CALEDONIA Mining Corporation PLC (Caledonia) has revealed that the recent increase in share purchases by American asset management giant, BlackRock Inc. (BlackRock), is primarily due to its inclusion in the Russell 3000 Index, rather than being driven by the company’s individual performance.
BlackRock, the world’s largest asset manager with total assets under management of US$10,64 trillion as of June 2024, has been steadily increasing its stake in Caledonia, reaching 4,27% as of June 17. This stake is valued at nearly US$9 million.
The Russell 3000 Index is a widely-followed American index that tracks the performance of the largest 3 000 publicly-traded companies in the United States, representing approximately 96% of the investable US equity market.
“BlackRock’s participation in Caledonia is as a manager of a passive fund so it’s an index tracker investor,” Caledonia chief executive officer Mark Learmonth told businessdigest, during a webinar of the company’s second quarter results presentation on Monday.
“We are in something called the Russell 3000 Index in the United States and that means BlackRock runs a fund which tracks that index.
“And to make sure the fund mirrors the performance of the index, they have to buy shares in underlying companies.
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“It (BlackRock) has to buy our shares from time to time depending on what weighting is in the overall index,” he added.
Essentially, BlackRock’s holding of Caledonia stock is a function of its strategy to replicate the composition of the Russell 3000 Index, where Caledonia is listed as a component.
Caledonia is a mining company that owns and operates the gold-producing Blanket Mine, Bilboes Mine, as well as the Motapa and Maligreen gold mining claims, all located in Zimbabwe.
“They are not active managers. They are passive managers and typically you will see as our market capitalisation goes up, they will have to buy more shares to increase the weighting of Caledonia in the overall portfolio,” Learmonth said.
Conversely, he said when Caledonia’s market capitalisation declines, BlackRock typically sells shares.
“They are only buying and selling shares in the market. They are not having shares issued to them,” Learmonth said.
Unlike active managers, who make frequent decisions on buying and selling securities to outperform the market, passive managers focus on matching the index’s performance.
They achieve this by holding the same or a representative sample of securities in the same proportions as the index.
Caledonia’s share price has experienced fluctuations throughout the year.
It began 2024 at a peak of US$12,51, corresponding to a market capitalisation of US$240,12 million on the New York Stock Exchange.