BlackRock World Mining Trust Plc – Final Results

BlackRock World Mining Trust plc LEI - LNFFPBEUZJBOSR6PW155
 

Annual Results Announcement (Article 4 Transparency Directive, DTR 4.1)
for the year ended 31 December 2017

FINANCIAL HIGHLIGHTS

Attributable to ordinary shareholders	31 December 2017	31 December 2016
Assets
Net assets (£’000)1	804,647	677,546
Net asset value per ordinary share	456.01p	383.98p
Ordinary share price (mid-market)	397.75p	336.50p
Euromoney Global Mining Index	599.99	496.61
Discount to net asset value2	12.8%	12.4%
	--------	--------
Performance
Net asset value per share (total return)3	24.0%	92.9%
Ordinary share price (total return)3	24.2%	100.6%
Euromoney Global Mining Index	20.8%	94.0%
	--------	--------

1.    The change in net assets reflects market movements.
2.    This is the difference between the share price and NAV per share with debt at par. Further details of the calculation of the discount are given in the glossary on page 94 of the Annual Report and Financial Statements.
3.    This measures the Company’s NAV and share price total return, which assumes dividends paid by the Company have been reinvested. Further details of the calculation of performance with dividends reinvested are given in the glossary on page 94 of the Annual Report and Financial Statements.

	Year ended  31 December 2017	Year ended  31 December 2016	Change  %
Revenue
Net revenue profit after taxation (£’000)	28,093	23,303	+20.6
Revenue return per ordinary share	15.92p	13.19p	+20.7
Dividend per ordinary share
– 1st interim	3.00p	4.00p
– 2nd interim	3.00p	–
– 3rd interim	3.00p	–
– Final	6.60p	9.00p
	--------	--------	--------
Total dividends paid and payable	15.60p	13.00p	+20.0
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CHAIRMAN’S STATEMENT

OVERVIEW
It is encouraging to report another positive year for the mining sector in 2017, following the exceptionally strong recovery in 2016. Improving global economic growth, the weaker US dollar, and the impact of the industry’s focus on cost containment since 2011, all combined to bolster commodity prices. Reform measures in China to tackle pollution and remove excess capacity across a range of industries, including steel, coal and aluminium, have also been more effective than initially expected, and have improved profitability across a number of sectors.

Whilst the mining sector has performed strongly over the past two years, we are cognisant of the fact that total shareholder returns are only back at 2014 levels and still a long way below their peak in 2011.

PERFORMANCE
Over the twelve months to 31 December 2017, the Company’s net asset value per share (NAV) has risen by 24.0% and the share price by 24.2%. The Company’s benchmark, the Euromoney Global Mining Index, rose by 20.8% over the same period (all percentages calculated in sterling terms with income reinvested).

The strategy over the last two years to increase exposure to longer term, junior/mid-cap companies with high growth potential has delivered positive relative returns for shareholders. Portfolio holdings in highly cash-generative well-financed majors, as well as firms involved in the extraction of the material required for battery manufacture, have also aided performance versus the benchmark. Additional information on commodity markets and key contributors to, and detractors from, portfolio performance are set out in the Investment Managers’ Report.

For sterling-based investors, returns for the year were negatively impacted by the strength of sterling against the US dollar which appreciated by more than 15% during the year under review.

Since the financial year-end and up until the close of business on 22 February 2018, the Company’s NAV per share has decreased by 2.4% compared with a fall of 1.0% in the benchmark index over the same period.

REVENUE RETURN AND DIVIDENDS
The Company’s revenue return per share for the year ended 31 December 2017 amounted to 15.92p compared with 13.19p for the previous year, representing an increase of 20.7%.

The Board has increased the frequency of dividend payments from twice to four times a year. The first quarterly dividend of 3.00p per share was paid on 30 June 2017 and two further dividends of 3.00p per share were paid on 15 September 2017 and 22 December 2017.

The Directors are recommending the payment of a final quarterly dividend of 6.60p per share for the year ended 31 December 2017. This, together with the quarterly dividends, makes a total of 15.60p per share (2016: 13.00p per share) representing an increase of 20.0% on the payments made in the previous financial year. The final dividend will be paid on 10 May 2018 to shareholders on the Company’s register on 23 March 2018, the ex-dividend date being 22 March 2018.

It remains the Board’s intention to seek to distribute substantially all of the Company’s available income for the year. Dividend distributions from our portfolio holdings make up over half of the Company’s revenue and these look set to grow in the current financial year. Shareholders should be aware that other sources of income face headwinds, such as additional interest rate rises narrowing the spread between our borrowing costs versus the coupon on the bonds we own, lower volatility reducing returns from option writing, and the appreciation of sterling against the US dollar impacting overall income as the majority of revenue is US dollar denominated.

DISCOUNT
The Directors recognise the importance to shareholders that the share price should not trade at a significant discount to the underlying NAV. Accordingly, the Board monitors this closely and will consider the repurchase of shares when appropriate and when it believes it is in shareholders’ interests to do so.

The discount of the Company’s share price to the underlying NAV per share finished the year under review at 12.8% on a cum income basis, having stood at 12.4% at the start of the year. The shares were trading at a discount of 10.9% as at the close of business on 22 February 2018.

The Board is proposing that the Company’s existing authority to buy back up to 14.99% of the Company’s issued share capital, excluding treasury shares, be renewed at the forthcoming Annual General Meeting.

ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at the offices of BlackRock at 12 Throgmorton Avenue, London EC2N 2DL on Wednesday, 25 April 2018 at 11.30 a.m. Details of the business of the meeting are set out in the Notice of Meeting on pages 90 to 93 of the Annual Report and Financial Statements. The Portfolio Managers will make a presentation to shareholders on the Company’s performance and the outlook for the mining sector in the year ahead.

OUTLOOK
This year looks set to be another year of synchronised global economic growth, an environment where commodities generally perform well. We believe the recovery in mined commodity prices, which started in early 2016, is set to continue with another strong year for cash generation and significant earnings upgrades. The sector is also still trading at a material valuation discount to broader equity markets. Key to this positive outlook is that mining companies continue their recent focus on capital discipline, as high levels of free cash flow will then translate into further balance sheet strengthening, returns on capital and shareholder distributions, rather than increased capacity.

The Portfolio Managers, as ever, will take advantage selectively of new opportunities as they arise in the coming year and will continue to focus on companies that show promise in terms of delivering attractive returns.

IAN COCKERILL
Chairman
26 February 2018

STRATEGIC REPORT

The Directors present the Strategic Report of the Company for the year ended 31 December 2017. The aim of the Strategic Report is to provide shareholders with the information to assess how the Directors have performed their duty to promote the success of the Company for the collective benefit of shareholders.

PRINCIPAL ACTIVITY
The Company carries on business as an investment trust and has a premium listing on the London Stock Exchange. Its principal activity is portfolio investment and that of its subsidiary, BlackRock World Mining Investment Company Limited (together the Group), is investment dealing. Investment trusts are pooled investment vehicles which allow exposure to a diversified range of assets through a single investment, thus spreading investment risk.

OBJECTIVE
The Company’s objective is to maximise total returns to shareholders through a worldwide portfolio of mining and metal securities. The Board recognises the importance of dividends to shareholders in achieving that objective, in addition to capital returns.

STRATEGY, BUSINESS MODEL AND INVESTMENT POLICY

Strategy
The Company invests in accordance with the objective given above. The Board is collectively responsible to shareholders for the long-term success of the Company and is its governing body. There is a clear division of responsibility between the Board and BlackRock Fund Managers Limited (the Manager). Matters reserved for the Board include setting the Company’s strategy, including its investment objective and policy, setting limits on gearing (both bank borrowings and the effect of derivatives), capital structure, governance and appointing and monitoring of the performance of service providers, including the Manager.

Business model
The Company’s business model follows that of an externally managed investment trust. Therefore the Company does not have any employees and outsources its activities to third party service providers including the Manager who is the principal service provider. In accordance with the Alternative Investment Fund Managers’ Directive (AIFMD) the Company is an Alternative Investment Fund (AIF). BlackRock Fund Managers Limited is the Company’s Alternative Investment Fund Manager.

The management of the investment portfolio and the administration of the Company have been contractually delegated to the Manager who in turn (with the permission of the Company) has delegated certain investment management and other ancillary services to BlackRock Investment Management (UK) Limited (the Investment Manager). The Manager, operating under guidelines determined by the Board, has direct responsibility for the decisions relating to the day-to-day running of the Company and is accountable to the Board for the investment, financial and operating performance of the Company.

Other service providers include the Depositary, BNY Mellon Trust & Depositary (UK) Limited. The Manager delegates fund accounting services to the Investment Manager, which in turn sub-delegates these services to The Bank of New York Mellon (International) Limited. The Company delegates registration services to the Registrar, Computershare Investor Services PLC.

Investment policy
The Company’s investment policy is to provide a diversified investment in mining and metal securities worldwide. 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.

In order to achieve its objective, it is intended that the Group will normally be fully invested, which means at least 90% of the gross assets of the Company and its subsidiary will be invested in stocks, shares, royalties and physical metals. However, if such investments are deemed to be overvalued, or if the Manager finds it difficult to identify attractively priced opportunities for investment, then up to 25% of the Group’s assets may be held in cash or cash equivalents. Risk is spread by investing in a number of holdings, many of which themselves are diversified businesses.

The Group may occasionally utilise derivative instruments such as options, futures and contracts for difference, if it is deemed that these will, at a particular time or for a particular period, enhance the performance of the Group in the pursuit of its objectives. The Company is also permitted to enter into stock lending arrangements.

As approved by shareholders in August 2013, the Group may invest in any single holding, of quoted or unquoted investments, that would represent up to 20% of gross assets at the time of acquisition. Although investments are principally in companies listed on recognised stock exchanges, the Company may invest up to 20% of the Group’s gross assets in investments other than quoted securities. Such investments include unquoted royalties, equities or bonds. In order to afford the Company the flexibility of obtaining exposure to metal and mining related royalties, it is possible that, in order to diversify risk, all or part of such exposure may be obtained directly or indirectly through a holding company, a fund or another investment or special purpose vehicle, which may be quoted or unquoted. The Board will seek the prior approval of shareholders to any unquoted investment in a single company, fund or special purpose vehicle or any single royalty which represents more than 10% of the Group’s assets at the time of acquisition.

In March 2015 the Board refined the guidelines associated with the Company’s royalty strategy and proposed to maintain the 20% maximum exposure to royalties but the royalty/unquoted portfolio should itself deliver diversification across operator, country and commodity. To this end, new investments into individual royalties/unquoted investments should not exceed circa 3% of gross assets at the time of investment. Total exposure to any single operator, including other issued securities such as debt and/or equity, where greater than 30% of that operator’s revenues come from the mine over which the royalty lies, must also not be greater than 3% at the time of investment. In addition, the guidelines require that the Investment Manager must, at the time of investment, manage total exposure to a single operator, via reducing exposure to listed securities if they are also held in the portfolio, in a timely manner where royalties/unquoted investments are revalued upwards. In the jurisdictions where statutory royalties are possible (in countries where mineral rights are privately owned) these will be preferred and in respect of contractual royalties (a contractual obligation entered into by the operator and typically unsecured) the valuation must take into account the higher credit risk involved. Board approval will continue to be required for all royalty/unquoted investments.

While the Company may hold shares in other listed investment companies (including investment trusts), the Company will not invest more than 15% of the Group’s gross assets in other UK listed investment companies.

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.

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 15.4% and, at the financial reporting date, net gearing (calculated as borrowings less cash as a percentage of net assets) stood at 12.2% of shareholders’ funds (2016: 12.4%). For further details on borrowings refer to note 14 on page 67 of the Annual Report and Financial Statements.

No material change will be made to the investment policy without shareholder approval.

PORTFOLIO ANALYSIS
As at 31 December 2017, the investment in Avanco Resources was held at Directors’ valuation, representing a total of £18,943,000 (US$25,626,000) (2016: £19,917,000 (US$24,611,000)). Unquoted investments can prove to be more risky than listed investments.

Information regarding the Company’s investment exposures is contained within the ten largest investments, the investments listing and portfolio analysis below. Further information regarding investment risk and activity throughout the year can be found in the Investment Manager’s Report.

CONTINUATION VOTE
As agreed by shareholders in 1998, an ordinary resolution for the continuation of the Company is proposed at each Annual General Meeting. Following market weakness in the mining sector in recent years, January 2016 appears to have been the low point in the cycle given the scale of upwards moves that have since followed. The industry has taken action to return commodities into balance and the sector has responded positively. The Directors therefore recommend that shareholders vote in support of the Company’s continuation.

