Monthly commentary - Mackenzie Resource Team

Global Resource Fund - Portfolio Insights 

• Sustained physical buying from Central Banks augmented by resurgent investor demand as the US dollar’s reserve currency status is increasingly being tested with large fiscal deficits and the assault on the independence of the U.S. Federal Reserve, continuous to provide strong support for gold prices and related equities. Barrick Gold’s (+62%) significant outperformance was driven by a major gold discovery in Nevada, and an underappreciated copper development pipeline. A string of guidance misses points to budgeting and productivity challenges at the company, which once resolved, could further strengthen its investment appeal.
• The energy sector remains challenged with oil prices in a $60-70/bbl range and gas demand experiencing a seasonal low during the summer months with the latter impacting gas producers. In addition to this difficult backdrop, several company-specific developments weighed on performance: ARC Resources (-11%) has been facing operational challenges related to well performance and the ramp-up of its flagship asset (Attachie), and Tourmaline Oil (-7%) released a five-year plan that was more capital-intensive than the market had anticipated.
• Despite these headwinds, stock selection was a positive contributor to relative performance. Cenovus Energy (+29%) outperformed on improving fundamentals, driven by strong quarterly results, asset sales in its questioned downstream portfolio, and is approaching an inflection point for cash flow generation. Meanwhile, Enerflex (+40%) delivered strong quarterly results, successfully completed its CEO search, and has made progress to benefit from strengthening fundamentals for gas compression and equipment providers.
• Following strong performance over the past 12 months, Saint-Gobain (-6%) paused amid France’s political unrest and as European markets await the positive impact from upcoming fiscal stimulus. Interfor (-19%) remained pressured by lumber prices and weak demand fundamentals, prompting the company to raise equity to support its balance sheet and weather the downturn.

Precious Metals Fund - Portfolio Insights 

• Gold exploration companies are awakening from a long slumber, fuelled by the rising gold price but also by string of recent exploration successes. The Fund always maintains a carefully curated portfolio of junior exploration companies through the cycle, which is paying off in the current environment. One such example is a long-term holding, Omai Gold Mines (+145%), which announced a large economic resource which had been drilled off over the past couple of years.
• Ontario-based Discovery Silver Corp (+73%) was a recent addition to the Fund following a site visit. It offers a rare combination of operationally levered mining operations with a large, underdeveloped resource base in both gold and silver.
• Gold developer K92 Mining (+10%) underperformed as it works through the construction and start-up stages of its expanded mine and mill.

Macro Views

• Despite policy uncertainty, global equity markets have continued to show resilience and momentum. Real interest rates have moderated, fueling optimism around a potential global economic reacceleration.
• The anticipated economic drag from tariffs has not yet materialized. The current administration’s policies are attracting the possibility of foreign direct investment (FDI), and lower interest rates may help narrow the fiscal deficit in the coming year. Labour markets remain largely in stasis, with minimal hiring or layoffs, and wage pressures from immigration policy shifts have yet to emerge. Most major economies remain committed to fiscal stimulus programs, supported by neutral to accommodative monetary conditions. This policy mix continues to underpin growth and resource consumption.
• A growing theme of concern in China is the concept of “Involution”. This term captures the intensifying and often counterproductive competition among domestic firms vying for limited resources and market share. The result has been diminishing returns, chronic overproduction and aggressive price-cutting, all of which are contributing to mounting deflationary pressures across key sectors. Beijing has started announcing “anti-involutionary” measures to cut capacity and rebalance supply and demand. Sectors characterized by low profitability, high capital intensity and high emissions such as coal, aluminum and petrochemicals are seeing capped production. This shift is improving margins and encouraging downstream investments with lower environmental impact, aligning with evolving policy frameworks. With savings rates exceeding 25%, Chinese retail investors face limited domestic options due to real estate weakness and stock market restrictions. Structurally higher interest rates further reduce the appeal of fixed income, complicating portfolio diversification. Gold continues to maintain its appeal to Chinese retail and stands out as a viable alternative. 

Oil & Natural Gas

• Oil prices have remained range-bound as the market balances potential supply disruption driven by geopolitical activity against increased production quotas from OPEC members looking to regain market share. We maintain a cautious outlook as seasonal demand in the Middle East subsides and we enter the refinery turnaround period in the fall. Notably, crude oil volumes on water have already climbed to their highest level in three years, potentially suggesting a buildup in seaborne supply. While China’s strategic stockpiling has provided a key support for global demand, any shift in its accumulation strategy could pose downside risks.
• In contrast, the natural gas market benefits from strong long-term fundamentals driven by the 1) commissioning of new LNG capacity; 2) The continued expansion of the North American LNG build-out, with over 65 mtpa of additional capacity announced year-to-date, and 3) strong demand outlook from the power generation sector. Although North American prices (NYMEX, AECO) have softened seasonally through the summer on robust production and weaker-than-anticipated demand, we remain positive in the sector, particularly as we approach the seasonally strong part of the year with an expected ~5% y/y increase in the gas demand from LNG.  
• Accordingly, we maintain an underweight position in oil producers and an overweight position in natural gas producers, reflecting our relative optimism on the long-term gas outlook.

Copper

• Copper demand remains robust and central to the themes of onshoring and electrification. Supply-side constraints are emerging due to underinvestment and operational disruptions at key mines including Grasberg (Indonesia), El Teniente (Chile), and Collahuasi (Chile). The incidents in Chile, the Congo, and Indonesia reflect broader industry challenges, reinforcing our constructive stance on copper prices.

Gold & Precious Metals

• Gold prices continue to power to record highs while equity markets are simultaneously hitting all time highs as well, which while highly unusual, is symptomatic of the broader de-dollarization trend which is in full swing. Central bank accumulation continues and we expect the resurgent interest from Western world investors to persist and maintain an aggressive overweight position in gold, in the Global Resource portfolio.
• Going forward, while gold prices are well supported by continued central bank buying, price action will also depend on the fiscal, monetary and policy actions of the U.S. and its tariff-affected trading partners. With recent investment flows into gold ETFs an increasingly important driver of the price rally, continued price gains are increasingly a function of confidence in the U.S. dollar, U.S. Treasuries, and China’s response to a polarizing world.
• Precious metals equities year-to-date have benefited from solid expansion in operating margins and have caught up to their historical 2:1 outperformance vs. bullion, due to operational and financial leverage. However, precious metal equity performance continues to show a wide divergence, with key drivers being capital allocation, M&A, operational discipline, currency and country risk. This offers active portfolio management opportunities to exploit this wide dispersion.

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