BlackRock World Mining Trust Plc - Final Results
LEI: LNFFPBEUZJBOSR6PW155
Annual Report and Financial Statements
Performance record
As at As at 31 December 31 December 2023 2022 Net assets (£’000)¹ 1,160,051 1,299,285 Net asset value per ordinary share (NAV) (pence) 606.78 688.35 Ordinary share price (mid-market) (pence) 587.00 697.00 Reference index2 – net total return 6,002.54 5,863.32 (Discount)/premium to net asset value3 (3.3)% 1.3% ======== ========
For the For the year ended year ended 31 December 31 December 2023 2022 Performance (with dividends reinvested) Net asset value per share3 -6.2% +17.7% Ordinary share price3 -10.4% +26.0% Reference index2 +2.4% +11.5% --------------- --------------- Performance since inception (with dividends reinvested) Net asset value per share3 +1,319.4% +1,413.6% Ordinary share price3 +1,365.9% +1,535.8% Reference index2 +1,005.2% +979.6% ======== ========
For the For the year ended year ended 31 December 31 December Change 2023 2022 % Revenue Net revenue profit after 64,691 76,013 -14.9 taxation (£’000) Revenue return per ordinary 33.95 40.68 -16.6 share(pence)4 --------------- --------------- --------------- Dividends per ordinary share (pence) – 1st interim 5.50 5.50 – – 2nd interim 5.50 5.50 – – 3rd interim 5.50 5.50 – – Final 17.00 23.50 -27.7 --------------- --------------- --------------- Total dividends paid and payable 33.50 40.00 -16.3 ======== ======== ========
1 The change in net assets reflects portfolio movements, share reissues and dividends paid during the year.
2
MSCI ACWI Metals & Mining 30% Buffer 10/40 Index (net total return). With effect from
3 Alternative Performance Measures, see Glossary in the Annual Report and Financial Statements.
4 Further details are given in the Glossary in the Annual Report and Financial Statements.
Chairman’s Statement
Highlights
· NAV per share -6.2% 1 (with dividends reinvested)
· Share price -10.4% 1 (with dividends reinvested)
· Total dividends of 33.50p per share
Overview
After a solid year of performance in 2022, the last 12 months to
Performance
Over the twelve months to
Our portfolio managers provide a more detailed explanation on the Company’s performance and the factors that contributed to, or detracted from, performance during the year in their Investment Manager’s Report that follows. They also provide more insight into the positioning of the portfolio and their views on the outlook for the coming year.
Revenue return and dividends
The Company’s revenue return per share for the year amounted to 33.95p, a 16.6% decrease compared with the prior year revenue return per share of 40.68p. Lower commodity prices, higher all in costs and a weakening US Dollar (as many commodity company dividends are paid in US Dollars) contributed to the reduction in earnings, leading to lower returns for shareholders.
During the year, three quarterly interim dividends of 5.50p per share were paid on
As in past years, all dividends are fully covered by income. In accordance with the Board’s stated policy, the total dividends represent substantially all of the year’s available income.
Subject to approval at the Annual General Meeting, the final dividend will be paid on
Gearing
The Company operates a flexible gearing policy which depends on prevailing market conditions. The Company may borrow up to 25% of the Group’s net assets. The maximum level of gearing used during the year was 14.6% and the level of gearing at
Management of share rating
The Directors recognise the importance to investors that the market price of the Company’s shares should not trade at a significant premium or discount to the underlying NAV. Accordingly, in normal market conditions, the Board may use the Company’s share buyback authority or alternatively re-issue shares from treasury or issue new shares (at a premium to NAV) to ensure that the share price is broadly in line with the underlying NAV, if it is deemed to be in shareholders’ interests.
The Company’s shares started the year under review trading at a premium and I am pleased to report that during the year the Company reissued 2,430,000 ordinary shares from treasury for a total gross consideration of £15,658,000, at an average price of 644.37p per share and an average 1.4% premium to NAV. The Company did not buy back any shares and, since the year end, no further shares have been reissued. The discount at the year end was 3.3% and on
Resolutions to renew the authorities to issue and buy back shares will be put to shareholders at the forthcoming Annual General Meeting.
Board composition
As mentioned in the Half Yearly Financial Report, the Board was delighted to welcome
The Board commenced a search to identify a new Director in early 2024, assisted by a third-party recruitment firm, Fletcher Jones. The successful candidate will be appointed as a Director following the conclusion of the AGM on
30th anniversary
In celebration of the Company’s 30th anniversary, the Board agreed to make an annual donation of
Following Chip Goodyear’s appointment last August, he sought approval to waive his rights to compensation related to his role as a Director of the Company. This waiver was at his initiative and request. The Board discussed the matter and decided it was appropriate to donate annually to the Fund an amount equivalent to Chip’s Director’s fee, in addition to the
Annual General Meeting arrangements
The Company’s AGM will be held at the offices of BlackRock at
For the benefit of shareholders who are unable to attend this year’s AGM in person, we have arranged for the proceedings to be viewed via a webinar. You can register to watch the AGM by scanning the QR Code inside the cover of the Annual Report or by visiting our website at www.blackrock.com/uk/brwm and clicking on the registration banner.
Please note that it is not possible to speak or vote at the AGM via this medium and joining the webinar does not constitute attendance at the AGM. Shareholders wishing to exercise their right to attend, speak and vote at the AGM should either attend in person or exercise their right to appoint a proxy to do so on their behalf.
Outlook
Higher interest rates and greater volatility have resulted in a high level of uncertainty for markets and a remarkable dispersion in commodity price returns during 2023. There has also been a challenging geopolitical backdrop with little end in sight for the conflicts in both
However, against this backdrop, inflationary pressures are easing in the US and
Chairman
1 Alternative Performance Measures. All percentages calculated in Sterling terms with dividends reinvested. Further details of the calculation of performance with dividends reinvested are given in the Glossary in the Annual Report and Financial Statements.
Investment Manager’s Report
Overview
2023 was a year of huge swings in performance for the sector as a whole and markets more broadly. While 2022 as a year finished with strong gains across the sector but much of this came from the rally in the fourth quarter of 2022 on the expectation that the reopening of
Commodity price returns were similarly diverse across the suite. These ranged from iron ore prices massively exceeding estimates by failing to move lower, whilst lithium fell sharply finishing the year well below even the most cautious of forecasts. Copper prices, despite tight market conditions, did not react to large production downgrades and surprise disruptions. Precious metals also moved in different directions with gold moving higher, whilst the platinum group metals fell. Mining company share prices generally derated during the year as investors, fearful of
However, overall the year was disappointing for the Company as a number of key holdings failed to generate returns for a variety of factors. Examples include: First Quantum Minerals where the Panama Government enforced the closure of the company’s largest asset due to a populist agenda; Chalice Mining set unrealistic project parameters; weakness in lithium prices impacted valuations of holdings in the Company, but the opposite for South Korean steel company POSCO with shares rerated on their exposure; and mid-sized copper growth holdings heavily derated during the year. The cumulative impact of this caused the Company’s NAV to underperform the reference index (MSCI ACWI Metals & Mining 30% Buffer 10/40 Index (net total return)) for only the second time in the last 9 years.
For the year as a whole, the NAV of the Company was down by 6.2% with income reinvested and share price total return was -10.4% as the discount widened slightly over the year. This compares to the
Seismic shifts
2023 arrived with a huge spread of expectations. How much further would interest rates rise? Would inflation be sticky or start to fade? Would companies be able to manage margins? These questions were then mixed in with slower growth, bank rescues (
For the mining sector the fundamentals of the medium term have remained firmly in place. Energy transition related commodity demand growth remains robust. Sales of electric vehicles (EVs) broke new records in both total numbers and market share levels. Installation of renewable power infrastructure also broke records with huge amounts built during the year and an industry sales pipeline for future projects as full as can be expected.
On the supply side, copper production numbers both for 2023 and beyond look to be less than expected as mines have been unable to ramp-up on time or to expected levels. Capital expenditure for new projects continues to exceed expectations, making project development less likely. Metal inventories generally declined during the year leaving them at multi year lows, again keeping markets tight. Resource nationalism remains an ever-present threat with risks in many countries around the world and some mines have been forced to close, including Cobre de
Despite these supportive factors the sector was unable to generate enough momentum to create widespread investor interest and the alternative, such as money market deposits at 5%, captured much of the flow of savings. Mining shares significantly underperformed the broader markets as valuations moved to multi decade lows. This is in stark contrast to 2022 when the sector, alongside oil, was one of the best places to be exposed.
Merger and acquisition (M&A) activity was elevated versus recent years, but most was characterised by failing to complete. Lithium companies in
In
ESG and the social license to operate
ESG (Environmental, Social and Governance) issues are highly relevant to the mining sector and we seek to understand the ESG risks and possible related opportunities facing companies and industries in the portfolio. As an extractive industry, the mining sector naturally faces a number of ESG challenges given its dependence on water, carbon emissions and geographical location of assets. However, we consider that the sector can provide critical infrastructure, taxes and employment to local communities, as well as materials essential to technological development, enabling the carbon transition through the production of the metals required for the technology underpinning that transition.
We consider ESG insights and data, including sustainability risks, within the total set of information in our research process and make a determination as to the materiality of such information as part of the investment process used to build and manage the portfolio. ESG insights are not the sole consideration when making investment decisions but, in most cases, the Company will not invest in companies which have high ESG risks (risks that affect a company’s financial position or operating performance) and which have no plans to address existing deficiencies or controversies in an appropriate way.
· We take a long-term approach, focused on engaging with portfolio company boards and executive leadership to understand the drivers of risk and financial value creation in companies’ business models, including material sustainability-related risks and opportunities, as appropriate.
· There will be cases where a serious event has occurred, for example an accident at mine site and, in that case, we will assess whether the relevant portfolio company is taking appropriate action to resolve matters before deciding what to do.
· There will be companies which have derated (the downward adjustment of multiples) as a result of an adverse ESG event or generally due to poor ESG practices where there may be opportunities to invest at a discounted price. However, the Company will only invest in these value-based opportunities if we are satisfied that there is real evidence that the relevant company’s culture has changed and that better operating practices have been put in place.
Given the activities that mining companies undertake, it is no surprise that there are always events that unfold during any calendar year. 2023 was a year where there were fewer events for the Company and this meant that engagement once again focused mainly on our holdings’ approach to the energy transition and how they plan to not only benefit from the opportunities, but also how they are planning to decarbonise their own operations.
During the year the main areas of focus were prior ESG issues relating to Vale and governance in relation to the board’s fiduciary responsibilities. Vale has continued to make further progress on its journey to raise its ESG profile following the tragic tailings related events from the last decade. The company paid
General price weakness
Similar to last year, average prices were generally lower across the suite aside from gold and silver. This, however, hides the intra year volatility which was more elevated than in recent times. For example, the price of copper over the year was basically flat but this hides the fact that at one point it had fallen 17% from peak to trough. This pattern played out across the metals universe and, were it not for the year end rally, most would have finished 2023 well below levels seen at the start of the year.
Despite the overall negative tone to price moves, the standout performer was iron ore which over the year was up by 20.3%. Even more importantly, the average price was flat which might not sound like a win but with estimates forecasting it to decline sharply the impact on margins of it being flat was significant.
Commodity price moves
% Change average 31 December 2023 % Change in 2023 prices 2023 vs 2022 Commodity Gold US$/ounce (oz) 2,065 13.8% 7.8% Silver US$/oz 24.25 2.1% 7.3% Platinum US$/oz 1,006 -2.4% 0.6% Palladium US$/oz 1,119 -37.0% -36.4% Copper US$/pound (lb) 3.84 1.2% -3.9% Nickel US$/lb 7.43 -45.2% -17.9% Aluminium US$/lb 1.06 -0.2% -16.6% Zinc US$/lb 1.2 -12.1% -23.9% Lead US$/lb 0.92 -12.9% -0.7% Tin US$/lb 11.42 1.7% -17.3% Baltic Freight Rate 2,094 38.2% -27.9% West Texas Intermediate 71.9 -10.4% -18.2% Oil (Cushing) US$/barrel Iron Ore (China 62% fines) 142 20.3% -0.9% US$/tonne Thermal Coal US$/tonne 146.4 -62.4% -47.7% Coking Coal US$/tonne 323.8 9.9% -19.1% Lithium US$/lb 108.7 -43.2% -32.9% ======== ======== ========
Sources: Datastream and Bloomberg,
Income
As highlighted in last year’s report, income received by the Company has exceeded expectations for several years in a row. This has been driven by higher absolute pay out levels for ordinary dividends, a greater number of holdings in the portfolio paying dividends, improved capital discipline by companies and generally stronger balance sheets. Looking back, the peak seems to have been in 2021 with last year a close second.
This year has seen income fall due to lower commodity prices and higher all in costs reducing profitability, meaning less to return to shareholders. In addition, as highlighted in last year’s report, companies allocated more surplus cash to share buy backs which bodes well for the future but in the short term further reduced dividend payments. It is noticeable just how rapidly share counts have declined on the back of these buy backs. For example, the shares in issue for ArcelorMittal and Glencore have declined by 8% and 5% respectively with a combined total of
Looking forward, we see no reason for companies not to honour their capital allocation plans and as such with commodity prices lower than in 2023 payments could in turn be below that of last year. However, at the time of writing, the commodity most important for dividends, iron ore, is well in excess of market forecasts meaning there is room for upgrades to dividend estimates.
The energy transition
As alluded to earlier, the energy transition continues to gather pace. EVs are taking market share away from combustion engine vehicles at levels well in excess of expectations. The roll out of renewable power projects and related infrastructure is happening far quicker than planned. This has, in part, been driven by a desire by European countries to diversify away from Russian supplied fossil fuels and the fact that with fossil fuel prices so high, renewable power is substantially more cost effective, not to mention helping countries/companies to meet their net zero commitments.
It is clear that we remain very close to the start of the energy transition cycle given the enormous scale of investment that is going to be needed over the coming decades. Looking at the data for renewable power, it is increasingly obvious how much more resource intensive it is. On top of this there will also be commodity demand from battery storage needs and the buildout of the hydrogen economy.
It is also essential for mining companies to embrace the need to decarbonise their own operations as future demand is likely to seek out supply from companies that do not just meet quality but also have green credentials. This move from “Brown to Green” presents a range of investment opportunities for the Company both in trying to reduce the heavy discount rates applied to carbon intensive production techniques, as well as new technologies that could solve some of the more damaging historical processes.
Base metals
It was a difficult year for the base metals with average prices down across the board as concerns around global growth, higher interest rates and China’s property sector saw significant destocking of metals which depressed prices. With prices moving lower and costs increasing (albeit at a slower rate than in 2022) margins for the producers also declined reducing cash generation and dividends. Encouragingly, as we approached the end of the year, expectations of US interest rate cuts and signs of demand stabilisation and stimulus in
Copper, our favoured base metal, finished the year flat as macro concerns offset improving fundamentals particularly on the supply side. Despite headwinds from China’s property market, China’s copper demand was healthy with apparent demand +12% year-on-year. China’s focus on “green” related investments in renewables, EVs and the grid, offset the drag on copper demand from the property sector.
The most interesting feature in the copper market this year has been the escalation in copper supply disruptions as we approached the end of the year. It was widely expected that 2024 would see notable supply growth as assets recovered post COVID-19 and new assets such as Anglo American’s Quelleveco mine and Teck’s Quebrada Blanca Phase 2 (QB2) project in
The most impactful supply shock is the closure of First Quantum Minerals’ Cobre Panama mine, which is now on care and maintenance. Cobre Panama has capacity to produce about 400ktpa of copper and there is a high degree of uncertainty when this mine will be restarted. We have also seen meaningful production downgrades from Anglo American, which lowered its copper production guidance by 180-210kt in 2024; Southern Copper, Vale and Rio Tinto all lowered their copper supply forecast in 2024 and we see ramp-up risk for Teck QB2 in 2024. Given the low level of copper inventories, the lack of investment in new mine capacity and structural operating challenges for many copper mines, prices are poised to rebase higher once the demand outlook improves.
