Monthly commentary - Mackenzie Resource Team

Written by the Mackenzie Resource Team

Global Resource Fund - Portfolio Insights 

• The Fund’s tactical overweight position in gold and gold producers, combined with active stock selection in the precious metals space, drove outperformance. Endeavor Mining, Anglogold Ashanti and Lundin Gold were some of the names that performed well.
• The Fund’s performance within building materials was mixed (albeit a net positive). Heidelberg Materials benefited from a resurgence in European optimism, driven by a sizeable German spending plan and increased likelihood of the Russia/Ukraine war coming to an end. That said, residential construction continued to be weak and oversupplied lumber markets negatively affected Interfor.
• The Fund’s underweight position in Chevron and Exxon and was a detractor in the energy space, particularly as these companies benefited from not only commodities tailwinds but also from their U.S.- based operations - an advantage given US proposed tariffs on Canadian and Mexican crude. Whitecap Resources’ decline was more idiosyncratic, driven by its poorly received merger announcement with Veren Energy. These negatives were offset by positive stock selection and contributions from TotalEnergies, Plains and National Fuel Gas.
• Methanex gave back its outperformance in the prior quarter following transitory start-up issues at its new greenfield plant, as well as growing prospects of economic deceleration.
• The fund remains invested in quality companies offering a solution to the relocation of the industrial capacity to the western world. A cycle of large fixed-asset investments is upon us. Commodities remain at the center of those investment decisions and remain a core component of inflation protection.

Precious Metals Fund - Portfolio Insights 

• Gold bullion prices were up 19%, driven by continued physical buying from Central Banks and Asian retail investors, and further augmented by resurgent demand from Western World investors that are increasingly questioning the US dollar’s reserve currency status.
• International gold miner Harmony Gold is operationally highly levered, and one of very few large-cap gold producers listed in emerging markets. Its share price performance is supported by solid operational delivery, as well as indicative of emerging market demand for gold and gold equities and was a strong contributor to performance in the quarter.
• Latam gold developer G Mining Ventures, another strong contributor to performance, delivered its first gold mining project on time and on budget, supported by a proven owner’s construction team. It is now moving on to developing the highly prospective Oko West mine.
• Westgold Resources detracted from performance as it failed to deliver on its promised organic growth and continues with the integration of the recently acquired Karora Resources.
• NGEX Minerals was added to the portfolio following a site visit that highlighted the potential for a large, high-grade copper/gold deposit in Argentina, with substantial exploration upside.
• The portfolio managers took some profits in Agnico Eagle Mines and Alamos Gold, which both delivered stellar operational performance over the past years, in sharp contrast to many senior gold miners, such as underweight Barrick and Newmont, that have failed to deliver to date.
• Generally disappointing precious metals equity performance over the past year leaves open the opportunity for a catch-up rally in 2025 supported by solid margin expansion, with Q1 providing a hint of the pent-up re-rating potential.

Macro Views

• The post election honeymoon ended toward the end of the first quarter with the US administration proposing hefty tariffs on many of their trade partners. The market was surprised by the size of the measures announced by the new administration. While capital markets seemed to be initially optimistic on the prospects of repatriating industrial activity to the US, the market later grew concerned as it came obvious that the broadening of tariffs would be disruptive in its current form. We have been of the opinion, for some time now, that trade flows will materially change over the next decade. We also believe that changing the flows of goods will be costly and will need to be done gradually to avoid a global recession. The latest communications from the White House seem to suggest a softening of their stance, especially towards western world trade partners. The prospect of a global recession combined with tariff induced inflation were brought to the fore. Bond markets are now discounting several US central bank rate cuts in 2025.

China

• Chinese monetary and fiscal stimulus seemed to have faltered. As stated in previous commentaries, the prospect of deep economic distress may have been avoided. However, the Chinese economy remains highly dependent on exports and will likely suffer from rising trading barriers across the globe. An orchestrated transition from an export lead to consumer lead economy seems too far away. The Chinese government is at a very difficult juncture. Our base case does not see a meaningful acceleration in fixed asset investment in China for 2025. 

Oil & Natural Gas

• Oil prices continued to weaken into the first quarter. OPEC is entering a difficult period where many members, including Saudi Arabia, are looking to increase production when global oil demand is faltering. As previously highlighted, Chinese oil demand growth is weak and is unlikely to improve with a tariff war underway. China seems focused on supporting its expanding EV industry with large subsidies, undermining oil consumption going forward.
• Global gas continued to demonstrate consumption resilience. US gas prices remained close to mid cycle level. The startup of Plaquemines in late 2024 and LNG Canada in mid 2025 will further support gas prices for the next 18 to 30 months. The fund continues to focus on gas producers over oil producers.

Gold

• At the start of 2025, Western world sellers of gold turned buyers, spooked by U.S. tariffs and erratic policies that increasingly threaten the US dollar’s reserve currency status. With no more willing sellers, the gold market is squeezed.
• Going forward, gold price action will largely depend on the U.S. fiscal, monetary and tariff agenda, and China’s response to an effective trade embargo. This should result in continued gold price volatility – and continued price gains if the U.S. dollar and the U.S. Treasury market would remain under sustained pressure as confidence further erodes.
• Gold remains structurally supported by Central Banks that are uncomfortable with a rapidly changing world order, such as China, Poland, Turkey and India. Ever since the confiscation of Russia’s foreign reserves in 2022, many central banks accelerated their purchase of gold bullion, likely starting a long-term strategy to diversify their reserves away from the U.S. dollar.

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