Monthly Investor Report - September

CQS Natural Resources Grwth&Inc PLC

19 October 2023

 

CQS Natural Resources Growth & Income Plc

Monthly Investor Report - September

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 Facts¹

Total Gross Assets	£153.72m
Reference Currency	GBP
Ordinary Shares:
Net Asset Value	210.66p
Mid-Market Price	179.50p
Dividend Yield (estimated)	3.1%
Net gearing4	9.1%
Discount	(14.79%)

Ordinary Share and NAV Performance²

	One Month	Three Months	Six Months	One Year	Three Years	Five Years	Since Inception
	(%)	(%)	(%)	(%)	(%)	(%)	(%)
NAV	1.2	5.8	2.6	1.0	113.6	100.9	626.8
Share Price	3.4	8.8	5.8	4.4	119.1	116.0	585.9

Commentary³

Market Supported by continued OPEC+ discipline, which also saw Russian overproduction being reined in, energy prices rose substantially during September, continuing to outpace the lacklustre performance of more cyclically sensitive Industrial metals. While the US FED held rates in September, the energy price strength is more broadly sustaining pressure on central banks to maintain hawkish, stronger-for-longer guidance on rates. Against a backdrop in which China has continued to reduce its holdings of US treasuries, US 10yr yields moved higher and the US Dollar Index strengthened around 2.5%.

Brent and WTI crude prices increased nearly 9% and 10% respectively as Saudi Arabia and Russia agreed to extend voluntary production cuts to the year end. The threat of strikes at Australian LNG facilities saw natural gas benchmarks in Europe and Asia rise 21% and 10% respectively though US benchmarks slipped due to mild temperatures. Coal proved resilient with strong demand arising from India, potentially reflecting strike risks at some of the country's mining operations. Alongside this, potential supply disruption risks from an increase in mine safety checks in China may also have contributed to price resilience, helping counter record production from Mongolia which reported a sharp jump in output which totaled 45Mt year to end-Aug, +184% year-on-year. Momentum in the resurgent nuclear power market picked-up during September's World Nuclear Association gathering. The U3O8 price jumped 22% during the month as utility buyers seek to secure long-term contracts, while the physically backed Sprott Physical Uranium Trust also returned to a premium allowing it to raise funds and purchase material.

Sustained US dollar strength, uninspiring Chinese economic data and ongoing concerns regarding the poor health of China's property sector saw copper end the month around 2% lower. The seaborne iron ore price held up, registering a 1.7% rise, as strong import demand from India also supported prices. This allowed the iron ore price to shrug off expectations of lower Chinese demand with indicated steel production limits for 2023 implying a reduction in regional ore consumption over the remainder of the year. The price of steel input nickel declined 7% with the latest monthly data from the International Nickel Study Group indicating mine output rose 17% on the prior year, well ahead of demand and implying a surplus of metal. Precious metal prices remained extremely sensitive to the outlook for interest rates and gold ended September nearly 5% lower. Despite the more positive energy pricing, E&P stocks closed the month little changed, copper mining equities slipped a modest 4%, while precious metal indices lost around 19% over the month.

Performance

Reflecting positive revenue receipts from dividend payments the Trust made a 3p per share special dividend which together with sterling's relative softness helped generate a total return of 3.1% for the month. The Fund NAV was little changed over the month. Strong positive contributions were made by tier 1 uranium mine developer NexGen, gold producer Emerald Resources and shipper BW LPG, whose share prices rose 19%, 18% and 8% respectively in sterling terms. The brief removal of Leo Lithium from suspension, as discussed last month, saw the shares halve, which unfortunately offset these gains, prior to being suspended again at the month-end, pending a further update on developments with the government.

 

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