DIVERSIFYING SOURCES OF INCOME

2015 Revenue Breakdown

Ordinary Dividends	61.9%
Special Dividends	0.2%
Fixed Interest	15.8%
Option Premium Income	22.1%
Royalty Income	0.0%
Other	0.0%

2016 Revenue Breakdown

Ordinary Dividends	47.6%
Special Dividends	3.6%
Fixed Interest	20.8%
Option Premium Income	22.2%
Royalty Income	5.5%
Other	0.3%

2017 Revenue Breakdown

Ordinary Dividends	57.3%
Special Dividends	1.8%
Fixed Interest	15.8%
Option Premium Income	17.8%
Royalty Income	7.1%
Other	0.2%

PERFORMANCE
In the year to 31 December 2017, the Company’s NAV has risen by 24.0% compared with an increase in the Euromoney Global Mining Index of 20.8%. The Company’s share price rose by 24.2% over the same period (all figures calculated in sterling terms with income reinvested).

RESULTS AND DIVIDENDS
The results for the Company are set out in the Consolidated Statement of Comprehensive Income. The total profit for the year, after taxation, was £158,863,000 (2016: £333,912,000) of which £28,093,000 (2016: £23,303,000) is revenue profit.

It is the Board’s intention to distribute substantially all of the available income. The Directors recommend the payment of a final dividend as set out in the Chairman’s Statement. Dividend payments for the year ended 31 December 2017 amounted to £27,527,000 (2016: £22,939,000).

KEY PERFORMANCE INDICATORS
The Board measures the development and success of the Company’s business through achievement of the Company’s investment objective, to maximise total returns through the cycle, which is considered to be the most significant key performance indicator for the Company.

Performance measured against various indices
The Board reviews and compares, at each meeting, the performance of the portfolio as well as the net asset value and share price for the Company and various indices. Information on the Company’s performance is given in the Chairman’s Statement and the Investment Manager’s Report. The Company outperformed its benchmark index in the year ended 31 December 2017.

Share price discount to net asset value (NAV) per share
The Company publishes a NAV per share figure on a daily basis through the official newswire of the London Stock Exchange. This figure is calculated in accordance with the Association of Investment Companies (AIC) formula. At each Board meeting, the Board monitors the level of the Company’s discount to NAV and reviews the average discount/premium for the Company’s relevant sector. In the year to 31 December 2017, the discount remained relatively flat rising from 12.4% on a cum income basis to 12.8%.

The Board considers the use of share buybacks to enhance shareholder value. At its regular meetings, it also undertakes reviews of marketing/investor relations and sales reports from the Manager and considers their effectiveness, as well as measures of investor sentiment.

Further details setting out how the discount or premium at which the Company’s shares trade is calculated are included in the glossary on page 94 of the Annual Report and Financial Statements.

Ongoing charges
The ongoing charges are based on actual costs incurred in the year as being the best estimate of future costs. The Board reviews the Company’s ongoing charges and monitors expenses to ensure that the total costs incurred by shareholders in the running of the Company remain competitive when measured against peer group funds. An analysis of the Company’s costs, including the management fee, Directors’ fees and general expenses, is submitted to each Board meeting. The management fee is reviewed at least annually. A definition setting out in detail how the operating charges ratio is calculated is included in the glossary on pages 94 and 95 of the Annual Report and Financial Statements.

The key performance indicators (KPIs) used to measure the progress and performance of the Company over time and which are comparable to those reported by other investment trusts are set out below:

	Year ended  31 December 2017	Year ended  31 December 2016
Net asset value total return1	+24.0%	+92.9%
Share price total return1	+24.2%	+100.6%
Benchmark total return	+20.8%	+94.0%
Discount to net asset value2	12.8%	12.4%
Revenue earnings per share	15.92p	13.19p
Total dividends per share	15.60p	13.00p
Ongoing charges3	1.00%	1.10%
Ongoing charges on gross assets4	0.88%	0.96%

1.   This measures the Company’s share price and NAV total return, which assumes dividends paid by the Company have been reinvested.
2.   This is the difference between the share price and the NAV per share with debt at par.
3.   Ongoing charges represent the management fee and all other operating expenses, excluding finance costs, transaction costs and taxation, as a % of average shareholders’ funds.
4.   Ongoing charges based on gross assets represent the management fee and all other operating expenses, excluding finance costs, transaction costs and taxation, as a % of average 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 only in the event of an increase in NAV on a quarter-on-quarter basis.

The Board monitors the above KPIs on a regular basis. Additionally, it regularly reviews a number of indices and ratios to understand the impact on the Company’s relative performance of the various components such as asset allocation and stock selection.

PRINCIPAL RISKS
The Company is exposed to a variety of risks and uncertainties. The Board has put in place a robust process to assess and monitor the principal risks. A core element of this process is the Company’s risk register which identifies the risks facing the Company and assesses the likelihood and potential impact of each risk and the controls established for mitigation. A residual risk rating is then calculated for each risk based on the outcome of the assessment. This approach allows the effect of any mitigating procedures to be reflected in the final assessment. Risks are reassessed and the risk environment in which the Company operates is also monitored and regularly appraised. New risks are also added to the register as they are identified which ensures that the document continues to be an effective risk management tool.

The risk register, its method of preparation and the operation of key controls in the Manager’s and other third party service providers’ systems of internal control, are reviewed on a regular basis by the Audit & Management Engagement Committee. In order to gain a more comprehensive understanding of the Manager’s and other third party service providers’ risk management processes and how these apply to the Company’s business, the Audit & Management Engagement Committee periodically receives and reviews internal control reports from the Company’s service providers.

In relation to the 2016 update to the UK Corporate Governance Code, the Board is confident that the procedures that the Company has put in place are sufficient to ensure that the necessary monitoring of risks and controls has been carried out throughout the reporting period. The Board will continue to assess the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity, on an ongoing basis.

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.

Principal Risk	Mitigation/Control
Counterparty
The potential loss that the Company could incur if a counterparty is unable (or unwilling) to perform on its commitments.	Due diligence is undertaken before contracts are entered into and exposures are diversified across a number of counterparties. The Depositary is now liable for restitution for the loss of financial instruments held in custody unless able to demonstrate the loss was a result of an event beyond its reasonable control.
Investment performance
Returns achieved are reliant primarily upon the performance of the portfolio. An inappropriate investment policy may lead to underperformance compared to the benchmark index, a loss of capital and dissatisfied shareholders.	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; monitors and maintains 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; receives and reviews regular reports showing an analysis of the Company's performance against the Euromoney Global Mining Index and other similar indices, including the performance of major companies in the sector; and has been assured that the Investment Manager has training and development programmes in place for its employees and its recruitment and remuneration packages are developed in order to retain key staff.
Legal & Compliance
The Company has been accepted 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 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. Any 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. The Company is required to comply with the provisions of the Companies Act 2006, the Alternative Investment Fund Managers’ Directive, the UK Listing Rules, Disclosure and Transparency Rules, the Market Abuse Regulations, the Bribery Act 2010 and Criminal Finances Act 2017.	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 are also carefully and regularly monitored. The Company Secretary, the 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. Following authorisation under the Alternative Investment Fund Managers’ Directive (AIFMD), the Company and its Alternative Investment Fund Manager (AIFM) are subject to the risks that the requirements of the Directive are not correctly complied with. The Board and the AIFM monitor changes in government policy and legislation which may have an impact on the Company. The Market Abuse Regulations came into force across the European Union on 3 July 2016. The Board has taken steps to ensure that individual Directors (and their Persons Closely Associated) are aware of their obligations under the regulation and has updated internal processes, where necessary, to ensure the risk of non-compliance is effectively mitigated.
Market
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, including the impact of the UK leaving the EU, can also substantially and adversely affect the securities and, as a consequence, the Company’s prospects and share price.	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.
Operational
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, BNY Mellon Trust & Depositary (UK) Limited (the Depositary) and The Bank of New York Mellon (International) Limited, who 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. Failure by any service provider to carry out its obligations 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.	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. Third party service providers, BlackRock and The Bank of New York Mellon, produce internal control 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 & Management Engagement Committee. The Company’s assets are subject to a strict liability regime and, in the event of a loss of assets, the Depositary must return 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.
Financial
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.	Details of these risks are disclosed in note 18 on pages 68 to 82 of the Annual Report and Financial Statements, together with a summary of the policies for managing these risks.
Marketing
Marketing efforts are inadequate or do not comply with relevant regulatory requirements. There is a failure to communicate adequately with shareholders or identify potential new shareholders resulting in reduced demand for the Company’s shares and a widening of the discount.	The Board reviews marketing strategy and initiatives and the Manager is required to provide regular updates on progress. BlackRock has a dedicated investment trust sales team visiting both existing and potential clients on a regular basis. Data on client meetings and issues raised are provided to the Board on a regular basis. All investment trust marketing documents are subject to appropriate review and authorisation.
Securities lending
The Company may engage in securities lending. Engaging in securities lending will have a credit risk exposure to the counterparties to any securities lending contract. The Company’s investments can be lent to counterparties over a period of time. A default by the counterparty, combined with a fall in the value of the collateral below that of the value of the securities lent, may result in a reduction in the value of the Company.	The Company intends to ensure that all securities lending is fully collateralised but, to the extent that any securities lending is not fully collateralised (for example due to timing issues arising from payment lags), the Company will have a credit risk exposure to the counterparties to the securities lending contracts. Further details on securities lending are disclosed on page 66 and pages 73 to 75 of the Annual Report and Financial Statements.

VIABILITY STATEMENT
In accordance with provision C.2.2 of the UK Corporate Governance Code, the Directors have assessed the prospects of the Company for a period of three years. This is generally the investment holding period investors consider while investing in the natural resources companies sector. In its assessment of the viability of the Company the Directors have noted that:

• the Company invests predominantly in highly liquid, large listed companies so its assets are readily realisable and provide a level of cash receipts in the form of interest and dividends;

• the Company invests in mining companies with long life assets;

• the Company’s forecasts for revenues, expenses and liabilities are relatively stable and it has largely fixed overheads which comprise a very small percentage of net assets (1.00%); and

• the business model should remain attractive for much longer than three years, unless there is a significant deterioration in commodity markets or further regulatory change.

The Company will undertake its annual continuation vote at the forthcoming Annual General Meeting and the Board has reviewed the potential impact that this may have on the Company’s viability. The Board is confident that the continuation vote will be passed and have prepared the viability statement under this assumption.

The Directors have also reviewed: 

• the Company’s principal risks and uncertainties as set out above;

• the potential impact of a fall in commodity equity markets on the value of the Company’s investment portfolio and underlying dividend income;

• the ongoing relevance of the Company’s investment objective, business model and investment policy; and

• the level of demand for the Company’s shares.

The Directors reviewed the assumptions and considerations underpinning the Company’s existing going concern assertion which are based on: 

• processes for monitoring costs;

• key financial ratios;

• evaluation of risk management controls;

• compliance with the investment objective;

• portfolio risk profile;

• share price discount to NAV;

• gearing; and

• counterparty exposure and liquidity risk.

Based on the results of their analysis, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment.

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 with no employees, the Company has no direct social or community responsibilities or impact on the environment. However, the Company believes that it is in shareholders’ interests to consider human rights issues and environmental, social and governance factors when selecting and retaining investments. Details of the Company’s policy on socially responsible investment are set out on page 40 of 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. Accordingly, the Directors consider that the Company is not required to make any slavery or human trafficking statement under the Modern Slavery Act 2015. In any event, the Board considers the Company’s supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

DIRECTORS, GENDER REPRESENTATION AND EMPLOYEES
The Directors of the Company on 31 December 2017, all of whom held office throughout the year, are set out in the governance structure and Directors’ biographies on page 27 of the Annual Report and Financial Statements. The Board consists of four male Directors and two female Directors. The Company does not have any employees; therefore there are no disclosures to be made in that respect.

The information set out on pages 14 to 26 of the Annual Report and Financial Statements forms part of this Strategic Report. The Strategic Report was approved by the Board at its meeting on 26 February 2018.

BY ORDER OF THE BOARD
CAROLINE DRISCOLL
FOR AND ON BEHALF OF
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
Company Secretary
26 February 2018

TRANSACTIONS WITH THE AIFM AND THE INVESTMENT MANAGER
BlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six months’ notice. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Further details of the investment management contract are disclosed in the Directors' Report on page 28 of the Annual Report and Financial Statements.

The investment management fee due for the year ended 31 December 2017 amounted to £6,274,000 (2016: £5,027,000). At the year end, £3,515,000 (2016: £1,532,000) was outstanding in respect of the management fees.