With the long-term fundamentals of the copper market remaining robust, in particular copper’s role in enabling the energy transition, we continue to remain positively exposed to copper producers within the Company. It was a mixed performance result among the companies with strong share price performance, including Foran Mining (0.9% of the portfolio). Foran Mining also delivered exciting exploration results at
The aluminium price finished the year flat compared with 2022. However, this masks the 17% decline in average prices year-on-year. Aluminium prices have declined significantly over the last two years as energy prices have fallen which is the largest cost component of producing aluminium. China’s demand for aluminium has been strongly boosted by its solar rollout, but so too has its production levels which has left the Chinese market largely balanced. Demand ex-
The nickel market was particularly challenging in 2023 with the nickel price finishing the year down 45% and average prices declining 18% year-on-year. Significant growth in Indonesian nickel supply has structurally changed the nickel market in recent years and with nickel pig iron (NPI) producers rapidly growing production and adapting their facilities to allow the production of nickel matte and other intermediary products. This allows them to sell into the market for class 1 battery grade nickel which is expected to see increasing demand alongside the growth in EVs. A key question for the nickel market is whether or not we see differential pricing for nickel based on the carbon intensity of production which is significant for many of the Indonesian producers given their reliance on thermal coal. The Company has two pure play exposures to nickel – the first Nickel Industries (0.5% of the portfolio) today a NPI producer which is transitioning towards LME grade nickel production which will improve earnings and margins. The second investment was done via a “PIPE” deal in 2022 into Lifezone Metals which has traded as a public company since the end of
Bulks and steel
The iron ore market was an area of strength in 2023 with the price finishing 20% higher and average prices flat year-on-year. Given the depressed outlook for China’s property sector, the broad expectation from commodity analysts was for prices to decline in 2023 alongside falling steel production in
The iron ore market remains highly concentrated with the four largest producers accounting for circa 70% of the seaborne market. We have seen the industry remain disciplined from a supply perspective with limited supply growth from the major producers, despite strong cash generation from their existing iron ore assets. We expect this to remain the case over the next few years as producers continue to focus on value over volume and decarbonising their operations.
The Company’s exposure to iron ore is primarily via the diversified majors BHP, Vale and Rio Tinto. These companies tend to generate strong margins and free cash flow from the iron ore businesses which underpins the attractive dividend yield they trade on. Given better than expected iron ore prices in 2023, we see scope for dividends from the iron ore producers to surprise to the upside. In addition, the Company has exposure to two pure play high grade iron ore producers, Champion Iron and Labrador Iron. Champion Iron is ramping-up its
During 2023 we saw notable differences in the performance of steel margins and equity prices for each of the key steel producing regions. The US has remained an area of strength in the global steel market, supported by higher infrastructure and re-shoring investment, alongside supply discipline from the producers. In
From an equity perspective, the Asian (ex-
Stronger than expected steel demand and rising blast furnace utilisation also benefited coking coal prices which averaged
After record-high thermal coal prices in 2022 following the European energy crisis, prices declined meaningfully in 2023 but finished modestly above market expectations.
The Company’s thermal coal exposure is via our 8.3% position in Glencore which has used elevated thermal coal prices in recent years to deleverage the business and buyback shares. During the year, Glencore made a proposal to Teck to merge their two businesses and subsequently demerger the combined coal business to create two separate companies – a metals business and a coal business. This proposal was not accepted by the Teck board and instead they chose to sell their coking coal business which Glencore acquired. Glencore has indicated that it will separate coal from the rest of the business over time. As a reminder, the Company has no exposure to pure play thermal coal producers.
Precious metals
Precious metals were an area of strength during 2023 with the gold price up by 14% and the average price 8% higher year-on-year. The gold price benefited from elevated geopolitical issues during the year, strong central bank purchases and as we approached the end of the year and the expectation of
Another interesting feature of the gold market in recent years has been the disconnect between the gold price and real yields. Historically, gold has performed well in an environment of low real yields, as gold is a non-yielding asset. Conversely, in an environment of rising real yields, the attractiveness of other “safe haven” assets such as cash and government bonds improves, which typically acts as a headwind to gold. Rising physical demand for gold from central banks alongside elevated geopolitical risk partly explains the strong performance of gold despite elevated real yields in 2023. As we approached the end of 2023 and the market began to price in rate cuts, we did see the gold price rally, more in line with the traditional correlation between gold and rates.
The silver price has modestly underperformed gold when looking at average prices during 2023 versus the same period last year. Industrial demand for silver was strong during 2023 with solar installations globally exceeding expectations. With silver inventories declining over the last two years and supply challenges in the world’s largest producer of silver,
The Company has increased its exposure to gold producers during the year given the improved gold price outlook. However, we have maintained our strategy of focusing on high quality producers which have an attractive operating margin and solid production profile and resource base. Typically, gold royalty companies offer a higher quality and lower risk exposure to gold as they do not face operating and capital cost inflation. Disappointingly, Franco-Nevada’s (1.4% of the portfolio) exposure to First Quantum Minerals’ Cobre Panama mine which was placed into care and maintenance towards the end of the year saw the shares finish the year down by 19% in US Dollar terms. 2023 marked another year of consolidation in the gold industry with Newmont Corporation (3.6% of the portfolio) successfully acquiring Australian listed Newcrest Mining to create the world’s largest gold producer.
Energy transition metals
Battery electric vehicles (BEVs) sales continued to grow in 2023, with estimates that sales would reach over 14 million battery electric vehicle units. This growth has been mainly driven by
Legislation continued to evolve and of particular note was the US looking to exclude Foreign Entity of Concern (FEOC) owned companies from qualifying for EV incentives under the Inflation Reduction Act. Beginning in 2024, an eligible clean vehicle may not contain any battery components that are manufactured by an FEOC and beginning in 2025 an eligible clean vehicle may not contain any critical minerals that were extracted, processed or recycled by a FEOC. This is disruptive as it will exclude many Chinese companies from the US supply chain.
The Company has exposure to the raw materials that go into EV batteries and the e-motor. Lithium is a critical component of an EV battery and, although demand for lithium has been strong this year, prices have been weak falling by 43% as the sector saw both destocking and increased supply. The Company’s holdings in lithium producers such as Albemarle and SQM cost performance. The holding in Sigma Lithium was an exception, up a modest 6.6% over the year. The company started producing lithium concentrate from its Brazilian project during the year, as well as announcing a Strategic Review was underway.
A critical component of the electric car is also the e-motor, which most commonly uses a Praseodymium-Neodymium (NdPr) magnet, an alloy of two rare earth elements (REEs). REEs are commonly mined and processed in
2023 saw a rapid rise in interest around uranium cumulating at the 28th
Royalty and unquoted investments
During the year the Company evaluated several new private investment deals but in the end declined to participate for a variety of reasons. As mentioned in previous reports, the focus of the unquoted investments is to aim to generate both capital growth and income to deliver the superior total return goal for the portfolio.
We continue to actively look for opportunities to grow royalty exposure given it is a key differentiator of the Company and an effective mechanism to lock-in long-term income which further diversifies the Company’s revenues.
2023 saw several of the recently listed shares deliver further progress at their projects. Bravo Mining reported excellent drilling results, an updated resource for their Luanga project and completed a financing which covers them for the next couple of years. Ivanhoe Electric reported strong drill results and completed a significant capital raise during the period.
As at the end of 2023, the unquoted investments in the portfolio amounted to 6.7% of the portfolio and consist of the BHP Brazil Royalty, the Vale Debentures, Jetti Resources and
BHP Brazil Royalty Contract (1.4% of the portfolio)
In
In 2018 we were delighted to report that Avanco Minerals was acquired by OZ Minerals, an Australian based copper and gold producer for
In August, the Pedra Branca mine experienced a geotechnical event which suspended operations in line with BHP’s global safety standards. The mine recommenced operations in October and is targeting normal production levels in early 2024. This has reduced 2023 production levels and associated royalty payments, but it is not expected to impact overall reserves and resources or long-term production rates. BHP has implemented changes to the mine design and mining method, along with additional monitoring systems to reduce the risk of future events.
Vale debentures (2.8% of the portfolio)
At the beginning of 2019 the Company completed a significant transaction to increase its holding in Vale debentures. The debentures consist of a 1.8% net revenue royalty over Vale’s Northern System and Southeastern System iron ore assets in
Dividend payments are expected to grow once royalty payments commence on the Southeastern System in 2025 and volumes from S11D and
The debentures offer a yield in excess of 10% based on the 1H-2023 annualised dividend. This is an attractive yield for a royalty investment, with this value opportunity recognised by other listed royalty producers, Franco-Nevada and Sandstorm Gold Royalties, which have both acquired stakes in the debentures in 2021.
Whilst the Vale debentures are a royalty, they are also a listed security on the Brazilian National Debentures System. As we have highlighted in previous reports, shareholders should be aware that historically there has been a low level of liquidity in the debentures and price volatility is to be expected, although this is improving following the sell-down in
Jetti Resources (2.1% of the portfolio)
In early 2022, the Company made an investment into mining technology company Jetti Resources (Jetti) which has developed a new catalyst that improves copper recovery from primary copper sulphides (specifically copper contained in chalcopyrite which is often uneconomic) under conventional leach conditions. Jetti is currently trialling their technology across a number of mines where they will look to integrate their catalyst into existing heap leach SX-EW mines to improve recoveries at a low capital cost. The technology has been demonstrated to work at scale at Capstone’s
During the second half of 2022 we were pleased to report that Jetti completed its Series D financing to raise
Derivatives activity
The Company from time to time enters into derivatives contracts, mostly involving the sale of “puts” and “calls”. These are taken to revenue and are subject to strict Board guidelines which limit their magnitude to an aggregate 10% of the portfolio. In 2023 income generated from options was £6.0 million, in line with contributions from prior periods. During the year implied volatility was generally lower than in prior years making the opportunity set less attractive. In addition, the cost of the trades had to be looked at in the context of higher interest rates, given that the borrowing capacity is generally used for such transactions. Despite these, enough opportunities were found to generate revenues almost in line with previous years without having to take too much risk. At the end of the year the Company had 0.1% of the net assets exposed to derivatives and the average exposure to derivatives during the year was less than 5% of net assets.
Gearing
At
Outlook
The dominant story for 2023 was that of interest rates versus inflation. The transition to higher rates was far from smooth as short-term expectations gyrated markets creating a bumpy ride for investors. However, it now looks likely that inflationary pressures have more than peaked and there is an increasing consensus that rates are not moving higher. It is worth remembering that the post global financial crisis and Covid period of zero rates are an outlier versus history and as such the new norm should be anchored around current levels rather than a return to such extreme lows.
At the time of writing it appears we are seeing a change in China’s demand for commodities, with investment into renewable infrastructure, manufacturing and EV’s growing significantly, against more traditional areas of commodity demand such as property declining. Energy transition spending globally continues to drive commodities demand growth and with supply growth across a number of commodities increasingly constrained markets look set to tighten further over the next few years which bodes well for prices.
For mining companies whose balance sheets remain strong and management teams are anchored to disciplined capital allocation frameworks, the challenge will be balancing the desire to invest either for decarbonisation or growth, versus returning capital to shareholders. Given the high level of capital intensity attached to building new capacity, those with the flexibility to repurchase shares should take advantage of the current low equity valuations given that it generally remains cheaper to buy existing capacity than to build it.
In summary, the near term as always remains volatile, but with medium-term demand and supply fundamentals strong, the Company is well positioned to capture returns from this imbalance. In the meantime dividend payments, whilst lower than the peak of a few years ago, remain competitive with alternatives such as bonds and cash meaning shareholders are paid to wait for the positive outlook to be reflected in share prices.
EVY HAMBRO AND
Ten largest investments
Together, the ten largest investments represented 54.8% of total investments of the Company’s portfolio as at
1
►
BHP
1,2
(2022: 1st)
Diversified mining group
Market value: £130,674,000
Share of investments: 10.1% comprising equity of 8.7% and
The world’s largest diversified mining group by market capitalisation. The group is an important global player in a number of commodities including iron ore, copper, thermal and metallurgical coal, manganese, nickel, silver and diamonds.
2
►
Vale
2,3,4
(2022: 2nd)
Diversified mining group
Market value: £124,601,000
Share of investments: 9.6% comprising equity of 6.9%, debentures of 2.8% and option of (0.1)%
(2022: 9.1%)
One of the largest mining groups in the world, with operations in 30 countries. Vale is the world’s largest producer of iron ore and iron ore pellets and the world’s largest producer of nickel. The group also produces manganese ore, ferroalloys, metallurgical and thermal coal, copper, platinum group metals, gold, silver and cobalt.
3
►
Glencore
(2022: 3rd)
Diversified mining group
Market value: £108,173,000
Share of investments: 8.3%
(2022: 7.7%)
One of the world’s largest globally diversified natural resources groups. The group’s operations include approximately 150 mining and metallurgical sites and oil production assets. Glencore’s mined commodity exposure includes copper, cobalt, nickel, zinc, lead, ferroalloys, aluminium, thermal coal, iron ore, gold and silver.
4
▲
Rio Tinto
(2022: 5th)
Diversified mining group
Market value: £94,600,000
Share of investments: 7.3%
(2022: 4.5%)
One of the world’s leading mining groups. The group’s primary product is iron ore, but it also produces aluminium, copper, diamonds, gold, industrial minerals and energy products.
5
▲
Freeport-McMoRan
(2022: 8th)
Copper producer
Market value: £65,125,000
Share of investments: 5.0%
(2022: 4.0%)
A global mining group which operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum.
6
▲
Newmont Corporation
4
(2022: 18th)
Gold producer
Market value: £44,450,000
Share of investments: 3.6%
(2022: 1.9%)
Following the acquisition of
7
▲
Barrick Gold
(2022: 13th)
Gold producer
Market value: £41,299,000
Share of investments: 3.2%
(2022: 2.3%)
Barrick Gold is the second largest gold producer by market capitalisation and has operations and projects in 15 countries across the world. In 2019 the group successfully established a joint venture with Newmont across their
8
▲
Wheaton Precious Metals
(2022: 14th)
Gold producer
Market value: £38,795,000
Share of investments: 3.0%
(2022: 2.3%)
Wheaton Precious Metals is one of the world’s largest precious metals streaming companies, offering investors cost predictability, direct leverage to increasing precious metals prices and a high-quality asset base consisting of 18 operating mines and 26 development assets.
9
▲
Hydro
(2022: 15th)
Aluminium producer
Market value: £34,264,000
Share of investments: 2.6%
(2022: 2.1%)
Hydro is a Norwegian aluminium and renewable energy company, headquartered in
10 ▼ Teck Resources
(2022: 9th)
Diversified mining group
Market value: £30,282,000
Share of investments: 2.3%
(2022: 3.6%)
A diversified mining group headquartered in
1 Includes mining royalty contract.
2 Includes investments held at Directors’ valuation.
3 Includes fixed income securities.
4 Includes options.
All percentages reflect the value of the holding as a percentage of total investments. For this purpose, where more than one class of securities is held, these have been aggregated.
