GMI Presentation July 2011

8/4/2019 GMI Presentation July 2011

1/24

Investment Manager Presentation July 11Evy Hambro, Joint Chief Investment Officer

Catherine Raw, Portfolio Manager


2/24

Disclaimer

1. Issued by Global Mining Investments Limited, ABN 31 107 772 467, (GMI) in conjunction with BlackRock Investment Management (UK) Limited(BlackRock), authorised and regulated by the Financial Services Authority. Registered office: 33 King William Street, London, EC4R 9AS. Tel: 020

7743 3000. Registered in England No. 2020394.2. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not

guaranteed. You may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value ofinvestments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment mayfall suddenly and substantially. Levels and basis of taxation may change from time to time.

3. GMI has made every effort to ensure the accuracy and currency of the information contained in this document. However, no warranty is made as to theaccuracy or reliability of the information. The presentation does not take into account a reader's investment objectives, particular needs or financialsituation. It is general information only and should not be considered as investment advice and should not be relied on as an investmentrecommendation. Before acting on any information, you should consider the appropriateness of it and the relevant product havi ng regard to yourinvestment objectives, particular needs and financial situation . In particular, you should seek independent financial advice and read offer documentprior to acquiring a financial product. To the maximum extent permitted by law, none of GMI and its directors, employees or agents accepts any liabilityfor any loss arising from the use of this document or its contents.

4. Any research in this document has been procured and may have been acted on by GMI and BlackRock for their own purpose. The results of such

research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change.They do not necessarily reflect the views of GMI or any company in the BlackRock Group or any part thereof and no assurances are made as to theiraccuracy.

5. GMI may invest in emerging markets which are typically those of poorer or less developed countries. The prospects for economic growth in a numberof these markets are considerable and equity returns have the potential to exceed those in mature markets as growth is achieved. However, there arerisks to the Company from political, economic and market factors in emerging markets which are of particular significance. These include the possibilityof various forms of punitive or confiscatory government intervention, reduced levels of regulation, higher brokerage and tran saction commissions, lessreliable settlement and custody practices, loss of registration of securities, lower market liquidity, higher market volatility (causing substantial increase inprice and currency risks) and less reliable financial reporting.

6. GMI does not hold physical gold or other metals. Investors should be aware of the above-average volatility inherent in mining shares and the lowcorrelation between this sector and equity markets as a whole. Shares in smaller companies can be more volatile and less liqu id than those of largercompanies. When a portfolio of high yielding bonds is held, there is an increased risk of capital erosion through default or if the redemption yield isbelow the income yield. Economic conditions and interest rate levels may impact significantly the values of high yield bonds. Where a Company has a

particularly concentrated portfolio and a particular investment declines or is otherwise adversely affected, it may have a mo re pronounced effect than ifthe Company held a larger number of investments.

7. Subject to the express requirements of any client-specific investment management agreement or provisions relating to the management of a fund, wewill not provide notice of any changes to our personnel, structure, policies, process, objectives or, without limitation, any other matter contained in thisdocument.

8. Unless otherwise specified, all information contained in this document is current as at 31 May 2011.


3/24

Why Gain Exposure to GlobalResources?

We believe that the global resources sector is the place to be, for at least the nextdecade and should be included in a diversified portfolio as a sector specificinvestment.

Supply-demand fundamentals support this proposition and should not be confusedwith short run speculative volatility in commodity pricing.

Investing in global resources is a specialised activity requiring detailed industry andmarket knowledge.

Resource portfolio construction should represent diversity across markets,commodities and companies.

GMI as an ASX listed stock provides this diversity through a single market entry

point, combining solid exposure to BHP & Rio plus a further 76 stocks listed across

10 stock exchanges including most of the major global resources companies.


4/24

Evolution of World GDP

*Purchasing power paritySources: Angus Maddison, University of Groningen; The Economist for years 1-1970; IMF World Economic Outlook for 2008-2010

A History of World GDP


5/24

Dj vu have we been here before?

