Morning Note: Market news and an update from gold miner Newmont.
Market News
China may suspend its 125% tariff on some US imports, people familiar said, to ease trade war costs. Medical equipment, plane leases, and ethane are among goods that may be exempted. But Beijing downplayed trade progress, saying no tariff talks are underway. A Foreign Ministry adviser said Trump misjudged China by calculating that it would cave into economic pressure. Scott Bessent said US trade talks, especially with Asian countries, are “moving along very well.” China is undergoing a “special negotiation.
The president suggested tariffs may help cut income taxes for people making under $200,000 annually. Meanwhile, many polls show voter discontent ahead of the 100th day of his second term. Shein hiked US prices by up to 377% ahead of new tariffs on small parcels from China, with beauty and home goods seeing the biggest jumps.
Gold dropped back below $3,300 per ounce as traders unwound positions on signs the metal’s advance may have run too far and too fast. The 10-year Treasury yields 4.27%, while Brent Crude trades at $66 a barrel.
After last week’s rally, US equities are currently expected to open a touch lower at the open this afternoon. This week is another big one for corporate earnings, with results from Microsoft, Apple, Meta, Amazon, BP, Shell, AstraZeneca Visa, Glencore, and Becton Dickinson.
In Asia this morning, equities made modest gains – Nikkei 225 (+0.4%); Hang Seng (+0.3) – as investors awaited progress in US trade negotiations with the region and signs of further stimulus from China before taking risky bets.
The UK economy will grow only 0.8% this year and 0.9% next, EY Item Club said, downgrading its outlook on exports and household spending. The downgrades raise the risk that the Chancellor of the Exchequer will need to increase taxes or cut spending to meet fiscal rules, with business investment expected to barely expand this year. The FTSE 100 is currently 0.5% higher at 8,451, while Sterling trades at $1.3290 and €1.1720.
Source: Bloomberg
Company News
Last week, Newmont released its Q1 2025 results which came in above market expectations driven by the surge in the gold price. The company continued to return capital to shareholders and reiterated its targets for the full year. The shares have been a strong performer this year, although we believe there is potential for a further rally given that gold stocks remain well below their highs at a time when the commodity price trades close to a record level.
Newmont is the world’s largest gold company and a producer of copper, silver, zinc and lead. This follows a transformational period during which the company bought US-listed Goldcorp for $10bn and Australia’s Newcrest Mining for $17bn. The company also entered into the Nevada Gold Mines joint venture with Barrick Gold – its 38.5% stake provides exposure to the single largest gold-mining complex in the world. In order to retain focus, Newmont has also divested six non-core assets, along with its 70% interest in the Havieron project.
Newmont now operates a world-class portfolio of assets and prospects in favourable mining jurisdictions in Africa, Australia, Latin America & Caribbean, North America, and Papua New Guinea. The portfolio includes more than half of the world’s Tier 1 mines.
At the end of 2024, the company declared total reserves of 134m attributable gold ounces and resources of 170m attributable gold ounces. There is also significant upside from other metals, including more than 13.5m tonnes of copper reserves.
The company says that every $100 an ounce change in the gold price adds just over $500m to the group’s revenue. With the current gold price (c. $3,300 an ounce) well above the company’s price assumption ($2,500 an ounce) and the expected cost of sales ($1,620 an ounce), Newmont should be able to generate significant cash flow over the medium term. As a result, the company provides an attractive way to gain exposure to the gold price, albeit with the operational and political risks that come with a production company.
In Q1 2025, attributable gold production fell by 8% to 1.54m ounces, primarily made up of 1.3m gold ounces from Newmont’s Tier 1 portfolio, as well as 35k tonnes of copper. The 19% decline compared to the previous quarter was primarily due to reduced contributions from non-core operations but also lower production at the non-managed JV at Nevada Gold Mines and ongoing safety improvements at Cerro Negro.
The gold price has rallied sharply so far this year, driven by global geopolitical and macro-economic uncertainty, exacerbated by the Trump administration, and continued central bank bullion buying. During Q1, Newmont realised a gold price of $2,944 per ounce, up 41% versus the previous year. The realised price will have risen further in the current quarter.
The group’s direct operating costs are made up of labour (50%), materials & consumables (30%), fuel & energy (15%), and other (5%). During Q1, total all-in sustaining costs (AISC) rose by 15% to $1,651/ounce and, as a result, cash profits (EBITDA) increased by 55% to $2,629m, while adjusted net EPS rose from 55c to 125c, well above the market forecast of 90c.
Capital investment fell from $850m to $826m, although the company continued to progress major capital projects. However, the business still generated a record free cash flow of $1.2bn, versus an outflow of $74m in Q1 last year. This left gearing at only 0.3x net debt to EBITDA, with $8.8bn in total liquidity.
The company repurchased $755m of its shares as part of the $3.0bn programme authorised by the Board through to October 2026 and declared a quarterly dividend of $0.25 per share.
The company remains on track to achieve its 2025 guidance. Excluding the non-core assets held for sale, the group expects gold production of 5.6m ounces from the core Tier 1 portfolio. All-in sustaining costs are expected to be $1,620 an ounce for the core portfolio. Sustaining capital expenditure (i.e. maintenance) is expected to be $1.8bn, with development spend of $1.3bn.
Source: Bloomberg