Arrows indicate the change in relative ranking of the position in the portfolio compared to its ranking as at
Investments as at
Main Market geographical value % of exposure £’000 investments Diversified Vale Global 88,855 Vale Debentures*#^ Global 36,516 } 9.6 Vale Call Option Jan 24BRL15.5 Global (770) BHP Global 112,240 8.7 Glencore Global 108,173 8.3 Rio Tinto Global 94,600 7.3 Teck Resources Global 30,282 2.3 Anglo American Global 24,081 } 1.9 Anglo American Put Option Global (99) 19/01/24 GBP£18.00 Trident Global 3,708 0.3 --------------- --------------- 497,586 38.4 ========= ========= Copper Freeport-McMoRan Global 65,125 5.0 Ivanhoe Electric United States 27,443 2.1 Jetti Resources# Global 27,204 2.1 Ivanhoe Mines Other Africa 24,627 1.9 Sociedad Minera Cerro Verde Latin America 20,142 1.6 First Quantum Minerals* Global 19,942 1.5 BHP Brazil Royalty#~ Latin America 18,316 1.4 Lundin Mining Global 15,672 1.2 Develop Global Australasia 14,145 1.1 Foran Mining Canada 11,225 0.9 CSA Cobar Mine Australasia 8,739 0.7 Ero Copper Latin America 6,890 0.6 MCC Mining# Latin America 5,491 0.4 Solaris Resources Latin America 5,473 0.4 Filo Mining Latin America 3,528 0.3 Aurubis Global 3,219 0.3 Antofagasta Latin America 2,627 0.2 MTAL Founders Shares Australasia 611 0.1 Metals Acquisition Australasia 339 – --------------- --------------- 280,758 21.8 ========= ========= Gold Newmont Corporation Global 44,982 } 3.6 Newmont Corporation Call Option Global (532) 19/01/24US$41.50 Barrick Gold Global 41,299 3.2 Wheaton Precious Metals Global 38,795 3.0 Agnico Eagle Mines Canada 20,729 1.6 Franco-Nevada Global 18,661 1.4 Northern Star Resources Australasia 14,040 1.1 Endeavour Mining Other Africa 9,090 0.7 Allied Gold* Other Africa 7,770 0.6 Polymetal International Russia – – Polyus Russia – – --------------- --------------- 194,834 15.2 ========= ========= Steel Steel Dynamics United States 28,799 2.2 Nucor United States 27,629 2.1 ArcelorMittal Global 23,207 1.8 Stelco Holdings Canada 8,172 0.6 SSAB Global 7,977 0.6 --------------- --------------- 95,784 7.3 ========= ========= Industrial Minerals Sigma Lithium Latin America 17,100 1.3 Mineral Resources Australasia 16,266 1.3 Albemarle Global 10,963 0.8 Iluka Resources Australasia 9,280 0.7 Lynas Rare Earths Australasia 8,825 0.7 Sheffield Resources Australasia 6,951 0.5 Chalice Mining Australasia 2,297 0.2 --------------- --------------- 71,682 5.5 ========= ========= Aluminium Hydro Global 34,264 2.6 Alcoa Global 9,019 0.7 --------------- --------------- 43,283 3.3 ========= ========= Iron Ore Champion Iron Canada 14,425 1.1 Labrador Iron Canada 13,301 1.0 Deterra Royalties Australasia 5,672 0.4 Equatorial Resources Other Africa 201 – --------------- --------------- 33,599 2.5 ========= ========= Uranium Cameco Canada 30,264 2.3 --------------- --------------- 30,264 2.3 ========= ========= Platinum Group Metals Bravo Mining Latin America 15,945 1.2 Northam Platinum Global 2,610 0.2 Impala Platinum South Africa 1,598 0.1 Sibanye Stillwater South Africa 1,029 0.1 --------------- --------------- 21,182 1.6 ========= ========= Mining Services Woodside Energy Group Australasia 7,209 0.5 Epiroc Global 6,421 0.5 --------------- --------------- 13,630 1.0 ========= ========= Nickel Lifezone Metals Global 7,091 0.5 Nickel Industries Indonesia 5,923 0.5 Bindura Nickel Global 28 – --------------- --------------- 13,042 1.0 ========= ========= Zinc Titan Mining United States 1,375 0.1 --------------- --------------- 1,375 0.1 ========= ========= Comprising: 1,297,019 100.0 ========= ========= – Investments 1,298,420 100.1 – Options (1,401) (0.1) --------------- --------------- 1,297,019 100.0 ========= =========
* Includes fixed income securities.
# Includes investments held at Directors’ valuation.
~ Mining royalty contract.
^
The investment in the Vale debentures is illiquid and has been valued using secondary market pricing information provided by the
All investments are in equity shares unless otherwise stated.
The total number of investments as at
As at
Commodity Exposure 1
__________________________________________________________________________ | |2023 portfolio|2022 portfolio#|2023 reference index*| |_____________________|______________|_______________|_____________________| |Diversified |38.4% |40.0% |35.6% | |_____________________|______________|_______________|_____________________| |Copper |21.8% |22.0% |9.9% | |_____________________|______________|_______________|_____________________| |Gold |15.2% |13.0% |21.0% | |_____________________|______________|_______________|_____________________| |Steel |7.3% |8.1% |20.7% | |_____________________|______________|_______________|_____________________| |Industrial Minerals |5.5% |6.5% |1.8% | |_____________________|______________|_______________|_____________________| |Aluminium |3.3% |3.3% |2.8% | |_____________________|______________|_______________|_____________________| |Iron Ore |2.5% |3.1% |5.0% | |_____________________|______________|_______________|_____________________| |Uranium |2.3% |0.4% |0.0% | |_____________________|______________|_______________|_____________________| |Platinum Group Metals|1.6% |2.0% |1.4% | |_____________________|______________|_______________|_____________________| |Mining Services |1.0% |0.4% |0.0% | |_____________________|______________|_______________|_____________________| |Nickel |1.0% |0.8% |0.0% | |_____________________|______________|_______________|_____________________| |Zinc |0.1% |0.1% |0.4% | |_____________________|______________|_______________|_____________________| |Other& |0.0% |0.3% |1.4% | |_____________________|______________|_______________|_____________________|
1 Based on index classifications.
#
Represents exposure at
* MSCI ACWI Metals & Mining 30% Buffer 10/40 Index (net total return).
& Represents a very small exposure.
Geographic Exposure 1
____________________________________ | |2023 | |______________________________|_____| |Global |67.4%| |______________________________|_____| |Canada |7.5% | |______________________________|_____| |Latin America |7.4% | |______________________________|_____| |Australasia |7.3% | |______________________________|_____| |Other2 |7.0% | |______________________________|_____| |Other Africa (exSouth Africa )|3.2% | |______________________________|_____| |South Africa |0.2% | |______________________________|_____|
____________________________________ | |2022 | |______________________________|_____| |Global |69.2%| |______________________________|_____| |Australasia |9.0% | |______________________________|_____| |Latin America |7.5% | |______________________________|_____| |Other3 |7.1% | |______________________________|_____| |Canada |4.1% | |______________________________|_____| |Other Africa (exSouth Africa )|2.4% | |______________________________|_____| |South Africa |0.7% | |______________________________|_____|
1 Based on the principal commodity exposure and place of operation of each investment.
2
Consists of
3
Consists of
Strategic Report
The Directors present the Strategic Report of
The Chairman’s Statement together with the Investment Manager’s Report form part of this Strategic Report. The Strategic Report was approved by the Board at its meeting on
Principal activities
The Company carries on business as an investment trust and has a premium listing on the
Investment trusts are pooled investment vehicles which allow exposure to a diversified range of assets through a single investment, thus spreading investment risk.
Objective
The Company’s objective is to maximise total returns to shareholders through a worldwide portfolio of mining and metal securities.
The Board recognises the importance of dividends to shareholders in achieving that objective, in addition to capital returns.
Strategy, business model and investment policy
Strategy
The Company invests in accordance with the objective given above. The Board is collectively responsible to shareholders for the long-term success of the Company and is its governing body. There is a clear division of responsibility between the
Business model
The Company’s business model follows that of an externally managed investment trust. Therefore, the Company does not have any employees and outsources its activities to third party service providers including the Manager who is the principal service provider. In accordance with the Alternative Investment Fund Managers’ Directive (AIFMD), as implemented, retained and onshored in the
The management of the investment portfolio and the administration of the Company have been contractually delegated to the Manager who in turn (with the permission of the Company) has delegated certain investment management and other ancillary services to
The Company delegates fund accounting services to the Manager, which in turn sub-delegates these services to
Investment policy
The Company’s investment policy is to provide a diversified investment in mining and metal securities worldwide actively managed with the objective of maximising total returns. While the policy is to invest principally in quoted securities, the Company’s investment policy includes investing in royalties derived from the production of metals and minerals as well as physical metals. Up to 10% of gross assets may be held in physical metals.
In order to achieve its objective, it is intended that the Group will normally be fully invested, which means at least 90% of the gross assets of the Company and its subsidiary will be invested in stocks, shares, royalties and physical metals. However, if such investments are deemed to be overvalued, or if the Manager finds it difficult to identify attractively priced opportunities for investment, then up to 25% of the Group’s assets may be held in cash or cash equivalents. Risk is spread by investing in a number of holdings, many of which themselves are diversified businesses.
The Group may occasionally utilise derivative instruments such as options, futures and contracts for difference, if it is deemed that these will, at a particular time or for a particular period, enhance the performance of the Group in the pursuit of its objectives. The Company is also permitted to enter into stock lending arrangements.
As approved by shareholders in
In
While the Company may hold shares in other listed investment companies (including investment trusts), the Board has agreed that the Company will not invest more than 15% of the Group’s gross assets in other
The Group’s financial statements are maintained in Sterling. Although many investments are denominated and quoted in currencies other than Sterling, the Board does not intend to employ a hedging strategy against fluctuations in exchange rates.
No material change will be made to the investment policy without shareholder approval.
Gearing
The Investment Manager believes that tactical use of gearing can add value from time to time. This gearing is typically in the form of an overdraft or short-term loan facility, which can be repaid at any time or matched by cash. The level and benefit of gearing is discussed and agreed with the Board regularly. The Company may borrow up to 25% of the Group’s net assets. The maximum level of gearing used during the year was 14.6% and, at the financial reporting date, net gearing (calculated as borrowings less cash and cash equivalents as a percentage of net assets) stood at 11.9% of shareholders’ funds (2022: 9.6%). For further details on borrowings refer to note 14 in the Financial Statements and the Alternative Performance Measure in the Glossary in the Annual Report and Financial Statements.
Portfolio analysis
Information regarding the Company’s investment exposures is contained within Section 2 (Portfolio) of the Annual Report and Financial Statements, with information on the ten largest investments, the investments listed and portfolio analysis above. Further information regarding investment risk and activity throughout the year can be found in the Investment Manager’s Report.
As at
Continuation vote
As agreed by shareholders in 1998, an ordinary resolution for the continuation of the Company is proposed at each Annual General Meeting. The Directors remain confident on the value available in the mining sector and therefore recommend that shareholders vote in support of the Company’s continuation.
Performance
Details of the Company’s performance for the year are given in the Chairman’s Statement. The Investment Manager’s Report includes a review of the main developments during the year, together with information on investment activity within the Company’s portfolio.
Results and dividends
The results for the Company are set out in the Consolidated Statement of Comprehensive Income. The total loss for the year, after taxation, was £78,985,000 (2022: profit of £202,420,000) of which £64,691,000 (2022: £76,013,000) is revenue profit.
It is the Board’s intention to distribute substantially all of the Company’s available income. The Directors recommend the payment of a final dividend as set out in the Chairman’s Statement. Dividend payments/payable for the year ended
Future prospects
The Board’s main focus is to maximise total returns over the longer term through investment in mining and metal assets. The outlook for the Company is discussed in both the Chairman’s Statement and the Investment Manager’s Report.
Social, community and human rights issues
As an investment trust, the Company has no direct social or community responsibilities or impact on the environment and the Company has not adopted an ESG investment strategy or exclusionary screens. However, the Directors believe that it is important and in shareholders’ interests to consider human rights issues and environmental, social and governance factors when selecting and retaining investments. Details of the Company’s approach to ESG and the Manager’s approach to ESG integration are also set out in the Annual Report and Financial Statements.
Modern Slavery Act
As an investment vehicle, the Company does not provide goods or services in the normal course of business and does not have customers. The Investment Manager considers modern slavery as part of supply chains and labour management within the investment process. Accordingly, the Directors consider that the Company is not required to make any slavery or human trafficking statement under the Modern Slavery Act 2015. In any event, the Board considers the Company’s supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.
Directors, gender representation and employees
The Directors of the Company on
Key performance indicators
At each Board meeting, the Directors consider a number of performance measures to assess the Company’s success in achieving its objectives. The key performance indicators (KPIs) used to measure the progress and performance of the Company over time and which are comparable to other investment trusts are set out below. As indicated in the footnote to the table, some of these KPIs fall within the definition of ‘Alternative Performance Measures’ under guidance issued by the
Year ended Year ended 31 December 31 December 2023 2022 Net asset value total return1,2 -6.2% 17.7% Share price total return1,2 -10.4% 26.0% (Discount)/premium to net asset value2 (3.3)% 1.3% Revenue earnings per share 33.95p 40.68p Total dividends per share 33.50p 40.00p Ongoing charges2, 3 0.91% 0.95% Ongoing charges on gross assets2, 4 0.81% 0.84% ========= =========
1 This measures the Company’s NAV and share price total return, which assumes dividends paid by the Company have been reinvested.
2 Alternative Performance Measures, see Glossary in the Annual Report and Financial Statements.
3 Ongoing charges represent the management fee and all other operating expenses, excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation, prior year expenses written back and certain non-recurring items, as a % of average daily net assets.
4 Ongoing charges based on gross assets represent the management fee and all other operating expenses, excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation, prior year expenses written back and certain non-recurring items, as a % of average daily gross assets. Gross assets are calculated based on net assets during the year before the deduction of the bank overdraft and loans. Ongoing charges based on gross assets are considered to be an appropriate performance measure as management fees are payable on gross assets (subject to certain adjustments and deductions).
Principal risks
The Company is exposed to a variety of risks and uncertainties. As required by the 2018 UK Corporate Governance Code (the
The risk register, its method of preparation and the operation of key controls in BlackRock’s and third-party service providers’ systems of internal control, are reviewed on a regular basis by the Audit Committee. In order to gain a more comprehensive understanding of BlackRock’s and other third party service providers’ risk management processes and how these apply to the Company’s business, BlackRock’s internal audit department provides an annual presentation to the Audit Committee chairs of the BlackRock investment trusts setting out the results of testing performed in relation to BlackRock’s internal control processes. The Audit Committee also periodically receives and reviews internal control reports from BlackRock and the Company’s service providers.
The Board has undertaken a robust assessment of both the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The COVID-19 pandemic gave rise to unprecedented challenges for businesses across the globe. Additionally, the risk that unforeseen or unprecedented events including (but not limited to) heightened geo-political tensions such as the war in
Emerging risks are considered by the Board as they come into view and are incorporated into the existing review of the Company’s risk register. They were also considered as part of the annual evaluation process. Additionally, the Manager considers emerging risks in numerous forums and the BlackRock Risk and Quantitative Analysis team produces an annual risk survey. Any material risks of relevance to the Company through the annual risk survey will be communicated to the Board.
The Board will continue to assess these risks on an ongoing basis. In relation to the
The principal risks and uncertainties faced by the Company during the financial year, together with the potential effects, controls and mitigating factors, are set out in the following table.
Market
Principal risk
Market risk arises from volatility in the prices of the Company’s investments. It represents the potential loss the Company might suffer through realising investments in the face of negative market movements.
Changes in general economic and market conditions, such as currency exchange rates, interest rates, rates of inflation, industry conditions, tax laws, political events and trends, can also substantially and adversely affect the securities and, as a consequence, the Company’s prospects and share price.
Market risk includes the potential impact of events which are outside the Company’s control, including (but not limited to) heightened geo-political tensions and military conflict, a global pandemic and high inflation.
Companies operating in the sectors in which the Company invests may be impacted by new legislation governing climate change and environmental issues, which may have a negative impact on their valuation and share price.
