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The prospects for miners (in a diversified income focused portfolio)

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
Investment strategy discussions not dealt with elsewhere.
richfool
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The prospects for miners (in a diversified income focused portfolio)

#339693

Postby richfool » September 11th, 2020, 2:49 pm

I hold BRWM (Blackrock World Mining trust) in my diversified (mainly, but not exclusively income focused) IT portfolio. However, I am not sure how to assess the future prospects of that (mining) sector.

On the one hand I see an ongoing demand for commodities like copper, iron and steel and indeed precious metals (to which BRWM has exposure). However, on the other hand, if we suffer a continuing downturn or recession due to Covid or geo-political events, or for example a China event, that could well significantly dampen the demand for commodities/metals.

From the time scale perspective, I tend to look medium term,i.e. where I can see the light down the tunnel, as opposed to very long term whereby I have to travel a long way down a tunnel before there is any glimmer of light!

I note BRWM also has exposure to gold, though whilst attractive currently, I do and can get that exposure through other investments.

I would welcome views on the prospects for the mining sector, particularly taking into account the above points.

This is the breakdown of the mining sectors held by the trust:

Gold 39.3
Diversified 30.8
Copper 17.1
Industrial Minerals 2.8
Nickel 2.6
Platinum Group Metals 2.5
Iron Ore 1.7
Steel 1.6
Materials 0.4
Silver & Diamonds 0.3
Aluminium 0.1
Zinc 0.1
Current assets 0.7
Total 100.0

Moderator Message:
Moved this topic back here - leaving a link. - Chris

dspp
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Re: The prospects for miners (in a diversified income focused portfolio)

#339706

Postby dspp » September 11th, 2020, 3:34 pm

richfool wrote:I hold BRWM (Blackrock World Mining trust) in my diversified (mainly, but not exclusively income focused) IT portfolio. However, I am not sure how to assess the future prospects of that (mining) sector.


richfool,
I have relocated this post for you. I hope others are along to provide answers.
regards,
dspp

88V8
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Re: The prospects for miners (in a diversified income focused portfolio)

#339763

Postby 88V8 » September 11th, 2020, 8:21 pm

Increasing urbanisation, the rise of the Chinese middle class, the deplorable rate of population increase in India, all this and more will drive the demand for raw materials.
It's a bumpy sector, but on the whole will imho continue to provide decent returns.

The unknown however, is how much China's Belt & Road will supplant its current materials purchases in the coming years. Most certainly they are working towards a greater self-sufficiency which does not bode well for the sector.

So, one to hold, but not too much.

I hold BERI, BHP, RIO, and a residue of KAZ from the days when they were 'one to watch'. Which they were, just not one to buy ;)

V8

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Re: The prospects for miners (in a diversified income focused portfolio)

#339774

Postby UncleEbenezer » September 11th, 2020, 9:05 pm

Isn't this question just one of those to which the answer is diversification?

I hold a small amount of BRWM: OTTOMH it might be in the ballpark of 1% of my wealth. I'd be very nervous if it were not 1% but 10%.

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Re: The prospects for miners (in a diversified income focused portfolio)

#339789

Postby richfool » September 11th, 2020, 10:19 pm

dspp wrote:
richfool wrote:I hold BRWM (Blackrock World Mining trust) in my diversified (mainly, but not exclusively income focused) IT portfolio. However, I am not sure how to assess the future prospects of that (mining) sector.


richfool,
I have relocated this post for you. I hope others are along to provide answers.
regards,
dspp

dspp, I appreciate the thinking behind moving this to "Mining & Metals", but I would prefer it to be returned to "Investment Strategies".

I deliberately put it into Investments Strategies, rather than Investment Trusts, (which was also relevant), because I was seeking input regarding the relevance and risk of having BRWM as part of an income focused investment trust portfolio, which I included in the title. That included seeking to elicit whether a mining focused IT would be particularly risky or too cyclical for inclusion and what the outlook/prospects might be for that sector. By posting it under Mining & Metals might limit the readers to those more specifically or solely focused on just mining & metals.

As a comparison, to help illustrate my point, I note that topics about investment trusts are often made on the "High Yield Strategies" and "Investment Strategies" boards, rather than on the "Investment Trust" or Property Coy & REIT boards because the topic is about using them as part of an income focused strategy, for similar reasons. E.g. CTY, MRCH, PHP, RGL, etc.

I would appreciate it therefore if you could return the thread to the Investment Strategies board.

