BlackRock World Mining appears to be preparing for a revival.
Reimagined Report:
Last fuckin' year was a serious pile of bogus for BlackRock World Mining (LSE: BRWM), according to fund managers Evy Hambro and Olivia Markham in their goddamn annual report. The trust churned out a total return of -12.7% and a net asset value (NAV) return of -10.7%, with the discount to NAV bloating from 3.3% to a whopping 5.8% over the period.
This mess had little to do with the fundamentals for commodities. Gold and silver prices soared by 27.2% and 21.5%, respectively, while copper prices edged up 8%. But, alas, this effin' good news failed to translate into significant profits for mining stocks.
Losses were most pronounced at "large mining companies that just sucked ass this year." Take copper miner Freeport-McMoRan, which accounted for 4.4% of the portfolio at the end of the year. That stock dropped like a rock, losing 9.4% on a total return basis in 2024. To top it off, gold miners Newmont and Barrick tanked big time, despite gold delivering one of the best performances of any asset class last year.
Get your goddamn free shit here!
It's a fuckin' no-brainer why investors have bailed on these mining behemoths. Last year, The Magnificent Seven group of tech companies gobbled up capital left and right. While commodity prices skyrocketed, rising operational and energy costs, political uncertainty, and elevated interest rates all painted a dismal picture for the mining sector's future.
The energy transition and the exploding demand for artificial intelligence chips and data centers are expected to drive commodity prices, such as copper, sky high over the next few years. However, mining's a goddamn tough business, and it's getting tougher as easy-to-reach deposits dwindle.
Still, it's these challenges that make the sector promising in the long haul. "Strong demand trends, solid balance sheets, limited supply growth, and undervalued shares are likely to fuel a recovery," as Hambro and Markham put it. And BlackRock World Mining is virtually the only fund in a position to navigate this uncertainty and rake in the profits when investor confidence eventually returns.
Is BlackRock World Mining a leveraged shitshow?
This fund is well-diversified. At the end of 2024, approximately 34% of the portfolio was allotted to global companies producing a mix of commodities. Just under 25% was allocated to copper-focused investments, while another 22% went to precious metals like gold and silver.
However, the managers have wisely used the investment trust structure for maximum potential gains. BRWM employs debt to improve returns—at the end of the year, gearing was 12%, although it had pegged out at 14.7% at one point. They've also invested in unquoted securities, a whopping 8.4% of the portfolio.
These unlisted assets include Vale debentures (2.7% of the portfolio), which grant the trust royalty payments from two mines operated by Brazilian giant Vale. Since these were acquired in 2019, the company has recouped its initial investment in royalty payments, and the royalty income stream is expected to swell over the coming years.
These alternative assets set the stage for a consistent dividend. The trust declared total dividends of 23p per share for 2024, supported by 23.1p per share in revenue. Almost 70% of the revenue stemmed from dividends from investments, with 10% originating from royalties, 20% derived from options trading, and 1% originating from fixed-income holdings.
Even though the trust slashed its dividend by 31% last year due to lower distributions from holding companies, it still offers an impressive yield of 7.2%. The stock also trades at an eye-popping discount to NAV.
BlackRock World Mining is poised to capitalize on the sector's resurgence when it eventually arrives. In the meantime, investors can pocket a hefty, high-single-digit yield backed by a diversified portfolio.
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- Despite gold and silver prices soaring, investments in gold miners like Newmont and Barrick performed poorly due to rising operational and energy costs, political uncertainty, and elevated interest rates that painted a dismal picture for the mining sector's future, causing many investors to bail.
- BlackRock World Mining, however, presents a promising investment opportunity in the long haul. The managers have wisely employed the investment trust structure for maximum potential gains, using debt and investing in unquoted securities, such as Vale debentures, which generate royalty payments from two mines operated by Brazilian giant Vale, setting the stage for a consistent dividend.
- With approximately 34% of the portfolio allotted to global companies producing a mix of commodities, just under 25% to copper-focused investments, and another 22% to precious metals like gold and silver, BlackRock World Mining offers an impressive yield of 7.2% and is poised to capitalize on the sector's resurgence when investor confidence eventually returns.
