 2023: 2,430,000 shares; year ended 31 December 2023: 2,430,000 shares) from treasury
for a net consideration after costs of £nil (six months ended
30 June 2023: £15,660,000; year ended
31 December 2023:
£15,658,000).
Since the period end and up to 23 August
2024, the Company has not reissued or bought back any
ordinary shares.
10. Reconciliation of liabilities arising from financing
activities
|
|
Six months
ended
30 June 2024
(unaudited)
£’000
|
Six months
ended
30 June 2023
(unaudited)
£’000
|
Year ended
31 December
2023
(audited)
£’000
|
|
Bank loan and overdraft at beginning of the period/year
|
149,828
|
158,783
|
158,783
|
|
Cash flows:
|
|
|
|
|
Net drawdown of loan
|
(14,599)
|
–
|
–
|
|
Non-cash flows:
|
|
|
|
|
Effects of foreign exchange gains
|
(746)
|
(8,549)
|
(8,955)
|
|
|
---------------
|
---------------
|
---------------
|
|
Bank loan and overdraft at end of the
period/year
|
134,483
|
150,234
|
149,828
|
|
|
=========
|
=========
|
=========
|
11. Reserves
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, 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 reserve 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 reserve and
revenue reserve may be distributed by way of dividend. The Parent
Company’s capital gains of £685,258,000 (30
June 2023: £754,209,000; 31 December
2023: £731,067,000) comprise a gain on capital reserve
arising on investments sold of £512,782,000 (30 June 2023: £494,063,000; 31 December 2023: £508,899,000), a gain on
capital reserve arising on revaluation of listed investments of
£149,772,000 (30 June 2023:
£225,150,000; 31 December 2023:
£189,283,000), revaluation gains on unquoted investments of
£15,195,000 (30 June 2023:
£27,706,000; 31 December 2023:
£25,478,000) and a revaluation gain on the investment in the
subsidiary of £7,509,000 (30 June
2023: £7,290,000; 31 December
2023: £7,407,000). The capital reserve arising on the
revaluation of listed investments of £149,772,000 (30 June 2023: £225,150,000; 31 December 2023: £189,283,000) is subject to
fair value movements and may not be readily realisable at short
notice; as such it may not be entirely distributable. The reserves
of the subsidiary company are not distributable until distributed
as a dividend to the Parent Company. 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.
12. Financial risks and valuation of financial
instruments
The Company’s investment activities expose it to the various types
of risk which are associated with the financial instruments and
markets in which it invests. The risks are substantially consistent
with those disclosed in the previous annual financial statements
with the exception of those outlined below.
Market risk arising from price risk
Price risk is the risk that the fair value or future cash flows of
a financial instrument will fluctuate because of changes in market
prices (other than those arising from interest rate risk or
currency risk), whether those changes are caused by factors
specific to the individual financial instrument or its issuer, or
factors affecting similar financial instruments traded in the
market. Local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health
issues, recessions, climate change or other events could have a
significant impact on the Group and the market price of its
investments and could result in increased premiums or discounts to
the Company’s net asset value.
Liquidity risk
The Group has an overdraft facility of £30 million (30 June 2023: £30 million; 31 December 2023: £30 million) and a
multi-currency loan facility of £200 million (30 June 2023: £200 million; 31 December 2023: £200 million) which are updated
and renewed on an annual basis. Under the loan facility, the
individual loan drawdowns are taken with a three month maturity
period.
At 30 June 2024, the Group had a US
Dollar loan outstanding of US$170,000,000 which matures on 12 September 2024 (30 June
2023: US Dollar loan of US$191,000,000 which matured on 22 September 2023; 31
December 2023: US Dollar loan of US$191,000,000 which matured on 22 March 2024). The Group had no outstanding
Sterling loan at 30 June 2024
(30 June 2023: £nil; year ended
31 December 2023: £nil).
As per the borrowing agreements, borrowings under the overdraft and
loan facilities shall at no time exceed £230 million or 25% of the
Group’s net asset value (whichever is the lower) (30 June 2023 and 31
December 2023: £230 million or 25% of the Group’s net asset
value (whichever is the lower)) and this covenant was complied with
during the respective periods.
Valuation of financial instruments
Financial assets and financial liabilities are either carried in
the Consolidated Statement of Financial Position at their fair
value (investments and derivatives) or at an amount which is
considered to be the fair value (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), as set out in the Group's Annual
Report and Financial Statements for the year ended 31 December 2023. All investments are held at
fair value through profit or loss. The amortised cost amounts of
due from brokers, dividends and interest receivable, due to
brokers, accruals, cash at bank, bank loans and bank overdrafts
approximate their fair value.
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, 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 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 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.
Assessing the significance of a particular input to the fair value
measurement in its entirety 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
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 in this instance 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 period.
