DSP World Mining Fund
- 1. DSP World Mining Fund An Open Ended Fund Of Fund Scheme investing in BlackRock Global Funds – World Mining Fund (BGF – WMF) July 31, 2018 This Scheme is suitable for investors who are seeking* : • Long-term capital growth • Investment in units of overseas funds which invest primarily in equity and equity related securities of mining companies *Investors should consult their financial advisors if in doubt about whether the product is suitable for them.
- 2. DSP World Mining Fund: Product Structure BlackRock Global Funds (BGF) World Mining Fund (WMF) USD 6.08 billion Source: BlackRock; AUM of BGF – WMF as on end-June, 2018 Indian Investors 2 An Open Ended Fund Of Fund Scheme investing in BlackRock Global Funds – World Mining Fund (BGF – WMF)
- 3. Where are we in the mining cycle? 3 100 300 500 700 900 1,100 1,300 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 Indexlevel Euromoney Global Mining Index As at end December, the index is up 255% from the lows and would have to rise ~70% to reach the peak of 2011 Mining sector peak in Q2 2011. Fuelled by China stimulus post the Global Financial Crisis China’s economic growth rate slows and sector comes under significant pressure Mining sector faces perfect storm of China fears plus concerns around debt levels China stimulus eases market concerns and commodities start to recover Global Financial Crisis Rising demand from emerging markets, particularly China resulted in a boom in commodity prices Current level… Appearance of strong signals that commodity markets are going into deficit Performance (%) Apr-17 - Apr-18 Apr-16 - Apr-17 Apr-15 - Apr-16 Apr-14 - Apr-15 Apr-13 - Apr-14 Euromoney Global Mining Index 20.40% 12.23% -17.21% -20.48% -3.43% The figures shown relate to past performance. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. Index returns are for illustrative purposes only. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Source: DataStream, 30 April 2018.
- 4. Mined commodity prices have performed well based on market dynamics Mined commodity performance The figures shown relate to past performance. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. Source: DataStream, 31 July 2018. 4 227% 11% 6% -27% -2% -10% 9% 13% 4% -6% -24% -9% -19% 9% -42% 13% 28% 33% 10% -19% 2% -14% 4% -18% 14% 32% 11% -9%-7% 6% -35% -19% -12% 16% 6% -3% -8% -21% 4% -7% -14% -26% 17% 30% 11% -13% -25% 12% 0% 6% -26% 61% 30% 10% -20% -18% -3% -3% -47% -39% 83% -8% -1% -7% 7% -20% -10% -30% -34% 0% 0% 0% -60% -40% -20% 0% 20% 40% 60% 80% 100% 2011 2012 2013 2014 2015 2016 2017 Average price YTD 2018 vs. average in 2017 YTD to end July 2018 Gold Nickel Aluminium Silver Copper Zinc Iron Ore Coking coal
- 5. Despite stellar performance in the last 2 years, investors remain underweight 5 Bank of America Merrill Lynch European Fund Managers Survey The figures shown relate to past performance. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Mining shares typically experience above average volatility when compared to other investments. Trends which occur within the general equity market may not be mirrored within mining securities. Source: Left: Datastream, 31 December 2017. Right: Bank of America Merrill Lynch Global Fund Manager Survey, 31 March 2018. Data refers to 2003-2018. Euromoney Global Mining Index calendar year performance -37.54% 2.10% -22.63% -18.10% -40.32% 62.67% 32.27% -60% -40% -20% 0% 20% 40% 60% 80% 2011 2012 2013 2014 2015 2016 2017 The sector’s recent outperformance has caused pain to the relative performance of investors who were underweight the mining sector
- 6. Value opportunity in the mining sector 6 The figures shown relate to past performance. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Mining shares typically experience above average volatility when compared to other investments. Trends which occur within the general equity market may not be mirrored within mining securities. Source: Bloomberg and Datastream, charts show data to 31 December 2017. Tables show data to 31 July 2018. EV/EBITDA multiples Relative P/B ratios indicate further upside potential The sector is attractively valued versus broader equity markets 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x EV/EBITDA FTSE 350 Mining Index MSCI World Index 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 Jun-83 Jun-85 Jun-87 Jun-89 Jun-91 Jun-93 Jun-95 Jun-97 Jun-99 Jun-01 Jun-03 Jun-05 Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 Pricetobook Mining Mining average Performance (%) Jul-17 - Jul- 18 Jul-16 - Jul-17 Jul-15 - Jul- 16 Jul-14 - Jul-15 Jul-13 - Jul-14 FTSE 350 Mining Index (GBP) 12.11% 42.40% 2.99% -36.82% 13.40% MSCI World Index (USD) 9.79% 13.90% -2.48% 2.99% 13.69% Performance (%) Jul-17 - Jul- 18 Jul-16 - Jul-17 Jul-15 - Jul- 16 Jul-14 - Jul-15 Jul-13 - Jul-14 Euromoney Global Mining Index 7.62% 14.67% 18.16% -43.79% 16.80%
