SP Angel Morning View -Today’s Market View, Friday 31st January 2025

Gold spikes to new all-time record as Trump escalates tariff rhetoric

MiFID II exempt information – see disclaimer below

The SP Angel Mining Team will be in Cape Town next week for the 121 Mining Investment Conference and the Indaba

• Simon, Sergey, Arthur and I will be boldly seeking out new opportunities and presenting commodity and company ideas to a full schedule of investors.
• Ewan, Charlie, Grant and Richard will also be available at the 121 and after
• Please drop us a line on john.meyer@spangel.co.uk if you would like to catch up with the team
• 121 Conference details:  https://www.weare121.com/121mininginvestment-cape-town/
• The morning note ‘lite’ will continue while we are in Africa

Griffin Mining (GFM LN) – Quarterly results following production disruption

Metals Exploration (MTL LN) – Near-mine exploration target identified at Runruno for LOM extension

Gold spikes to new all-time record of $2,796/oz as Trump escalates tariff rhetoric

• Prices remain high in London this morning at $2,792/oz.
• Physical gold hoarding in the US is attracting attention with the queue for deliveries of physical gold out of the Bank of England lengthened from days to months.
• Focus is currently on a major inventory build on COMEX, pushing the spread between London and New York bullion to record highs.
• Inflation: remains a concern in the US with Trump threatening to bring in 25% Tariffs against Canada and Mexico on Saturday.
• The Fed held interest rates on Wednesday, also on inflation concerns.
• The move came amid flat US Treasury yields and a higher dollar, as gold continues to detach from traditional correlations.
• The FT also suggests that this reflects a transatlantic price arbitrage.
• World Gold Council analysts state that ‘we are not getting a sense from the rhetoric from the administration that it intends to go after the monetary metals.’
• Gold has been on an uptrend since the Ukraine War, which triggered central bank stockpiling globally after the US sought to freeze Russia’s foreign reserve greenbacks.
• West vs East monetary tension has escalated again under Trump, who yesterday voiced concerns over BRICs countries seeking to establish an alternative currency to compete with the dollar.
• The President stated, America is ‘going to require a commitment from these seemingly hostile Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty US Dollar.’
• China’s PBoC has been a major buyer of gold over the past three years, boosting stockpiles from a relatively low level, and increasing by 44t in 2024.
• Their purchases reportedly resumed in November, adding again in December, which has supported the recent rally over record highs.
• Chinese retail are also buying gold to protect from weak property and equity markets, with Chinese ETF holdings increasing 87% in 2024.
• The West seems to be waking up to a new global appetite for gold, with a sharp increase in physical inventory build in the US reflecting concerns over consistent flows out of London and into China.
• US gold ETF holdings are ticking higher but remain well below 2020 levels when speculative fervour fuelled buying in the COVID panic.
• Looking forward, we consider continued tensions between Trump and BRICs countries as supportive of gold prices, alongside the potential for lower US Treasury yields on the back of cooling US inflation and labour data.

India –approves $1.88bn to develop its critical minerals sector according to the government information minister

• India aims to secure essential raw materials like lithium and reduce reliance on imports, particularly from China, by intensifying exploration efforts within India and its offshore areas.
• The news indicates India is just as concerned as the West in terms of critical raw material supply and is looking to promote self-reliance in critical mineral supply chains.
• India remains vulnerable to Chinese tariffs and export restrictions particularly with particular dependency in bismuth (85.6%), lithium (82%), silicon (76%), titanium (50.6%), tellurium (48.8%), and graphite (42.4%).
• Problem is that India has been a total no-go area for non-Indian mining companies for as long as we can remember reducing geological investigation and expertise in the region.
• The few geologists and miners have attempted to obtain licenses in India for exploration and mining and have been frustrated at every turn.
• Worse still Indian companies operating outside of India are often not known for their integrity.
  • Eg. Vedanta’s tax issues with Konkola in Zambia.
  • The founder of Tirupiti Graphite has just been ’removed’ from his role as ceo post investigation.
• While Indian companies have expertise in coal, copper, aluminium and zinc we do not see their expertise in rare earths and other critical raw materials.
• It will be interesting to see how well the $1.88bn is spent and how much is misappropriated.