Thanks

richfool
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Re: The prospects for miners (in a diversified income focused portfolio)

#339793

Postby richfool » September 11th, 2020, 10:32 pm

88V8 wrote:Increasing urbanisation, the rise of the Chinese middle class, the deplorable rate of population increase in India, all this and more will drive the demand for raw materials.
It's a bumpy sector, but on the whole will imho continue to provide decent returns.

The unknown however, is how much China's Belt & Road will supplant its current materials purchases in the coming years. Most certainly they are working towards a greater self-sufficiency which does not bode well for the sector.

So, one to hold, but not too much.

I hold BERI, BHP, RIO, and a residue of KAZ from the days when they were 'one to watch'. Which they were, just not one to buy ;)

V8

Uncle Ebenezer wrote:Isn't this question just one of those to which the answer is diversification?

I hold a small amount of BRWM: OTTOMH it might be in the ballpark of 1% of my wealth. I'd be very nervous if it were not 1% but 10%.


Thank you both for your thoughts.

Yes, I like the idea from the perspective of diversification, (and income), but at the current time I am adopting a strategy of reducing risk, and thus avoiding particularly risky trusts or sectors. Also, I am aware of the cyclical nature of the sector and the prospect of recessions and downturns, so was pondering whether I should offload my (modest) holding. (Though) I do hold a gold miner (a smaller holding still).

Some of my UK and Global IT's hold a miner or two and would thus give me a small amount of exposure that way.

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Re: The prospects for miners (in a diversified income focused portfolio)

#339794

Postby 88V8 » September 11th, 2020, 10:48 pm

Those four I mentioned amount to about 4% of our investments, by value. I added somewhat in March.

As you say, not exactly a serene sector, but then one can find problems pretty well everywhere at present.
Holding through a specialised IT is probably more sensible than trying to follow the fortunes of a few mining majors.

V8

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Re: The prospects for miners (in a diversified income focused portfolio)

#339814

Postby scrumpyjack » September 12th, 2020, 8:48 am

One thing to look at in miners and risk is their cost of production vs the selling value. Er Rio and Bhp both have COP well under half the current iron ore price so they can weather a huge drop in the market price without becoming loss making.

That ratio is very relevant in deciding how risky a miner is

richfool
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Re: The prospects for miners (in a diversified income focused portfolio)

#339838

Postby richfool » September 12th, 2020, 10:56 am

88V8 wrote:Those four I mentioned amount to about 4% of our investments, by value. I added somewhat in March.

As you say, not exactly a serene sector, but then one can find problems pretty well everywhere at present.
Holding through a specialised IT is probably more sensible than trying to follow the fortunes of a few mining majors.

V8

scrumpyjack wrote:One thing to look at in miners and risk is their cost of production vs the selling value. Er Rio and Bhp both have COP well under half the current iron ore price so they can weather a huge drop in the market price without becoming loss making.

That ratio is very relevant in deciding how risky a miner is


Thanks for your thoughts. I decided I would offload my small holding of BRWM, partly to reduce risk and partly to reduce the total number of IT's I hold and help streamline my holdings. Upon a quick check, I note I get exposure to both RIO and BHP through Murray Income trust (MUT) and through some other IT's already in my portfolio. E.g. AAIF, SOI and HFEL each hold RIO.

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Re: The prospects for miners (in a diversified income focused portfolio)

#339852

Postby dspp » September 12th, 2020, 11:38 am

richfool wrote:
dspp wrote:
richfool wrote:I hold BRWM (Blackrock World Mining trust) in my diversified (mainly, but not exclusively income focused) IT portfolio. However, I am not sure how to assess the future prospects of that (mining) sector.


richfool,
I have relocated this post for you. I hope others are along to provide answers.
regards,
dspp

dspp, I appreciate the thinking behind moving this to "Mining & Metals", but I would prefer it to be returned to "Investment Strategies". I would appreciate it therefore if you could return the thread to the Investment Strategies board.

Thanks


richfool,
I've just picked this up. I had actually relocated it because of an alert requesting I did so. I'll drop you a PM to discuss, but I am putting this here so others know you are not being ignored meantimes.
regards,
dspp

edit: some other kind Mod has already shunted it back across.

richfool
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Re: The prospects for miners (in a diversified income focused portfolio)

#339872

Postby richfool » September 12th, 2020, 12:42 pm

The thread is already back Investment Strategies now, and I think I now have the answers I was looking for. Thanks. (PM refers).


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