Energy & Materials Sector

• MBK launches a tender offer to acquire 14.6% of Korea Zinc at ₩660,000 per share, a ₩2T deal with an 18.7% premium. Offer runs from September 13 to October 4.
• On top of that, MBK’s also rolling out a tender offer for Young Poong Precision at ₩20,000 per share—a hefty 113% premium over yesterday’s close.
• Spread action is possible if the Choi family counters, driving volatility. The market’s watching for a higher bid, which could create trading opportunities amid rising spread volatility.

• After the market close on 12 September, Maekyung Business Daily reported that MBK Partners will become the largest shareholder of Korea Zinc (010130 KS) along with Young Poong (000670 KS). 
• MBK Partners, along with Youngpoong and advisor Jang Hyung-jin, also plans to conduct a tender offer of 14.6% stake in Korea Zinc. 
• The tender offer price for Korea Zinc is 660,000 won per share, which is 18.7% higher than the closing price on 12 September.

• For the week ending 06/Sept, US crude inventories increased by 0.8m barrels, lower than the 0.9m barrel forecast. Gasoline stockpiles rose unexpectedly, while distillate inventories grew more than anticipated.
• US natural gas inventories rise 40 Bcf for the week ending 06/Sep, lower than analyst expectations of a 49 Bcf buildup. Inventories are 9.6% above the 5-year seasonal average.
• BP, Occidental Petroleum, and Exxon Mobil see target price cuts. Schlumberger announces breakthrough in Lithium production.

• What you need to know: • ADF reported mixed Q2 financials that missed our revenue estimate due project delays but largely beat our profitability estimates.
• • Revenue came in at $74.9M vs. our $92.6M (due to $35M in delays) while EBITDA came in at $24.9M (33% margin) vs. our estimate of $17.9M.
• • Management remained bullish on the long-term growth of the sector and ended the quarter in large net cash position.

• Dyna Mac Holdings (DMHL SP) disclosed a voluntary conditional offer from Hanwha Aerospace (012450 KS) and Hanwha Ocean (042660 KS) at S$0.60, a 21.2% premium to the undisturbed price.
• The offer is conditional on regulatory approval (Competition and Consumer Commission of Singapore) and a 50% minimum acceptance condition. 
• The offer is reasonable compared to peer multiples. However, it may face resistance as it is below the recent high of S$0.615 and Dyna-Mac’s improving outlook (S$681 million order book). 

• RPPL reported a strong Q1FY25 led by margin improvement. EBITDA margin rose to 14.7% vs 13.5% QoQ and 12.0% YoY. Stability in raw material pricing and operating efficiencies helped margins. 
• While growth in overall revenues was average at 8.3% YoY, growth in high-margin packaging products segment, which contributes 80% of total revenues, was strong at 16% YoY. 
• Exports at INR 9.2cr were below the INR 10cr+ run-rate, however, the growth momentum is intact. RPPL is in process of finalizing an export contract with a major global distributor.

• WTI futures closed at its 2024 low on 10/Sep, as demand concerns dragged prices down as the supply risk premium dimmed.
• WTI options Put/Call volume ratio fell to 1.09 (10/Sep) from 1.20 the week prior as put volume fell 13.6% WoW while call volume fell by only 4.3%.
• WTI OI PCR was unchanged at 0.77 for the week ending 10/Sep from 04/Sep. Call OI rose 6.8% WoW and put OI picked up by 6.4%.

• Following a Partial Offer for Hanwha Corporation (000880 KS) in July, and Hanwha Galleria (452260 KS)‘s yesterday, the Hanwha Group has now made an Offer for Dyna-Mac (DMHL SP).
• Hanwha Ocean (042660 KS) and Hanwha Aerospace (012450 KS), collectively holding 25.36%, have made a S$0.60/share cash Offer for shares not owned, conditional on a 50% acceptance hurdle.   
• Terms are not final for the offshore oil-and-gas contractor. Optically, that’s probably prudent. The Offer also requires Singapore’s competition watchdog signing off. 

• US natural gas prices rose 7% for the week ending 06/Sep, boosted by higher cooling demand, rising LNG exports, falling output, and moderate build-up in US natural gas storage.
• Henry Hub Put/Call volume ratio fell to 1.06 (10/Sep) from 1.17 (04/Sep) as put volumes fell by 17.9% WoW, while call volumes declined by 9.6%.
• Put OI increased for expiries on 25/Sep, Oct, and Nov. While call OI picked up for contracts expiring in Dec, Jan, Feb, and Mar. 