Jetti Resources and MCC Mining
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 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
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 business related risks, including
climate risk, in accordance with the fair value related
requirements of the Group’s financial reporting
framework.
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
as at 30 June 2024 (unaudited)
|
Level 1
£’000
|
Level 2
£’000
|
Level 3
£’000
|
Total
£’000
|
|
Assets:
|
|
|
|
|
|
Equity investments
|
1,114,885
|
–
|
35,218
|
1,150,103
|
|
Fixed income securities
|
7,900
|
31,295
|
–
|
39,195
|
|
Investment in contractual rights
|
–
|
–
|
19,935
|
19,935
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total assets
|
1,122,785
|
31,295
|
55,153
|
1,209,233
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Liabilities:
|
|
|
|
|
|
Derivative financial instruments – written options
|
–
|
(1,396)
|
–
|
(1,396)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total
|
1,122,785
|
29,899
|
55,153
|
1,207,837
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Financial assets/(liabilities) at fair value through profit or loss
as at 30 June 2023 (unaudited)
|
Level 1
£’000
|
Level 2
£’000
|
Level 3
£’000
|
Total
£’000
|
|
Assets:
|
|
|
|
|
|
Equity investments
|
1,164,070
|
12,860
|
33,770
|
1,210,700
|
|
Fixed income securities
|
9,558
|
44,250
|
–
|
53,808
|
|
Investment in contractual rights
|
–
|
–
|
19,350
|
19,350
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total assets
|
1,173,628
|
57,110
|
53,120
|
1,283,858
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Liabilities:
|
|
|
|
|
|
Derivative financial instruments – written options
|
–
|
–
|
–
|
–
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
Total
|
1,173,628
|
57,110
|
53,120
|
1,283,858
|
|
|
=========
|
=========
|
=========
|
=========
|
|
Financial assets/(liabilities) at fair value through profit or loss
as at 31 December 2023 (audited)
|
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
|
|
|
=========
|
=========
|
=========
|
=========
|
A reconciliation of fair value measurement in Level 3 is set out
below.
|
Level 3 Financial assets at fair value through profit or
loss
|
Six months
ended
30 June 2024
(unaudited)
£’000
|
Six months
ended
30 June 2023
(unaudited)
£’000
|
Year ended
31 December
2023
(audited)
£’000
|
|
Opening fair value
|
51,011
|
56,891
|
56,891
|
|
Return of capital – royalty
|
(203)
|
(341)
|
(497)
|
|
Total profit or loss included in net profit on investments in the
Consolidated Statement of Comprehensive Income
|
|
|
|
|
– assets held at the end of the period/year
|
4,345
|
(3,430)
|
(5,383)
|
|
|
---------------
|
---------------
|
---------------
|
|
Closing balance
|
55,153
|
53,120
|
51,011
|
|
|
=========
|
=========
|
=========
|
The Level 3 valuation process and techniques used are explained in
the accounting policies in note 2(h) on page 102 of the Company’s
Annual Report and Financial Statements for the year ended
31 December 2023. A more detailed
description of the techniques is found above under 'Valuation
process and techniques’ for Level 3 valuations.
The Level 3 investments as at 30 June
2024 in the table that follows relate to the BHP Brazil
Royalty, convertible bonds and equity shares of Jetti Resources,
MCC Mining and Polyus ADRs. 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, MCC
Mining and Polyus ADRs, the key inputs are shown below.
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
30 June 2024, 30 June 2023 and 31
December 2023 are as shown below.
|
Description
|
As at
30 June
2024
£’000
|
Valuation
technique
|
Unobservable
input
|
Range of weighted
average inputs
|
Reasonable
possible shift1
+/ -
|
Impact on fair
value
|
|
Jetti Resources
|
25,207
|
Market approach
|
Earnings multiple
|
5.50x
|
10.0%
|
£2.5m
|
|
BHP Brazil Royalty
|
19,935
|
Discounted cash flows
|
Discount rate – weighted average cost of capital
|
8.0% – 10.0%
|
1.0%
|
£1.0m
|
|
|
|
|
Average gold prices
|
US$1,650 – US$ 2,314 per ounce
|
10.0%
|
£1.5m
|
|
|
|
|
Average copper prices
|
US$7,700 – US$10,000 per tonne
|
10.0%
|
£1.0m
|
|
MCC Mining
|
10,011
|
Market approach
|
Price of recent transaction
|
|
10.0%
|
£1.0m
|
|
Polyus ADRs
|
–
|
Listing suspended – valued at nominal US$0.01
|
|
|
|
|
|
|
---------------
|
|
|
|
|
|
|
Total
|
55,153
|
|
|
|
|
|
|
|
=========
|
|
|
|
|
|
|
Description
|
As at
30 June
2023
£’000
|
Valuation
technique
|
Unobservable
input
|
Range of weighted
average inputs
|
Reasonable
possible shift1
+/ -
|
Impact on fair
value
|
|
Jetti Resources
|
28,264
|
Market approach
|
Earnings multiple
|
6.22x
|
5.0%
|
£1.1m
|
|
BHP Brazil Royalty
|
19,350
|
Discounted cash flows
|
Discount 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
|
|
MCC Mining
|
5,506
|
Market approach
|
Price of recent transaction
|
|
5.0%
|
£0.3m
|
|
Polyus ADRs
|
–
|
Listing suspended - valued at nominal US$0.01
|
|
|
|
|
|
|
---------------
|
|
|
|
|
|
|
Total
|
53,120
|
|
|
|
|
|
|
|
=========
|
|
|
|
|
|
|
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
|
Discount 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.