Gold market comment (17/01/2025):     Podcast:  https://audioboom.com/posts/8639775-john-meyer-gold-is-good-solid-asset-to-own

Video:  

Economics

Central banks temper rate cuts as Fed holds rates this week

• This week saw quarter point rates cuts by the ECB (EU) to 3.9%, Sweden to 2.25%, Canada 3% and South Africa to 7.5%.
• The US Fed held rates at 4.5% and Brazil raised rates by 1% to 13.25%
• Many central banks will either halt or reduce rate cuts based on the Fed hold to avoid currency depreciation and importing greater inflation.
• Borrowing costs will remain higher for longer and liquidity will remain reduced in many areas.

US – GDP expanded 2.3%qoq (annualised) in 4Q24 lagging expectations for a 2.6% growth, although, on the back of destocking and Boeing strike led drop in business investment.

• Consumer spending came in at a robust 4.2%.
• Net trade contributed to growth but only marginally with concerns that the segment will become a drag in 2025 as companies will be looking to pull imports forward ahead of potential tariffs while stronger dollar to weigh on exports.
• President Donald Trump is planning to place 25% import tariffs on Canada and Mexico starting February 1.
• Oil imports may potentially be excluded from those tariffs.
• Regarding trade restrictions on imports from China, President Trump said that new initiatives are being prepared without giving away any details.

Japan – Tokyo core inflation climbed 2.5%yoy with growth picking up for a third consecutive month and adding to expectations for more BOJ rate hikes.

• The gauge ex fresh food and fuel was up 1.9%.
• The data follows the central bank decision last week to raise interest rates to 0.5%, the highest level since 2008.

Eurozone – The central bank cut rates by 25bp, in line with expectations, in a unanimous decision as concerns over waning economic growth pick up.

• The decision takes rates to 2.75%, the lowest level since early 2023 and marks the fifth cut since last summer.
• The economy has not grown in t final quarter of 2024 earlier reports showed.
• President Lagarde said that economic risks were “tilted to the downside” amid rising global trade frictions with lower confidence weighing on investment and consumption.
• The ECB expects the economy to grow 0.7% in 2025, down on 1.1% registered in 2024.
• Markets continue to expect 2-3 more cuts this year.

UK – Property pries growth slowed in January amid a pick up in mortgage rates.

• The average price came in at ~£268k, up 0.1%mom and 4.1%yoy.
• Borrowing costs are reported to have climbed in December with a 2y fixed mortgage rate and a 60% LTV was 44.47% last month, up on 4.39% in November and 4.21% in October.
• The central bank is expected to cut rates by 25bp taking the benchmark to 4.5% Thursday next week.
• Markets are expecting three 25bp rate cuts this year.
• Prices are likely to face headwinds mid year amid an expiry of a recent stamp duty holiday with the level when first time buyers start paying the tax reduced to £300k from current £425k from April 1.
• That would add £6.25k in extra taxes to the cost off purchasing first property.

Thames Water hike rate by 20%

• I have just been notified that my Thames Water bill has just gone up by 20% or £1,394 a year.
• I am not allowed to go off-grid and as a homeowner, I am forced to use Thames Water as there is no competition for water and sewerage services in the UK.
• Thank you to the Macquarie banking group for loading Thames Water with debt, enjoying fat dividends and leaving the mess for customers to pick up the bill.
• Thank you to Ofwat for allowing Thames Water to look after their bankers and investors ahead of their customers. Heads need to roll!

South Africa – ESKOM power tariffs rises cut back

• The new tariffs rises will be:
  • 12.74% was going to be 36.15% for 2025/26
  • 5.36% vs 11.81% for 2026/27
  • 6.19% vs 9.1% for 2027/28

Currencies

US$1.0386/eur vs 1.0420/eur previous. Yen 154.63/$ vs 154.55/$. SAr 18.645/$ vs 18.479/$. $1.242/gbp vs $1.245/gbp. 0.622/aud vs 0.623/aud. CNY 7.245/$ vs 7.245/$.