• Allegiant Gold is a leading gold explorer with five assets in Nevada.
• Its flagship, the Eastside District, hosts a 1.4Moz Au and 9Moz Ag deposit.
• AUAU has commenced a 5,000m drill program at Eastside, part of which will focus on resource expansion and the rest on exploration targets.

• The Anchois-3 well has 3 objectives. While the initial pilot hole encountered the targeted reservoirs at the Anchois Footwall prospect, they were interpreted as water wet.
• Our ReNAV for this prospect was £0.03/sh.
• The well was sidetracked in the B sands which are the main appraisal targets. Preliminary interpretation indicates the presence of gas in these sands.

• ASX 200 index rebalancing: West Gold and Yancoal added, Strike Energy removed
• Impact on stock prices and trading dynamics around index inclusions and removals
• Observations on companies prematurely entering the index and facing challenges after being removed

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Iron ore prices declined 9.4% last week, closing below the monthly S1 pivot point, indicating resistance.
• Despite a brief 0.75% rise on Friday, prices signaled a bearish crossover in the 9D and 21D SMAs, reinforcing negative sentiment.
• The 91-price level remains strong support, with key resistance levels at 93.9, 95.7, and 98.9. A sharp reversal could push prices to 96.5 or higher.

HELLENiQ ENERGY’s Q224 results showed a continuation of Q124 trends, with refining margins trending down but increased year-on-year oil prices and operational improvements driving sales and earnings growth. Q2 sales of €3,274m were up 9.9% y-o-y, adjusted EBITDA of €232m was up 42% y o y and adjusted net income of €73m was up 192% y-o-y. The Q224 HELLENiQ benchmark margin declined to $5.5/bbl, from $8.8/bbl in Q124, but was above the $4.4/bbl achieved in Q223. The company noted that the Q324 estimated refining margin has averaged $3.9/bbl, which is lower than Q224, and management expects a more normalised H224.

• LVG announced an update on Barrick Gold’s exploration activities on the claims surrounding the Tembo Project, which LVG carries interest in.
• On September 4th, the Company announced submission of all documentation for the 10-year renewal and transfer of the Imwelo Mining License.
• The acquisition should close by the end of September.

• 1H24 production was 43.7 mboe/d, which is in line with our expectations.
• Net cash of ~US$143 mm at the end of June was also near our forecasts.
• The FY24 production is expected to be towards the bottom end of the guidance of 41-46 mboe/d, mostly due to more downtime than expected at the Triton hub.

• Shougang Fushan Resources (639 HK) ended H1 FY24 with over 10.5 bn HKD of net cash and investments, compared to 12.7 bn HKD of market capitalization. 
• At 1600 RMB/ton coking coal prices (current spot price), the business will be able to generate 1.1 bn HKD of profits, with an 80% payout implying a 7% dividend yield. 
• The current spot prices are 16% below the average five-year price of 1900 RMB/ton ( yield 10%), and at these prices, the company still makes an EBITDA margin of 40-45%. 

• US oil and gas rig count fell by one to 582 for the week ending 06/Sep, marking a decline in rig count for the fourth consecutive week.
• The US oil rig count is unchanged at 483 for the third consecutive week. Meanwhile, gas rigs declined by one to 94, marking their lowest level since April 2021.
• For the week ending 30/Aug, US crude oil production stayed flat WoW at 13.3m bpd. In August, production reached a record high of 13.4m bpd on two occasions.

• Targa Resources Corporation has presented its second quarter 2024 results, emphasizing strong performance across several fronts.
• The highlight of the quarter includes the operational beginning of the Train 9 fractionator in Mont Belvieu and the Roadrunner II plant in Permian Delaware, indicating a robust strategic growth in asset developments.
• These expansions are timely and critical due to the increasing volume across Targa’s systems, driven by record volumes in the Permian that led to elevated NGL transportation and fractionation volumes downstream.

• There are 2 changes for the S&P/ASX100 Index, 3 changes for the S&P/ASX 200 (AS51 INDEX) and 16 adds/ 8 deletes for the S&P/ASX300 Index.
• The two big surprises are the inclusion of Guzman Y Gomez (GYG AU) and Yancoal Australia (YAL AU) in the S&P/ASX 200 (AS51 INDEX) and S&P/ASX300 Index.
• The adds to the indices have outperformed the deletes over the last few months and there could be profit-taking in the next few days.

