Blackrock World Mining Trust (LSE:BRWM) is starting to look interesting again after a sharp derating in recent months, according to broker Stifel.
Having been close to a premium a few months ago, the shares now trade at a sizeable discount.
Dividends this year will be cut significantly, but the yield is still likely to be around 5%
Stifel has upgraded its recommendation to positive, with the share likely to revert towards NAV when sentiment towards the mining sector improves.
In normal market conditions, the board says it may use the company’s share buyback and share issuance powers to ensure that the share price is broadly in line with the underlying NAV.
In the past year, there have been no buybacks or issuance of shares.
“However, with the sharp discount widening in recent weeks, we assume we must be close to a level where the board will start buying in shares to deal with any overhang of shares.”
Exposure to the gold mining sector is around 24% of NAV, but the broader sector weakness reflects global recession worries, a slowdown in Chinese demand for commodities and sizeable reductions in dividends paid by some mining companies.