Coronation Resources Fund

PERFORMANCE

The Fund declined by 13.3% for the quarter (Q2), leaving 12-month returns at 29.9%. The Fund’s long-term performance remains pleasing relative to both the peer group and the benchmark. However, notwithstanding strong relative performance in 2026, shorter-term performance has lagged both comparatives meaningfully.

The strongest contributor to alpha in Q2 was our large Grindrod position, followed by our underweights across the precious metals sector. Our primary detractors in the period were our underweight in Anglo American, combined with our Pan African Resources position.

FUND ACTIVITY

We sold the majority of our PGM exposure early in Q2, whilst adding Harmony Gold (Harmony) as well as bulking up positions in Grindrod, Exxaro, and South32.

The Fund’s PGM exposure has been volatile over the last 12 months in what has been an exceptionally erratic PGM market. During the early phases of the Middle East conflict in Q1, when PGMs sold off aggressively, we added exposure in the Fund up to an overweight position. The subsequent months have seen aggressive uptake of battery electric vehicles (BEVs) globally, outside of the US, as the high oil price combined with an increasing availability of low-cost BEV models in most regions. We believe the most likely trajectory for BEV adoption over the medium to longer term now has a higher level of penetration than we were expecting six months ago. Lower deficits in the short term, and a market in surplus in the longer term, leave the sector in a challenging position.

Harmony is a new position in the Fund as its valuation relative to the other SA-listed gold companies improved alongside a rise in the quality of the business. Harmony can be thought of as three separate businesses: a declining high-cost underground portfolio in SA, a stable mid-cost SA portfolio, and a growing Australian copper/gold portfolio. The acquisition of AngloGold’s remaining assets in SA several years ago was key in ensuring the sustainability of the business longer term as well as in pursuing growth overseas. Deserved market scepticism over the growth assets, as well as a hedging programme which has softened some of the gold price rise, has provided us with an opportunity to buy Harmony at a meaningful discount to peers. As copper grows its size in the overall business, we could see a re-rating in the business as we have seen with other copper-heavy stocks in recent years. We funded our buying of Harmony through reducing PGMs, as well as switching out of some of our AngloGold and Gold Fields exposure.

OUTLOOK

Commodity price performance has been mixed over Q2. Precious metals and oil were under pressure whilst bulk commodities were stable and base metals were positive. Performance for nearly all commodities over the last few years has been very strong. This rising earnings environment has been met with rising price-to-earnings multiples across most commodities, and it is this dynamic that leaves us cautious on the mining sector’s ability to deliver strong returns from here in aggregate. Stock selection will be key in this environment, and we have concentrated our exposure into idiosyncratic opportunities such as Grindrod, Harmony, and South32 where there are stock-specific value drivers, and into Exxaro where the valuation appears very favourable.

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