In addition to the above services, BlackRock has provided the Company with marketing services. The total fees paid or payable for these services for the year ended 31 December 2017 amounted to £93,000 excluding VAT (2016: £104,000 excluding VAT). Marketing fees of £93,000 were outstanding as at 31 December 2017 (2016: £94,000).

RELATED PARTY TRANSACTIONS

The Board consists of six non-executive Directors all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £45,000, the Chairman of the Audit & Management Engagement Committee/Senior Independent Director receives an annual fee of £37,500, and each other Director receives an annual fee of £30,000. All six members of the Board hold shares in the Company. Mr Buchan holds 29,000 ordinary shares, Mr Cheyne 24,000 ordinary shares, Mr Cockerill 40,789 ordinary shares, Mr Edey 20,000 ordinary shares, Ms Mosely 7,400 ordinary shares and Ms Lewis 2,429 ordinary shares. The amount of Directors’ fees outstanding at 31 December 2017 was £16,875 (2016: £16,875).

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 under IFRS as adopted by the European Union.

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 IFRS as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements;

• provide additional disclosures when compliance with the specific requirements in IFRS as adopted by the European Union is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s and Company’s financial position and financial performance; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are also responsible for preparing the Strategic Report, Directors’ Report, the Directors’ Remuneration Report, the Corporate Governance Statement and the Report of the Audit & Management Engagement Committee in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure and Transparency Rules. The Directors have delegated responsibility to the Manager for the maintenance and integrity of the Company’s corporate and financial information included on the BlackRock website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors confirm to the best of their knowledge that:

• the financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and net return of the Group and Company; and

• the Strategic Report contained in the Annual Report and Financial Statements includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces.

The 2016 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 & Management Engagement 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 & Management Engagement Committee’s Report on pages 42 to 45 of the Annual Report and Financial Statements. As a result, the Board has concluded that the Annual Report and Financial Statements for the year ended 31 December 2017, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group’s and Company’s position, performance, business model and strategy.

FOR AND ON BEHALF OF THE BOARD
IAN COCKERILL
Chairman
26 February 2018

INVESTMENT MANAGER’S REPORT

PORTFOLIO PERFORMANCE
This time last year we reported on a spectacular recovery in mining company share prices that led to a 100.6% increase in the share price of the Company. Although the move was large, it was from a multi-year low and well overdue. 2017, as forecast in the outlook section from last year, has been less spectacular but nonetheless a year of very strong returns.

For the calendar year 2017, in sterling terms with income reinvested, the Company’s undiluted net asset value (NAV) and share price rose by 24.0% and 24.2% respectively. By comparison, in sterling terms, the Euromoney Global Mining Index rose by 20.8% (with income reinvested) which leaves the return generated by the Company ahead of its reference benchmark net of both fees and expenses.

The chart on page 14 of the Annual Report and Financial Statements shows that it has not all been plain sailing though as the first half of the year saw share prices post strong gains early on only to rapidly give them all back and more before rallying into the end of June. The recovery from mid-year lows continued through to the year end as confidence on the global economy combined with improving commodity prices. Another supportive factor has been the absence of material cost inflation which has allowed the companies to benefit from expanding margins. During this period the deliberate decision to have exposure to high growth juniors, as well as highly cash generative major companies, ended up delivering both a positive absolute return as well as a strong relative return compared to the reference benchmark.

It is pleasing to see that the mix of strategies in the Company delivered during the year. The high concentration of exposure to cash generative and well financed majors added value, as well as being a key source of income. The chart below highlights the cumulative contribution from dividends since the IPO of the Company in 1993 at 100p per share. During this time, the shares have delivered a NAV total return of 679.2% or 8.9% per annum versus the FTSE 100 Index of 443.0% and 7.3% respectively and 490.4% and 7.7% for the FTSE All Share.

The decision in 2016 to increase exposure to junior and mid-sized companies also added value as the companies advanced projects either to development stage or brought them into production, both of which triggered share price re-ratings. Another key source of performance came from backing battery material producers whose share prices soared during the year. The growth in end demand for these minerals caused a huge rally in both commodity prices and the share prices of companies producing them. With demand for batteries set to grow for years to come, this area is likely to be a key part of the Company but we remain aware of just how volatile ‘vogueish’ commodities can be.

HISTORICAL REVENUE EARNINGS PER SHARE AND DIVIDENDS

Dividend per share (pence)

	Revenue earnings per ordinary share	Dividends per ordinary share
1994	0.86	0.77
1995	1.32	1.00
1996	1.19	1.15
1997	0.91	0.85
1998	1.43	2.35
1999	1.00	1.20
2000	1.63	1.30
2001	3.82	3.15
2002	2.52	2.10
2003	1.73	1.70
2004	3.01	2.50
2005	3.39	2.80
2006	8.78	4.50
2007	8.25	5.50
2008	5.64	5.50
2009	4.90	4.75
2010	6.57	6.00
2011	14.71	14.00
2012	21.78	21.00
2013	22.36	21.00
2014	21.13	21.00
2015	18.47	21.00
2016	13.19	13.00
2017	15.92	15.60

MINING SECTOR OVERVIEW
The year started with a range of unnerving risks that could easily have upset the supportive global growth environment. The outlook for elections in Europe was particularly worrying after the surprise Brexit vote in 2016. Increasing popularity of the anti EU momentum across Europe presented risks that there would be another surprise result in the forthcoming elections in Germany, France and Holland. Thankfully, these all passed without such a result and growth across Europe has significantly surprised to the upside.

In Asia, North Korea fired numerous missiles during the year but the situation seemed to cool down in the second half of 2017 on the back of additional sanctions put in place by the United Nations. Another risk was the 19th National Congress of the Communist Party of China during October. This event could have seen a change in direction for the country but it actually cemented the power and agenda of President Xi which should be supportive for economic stability, further growth and an enlarged reform agenda. It is important that shareholders understand the impact that these reforms have had on the commodity market. Huge falls in fixed asset investment into new materials supply, as well as closures of existing capacity, have seen the role of China in commodity markets evolve over the last 18 months. As capacity has been closed, China has moved from being a net supplier to a net importer in some metals which has tightened up seaborne trade and in turn lifted prices. Other reforms have seen China adjust the quality of commodities that consumers can use so that they are able to meet new environmental limits on pollution. With these reforms set to stay in place and in all likelihood stricter ones to come, it bodes well for China to act not just as a leader for demand but also as a support on the supply side.

In the US, economic growth again beat expectations as President Trump managed to garner support for his tax reform programme. The changes bode well for inward investment into the US economy as companies take advantage of the ability to ‘onshore’ foreign cash at a lower tax rate.

With the global economic backdrop so supportive to commodity demand, the move higher in commodity prices has been assisted by both a weaker than expected US dollar and the five year trend of underinvestment into new capacity by producers. During the year, base metal prices rose significantly with most up between 20% and 35%. On the other hand, precious metal prices have been pedestrian by comparison (apart from palladium which is up by 56%). Bulk commodity prices have continued to be range bound but at very profitable levels for the producers.

After the strong rally in 2016, our main fear had been that management teams would use the recovery to start allocating capital to new growth projects just when demand and supply were moving back into equilibrium. Thankfully this has not happened and it has been pleasing to see the continued discipline deployed by the companies. Most have continued to pay off debt and complete portfolio simplification, which has allowed them to increase dividends with some even buying back shares. Despite this, the sector has traded all year at a significant discount to historic multiples and it seems that there is a lack of investor confidence in the sustainability of the recovery due to fears that capital discipline will be temporary. With most investors still on the side-lines, this bodes well for the chance of a rotation back into the sector during 2018.

Outside of the main commodity themes, the Company has been building exposure to companies that supply raw materials into the rapidly growing battery market. This theme was particularly important during 2017 as share prices for companies involved in this area delivered sector leading returns due to the increasing confidence about a shift away from the internal combustion engine and rising market share for the range of electric or hybrid vehicles. There is more detail on this area later in the report.

Lastly, it is important to note that performance of the portfolio is now being driven more by the underlying themes we try to get exposure to rather than just commodity beta. These themes revolve around: resource replenishment; deleveraging; value; capital discipline; asset quality and growth. Companies are chosen primarily for the ability to enhance the chances of exploiting these themes rather than the commodity they produce. However, there are clear exceptions to this, such as the portfolio’s battery material exposure. We believe that by following this longer term strategy it will drive outperformance over the medium-term rather than just focusing on short-term commodity related beta for performance.

BASE METALS
It was another strong year for base metals, with improving fundamentals from both the demand and supply side of the equation. A key feature of commodity markets in 2017 has been China’s influence on supply via its reform programme, as well as its edict to improve environmental standards across the country. This supported a number of the base metals particularly during the second half of the year, which combined with the sector’s lack of investment into new supply, sees well supported markets for the base metals, in particular copper, over the medium-term.

The flagship base metal, copper, continued its upward momentum in 2017 increasing by 30.5% year-on-year. Supply side disruptions dominated the market during the first half of the year, resulting in the first fall in mined copper output for many years. While we see production growth returning, which should result in a broadly stable copper market in 2018, this year sees the last of the copper megaprojects being commissioned that were committed to during the previous cycle. The supply-driven copper deficit which has been ‘three years away’ for much of the past five years, is now only 18-24 months away from impact. The Company has 20.2% of the portfolio exposed to pure play copper producers (a combination of debt and equity), seeing it well positioned to benefit from a tightening in the copper market over the medium-term. Our copper exposed equities were among the strongest contributors to relative performance during the year, led by our royalty and equity position in Avanco Resources, as well as the Company’s holding in Sociedad Minera Cerro Verde (3.8% of the portfolio) which successfully ramped-up its Cerro Verde mine during the year and Glencore targeting 25% growth in copper between 2018 and 2020 as it ramps-up its Katanga operations in the Democratic Republic of Congo.

Last year’s darling of the base metals, zinc, continued its strong run in 2017 rising by 30.5%, with the average price increasing by 38.2% year-on-year. Zinc’s price gains over the past two years have been spectacular with the price rallying from US$1,568/t at the beginning of 2016 to US$3,319/t by the end of 2017. Falling mine supply, increased environmental standards across Chinese domestic capacity and Glencore’s curtailment of capacity in 2015, has materially tightened the market, with inventories today at their lowest level since mid-2008 at just under seven days of global zinc consumption. The market continues to look tight into 2018, even after Glencore confirmed it will restart its Lady Loretta mine and bring back 160ktpa of zinc by 2019. During the course of 2017 the Company has looked to selectively increase its zinc exposure via its holdings in diversified producers Glencore (8.7% of the portfolio), Teck Resources (5.7% of the portfolio) and Lundin Mining (1.4% equity and 1.5% debt), as well as pure play producers such as Trevali Mining (0.5% of the portfolio), Titan Mining (0.5% of the portfolio), Volcan (0.2% of the portfolio) and Arizona Mining (0.4% of the portfolio).

The Chinese Government’s push to rationalise the aluminium industry via its supply-side reform programme saw it become the best performing base metal in 2017, up 32.4% year-on-year. While the demand outlook for aluminium has been very strong in recent years, rapid growth in Chinese supply has left the market in oversupply. China’s supply-side reform programme, has seen 4.5mtpa of ‘illegal’ capacity closed this year, with strict requirements around the amount of new capacity that will be allowed to come online in 2018. This is likely to see lower aluminium exports from China, which over the medium-term, may require the restart of ex-China capacity.

Finally, nickel enjoyed a strong run during the second half of 2017 following the market’s excitement around the potential for higher demand via electric vehicles (EV). While we see battery chemistry shifting over time to a higher nickel content, the EV story is unlikely to impact nickel for a number of years, with the near-term price to be driven by the cost of making nickel pig iron (NPI) in China. As noted in our Interim Report, the Company has reduced its position to the world’s largest nickel producer Norilsk Nickel, as dividend expectations have been cut over the last 12 months.

Selected commodity price changes during 2017
 

	Price  31 December 2017	% change  12 month	% change  average 2017  vs. 2016
Precious metals US$/oz
Gold	1,303.5	12.6	0.8
Silver	17.01	6.0	-0.5
Platinum	927	3.2	-4.0
Base metals US$/lb
Aluminium	1.02	32.4	22.6
Zinc	1.51	30.5	38.2
Copper	3.27	30.5	26.7
Nickel	5.76	27.5	8.5
Lead	1.13	24.3	23.9
Tin	9.12	-5.2	11.8
Industrial commodities
Lithium Carbonate CIF to China spot 99% US$/t	25,512	40.6	-1.8
Uranium US$/lb	23.8	17.3	-16.7
Thermal Coal US$/t Newcastle	101.7	7.3	34.4
Coking Coal US$/t	193.0	0.5	31.9
Iron Ore – fines 62% Fe China Import US$/t	74.0	-7.5	21.3

Sources: Datastream and Bloomberg.