Dollar Index 108.200 vs 107.878 previous.

Precious metals:         

Gold US$2,794/oz vs US$2,775/oz previous

Gold ETFs 83.5moz vs 83.2moz previous

Platinum US$971/oz vs US$956/oz previous

Palladium US$984/oz vs US$980/oz previous

Silver US$31.6/oz vs US$31.0/oz previous

Rhodium US$4,650/oz vs US$4,650/oz previous

Base metals:   

Copper US$9,071/t vs US$9,105/t previous

Aluminium US$2,605/t vs US$2,631/t previous

Nickel US$15,370/t vs US$15,390/t previous

Zinc US$2,779/t vs US$2,794/t previous

Lead US$1,957/t vs US$1,971/t previous

Tin US$30,110/t vs US$30,220/t previous

 Energy:           

Oil US$77.0/bbl vs US$76.2/bbl previous

• Crude oil prices edged higher after President Trump reiterated his threat to impose a 25% tariff on all Canadian imports from tomorrow, which include ~4mb/d of the latter’s oil output. Valero, which operates 1.6mb/d of US refining capacity, commented that the move would likely cause a 10% decrease to its refined product output.
• European energy prices remain elevated as gas inventories fell to 635TWh or 55% full this week, with the market focused on EU inventory targets for natural gas storage to remain above 50% by February 1st and above 30% on May 1st, to ensure a final target of 90% is achieved by November 1st.
• US Henry Hub natural gas prices edged lower on warmer weather forecasts even as the EIA reported a massive 321bcf w/w draw to 2,571bcf (vs -317bcf exp), with storage inventories falling to 5.3% below last year and 4.1% below the 5-year average to eliminate the gas inventory surplus for the first time since early 2022.
• Media reports the UK Government has submitted a Nationally Determined Contribution (NDC) plan to the United Nations to cut CO2 emissions by at least 81% by 2035, which was first announced at the COP29 summit.

 Natural Gas €52.5/MWh vs €50.7/MWh previous

Uranium Futures $70.9/lb vs $70.6/lb previous

Bulk:   

Iron Ore 62% Fe Spot (Singapore) US$106.5/t vs US$105.8/t

Chinese steel rebar 25mm US$487.6/t vs US$487.6/t

HCC FOB Australia US$187.0/t vs US$187.0/t

Thermal coal swap Australia FOB US$116.0/t vs US$114.0/t

Other:  

Cobalt LME 3m US$21,550/t vs US$21,550/t

NdPr Rare Earth Oxide (China) US$57,284/t vs US$57,284/t

Lithium carbonate 99% (China) US$10,145/t vs US$10,145/t

China Spodumene Li2O 6%min CIF US$815/t vs US$815/t

Ferro-Manganese European Mn78% min US$1,005/t vs US$1,005/t

China Tungsten APT 88.5% FOB US$338/mtu vs US$338/mtu

China Graphite Flake -194 FOB US$430/t vs US$430/t

Europe Vanadium Pentoxide 98% US$4.5/lb vs US$4.5/lb

Europe Ferro-Vanadium 80% US$24.6/kg vs US$24.6/kg

China Ilmenite Concentrate TiO2 US$296/t vs US$296/t

Global Rutile Spot Concentrate 95% TiO2 US$1,588/t vs US$1,588/t

Spot CO2 Emissions EUA Price US$65.1/t vs US$65.1/t

Brazil Potash CFR Granular Spot US$305.0/t vs US$305.0/t

Germanium China 99.99% US$2,725.0/kg vs US$2,725.0/kg

China Gallium 99.99% US$385.0/kg vs US$385.0/kg

Battery News

Nio sees 100,000+ battery swaps for five consecutive days

• The Chinese automaker has surpassed 100,000 battery swaps daily for five consecutive days.
• On Saturday 25^th January, Nio saw 119,765 battery swaps completed.
• Increased traffic at the swap stations was thanks to Chinese New Year, with people travelling to see family.

