Daily Brief Energy/Materials: BHP Group Ltd, Merdeka Gold Resources, Exide Industries, SGX Rubber Future TSR20, Crude Oil, Canyon Resources, Yankuang Energy Group, Alamos Gold Inc, China Energy Engineering and more

• Press reports indicated that China could temporarily suspend purchases of BHP’s iron ore from Jimblebar, which could account for a mid-single digit percentage of revenue
• The UK press reported Geraldine Slattery will likely be BHP’s new CEO, who currently heads BHP’s Australian operations and has over three decades with the company
• BHP is 4% above our DCF, its 2.8x P/B is not clearly excessive or attractive, and we see risks to iron ore, copper and coal prices from a broad slowdown

• Largest IPO 2025: EMAS IJ raised ~USD 281m, 4.6× oversubscribed, spun off from MDKA to fund Sulawesi’s Pani Gold Project.
• Asset Scale: Pani holds 1.9 Moz reserves, 7 Moz resources; production to ramp from 145 koz (2026) to ~500 koz (2032).
• Valuation & Risks: IPO EV ~USD 3.2 bn; ~8–9× EV/EBITDA during 2026–29 heap leach, falling to ~2–3× at 2032 steady-state; execution, funding risks remain.

• Exide Industries is doubling down on lithium-ion cell and pack manufacturing with huge committed capex, while sustaining its dominant lead-acid franchise.
• The company’s strong cash flows from lead acid batteries are funding high-risk, high-reward bets on EV and renewable storage, positioning it as India’s only dual-chemistry energy storage leader.
• Execution risk in lithium-ion scale-up is high, but Exide’s brand equity provide a buffer. The story now hinges on whether early-mover advantage in Li-ion can translate into sustainable returns.

• Tire makers see profit pressure despite revenue gains  
• JK Tyre eyes double-digit growth, expands global footprint  
•  CEAT eyes expanding Chennai plant at US$51 million spend  

• Crude oil futures were climbing higher on Tuesday as concerns about oversupply vied with geopolitical uncertainty to set the tone for the early part of the week.
• Front-month Nov25 ICE Brent futures were trading at $67.91/b (2017 BST) versus Monday’s settle of $66.57/b, while Nov25 NYMEX WTI was at  $63.71/b against a previous close of $62.28/b.
• Benchmarks had opened the session lower, but geopolitical tensions continue to keep markets on edge amid ongoing strikes on Russian energy infrastructure, while Russian military activity close to the Polish border has raised wider tensions.

• Crude oil futures were slightly lower on Tuesday as concerns about oversupply vied with geopolitical uncertainty to set the tone for the early week.
• Front-month Nov25 ICE Brent futures were trading at $66.37/b (0850 BST) versus Monday’s settle of $66.57/b, while Nov25 NYMEX WTI was at  $62.10/b against a previous close of $62.28/b.
• Markets have been unable to shake off fears of a looming supply glut, with the International Energy Agency (IEA) setting off alarm bells last month with its forecast of a 2.5 million bpd Q4 surplus rising to over 3 million bpd next year, with OPEC+ seemingly on course to add more 2.5 million bpd by the end of this year.

• Canyon Resources (CAY AU) is looking to raise around US$132m in a primary placement.
• The company will use the proceeds to fund capital expenditures, as well as increase its stake in the railway line serving its mine in Central Africa’s Cameroon.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• Yankuang Energy Group is a major Chinese state-owned enterprise, primarily engaged in coal mining, which accounts for the majority of its revenue. The company is actively diversifying into coal chemicals, new materials, and renewable energy to mitigate risks associated with the global energy transition and fluctuating commodity prices.
• The company’s financial performance is heavily influenced by coal price volatility. While it has demonstrated periods of strong profitability and shareholder returns, recent performance has been impacted by declining coal prices, leading to a significant drop in net income.
• Strategically, Yankuang is focused on expanding its production capacity in both coal and chemicals, while also setting ambitious targets for renewable energy. However, this expansion is largely debt-fueled, raising concerns about its financial leverage and balance sheet fragility amidst a challenging market outlook for coal.

This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.

• Strong, Fully-Funded Growth Profile in Tier-1 Jurisdictions: Alamos Gold is executing a significant production growth plan, expecting to increase output by approximately 24% from 2024 to 2027, with a long-term target of around 900,000 ounces annually. This growth is driven by low-cost, high-return organic projects in Canada, including the Phase 3+ Expansion at Island Gold and the newly approved Lynn Lake project, which are fully funded by internal cash flow.
• Declining Cost Trajectory and Margin Expansion: The company is positioned for a significant reduction in all-in sustaining costs (AISC), projected to fall from ~$1,275/oz in 2024 to as low as $1,125-$1,225/oz by 2027. This cost improvement, driven by the completion of major capital projects and economies of scale, should lead to substantial margin expansion and free cash flow generation, particularly in a strong gold price environment.
• Solid Financial Position and Experienced Management: Alamos maintains a robust balance sheet with a strong liquidity position and a conservative leverage profile, providing the flexibility to fund its growth pipeline. The company is led by a seasoned management team, including founder and CEO John A. McCluskey, who has a proven track record of value creation and operational execution since 2003.

This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.

• Dominant Market Position with Strong Growth: As a leading state-owned enterprise, China Energy Engineering Corp (CEEC) is a key player in China’s energy and infrastructure construction sectors. The company has demonstrated a robust growth track record with a 3-year revenue CAGR of 10.68% and a net income CAGR of 8.88%, driven by strong domestic investment in energy infrastructure and its active participation in the global Belt and Road Initiative.
• Significant Cash Flow Concerns: Despite impressive top-line growth, the company exhibits a critical weakness in cash flow generation. Free cash flow has been severely negative over the past three years and the last several quarters, indicating that high capital expenditures and working capital requirements are consuming more cash than the operations generate. This raises concerns about the quality of earnings and long-term financial sustainability.
• Strategic Focus on New Energy: CEEC is strategically aligning with China’s national goals for carbon neutrality by increasing its focus on renewable energy projects, including solar, wind, and hydropower. This transition presents a significant long-term growth opportunity, but also requires substantial upfront investment, contributing to the current negative free cash flow.

This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.