GOLD & PRECIOUS METALS
Gold has been remarkably stable over the past couple of years with the average gold and silver price flat year-on-year. This range bound commodity environment saw a muted performance by the equities over the course of the year, with the FTSE Gold Mines Index up by 0.6% (GBP terms). Although 2017 has been a positive one for gold finishing up 12.6% to US$1,303/oz, it has underperformed the base metals and bulk commodities and the Company has run a relative underweight to precious metals during the year.

Two opposing forces have largely driven the gold price in 2017 – on the one hand, a normalisation of Quantitative Easing (QE) with the US Federal Reserve (the Fed) moving to Quantitative Tightening and raising rates, offset by weakness in the US dollar and building inflationary pressures with the improving industrial outlook. As we saw in 2016, geopolitics are having an increasing influence on the gold price, with the price rallying ahead of European elections at the beginning of the year, building tensions in the Middle East in the second half, and the ongoing threat of a nuclear missile launch from North Korea.

While the QE era which has supported gold prices since the Global Financial Crisis is now coming to a close and likely to act as a headwind to gold, we would argue this is largely factored into today’s price. Key for gold in 2018 will be the pace at which the Fed raise rates and whether or not they choose to remain behind the curve.

Turning to the fundamentals, the outlook for mine supply continues to deteriorate with the World Gold Council forecasting a decline in supply from 2019. The industry’s lack of investment in exploration in recent years has seen the average reserve life of the industry decline to 12 years, the lowest level in five years. The industry’s need to replenish reserves remains ever present, supporting our preference for high quality, longer life producers with resource bases sufficient to replace reserves that are mined each year. From a demand perspective, demand from jewellery, central banks and bars/coins is running below its five-year average; however, demand from Exchange Traded Funds (ETFs) i.e. investment demand, is running above trend with net inflows of 6.5Moz into Gold ETFs in 2017, although below the 15Moz in 2016.

As noted above, gold equities as measured by the FTSE Gold Mines Index returned 0.6% (GBP terms) for the year, underperforming the industrial miners. While the Company had a relative underweight position to precious metals, our precious metals exposure detracted from performance in 2017. This was largely driven by stock specific issues across our smaller/mid cap gold holdings including Eldorado Gold which continues to have permitting challenges in Greece and disappointingly announced recovery issues at its key asset, Kisladag, at the end of the year. Another notable detractor was Banro, where we had converted our position in the gold-linked preference share into cash and equity earlier in the year. Ongoing operational issues and subsequent liquidity constraints saw the company announcing a restructuring plan supported by its major stakeholders. As at the end of the year, the Company had exited its entire position in Banro. On the positive side, underweights to major producers Barrick and Goldcorp aided relative performance, with the former impacted by the dispute with the Tanzanian Government over Acacia Mining.

The Company’s diamond exposure has been a disappointment in 2017; however, we remain confident in an improvement in earnings and share prices of our diamond holdings in 2018. Mountain Province (0.5% equity and 1.6% debt), which in conjunction with De Beers commissioned the Gauche Kue diamond mine in Canada during the year, saw a larger amount of fluorescences in the stones than originally forecast. This resulted in larger discounts to forecast pricing and subsequently put pressure on the company’s ability to refinance. Towards the end of the year we participated in a debt offering by the company securing an attractive yield of 8% and providing Mountain Province with greater balance sheet flexibility than their previous debt package. Finally, Petra Diamonds (0.7% of the portfolio) disappointed the market downgrading 2017 production guidance with a slower ramp-up at Cullinan, as well as a dispute with the Tanzania Government at its Williamson mine. This, in conjunction with an already tight balance sheet, put significant pressure on the share price, which was down 50% in 2017.

BULK COMMODITIES
The biggest beneficiary of China’s supply-side reform programme in 2017 has been the global steel industry. Significant cuts to blast furnace and induction furnace capacity has seen both prices and margins improve, with steel producers chasing productivity to maximise output. This has played into the hands of companies producing high-grade iron ore and metallurgical coking coal with the Company benefiting via its holdings in Vale (7.3% of the portfolio), BHP Billiton (8.4% of the portfolio) and Rio Tinto (8.8% of the portfolio).

One of the most interesting features of the iron ore market this year has been the widening of the discount between lower quality (58% Fe grade) and higher quality (65% Fe grade) iron ore. This spread has widened significantly over the last 12 months, driven by steel producers’ desire to maximise productivity. The debate in the market has centred on whether this widening is cyclical or structural. While the high level of steel mill profitability suggests part of the discount is cyclical, we see a greater proportion of it as structural, with China continuing to limit steel capacity, as well as improve environmental standards (benefiting higher grade material). This changing dynamic saw us exit our position in Fortescue during 2017, and the Company benefiting materially from the position we initiated in Vale during 2016 with the stock up 60% (US$) – one of the best performing miners in 2017. Vale has seen a complete transformation of its business over the last year with margins expanding as it ramps-up its S11D iron ore project, capital expenditure rolling off and asset sales completing which have enabled the company to rapidly de-gear the balance sheet targeting a US$10bn net debt position by the end of 2018. To put icing on the cake, the shareholders of Vale approved a new corporate structure which will see the shares migrate to a single share class structure and should further improve corporate governance and liquidity.

Despite record cash generation, we have been particularly encouraged by the discipline shown by the major iron ore producers during the year who remain focused on maximising value over volume. With average iron ore prices increasing by 20% year-on-year, we have seen substantial earnings upgrades for the producers underpinning material dividend increases for companies such as BHP and Rio Tinto.

Improved profitability across the steel industry has also benefited metallurgical (met) coal with average prices up by 32% year-on-year. In recent years there has been significant volatility in the met coal price largely due to weather events in Australia. The spot met coal price has traded significantly above the cost curve during 2017 in order to incentivise every available tonne to the market. China’s crackdown on pollution has seen Chinese coke production reduced, with steel producers being forced to import greater amounts of metallurgical coal hence bidding up prices. This has resulted in very strong margins for the producers such as Teck Resources. Disappointingly, the market’s uncertainty over the medium-term price for the commodity, has seen the shares fail to reflect the current high levels of cash generation in the business. As the company continues to generate strong levels of cash, allowing them to deleverage and increase returns to shareholders, we remain optimistic on the outlook for the company in 2018, with Teck a key holding in the Company’s portfolio (5.7% of the portfolio).

Finally, on thermal coal, the market continues to remain tight with the average spot price increasing by 34% year-on-year. Strong industrial production with power generation up across all key Asian economies has underpinned high demand, with the supply side tightening following China’s domestic supply cuts in 2016 which have effectively put a floor under prices. While we are cognisant of the long-term challenges to demand, near-term the market looks well supported with consensus thermal coal prices significantly below current levels. The Company’s primary exposure to thermal coal resides with our overweight position in Glencore (8.7% of the portfolio) one of the best performing majors rising by 50% (in US$ terms) in 2017.

BATTERY MATERIALS
Few industries have the potential to change as much as the automotive in the next ten years. Evidence for the rise of the electrified vehicle appears to have reached critical mass in terms of consumer preference, government incentive and technological capability. Targets for EV penetration were raised throughout 2017 by companies, industry experts and financial market participants. Adoption rates of EVs are far from certain, but the winds of change are being felt and market participants now believe around 10% penetration, or 10mil EVs, is now achievable by 2025. The first Tesla Model 3, the poster child for an affordable, desirable EV, rolled off the production line in July.

The lithium-ion battery and the metals it uses including lithium, cobalt and nickel, are at the centre of this trend. Increases in demand for these metals is widely anticipated and this means new mines must be incentivised through higher prices. In the past few years, the Company has built-up a basket of positions in companies with exposure to this theme and in 2017 this basket added to performance.

One of the most significant contributors has been our exposure to cobalt, where the LME spot price is up 130%. Our position in Katanga Mining (1.4% of the portfolio), after being a sleeper in the portfolio, has shown that patience can sometimes pay off and is up over 1300% in 2017. In addition, in 2017 the lithium price rose 5% to RMB171,000/t for lithium carbonate. The Company has invested in several companies with exposure to lithium at various stages of maturity. These include Albemarle (1.1% of the portfolio), an established lithium producer with arguably the two lowest cost production assets in the world, the Talison mine and the Atacama Salar. Galaxy Resources (0.7% of the portfolio) is an emerging lithium producer in the unique position of having both cash generation from the producing Mt Cattlin mine in Australia and one of the most promising exploration salars in Sal De Vida, and emerging producers Altura Mining (0.9% of the portfolio) and Pilbara Minerals (0.9% of the portfolio) which became fully funded to production in the second half of 2017. With the supportive market backdrop our holdings in lithium miners added strongly to performance in 2017, as shown by our exposure to the industrial minerals sub-sector contributing circa one third of the relative returns.

LONGER-TERM INVESTMENTS
During the last two years the Company has built up a concentrated portfolio of exposure to smaller companies that we hope have significant long-term potential. These companies are often highly risky due to the early stage nature of their assets, lack of cash flow and therefore constant need for funding, riskier locations etc. However, if purchased at the right point in the cycle, often using off-market transactions to ensure attractive discounts to market prices and then monitored for opportunities to harvest gains, they can be a significant source of performance.

We are pleased to say that by the end of 2017 this strategy has delivered a highly satisfactory level of returns for the portfolio. Names such as Altura, Galaxy Resources, Trevali Mining, Sheffield Resources and Metro Mining, have all helped drive performance. However, not all investments delivered during the year. TMAC Resources was unable to ramp-up production at their new gold mine in Canada due to what we believe are short-term issues in the plant. In addition, start up issues at Metals Exploration’s Runruno gold mines in the Philippines also delayed the announcement of commercial production. It is our expectation that both of these companies should be able to overcome the near-term challenges and this should deliver a recovery in share price performance.

ROYALTIES AND ILLIQUID INVESTMENTS
The Company currently has one unquoted investment, the Avanco Royalty contract, representing 2.1% of the portfolio as at the year end. This, and any future investments, will be managed in line with the guidelines set by the Board as outlined to shareholders in this Annual Report.

AVANCO ROYALTY CONTRACT
In October 2013, the Company signed a non-binding memorandum of understanding with Avanco Resources for a contractual royalty covering its exploration licenses within the world-class mineral district of Carajas in Brazil. A binding royalty agreement was subsequently signed in July 2014 in which the Company committed US$12 million in return for Net Smelter Return (net revenue after deductions for freight, smelter and refining charges) royalty payments comprising 2% on copper, 25% on gold and 2% on all other metals produced from their Antas North and Pedra Branca (Stage 1 and Stage 2) licenses. In addition, there will be a flat 2% royalty over all metals produced from any other discoveries within Avanco’s license area as at the time of the agreement.

In its second year of operation, the Antas mine has continued to perform well exceeding the upper end of production guidance for both copper and gold of 14,000 tonnes and 10,500 ounces respectively. While operating costs have increased modestly, largely driven by the strengthening of the Brazilian currency, the additional production and higher copper price has resulted in better than expected royalty payments which totalled US$3.1 million in 2017. As Avanco continues to build cash, exploration spend is being selectively increased with some exciting results around the existing Antas mine which has the potential to add life to the existing operation. We await results of the recent drilling programme at Antas which are due out early in 2018.

Avanco continues to progress its second and larger copper project Pedra Branca. As noted in the Interim Report, an updated pre-feasibility study on the project was released in May 2017, with the Pedra Branca East orebody expected to support 24ktpa copper and 16kozpa gold, and the Pedra Branca West deposit adding an additional 10ktpa copper at a later time. The box cut and portal for the mine are already established, with the decline to begin in early 2018. Avanco is in the process of refining the pre-feasibility study to include new drilling information and project enhancements to further improve returns. The definitive feasibility study is due to be completed by the middle of 2018, with the company targeting first production in mid-2020.

Since making our first payment to Avanco in July 2014, the Company has paid out a total of US$12 million and received royalty payments totalling US$5.7 million in the last two years. Exposure to the royalty combined with the holding of shares in Avanco was 3.4% at the end of the year. In line with guidance relating to unquoted investments, exposure to the shares was reduced during the year.