1. Concerns over Chinese economy slowing

2. Japanese earthquake

3. Sovereign debt issues re-surface

4. Market fears over US economy as QE3 appears less

likely

Familiar seasonal pattern so far year to date

Similar macro concerns relating to:

Chinese monetary tightening

US economic growth

European sovereign debt issues

Performance of mining sector in 2010 versus 2011 year-to-date

Source: DataStream to 1st July 2011 HSBC Global Mining Index used as representative of mining sector

Performance of mining sector versus general equities year-to-date


6/24

Demand-side dynamics

2009 regional breakdown of global commodity demand Copper Demand

Chinese and Indian Thermal Coal Imports Sea-borne Iron Ore Demand

Source: Deutsche Bank, March 2011. *Forecast data


7/24

Supply-side dynamics

Supply constrained by:

Average mined grades falling

Infrastructure challenges

Discovery rates falling

Shortage of skilled labour

Long lead times on equipment

Geopolitical challenges

Challenges to forecast bulk commodity production:

Growth constrained by congestion on roads, rail and at ports


8/24

Short term events driving spot prices higher

Markets are tight across a number of key commodities

Short term disruptions such as flooding and snow havemagnified impact on prices

So far in 2011 this has impacted

coking coal

iron ore

thermal coal (to a lesser extent)

Flooding in Queensland impacting coking coal operations

Snow impacting supply routes in Canada


9/24

Supply-side dynamics: Resource

nationalism

Wave of resource nationalism as governments look to mining companies as source of revenues

Peruvian elections Humala victory

Humala proposing to double mining royalty, introduce windfall tax and increase corporate tax

Greatest impact on outlook for copper

country represents ~7% of global copper production but ~20% of production growth from 2011 to 2020

Also significant for gold: ~8% of global production; and zinc: >5% of production

New projects are at risk while companies wait for clarity on investment environment in Peru

Other countries also exhibiting nationalistic predilections include:

Australia: mineral resources rent tax and potential carbon tax

Canada: BHP Billiton bid for Potash Corp blocked by government on strategic grounds

Chile: increase in mining royalty to pay for earthquake rebuild

DRC: mineral license review and expropriation of producing mines

Guinea: renegotiation of mining license agreements

South Africa: talk of nationalisation of the mining industry by elements within the ruling party

Zimbabwe: requirement for 51% indigenisation of all foreign-owned operations

Longer term impact:

Slows down the rate of investment and therefore growth in supply

Mining companies require higher returns to compensate for higher degree of uncertainty

Net effect is higher commodity prices


10/24

1

Coal prices

BHP Billiton have departed from annual benchmark for coking coal moving to quarterly in 2010. Nowoffering monthly pricing

High quality seaborne product sufficiently differentiated from low quality Chinese supply

Early settlement of thermal coal contracts shows potential of bulk producers to exert pricing power

Source: Macquarie data as at 24 June

2011

Coking Coal Pricing Thermal Coal Pricing

Source: Macquarie data as at 1 July

2011


11/24

1

Iron ore

Iron ore markets changing significantly with move to quarterly pricing

This appears to be a permanent change though the exact mechanism for pricing is still evolving

Provides greater level of pricing transparency

Directly references spot price driven by high cost Chinese and Indian production

Marginal costs of production for iron ore have increased by over $20 to $149/t

Source: CLSA data as at 27 May 2011 Source: Macquarie/The Steel Index as at end March 2011

Iron ore pricing Supply curve to Chinese market for iron ore fines


12/24

1

Challenges facing the copper market

The copper market is challenged by the following factors:

Declining open pit production

Average grade declines across the industry

Declining production capacity in low risk regions

With a forecast deficit of 500kt in 2011, there is a high risk of supply side shocks in the short term

In the long term these will clearly impact the ability of the copper market to significantly increase supply to meetthe forecast growth in demand

Open-pit production

74%

60%

2009 2025E

Challenges to forecast copper production:Increasing depth, decreasing grade and higher risk

Average grade

1.17%

1.03%

2009 2025E

Production capacity in

low risk re gions

88%

80%

2009 2025E

Source: Rio Tinto, October 2009, based on Brook Hunt

data

Copper Mine Disruptions by Type: 2004 - 2010

Source: Brook Hunt, February 2011


13/24

1

Base metal prices and criticalinventory levelsCopper Zinc

Aluminium Nickel

Source: CRU International; LME; GS&PA Research, as at 2Q 2011

0

5

10

15

20

Mar-90

Mar-92

Mar-94

Mar-96

Mar-98

Mar-00

Mar-02

Mar-04

Mar-06

Mar-08

Mar-10

W

eeksofWestern

Consumption

0

50

100

150

Usc/lb

Critica l Stocks (LHS) Transit ion Stocks (LHS)

