TIDMCYN
RNS Number : 9515Z
CQS Natural Resources Grwth&Inc PLC
18 May 2023
18 May 2023
CQS Natural Resources Growth & Income plc
(the "Company")
Monthly Investor Report - April
The Company announces the release of the monthly factsheet for
April which is now available on the Company's website following the
link and a summary can be found below.
https://ncim.co.uk/wp/wp-content/uploads/2023/03/CQS-New-City-CNR-02.23.pdf
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/Ann-Marie Pereira
01534 813 967/ 01534 709198
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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; and
-- Potential inflation hedge.
Key Fund Facts(1)
Total Gross Assets GBP153.99m
Reference Currency GBP
Ordinary Shares:
Net Asset Value 203.30p
Mid-Market Price 174.75p
Dividend Yield (estimated) 3.2%
Net gearing(4) 11.5%
Discount (14.04%)
Ordinary Share and NAV Performance (2)
One Month Three Months Six Months One Year Three Years Five Years Since Inception
(%) (%) (%) (%) (%) (%) (%)
NAV -3.2 -15.5 -10.8 -11.3 164.9 79.4 585.5
Share Price 1.9 -14.9 -12.3 -16.9 187.9 92.8 560.4
Benchmark -2.7 -8.9 11.0 -12.8 65.3 78.3 595.8
Commentary(3)
Industrial metal prices remained pressured during April as
perceived slow down risks, heightened by the collapse or bail out
of some US regional banks and Credit Suisse, continued to
weigh.
Copper closed April around 5% lower while iron ore lost 12% over
the month. Oil was little changed as these concerns were offset by
OPEC+ further cutting production quota's by over 1M barrels per
day, together with strong demand from China, which reaffirmed the
region's post-covid demand recovery. Gold gained 2% as investors
sought market protection, whilst weakening economic data reduced
market expectations for future Central Bank rate hikes. Below the
surface, China's robust 4.5% headline Q1 GDP was buoyed by a
domestic consumer rebound which offset softer export markets.
Performance
Including the 1.26p interim dividend the Fund return declined
3.2% in April, reflecting the relatively muted performance of
sector equities during the month. Iron ores fell due to weak demand
from the fall out of the Chinese property crisis, weighed on Rio
Tinto and BHP, where Iron ore is a major component of earnings. The
fund does not own these or any Iron ore producers, as we expect
Chinese demand to remain soft as a result of weak property, whilst
there is little supply response from the major producers to lower
pricing.
Galena was the largest detractor to Fund performance with the
shares halving during the month after weather related disruption to
supplies for completion lead-zinc mine development prompted a
deeply discounted equity raise by the company, leading to the share
price to reset at this level. This was largely offset by the 33%
share price increase registered by gold producer Emerald
Resources.
In another case of major M&A in mining, Teck Resources
gained 27% following Glencore's offer for the company. After a
strong prior month performance, gold equities ended the month
marginally lower with little benefit to sentiment from Newmont's
increased all share offer for Newcrest Mining Ltd. in what would be
world's largest gold acquisition if successful. M&A remains an
emerging theme with copper miner Hudbay announcing a $439m bid for
Copper Mountain which will take the enlarged entity third largest
TSX-listed copper producer, or second largest should Teck be
absorbed by Glencore. Importantly acquirers are not being penalised
by the market as they have been previously, which should continue
to support this M&A theme. We believe many positions in the
fund are well placed for this, as they are generally cheaper than
larger peers and after cheaper than building the equivalent in this
inflationary environment.
Positioning
The fund added to its precious metal miners weighting, noting
the strong back drop for the metals themselves and that the miners
had materially lagged this move.
Galena management flagged no damage to the site and the Fund
participated in the A$15m placing given the deep discount offering
an attractive risk reward. The Fund also participated in a small
placing by gold developer Calidus after the group indicated mining
performance had significantly improved following a
slower-than-expected initial ramp-up. During the month the all
share acquisition of gold developer Sabina by producer B2Gold
completed, whilst the fund's holding in shipper BWLPG was reduced
after strong share price performance. Exposure to US onshore oil
producer, Diamondback, was also reduced having held up well on an
absolute and relative basis despite the recent lacklustre
performance of oil. The remaining position of copper miner Capstone
Mining was also sold during the month.
Outlook
With China's reopening firmly underway there are encouraging,
signs for demand growth, despite some caution from a weaker picture
in the West. We continue to believe that energy is the sector most
exposed to a remerging China with limited demand declines even if
the West slows. We increased the precious metal exposure noting
sentiment appears to have lagged the commodity price moves, which
also provides some protection to the US banking crisis and US debt
ceiling risks.
Apart from copper and mining equities, sentiment towards
industrial commodities appears to be anticipating a worsening drag
from ever more sluggish developed market outlook adding weight to
the expected tempering of interest rate rises beyond summer.
Sector Breakdown(4)
Top 20 Holdings (% of MV)(1,5)
Company % of
MV
Precision Drilling Com NPV 5.7
Transocean USD0.01 4.2
Nexgen Energy NPV 4.0
Diamondback Energy USD0.01 3.9
BW LPG USD0.01 3.9
Diversified Energy GBP0.01 3.7
Emerald Resources NPV 3.5
REA Hldgs 9% CUM Pref GBP1 3.3
Euronav NPV 3.3
Vermilion Energy Com NPV 3.0
EOG Resources USD0.01 2.9
West African Resources NPV 2.9
LEO Lithium NPV 2.5
Sigma Lithium Corp NPV 2.5
Talon Metals Corp NPV 2.2
Foran Mining Corp NPV 2.1
Thungela Resources NPV 2.0
Lynas Rare Earths NPV 1.7
Peabody Energy Corp NPV 1.6
Ascendant Resources NPV 1.6
Top 20 Holdings represent 60.5
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) 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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