FIXED INCOME SECURITIES
The Company continues to have a significant exposure to fixed income securities with 7.5% of the portfolio allocated as at the end of 2017. As market conditions have improved and companies have successfully refinanced existing facilities at lower rates, the attractiveness of fixed income has reduced, which has seen us lower our exposure from 9.4% as at the end of 2016. First Quantum Minerals remains the Company’s largest exposure to a single issuer at 2.7% of the portfolio; however, it has been reduced over the last 12 months, whilst we have rotated into some more attractive higher yielding opportunities. One of these is a bond issued by Pilbara Minerals, an emerging lithium producer which, due to the niche nature of lithium, was unable to secure attractive bank financing providing an opportunity for the Company to invest in a 12% coupon, five year debt facility, secured on the company’s asset. As balance sheets have been repaired across the sector, companies are refinancing existing debt facilities at more attractive rates and we continue to monitor the after-tax effective yield of our fixed income holdings (net of our cost of borrowing), relative to underlying dividend yields (and total return) available from the equities across the sector.

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. During 2017, income generated from options was £6.1 million net of contracts repurchased. Given the positive momentum of the sector, the majority of contracts written were put options that expired worthless. Following strong periods of performance, the Company also looked to enhance returns where profits were taken on existing holdings by writing calls on these positions. As at the end of 2017, the Company had 0.1% of net assets exposed to derivatives.

GEARING
At 31 December 2017, the Company had net borrowing and an overdraft amounting to £98.3 million, representing gearing of 12.2% of net assets. For the most part, this gearing has been drawn down against the higher yielding mining company corporate bonds and is predominantly denominated in the same currency as that of the bonds. Gearing, which can be drawn down or repaid at any time, is used in the portfolio to take tactical advantage of market volatility and opportunities, as well as to enhance overall returns during the medium to long-term.

OUTLOOK AND STRATEGY FOR 2018
The outlook for 2018 is once again promising. The consensus forecast for global economic growth is 3.7% and, with a lack of investment into new capacity combining with the supply side reform agenda in China, it looks as though commodity prices should remain at levels that allow producers to generate strong margins. We are, however, aware that nothing is constant and that costs are likely to rise as inflation in some areas of the operating base looks set to increase. Our expectation is that the impact on margins can be minimised by further productivity gains, or prices remaining around current levels allowing the companies to generate significant amounts of free cash.

The outlook above should leave the Company and other shareholders at the mercy of management teams in terms of them either remaining disciplined and not overinvesting capital back into the business or reverting to the bad old ways of value destruction. Should the former play out again as it did in 2017, it leaves the companies in a strong position to return surplus cash to investors and hopefully trigger a share price rerating as investors rotate their portfolios back towards the sector.

Growth in dividend payments from the underlying portfolio is key to 2018 in terms of increasing the dividend paid by the Company. This is due to the fact that growth in other sources of revenue is likely to be hindered by rising interest rates, lower returns from fixed income arbitrage, and low levels of implied volatility which will constrain our operations in the option market. In addition, the ongoing weakness in the US dollar will act as a headwind for the Company, as nearly all of its income is denominated in US dollars. However, as ordinary dividends make up the vast majority of the Company’s revenue, small increases in these should more than compensate for the lack growth in other areas.

As should be clear from the majority of this report, we remain excited about the potential for share price growth to enhance the Company’s overall total return in 2018.

EVY HAMBRO AND OLIVIA MARKHAM
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
26 February 2018

TEN LARGEST INVESTMENTS AS AT 31 DECEMBER 2017

Set out below is a brief description by the Investment Manager of the Company’s ten largest investments.

Rio Tinto: 8.8% (2016: 10.0%) is the world’s second largest mining company by market capitalisation. It has interests over a broad range of metals and minerals including iron ore, aluminium, copper, coal, industrial minerals, gold and uranium. With one of the strongest balance sheets in the sector, the company announced US$8.2 billion of cash returns to shareholders in 2017. Rio Tinto continues to pursue a cash focus and value over volume strategy, where it is targeting US$1.5 billion of productivity improvements per year from 2021. The company is selectively investing in growth where it is currently investing in Amrun, a high-grade bauxite asset in Australia, as well as an expansion at its Oyu Tolgoi copper project in Mongolia.

Glencore: 8.7% (2016: 7.3%) is a diversified miner with activities in mining, smelting, refining, processing and marketing of metals and minerals, energy products and agricultural products globally. In addition, the company provides financing, logistics, marketing and purchasing services to producers and consumers of commodities. Since mid-2015 the company has been focused on rapidly de-gearing the balance sheet, with net debt falling from US$26 billion (December 2015) to a targeted range of US$10-16 billion, providing greater balance sheet strength and flexibility for the future. Going forward, the company intends to pay a base dividend of US$1 billion from its Marketing business plus a minimum payout of 25% of Industrial free cash flow. With strong production growth in copper, nickel and cobalt over the next three years, Glencore provides exposure to our positive view on electric vehicle demand going forward.

BHP Billiton: 8.4% (2016: 8.2%) is the world’s largest mining company by market capitalisation. The company is an important global player in a number of commodities including iron ore, copper, coal, manganese, aluminium, diamonds and uranium. The underperformance of BHP over the last three years, has seen the company come under focus from a number of shareholders. In August 2017 the company announced that it would exit its US onshore shale business, keep capital spending below US$8 billion over the next few years and target a net debt range of US$10-15 billion. The company remains focused on various productivity and incremental brownfield growth options targeting a >10% reduction in copper equivalent unit costs over the medium term and improving Return on Capital Employed to ~30% by 2022.

Vale: 7.3% (2016: 5.4%) is a Brazilian-based diversified mining company and the world’s largest producer of iron ore and nickel, as well as rising outputs of copper, coal and fertilizers. Its main mining operations are in Brazil, Canada, Australia, Indonesia and Mozambique, and the dominant earnings and cash flow driver continues to be its Brazilian based iron ore operations. During 2016 the company significantly de-geared through a divestment programme and significant cash flow generation from its mining operations. In May 2017, Vale appointed a new CEO, Fabio Schvartsman, with a key focus of creating a leaner and more competitive company, targeting to reduce net debt to US$10billion by the end of 2018. During 2017 the shareholders of Vale approved a new corporate structure which will see the shares migrate to a single share class structure which should further improve corporate governance and liquidity.

First Quantum Minerals*: 7.3% (2016: 9.4%) is an integrated copper producer whose principal operating assets are in Zambia. First Quantum is in the midst of a significant expansion of its business, most notable the Cobre de Panama mine in Panama which remains on-track to reach commercial production in 2019. During the course of 2016 the company took several actions to de-risk the balance sheet including the sale of its Kevista nickel mine for US$712 million, refinancing of its credit facility with improved financial covenants and amortization schedule, as well as adding to their copper price hedge to ensure the capital availability for the Cobre de Panama expenditure. During the first half of 2017 the company commissioned the new Sentinel copper mine in the DRC which has the capacity to produce over 250kt of copper in concentrate annually. The Company holds both the equity and the senior unsecured debt.

Teck Resources: 5.7% (2016: 2.5%) is a world leader in metallurgical coal production, with an 8% share of the global seaborne coking coal market. The company is also the world’s third-largest zinc concentrate producer and the tenth-largest zinc metal refiner. Teck is a major producer of copper and also produces gold, lead, molybdenum and various other metal products. Teck owns a 20.9% interest in the Fort Hills oil sands project. The strong rally in coking coal prices during 2016 and 2017, combined with asset sales, has allowed Teck to materially strengthen its balance sheet as it looks to approve its QB2 Project over the next year.

Sociedad Minera Cerro Verde: 3.8% (2016: 3.2%) is a copper and molybdenum operation in Peru operated by Freeport-McMoRan Copper & Gold where they maintain a 53.6% ownership in the company. In 2013 construction activities commenced on the US$4.4 billion large-scale expansion of the asset which saw copper production more than double from 210kt in 2015 to 560kt in 2017. The project successfully ramped-up during 2016 with significant cash flows and dividend payments expected from 2018.

Newmont Mining: 2.9% (2016: 2.8%) is one of the world’s leading gold producers with the majority of its production from North America and Australia. In recent years Newmont has divested assets to build a longer-life, lower cost asset portfolio. With a stronger balance sheet, Newmont updated its dividend policy at the end of 2016 targeting a 25% pay-out of free cash flow. In May 2017 the company announced that it had bought 19.9% of Continental Gold and entered into an investment agreement which includes various standstill provisions until Continental’s Buritica Project goes into production in 2020. At the company’s investor day in December 2017, the company announced that it expects its 2018 dividend to be at least 50% more than the current dividend, setting itself well above peers in terms of its ability to return cash to shareholders as well as maintain its production profile.

Lundin Mining*: 2.9% (2016: 4.4%) is a base metals producer with operations in Chile, Europe and the US. At the end of 2016 Lundin announced that they had successfully negotiated a deal to sell their 24% stake in Tenke to China Molybdenum for US$1.2 billion. Freeport announced that it had entered an agreement to sell its 56% interest in Tenke for US$2.65 billion to China Molybdenum earlier in the year which prompted Lundin’s exit. Today, Lundin maintains a strong balance sheet and continues to look for value accretive M&A opportunities. Towards the end of 2017 the company disappointed the market announcing a revised mine plan and higher sustaining costs over the next three years at its key copper mine Candeleria in Chile. The Company holds both the equity and the 7.875% senior secured notes due 2022.

South32: 2.7% (2016: 2.7%) is a diversified metals and mining company, which was spun out from BHP Billiton in May 2015. The company has an international footprint, operating in Africa, Australia and South America, and has interests in a large range of mined commodities to include alumina, aluminium, bauxite, energy coal, metallurgical coal, lead, nickel, manganese, silver and zinc. However, during the year, the company unveiled plans to spin off its South African coal business, stating that from April 2018 South African Energy Coal will operate as a stand-alone business. The company also reported strong results during the year, announcing fiscal 2017 underlying profit of US$1.15 billion, an increase of US$138 million from the previous year. This performance has encouraged the company to commit to a buy back programme of US$750 million.

* Includes fixed interest securities.
All percentages reflect the value of the holding as a percentage of total investments. Percentages in brackets represent the value of the holding as at 31 December 2016. Together, the ten largest investments represent 58.5% of total investments (31 December 2016: 58.0%).

INVESTMENTS AS AT 31 DECEMBER 2017

	Main  geographical exposure	Market value  £’000	% of  investments
Diversified
Rio Tinto	Global	79,588	8.8
Glencore	Global	78,548	8.7
BHP Billiton	Global	76,100	8.4
Vale *	Global	66,026	7.3
Vale – ADS Put Option 19/01/18 US$11	Global	(82)	–
Teck Resources	Global	51,571	5.7
Lundin Mining *	Global	26,240	2.9
Lundin Mining Put Option 19/01/18 CAD$8.08	Global	(176)	–
South32	Global	25,362	2.8
South32 Call Option 24/01/18 AUD$3.4129	Global	(346)	(0.1)
Boliden	Global	16,421	1.9
Vedanta Resources	India	6,034	0.6
KAZ Minerals	Kazakhstan	3,593	0.4
Sierra Metals	Peru	2,931	0.3
Osisko Metals >	Canada	2,158	0.2
		--------	--------
		433,968	47.9
		--------	--------
Copper
First Quantum Minerals *	Global	65,809	7.3
Sociedad Minera Cerro Verde	Peru	34,031	3.8
Avanco Resources # ~	Brazil	31,550	3.4
Katanga Mining	DRC	12,279	1.4
Nevsun Resources	Eritrea	10,797	1.1
OZ Minerals	Australia	8,919	1.0
Ivanhoe Mines	DRC	8,011	0.9
Metals X	Australia	4,658	0.5
Ero Copper	Brazil	4,598	0.5
SolGold	Ecuador	3,216	0.4
		--------	--------
		183,868	20.3
		--------	--------
Gold
Newmont Mining	Global	26,349	2.9
Newcrest Mining	Australia	21,101	2.3
Randgold Resources	Africa	14,669	1.6
Northern Star Resources	Australia	13,755	1.5
Franco-Nevada	Global	11,852	1.4
Agnico Eagle Mines	Canada	11,365	1.3
Centamin	Egypt	7,910	0.9
Pretium Resources	Canada	7,860	0.9
B2Gold	Global	5,723	0.6
Alamos Gold	Global	4,815	0.5
Polyus	Russia	3,730	0.4
Eldorado Gold	Global	3,199	0.4
Metals Exploration	Philippines	2,938	0.3
Shanta Gold Convertible	Tanzania	2,052	0.2
TMAC Resources	Canada	1,968	0.2
Stratex International	Turkey	279	–
Carawine Resources +	Australia	73	–
		--------	--------
		139,638	15.4
		--------	--------
Silver & Diamonds
Mountain Province Diamonds *	Canada	19,356	2.1
Wheaton Precious Metals	Global	13,050	1.4
Fresnillo	Mexico	10,003	1.1
Industrias Penoles	Mexico	7,748	0.9
Lucara Diamond	Botswana	6,608	0.7
Petra Diamonds *	South Africa	6,254	0.7
Kennady Diamonds	Canada	2,484	0.3
Volcan	Peru	1,889	0.2
Silver Mines	Australia	703	0.1
MAG Silver #	Mexico	477	0.1
Cautivo Mining	Peru	9	–
		--------	--------
		68,581	7.6
		--------	--------
Industrial Minerals
Iluka Resources	Australia	17,346	1.9
Albemarle	Global	10,400	1.1
Altura Mining	Australia	8,326	0.9
Pilbara Minerals *	Australia	8,134	0.9
Galaxy Resources	Australia	5,973	0.7
Nemaska Lithium >	Canada	3,638	0.4
Cobalt 27 Capital	Global	2,800	0.3
Neo Lithium # >	Argentina	2,583	0.3
Sheffield Resources	Australia	2,203	0.2
Bacanora Minerals	Mexico	1,725	0.2
Syrah Resources	Mozambique	600	0.1
		--------	--------
		63,728	7.0
		--------	--------
Zinc
Trevali Mining	Global	4,884	0.5
Titan Mining	USA	4,531	0.5
Arizona Mining	USA	3,568	0.4
		--------	--------
		12,983	1.4
		--------	--------
Alumunium
Metro Mining	Australia	2,331	0.3
		--------	--------
		2,331	0.3
		--------	--------
Iron Ore
Equatorial Resources	Republic of Congo	650	0.1
		--------	--------
		650	0.1
		--------	--------
Other
Bindura Nickel	Zimbabwe	128	–
		--------	--------
		128	–
		--------	--------
Portfolio		905,875	100.0
		--------	--------
Comprising:
– Investments		906,479	100.1
– Written options		(604)	(0.1)
		--------	--------
		905,875	100.0
		--------	--------