- 7. High levels of free cash flow being generated by the miners 7 Source: Bank of America Merrill Lynch, 6 June 2018. Reference to the names of each company mentioned in this communications is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies. Spot prices as at 6 June 2018. Base case based on Bank of America Merrill Lynch estimates. 9.2% 7.1% 10.4% 11.8% 6.8% 7.9% 6.2% 11.3% 15.5% 9.7% 9.7% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% BHP RioTinto Anglo Glencore Antofagasta Hydro Randgold Vale South32 Fortescue GROUP 2018FCFYield(percent) 2018-2022EcumulativeFCFas%ofEV Base case spot 2018 FCF Yield Using Spot Prices
- 9. A) China worries The figures shown relate to past performance. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. Index returns are for illustrative purposes only. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Source: DataStream, data to 31 July 2018. 9 China PMI remaining above 50, indicating expansionEuromoney Global Mining Index 300 400 500 600 700 800 900 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 EuromoneyGlobalMiningIndexlevel Performance (%) Jul-17 - Jul- 18 Jul-16 - Jul-17 Jul-15 - Jul- 16 Jul-14 - Jul-15 Jul-13 - Jul-14 Euromoney Global Mining Index 7.62% 14.67% 18.16% -43.79% 16.80% Dips in China sentiment happen at least once a year and every time have represented buying opportunities 42 44 46 48 50 52 54 56 58 60 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 PMIIndex(50isneutral) “China’s economy is on the verge of a painful credit crunch” Market Watch: March 2017 “Are we finally seeing a hard economic landing in China?” Fortune.com: August 2015 “Scared of China hard landing? You should be” South CNBC: December 2015
- 10. China’s supply side reform is increasing deficits 10 Source left: OECD and Morgan Stanley, 17th October 2017. The chart illustrates net capacity reductions (the amount shuttered minus new additions). This is based on an estimate from Morgan Stanley on 25th September 2017. Source right: Goldman Sachs, 30 September 2017. There is no guarantee that any forecasts made will come to pass. We are unlikely to see closed capacity reopened, and with China still needing the supply, seaborne markets will tighten further China’s government is shutting down factories to fight air pollution and to increase productivity efficiency Coal -16.2%/-800mt 5 year (2016- 2020) capacity reduction target Steel -12.3%/-140mt 5 year (2016- 2020) capacity reduction target Aluminium Shut down all illegal capacity built without permits after May 2013 0 50 100 150 200 250 EU-28 China cuts 2016-2017 Japan India United States Milliontonnes Steel capacity Cuts to capacity
- 11. 4000 4500 5000 5500 6000 6500 7000 7500 8000 0 20 40 60 80 100 120 140 160 CopperpriceU$/MT IronOrepriceU$/MT Iron Ore Copper (RHS) -500 0 500 1000 1500 2000 2500 3000 3500 0 5 10 15 20 25 30 35 Jan-2004 Nov-2004 Sep-2005 Jul-2006 May-2007 Mar-2008 Jan-2009 Nov-2009 Sep-2010 Jul-2011 May-2012 Mar-2013 Jan-2014 Nov-2014 Sep-2015 Jul-2016 May-2017 Mar-2018 BillionsChineseYuan YOY%Change Money Supply M2 China New Loans (RHS) 0 5 10 15 20 25 Jan-00 Nov-00 Sep-01 Jul-02 May-03 Mar-04 Jan-05 Nov-05 Sep-06 Jul-07 May-08 Mar-09 Jan-10 Nov-10 Sep-11 Jul-12 May-13 Mar-14 Jan-15 Nov-15 Sep-16 Jul-17 May-18 Annualchange(%) Chinese economic transition sees data stabilising rather than falling 11 China real GDP growth breakdown China’s Industrial Production Money supply slows as the country continues to delever Commodities have reacted positively The figures shown relate to past performance. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. Source: Datastream and BlackRock Investment Institute, 30 June 2018. Data refers to 01/01/10-31/12/17 (top left), 01/01/00-31/07/18 (top right), 01/01/04-31/07/18 (bottom left), 01/01/13- 31/07/18 (bottom right).