• Concerns about a further slowdown in the Chinese and US economies have led to the commodity complex selling off, but copper remains resilient at the 9000 USD/ton level.
• Copper inventories on the exchanges have declined by over 6% in the last three weeks, although they remain elevated at over 470k tons. 
• We see pockets of value emerging in equities post the sell-off but would only trigger stocks like Southern Copper (SCCO US) and Ivanhoe Mines (IVN CN) at lower levels. 

• Iron ore broke out of its three-year band two weeks ago and, after a brief recovery, trended lower by 9% WoW. It is now within touching distance of 90 USD/ton. 
• Chinese steel margins showed no signs of improving, with the average mills losing 70-80 USD/ton. Iron ore inventories continued to climb at the ports, exceeding 150 million tons.
• We would stay clear of iron ore names for the time being as we wait for iron ore to consolidate at some levels. 

• Indo Tambangraya Megah (ITMG IJ) recently announced an underwhelming 1228 Rph/share dividend for H1 FY24 (implying a 9% annualized yield).
• Core profits for H1 2024 were 157 mn USD ( excluding 21 mn USD forex and a six mn USD write-off). We are confident of sequential improvement in earnings. 
• The company has deep value: 43% of its market cap is in cash, its PE is 5.7x, and its yield, based on a 65% payout ratio, is 11%.

•  Omai announced the first batch of assay result from the ongoing 10,000m drill program.
• 10 diamond drill holes have been completed totalling 3,732m and a second drill came online in late August.
• Assays from 7 holes were reported today, mostly in previously untested gap zones, yielding strong gold mineralization in the majority of holes.

• Following a successful acidization job, Well State 36-2R has been tested at peak rates of >2,100 boe/d, including up to 510 bbl/d of condensate/light oil and almost no water.
• This excludes potential natural gas liquids production that would result in an even higher rate.
• This flow rate compares very positively with the peak rate of 1,350 boe/d achieved during the first test (announced in July).

Vedanta Resources (VRL) has launched a roadshow to market its USD 144A/RegS benchmark-sized notes (likely to be 5NC2 or mainly 5NC2, and/or 7NC3), with a potential total size of USD 1.5 bn. The proceeds will be used to refinance the USD 13.875% 2027 notes (USD 470 mn outstanding) and USD 13.875% 2028 notes (USD 1,008 mn outstanding). VRL has sent a conditional redemption notice to trustees of the 2027 notes and 2028 notes, assuming the proposed notes issuance is successful.​ VRL has concurrently launched a tender offer for the 2027 and 2028 notes. 

We expect the proposed 5NC2 notes to price at c. 10%, and the 7NC3 notes at c. 11%.

• For the week ending 30/Aug, US crude inventories fell by 6.9m barrels, surpassing analysts expectations a 600k barrel drawdown. Distillate stocks surprisingly dropped, while gasoline inventories unexpectedly rose.
• US natural gas inventories rise 13 bcf for the week ending 30/Aug, missing analyst expectations of a 26 bcf buildup. Inventories are 10.7% above the 5-year seasonal average.
• ADNOC to acquire a 35% stake in ExxonMobil’s proposed low-carbon hydrogen facility. BPN Paribas raised the target price on Chevron, while Grupo Santander downgraded TotalEnergies.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Greentown China
• Medco Energi

• Ionic Rare Earths Ltd (ASX:IXR) is a magnet (REOs) recycling (Belfast, UK) and REE mining explorer (Uganda) plus a Brazilian REE Refining JV, excluded from our NPV, with Viridis Mining and Metals Limited (VMM).
• ACF visited IonicTech’s magnet recycling demo plant in July 2024.
• Since our last IXR Flash Note, we raise our valuation by 16% to A$ 0.109 vs A$ 0.094 previously and put Makuutu in a maintenance period.

• Kinetik’s Second Quarter 2024 earnings results reflect a period of significant transition and growth, underscored by its expansion through strategic acquisitions and portfolio adjustments.
• The quarter marked the closure of the GCX divestiture and the Durango acquisition, broadening Kinetik’s operational footprint in the Permian Basin, particularly into the northern Delaware Basin.
• This expansion not only diversifies Kinetik’s geographic footprint and customer base but also improves its balance sheet and aligns with its strategic growth ambitions.

• Key watchpoints: Will POSCO cancel the 3.4% treasury shares in Q4 and how will they replenish cash reserves after paying ₩1.5 trillion? Their moves could set trends.
• POSCO might cancel these shares to boost their value-up index weight. This could drive up the stock price, giving them an opening to improve their cash position through equity financing.
• Expect a short-term stock pivot with value-up index and ETFs driving inflows and price pops. After this, equity financing may signal stock peaks, with POSCO and others leading the trend.

