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Home > Investments > Investment Trusts

Blackrock in mine deal

Trust manager predicts big dividend boost and narrowing of discount as a result of landmark deal.

By Nick Reeve | Published Aug 06, 2012 | comments

BlackRock has struck a landmark deal with an iron ore mining company to boost the dividend of its £1.3bn BlackRock World Mining investment trust.

The trust, run by star manager Evy Hambro, last week paid iron ore specialist London Mining $110m (£71m) for access to a quarterly royalty payment from the firm’s Sierra Leone mine.

The deal means the investment trust will be paid 2 per cent of sales of iron ore emanating from the company’s substantial Marampa assets.

In the first half of the year the mine sold 594,000 tonnes of iron ore, which would have netted the trust a $1.2m windfall.

Mr Hambro, who also manages the £2.4bn BlackRock Gold & General fund and the Luxembourg domiciled $10.8bn World Mining Sicav, said he expects the deal to boost the trust’s dividend yield and share price relative to the value of its investments.

As a result, Mr Hambro said he expected an increased dividend payment this year on top of the 133 per cent increase announced last year. The trust is currently yielding 2.5 per cent.

Mr Hambro said the trust’s ability to borrow money cheaply to finance the deal meant it was far easier to implement than in an open-ended fund.

In addition, most European funds are subject to strict limits on how much can be invested in one stock – meaning the deal is unlikely to be repeated in Mr Hambro’s other funds.

However, the manager said the trust’s board may be open to repeating the deal if successful.

“The board is speaking to shareholders to get a feeling for how far we want to go down this route,” Mr Hambro said.

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