- 12. B) Mistrust in management
- 13. Value over volume 13 Capex in the mining sector slashed through the down-cycle Source: Morgan Stanley, 19th March 2018. There is no guarantee that any forecasts made will come to pass. A D M A S T E R - S T A M P ! A E 0 8 1 8 E - 5 6 7 6 7 9 - 1 7 7 8 8 6 6 0 50,000 100,000 150,000 200,000 250,000 USDmillion
- 14. Net debt to EBITDA now 0.2x having been ~3x 3 years ago Will capital discipline prevail? 14 Rhetoric from management teams now points to capital disciplineChanging of the guard: New management teams, board turnover e.g. new chairman at BHP, Rio and Anglo Changing dividend policies: Progressive to pay-out ratios Companies don’t have projects ready to be sanctioned Sector aware of the history of value destruction via M&A Source: Rio Tinto website, accessed 6th February 2018. Reference to the names of each company mentioned in this communications is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies. There is no guarantee that any forecasts made will come to pass. Any investments named within this material may not necessarily be held in any accounts managed by BlackRock. Figures shown in USD. Banks have been repaid, now for shareholders to be repaid ‘I’m not interested in being the largest or the biggest’. ‘All assets are available for sale at any time, it’s just a question of value…bring your credit card’. ‘What you should expect from us is to keep delivering on our promises’. A D M A S T E R - S T A M P ! A E 0 8 1 8 E - 5 6 7 6 7 9 - 1 7 7 8 8 6 6
- 15. C) Low confidence margins will be maintained
- 16. Demand outlook: stable and synchronous growth expected 16 BlackRock GPS vs. G7 consensus Global manufacturing activity displaying continued expansion Source: BlackRock Investment Institute, with data from Consensus Economics and Thomson Reuters, 31 July 2018. Notes: The GPS shows where the 12-month consensus gross domestic product (GDP) forecast may stand in three months’ time for G7 economies. The blue line shows the current 12-month economic consensus forecast as measured by Consensus Economics. Source: Datastream, 31 July 2018. Note: PMI stands for Purchasing Managers’ Indexes. PMI is an economic indicator that is derived from monthly surveys of private sector companies. An Index level above 50 indicates an improvement in manufacturing activity. A D M A S T E R - S T A M P ! A E 0 8 1 8 E - 5 6 7 6 7 9 - 1 7 7 8 8 6 6 30 35 40 45 50 55 60 65 PMILevel China US Eurozone World In periods of synchronous global growth, we don’t see bear markets for commodities 1.5 1.6 1.7 1.8 1.9 2 2.1 2.2 2.3 2.4 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 12mAheadGDPGrowth G7 GPS G7 12m Forward Consensus GDP
- 17. Company focus remains on keeping costs low 17 Example: BHP • BHP is targeting US$11 billion in productivity gains from FY12 to FY16. • Further cost reductions supports a 10% value uplift Source: Left: Rio Tinto investor presentation, accessed 6th February 2018. Right: BHP investor presentation, accessed 6th February 2018. Reference to the names of each company mentioned in this communications is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies. There is no guarantee that any forecasts made will come to pass. Figures shown in USD. Values at analyst 2017 consensus price forecasts. Valuation date 1st July 2017 $8.2bn Reduced costs: operating, exploration and evaluation cost reductions achieved by 30th June 2017 vs 2012 $8.2bn Reduced net debt: Since net debt peaked at 30th June 2013 By 40% Increased cash returns: Dividends and buybacks in 2017 compared to 2012 Productivity improvements to continue to deliver cash benefits to shareholders Example: Rio Tinto