Thai EV sales set to jump 40% in 2025

• EV sales in Thailand, Southeast Asia’s largest EV market, are forecast to jump 40% this year, exceeding 100,000 units and reversing a 8% drop in sales last year, according to the Electric Vehicle Association of Thailand. (Reuters)
• There is expected to be a surge in local production from Chinese automakers, who have been expanding their global production capacity over recent years.
• Thailand’s already struggling domestic industry is set to be hit even harder with tumbling sales thanks to Chinese automakers aggressive pricing.

Tesla announces third Megafactory to produce Megapacks

• Elon Musk has announced that Tesla is building a third Megafactory to produce more Megapacks.
• Energy storage was Tesla’s silver lining at the end of 2024.
• Tesla’s automotive business shrank in both revenue and margins, but the energy storage business grew more than 100% yoy in the quarter.
• Tesla deployed 31.4GWh of battery storage, compared to 14.7GWh in 2023.
• The company has just completed the construction of its second Megafactory, in Shanghai, China.
• In the announcement, Musk did not disclose the location of the new factory.

Toyota remains top automaker in 2024

• Toyota Motor Group sold 10.8m vehicles in 2024 to remain the number one automaker globally for the fifth consecutive year.
• Despite posting a 3.7% decrease in sales over the year, the Japanese automaker still came out on top.
• Toyota’s sales were strong in part due to demand for its hybrid vehicles in the US.
• Volkswagen Group posted a decrease in sales of 2.3%.

Company News

Griffin Mining (GFM LN) 148p, Mkt cap £271m – Quarterly results following production disruption

• Chinese polymetallic miner Griffin reports quarterly and full year production results from Caijiaying Zinc Gold mine.
• The Company processed 36kt over the period, vs 397kt in the previous quarter.
• Zinc in conc produced at 1.4kt vs 11.8kt previous quarter, 731oz gold produced vs 4.1koz previous and 97t lead produced.
• CY24 saw 1.17mt processed, down from 1.5mt in 2023.
• Zinc in conc produced over the year at 39.4kt vs 56.9kt previous.
• Gold produced at 16.1koz vs 17koz previous.
• The slowdown in production reflects the suspension of mining operations on 11^th October 2024 after a fatality.
• Milling and mining operations returned to normal from January 1^st.

Metals Exploration (MTL LN) 5.2p, Mkt Cap £91m – Near-mine exploration target identified at Runruno for LOM extension

• Philippines and Nicaragua gold producer Metals Exploration provides an update on the Runruno mine.
• The Company has identified an exploration target 20km south of the existing Runruno mine at the Dupax tenement.
• The prospect was subject to historic mining .
• Road construction is underway to facilitate haulage and access, should exploration prove successful.
• The Dupax tenement is a VMS target with historical rock chip samples up to 15g/t Au and 7% Cu.
• The Company’s internal estimates suggest potential for 10-20mt.
• The main outcrop is believed to extend over 1000m x 100m wide.
• The Company recently completed drill target delineation, and drilling permitting is underway.
• MTL suggests that ‘minimal drilling is required to bring it to a resource-ready basis to seek operational permits.’
• The Dupax ore would require ‘re-purposing of the existing Runruno plant’ via increased flotation.

LSE Group Starmine awards for 2024 commodity forecasting:

No.1 in Precious Metals: SP Angel mining team awarded No 1. ranking for Precious Metals forecasting in LSEG Annual Starmine Award for Reuters Polls 2024

No.2 in Base Metals: SP Angel mining team awarded No 2. ranking for Base Metals forecasting in LSEG Annual Starmine Award for Reuters Polls 2024

Analysts

John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490

Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484

Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk – 0203 470 0474

Arthur Parish – Arthur.Parish@spangel.co.uk – 0203 470 0476

Sales

Richard Parlons –Richard.Parlons@spangel.co.uk – 0203 470 0472

Abigail Wayne – Abigail.Wayne@spangel.co.uk – 0203 470 0534

Rob Rees – Rob.Rees@spangel.co.uk – 0203 470 0535

Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471

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