*     Includes fixed interest investments.
#    Investments held at Directors’ valuation.
~    Includes mining royalty contract.
+    Includes loyalty option.
>    Includes warrant investments

All investments are in equity shares unless otherwise stated.

The total number of investments as at 31 December 2017 (including options classified as liabilities on the balance sheet) was 70 (31 December 2016: 60).

As at 31 December 2017 the Company held equity interests in six companies comprising more than 3% of a company’s share capital as follows: Avanco Resources; Stratex International; Titan Mining; Osisko Metals; Metals Exploration and Silver Mines.

PORTFOLIO ANALYSIS AS AT 31 DECEMBER 2017

COMMODITY EXPOSURE*

	BlackRock World Mining Trust plc 2017 %	BlackRock World Mining Trust plc 2016* %	Euromoney Global Mining Index 2017 %
Other	0.0	0.0	3.0
Coal	0.0	0.0	4.5
Iron Ore	0.1	0.1	1.4
Aluminium	0.3	0.0	3.5
Zinc	1.4	0.6	2.0
Industrial Minerals	7.0	3.7	1.4
Silver & Diamonds	7.6	9.8	4.8
Gold	15.4	18.6	20.5
Copper	20.3	19.8	11.4
Diversified	47.9	47.4	47.5

* Represents exposure at 31 December 2016.

GEOGRAPHICAL EXPOSURE*

2017

Global	62.7%
Latin America	11.2%
Australia	10.3%
Africa (ex SA)	7.1%
Canada	5.4%
Other***	2.6%
South Africa	0.7%

2016

Global	57.1%
Latin America	11.2%
Australia	10.2%
Africa (ex SA)	6.9%
Other**	6.6%
Canada	6.2%
South Africa	1.8%

*       Based on the principal commodity exposure and place of operation of each investment.
**     Consists of Russia, Sweden and Turkey.
***    Consists of India, Kazakhstan, Philippines, Russia, Turkey and USA.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2017

	Notes	Revenue  2017  £’000	Revenue  2016  £’000	Capital  2017  £’000	Capital  2016  £’000	Total  2017  £’000	Total  2016  £’000
Income from investments held at fair value through profit or loss	3	28,017	22,383	–	–	28,017	22,383
Other income	3	6,152	6,487	–	–	6,152	6,487
		--------	--------	--------	--------	--------	--------
Total revenue		34,169	28,870	–	–	34,169	28,870
		--------	--------	--------	--------	--------	--------
Net profit on investments held at fair value through profit or loss		–	–	127,963	326,525	127,963	326,525
Net profit/(loss) on foreign exchange		–	–	8,414	(11,981)	8,414	(11,981)
		--------	--------	--------	--------	--------	--------
Total		34,169	28,870	136,377	314,544	170,546	343,414
		--------	--------	--------	--------	--------	--------
Expenses
Investment management fees	4	(1,500)	(1,179)	(4,774)	(3,848)	(6,274)	(5,027)
Other operating expenses	5	(979)	(895)	(4)	(13)	(983)	(908)
		--------	--------	--------	--------	--------	--------
Total operating expenses		(2,479)	(2,074)	(4,778)	(3,861)	(7,257)	(5,935)
		--------	--------	--------	--------	--------	--------
Net profit on ordinary activities before finance costs and taxation		31,690	26,796	131,599	310,683	163,289	337,479
Finance costs	6	(512)	(309)	(1,535)	(940)	(2,047)	(1,249)
		--------	--------	--------	--------	--------	--------
Net profit on ordinary activities before taxation		31,178	26,487	130,064	309,743	161,242	336,230
Taxation		(3,085)	(3,184)	706	866	(2,379)	(2,318)
		--------	--------	--------	--------	--------	--------
Profit for the year		28,093	23,303	130,770	310,609	158,863	333,912
		--------	--------	--------	--------	--------	--------
Earnings per ordinary share (pence)	8	15.92	13.19	74.11	175.85	90.03	189.04
		========	========	========	========	========	========

The total column of this statement represents the Group’s Statement of Comprehensive Income, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. All income is attributable to the equity holders of the Group.

The Group does not have any other comprehensive income. The net profit for the year disclosed above represents the Group’s total comprehensive income.

CONSOLIDATED AND PARENT STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2017

Group	Note	Called up  share  capital  £’000	Share  premium  account  £’000	Capital  redemption  reserve  £’000	Special  reserve  £’000	Capital  reserves  £’000	Revenue  reserve  £’000	Total  £’000
For the year ended 31 December 2017
At 31 December 2016		9,651	127,155	22,779	114,589	365,631	37,741	677,546
Total Comprehensive Income:
Net profit for the year		–	–	–	–	130,770	28,093	158,863
Transactions with owners, recorded directly to equity:
Dividends paid*	7	–	–	–	–	–	(31,762)	(31,762)
		--------	--------	--------	--------	--------	--------	--------
At 31 December 2017		9,651	127,155	22,779	114,589	496,401	34,072	804,647
		=====	======	=====	======	======	=====	======
For the year ended 31 December 2016
At 31 December 2015		9,651	127,155	22,779	116,471	55,022	46,235	377,313
Total Comprehensive Income:
Net profit for the year		–	–	–	–	310,609	23,303	333,912
Transactions with owners, recorded directly to equity:
Ordinary shares purchased into treasury		–	–	–	(1,873)	–	–	(1,873)
Share purchase costs		–	–	–	(9)	–	–	(9)
Dividends paid**	7	–	–	–	–	–	(31,797)	(31,797)
		--------	--------	--------	--------	--------	--------	--------
At 31 December 2016		9,651	127,155	22,779	114,589	365,631	37,741	677,546
		=====	======	=====	======	======	=====	======

   

Company	Note	Called up  share  capital  £’000	Share  premium  account  £’000	Capital  redemption  reserve  £’000	Special  reserve  £’000	Capital  reserves  £’000	Revenue  reserve  £’000	Total  £’000
For the year ended 31 December 2017
At 31 December 2016		9,651	127,155	22,779	114,589	373,115	30,257	677,546
Total Comprehensive Income:
Net profit for the year		–	–	–	–	130,770	28,093	158,863
Transactions with owners, recorded directly to equity:
Dividends paid*	7	–	–	–	–	–	(31,762)	(31,762)
		--------	--------	--------	--------	--------	--------	--------
At 31 December 2017		9,651	127,155	22,779	114,589	503,885	26,588	804,647
		=====	======	=====	======	======	=====	======
For the year ended 31 December 2016
At 31 December 2015		9,651	127,155	22,779	116,471	62,504	38,753	377,313
Total Comprehensive Income:
Net profit for the year		–	–	–	–	310,611	23,301	333,912
Transactions with owners, recorded directly to equity:
Ordinary shares purchased into treasury		–	–	–	(1,873)	–	–	(1,873)
Share purchase costs		–	–	–	(9)	–	–	(9)
Dividends paid**	7	–	–	–	–	–	(31,797)	(31,797)
		--------	--------	--------	--------	--------	--------	--------
At 31 December 2016		9,651	127,155	22,779	114,589	373,115	30,257	677,546
		=====	======	=====	======	======	=====	======

*     The final dividend of 9.00p per share for the year ended 31 December 2016, declared on 23 February 2017 and paid on 12 May 2017; 1st interim dividend of 3.00p per share for the year ended 31 December 2017, declared on 4 May 2017 and paid on 30 June 2017; 2nd interim dividend of 3.00p per share for the year ended 31 December 2017, declared on 10 August 2017 and paid on 15 September 2017; and 3rd interim dividend of 3.00p per share for the year ended 31 December 2017, declared on 10 November 2017 and paid on 22 December 2017.

**   The final dividend of 14.00p per share for the year ended 31 December 2015, declared on 23 February 2016 and paid on 8 May 2016; and interim dividend of 4.00p per share for the year ended 31 December 2016, declared on 11 August 2016 and paid on 16 September 2016.

CONSOLIDATED AND PARENT STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2017

		31 December 2017		31 December 2016
	Notes	Group  £’000	Company  £’000	Group  £’000	Company  £’000
Non current assets
Investments held at fair value through profit or loss		906,479	915,464	760,167	769,152
		--------	--------	--------	--------
		906,479	915,464	760,167	769,152
		--------	--------	--------	--------
Current assets
Other receivables		2,567	2,567	5,153	5,153
Cash collateral held with brokers		1,983	1,983	2,412	2,412
Cash and cash equivalents		693	693	68	68
		--------	--------	--------	--------
		5,243	5,243	7,633	7,633
		--------	--------	--------	--------
Total assets		911,722	920,707	767,800	776,785
		--------	--------	--------	--------
Current liabilities
Other payables		(4,873)	(5,939)	(2,931)	(3,997)
Derivative financial liabilities held at fair value through profit or loss		(604)	(604)	(855)	(855)
Bank overdraft		(12,249)	(20,168)	(1,324)	(9,243)
Bank loans		(88,708)	(88,708)	(84,976)	(84,976)
		--------	--------	--------	--------
		(106,434)	(115,419)	(90,086)	(99,071)
		--------	--------	--------	--------
Total assets less current liabilities		805,288	805,288	677,714	677,714
		--------	--------	--------	--------
Non current liabilities
Deferred taxation liability		(641)	(641)	(168)	(168)
		--------	--------	--------	--------
Net assets		804,647	804,647	677,546	677,546
		--------	--------	--------	--------
Equity attributable to equity holders
Called up share capital	9	9,651	9,651	9,651	9,651
Share premium account	10	127,155	127,155	127,155	127,155
Capital redemption reserve	10	22,779	22,779	22,779	22,779
Special reserve	10	114,589	114,589	114,589	114,589
Capital reserves
At 1 January		365,631	373,115	55,022	62,504
Net profit for the year		130,770	130,770	310,609	310,611
		--------	--------	--------	--------
	10	496,401	503,885	365,631	373,115
		--------	--------	--------	--------
Revenue reserves
At 1 January		37,741	30,257	46,235	38,753
Net profit for the year		28,093	28,093	23,303	23,301
Dividends paid		(31,762)	(31,762)	(31,797)	(31,797)
		--------	--------	--------	--------
	10	34,072	26,588	37,741	30,257
		--------	--------	--------	--------
Total equity		804,647	804,647	677,546	677,546
		======	======	======	======
Net asset value per ordinary share (pence)	8	456.01	456.01	383.98	383.98
		======	======	======	======

CONSOLIDATED AND PARENT CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017