Excess Stocks (LHS) Aluminium Price (RHS)

0

5

10

Mar-90

Mar-92

Mar-94

Mar-96

Mar-98

Mar-00

Mar-02

Mar-04

Mar-06

Mar-08

Mar-10

WeeksofWestern

Consumption

0

100

200

300

400

Usc/lb

Crit ical Stocks (LHS) Transit ion Stocks (LHS)

Excess Stock s (LHS) Copper P ric e (RHS)

0

5

10

15

20

Mar-90

Mar-92

Mar-94

Mar-96

Mar-98

Mar-00

Mar-02

Mar-04

Mar-06

Mar-08

Mar-10

W

eeksofWestern

Consumption

0

500

1000

1500

2000

2500

Usc/lb

Critica l Stocks (LHS) Transit ion Stocks (LHS)

Ex ces s S toc ks (LHS) Nic kel Pri ce (RHS)

0

5

10

15

20

Mar-90

Mar-92

Mar-94

Mar-96

Mar-98

Mar-00

Mar-02

Mar-04

Mar-06

Mar-08

Mar-10

WeeksofWestern

Consumption

0

50

100

150

200

Usc/lb

Critica l Stocks (LHS) Transit ion Stocks (LHS)Ex ces s S toc ks (LHS) Zinc P rice (RHS)


14/24

1

From Debt Mountains to Cash Piles

Mining sector forecast to be in a net cash position by the end of 2011

First time this has been the case in recent history

-150,000

-100,000

-50,000

0

50,000

100,000

2005 2006 2007 2008 2009 2010e 2011e 2012e

US$(m)

Net Cash

Source: Citigroup, October 2010

Use of improved spending power capex, M&A and dividends

A N T di R f th


15/24

1

A New Trading Range for theDiversifieds?

Diversified companies have been trading in a lower PE range than during the last cycle (92-02)

Mining stocks trading at a discount compared to historic levels

Source: DataStream. Weekly data to 4 July 2011.


16/24

1

Corporate Events

Mining sector financial strength has returned

Dividends resumed or increased

Gold companies initiating and/or increasing dividends

Dividends re-instated and increased across the mining sector

Recent examples: BHP Billiton, Rio Tinto, Xstrata, AngloAmerican, Teck Resources, OZ Minerals

Special dividends announced by Freeport, Vale and Antofagasta

Share buybacks

Vale announced and completed US$2 billion buyback between

September and November 2010 BHP Billiton announced US$10 billion buyback

Rio Tinto announced a $5 billion buyback

Debt markets are open at attractive rates

Teck refinanced high interest debt with longer dated and significantlylower interest debt

Rio refinanced Alcan-related US$5bn revolving credit line

2010 a record year for M&A, 2011 looks set to

follow suit In 2010, 186 deals worth US$134 billion that were either completed or

live at the end of the year

Top sectors for M&A: gold, coal and iron ore

So far in 2011:

Rio Tinto successful in its US$4bn bid for Riversdale

BHP Billiton buys shale gas assets from Chesapeake Energy forUS$4.75bn

Equinox announces a US$4.9bn hostile bid for Lundin Mining

Minmetals Resources announce U$6.3bn hostile bid for Equinox

Barrick announces US$7.6bn friendly takeover for Equinox

GMI P f li P f ( f


17/24

1

GMI Portfolio Performance (net ofmanagement fees)

A$ 1m 3m YTD FYTD 1 Yr3 Yrs(p.a.)

5 Yrs(p.a.)

Sincelaunch(p.a.)

