BLACKROCK WORLD MINING TRUST: China’s resurgence could send the fund back into the hunt for gold

The BlackRock World Mining investment fund has seen its share price fall since the beginning of last year, from around £7.70 to £4.90. This is alarming for shareholders, but it is not all bad news: the outlook is looking a little more optimistic and investors have been rewarded for their loyalty with a steady stream of dividends.

The £906m trust, run by Evy Hambro and Olivia Markham, has been unable to escape the problems that have plagued some of the world’s mining giants.

Demand for some of the commodities these companies extract (such as iron ore, aluminium and copper) has been hit by the slowdown in the Chinese economy. There have also been supply issues that have led to major mining companies reporting disappointing production figures.

These two factors have combined to push down the share prices of the major mining companies. Since the beginning of the year, shares in BHP, Glencore and Rio Tinto have fallen by 25%, 19% and 18% respectively. Given that these three companies are among the trust’s top ten holdings, it is not surprising that World Mining shares have also fallen by 16%.

“It’s frustrating that the share price has fallen,” Hambro admits.

However, shareholders have been shielded from the full impact of the dividend cuts these three companies have also made in their last financial year, as the trust seeks income from numerous sources, not just dividends.

It does this by holding revenue-generating bonds issued by mining companies. It also receives royalty payments (a portion of the revenue generated by specific mines) in exchange for partially financing the capital needed to bring the mine into production mode.

Hambro said: “Over the past four and a half years we have paid out dividends to shareholders in excess of £1.47. This is a significant amount of income in a market that has been weak for mining stocks for much of that time.”

The trust dividends are paid quarterly and in terms of annual yields are attractive, at just shy of 7 percent. Looking ahead, Hambro is encouraged by signs that the Chinese government is targeting 5 percent economic growth this year.

If it comes to fruition, he says, it would represent a turning point for the economy. “If the market was less concerned about China, I’m sure there would be new metal supplies in response to rising commodity prices,” he says.

He also believes that the global transition to clean energy will boost demand for raw materials such as steel (iron ore), copper and the various metals needed for electric car production (graphite, lithium and nickel). Data centres needed for artificial intelligence will also boost demand for copper, lithium and silicon.

“We are moving towards a world with greater electricity consumption,” says Hambro. “That will increase demand for the raw materials that the companies we invest in extract.”

According to Hambro, the gold price boom, which has risen by more than 20% in the past year, is expected to continue, especially if interest rates in the United States fall. Nearly a quarter of the trust’s assets are gold-related.

Unfortunately, BlackRock policy prevented Hambro from discussing the specific stocks the trust owns. A rather ridiculous policy, the equivalent of a partial censorship order. The top ten holdings, available in the trust’s latest fact sheet, are shown in the table.

The trust’s stock identification number is 0577485 and the ticker symbol is BRWM. The current annual charges amount to a total of 0.91 percent.