	31 December 2017		31 December 2016
	Group  £’000	Company  £’000	Group  £’000	Company  £’000
Operating activities
Net profit before taxation	161,242	161,242	336,230	336,230
Add back finance costs	2,047	2,047	1,249	1,249
Net profit on investments held at fair value through profit or loss (including transaction costs)	(127,963)	(127,963)	(326,525)	(326,528)
Net (profit)/loss on foreign exchange	(8,414)	(8,414)	11,981	11,981
Sales of investments held at fair value through profit or loss	232,049	232,049	264,377	264,377
Purchases of investments held at fair value through profit or loss	(250,649)	(250,649)	(271,240)	(271,240)
Decrease/(increase) in other receivables	2,946	2,946	(1,356)	(1,356)
Increase/(decrease) in other payables	2,029	2,029	(660)	(660)
Increase in amounts due from brokers	(360)	(360)	–	–
Increase/(decrease) in amounts due to brokers	74	74	(2,714)	(2,714)
Net movement in cash collateral held with brokers	429	429	(1,072)	(1,072)
	--------	--------	--------	--------
Net cash inflow from operating activities before interest and taxation	13,430	13,430	10,270	10,267
	--------	--------	--------	--------
Taxation paid	(1,215)	(1,215)	(1,495)	(1,495)
Taxation on investment income included within gross income	(852)	(852)	(613)	(613)
	--------	--------	--------	--------
Net cash inflow from operating activities	11,363	11,363	8,162	8,159
	--------	--------	--------	--------
Financing activities
Drawdown of loans	11,900	11,900	11,896	11,896
Interest paid	(2,047)	(2,047)	(1,249)	(1,249)
Shares purchased into treasury	–	–	(1,873)	(1,873)
Share purchase costs paid	–	–	(9)	(9)
Dividends paid	(31,762)	(31,762)	(31,797)	(31,797)
	--------	--------	--------	--------
Net cash outflow from financing activities	(21,909)	(21,909)	(23,032)	(23,032)
	--------	--------	--------	--------
Decrease in cash and cash equivalents	(10,546)	(10,546)	(14,870)	(14,873)
	--------	--------	--------	--------
Cash and cash equivalents at start of the year	(1,256)	(9,175)	13,223	5,307
Effect of foreign exchange rate changes	246	246	391	391
	--------	--------	--------	--------
Cash and cash equivalents at end of year	(11,556)	(19,475)	(1,256)	(9,175)
	--------	--------	--------	--------
Comprised of:
Cash and cash equivalents	693	693	68	68
Bank overdraft	(12,249)	(20,168)	(1,324)	(9,243)
	========	========	========	========

NOTES TO THE FINANCIAL STATEMENTS

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 on 28 October 1993 and this is the 24th Annual Report.

The principal activity of the subsidiary, BlackRock World Mining Investment Company Limited, is investment dealing.

2. ACCOUNTING POLICIES
The principal accounting policies adopted by the Group and Company are set out below.

(a) Basis of preparation
The Group and Parent Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual Statement of Comprehensive Income and related notes. All of the Group’s operations are of a continuing nature.

Insofar as the Statement of Recommended Practice (SORP) for investment trust companies and venture capital trusts issued by the Association of Investment Companies (AIC), revised in November 2014, is compatible with IFRS, the financial statements have been prepared in accordance with guidance set out in the SORP.

Substantially, all of the assets of the Group consist of securities that are readily realisable and, accordingly, the Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future. Consequently, the Directors have determined that it is appropriate for the financial statements to be prepared on a going concern basis.

The Group’s financial statements are presented in sterling, which is the functional currency of the Group and 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.

The International Accounting Standards Board (IASB) has published amendments to IAS 7 ‘Statement of Cash Flows’. The amendments are intended to clarify IAS 7 to improve information provided to users of financial statements about an entity’s financing activities. To achieve this objective, the IASB requires that the following changes in liabilities arising from financing activities are disclosed (to the extent necessary): (i) changes from financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses; (iii) the effect of changes in foreign exchange rates; (iv) changes in fair values; and (v) other changes. They are effective for annual periods beginning on or after 1 January 2017. The Company has adopted the standard for the financial year 31 December 2017. An additional reconciliation of liabilities arising from financing activities is presented in note 15 on page 67 of the Annual Report and Financial Statements.

A number of other new standards, (as noted below), amendments to standards and interpretations that became effective during the year, had no significant impact on the amounts reported in these financial statements but may impact accounting for future transactions and arrangements.

At the date of authorising these financial statements the following standards and interpretations which had not been applied in these financial statements were in issue but not yet effective.

IFRS 9 – Financial Instruments (2014) replaces IAS 39 and deals with a package of improvements including principally a revised model for classification and measurement of financial instruments, a forward looking expected loss impairment model and a revised framework for hedge accounting. In terms of classification and measurement, the revised standard is principles based depending on the business model and nature of cash flows. Under this approach, instruments are measured at either amortised cost or fair value. Under IFRS 9, equity and derivative investments will be held at fair value because they fail the ‘solely payments of principal and interest’ test and debt investments will be held at fair value if the business model is to manage them on a fair value basis. The scope of the fair value option is reduced within IFRS 9. The standard is effective from 1 January 2018 with earlier application permitted. The Group does not plan to early adopt this standard. The standard is not expected to have any impact on the Company as all its investments are held at fair value through profit or loss.

IFRS 15 – Revenue from Contracts with Customers (effective 1 January 2018) specifies how and when an entity should recognise revenue and enhances the nature of revenue disclosures. Given the nature of the Company’s revenue streams from financial instruments, the provisions of this standard are not expected to have any impact.

IFRS 16 – Leases (effective 1 January 2019) specifies accounting for leases and removes distinction between operating and finance leases. This standard is not applicable to the Company as it has no leases.

(b) Basis of consolidation
The Group’s financial statements are made up to 31 December each year and consolidate the financial statements of the Company and its wholly owned subsidiary, which is registered and operates in England and Wales, BlackRock World Mining Investment Company Limited.

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 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 are 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 column of the Consolidated Statement of Comprehensive Income unless the option has been written for the maintenance and enhancement of the Company’s investment portfolio and represents an incidental part of a larger capital transaction, in which case any premia arising are allocated to the capital column 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 comprise 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 gains/losses 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 gains/losses on investments held at fair value through profit or loss.

Where the Company 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.

Deposit interest and underwiting commission receivable are 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 column 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 column 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 pages 65 and 66 of 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;

• the investment management fee and finance costs have been allocated 75% to the capital column and 25% to the revenue column of the Consolidated Statement of Comprehensive Income in line with the Board’s expected 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, 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 tax in the future or right to pay less tax 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
The Company’s investments, including contractual rights, are designated upon initial recognition as held at fair value through profit or loss in accordance with IAS 39 – ‘Financial Instruments: Recognition and Measurement’ and are managed and evaluated on a fair value basis in accordance with its investment strategy.

All investments, including contractual rights, are initially and subsequently measured 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 is initially measured at fair value excluding transaction costs. The sales of assets are recognised at the trade date of the disposal. Proceeds are measured at fair value, which is regarded as the proceeds of sale less any transaction costs.

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 commoditity prices and changes in estimates of proven and probable reserves specifically associated with the mine.

Under IFRS, the investment in the subsidiary in the Company’s Statements 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 ‘Profits or losses 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 use of available and supportable market data as possible).

(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 Company 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 revenue, 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 revenue 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 at their nominal value.

(k) Dividends payable
Under IFRS, 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 accrued in the financial statements unless they have been paid.

Dividends payable to equity shareholders are recognised in the 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 Statements of Financial Position.

(n) Bank borrowings
Bank overdrafts and loans are recorded as the 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 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) 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 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 Avanco 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 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 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 on pages 68 to 82 of the Annual Report and Financial Statements.

3. INCOME

	2017  £’000	2016  £’000
Investment income:
UK listed dividends	9,071	4,727
Overseas listed dividends	10,495	9,008
Overseas listed special dividends	628	1,038
Income from contractual rights (Avanco Royalty)	2,438	1,595
Fixed interest	5,385	6,015
	--------	--------
	28,017	22,383
	--------	--------
Other income:
Option premium income	6,093	6,397
Deposit interest	5	6
Underwriting commission	35	–
Stock lending income	19	84
	--------	--------
	6,152	6,487
	--------	--------
Total income	34,169	28,870
	=====	=====

During the year the Group received option premiums totalling £6,140,000 (2016: £6,800,000) for writing options for the purposes of revenue generation. Option premiums of £6,093,000 (2016: £6,397,000) were amortised to income. At 31 December 2017 there were three (2016: three) open positions with an associated liability of £604,000 (2016: £855,000).

Dividends and interest received during the year amounted to £21,538,000 and £5,964,000 respectively (2016: £13,253,000 and £6,157,000).

No special dividends have been recognised in capital (2016: nil).

4. INVESTMENT MANAGEMENT FEES

	2017			2016
	Revenue  £’000	Capital  £’000	Total  £’000	Revenue  £’000	Capital  £’000	Total  £’000
Investment management fee	1,500	4,774	6,274	1,179	3,848	5,027
	--------	--------	--------	--------	--------	--------
Total	1,500	4,774	6,274	1,179	3,848	5,027
	=====	=====	=====	=====	=====	=====

The management fee (which includes all services provided by BlackRock) is 0.8% of the Company’s net assets. However, in the event that the NAV per share increases on a quarter-on-quarter basis, the fee will then be paid on gross assets for the quarter. During the year, £5,662,000 (2016: £4,472,000) of the investment management fee was generated from net assets and £567,000 (2016: £555,000) from the gearing effect on gross assets. The average of the net assets under management during the year ended 31 December 2017 was £727,890,000 (2016: £537,003,000). The fee is allocated 25% to the revenue column and 75% to the capital column of the Consolidated Statement of Comprehensive Income.

5. OTHER OPERATING EXPENSES

	2017  £’000	2016  £’000
Allocated to revenue
Custody fee	115	91
Auditors’ remuneration:
– audit services	31	31
– other assurance services1	6	6
Registrar’s fee	78	78
Directors’ emoluments2	217	228
Broker fees	25	25
Depositary fees	82	60
Marketing fees	93	104
Bank facility fees3	154	–
Other administrative costs	178	272
	--------	--------
	979	895
	--------	--------
Allocated to capital
	--------	--------
Transaction charges	4	13
	--------	--------
	983	908
	=====	=====
	2017	2016
The Company’s ongoing charges, calculated as a percentage of average net assets and using expenses, excluding finance costs, transaction costs and taxation were:4	1.00%	1.10%
	--------	--------
The Company’s ongoing charges, calculated as a percentage of average gross assets and using expenses, excluding finance costs, transaction costs and taxation were:5	0.88%	0.96%
	--------	--------

1    Fees paid to the auditors for other assurance services of £6,390 excluding VAT (2016: £6,200) relate to the review of the half yearly financial statements.
2    Details of the Directors’ emoluments are given in the Directors’ Remuneration Report on page 35 of the Annual Report and Financial Statements. Emoluments include taxable benefits for reimbursement of expenses.
3    There is a 4 basis point facility fee chargeable on the full facility amount whether drawn or undrawn. This has the effect of reducing the margin from 100bps to 96bps so that the total spread on drawn amounts still equals 100bps but the undrawn portion is charged at 4bps. It reflects the fact that under regulations introduced in 2016 the provision of the facility requires BNYM to allocate capital against the facility.
4    Ongoing charges based on net assets represent the management fees and all other operating expenses, excluding finance costs, transaction charges and taxation, as a % of average net assets.
5    Ongoing charges based on gross assets represent the management fee and all other operating expenses, excluding finance costs, transaction costs and taxation, as an average of gross assets. Gross assets are calculated based on net assets during the year before deduction of the bank overdraft and loans.

For the year ended 31 December 2017, expenses of £4,000 (2016: £13,000) were charged to the capital column of the Consolidated Statement of Comprehensive Income. These relate to costs charged by the custodian on sale and purchase trades.

6. FINANCE COSTS

	2017			2016
	Revenue  £’000	Capital  £’000	Total  £’000	Revenue  £’000	Capital  £’000	Total  £’000
Interest on bank loans	495	1,484	1,979	289	881	1,170
Interest on bank overdraft	17	51	68	20	59	79
	--------	--------	--------	--------	--------	--------
Total	512	1,535	2,047	309	940	1,249
	=====	=====	=====	=====	=====	=====

7. DIVIDENDS

	Record date	Payment date	2017  £’000	2016  £’000
Final dividend of 9.00p per share for the year ended 31 December 2016 (2015: 14.00p)	17 March 2017	12 May 2017	15,881	24,739
1st interim dividend of 3.00p per share for the year ended 31 December 2017 (2016: 4.00p)	2 June 2017	30 June 2017	5,294	7,058
2nd interim dividend of 3.00p per share for the year ended 31 December 2017 (2016: nil)	18 August 2017	15 September 2017	5,293	–
3rd interim dividend of 3.00p per share for the year ended 31 December 2017 (2016: nil)	24 November 2017	22 December 2017	5,294	–
			--------	--------
			31,762	31,797
			======	=====

The total dividends payable in respect of the year ended 31 December 2017 which form the basis of section 1158 of the Corporation Tax Act 2010 and section 833 of the Companies Act 2006, and the amounts proposed, meet the relevant requirements as set out in this legislation.