- 18. Portfolio themes
- 19. 0 10 20 30 40 Jan-03 Nov-03 Sep-04 Jul-05 May-06 Mar-07 Jan-08 Nov-08 Sep-09 Jul-10 May-11 Mar-12 Jan-13 Nov-13 Sep-14 Jul-15 May-16 Mar-17 Jan-18 Price Vale share price performance Unlocking Value: Vale’s Value Vision 19 Peak Capex in 2011 was $18bn. Capital expenditures now set to remain low Vale is projected to generate substantial cash flow Free Cash Flow accumulated (2018-2020), US$ billion Resulting in significant shareholder return The figures shown relate to past performance. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. Source: Vale Company presentation, accessed: 18th January 2018. Share price performance: Datastream as at 31 July 2018. Reference to the names of each company mentioned in this communications is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies. There is no guarantee that any forecasts made will come to pass. The figures shown relate to past performance. Past Performance is not a reliable indicator of current and future results. Figures shown in USD. A D M A S T E R - S T A M P ! A E 0 8 1 8 E - 5 6 7 6 7 9 - 1 7 7 8 8 6 6 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 2017E 2018E 2019E 2020E 2021E 2022E US$billion Growth Sustaining Replacement Growth non-approved Performance (%) Jul-17 - Jul- 18 Jul-16 - Jul- 17 Jul-15 - Jul- 16 Jul-14 - Jul- 15 Jul-13 - Jul- 14 Vale 46.16% 74.43% 9.32% -63.34% 4.59%
- 20. Theme: Growth in a constrained environment 20 Source: First Quantum Company presentation, accessed: 18th January 2018. *First Quantum includes an estimated 300k tonnes of production from Cobre Panama. Reference to the names of each company mentioned in this communications is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies. There is no guarantee that any forecasts made will come to pass. Projected unrivalled growth in copper production First production for Cobre Panama project scheduled for Q4 2018 As the company delevers and remains disciplined, the opportunity for shareholder returns rises The company has now passed its point of peak annual capex and deleveraging should start in H2 2018. 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 Milliontonnes 2019E Copper Production
- 21. Theme: Electric vehicles providing opportunities for the mining sector 21 Incremental commodity demand assuming electric vehicles represent 24% of total passenger vehicle sales (UBS 2030 assumption) - % of today’s global production 686% 463% Source: Left: IHS Goldman Sachs Global Investment Research, 2017. Right: UBS estimates, 31 October 2017. There is no guarantee that any forecasts made will come to pass. BlackRock has not acquired any rights or license to reproduce the images set out in this document. The images set out in this document are used only for the purposes of this presentation. -13% 0% 0 3% 3% 5% 25% 126% 157% -50% 0% 50% 100% 150% 200% PGM Steel Silicon Aluminum Manganese Copper Nickel Graphite Rare earths Cobalt Lithium Enhanced ICE Hybrid Electric (HEV) Electric Drive 0% 5% 10% 15% 20% 25% 2015 2020 2025 Electric vehicles as a % of global auto sales Electric Vehicles Plug In Hybrid Electric Vehicle Hybrid Electric Vehicles