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.
13. 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 Company’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 on page 56 of the Annual Report and Financial
Statements for the year ended 31 December
2023.
The investment management fee due for the six months ended
30 June 2024 amounted to £4,562,000
(six months ended 30 June 2023:
£4,793,000; year ended 31 December
2023: £9,691,000). At the period end, £7,169,000 was
outstanding in respect of the management fee (30 June
2023: £7,685,000; 31 December
2023: £7,262,000).
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 period ended
30 June 2024 amounted to £61,000
excluding VAT (six months ended 30 June
2023: £65,000; year ended 31 December
2023: £144,000). At the period end, £115,000 was outstanding
in respect of the marketing services (30
June 2023: £81,000; 31 December
2023: £55,000).
The ultimate holding company of the Manager and the Investment
Manager is BlackRock, Inc., a company incorporated in Delaware, USA.
14. Related party disclosure
During the period ended 30 June 2024,
there have been no transactions with related parties which have
materially affected the financial position or the performance of
the Company.
Directors’ shareholdings
At the period end members of the Board held ordinary shares in the
Company as set out below:
|
Directors
|
30 June
2024
Ordinary shares
|
30 June
2023
Ordinary shares
|
31 December
2023
Ordinary shares
|
|
Charles Goodyear (Chairman)1
|
60,000
|
n/a
|
60,000
|
|
Jane Lewis
|
7,000
|
5,362
|
5,362
|
|
Judith Mosely
|
7,400
|
7,400
|
7,400
|
|
Srinivasan Venkatakrishnan
|
2,000
|
1,000
|
2,000
|
|
Elisabeth Scott2
|
–
|
n/a
|
n/a
|
|
|
=========
|
=========
|
=========
|
1 Appointed
as a Director on 24 August
2023.
2 Appointed
as a Director on 9 May
2024.
Since the period end and up to the date of this report there have
been no changes in Directors’ holdings.
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).
|
|
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.
|
|
As at 30 June 2024
|
1.32
|
n/a
|
n/a
|
|
As at 30 June 2023
|
1.25
|
n/a
|
n/a
|
|
As at 31 December 2023
|
1.29
|
n/a
|
n/a
|
|
|
=========
|
=========
|
=========
|
15. Capital commitments and contingent
liabilities
There was no capital commitment as at 30
June 2024 (30 June 2023: one
commitment for US$10,000,000 in
relation to the SPAC PIPE commitment for investment in Lifezone
SPAC; 31 December 2023:
none).
There were no contingent liabilities at as 30 June 2024 (30 June
2023: none; 31 December 2023:
none).
16. Publication of non-statutory
accounts
The financial information contained in this Half Yearly Financial
Report does not constitute statutory accounts as defined in Section
435 of the Companies Act 2006. The financial information for the
six months ended 30 June 2024 has not
been audited or reviewed by the Company’s auditors (six months
ended June 2023: has been reviewed by
the Company's auditors).
The information for the year ended 31
December 2023 has been extracted from the latest published
audited financial statements, which have been filed with the
Registrar of Companies, unless otherwise stated. The report of the
auditors on those accounts contained no qualification or statement
under Sections 498(2) or (3) of the Companies Act 2006.
17. Annual results
The Board expects to announce the annual results for the year
ending 31 December 2024 in
February 2025.
Copies of the results announcement can be obtained from the
Secretary on 020 7743 3000 or at cosec@blackrock.com. The Annual
Report should be available by the beginning of March 2025, with the Annual General Meeting being
held in May 2025.
ENDS
The Condensed Half Yearly Financial Report will also be available
on the BlackRock website at www.blackrock.com/uk/brwm. Neither the
contents of the Manager’s website nor the contents of any website
accessible from hyperlinks on the Manager’s website (or any other
website) is incorporated into, or forms part of, this
announcement.
For further information, please
contact:
Charles Kilner, Director - Closed
End Funds, BlackRock Investment Management (UK)
Limited -
Tel: 020 7743 1869
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 3620
E-mail: BlackRockInvestmentTrusts@lansons.com or EdH@lansons.com
12 Throgmorton Avenue
London EC2N 2DL
23
August 2024