Mitigation/Control
The Board considers the diversification of the portfolio, asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Investment Manager.
The Board monitors the implementation and results of the investment process with the Investment Manager.
The Board also recognises the benefits of a closed-end fund structure in extremely volatile markets such as those experienced as a consequence of the COVID-19 pandemic and the war in
The Investment Manager seeks to understand the Environmental, Social and Governance (ESG) risks and opportunities facing companies and industries in the portfolio. The Company has not adopted an ESG investment strategy and does not exclude investment in stocks based on ESG criteria, but the Investment Manager considers ESG information when conducting research and due diligence on new investments and again when monitoring investments in the portfolio. Further information on BlackRock’s approach to ESG integration can be found in the Annual Report and Financial Statements.
Investment performance
Principal risk
The returns achieved are reliant primarily upon the performance of the portfolio.
The Board is responsible for:
· deciding the investment strategy to fulfil the Company’s objective; and
· monitoring the performance of the Investment Manager and the implementation of the investment strategy.
An inappropriate investment strategy may lead to:
· underperformance compared to the reference index;
· a reduction or permanent loss of capital; and
· dissatisfied shareholders and reputational damage.
The Board is also cognisant of the long-term risk to performance from inadequate attention to ESG issues and in particular the impact of climate change.
Mitigation/Control
To manage this risk the Board:
· regularly reviews the Company’s investment mandate and long-term strategy;
· has set investment restrictions and guidelines which the Investment Manager monitors and regularly reports on;
· receives from the Investment Manager a regular explanation of stock selection decisions, portfolio exposure, gearing and any changes in gearing, and the rationale for the composition of the investment portfolio;
· oversees the maintenance of an adequate spread of investments in order to minimise the risks associated with particular countries or factors specific to particular sectors, based on the diversification requirements inherent in the investment policy; and
· receives and reviews regular reports showing an analysis of the Company’s performance against other indices, including the performance of major companies in the sector.
ESG analysis is integrated into the Investment Manager’s investment process as set out in the Annual Report and Financial Statements. This is monitored by the Board. As the world works toward a transition to a low-carbon economy, the Investment Manager is interested in hearing from companies about their strategies and plans for responding to the challenges and capturing the opportunities that this transition creates. When companies consider climate-related risks, it is likely they will also assess their impact and dependence on natural capital.
Operational
Principal risk
In common with most other investment trust companies, the Company has no employees. The Company therefore relies on the services provided by third parties and is dependent on the control systems of the Manager, the Depositary and Fund Accountant which maintain the Company’s assets, dealing procedures and accounting records.
The security of the Company’s assets, dealing procedures, accounting records and adherence to regulatory and legal requirements depend on the effective operation of the systems of these third party service providers. There is a risk that a major disaster, such as floods, fire, a global pandemic, or terrorist activity, renders the Company’s service providers unable to conduct business at normal operating effectiveness.
Failure by any service provider to carry out its obligations to the Company could have a material adverse effect on the Company’s performance. Disruption to the accounting, payment systems or custody records (including cyber security risk) could prevent the accurate reporting and monitoring of the Company’s financial position.
Mitigation/Control
Due diligence is undertaken before contracts are entered into with third-party service providers. Thereafter, the performance of the provider is subject to regular review and reported to the Board.
The Board reviews on a regular basis an assessment of the fraud risks that the Company could potentially be exposed to and also a summary of the controls put in place by the Manager, Depositary, Custodian, Fund Accountant and Registrar specifically to mitigate these risks.
Most third-party service providers produce Service Organisation Control (SOC 1) reports to provide assurance regarding the effective operation of internal controls as reported on by their reporting accountants. These reports are provided to the Audit Committee for review. The Committee would seek further representations from service providers if not satisfied with the effectiveness of their control environment.
The Company’s financial instruments held in custody are subject to a strict liability regime and, in the event of a loss of such financial instruments, the Depositary must return financial assets of an identical type or the corresponding amount, unless able to demonstrate the loss was a result of an event beyond its reasonable control.
The Board reviews the overall performance of the Manager, Investment Manager and all other third-party service providers on a regular basis and compliance with the Investment Management Agreement annually.
The Board also considers the business continuity arrangements of the Company’s key service providers on an ongoing basis and reviews these as part of its review of the Company’s risk register.
Legal and regulatory compliance
Principal risk
The Company has been approved by HM Revenue & Customs as an investment trust, subject to continuing to meet the relevant eligibility conditions, and operates as an investment trust in accordance with Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company is exempt from corporation tax on capital gains tax on the profits realised from the sale of its investments.
Any breach of the relevant eligibility conditions could lead to the Company losing investment trust status and being subject to corporation tax on capital gains realised within the Company’s portfolio. In such event, the investment returns of the Company may be adversely affected.
A serious breach could result in the Company and/or the Directors being fined or the subject of criminal proceedings or the suspension of the Company’s shares which would in turn lead to a breach of the Corporation Tax Act 2010.
Amongst other relevant laws, the Company is required to comply with the provisions of the Companies Act 2006, the Alternative Investment Fund Managers’ Directive as implemented, retained and onshored in the
Mitigation/Control
The Investment Manager monitors investment movements, the level and type of forecast income and expenditure and the amount of proposed dividends to ensure that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not breached. The results are reported to the Board at each meeting.
Compliance with the accounting rules affecting investment trusts is also carefully and regularly monitored.
The Company Secretary, Manager and the Company’s professional advisers provide regular reports to the Board in respect of compliance with all applicable rules and regulations. The Board and the Manager also monitor changes in government policy and legislation which may have an impact on the Company.
The Company’s Investment Manager at all times complies with the sanctions administered by the
Financial
Principal risk
The Company’s investment activities expose it to a variety of financial risks which include market risk, counterparty credit risk, liquidity risk and the valuation of financial instruments.
Mitigation/Control
Details of these risks are disclosed in note 18 to the Financial Statements, together with a summary of the policies for managing these risks.
In the view of the Board, there have not been any changes to the fundamental nature of these risks and these principal risks and uncertainties are equally applicable for the current financial year.
Viability statement
In accordance with provision 31 of the 2018 UK Corporate Governance Code, the Directors have assessed the prospects of the Company over a longer period than the twelve months referred to by the ‘Going Concern’ guidelines. The Company is an investment trust with the objective of providing an attractive level of income return together with capital appreciation over the long term.
The Directors expect the Company to continue for the foreseeable future and have therefore conducted this review for a period up to the Annual General Meeting in 2027. The Directors assess viability over a rolling three-year period as they believe it best balances the Company’s long-term objective, its financial flexibility and scope, with the difficulty in forecasting economic conditions which could affect both the Company and its shareholders. The Company also undertakes a continuation vote every year with the next one taking place at the forthcoming Annual General Meeting.
In making an assessment on the viability of the Company, the Board has considered the following:
· the impact of a significant fall in commodity markets on the value of the Company’s investment portfolio;
· the ongoing relevance of the Company’s investment objective, business model and investment policy in the prevailing market;
· the principal and emerging risks and uncertainties, as set out above, and their potential impact;
· the level of ongoing demand for the Company’s shares;
· the Company’s share price discount/premium to NAV;
· the liquidity of the Company’s portfolio; and
· the level of income generated by the Company and future income and expenditure forecasts.
The Directors have concluded that there is a reasonable expectation that the Company will continue in operation and meet its liabilities as they fall due over the period of their assessment based on the following considerations:
· the Investment Manager’s compliance with the investment objective and policy, its investment strategy and asset allocation;
· the portfolio is liquid and mainly comprises readily realisable assets which continue to offer a range of investment opportunities for shareholders as part of a balanced investment portfolio;
· the operational resilience of the Company and its key service providers and their ability to continue to provide a good level of service for the foreseeable future;
· the effectiveness of business continuity plans in place for the Company and its key service providers;
· the ongoing processes for monitoring operating costs and income which are considered to be reasonable in comparison to the Company’s total assets;
· the Board’s discount management policy; and
· the Company is a closed-end investment company and therefore does not suffer from the liquidity issues arising from unexpected redemptions.
In addition, the Board’s assessment of the Company’s ability to operate in the foreseeable future is included in the Going Concern Statement which can be found in the Directors’ Report in the Annual Report and Financial Statements.
Section 172 statement: Promoting the success of the Company
The Companies (Miscellaneous Reporting) Regulations 2018 require directors of large companies to explain more fully how they have discharged their duties under Section 172(1) of the Companies Act 2006 in promoting the success of their companies for the benefit of members as a whole. This includes the likely consequences of their decisions in the longer term and how they have taken wider stakeholders’ needs into account.
The disclosure that follows covers how the Board has engaged with and understands the views of stakeholders and how stakeholders’ needs have been taken into account, the outcome of this engagement and the impact that it has had on the Board’s decisions. The Board considers the main stakeholders in the Company to be the Manager, Investment Manager and the shareholders. In addition to this, the Board considers investee companies and key service providers of the Company to be stakeholders; the latter comprise the Company’s Depositary, Registrar, Fund Accountants and Brokers.
Stakeholders
Shareholders
Continued shareholder support and engagement are critical to the continued existence of the Company and the successful delivery of its long-term strategy. The Board is focused on fostering good working relationships with shareholders and on understanding the views of shareholders in order to incorporate them into the Board’s strategy and objective in maximising total returns to shareholders through a worldwide portfolio of mining and metal securities.
Manager and Investment Manager
The Board’s main working relationship is with the Manager, who is responsible for the Company’s portfolio management (including asset allocation, stock and sector selection) and risk management, as well as ancillary functions such as administration, secretarial, accounting and marketing services. The Manager has sub-delegated portfolio management to the Investment Manager. Successful management of shareholders’ assets by the Investment Manager is critical for the Company to deliver successfully its investment strategy and meet its objective. The Company is also reliant on the Manager as AIFM to provide support in meeting relevant regulatory obligations under the AIFMD and other relevant legislation.
Other key service providers
In order for the Company to function as an investment trust with a listing on the premium segment of the official list of the
Investee companies
Portfolio holdings are ultimately shareholders’ assets and the Board recognises the importance of good stewardship and communication with investee companies in meeting the Company’s investment objective and strategy. The Board monitors the Manager’s stewardship activities and receives regular feedback from the Manager in respect of meetings with the management of investee companies.
A summary of the key areas of engagement undertaken by the Board with its key stakeholders in the year under review and how Directors have acted upon this to promote the long-term success of the Company are set out in the table below.
Area of Engagement
Investment mandate and objective
Issue
The Board is committed to promoting the role and success of the Company in delivering on its investment mandate to shareholders over the long term.
The Board also has responsibility to shareholders to ensure that the Company’s portfolio of assets is invested in line with the stated investment objective and in a way that ensures an appropriate balance between spread of risk and portfolio returns.
Engagement
The Board worked closely with the Investment Manager throughout the year in further developing investment strategy and underlying policies, not simply for the purpose of achieving the Company’s investment objective but in the interests of shareholders and future investors. In addition the Company continues to seek out new unquoted investments which could add long-term value.
Impact
The portfolio activities undertaken by the Investment Manager can be found in their Report. The Investment Manager continues to actively look for opportunities to grow royalty exposure given it is a key differentiator of the Company and an effective mechanism to lock-in long-term income which further diversifies the Company’s revenues.
Details regarding the Company’s NAV and share price performance can be found in the Chairman’s Statement and in this Strategic Report.
Responsible investing
Issue
More than ever, the importance of good governance and sustainability practices are key factors in making investment decisions. Climate change is becoming a defining factor in companies’ long-term prospects across the investment spectrum with significant and lasting implications for economic growth and prosperity. The mining industries in which the Company’s investment universe operate are facing ethical and sustainability issues that cannot be ignored by asset managers and investment companies alike.
Engagement
The Board works closely with the Investment Manager to review regularly and challenge the Company’s performance, investment policy and strategy to seek to ensure that the Company’s investment objective continues to be met in an effective and responsible way in the interests of shareholders and future investors. The Company has not adopted an ESG investment strategy and does not exclude investment in stocks based on ESG criteria, but the Board believes that responsible investment and sustainability are integral to the longer-term delivery of the Company’s success.
The Investment Manager’s approach to the consideration of ESG factors in respect of the Company’s portfolio, as well as the Investment Manager’s engagement with investee companies to encourage sound corporate governance practices, are kept under review by the Board. The Board also expects to be informed by the Investment Manager of any sensitive voting issues involving the Company’s investments.
The Investment Manager reports to the Board in respect of its approach to ESG integration; a summary of BlackRock’s approach to ESG integration is set out in the Annual Report and Financial Statements. The Investment Manager’s approach to engagement with investee companies and voting guidelines is summarised in the Annual Report and Financial Statements and further detail is available on the BlackRock website.
Impact
The Board and the Investment Manager believe there is likely to be a positive correlation between strong ESG practices and investment performance over time. This is especially important in mining given the long investment cycle and the impact of ESG practices on the ability of a mining company to maintain its social licence to operate. ESG is one of the many factors that we look at and site visits to companies’ operations provide valuable insights into their ESG practices. The Investment Manager has continued to engage with investee companies.
In 2020 BlackRock exited its active public debt and equity investment in businesses generating greater than 25% of their revenue from thermal coal production due to the heightened risks associated with their economic activity. During the year under review, the Company has had no exposure to companies whose principal activity is the extraction of thermal coal.
Within the parameters of the Company’s existing investment policy, the Investment Manager is continuing to look for opportunities to deploy capital in growth investments that should benefit from the energy transition. It is likely that this area will become a more significant part of the portfolio.
Shareholders
Issue
Continued shareholder support and engagement are critical to the continued existence of the Company and the successful delivery of its long-term strategy.
Engagement
The Board is committed to maintaining open channels of communication and to engage with shareholders. The Company welcomes and encourages attendance and participation from shareholders at its Annual General Meetings. Shareholders will have the opportunity to meet the Directors and Investment Manager and to address questions to them directly. The Investment Manager will also provide a presentation on the Company’s performance and the outlook for the mining sector.
The Annual Report and Half Yearly Financial Report are available on the BlackRock website and are also circulated to shareholders either in printed copy or via electronic communications. In addition, regular updates on performance, monthly factsheets, the daily NAV and other information are also published on the website at www.blackrock.com/uk/brw m . The Company’s website and marketing initiatives are geared to providing a breadth and depth of informative and engaging content.
The Board also works closely with the Manager to develop the Company’s marketing strategy with the aim of ensuring effective communication with shareholders.
Unlike trading companies, one-to-one shareholder meetings normally take the form of a meeting with the Investment Manager as opposed to members of the Board. The Company’s willingness to enter into discussions with institutional shareholders is also demonstrated by the programmes of institutional presentations by the Investment Manager. Additionally, the Investment Manager regularly presents at professional and private investor events to help explain and promote the Company’s strategy.
If shareholders wish to raise issues or concerns with the Board, they are welcome to do so at any time. The Chairman is available to meet directly with shareholders periodically to understand their views on governance and the Company’s performance where they wish to do so. He may be contacted via the Company Secretary whose details are given in the Annual Report and Financial Statements.
Impact
The Board values any feedback and questions from shareholders ahead of and during Annual General Meetings in order to gain an understanding of their views and will take action when and as appropriate. Feedback and questions will also help the Company evolve its reporting, aiming to make reports more transparent and understandable.
Feedback from all substantive meetings between the Investment Manager and shareholders will be shared with the Board. The Directors will also receive updates from the Company’s broker and Kepler, marketing consultants, on any feedback from shareholders, as well as share trading activity, share price performance and an update from the Investment Manager.
The portfolio management team attended a number of professional investor meetings (many by video conference) and held discussions with a number of wealth management desks and offices in respect of the Company during the year under review.
