The Electrum Fund fell -15.2% during the month (I2 EUR), compared with the EMIX Global Mining Index which fell -13.0% (in Euro terms).
The impact of rising US interest rates and growing concerns over slowing global economic growth were felt across all markets during the month, and the mining sector has been no exception. Hawkish rhetoric from the US Federal Reserve continues to sap investor sentiment towards commodities, as policymakers stick resolutely to their core objective to reduce inflation, notwithstanding the serious risks posed by higher rates to economic growth and business activity. US dollar strength remains a headwind for commodity prices, yet producers with costs in other currencies, such as Australian Dollar, Euro or South African Rand, benefit from some relief.
The global economic outlook remains clouded, yet relative to most other sectors, commodities appear well positioned for the months ahead. Key current themes for commodity markets include the ongoing energy crisis, rising food prices, and broader supply chain challenges, each of which have been exacerbated by the Russia-Ukraine conflict and the aftermath of the COVID-19 pandemic. Amid this inflationary economic environment, sub-sectors of the metals and mining sector are poised to thrive. We believe energy-related commodities, such as aluminium, and fertilizers offer particular opportunities at present, while the longer-term thematic trend surrounding the green revolution is becoming even more compelling. Mining equities have faced declines in recent months, yet nothing has changed with regard to the amounts of metals such as copper, lithium and rare earths which will be needed to achieve a net zero goal by 2050.
Upcoming earnings results for the sector are likely to be volatile, yet we expect a selection of high-quality miners to show they are maintaining strong margins and demonstrating operational success. In our view this underscores the need for active management in the mining equities sector. The Electrum Fund combines “bottom-up” stock selection based on fundamental value with “top-down” sector allocation, rotating between sub-sectors of the mining sector to focus on those areas with the strongest outlook. Overall, the Electrum Fund continues to offer exposure to producers of the metals and materials needed for the green revolution and the transition to clean, secure energy.