• The Rex Minerals (RXM AU) IE considers MACH Metals Australia’s A$0.47 offer fair and reasonable as it is towards the upper end of the A$0.346 to A$0.484 valuation range. 
• The key conditions are shareholder and FIRB approvals. FIRB approval should be forthcoming as Salim is the largest shareholder and the cordial Indonesia-Australia relations.
• An attractive offer, medium retail ownership and no independent substantial shareholder ensures a done deal. At the last close and for the 30 October payment, the gross/annualised spread is 3.3%/15.9%. 

• Price action on SPX is extremely similar to prior major topping patterns in April 2000 and August 2007, which is why we recommended reducing risk near 5670-5783 last week.
• Additional similarities to 2000/2007 (other than price action) include the Fed cutting rates, recession indicators such as the Sahm rule and Schannep Recession Indicator (SRI) triggered, and yield curve un-inverting.
• SPX resistance is in the 5670-5783 range; if a major top is happening, that is where it would start from (using the 2000 and 2007 tops as comparisons).

• Back on the 8th July, copper-gold play Rex Minerals (RXM AU) entered into a Scheme with MACH Australia. MACH, a wholly-owned entity of Indonesia’s Salim Group, at A$0.47/share, in cash.
• That’s a 71% premium to last close and a decade-high. The Offer has unanimous board support. Apart from Rex shareholder approval, the Offer requires FIRB signing off.
• The Scheme Booklet is now out, with a Scheme Meeting to be held on the 10th October. Expected implementation on the 30 October. The IE says fair & reasonable.

• Despite a strong start, WTI prices fell 1.7% for the week ending 30/Aug, as demand concerns outweighed the worries of supply disruptions in Libya. 
• WTI options Put/Call volume ratio increased to 1.72 from 1.13 the week prior as put volume increased 45.6% WoW while call volume declined 4.5%.
• WTI OI PCR increased to 0.78 (30/Aug) from 0.75 (23/Aug) as call OI rose 4.5% WoW and put OI increased by 8%. 

• US natural gas prices rose 5.2% for the week ending 30/Aug, driven by warmer weather forecasts and low prices encouraging power generators to favour gas over coal.
• Henry Hub Put/Call volume ratio fell to 1 from 1.34 the previous week as put volumes dropped by 38.5% WoW, while call volumes declined by 17.5%. 
• Put OI rose for expirations in Sep, Oct, and Nov, while call OI increased for contracts expiring in Dec, Jan, and Feb. 

• The VS1 sand has produced ~320 bbl/d of 18.6 API oil during a brief test of a sidetrack of Well 20H.
• The oil gravity is similar to that found in the VS2 reservoir.
• The VS1 reservoir has not been developed to date as the company has only focused on the VS2 that has much better permeability.

• The WTR Sustainable Index was down 0.7% W/W versus the S&P 500 Index (up 0.2%), the Russell 2000 Index (flat) and the Nasdaq Index (down 0.7%).
• Energy Technology (13.7% of the index) was down 2.2%, while Industrial Climate and Ag Technology (46.6% of the index) was up 0.4%, ClimateTech Mining was down 1.3%, and Advanced Transportation Solutions (20.3% of index) was down 1.6%.
• Top 10 Performers: FSR, BNRG, ELBM, EXRO, NHHH, HCNWF, EZGO, NEOV, IONR, MXL

• On 15 August, Latin Resources (LRS AU) disclosed a binding offer from Pilbara Minerals (PLS AU) at 0.07 PLS share per LRS share, a 66.3% premium to the undisturbed price. 
• The key condition is LRS shareholder approval. No disinterested shareholder holds the 25% blocking stake, and low retail ownership lowers the headcount test risk. 
• The Salinas definitive feasibility study, expected in September, provides option value. A strong result could draw a competing offer or force PLS into sweetening terms.  

• At the first close , SASAC/NCSSF-backed Champion Holdings failed to secure the 50% acceptance condition. No surprises there. What was a surprise was Champion Tech letting the Offer lapse. 
• Champion Tech could have extended the Offer to the 30th Sept, which would have achieved little. But they could have bumped terms. They did neither.
• That leaves ORG Technology Co., Ltd. A (002701 CH) as the sole bidder for CPMC Holdings (906 HK) . And arguably, an unwilling bidder at that. 