Portfolio holdings are ultimately shareholders’ assets and the Board recognises the importance of good stewardship and communication with investee companies in meeting the Company’s investment objective and strategy. The Board monitors the Manager’s stewardship activities and receives regular feedback from the Investment Manager in respect of meetings with the management of portfolio companies.
Management of share rating
Issue
The Board recognises the importance to shareholders that the market price of the Company’s shares should not trade at either a significant discount or premium to their prevailing NAV. The Board believes this may be achieved by the use of share buyback powers and the issue of shares.
Engagement
The Board monitors the Company’s share rating on an ongoing basis and receives regular updates from the Manager and the Company’s Brokers regarding the level of discount/premium. The Board believes that the best way of maintaining the share rating at an optimal level over the long term is to create demand for the shares in the secondary market. To this end, the Investment Manager is devoting considerable effort to broadening the awareness of the Company, particularly to wealth managers and to the wider retail market.
In addition, the Board has worked closely with the Manager to develop the Company’s marketing strategy, with the aim of ensuring effective communication with existing shareholders and to attract new shareholders to the Company in order to improve liquidity in the Company’s shares and to sustain the share rating of the Company.
Impact
The Board continues to monitor the Company’s premium/discount to NAV and will look to issue or buy back shares if it is deemed to be in the interests of shareholders as a whole. The Company participates in a focused investment trust sales and marketing initiative operated by the Manager on behalf of the investment trusts under its management. Further details are set out in the Annual Report and Financial Statements.
During the financial year the Company reissued 2,430,000 shares from treasury. As at
Service levels of third-party providers
Issue
The Board acknowledges the importance of ensuring that the Company’s principal suppliers are providing a suitable level of service, including the Investment Manager in respect of investment performance and delivering on the Company’s investment mandate; the Custodian and Depositary in respect of their duties towards safeguarding the Company’s assets; the Registrar in its maintenance of the Company’s share register and dealing with investor queries; and the Company’s Brokers in respect of the provision of advice and acting as a market maker for the Company’s shares.
Engagement
The Manager reports to the Board on the Company’s performance on a regular basis. The Board carries out a robust annual evaluation of the Manager’s performance, their commitment and available resources.
The Board performs an annual review of the service levels of all third-party service providers and concludes on their suitability to continue in their role. The Board receives regular updates from the AIFM, Depositary, Registrar and Brokers on an ongoing basis.
The Board has also worked closely with the Manager to gain comfort that relevant business continuity plans are operating effectively for all of the Company’s key service providers.
Impact
All performance evaluations were performed on a timely basis and the Board concluded that all third-party service providers, including the Manager and Investment Manager, were operating effectively and providing a good level of service.
The Board has received updates in respect of business continuity planning from the Company’s Manager, Custodian, Depositary, Fund Accountant, Registrar and Printer and is confident that arrangements are in place to ensure a good level of service will continue to be provided.
Board composition
Issue
The Board is committed to ensuring that its own composition brings an appropriate balance of knowledge, experience and skills, and that it is compliant with best corporate governance practice under the
Engagement
The Board has engaged the services of an external search consultant, Fletcher Jones, to identify potential candidates to replace
All Directors are subject to a formal evaluation process on an annual basis (more details and the conclusions of the 2023 evaluation process are given in the Annual Report and Financial Statements). All Directors stand for re-election by shareholders annually.
Shareholders may attend the Annual General Meeting and raise any queries in respect of Board composition or individual Directors in person or may contact the Company Secretary or the Chairman using the details provided with any issues.
Impact
As at the date of this report, the Board was comprised of three men and two women. Under the AIC Code the tenure of a director who is elevated to Chairman may be extended by three years. The Board decided that this extension should apply to Mr Cheyne’s tenure which was therefore extended until the Annual General Meeting in
The Directors are not aware of any issues that have been raised directly by shareholders in respect of Board composition in the year under review. Details for the proxy voting results in favour and against individual Directors’ re-election at the 2023 Annual General Meeting are given on the Manager’s website at www.blackrock.com/uk/brwm.
Environmental, Social and Governance issues and approach
The Board’s approach
Environmental, Social and Governance (ESG) issues can present both opportunities and threats to long-term investment performance. The Company’s investment universe comprises sectors that are undergoing significant structural change and are likely to be highly impacted by increasing regulation as a result of climate change and other social and governance factors. Your Board is committed to ensuring that we have appointed an Investment Manager that integrates ESG considerations into its investment process and has the skill to navigate the structural transition that the Company’s investment universe is undergoing. The Board believes effective engagement with company management is, in most cases, the most effective way of driving meaningful change in the behaviour of investee company management. While the Company does not have an ESG or impact focused investment strategy or apply exclusionary screens, as in most cases the Company will not invest in companies which have high ESG risks and no plans to address existing deficiencies. Where the Board is not satisfied that an investee company is taking steps to address matters of an ESG nature, it may discuss with the Investment Manager how this situation might be resolved, including potentially by a full disposal of shares.
ESG integration does not change the Company’s investment objective or constrain the Investment Manager’s investable universe, and does not mean that an ESG or impact focused investment strategy or any exclusionary screens have been or will be adopted by the Company. Similarly, ESG integration does not determine the extent to which the Company may be impacted by sustainability risks. More information on BlackRock’s global approach to ESG integration, as well as activity specific to the
The Company does not meet the criteria for Article 8 or 9 products under the EU Sustainable Finance Disclosure Regulation (SFDR) and the investments underlying this financial product do not take into account the EU criteria for environmentally sustainable economic activities. The Investment Manager has access to a range of data sources, including principal adverse indicator (PAI) data, when making decisions on the selection of investments. However, whilst BlackRock considers ESG risks for all portfolios and these risks may coincide with environmental or social themes associated with the PAIs, the Company does not commit to considering PAIs in driving the selection of its investments. Additional information on ESG integration, sustainability risk and SFDR is set out in the AIFMD Fund Disclosures available on the Company’s website.
BlackRock’s approach to ESG integration
BlackRock believes that sustainability risk, including climate risk are investment risks. As a fiduciary, we manage material risks and opportunities that could impact portfolios. Sustainability can be a driver of investment risks and opportunities and we incorporate them in our firm wide processes when they are material. This in turn (in BlackRock’s view) is likely to drive a significant reallocation of capital away from traditional carbon-intensive industries over the next decade. BlackRock believes that carbon-intensive companies will play an integral role in unlocking the full potential of the energy transition, and to do this, they must be prepared to adapt, innovate and pivot their strategies towards a low carbon economy.
As part of BlackRock’s structured investment process, ESG risks and opportunities (including sustainability/climate risk) are considered within the portfolio management team’s fundamental analysis of companies and industries and the Company’s portfolio managers work closely with the BIS team to assess the governance quality of companies and understand any potential issues, risks or opportunities.
As part of their approach to ESG integration, the portfolio managers use ESG information when conducting research and due diligence on new investments and again when monitoring investments in the portfolio. In particular, portfolio managers now have access to 1,200 key ESG performance indicators in Aladdin (BlackRock’s proprietary trading system) from third-party data providers. BlackRock’s internal sustainability research framework scoring is also available alongside third-party ESG scores in core portfolio management tools. BlackRock’s analysts’ sector expertise and local market knowledge allows it to engage with companies through direct interaction with management teams and conducting site visits. BIS engages with company leadership to understand how they are identifying and managing material business risks and opportunities, including sustainability related risks and the potential impacts these may have on long-term financial performance. BIS and the portfolio management team’s understanding of material sustainability risks and opportunities is further supported by BlackRock’s Sustainable and Transition Solutions (STS) function. STS looks to advance ESG research and integration, active engagement and the development of sustainable investment solutions across the firm.
Given the Board’s belief in the importance of engagement and communication with portfolio companies, they receive regular updates from the Investment Manager in respect of activity undertaken for the year under review. The Investment Manager engages with company management teams and undertakes company meetings to identify the best management teams with the ability to create value for shareholders over the long term. In addition, BlackRock also has a separate BlackRock Investment Stewardship (BIS) team. Investment stewardship is one of the ways in which BlackRock fulfils its fiduciary responsibilities as an asset manager to its clients. BIS serves as a link between them and the companies BlackRock invests in. BIS engages with investee companies to build its understanding of these companies’ approach to addressing material business risks and opportunities. Additional information is set out in the table and charts in the Annual Report and Financial Statements, as well as the key engagement themes for the meetings held in respect of the Company’s portfolio holdings.
Year ended31 December 2023 Number of engagements held 48 Number of companies met 22 % of equity investments covered 33 Shareholder meetings voted at 60 Number of proposals voted on 651 Number of votes against management 39 % of total items voted represented by votes against management 6.0 =========
Sources: BlackRock,
Investment stewardship
Consistent with BlackRock’s fiduciary duty as an asset manager, BIS seeks to support investee companies in their efforts to deliver long-term financial value on behalf of their clients. These clients include public and private pension plans, governments, insurance companies, endowments, universities, charities and, ultimately, individual investors, among others. BIS serves as a link between BlackRock’s clients and the companies they invest in. Clients depend on BlackRock to help them meet their investment goals; the business and governance decisions that companies make may have a direct impact on BlackRock’s clients’ long-term investment outcomes and financial well being.
From BlackRock’s perspective, business relevant sustainability issues can contribute to a company’s long-term financial performance, and thus further incorporating these considerations into the investment research, portfolio construction, and stewardship process can enhance long-term risk adjusted returns. The Company’s Investment Manager works closely with BIS to assess the governance quality of companies and business practices, and better understand any potential issues, risks or opportunities. The Investment Manager uses this information when conducting research and due diligence on new investments and again when monitoring investments in the portfolio.
Global principles
The BIS Global Principle s , regional voting guideline s , and engagement priorities (collectively, the ‘BIS policies’) set out the core elements of corporate governance that guide BIS’ efforts globally and within each regional market, including when engaging with companies and voting at shareholder meetings when authorised to do so on behalf of clients. Each year, BIS reviews its policies and updates them as necessary to reflect changes in market standards and regulations, insights gained over the year through third-party and its own research, and feedback from clients and companies.
Regional proxy voting guidelines
BIS’ regional voting guidelines are intended to help clients and companies understand its thinking on key governance matters. They are the benchmark against which it assesses a company’s approach to corporate governance and the items on the agenda to be voted on at a shareholder meeting. BIS applies its guidelines pragmatically, taking into account a company’s unique circumstances where relevant. BlackRock informs voting decisions through research and engages as necessary. BIS reviews its voting guidelines annually and updates them as necessary to reflect changes in market standards, evolving governance practices and insights gained from engagement over the prior year. BIS’ market-specific voting guidelines are available on its website at
www.blackrock.com/corporate/about-us/investment-stewardship#stewardship-policie
s
.
BlackRock is committed to transparency in terms of disclosure on its stewardship activities on behalf of clients. The BIS policies help BlackRock’s clients understand its work to advance their interests as long-term investors in public companies. Additionally, BIS publishes both annual and quarterly reports detailing its stewardship activities, as well as vote bulletins that describe its rationale for certain votes at high profile shareholder meetings.
BlackRock’s reporting and disclosures
In terms of its own reporting, BlackRock believes that the
BY ORDER OF THE BOARD
FOR AND ON BEHALF OF
Company Secretary
RELATED PARTY TRANSACTIONS
At the date of this report, the Board consists of five non-executive Directors, all of whom are considered to be independent of the Manager by the Board. Following the conclusion of the Annual General Meeting on
Statement of Directors’ Responsibilities in respect of the Annual Report and Financial Statements
The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the financial statements in accordance with
Under Company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. In preparing those financial statements, the Directors are required to:
· present fairly the financial position, financial performance and cash flows of the Group and Company;
· select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;
· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
· make judgements and estimates that are reasonable and prudent;
·
state whether the financial statements have been prepared in accordance with
·
provide additional disclosures when compliance with the specific requirements in accordance with
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are also responsible for preparing the Strategic Report, Directors’ Report, the Directors’ Remuneration Report, the Corporate Governance Statement and the Report of the Audit Committee in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure Guidance and Transparency Rules. The Directors have delegated responsibility to the Manager for the maintenance and integrity of the Company’s corporate and financial information included on the BlackRock website. Legislation in the
Each of the Directors, confirm to the best of their knowledge that:
·
the financial statements, which have been prepared in accordance with
· the Strategic Report contained in the Annual Report and Financial Statements includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces.
The 2018 UK Corporate Governance Code also requires Directors to ensure that the Annual Report and Financial Statements are fair, balanced and understandable. In order to reach a conclusion on this matter, the Board has requested that the Audit Committee advise on whether it considers that the Annual Report and Financial Statements fulfil these requirements. The process by which the Committee has reached these conclusions is set out in the Audit Committee’s Report in the Annual Report and Financial Statements.
As a result, the Board has concluded that the Annual Report and Financial Statements for the year ended
FOR AND ON BEHALF OF THE BOARD
Chairman
Consolidated Statement of Comprehensive Income for the year ended
2023 2022 Revenue Capital Total Revenue Capital Total Notes £’000 £’000 £’000 £’000 £’000 £’000 Income from investments held at fair 3 68,317 630 68,947 78,087 811 78,898 value through profit or loss Other income 3 6,827 – 6,827 7,909 – 7,909 --------------- --------------- --------------- --------------- --------------- --------------- Total revenue 75,144 630 75,774 85,996 811 86,807 ========= ========= ========= ========= ========= ========= Net (loss)/profit on investments and options – (140,576) (140,576) – 152,937 152,937 held at fair value through profit or loss Net profit/ (loss) on – 9,018 9,018 – (17,645) (17,645) foreign exchange --------------- --------------- --------------- --------------- --------------- --------------- Total 75,144 (130,928) (55,784) 85,996 136,103 222,099 ========= ========= ========= ========= ========= ========= Expenses Investment 4 (2,374) (7,317) (9,691) (2,615) (8,031) (10,646) management fee Other operating 5 (1,278) (15) (1,293) (1,037) (28) (1,065) expenses --------------- --------------- --------------- --------------- --------------- --------------- Total operating (3,652) (7,332) (10,984) (3,652) (8,059) (11,711) expenses ========= ========= ========= ========= ========= ========= Net profit/ (loss) on ordinary activities 71,492 (138,260) (66,768) 82,344 128,044 210,388 before finance costs and taxation Finance costs 6 (2,375) (7,166) (9,541) (1,182) (3,520) (4,702) --------------- --------------- --------------- --------------- --------------- --------------- Net profit/ (loss) on ordinary 69,117 (145,426) (76,309) 81,162 124,524 205,686 activities before taxation Taxation (4,426) 1,750 (2,676) (5,149) 1,883 (3,266) (charge)/credit --------------- --------------- --------------- --------------- --------------- --------------- Net profit/ (loss) on ordinary 64,691 (143,676) (78,985) 76,013 126,407 202,420 activities after taxation ========= ========= ========= ========= ========= ========= Earnings/(loss) per ordinary share (pence) – 8 33.95 (75.40) (41.45) 40.68 67.64 108.32 basic and diluted ========= ========= ========= ========= ========= =========
The total columns of this statement represent the Group’s Statement of Comprehensive Income, prepared in accordance with
The Group does not have any other comprehensive income/(loss) (2022: £nil). The net profit/(loss) for the year disclosed above represents the Group’s total comprehensive income.
