Mining Companies
Mining companies have had very strong margins in recent years, which has led to reduced debt, increased dividends, and share buybacks. There has also been a lot of activity in the M&A space—that is, acquisitions or mergers of companies. Unlike the last bull market, when many companies acquired so-called "explorers," the focus now has shifted to acquiring already producing companies. This is because they want to avoid the risks they took during the previous bull market.
However, what's interesting is that buying already-producing companies does not increase the future supply of the commodity. If supply doesn't grow while demand continues to rise, this typically results in higher and higher prices for the commodity, which, in turn, benefits the companies’ earnings potential.
We’re now also starting to see bids being rejected. During the month, Australian company Gold Road Resources turned down an acquisition offer worth 3.3 billion Australian dollars from South African mining giant Gold Fields. The bid included a 24.5% premium. However, Gold Road rejected the offer, calling it “materially undervaluing” and “highly opportunistic.” High M&A activity indicates that the sector is heating up more and more.
AuAg Macro - Monetary Inflation
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China has pledged to intensify its monetary and fiscal stimulus efforts to reach its 5% growth target for 2025 while also trying to soften the impact of an escalating trade war with the United States. Measures so far have included several initiatives to boost domestic consumption, support the property market, and counter the deflationary pressure that has emerged.
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For 2025, Beijing has now “raised” its planned budget deficit from the previous 3% to around 4% of GDP. However, if you compare actual revenues to total spending, the real deficit is soon approaching 10%. Money printers are running hot across the world.
AuAg Macro - Electrification
Since most media attention is now focused on Trump and tariffs, industrial development has fallen into the background since the AI hype settled down. At the same time, the copper price has shown strength and reached a new all-time high during the month. Here, we see a mix of tariffs and Chinese investments playing a major role in supporting the copper price.
In the long term, the demand for copper looks set to increase – also for reasons that might not get much attention. One key driver we see “under the radar” is upgrading power grids and water infrastructure in the U.S. and several other countries. This is an important puzzle piece in the future demand for copper.
Fund of the Month
AuAg Gold Rush continues to shine and has now completed its first three full months with its new active portfolio and a fresh new name! In the first quarter, when both global funds and the USD took a hit, our new addition held up strongly, delivering a return of +22.75% year-to-date (in SEK).
The fund’s structure – with both a defensive and an offensive part – has proven to work well even in this upward market phase. The fund’s return also stands at +3.87% compared to BGF World Gold, the largest fund in the sector (which has been around since 1994). We’re also happy to see the fund grow so quickly during these months, now surpassing 100 million SEK in assets under management. Of course, we hope to see AuAg Gold Rush available on even more platforms going forward.
We’re also very pleased to announce that the fund has been passported to Norway, where it will become our first fund available for trading in NOK.
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