TIDMCYN
RNS Number : 5743N
CQS Natural Resources Grwth&Inc PLC
25 September 2023
CQS Natural Resources Growth & Income Plc
Monthly Investor Report - August
The full monthly factsheet is now available on the Company's
website and a summary can be found below.
https://ncim.co.uk/wp/city-natural-resources-high-yield-trust
Enquiries:
For the Investment Manager
CQS (UK) LLP
Craig Cleland
0207 201 5368
For the Company Secretary and Administrator
BNP Paribas S.A., Jersey Branch
Dean Plowman
01534 813 967
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Fund Description
The Fund aims to generate capital growth and income,
predominantly from a portfolio of mining and resource equities, and
from mining, resource and industrial fixed interest securities.
Portfolio Managers
Ian Francis, Keith Watson and Robert Crayfourd
Key Advantages for the Investor
-- Access to under-researched, mid and smaller-cap companies in
the global Natural Resources sector
-- Quarterly dividend paid to shareholders
-- Potential inflation hedge
Key Fund Facts(1)
Total Gross Assets GBP157.26m
Reference Currency GBP
Ordinary Shares:
Net Asset Value 211.18p
Mid-Market Price 178.25p
Dividend Yield (estimated) 3.1%
Net gearing(4) 11.4%
Discount (15.59%)
Ordinary Share and NAV Performance (2)
One Month Three Months Six Months One Year Three Years Five Years Since Inception
(%) (%) (%) (%) (%) (%) (%)
NAV -1.6 9.9 -4.1 -4.8 107.8 99.7 618.3
Share Price -2.5 1.3 -3.5 -6.3 114.0 110.4 563.3
Commentary(3)
Industrial metals declined over the first half of August though
subsequently recovered as weak economic data and still hawkish
central bank commentary gave way to prospects for more meaningful
Chinese stimulus. In the US, the ISM manufacturing PMI reading for
July showed the industrial sector remained in contraction.
Nevertheless, FOMC minutes maintained a hawkish bias with the FED
reiterating its willingness to accept "a period of below-trend
growth in real GDP and some softening in labour market conditions"
to return inflation to its 2% target. A continuation of weak
Chinese economic data was also evident though acute pressure in the
property sector, and by extension increased stress local government
financing, prompted some monetary easing by the PBOC and also a
loosening of mortgage requirements in the region. Having declined
nearly 8% copper recovered to end the month down a more modest 4.4
while related copper mining equities ended the month down 10%
having slipped 14%. Proving more sensitive to the property sector
stimulus, the benchmark iron ore price recovered from a 7%
mid-month fall to end August up 2%. Steel input nickel faired less
well closing August down around 9%.
Energy commodities performed well. Brent and WTI posting modest
gains of around 1-2% while related E&P equities ended August up
around 4%. Crude oil prices were supported by OPEC's decision to
extend production cuts helping to eat into global inventories. The
prospect of a replenishment of the US Strategic Petroleum Reserve
also provide relative support though the OPEC+ led pricing strategy
has deterred any meaningful refill to date. Meanwhile natural gas
benchmark prices jumped as the prospect of strike action by
Australian LNG workers on major Australian gas fields threatened to
disrupt supply. Asian and EU benchmarks rose almost 21% and 16%
respectively while US Henry Hub prices ended August unchanged.
Uranium prices were supported by the pick up in utility
contracting, with spot U308 prices rising 6.2% to close the month
at $59.75/lb. News flow remained positive: China approved six new
nuclear reactors as it continues to grow low carbon, baseload power
capacity; Niger's new military government banned uranium exports
following France's withdrawal of financial aid to the country; and
the physically Sprott trust briefly returned to a premium allowing
it to issue shares and purchase some material.
With oil and gas demand being less discretionary than base metal
demand and related E&P valuations appearing relatively more
attractive than mining equities the Fund retains a large energy
weighting in preference to industrial metals exposure.
Gold ended the month down a modest 1% with related equities
slipping around 4.5%. Gold demand remains supported by strong
central bank buying, though are yet to see buying by physical ETFs
which can have an outsized impact on the market balance. China's
recent reduction in US treasury holdings may also signify intent to
diversify away from the US dollar with ongoing political tensions
between the two nations.
Performance
The Fund NAV fell 1.6% over the month with the performance of
energy stocks offsetting weakness of industrial metal and gold
mining equities. Shipping and uranium stocks made positive
contributions to performance. Continued improvement in day rates
for LPG shipper BW LPG and crude shipper Euronav saw the respective
share prices rise 15% and 5% in sterling terms. Uranium miners such
as Nexgen and UR-Energy also gained 8% and 26% respectively in
sterling terms, as the benefits of the nuclear sector as the only
source of zero carbon, base load power continues to provide a
strong tailwind of political and investor support.
After month end, Leo Lithium came off trading halt and reported
that the Malian government were not going to allow direct shipping
of ore. Whilst this has minimal impact on the NPV as the majority
of their ore would be processed once the plant was built, it does
remove a source of near-term cash flow, whilst the Lithium price
had also been weaker during the halted period. The stock opened
down 50%, giving up much of the prior gains and is reflected in the
daily NAV's. Sigma Lithium was also detractor over the month, but
having been greatly reduced, the impact was small.
Sector Breakdown (% of MV) (4)
Top 20 Holdings (% of MV)(1,5)
Company % of
MV
Precision Drilling Com NPV 5.9
Transocean USD0.01 5.5
Nexgen Energy NPV 5.1
Leo Lithium NPV 5.1
BW LPG USD0.01 5.0
Diamondback Energy USD0.01 4.0
Emerald Resources NPV 3.6
Diversified Energy GBP0.01 3.6
Vermilion Energy Com NPV 3.3
EOG Resources USD0.01 3.0
REA Hldgs 9% Cum Pref GBP1 2.6
West African Resources NPV 2.2
First Quantum Minerals NPV 2.0
Frontline USD1.0000 2.0
Foran Mining Corp NPV 1.9
Lynas Rare Earths NPV 1.7
Galena Mining NPV 1.7
Talon Metals Corp NPV 1.6
Thungela Resources NPV 1.6
Karora Resources NPV 1.6
Top 20 Holdings Represent 63.0
Sources: (1) CQS as at the last business day of the month
indicated at the top of this investor report. (2) Total return
performance net of fees and expenses as at the last business day of
the month indicated at the top of this investor report. The
Company's investment benchmark is 80 per cent. Euromoney Global
Mining Index (sterling adjusted) and 20 per cent Credit Suisse High
Yield Index (sterling adjusted). Performance data is calculated
from 1 August 2003 (total return basis). (3) All market data
sourced from Bloomberg unless otherwise stated. All returns quoted
in local currency unless otherwise stated. The Company may since
have exited some or all of the positions detailed in the
commentary. (4) CQS as at the last business day of the month
indicated at the top of this investor report. (5) CQS, as at the
last business day of the month indicated at the top of this
investor report. For methodology details see Article 4(3) of
Directive 2011/61/EU (AIFMD) and Articles 6, 7, 9 and 10 of
Delegated Regulation 231/2013. (6) CQS as at the last business day
of the month indicated at the top of this investor report. For
methodology details see Article 4(3) of Directive 2011/61/EU
(AIFMD) and Articles 6, 8, 9, 10 and 11 of Delegated Regulation
231/2013. (7) All holdings data are rounded to one decimal place.
Totals may therefore differ to sum of constituents. These include
historic returns and past performance is not a reliable indicator
of future results. The value of investments can go down as well as
up. Please read the important legal notice at the end of this
document.
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END
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