Consolidated Statement of Changes in Equity for the year ended
Called Share Capital up share premium redemption Special Capital Revenue capital account reserve reserve reserves reserve Total Group Notes £’000 £’000 £’000 £’000 £’000 £’000 £’000 For the year ended 31 December 2023 At 31 December 9,651 148,107 22,779 180,736 868,837 69,175 1,299,285 2022 Total comprehensive (loss)/income: Net (loss)/profit – – – – (143,676) 64,691 (78,985) for the year Transactions with owners, recorded directly to equity: Ordinary shares 9,10 – 3,386 – 12,305 – – 15,691 reissued from treasury Share reissue 9,10 – – – (33) – – (33) costs Dividends 7 – – – – – (75,907) (75,907) paid1 --------------- --------------- --------------- --------------- --------------- --------------- --------------- At 31 December 9,651 151,493 22,779 193,008 725,161 57,959 1,160,051 2023 ========= ========= ========= ========= ========= ========= ========= For the year ended 31 December 2022 At 31 December 9,651 138,818 22,779 155,123 742,430 74,073 1,142,874 2021 Total comprehensive income: Net profit for – – – – 126,407 76,013 202,420 the year Transactions with owners, recorded directly to equity: Ordinary shares – 9,289 – 25,683 – – 34,972 reissued from treasury Share reissue – – – (70) – – (70) costs Dividends 7 – – – – – (80,911) (80,911) paid2 --------------- --------------- --------------- --------------- --------------- --------------- --------------- At 31 December 9,651 148,107 22,779 180,736 868,837 69,175 1,299,285 2022 ========= ========= ========= ========= ========= ========= =========
1
The final dividend of 23.50p per share for the year ended
2
The final dividend of 27.00p per share for the year ended
Parent Company Statement of Changes in Equity for the year ended
Called Share Capital up share premium redemption Special Capital Revenue capital account reserve reserve reserves reserve Total Company Notes £’000 £’000 £’000 £’000 £’000 £’000 £’000 For the year ended 31 December 2023 At 31 December 9,651 148,107 22,779 180,736 874,567 63,445 1,299,285 2022 Total comprehensive (loss)/income: Net (loss)/profit – – – – (143,500) 64,515 (78,985) for the year Transactions with owners, recorded directly to equity: Ordinary shares 9,10 – 3,386 – 12,305 – – 15,691 reissued from treasury Share reissue 9,10 – – – (33) – – (33) costs Dividends 7 – – – – – (75,907) (75,907) paid1 --------------- --------------- --------------- --------------- --------------- --------------- --------------- At 31 December 9,651 151,493 22,779 193,008 731,067 52,053 1,160,051 2023 ========= ========= ========= ========= ========= ========= ========= For the year ended 31 December 2022 At 31 December 9,651 138,818 22,779 155,123 748,107 68,396 1,142,874 2021 Total comprehensive income: Net profit for – – – – 126,460 75,960 202,420 the year Transactions with owners, recorded directly to equity: Ordinary shares – 9,289 – 25,683 – – 34,972 reissued from treasury Share reissue – – – (70) – – (70) costs Dividends 7 – – – – – (80,911) (80,911) paid1 --------------- --------------- --------------- --------------- --------------- --------------- --------------- At 31 December 9,651 148,107 22,779 180,736 874,567 63,445 1,299,285 2022 ========= ========= ========= ========= ========= ========= =========
1
The final dividend of 23.50p per share for the year ended
2
The final dividend of 27.00p per share for the year ended
For information on the Company’s distributable reserves please refer to note 17 in the Annual Report and Financial Statements.
Consolidated and Parent Company Statements of Financial Position as at
31 December 2023 31 December 2022 Group Company Group Company Notes £’000 £’000 £’000 £’000 Non current assets Investments held at fair value through 1,298,420 1,305,827 1,424,844 1,432,075 profit or loss Current assets Current tax 1,276 1,276 821 821 asset Other 3,592 3,592 4,431 4,431 receivables Cash collateral 6,269 6,269 6,795 6,795 held with brokers Cash and cash 10,612 4,261 29,492 23,317 equivalents --------------- --------------- --------------- --------------- Total current 21,749 15,398 41,539 35,364 assets ========= ========= ========= ========= Total assets 1,320,169 1,321,225 1,466,383 1,467,439 ========= ========= ========= ========= Current liabilities Current tax (352) (352) (373) (361) liability Other (8,052) (9,108) (6,155) (7,223) payables Derivative financial liabilities held at fair (1,401) (1,401) (1,227) (1,227) value through profit or loss Bank loans (149,828) (149,828) (158,783) (158,783) --------------- --------------- --------------- --------------- Total current (159,633) (160,689) (166,538) (167,594) liabilities ========= ========= ========= ========= Total assets less current 1,160,536 1,160,536 1,299,845 1,299,845 liabilities ========= ========= ========= ========= Non current liabilities Deferred taxation (485) (485) (560) (560) liability --------------- --------------- --------------- --------------- Net assets 1,160,051 1,160,051 1,299,285 1,299,285 ========= ========= ========= ========= Equity attributable to equity holders Called up 9 9,651 9,651 9,651 9,651 share capital Share premium 10 151,493 151,493 148,107 148,107 account Capital redemption 10 22,779 22,779 22,779 22,779 reserve Special 10 193,008 193,008 180,736 180,736 reserve Capital reserves: At 1 January 868,837 874,567 742,430 748,107 Net (loss)/profit (143,676) (143,500) 126,407 126,460 for the year --------------- --------------- --------------- --------------- At 31 10 725,161 731,067 868,837 874,567 December Revenue reserve: At 1 January 69,175 63,445 74,073 68,396 Net profit 64,691 64,515 76,013 75,960 for the year Dividends (75,907) (75,907) (80,911) (80,911) paid --------------- --------------- --------------- --------------- At 31 10 57,959 52,053 69,175 63,445 December ========= ========= ========= ========= Total equity 1,160,051 1,160,051 1,299,285 1,299,285 ========= ========= ========= ========= Net asset value per 8 606.78 606.78 688.35 688.35 ordinary share (pence) ========= ========= ========= =========
Consolidated and Parent Company Cash Flow Statements for the year ended
31 December 2023 31 December 2022 Group Company Group Company £’000 £’000 £’000 £’000 Operating activities Net (loss)/profit on ordinary (76,309) (76,309) 205,686 205,686 activities before taxation Add back finance 9,541 9,541 4,702 4,702 costs Net loss/(profit) on investments and options held at fair value through 140,576 140,400 (152,937) (152,990) profit or loss (including transaction costs) Net (profit)/loss (9,018) (9,018) 17,645 17,645 on foreign exchange Sale of investments and return of 648,272 648,272 489,236 489,236 capital on contractual rights Purchase of investments and options held at (662,250) (662,250) (503,782) (503,782) fair value through profit or loss Decrease in other 1,069 1,069 13 13 receivables Increase in other 1,556 1,556 1,025 1,013 payables (Increase)/decrease in amounts due from (409) (409) 243 243 brokers Net movement in cash collateral 526 526 (6,215) (6,215) held with brokers --------------- --------------- --------------- --------------- Net cash inflow from operating 53,554 53,378 55,616 55,551 activities before taxation ========= ========= ========= ========= Taxation paid (12) (12) (432) (432) Taxation on investment income (2,664) (2,664) (3,210) (3,210) included within gross income --------------- --------------- --------------- --------------- Net cash inflow from operating 50,878 50,702 51,974 51,909 activities ========= ========= ========= ========= Financing activities Drawdown of loans – – 2,359 2,359 Interest paid (9,571) (9,571) (4,720) (4,720) Net proceeds from ordinary shares 15,658 15,658 34,902 34,902 reissued from treasury Dividends paid (75,907) (75,907) (80,911) (80,911) --------------- --------------- --------------- --------------- Net cash outflow from financing (69,820) (69,820) (48,370) (48,370) activities ========= ========= ========= ========= Decrease/(increase) in cash and cash (18,942) (19,118) 3,604 3,539 equivalents Cash and cash equivalents at 29,492 23,317 25,976 19,866 start of the year Effect of foreign exchange rate 62 62 (88) (88) changes --------------- --------------- --------------- --------------- Cash and cash equivalents at end 10,612 4,261 29,492 23,317 of year ========= ========= ========= ========= Comprised of: Cash and cash 10,612 4,261 29,492 23,317 equivalents --------------- --------------- --------------- --------------- 10,612 4,261 29,492 23,317 ========= ========= ========= =========
Notes to the financial statements for the year ended
1. Principal activity
The principal activity of the Company is that of an investment trust company within the meaning of Section 1158 of the Corporation Tax Act 2010. The Company was incorporated in
The principal activity of the subsidiary,
2. Material accounting policies
The material accounting policies adopted by the Group and Company have been applied consistently, other than where new policies have been adopted and are set out below.
(a) Basis of preparation
On
Insofar as the Statement of Recommended Practice (SORP) for investment trust companies and venture capital trusts, issued by the
Substantially all of the assets of the Group consist of securities that are readily realisable and, accordingly, the Directors believe that the Group has adequate resources to continue in operational existence for the foreseeable future for the period to
The Directors have considered the impact of climate change on the value of the investments included in the financial statements and have concluded that:
· there was no further impact of climate change to be considered as the investments are valued based on market pricing as required by IFRS 13; and
· the risk is adequately captured in the assumptions and inputs used in measurement of Level 3 assets, as noted in note 18 of the Financial Statements.
None of the Group's other assets and liabilities were considered to be potentially impacted by climate change.
The Group’s financial statements are presented in Sterling, which is the currency of the primary economic environment in which the Group operates. All values are rounded to the nearest thousand pounds (£’000) except where otherwise indicated.
Adoption of new and amended International Accounting Standards and interpretations:
IFRS 9 – Fees in the ’10 per cent’ Test for Derecognition of Financial Liabilities
(effective
IFRS 17
–
Insurance contracts
(effective
IAS 12 – Deferred tax related to assets and liabilities arising from a single transaction
(effective
IAS 8 – Definition of accounting estimates
(effective
IAS 1 and IFRS Practice Statement 2 – Disclosure of accounting policies
(effective
IAS 12 – International Tax Reform Pillar Two Model Rules
(effective
Relevant International Accounting Standards that have yet to be adopted:
IAS 1 – Classification of liabilities as current or non-current
(effective
IAS 1 – Non-current liabilities with covenants
(effective
None of the standards that have been issued, but are not yet effective, are expected to have a material impact on the Group.
(b) Basis of consolidation
The Group’s financial statements are made up to 31 December each year and consolidate the financial statements of the Company and its wholly owned subsidiary, which is registered and operates in
Subsidiaries are consolidated from the date of their acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of subsidiaries used in the preparation of the consolidated financial statements are based on consistent accounting policies. All intra-group balances and transactions, including unrealised profits arising therefrom, are eliminated.
(c) Presentation of the Statement of Comprehensive Income
In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Consolidated Statement of Comprehensive Income between items of a revenue and a capital nature has been presented alongside the Consolidated Statement of Comprehensive Income.
(d) Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment of business being investment business.
(e) Income
Dividends receivable on equity shares are recognised as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end are treated as revenue for the year. Provision is made for any dividends and interest income not expected to be received. Special dividends, if any, are treated as a capital or a revenue receipt depending on the facts or circumstances of each particular case. The return on a debt security is recognised on a time apportionment basis so as to reflect the effective yield on the debt security. Interest income and deposit interest is accounted for on an accruals basis.
Options may be purchased or written over securities held in the portfolio for generating or protecting capital returns, or for generating or maintaining revenue returns. Where the purpose of the option is the generation of income, the premium is treated as a revenue item. Where the purpose of the option is the maintenance of capital, the premium is treated as a capital item.
Option premium income is recognised as revenue evenly over the life of the option contract and included in the revenue account of the Consolidated Statement of Comprehensive Income unless the option has been written for the maintenance and enhancement of the Group’s investment portfolio and represents an incidental part of a larger capital transaction, in which case any premia arising are allocated to the capital account of the Consolidated Statement of Comprehensive Income.
Royalty income from contractual rights is measured at the fair value of the consideration received or receivable where the Investment Manager can reliably estimate the amount, pursuant to the terms of the agreement. Royalty income from contractual rights received comprises of a return of income and a return of capital based on the underlying cost of the contract and, accordingly, the return of income element is taken to the revenue account and the return of capital element is taken to the capital account. These amounts are disclosed in the Consolidated Statement of Comprehensive Income within income from investments and net profit on investments held at fair value through profit or loss, respectively.
The useful life of the contractual rights will be determined by reference to the contractual arrangements, the planned mine life on commencement of mining and the underlying cost of the contractual rights will be revalued on a systematic basis using the units of production method over the life of the contractual rights which is estimated using available estimated proved and probable reserves specifically associated with the mine. The Investment Manager relies on public disclosures for information on proven and probable reserves from the operators of the mine. Amortisation rates are adjusted on a prospective basis for all changes to estimates of the life of contractual rights and iron ore reserves. These are disclosed in the Consolidated Statement of Comprehensive Income within net profit on investments held at fair value through profit or loss.
Where the Group has elected to receive its dividends in the form of additional shares rather than in cash, the cash equivalent of the dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital.
Underwriting commission receivable is taken into account on an accruals basis.
(f) Expenses
All expenses, including finance costs, are accounted for on an accruals basis. Expenses have been charged wholly to the revenue account of the Consolidated Statement of Comprehensive Income, except as follows:
· expenses which are incidental to the acquisition or sale of an investment are charged to the capital account of the Consolidated Statement of Comprehensive Income. Details of transaction costs on the purchases and sales of investments are disclosed within note 10 to the financial statements on in the Annual Report and Financial Statements;
· expenses are treated as capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated; and
· the investment management fee and finance costs have been allocated 75% to the capital account and 25% to the revenue account of the Consolidated Statement of Comprehensive Income in line with the Board’s expectations of the long-term split of returns, in the form of capital gains and income, respectively, from the investment portfolio.
(g) Taxation
The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Consolidated Statement of Comprehensive Income because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that were applicable at the balance sheet date.
Where expenses are allocated between capital and revenue accounts, any tax relief in respect of the expenses is allocated between capital and revenue returns on the marginal basis using the Company’s effective rate of corporation tax for the accounting period.
Deferred taxation is recognised in respect of all temporary differences that have originated but not reversed at the financial reporting date, where transactions or events that result in an obligation to pay more taxation in the future or right to pay less taxation in the future have occurred at the financial reporting date. This is subject to deferred taxation assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred taxation assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise.
(h) Investments held at fair value through profit or loss
In accordance with IFRS 9, the Group classifies its investments at initial recognition as held at fair value through profit or loss and are managed and evaluated on a fair value basis in accordance with its investment strategy and business model.
All investments, including contractual rights, are measured initially and subsequently at fair value through profit or loss. Purchases of investments are recognised on a trade date basis. Contractual rights are recognised on the completion date, where a purchase of the rights is under a contract, and are initially measured at fair value excluding transaction costs. Sales of investments are recognised at the trade date of the disposal.
The fair value of the financial investments is based on their quoted bid price at the financial reporting date, without deduction for the estimated future selling costs. This policy applies to all current and non-current asset investments held by the Group.
The gains and losses from changes in fair value of contractual rights are taken to the Consolidated Statement of Comprehensive Income and arise as a result of the revaluation of the underlying cost of the contractual rights, changes in commodity prices and changes in estimates of proven and probable reserves specifically associated with the mine.
Under IAS, the investment in the subsidiary in the Company’s Statement of Financial Position is fair valued which is deemed to be the net asset value of the subsidiary.
Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Consolidated Statement of Comprehensive Income as ‘Net profit on investments held at fair value through profit or loss’. Also included within the heading are transaction costs in relation to the purchase or sale of investments.
For all financial instruments not traded in an active market, the fair value is determined by using various valuation techniques. Valuation techniques include market approach (i.e., using recent arm’s length market transactions adjusted as necessary and reference to the current market value of another instrument that is substantially the same) and the income approach (i.e., discounted cash flow analysis and option pricing models making as much use of available and supportable market data where possible). See note 2(q) below.
