Performance record
| As at 30 June 2024 | As at 31 December 2023 | ||
| Net assets (£’000)1 | 1,093,972 | 1,160,051 | |
| Net asset value per ordinary share (NAV) (pence) | 572.21 | 606.78 | |
| Ordinary share price (mid-market) (pence) | 569.00 | 587.00 | |
| Reference index2 – net total return | 6,041.29 | 6,002.54 | |
| Discount to net asset value3 | (0.6)% | (3.3)% | |
| ========= | ========= |
| For the six months ended 30 June 2024 | For the year ended 31 December 2023 | ||
| Performance (with dividends reinvested) | |||
| Net asset value per share3 | -1.9% | -6.2% | |
| Ordinary share price3 | +1.1% | -10.4% | |
| Reference index2 | +0.6% | +2.4% | |
| ————— | ————— | ||
| Performance since inception (with dividends reinvested) | |||
| Net asset value per share3 | +1,291.6% | +1,319.4% | |
| Ordinary share price3 | +1,381.5% | +1,365.9% | |
| Reference index2 | +1,012.4% | +1,005.2% | |
| ========= | ========= |
| For the six months ended 30 June 2024 | For the six months ended 30 June 2023 | Change % | |
| Revenue | |||
| Net revenue profit after taxation (£’000) | 22,848 | 31,767 | -28.1 |
| Revenue return per ordinary share (pence)3 | 11.95 | 16.73 | -28.6 |
| ————— | ————— | ————— | |
| Dividend per ordinary share (pence) | |||
| – 1st interim | 5.50 | 5.50 | – |
| – 2nd interim | 5.50 | 5.50 | – |
| ————— | ————— | ————— | |
| Total dividends paid and payable | 11.00 | 11.00 | – |
| ========= | ========= | ========= |
1 The change in net assets reflects portfolio movements, dividends paid and the reissue of ordinary shares from treasury during the period.
2 MSCI ACWI Metals & Mining 30% Buffer 10/40 Index (net total return). With effect from 31 December 2019, the reference index changed to the MSCI ACWI Metals & Mining 30% Buffer 10/40 Index (net total return). Prior to 31 December 2019, the reference index was the EMIX Global Mining Index (net total return). The performance returns of the reference index since inception have been blended to reflect this change.
3 Alternative Performance Measures, see Glossary contained within the Half Yearly Financial Report.
Chairman’s Statement
Following the Annual General Meeting in May, I assumed the role as Chairman of your Company. I am delighted to present the Half Yearly Financial Report to shareholders.
Market overview
Markets have experienced heightened volatility shaped by continued geopolitical and macroeconomic drivers. Interest rate policy and inflation have remained top of mind amid elevated public debt and weaker growth relative to the pre-pandemic era. The US-China trade war and geopolitical tensions, including the Russia/Ukraine war and the conflict in the Middle East, have also increased the supply chain risk.
It was a mixed period for the mining sector with a new all-time high price set for copper and gold and a pick-up in merger and acquisition (M&A) activity. This was offset by weakness across the bulk commodities as property related demand in China continued to soften. Despite a number of positive drivers during the first half, concerns over the outlook for China’s economy negatively impacted the sector and the six month reporting period ended on a weak note as momentum faltered and most commodity prices declined.
Performance
Against this backdrop, for the six month period ending 30 June 2024, the Company’s net asset value per share (NAV) returned -1.9% and the share price returned +1.1%. The Company’s reference index, the MSCI ACWI Metals & Mining 30% Buffer 10/40 Index, returned +0.6% (all percentages calculated in Sterling terms with dividends reinvested).
Since the period end and up to the close of business on 21 August 2024, the Company’s NAV has decreased by 2.9% compared to a fall of 3.2% (on a net return basis) for the reference index (in Sterling terms with dividends reinvested). Further information on the Company’s performance and the factors that contributed to, or detracted from, performance during the six months is set out in the Investment Manager’s Report.
Revenue return and dividends
Over the six month period to 30 June 2024, the Company’s revenue return amounted to 11.95p per share, compared to 16.73p per share for the corresponding period in 2023. This represents a decrease of 28.6% and reflects reductions in dividends from many mining companies.
The first quarterly dividend of 5.50p per share was paid on 31 May 2024. Today, the Board has announced a second quarterly dividend of 5.50p per share which will be paid on 30 September 2024 to shareholders on the register on 6 September 2024 with the ex-dividend date being 5 September 2024. It remains the Board’s intention to distribute substantially all of the Company’s available income in the future.
Management of share rating
For the period under review, the Company’s ordinary shares have traded at an average discount to NAV of 4.6% and were trading at a discount of 3.1% on a cum income basis as at 21 August 2024, the latest practicable date prior to the issue of this report. The Company did not buy back or reissue any shares during the six month period ended 30 June 2024. Since the period end and up to the date of this report, no ordinary shares have been reissued or bought back.
The Directors recognise the importance to investors that the Company’s share price does not trade at a significant premium or discount to NAV. Accordingly, the Directors monitor the share price closely and, in the context of wider market conditions, with investor sentiment and premiums/discounts being influenced by various external factors, will consider the issue of shares at a premium or the repurchase at a discount to help balance demand and supply in the market.
Gearing
One of the advantages of the investment trust structure is that the Company can use gearing with the objective of increasing portfolio returns over the longer term. The Company operates a flexible gearing policy which depends on prevailing market conditions. It is not intended that gearing will exceed 25% of the net assets of the Company and its subsidiary. Gearing at 30 June 2024 was 10.5% and maximum gearing during the period was 14.7%.
Board composition
I am delighted to welcome Elisabeth Scott to the Board. She was appointed following the Annual General Meeting held on 9 May 2024. Elisabeth possesses a great deal of investment trust specific expertise and asset management experience, both through her executive career as an investment manager and in her current involvement with a number of complementary boards. Elisabeth also chaired the Association of Investment Companies from January 2021 until January 2024. Further information on her background and experience can be found on page 48 of the Half Yearly Financial Report.
As previously advised in last year’s Annual Report, David Cheyne, having completed nearly 12 years on the Board, retired following the 2024 Annual General Meeting. On behalf of the Board, I want to thank David for his many years of excellent service to the Company and its shareholders and we wish him the best for the future.
I am pleased to report that the Board is compliant with the recommendations of the Parker Review and the FTSE Women Leaders Review. In accordance with the Listing Rules, we have also disclosed the ethnicity of the Board and our policy on matters of diversity. This disclosure can be found on pages 70 and 71 of the Company’s Annual Report.
Market outlook
Looking ahead, market volatility is unlikely to abate. 2024 marks a significant year for elections worldwide bringing uncertainty on the policy and geopolitical front. China, one of the most important economies for commodity demand, has also fueled concerns for the growth outlook and there is the potential for mounting geopolitical risk, primarily in the Middle East. Although inflationary pressures are easing, a measured approach by each central bank would indicate potential interest rate cuts in Europe and Asia and an increasing likelihood of a rate cut in the US.
However, there are reasons for optimism for the commodities sector. The mining industry is key to delivering the materials required for infrastructure investment, including the investment required to support the transition to a low carbon energy environment. This transition is expected to drive materials demand for many years to come. Artificial intelligence (AI) systems depend on minerals and metals in several ways and the investment in AI data centres and power grids is also set to bolster metals demand. Despite the pick-up in M&A activity, we are pleased to see mining companies continue to show strong capital discipline, which should ensure that there is an appropriate split of available cash flow between shareholder distributions and growth.
CHARLES GOODYEAR
Chairman
23 August 2024