• Discounts to NAV of covered holdcos did not follow a clear trend during August. Discounts to NAV: C.F.Alba, 46.2% (vs. 45.3% as of August 9); GBL, 41.1% (vs. 42.2%); 
• Heineken Holding, 16.5% (vs. 16%); Industrivärden C, 1.7% (vs. 2.2%); Investor B, 1.9% (vs.7.5%); Porsche Automobile Holding, 35.7% (vs. 34.6%). Rio DLC spread tightened to 19.8% (vs. 22.1%).
• What seems interesting (unchanged views): Porsche SE vs. listed assets and the Rio DLC (long RIO LN/short RIO AU).

• August was a mixed month for all metals, including the mining equities.
• Gold continues to outperform other metals, up 2.3% on the month and up a staggering 29% over the last year.
• Mining equities performed in line with broader markets, following significant outperformance in July.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Meituan
• New World Development
• Nickel Industries

• Today’s surge in Korean battery stocks stems from sector rotation and improved fundamentals, with SK On’s healthier balance sheet and Samsung SDI’s new U.S. plant fueling optimism.
• But with POSCO affiliates showing standout performance relative to their peers., the value-up factor is once again shaking things up and driving those differences in relative performance.
• Today’s price action suggests using the value-up factor for long-short strategies, especially with KRX hinting at sector quotas in the value-up index.

• On 29 August, the three major POSCO Group companies including POSCO Holdings announced that they plan to provide detailed explanations of their Corporate Value Up plans in 4Q 2024. 
• In general, the companies that have provided more detailed plans for their Corporate Value Up plans have done better recently. 
• However, now there are cases such as the three main POSCO Group companies whose share prices are rising just by announcing that they will provide Corporate Value Up plans later.

• Iron ore futures rose 5.3% last week but declined 3% on September 2nd, signaling a potential continuation of the downtrend.
• Technical indicators such as RSI, MACD, and Bollinger Bands suggest a short-term downtrend, with price struggling to break above the 21-day moving average.
• Elevated historical volatility near a 4-month high indicates that market instability may persist, suggesting caution in trade setups.

• Despite sharp price moves, iron ore options activity was muted with a sharp decline in put volumes.
• The DCE/SGX spread widened from 4.6% to 7.5% as DCE futures traded at a premium.
• SGX Iron Ore options volume fell by 31.8% WoW, with increased call activity focused on September expiries at the 105 strike.

• Iron ore futures surged 5.3% last week but fell 3% on September 2nd, reflecting uncertain price sentiment.
• Chinese portside inventories rose by 3.4 million tons, reaching a two-year high, driven by high arrivals and reduced pick-up volumes.
• Heading into peak consumption season in China, supply headwinds may drive sentiment rather than demand tailwinds.

• US oil and gas rig count fell by two to 583 for the week ending 30/Aug, marking a decline in rig count for the third straight week.
• The US oil rig count remained unchanged at 483 for the second consecutive week. Meanwhile, gas rigs declined by two to 95, marking their lowest level since April 2021.
• For the week ending 23/Aug, US crude oil production declined to 13.3m bpd bpd, down from the record high of 13.4m bpd reached the previous week.

• There is a high level of bullish sentiment about copper in the market, with strong interest from companies and analysts.
• Demand projections for copper are driving the need for new deposits, but existing assets are currently meeting demand through resource growth.
• Contrarian views suggest that existing assets are outperforming new discoveries in meeting copper demand, with potential for production delays of up to 15 years for new deposits.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Talk of a 5-10% output cut in Tangshan to be maintained through year end causing steel prices in China to stabilize
• Accumulated losses in China’s steel industry at $400 million over the first seven months of the year, leading to concerns about forced consolidation
• Improvement in sentiment due to positive demand side news in the metals industry, including local governments using special purpose bonds to buy properties and a rare target set for housing completions in the second half of the year

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Condor Energies is a ~US$75 mm market cap TSX-listed company focused on low carbon and energy transition opportunities in Central Asia.
• Condor was transformed in 2024 by the acquisition of >10 mboe/d production of natural gas in Uzbekistan.
• The key value driver for the shares is the imminent sanction of Condor’s 1st liquefaction plant in Kazakhstan to convert low-cost natural gas into high value LNG to displace expensive diesel for rail and mining haul truck transportation.

Nanoco Group’s announcement that the collaboration with its European partner is essentially coming to an end is clearly disappointing news. We reduce our FY25 revenues by £2.5m and FY25 net cash by £2.1m to reflect this, although the contractual unwinding and potential restructuring may prompt further changes. While Nanoco is now clearly in a significant transitional state, the partnership with the Asian partner continues. The group’s intellectual property, expertise, manufacturing and test capability provide it with potential strategic value, with Nanoco’s strong balance sheet and low-cost model providing a degree of optionality.