GMI Portfolio -0.7% -3.2% -3.4% 24.3% 17.9% -9.3% 6.5% 18.7%

HSBC Global Mining Index -2.6% -6.1% -6.9% 13.1% 7.3% -6.6% 4.3% 12.6%

A$ FYTD FY 2010 FY 2009 FY 2008 FY 2007 FY 2006 FY 2005

GMI Portfolio 24.3% 23.0% -48.6% 23.6% 45.3% 92.3% 24.5%

HSBC Global Mining Index 13.1% 19.8% -38.2% 16.7% 24.7% 74.0% 14.3%

Alpha +11.2% +3.2% -10.4% +6.9% +20.6% +18.3% +10.2%

Cumulative Performance

Annual Performance

Source: Internal. As at end May 2011. Returns for longer than one year are annualised. Launch date 6 April 2004.

Source: Internal. As at end May 2011. Financial Year (FY) is 30 June.

GMI P tf li P f ( t f


18/24

1

GMI Portfolio Performance (net ofmanagement fees)

0

100

200

300

400

500

Ap

r-04

Jul-04

Oct-04

Ja

n-05

Ap

r-05

Jul-05

Oct-05

Ja

n-06

Ap

r-06

Jul-06

Oct-06

Ja

n-07

Ap

r-07

Jul-07

Oct-07

Ja

n-08

Ap

r-08

Jul-08

Oct-08

Ja

n-09

Ap

r-09

Jul-09

Oct-09

Ja

n-10

Ap

r-10

Jul-10

Oct-10

Ja

n-11

Ap

r-11

Indexedt

o1

00

GMI Portfolio Performance vs HSBC Global Mining Index since inception (in A$)

GMI Portfolio (A$) HSBC Global Mining Index (A$)


19/24

1

Current Porfolio Positioning

AUM: A$280m

Gearing of 5.4%

Fixed income exposure

13.4% of portfolio (83% convertible debt, 17% corporate debt)

Running yield of 4.6%

Yield on book cost 6.5%

4.8% of portfolio in unquoted securities

Key event for portfolio: successful IPO of Glencore (7.2%)

Source: Internal, June 2011

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

Diversi

fied

G

old

Coppe

r

IronOr

e

C

oal

Platin

um

Alum

inium

Nickel

Other

GMI Portfolio

HSBC Global Mining Index

Commodity exposure of GMI relative to benchmark


20/24

2

GMI Top 10 Holdings

Source: Internal, as at end May 2011

Stock Geography Commodity Percentage Holding

Rio Tinto Global Diversified 9.1%

BHP Billiton Global Diversified 8.1%

Glencore Global Diversified 8.0%

Vale Latin America Diversified 6.4%

Teck North America Diversified 4.9%

Xstrata Global Diversified 4.5%

Freeport McMoran Global Copper 4.2%

Newcrest Australia Gold 4.2%

Anglo American Global Diversified 3.6%

First Quantum Minerals Africa Copper 2.8%

Stock Geography Commodity Percentage Holding

Rio Tinto Global Diversified 9.1%

BHP Billiton Global Diversified 8.1%

Glencore Global Diversified 8.0%

Vale Latin America Diversified 6.4%

Teck North America Diversified 4.9%

Xstrata Global Diversified 4.5%

Freeport McMoran Global Copper 4.2%

Newcrest Australia Gold 4.2%

Anglo American Global Diversified 3.6%

First Quantum Minerals Africa Copper 2.8%

Number of Holdings: 78


21/24

Global Mining Investments Limited

Q & A

2


22/24

2

Appendix

BlackRocks Natural Resources Team


23/24

2

BlackRock s Natural Resources Team,

London

Agriculture

As at June 2011. *New senior portfolio manager to join Mining and Gold sector in August 2011

Richard DavisCatherine Raw

Tom Holl

Poppy AllonbyAlastair BishopJoshua Freedman

BlackRock Offices worldwide250+ equity analysts, 300+ fixed income analysts

BlackRock Solutions & Risk Management1,800+ Professionals

Evy Hambro & Robin Batchelor

Joint Chief Investment Officers

Portfolio Manager AssistantsSimon McClure &

Greg Bullock

Mining & Gold* Energy & New Energy

Desmond CheungRichard DavisPiers Holden

Product SpecialistsMalcolm Smith

Fiona Stubbs & Alex Ball


24/24

Date post:	07-Apr-2018
Category:	Documents
Upload:	jonathan-nowak
View:	217 times
Download:	0 times

GMI Presentation July 2011

Documents