BlackRock World Mining says capital needed to meet AI-driven demand

BlackRock World Mining Trust PLC said years of underinvestment have left the mining sector struggling to meet rising demand for metals needed to support artificial intelligence.

Speaking at the Association of Investment Companies Showcase, Olivia Markham, portfolio manager of BlackRock World Mining Trust, said the sector had been underinvested in for a decade and was struggling to increase supply despite growing demand for metals driven by artificial intelligence, electrification and national security needs.

Mining companies face constraints including lengthy permitting processes, infrastructure requirements and shortages of skilled workers, she said.

Markham said last year was particularly strong for the sector as investors increasingly recognised the importance of metals to the development of AI infrastructure.

"We were really happy with the performance last year, particularly with some of the performance that was delivered from some of our private and unquoted investments," she said. These investments, she added, offered shareholders exposure to opportunities that were not readily available through listed UK mining companies.

She also welcomed stronger performance across the sector in the second half of the year.

Markham said governments had been quicker than investors to recognise the strategic importance of metals amid geopolitical instability and efforts to reduce dependence on foreign suppliers. She cited the US government's project vault, which allocated USD12.00 billion to establish a strategic reserve of critical minerals and reduce the country's exposure to China.

"China has a complete stranglehold on this market," she said.

However, Markham warned that rebuilding domestic supply chains would take years and require substantial investment.

Governments are seeking to bring supplies of critical metals closer to home, she added, but doing so would cost more, take time and require higher commodity prices to make projects economically viable.

The shift is evident not only in rare earths but also in the steel, copper and aluminium industries, she said.

"Governments get it, investors are only waking up to this," Markham said.

She also highlighted the growing role of mergers and acquisitions in the mining sector. As existing mines age and companies are forced to develop more challenging, higher-cost deposits, acquisitions can offer a cheaper and more profitable route to growth than developing new mines.

Although consolidation in the mining industry has historically delivered mixed results, Markham said recent deals had been more disciplined. She argued that larger mining companies could attract more institutional investment by improving liquidity and providing the scale and expertise needed to develop increasingly challenging projects.

"Our sector is arguably financially irrelevant. The mining sector today is less than 2% of MSCI equity. So we need bigger companies to create more liquidity for bigger investors to start allocating."

BlackRock World Mining Trust shares closed up 2.7% at 948.00 pence in London on Friday.

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