(i) Options
Options are held at fair value through profit or loss based on the bid/offer prices of the options written to which the Group is exposed. The value of the option is subsequently marked-to-market to reflect the fair value through profit or loss of the option based on traded prices. Where the premium is taken to the revenue account, an appropriate amount is shown as capital return such that the total return reflects the overall change in the fair value of the option. When an option is exercised, the gain or loss is accounted for as a capital gain or loss. Any cost on closing out an option is transferred to the revenue account along with any remaining unamortised premium.
(j) Other receivables and other payables
Other receivables and other payables do not carry any interest and are short-term in nature and are accordingly stated on an amortised cost basis.
(k) Dividends payable
Under IAS, final dividends should not be accrued in the financial statements unless they have been approved by shareholders before the financial reporting date. Interim dividends should not be recognised in the financial statements unless they have been paid.
Dividends payable to equity shareholders are recognised in the Consolidated and Parent Company Statements of Changes in Equity.
(l) Foreign currency translation
Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities and non-monetary assets held at fair value are translated into Sterling at the rate ruling on the financial reporting date. Foreign exchange differences arising on translation are recognised in the Consolidated Statement of Comprehensive Income as a revenue or capital item depending on the income or expense to which they relate. For investment transactions and investments held at the year end, denominated in a foreign currency, the resulting gains or losses are included in the profit/(loss) on investments held at fair value through profit or loss in the Consolidated Statement of Comprehensive Income.
(m) Cash and cash equivalents
Cash comprises cash in hand, bank overdrafts and on demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. Bank overdrafts are shown separately on the Consolidated and Parent Company Statements of Financial Position.
(n) Bank borrowings
Bank overdrafts and loans are recorded at the net proceeds received. Finance charges, including any premium payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the Consolidated Statement of Comprehensive Income using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
(o) Offsetting
Financial assets and financial liabilities are offset and the net amount reported in the Consolidated and Parent Company Statements of Financial Position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.
(p) Share repurchases, share reissues and new share issues
Shares repurchased and subsequently cancelled – share capital is reduced by the nominal value of the shares repurchased and the capital redemption reserve is correspondingly increased in accordance with Section 733 of the Companies Act 2006. The full cost of the repurchase is charged to the special reserve.
Shares repurchased and held in treasury – the full cost of the repurchase is charged to the special reserve.
Where treasury shares are subsequently reissued:
· amounts received to the extent of the repurchase price are credited to the special reserve and capital reserves based on a weighted average basis of amounts utilised from these reserves on repurchases; and
· any surplus received in excess of the repurchase price is taken to the share premium account.
Where new shares are issued, amounts received to the extent of any surplus received in excess of the par value are taken to the share premium account.
Share issue costs are charged to the share premium account. Costs on share reissues are charged to the special reserve and capital reserves.
(q) Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results. Estimates and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
Fair value of unquoted financial instruments
When the fair values of financial assets and financial liabilities recorded in the Consolidated and Parent Company Statements of Financial Position cannot be derived from active markets, their fair value is determined using a variety of valuation techniques that include the use of valuation models.
(a) The fair value of the BHP Brazil contractual rights was assessed by an independent valuer with a recognised and relevant professional qualification. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values. The estimates include considerations of production profiles, commodity prices, cash flows and discount rates. Changes in assumptions about these factors could affect the reported fair value of financial instruments in the Consolidated and Parent Company Statements of Financial Position and the level where the instruments are disclosed in the fair value hierarchy. To assess the significance of a particular input to the entire measurement, the external valuer performs sensitivity analysis.
(b)
The fair value of the investment in equity shares of Jetti Resources and
The valuation is carried out based on market approach using earnings multiple and price of recent transactions. Changes in assumptions about these factors could affect the reported fair value of financial instruments in the Consolidated and Parent Company Statements of Financial Position and the level where the instruments are disclosed in the fair value hierarchy. To assess the significance of a particular input to the entire measurement, the external valuer performs sensitivity analysis.
(c) The investment in the subsidiary company was valued based on the net assets of the subsidiary company, which is considered appropriate based on the nature and volume of transactions in the subsidiary company.
The key assumptions used to determine the fair value of the unquoted financial instruments and sensitivity analyses are provided in note 18(d).
3. Income
2023 2022 £’000 £’000 Investment income: UK dividends 8,647 17,536 UK special dividends – 2,167 Overseas dividends 33,457 45,094 Overseas special dividends 17,736 3,808 Income from contractual rights (BHP Brazil 4,186 3,096 Royalty) Income from Vale debentures 2,608 3,863 Income from fixed income investments 1,683 2,523 --------------- --------------- Total investment income 68,317 78,087 ========= ========= Other income: Option premium income 5,964 7,297 Deposit interest 678 513 Broker interest received 104 18 Stock lending income 81 81 --------------- --------------- 6,827 7,909 ========= ========= Total income 75,144 85,996 ========= =========
During the year, the Group received option premium income in cash totalling £6,724,000 (2022: £7,541,000) for writing put and covered call options for the purposes of revenue generation.
Option premium income is amortised evenly over the life of the option contract and, accordingly, during the year, option premiums of £5,964,000 (2022: £7,297,000) were amortised to revenue.
At
Dividends and interest received in cash during the year amounted to £59,542,000 and £5,159,000 (2022: £68,630,000 and £5,918,000).
Special dividends of £630,000 have been recognised in capital during the year (2022: £811,000).
4. Investment management fee
2023 2022 Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000 Investment management 2,374 7,317 9,691 2,615 8,031 10,646 fee --------------- --------------- --------------- --------------- --------------- --------------- Total 2,374 7,317 9,691 2,615 8,031 10,646 ========= ========= ========= ========= ========= =========
The investment management fee (which includes all services provided by BlackRock) is 0.80% of the Company’s gross assets (subject to certain adjustments). During the year, £9,421,000 (2022: £9,848,000) of the investment management fee was generated from net assets and £270,000 (2022: £798,000) from the gearing effect on gross assets due to the quarter–on– quarter increase in the NAV per share for the year as set out below:
Cum income Quarterly Gearing effect NAV per share increase/ Quarter end (decrease) % on management (pence) fees (£’000) 31 December 2021 622.21 – – 31 March 2022 769.58 +23.7 267 30 June 2022 584.86 -24.0 – 30 September 2022 602.65 +3.0 294 31 December 2022 688.35 +14.2 237 31 March 2023 664.51 -3.5 – 30 June 2023 612.72 -7.8 – 30 September 2023 601.47 -1.8 – 31 December 2023 606.78 +0.9 270 ========= ========= =========
The daily average of the net assets under management during the year ended
The fee is allocated 25% to the revenue account and 75% to the capital account of the Consolidated Statement of Comprehensive Income.
There is no additional fee for company secretarial and administration services.
5. Other operating expenses
2023 2022 £’000 £’000 Allocated to revenue: Custody fee 109 101 Auditors’ remuneration: – audit services 55 51 – non-audit services1 9 9 Registrar’s fee 86 86 Directors’ emoluments2 179 197 AIC fees 21 21 Broker fees 25 24 Depositary fees 116 116 FCA fee 40 30 Directors’ insurance 22 23 Marketing fees 144 132 Stock exchange fees 52 37 Legal and professional fees 147 35 Bank facility fees3 85 97 Printing and postage fees 55 47 Directors’ search fees 25 – Write back of prior year expenses4 – (55) Other administrative costs 108 86 --------------- --------------- 1,278 1,037 ========= ========= Allocated to capital: Transaction charges5 15 28 --------------- --------------- 1,293 1,065 ========= =========
2023 2022 The Company’s ongoing charges6, calculated as a percentage of average daily net assets and using the management fee and all other operating expenses, excluding finance costs, direct transaction costs, transaction charges, VAT 0.91% 0.95% recovered, taxation, prior year expenses written back and certain non-recurring items were: ========= ========= The Company’s ongoing charges6, calculated as a percentage of average daily gross assets and using the management fee and all other operating expenses, excluding finance costs, direct transaction costs, transaction charges, VAT 0.81% 0.84% recovered, taxation, prior year expenses written back and certain non-recurring items were: ========= =========
1 Fees paid to the auditors for non-audit services of £9,350 excluding VAT (2022: £8,925) relate to the review of the Condensed Half Yearly Financial Report.
2 Details of the Directors’ emoluments can be found in the Directors’ Remuneration Report in the Annual Report and Financial Statements. The Company has no employees.
3 There is a 4 basis point facility fee chargeable on the full loan facility whether drawn or undrawn.
4 No expenses have been written back during the year (2022: Directors' expenses, miscellaneous fees, legal fees and professional services fees).
5
For the year ended
6 Alternative Performance Measure, see Glossary in the Annual Report and Financial Statements.
6. Finance costs
2023 2022 Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000 Interest paid on 2,370 7,151 9,521 1,177 3,505 4,682 bank loans Interest paid on 5 15 20 5 15 20 bank overdraft --------------- --------------- --------------- --------------- --------------- --------------- Total 2,375 7,166 9,541 1,182 3,520 4,702 ========= ========= ========= ========= ========= =========
7. Dividends
Dividends paid on equity shares:
2023 2022 Record date Payment date £’000 £’000 Final dividend of 23.50p per share for the 10 March 2023 26 April 2023 44,392 49,898 year ended 31 December 2022 (2021: 27.00p) 1st interim dividend of 5.50p per share for the year 5 May 2023 31 May 2023 10,485 10,251 ended 31 December 2023 (2022: 5.50p) 2nd interim dividend of 5.50p per share 8 September for the year 2023 6 October 2023 10,515 10,381 ended 31 December 2023 (2022: 5.50p) 3rd interim dividend of 5.50p per share 24 November for the year 2023 22 December 2023 10,515 10,381 ended 31 December 2023 (2022: 5.50p) --------------- --------------- 75,907 80,911 ========= =========
The total dividends payable in respect of the year ended
Dividends paid or declared on equity shares:
2023 2022 £’000 £’000 1st quarterly interim dividend of 5.50p per share for the year ended31 December 2023 (2022: 10,485 10,251 5.50p) 2nd quarterly interim dividend of 5.50p per share for the year ended31 December 2023 (2022: 10,515 10,381 5.50p) 3rd quarterly interim dividend of 5.50p per share for the year ended31 December 2023 (2022: 10,515 10,381 5.50p) Final dividend of 17.00p per share for the year 32,501 44,392 ended31 December 2023 (2022: 23.50p) --------------- --------------- 64,016 75,405 ========= =========
1
Based on 191,183,036 ordinary shares in issue on
8. Consolidated earnings and net asset value per ordinary share
Total revenue, capital (loss)/earnings and net asset value per ordinary share are shown below and have been calculated using the following:
2023 2022 Net revenue profit attributable to ordinary 64,691 76,013 shareholders (£’000) Net capital (loss)/profit attributable to (143,676) 126,407 ordinary shareholders (£’000) ----------------- ----------------- Total (loss)/profit attributable to ordinary (78,985) 202,420 shareholders (£’000) ========== ========== Equity shareholders’ funds (£’000) 1,160,051 1,299,285 The weighted average number of ordinary shares in issue during the year on which the 190,564,324 186,868,187 earnings per ordinary share was calculated was: The actual number of ordinary shares in issue at the year end on which the net asset 191,183,036 188,753,036 value per ordinary share was calculated was: Earnings per ordinary share Revenue earnings per share (pence) – basic 33.95 40.68 and diluted Capital (loss)/earnings per share (pence) – (75.40) 67.64 basic and diluted ----------------- ----------------- Total (loss)/earnings per share (pence) – (41.45) 108.32 basic and diluted ========== ==========
As at As at 31 December 31 December 2023 2022 Net asset value per ordinary share (pence) 606.78 688.35 Ordinary share price (pence) 587.00 697.00 ========= =========
9. Called up share capital
Ordinary shares Nominal in issue Treasury shares Total shares value number number number £’000 Allotted, called up and fully paid share capital comprised: Ordinary shares of 5p each At 31 December 188,753,036 4,258,806 193,011,842 9,651 2022 Ordinary shares reissued 2,430,000 (2,430,000) – – from treasury ----------------- ----------------- ----------------- ----------------- At 31 December 191,183,036 1,828,806 193,011,842 9,651 2023 ========== ========== ========== ==========
During the year ended
– did not buy back shares into treasury (2022: none);
– reissued 2,430,000 shares (2022: 5,071,920 shares) from treasury for a net consideration after costs of £15,658,000 (2022: £34,902,000).
Since the year end and up to
10. Reserves
Capital reserve Capital arising on reserve revaluation Share Capital arising on of premium redemption Special investments investments Revenue account reserve reserve sold held reserve Group £’000 £’000 £’000 £’000 £’000 £’000 At 31 148,107 22,779 180,736 428,323 440,514 69,175 December 2022 Movement during the year: Total comprehensive income/ (loss): Net profit/ (loss) for – – – 82,077 (225,753) 64,691 the year Transactions with owners, recorded directly to equity: Ordinary shares 3,386 – 12,305 – – – reissued from treasury Share reissue – – (33) – – – costs Dividends – – – – – (75,907) paid --------------- --------------- --------------- --------------- --------------- --------------- At 31 151,493 22,779 193,008 510,400 214,761 57,959 December 2023 ========= ========= ========= ========= ========= =========
Distributable reserves Capital reserve Capital arising on reserve revaluation Share Capital arising on of premium redemption Special investments investments Revenue account reserve reserve sold held reserve Company £’000 £’000 £’000 £’000 £’000 £’000 At 31 148,107 22,779 180,736 426,822 447,745 63,445 December 2022 Movement during the year: Total comprehensive income/ (loss): Net profit/ (loss) for – – – 82,077 (225,577) 64,515 the year Transactions with owners, recorded directly to equity: Ordinary shares 3,386 – 12,305 – – – reissued from treasury Share reissue – – (33) – – – costs Dividends – – – – – (75,907) paid --------------- --------------- --------------- --------------- --------------- --------------- At 31 151,493 22,779 193,008 508,899 222,168 52,053 December 2023 ========= ========= ========= ========= ========= =========
Capital reserve Capital arising on reserve revaluation Share Capital arising on of premium redemption Special investments investments Revenue account reserve reserve sold held reserve Group £’000 £’000 £’000 £’000 £’000 £’000 At 31 138,818 22,779 155,123 345,594 396,836 74,073 December 2021 Movement during the year: Total comprehensive income: Net profit – – – 82,729 43,678 76,013 for the year Transactions with owners, recorded directly to equity: Ordinary shares 9,289 – 25,683 – – – reissued from treasury Share reissue – – (70) – – – costs Dividends – – – – – (80,911) paid --------------- --------------- --------------- --------------- --------------- --------------- At 31 148,107 22,779 180,736 428,323 440,514 69,175 December 2022 ========= ========= ========= ========= ========= =========
Distributable reserves Capital reserve Capital arising on reserve revaluation Share Capital arising on of premium redemption Special investments investments Revenue account reserve reserve sold held reserve Company £’000 £’000 £’000 £’000 £’000 £’000 At 31 138,818 22,779 155,123 344,093 404,014 68,396 December 2021 Movement during the year: Total comprehensive income: Net profit – – – 82,729 43,731 75,960 for the year Transactions with owners, recorded directly to equity: Ordinary shares 9,289 – 25,683 – – – reissued from treasury Share reissue – – (70) – – – costs Dividends – – – – – (80,911) paid --------------- --------------- --------------- --------------- --------------- --------------- At 31 148,107 22,779 180,736 426,822 447,745 63,445 December 2022 ========= ========= ========= ========= ========= =========
Pursuant to a resolution of the Company passed at an Extraordinary General Meeting on
The share premium account and capital redemption reserve are not distributable reserves under the Companies Act 2006. In accordance with ICAEW Technical Release 02/17BL on Guidance on Realised and Distributable Profits under the Companies Act 2006, the special reserve and capital reserves of the Parent Company may be used as distributable reserves for all purposes and, in particular, the repurchase by the Parent Company of its ordinary shares and for payments such as dividends. In accordance with the Company’s Articles of Association, the special reserve, capital reserves and the revenue reserve may be distributed by way of dividend. The Parent Company’s capital gains of £731,067,000 (2022: £874,567,000) comprise a gain on the capital reserve arising on investments sold of £508,899,000 (2022: £426,822,000), a gain on the capital reserve arising on revaluation of listed investments of £189,283,000 (2022: £409,037,000) revaluation gains on unquoted investments of £25,478,000 (2022: £31,477,000) and a revaluation gain on the investment in the subsidiary of £7,407,000 (2022: gain of £7,231,000). The capital reserve arising on the revaluation of listed investments of £189,165,000 (2022: £409,037,000) is subject to fair value movements and may not be readily realisable at short notice; as such it may not be entirely distributable. The investments are subject to financial risks, as such capital reserves (arising on investments sold) and the revenue reserve may not be entirely distributable if a loss occurred during the realisation of these investments. The reserves of the subsidiary company are not distributable until distributed as a dividend to the Parent Company.