- 22. Attractive supply and demand fundamentals: Copper 22 Copper supply and demandCopper faces wage talks in Chile Source: Top Left: Citi Bank, 31 January 2018. Bottom left: BlackRock, 1 January 2018. Top right: Datastream, 31 July 2018. Bottom right: Wood Mackenzie Metals Markets Service, 31 December 2017. There is no guarantee that any forecasts made will come to pass. • The fundamentals of copper are supportive for robust long term prices: - Production CAGR is 2.2% until 2020 (with no disruption allowances) - Supply is expected to fall as capacity is curtailed, with consistent supply deficit beginning in 2021 - Demand continues to expand for copper - The sector will generate $62bn of cumulative Free cash flows in 2018-20 Producers benefitting from an improved trading range for copper -300 -200 -100 0 100 200 300 400 500 600 700 kt Surplus / Deficit Mines negotiating in 2018 Chilean mines will negotiate contracts with 32 unions next year, representing ~75% of Chile’s copper output and 20% of world production 4000 4500 5000 5500 6000 6500 7000 7500 Jan-2016 Feb-2016 Mar-2016 Apr-2016 May-2016 Jun-2016 Jul-2016 Aug-2016 Sep-2016 Oct-2016 Nov-2016 Dec-2016 Jan-2017 Feb-2017 Mar-2017 Apr-2017 May-2017 Jun-2017 Jul-2017 Aug-2017 Sep-2017 Oct-2017 Nov-2017 Dec-2017 Jan-2018 Feb-2018 Mar-2018 Apr-2018 May-2018 Jun-2018 Jul-2018 PriceUS$/tonne Copper U$/tonne
- 24. Macroeconomic backdrop: political uncertainty being ignored by markets? 24 Key considerations for 2018 BlackRock Geopolitical Risk Indicator Global Financial Crisis Eurozone sovereign debt crisis Crimea invasion US election Russia Presidential elections: • Mar. 18 UK EU deadline for UK- EU agreement on Brexit deal: October Eurozone Key ECB meetings • Jan. 25 June 14 Oct. 25 • Mar. 8 July 26 Dec. 13 • Apr. 26 Sept. 13 US Key Fed meetings: • Mar. 20-21 • June 12-13 • Sept. 25-26 • Dec. 18-19 Senate and house elections: • Nov. 6 Italy Elections: • By May Japan Key BoJ meetings: • Jan. 22-23 • Apr. 26-27 • July 30-31 • Oct. 30-31 Sources: BlackRock Investment Institute, with data from Thomson Reuters and Dow Jones, November 2017. Notes: The BGRI is based on text analysis of our top 10 risks within the Dow Jones Global Newswire database and Thomson Reuters Broker Report database. We then assign a score based on the frequency of words that relate to the risks. The index is still under development and is meant for illustrative purposes only. Political risk looks elevated and is potentially not being priced in -2 -1 0 1 2 3 2005 2007 2009 2011 2013 2015 2017 BGRIreading
- 25. 25 Are US Fed rate hikes a negative for gold? 2004-06 saw significant monetary tightening, meanwhile the US dollar drifted lower Gold’s inverse relationship with the US dollar The figures shown relate to past performance. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. Source: Datastream, 31 July 2018 Vs. A D M A S T E R - S T A M P ! A E 0 8 1 8 E - 5 6 7 6 7 9 - 1 7 7 8 8 6 6 0 1 2 3 4 5 6 80 82 84 86 88 90 92 94 96 98 100 Aug-03 Nov-03 Feb-04 May-04 Aug-04 Nov-04 Feb-05 May-05 Aug-05 Nov-05 Feb-06 May-06 Aug-06 Nov-06 FedFundsrate(percent) DXYIndex USD Index Fed Funds rate - RHS The US dollar weakens when the US economy is doing well, if other regions are doing even better Performance (%) Jul-17 - Jul-18 Jul-16 - Jul-17 Jul-15 - Jul- 16 Jul-14 - Jul-15 Jul-13 - Jul-14 DXY Index 1.76% -2.79% -1.86% 19.49% 0.01% 1,050 1,100 1,150 1,200 1,250 1,300 1,350 1,400 88 90 92 94 96 98 100 102 104 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Goldprice(USDperoz.) DXYIndex USD Index Gold price - RHS
