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Hambro: mining returns ‘nothing to shout about’
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by Caelainn Barr on Aug 23, 2012 at 07:01
Miners have had a difficult time so far in 2012. Volatile markets, concerns about global growth and weaker commodity prices have all impacted on returns for the sector.
However Evy Hambro, manager of the BlackRock World Mining trust, says investors need to look at the strength of individual company balance sheets rather than dismissing the sector in the current downturn.
The trust's top holdings are Rio Tinto (RIO.L), BHP Billiton (BLT.L), and London Mining (LOND.L). The portfolio is invested in equities as well as tapping into royalty streams from mining companies, which allows them to benefit from income made on metal sales.
The trust has given NAV returns of 29% over the past three years but has lost 14% over the past year. Its price performance has also added 32% in the past three years, but fallen 12% over the past year.
Hambro says the trust sold out of much of its platinum holdings, expect for Impala Platinum (IPLA.L), last year before any signs that tensions were brewing in South Africa, the world’s biggest producer of the metal where miner Lonmin (LMI.L) has been at the centre of the bloodiest labour dispute since the end of apartheid.
He also says he expects gold equities to catch up with the yellow metal in the near future as reduced mining costs should elevate returns.
Although 2011 was a good year, with profits coming from iron ore and copper miners, Hambro says the sector is unlikely to give a repeat performance this year.
The trust is trading at 567.5p per share, a 12.3% discount to its net asset value (NAV) of 647p.
Hambro also manages the BlackRock Gold & General fund, a Citywire Selection Star Pick, which has given returns of 22.3% over the past three years beating the benchmark FTSE Gold Mines total returns of 9.1%.
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- Rio Tinto PLC (RIO.L)
- Bhp Billiton PLC (BLT.L)
- London Mining PLC (LOND.L)
- Impala Platinum Holdings Ltd (IPLA.L)
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