Mining stocks are back in favour – but proceed with caution

This investment trust packed with mining stocks has risen by 70% since the end of 2019, but investors should be cautious about assuming “this time is different”, says Max King

A miner about to blow something up
Miners are being more careful with new projects
(Image credit: © GLENN ARCOS/AFP via Getty Images)

The share price of BlackRock World Mining Trust (LSE: BRWM) has risen by 170% since its pandemic low and by 70% since the end of 2019, supplemented by an annual dividend yield of 3.6%. Yet Olivia Markham, co-manager of the £1.2bn trust, is optimistic that there is further to go.“Compared with other cycles, which usually last around 36 months, we are about half way through, but not necessarily that far in terms of investor returns,” she says. “The backdrop for most commodities is healthy, valuations are attractive, company balance sheets are incredibly strong and management is focused on capital discipline.”

Still, old hands will remember how the shares fell by two-thirds in six months in 2008, after having multiplied six fold in the previous five years. They then soared by 220% to a peak over £8 in early 2010, before falling back below £2 in early 2016. They now trade at net asset value, close to 650p. When they fall out of favour, the discount has risen to 20%.

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Max King
Investment Writer

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.

After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.