- 26. 60 80 100 120 140 160 180 Jan-75 Jan-76 Jan-77 Jan-78 Jan-79 Jan-80 Jan-81 Jan-82 Jan-83 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 DXY Index 26 The figures shown relate to past performance. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. Source: Datastream, 31 July 2018 USD is down 7% from peak, but previous cycles have seen >40% 6 yrs +67% 10 yrs -47% 7 yrs +42% 9.5 yrs -39% 5.5 yrs +43% Indexlevel A D M A S T E R - S T A M P ! A E 0 8 1 8 E - 5 6 7 6 7 9 - 1 7 7 8 8 6 6 Performance (%) Jul-17 - Jul-18 Jul-16 - Jul-17 Jul-15 - Jul-16 Jul-14 - Jul-15 Jul-13 - Jul-14 DXY Index 1.76% -2.79% -1.86% 19.49% 0.01%
- 27. US 10 year government bond yields 27 Source: Datastream, 31 July 2018. 0 2 4 6 8 10 12 US10yeargovernmentbondyields–Percent(%)
- 28. 28 Inflation, real rates and gold Deflation concerns have faded Mixed inflationary outlook Structural headwinds Cyclical tailwinds Technology Demographics US tax reform / changes Oil price increase Technology keeping a lid on inflation Source left: Datastream, 31 July 2018. Right: various news sources, May 2018. Figures shown in USD. -3 -2 -1 0 1 2 3 4 5 6 7 Jan-08 Sep-08 May-09 Jan-10 Sep-10 May-11 Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-15 Jan-16 Sep-16 May-17 Jan-18 Percent Global inflation rates (CPI) UK China Eurozone US Japan
- 29. Gold market: supply and demand 29 Source: World Gold Council, data as at 30 June 2018, accessed: 2 August 2018 Overall supply and demand picture 2010 2011 2012 2013 2014 2015 2016 2017 YTD 2018 Demand (tonnes) Jewellery 2,054 2,096 2,140 2,704 2,504 2,421 2,061 2,182 1,031 Technology 460 429 381 356 349 332 323 333 165 Electronics 327 316 288 279 278 262 256 266 132 Other Industrial 88 76 65 54 51 51 50 51 25 Dentistry 46 36 28 23 20 19 18 17 8 Investment 1,633 1,733 1,615 814 878 961 1,615 1,248 570 Total bar and coin 1,204 1,501 1,309 1,726 1,062 1,086 1,068 1,042 509 Physical Bar demand 921 1,189 1,013 1,355 777 787 794 779 376 Official Coin 196 228 186 270 205 224 207 188 101 Medals/Imitation Coin 87 84 111 101 80 75 67 75 32 ETFs & similar products 430 232 306 -912 -184 -125 547 206 61 Central banks & other inst. 79 481 569 624 584 577 390 375 193 Total demand 4,227 4,738 4,706 4,498 4,314 4,290 4,389 4,138 1,960 Supply (tonnes) Mine production 2,744 2,846 2,911 3,072 3,150 3,216 3,279 3,305 1,630 Net producer hedging -109 23 -45 -28 105 13 33 -26 22 Recycled gold 1,680 1,656 1,677 1,255 1,194 1,129 1,291 1,168 575 Total supply 4,316 4,524 4,543 4,298 4,448 4,358 4,603 4,447 2,227 -6000 -4000 -2000 0 2000 4000 6000 2010 2011 2012 2013 2014 2015 2016 2017 YTD 2018 Tonnes Jewellery Technology Investment Central banks & other inst. Mine production Net producer hedging Recycled gold
- 30. Outlook for mined production 30 The industry is finding less gold Capital expenditure has collapsed Source: Left: SNL Mining and Metals, 28 February 2017. Right: Scotiabank, 10 April 2018. There is no guarantee that any forecasts made will come to pass. Data refers to annual data, 1990-2015 (LHS), and annual data, 2006-2016 and annual forecasts, 2017-2019 (RHS). 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 164 166 168 170 172 174 176 178 180 Goldprice(US$/oz)/GoldExplorationBudgets (US$m) Goldinmajordiscoveries(Moz) Gold in reserves, resources and past production (Moz) Gold price (US$/oz) Discovery-orientated gold budgets (US$m) 0 50 100 150 200 250 300 350 400 450 US$/oz
- 31. How is the BGF World Mining Fund positioned?
