Stand 31.10.2021
Performance Review Gold prices edged up by 0.7% in the fourth quarter (to US$1,898) as central banks continued to flood markets with liquidity, but prices remainedabout 10% below their August record high above US$2,000 per troy ounce. In terms of negative price influences that stalled the metals 2020rally, the rollout of COVID-19 vaccines injected optimism into financial markets and drew attention away from classic safe-haven investmentssuch as gold, as did the US election outcomes. Gold nonetheless posted its largest annual advance in a decade (+25.1%). Holdings in bullion-backed exchange-traded funds set an all-time high during the quarter and lent key support. Unprecedented amounts of stimulus from centralbanks fuelled currency debasement fears and stoked additional demand for gold and silver. Silver returns eclipsed gold, up 13.6% in the fourthquarter and 48% for the year, as investors bought the metal as a hedge and to capture potential new demand for solar energy installation.Palladium saw its fifth consecutive annual gain with a rise of about 26% in 2020, to US$2,449 an ounce (aided by a 6% gain in the fourthquarter), while platinum rallied 20% in the quarter and 11% for the year (to US$1,072 an ounce). In the industrial metals complex, existingstockpiles were drawn down while traders ignited a wide-ranging price rally as they considered that 2020s pandemic disruptions could lead topotential supply deficits in 2021. Copper futures posted a ninth straight monthly gain in December, the longest rally since 1994 to cap a fourthquarter rise of 16.4% (to US$7,766 per metric ton). For the quarter, the funds A (acc) USD shares returned 4,79%, and its benchmark, the FTSE Gold Mines Index, returned 9,37%. QUARTERLY KEY PERFORMANCE DRIVERS Although the funds gold miners (representing roughly 80% of total net assets) traded slightly lower over the quarter, we also held numerous off-index companies that posted double-digit percentage gains, which opened up a wide performance gap between the fund and its benchmark.Company-specific progress underpinned the rallies in most of these names, including outsized gains for our off-index stakes in Chalice Mining,Orla Mining and Skeena Resources. Australia-based Chalice reported successful drilling results as it discovered and defined significant high-grade extensions composed of platinum group elements, nickel, copper and gold at its Julimar project. Given the width and grade of the drillresults over a large area and recent surprises to the upside, the multi-faceted mineralised Julimar complex could potentially emerge as a globallysignificant deposit of critical metals in Western Australia. Unlike the gold industry, our positions in metals producers who focus on platinum, palladium and other non-gold metals had an exceptionallystrong quarter. Platinum- and palladium miners, including our off-index positions in South African-focused companies such as Impala PlatinumHoldings and Platinum Group Metals, benefitted from tightening supply/demand fundamentals. Investment demand for platinum, the key rawmaterial used in many vehicle pollution-control devices, has been robust, while the World Platinum Investment Council in mid-Novemberprojected a record production deficit for 2020 based on disruptions at key mine sites. Diversified mining companies focused on base metals suchas copper also surged in value; nearly all of our related holdings rallied significantly including key contributor Ivanhoe Mines. The fund also heldsmaller off-benchmark exposures to niche miners that focus on silver or copper production, and they, too, posted solid overall gains forthe quarter. The fund held only a few detractors of consequence, though a much lighter-than-index position in Newmont was the largest hindrance throughoutthe autumn months compared to the benchmark as it continued to fare better than the peer group averages (while still shedding value).Elsewhere in the gold industry, an overweighted stake in Centamin lost more than a third of its equity value. Centamin, which operates anEgyptian gold mine and exploration sites in West Africa, lowered its fourth-quarter, full-year 2020 and 2021 production guidance for the Sukariopen-pit gold mine due to movement in the west wall of the pit. The incident necessitated a revised remediation and waste-removal plan beforethey felt they could safely mine the higher-grade ore at the bottom of the current pit. Although the deferral of gold production to future years wasdisappointing, we believe it was the right decision to ensure employee safety.