Dividends paid,  proposed or declared on equity shares:	2017  £’000	2016  £’000
1st interim dividend of 3.00p per share for the year ended 31 December 2017 (2016: 4.00p)	5,294	7,058
2nd interim dividend of 3.00p per share for the year ended 31 December 2017 (2016: nil)	5,293	–
3rd interim dividend of 3.00p per share for the year ended 31 December 2017 (2016: nil)	5,294	–
Final interim dividend of 6.60p per share for the year ended 31 December 2017 (2016: final dividend 9.00p)*	11,646	15,881
	--------	--------
	27,527	22,939
	--------	--------

*     Based on 176,455,242 (2016: 176,455,242) ordinary shares in issue on 26 February 2018.

8. CONSOLIDATED EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE

	2017	2016
Net revenue profit attributable to ordinary shareholders (£’000)	28,093	23,303
Net capital profit attributable to ordinary shareholders (£’000)	130,770	310,609
	--------	--------
Total profit attributable to ordinary shareholders (£’000)	158,863	333,912
	========	========
Equity shareholders’ funds (£’000)	804,647	677,546
	========	========
The weighted average number of ordinary shares in issue during the year on which the earnings per ordinary share was calculated was:	176,455,242	176,639,636
The actual number of ordinary shares in issue at the year end on which the net asset value per ordinary share was calculated was:	176,455,242	176,455,242
	---------------	----------------
Return per share
Revenue earnings per share – (pence)	15.92	13.19
Capital earnings per share – (pence)	74.11	175.85
	--------	--------
Total earnings per share – (pence)	90.03	189.04
	--------	--------
Net asset value per ordinary share – (pence)	456.01	383.98
Ordinary share price (pence)	397.75	336.50
	======	======

There were no dilutive securities at the year end.

9. CALLED UP SHARE CAPITAL

	Number of  Ordinary  shares	Treasury  shares	Total  shares	Nominal  value  £’000
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 5p each
At 31 December 2016	176,455,242	16,556,600	193,011,842	9,651
	----------------	--------------	----------------	--------
At 31 December 2017	176,455,242	16,556,600	193,011,842	9,651
	=========	========	=========	=====

No ordinary shares were issued, purchased or cancelled during the year (2016: 832,000 shares purchased for a total consideration of £1,882,000). No shares have been purchased since the year end up to and including the date of this report.

10. RESERVES

	Share  premium  account  £’000	Capital  redemption  reserve  £’000	Special  reserve  £’000	Capital  reserve –  arising on  investments  sold  £’000	Capital  reserve –  arising on  revaluation of  investments  held  £’000	Revenue  reserve  £’000
Group
At 31 December 2016	127,155	22,779	114,589	296,117	69,514	37,741
Movement during the year:
Total Comprehensive Income:
Net capital profit for the year	–	–	–	25,647	105,123	–
Net revenue profit for the year	–	–	–	–	–	28,093
Transactions with owners recorded directly to equity:
Dividends paid	–	–	–	–	–	(31,762)
	---------	---------	--------	--------	--------	--------
At 31 December 2017	127,155	22,779	114,589	321,764	174,637	34,072
	======	======	======	======	======	=====

   

	Share  premium  account  £’000	Capital  redemption  reserve  £’000	Special  reserve  £’000	Capital  reserve –  arising on  investments  sold  £’000	Capital  reserve –  arising on  revaluation  of investments  held  £’000	Revenue  reserve  £’000
Company
At 31 December 2016	127,155	22,779	114,589	296,116	76,999	30,257
Movement during the year:
Total Comprehensive Income:
Net capital profit for the year	–	–	–	25,647	105,123	–
Net revenue profit for the year	–	–	–	–	–	28,093
Transactions with owners recorded directly to equity:
Dividends paid	–	–	–	–	–	(31,762)
	---------	---------	--------	--------	--------	--------
At 31 December 2017	127,155	22,779	114,589	321,763	182,122	26,588
	======	======	======	======	======	=====

The share premium account and capital redemption reserve are not distributable profits under the Companies Act 2006. The special reserve may be used as distributable profits for all purposes and, in particular, the repurchase by the Company of its ordinary shares. In accordance with the Company’s articles, net capital returns may be distributed by way of dividend.

11. RISK MANAGEMENT POLICIES AND PROCEDURES

Valuation of financial instruments
Financial assets and financial liabilities are either carried in the Statements of Financial Position at their fair value (investment and derivatives) or at an amount which is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accruals, cash at bank and bank overdrafts). IFRS 13 requires the Group to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Group are explained in the accounting policies note 2(h) to the Financial Statements on pages 59 and 60 of the Annual Report and Financial Statements.

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 as follows.

The fair value hierarchy has the following levels:

Level 1 – Quoted market price in an active market for an identical instrument. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly 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 used to price securities based on observable inputs. This category includes instruments valued using quoted market prices in active markets for similar instruments; 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.

Level 3 – Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and these inputs could have a significant impact on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant entity determined adjustments or assumptions are required to reflect differences between the instruments and instruments for which there is no active market. The 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 in its entirety.

For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. 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 in its entirety requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes ‘observable’ requires significant judgement by the Investment Manager. 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.

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 Company.

The investment in the subsidiary is classified within Level 3 since the subsidiary is not a listed entity. The fair value of the investment in the subsidiary is calculated based on the fair value of the net assets of the underlying balances within the subsidiary. Therefore, no sensitivity analysis has been presented.

Valuation process and techniques for Level 3 valuations
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 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 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 Portfolio Managers and reviewed by the Pricing Committee of the Investment Manager. On a quarterly basis the Portfolio Managers will review the valuation of the contractual rights and inputs for significant changes. A valuation of contractual rights is performed annually by an external valuer, SRK Consulting (UK) Limited, and reviewed by the Pricing Committee of the Investment Manager. The valuations are also subject to quality assurance procedures performed within the Pricing Committee. On a semi-annual basis, after the checks above have been performed, the Investment Manager presents the valuation results to the Directors. This includes a discussion of the major assumptions used in the valuations. There were no changes in valuation techniques during the year.

Fair values of financial assets and liabilities
The table below sets out fair value measurements using the IFRS 13 fair value hierarchy.

Financial assets at fair value through profit or loss at 31 December 2017 – Group	Level 1  £’000	Level 2  £’000	Level 3  £’000	Total  £’000
Assets:
Equity	817,259	2,605	–	819,864
Fixed interest securities	64,991	2,681	–	67,672
Investment in contractual rights	–	–	18,943	18,943
	--------	--------	--------	--------
	882,250	5,286	18,943	906,479
Liabilities:
Derivative financial instruments – written options	–	(604)	–	(604)
	--------	--------	--------	--------
	882,250	4,682	18,943	905,875
	======	=====	=====	======

   

Financial assets at fair value through profit or loss at 31 December 2016 – Group	Level 1  £’000	Level 2  £’000	Level 3  £’000	Total  £’000
Assets:
Equity	655,028	4	13,633	668,665
Fixed interest securities	68,015	3,570	–	71,585
Investment in contractual rights	–	–	19,917	19,917
	--------	--------	--------	--------
	723,043	3,574	33,550	760,167
Liabilities:
Derivative financial instruments – written options	–	(855)	–	(855)
	--------	--------	--------	--------
	723,043	2,719	33,550	759,312
	======	=====	=====	======

   

Financial assets at fair value through profit or loss at 31 December 2017 – Company	Level 1  £’000	Level 2  £’000	Level 3  £’000	Total  £’000
Assets:
Equity	817,259	2,605	8,985	828,849
Fixed interest securities	64,991	2,681	–	67,672
Investment in contractual rights	–	–	18,943	18,943
	--------	--------	--------	--------
	882,250	5,286	27,928	915,464
Liabilities:
Derivative financial instruments – written options	–	(604)	–	(604)
	--------	--------	--------	--------
	882,250	4,682	27,928	914,860
	======	=====	=====	======

   

Financial assets at fair value through profit or loss at 31 December 2016 – Company	Level 1  £’000	Level 2  £’000	Level 3  £’000	Total  £’000
Assets:
Equity	655,028	4	22,618	677,650
Fixed interest securities	68,015	3,570	–	71,585
Investment in contractual rights	–	–	19,917	19,917
	--------	--------	--------	--------
	723,043	3,574	42,535	769,152
Liabilities:
Derivative financial instruments – written options	–	(855)	–	(855)
	--------	--------	--------	--------
	723,043	2,719	42,535	768,297
	======	=====	=====	======

A reconciliation of fair value measurement in Level 3 is set out below.

Level 3 Financial assets at fair value through profit or loss at 31 December – Group	2017  £’000	2016  £’000
Opening fair value	33,550	18,714
Preference shares converted to equity and transferred to Level 1	(13,482)	–
Disposals – Preference shares previously in Level 3 redeemed for cash	(6,396)	–
Total gains or losses included in gains/(losses) on investments in the Consolidated Statement of Comprehensive Income:
– assets disposed during the year	6,245	–
– assets held at the end of the year	(974)	14,836
	--------	--------
Closing balance	18,943	33,550
	=====	=====

   

Level 3 Financial assets at fair value through profit or loss at 31 December – Company	2017  £’000	2016  £’000
Opening fair value	42,535	27,696
Preference shares converted to equity and transferred to Level 1	(13,482)	–
Disposals – Preference shares previously in Level 3 redeemed for cash	(6,396)	–
Total gains or losses included in gains/ (losses) on investments in the Consolidated Statement of Comprehensive Income:
– assets disposed during the year	6,245	–
– assets held at the end of the year	(974)	14,839
	--------	--------
Closing balance	27,928	42,535
	=====	=====

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 on page 79 of the Annual Report and Financial Statements under ‘Valuation process and techniques’.

Quantitative information of significant unobservable inputs – Level 3 – Group and Company
 

Description	2017  £’000	2016  £’000	Valuation technique	Unobservable input
Banro gold-linked preference shares	–	13,633	Discount to gold prices	30% Illiquidity discount
	--------	--------
Avanco royalty	18,943	19,917	Discount cash flows	Discount rate – weighted average cost of capital Average gold and copper prices
	--------	--------
Investment in subsidiary company	8,985	8,985	Net assets	Net assets
	=====	=====

Sensitivity analysis to significant changes in unobservable inputs within Level 3 hierarchy
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy, together with an estimated quantitative sensitivity analysis, as at 31 December 2017, are as shown below.

Description	Input	Estimated sensitivity used*	Impact on fair value
Avanco royalty	Discount rate – weighted average cost of capital Average gold and copper prices	2017 – 1% 2016 – 1% 2017 – 10% 2016 – 10%	2017 – £1.4m 2016 – £2.2m 2017 – £3.7m 2016 – £4.8m

*     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.

12. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 December 2017 (2016: nil).

13. 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 2017 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 2017 contains no qualification or statement under section 498(2) or (3) of the Companies Act 2006.

The comparative figures are extracts from the audited financial statements of BlackRock World Mining Trust plc and its subsidiary for the year ended 31 December 2016, which have been filed with the Registrar of Companies. The report of the auditor on those financial statements contained no qualification or statement under section 498 of the Companies Act 2006.

14. ANNUAL REPORT AND FINANCIAL STATEMENTS

Copies of the Annual Report and Financial Statements will be published shortly and will be available from the registered office, c/o The Secretary, BlackRock World Mining Trust plc, 12 Throgmorton Avenue, London EC2N 2DL.

15. ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL on Wednesday, 25 April 2018 at 11.30 a.m.

ENDS

The Annual Report and Financial Statements will also be available on the BlackRock website at www.blackrock.co.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:

Simon White, Managing Director, Closed End Funds, BlackRock Investment Management (UK) Limited – Tel:  020 7743 5284

Evy Hambro, Fund Manager, BlackRock Investment Management (UK) Limited – Tel:  020 7743 4511

Emma Phillips, Media & Communications, BlackRock Investment Management (UK) Limited – Tel:  020 7743 2922

Press Enquiries:

Lucy Horne, Lansons Communications – Tel:  020 7294 3689
E-mail:  lucyh@lansons.com

26 February 2018
12 Throgmorton Avenue
London EC2N 2DL