- 32. BGF World Mining Fund 32 Top 10 holdings Sub-sector breakdown Top 5 overweights at the stock level Top 5 underweights at the stock level Source: BlackRock, 31 July 2018. The specific companies identified and describe above do not represent all of the companies purchased or sold, and no assumptions should be made that the companies identified and discussed were or will be profitable. Subject to change. The benchmark is the Euromoney Global Mining Constrained Weight Index. Stock Sector Theme Fund Benchmark Vale Diversified Deleverage 10.51% 6.50% BHP Diversified Deleverage 10.07% 9.69% Rio Tinto Diversified Deleverage 9.77% 9.05% Glencore Diversified Deleverage 8.69% 6.24% First Quantum Copper Grow th 5.15% 1.55% Teck Resources Diversified Deleverage 4.82% 1.93% Newmont Mining Gold Deleverage 4.04% 2.85% South32 Diversified Deleverage 3.29% 1.89% Randgold Resources Gold Grow th 3.27% 1.02% Newcrest Mining Gold Grow th 2.93% 1.79% Overweight holding Fund Benchmark Active Vale 10.51% 6.50% 4.00% First Quantum 5.15% 1.55% 3.60% Teck Resources 4.82% 1.93% 2.89% Glencore 8.69% 6.24% 2.45% Randgold Resources 3.27% 1.02% 2.25% Underweight holding Fund Benchmark Active Freeport McMoran 0.00% 3.49% -3.49% Anglo American 0.94% 3.38% -2.44% Norilsk Nickel 0.00% 1.98% -1.98% Barrick Gold 0.00% 1.91% -1.91% Goldcorp 0.00% 1.58% -1.58% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% Portfolio Benchmark
- 33. 66.65% 9.46% 9.02% 5.95% 4.42% 2.09% 0.96% 0.62% 0.50% 0.33% Global Latin America Australasia Africa ex SA North America Europe Asia ex China cash Russia South Africa BGF World Mining Fund portfolio breakdown 33 Fund breakdown by country of listing Fund breakdown by risk region Geographic exposure relates principally to the domicile of the issuers of the securities held in the product, added together and then expressed as a percentage of the product's total holdings. However, in some instances it can reflect the country where the issuer of the securities carries out much of their business. Allocations are subject to change. Numbers may not add up to 100% due to rounding. Source: BlackRock, 31 July 2018
- 34. BlackRock Natural Resources Team Source: BlackRock as at 1 August 2018 34 BlackRock Offices worldwide 250+ equity analysts, 300+ fixed income analysts BlackRock Solutions & Risk Management 1,800+ Professionals Chief Investment Officer Evy Hambro Names are displayed in alphabetical order by surname. Cailey Barker Hannah Gray Tom Holl Olivia Markham Aidan McGuckin Mining & Gold Alastair Bishop Ruth Brooker Mark Hume Charlie Lilford Lindsay Sinclair Energy & New Energy Greg Bullock Portfolio Manager Assistant Alex Foster Titania Hanrahan Courtney O’Shea Nicole Vettise Fred Wood Product Strategists Simon McClure Business Manager David Huggins Skye Macpherson Agriculture
- 36. In the preparation of the material contained in this document, DSP Investment Managers Pvt. Ltd. (“AMC”) has used information that is publicly available, including information developed in-house or basis information received from its affiliates. The AMC however does not warrant the accuracy, reasonableness and / or completeness of any information. The data/statistics are given to explain general market trends in the securities market, it should not be construed as any research report/research recommendation. We have included statements / opinions / recommendations in this document, which contain words, or phrases such as “will”, “expect”, “should”, “believe” and similar expressions or variations of such expressions, that are “forward looking statements”. Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on our services and / or investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices etc. Neither the Fund nor any of its schemes are registered in any jurisdiction except with SEBI (in line with SEBI (Mutual Fund) Regulations, 1996). The distribution of this material in certain jurisdictions may be restricted or subject to registration requirements and, accordingly, persons who come into possession of this material in such jurisdictions are required to inform themselves about, and to observe, any such restrictions. ASSET ALLOCATION 1. Units of BGF – WMF# or other similar overseas mutual fund scheme(s): 95% to 100% 2. Money market securities and/ or units of money market/liquid schemes of DSP Mutual Fund: 0% to 5% #in the shares of BGF – WMF, an Undertaking for Collective Investment in Transferable Securities (UCITS) III fund. The sector(s)/stock(s)/issuer(s) mentioned in this document do not constitute any recommendation/opinion of the same and the Underlying Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s). The portfolio of the Underlying Fund is subject to changes within the provisions of its Offer document. Past performance may not sustain in future and should not be used as a basis for comparison with other investments. All figures and other data given in this document are as on 31st July, 2018 unless stated otherwise and the same may or may not be relevant in future. Please refer to the Scheme information document for investment pattern, strategy and risk factors of the Scheme. Investors are advised to consult their own legal, tax and financial advisors to determine possible tax, legal and other financial implication or consequence of subscribing to the units of the DSP Mutual Fund (“Fund”). There is no guarantee of returns/ income generation in the Scheme. Further, there is no assurance of any capital protection/capital guarantee to the investors in the Scheme. Mutual Fund investments are subject to market risks, read all scheme related documents carefully Disclaimer 36