11. Valuation of financial instruments
Financial assets and financial liabilities are either carried in the Consolidated and Parent Company Statements of Financial Position at their fair value (investment and derivatives) or at amortised cost (due from brokers, dividends and interest receivable, due to brokers, accruals, cash at bank and bank overdrafts). IFRS 13 requires the Group to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Group are explained in the accounting policies note 2(h) to the Financial Statements above.
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.
The fair value hierarchy has the following levels:
Level 1 – Quoted market price for identical instruments in active markets
A financial instrument is regarded as quoted in an active market if quoted prices are readily available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The Group does not adjust the quoted price for these instruments.
Level 2 – Valuation techniques using observable inputs
This category includes instruments valued using quoted prices for similar instruments in markets that are considered less than active, or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
Valuation techniques used for non-standardised financial instruments such as options, currency swaps and other over-the-counter derivatives include the use of comparable recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity specific inputs.
Over-the-counter derivative option contracts have been classified as Level 2 investments as their valuation has been based on market observable inputs represented by the underlying quoted securities to which these contracts expose the Group.
Level 3 – Valuation techniques using significant unobservable inputs
This category includes all instruments where the valuation technique includes inputs not based on market data and these inputs could have a significant impact on the instrument’s valuation.
This category also includes instruments that are valued based on quoted prices for similar instruments where significant entity determined adjustments or assumptions are required to reflect differences between the instruments and instruments for which there is no active market. The Investment Manager considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value measurement requires judgement, considering factors specific to the asset or liability including an assessment of the relevant risks including but not limited to credit risk, market risk, liquidity risk, business risk and sustainability risk. The determination of what constitutes ‘observable’ inputs requires significant judgement by the Investment Manager and these risks are adequately captured in the assumptions and inputs used in measurement of Level 3 assets or liabilities.
Valuation process and techniques for Level 3 valuations
(a) BHP Brazil Royalty
The Directors engage a mining consultant, an independent valuer with a recognised and relevant professional qualification, to conduct a periodic valuation of the contractual rights and the fair value of the contractual rights is assessed with reference to relevant factors. At the reporting date the income streams from contractual rights have been valued on the net present value of the pre-tax cash flows discounted at a rate the external valuer considers reflects the risk associated with the project. The valuation model uses discounted cash flow analysis which incorporates both observable and non-observable data. Observable inputs include assumptions regarding current rates of interest and commodity prices. Unobservable inputs include assumptions regarding production profiles, price realisations, cost of capital and discount rates. In determining the discount rate to be applied, the external valuer considers the country and sovereign risk associated with the project, together with the time horizon to the commencement of production and the success or failure of projects of a similar nature. To assess the significance of a particular input to the entire measurement, the external valuer performs a sensitivity analysis. The external valuer has undertaken an analysis of the impact of using alternative discount rates on the fair value of contractual rights.
This investment in contractual rights is reviewed regularly to ensure that the initial classification remains correct given the asset’s characteristics and the Group’s investment policies. The contractual rights are initially recognised using the transaction price as it was indicative of the best evidence of fair value at acquisition and are subsequently measured at fair value, taking into consideration the relevant IFRS 13 requirements. In arriving at their estimates of market values, the valuers have used their market knowledge and professional judgement. The Group classifies the fair value of this investment as Level 3.
Valuations are the responsibility of the Directors of the Company. In arriving at a final valuation, the Directors consider the independent valuer’s report, the significant assumptions used in the fair valuation and the review process undertaken by BlackRock’s Pricing Committee. The valuation of unquoted investments is performed on a quarterly basis by the Investment Manager and reviewed by the
(b) Jetti Resources and
The fair value of the investment equity shares of Jetti Resources and
Fair values of financial assets and financial liabilities
The table below sets out fair value measurements using the IFRS 13 fair value hierarchy.
Financial assets/ (liabilities) at fair value Level 1 Level 2 Level 3 Total through profit £’000 £’000 £’000 £’000 or loss at 31 December 2023 – Group Assets: Equity 1,193,969 – 32,695 1,226,664 investments Fixed income 16,924 36,516 – 53,440 securities Investment in contractual – – 18,316 18,316 rights --------------- --------------- --------------- --------------- Total assets 1,210,893 36,516 51,011 1,298,420 ========= ========= ========= ========= Liabilities: Derivative financial – (1,401) – (1,401) instruments – written options --------------- --------------- --------------- --------------- Total 1,210,893 35,115 51,011 1,297,019 ========= ========= ========= =========
Financial assets/ (liabilities) at fair value Level 1 Level 2 Level 3 Total through profit £’000 £’000 £’000 £’000 or loss at 31 December 2022 – Group Assets: Equity 1,250,984 9 35,692 1,286,685 investments Fixed income 68,894 48,066 – 116,960 securities Investment in contractual – – 21,199 21,199 rights --------------- --------------- --------------- --------------- Total assets 1,319,878 48,075 56,891 1,424,844 ========= ========= ========= ========= Liabilities: Derivative financial – (1,227) – (1,227) instruments – written options --------------- --------------- --------------- --------------- Total 1,319,878 46,848 56,891 1,423,617 ========= ========= ========= =========
Financial assets/ (liabilities) at fair value Level 1 Level 2 Level 3 Total through profit £’000 £’000 £’000 £’000 or loss at 31 December 2023 – Company Assets: Equity 1,193,969 – 40,102 1,234,071 investments Fixed income 16,924 36,516 – 53,440 securities Investment in contractual – – 18,316 18,316 rights --------------- --------------- --------------- --------------- Total assets 1,210,893 36,516 58,418 1,305,827 ========= ========= ========= ========= Liabilities: Derivative financial – (1,401) – (1,401) instruments – written options --------------- --------------- --------------- --------------- Total 1,210,893 35,115 58,418 1,304,426 ========= ========= ========= =========
Financial assets/ (liabilities) at fair value Level 1 Level 2 Level 3 Total through profit £’000 £’000 £’000 £’000 or loss at 31 December 2022 – Company Assets: Equity 1,250,984 9 42,923 1,293,916 investments Fixed income 68,894 48,066 – 116,960 securities Investment in contractual – – 21,199 21,199 rights --------------- --------------- --------------- --------------- Total assets 1,319,878 48,075 64,122 1,432,075 ========= ========= ========= ========= Liabilities: Derivative financial – (1,227) – (1,227) instruments – written options --------------- --------------- --------------- --------------- Total 1,319,878 46,848 64,122 1,430,848 ========= ========= ========= =========
A reconciliation of fair value measurement in Level 3 is set out below.
Group Company Level 3 Financial assets at fair value 2023 2022 2023 2022 through profit £’000 £’000 £’000 £’000 or loss at 31 December Opening fair 56,891 33,413 64,122 40,591 value Return of capital – (497) (267) (497) (267) royalty Additions at – 20,106 – 20,106 cost Transfer of equities from – 2 – 2 Level 1 to Level 3 Conversion of equity and – (2,546) – (2,546) transfer to Level 1 Conversion of convertible bonds to equity – (10,160) – (10,160) and transfer to Level 2 Transfer of equities and – (19,305) – (19,305) convertible bonds to Level 2 Total profit or loss included in net profit on investments in the Consolidated Statement of Comprehensive Income: – assets transferred to – 169 – 169 Level 1 during the period – assets transferred to – 14,212 – 14,212 Level 2 during the period – assets held at the end of the (5,383) 21,267 (5,207) 21,320 period --------------- --------------- --------------- --------------- Closing balance 51,011 56,891 58,418 64,122 ========= ========= ========= =========
The Level 3 valuation process and techniques used are explained in the accounting policies in note 2(h). A more detailed description of the techniques is found under ‘Valuation process and techniques’ for Level 3 valuations.
The Level 3 investments as at
In arriving at the fair value of the BHP Brazil Royalty, the key inputs are the underlying commodity prices and illiquidity discount. In arriving at the fair value of Jetti Resources and
The Level 3 valuation process and techniques used by the Company are explained in the accounting policies in notes 2(h) and 2(q) and a detailed explanation of the techniques is also available under ‘Valuation process and techniques’.
The Lifezone SPAC Pipe commitment held at nil value as at
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
As at Range of Reasonable 31 December Unobservable weighted Impact 2023 Valuation average possible on Description £’000 technique input inputs shift1 +/- fair value Discounted Discounted rate– BHP Brazil 18,316 weighted 5.0% – 1.0% £1.0m Royalty cash flows average 8.0% cost of capitalUS$1 ,706– Average 10.0% £1.8m gold pricesUS$1,780 per ounce AverageUS$8 ,397– copper 10.0% £1.2m pricesUS$8,469 per tonne Jetti 27,204 Market Earnings 6.00x 5.0% £1.4m Resources approach multiple Market Price of MCC Mining 5,491 approach recent 5.0% £0.3m transaction Listing suspended Polyus – – valued at nominalUS$0.01 Delisted – Polymetal International – valued at nominalUS$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.
As at Range of Reasonable 31 December Unobservable weighted Impact 2022 Valuation average possible on Description £’000 technique input inputs shift1 +/- fair value Discounted OZ Minerals Discounted rate– Brazil 21,199 weighted 5.0% – 1.0% £1.0m Royalty cash flows average 8.0% cost of capitalUS$1 ,400– Average 10.0% £1.5m gold pricesUS$1,600 per ounce AverageUS$7 ,209– copper 10.0% £1.0m pricesUS$8,510 per tonne Jetti 29,873 Market Earnings 5.93x 5.0% £0.6m Resources approach multiple Market Price of MCC Mining 5,819 approach recent 5.0% £0.3m transaction Lifezone commitment – (see Note 21) Listing suspended Polyus – – valued at nominalUS$0.01 --------------- Total 56,891 =========
1 The sensitivity analysis refers to a percentage amount added or deducted from the input and the effect this has on the fair value.
The sensitivity impact on fair value is calculated based on the sensitivity estimates set out by the independent valuer in its report on the valuation of contractual rights. Significant increases/(decreases) in estimated commodity prices and discount rates in isolation would result in a significantly higher/(lower) fair value measurement. Generally, a change in the assumption made for the estimated value is accompanied by a directionally similar change in the commodity prices and discount rates.
For exchange listed equity investments, the quoted price is the bid price. Substantially, all investments are valued based on unadjusted quoted market prices. Where such quoted prices are readily available in an active market, such prices are not required to be assessed or adjusted for any price related risks, including climate risk, in accordance with the fair value related requirements of the Company’s financial reporting framework.
(e) Capital management policies and procedures
The Group’s capital management objectives are:
– to ensure it will be able to continue as a going concern; and
– to achieve a balanced return of dividends and capital growth over the longer term, by investing primarily in securities of companies in the mining and metals sectors.
This is to be achieved through an appropriate balance of equity capital and gearing. The Company operates a flexible gearing policy which depends on prevailing conditions. The policy is that debt should not be more than 25% of the Group’s net assets.
The Group’s total invested capital at
Under the terms of the overdraft and loan facility agreement, the Group’s total indebtedness shall at no time exceed £230 million or 25% of the Group’s net asset value (whichever is the lowest).
The cash and bank overdraft accounts of the Company and subsidiary in the same currency are managed under a compensated group arrangement and are therefore presented on a net basis in the Group financial statements.
The Board with the assistance of the Investment Manager monitors and reviews the broad structure of the Group’s capital on an ongoing basis. This review includes:
– the planned level of gearing, which takes into account the Investment Manager’s view on the market; and
– the need to buy back equity shares, either for cancellation or to be held in treasury, which takes account of the difference between the NAV per share and the share price (i.e. the level of share price discount or premium).
The Group is subject to externally imposed capital requirements:
– as a public company, the Group has a minimum share capital of £50,000; and
– in order to be able to pay dividends out of profits available for distribution, the Group has to be able to meet one of the two capital restrictions tests imposed on investment companies by law.
During the year, the Group complied with the externally imposed capital requirements to which it was subject.
12. Transactions with the Investment Manager and AIFM
The investment management fee due for the year ended 31 December 2023 amounted to £9,691,000 (2022: £10,646,000). At the year end, £7,262,000 was outstanding in respect of the management fee (2022: £5,443,000).
In addition to the above services, BIM (
The ultimate holding company of the Manager and the Investment Manager is BlackRock, Inc., a company incorporated in
13. Related party disclosure
Directors’ emoluments
At the date of this report, the Board consists of five non-executive Directors, all of whom are considered to be independent of the Manager by the Board. Following the conclusion of the Annual General Meeting on 9 May 2024, the Board will consist of five non-executive Directors.
Disclosures of the Directors’ interests in the ordinary shares of the Company and fees and expenses payable to the Directors are set out in the Directors’ Remuneration Report in the Annual Report and Financial Statements. As at 31 December 2023, £17,000 (2022: £16,000) was outstanding in respect of Directors’ fees.
Significant holdings
The following investors are:
a.
funds managed by the
b. investors (other than those listed in (a) above) who held more than 20% of the voting shares in issue in the Company and are, as a result, considered to be related parties to the Company (Significant Investors).
As at 31 December 2023
Total % of shares held by Number of Significant Significant Investors who Total % of shares held by Investors who are not are not affiliates of Related affiliates of BlackRock Group or BlackRock Funds BlackRock Group or BlackRock, BlackRock, Inc. Inc. 1.29 n/a n/a
As at 31 December 2022
Total % of shares held by Number of Significant Total % of shares held by Significant Investors who Related Investors who are not are not affiliates of BlackRock Funds affiliates of BlackRock Group or BlackRock Group or BlackRock, BlackRock, Inc. Inc. 2.27 n/a n/a
14. Capital commitment
There was no capital commitment at 31 December 2023 (2022: one commitment for US$10,000,000 in relation to the SPAC PIPE commitment for investment in Lifezone SPAC).
15. Publication of non statutory accounts
The financial information contained in this announcement does not constitute statutory accounts as defined in the Companies Act 2006. The Annual Report and Financial Statements for the year ended 31 December 2023 will be filed with the Registrar of Companies after the Annual General Meeting.
The figures set out above have been reported upon by the auditor, whose report for the year ended 31 December 2023 contains no qualification or statement under Section 498(2) or (3) of the Companies Act 2006.
The comparative figures are extracts from the audited financial statements of
16. Annual Report and Financial Statements
Copies of the Annual Report and Financial Statements will be published shortly and will be available from the registered office, c/o The Secretary,
17. Annual General Meeting
The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue,
The Annual Report and Financial Statements will also be available on the BlackRock website at www.blackrock.com/uk/brwm. Neither the contents of the website nor the contents of any website accessible from hyperlinks on the website (or any other website) is incorporated into, or forms part of, this announcement.
For further information, please contact:
Press enquires:
Tel: 020 7294 3616
E-mail: BlackRockInvestmentTrusts@lansons.com or EdH@lansons.com
7 March 2024
12 Throgmorton Avenue
ENDS
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