Energy & Materials Sector

• NPS is now viewing their voting rights on Korea Zinc purely from a returns angle, shifting from earlier expectations of siding with Choi due to political pressure.
• We need a tendering strategy for a 20% proration risk, focusing on when MBK will buy that extra 3.7% stake to cut losses on untendered shares.
• MBK will aim to buy leftover shares cheaply. Their approach depends on the progress of Choi and Trafigura’s talks

• For the week ending 11/Oct, US crude inventories decreased by 2.2m barrels, diverging from expectations of a 1.8m barrel build. Additionally, gasoline and distillate stockpiles also declined more than anticipated.
• US natural gas inventories rose 76 Bcf for the week ending 11/Oct, lower than analyst expectations of an 80 Bcf buildup. Inventories are 4.6% above the 5-year seasonal average.
• Halliburton, Schlumberger, and Occidental’s target prices were cut. Notably, analysts kept their Buy ratings on Reliance despite its net profit falling by 4.8% YoY.

• Requests for retraction in contracts by buyers 
• Oversupply of spot cargoes feeds pessimistic expectations

• • Production to date in October is 950 bbl/d, the same level as reported on 24 September.
• • The MGH-43 well has encountered 41 m of prospective gross sand intervals with good to excellent oil shows in the main TAF target that will now be perforated.
• Due to unstable hole conditions in MGH-43, Criterium was unable to conduct pressure testing and resistivity calculations on the zones of interest and therefore could not determine the estimated productivity rates.

• Energy Transfer’s Q2 2024 earnings report reveals a company navigating complex operational landscapes with a mixture of robust results and strategic adjustments, providing a broad perspective on its strengths and challenges as it plans forward.
• The company reported a noticeable rise in their financial and operational metrics indicating vital signs of growth.
• However, certain segments experienced downturns that could suggest areas requiring attention for future stability and improvement.

• Sealed Air’s Q2 2024 earnings presentation provided detailed insights into the company’s financial health and strategic direction under the leadership of the newly appointed CEO, Patrick Kivits.
• This period also marked a reshuffling in the executive roles with Dustin Semach stepping up as President and CFO.
• Sealed Air reported a quarter with mixed results, highlighting successes in its Food segment and ongoing challenges in the Protective segment.

• Beijing Capital Grand (1329 HK) (BCG), a commercial property developer in China, is currently suspended pursuant to the Takeovers Code. 
• Beijing Capital Land Ltd H (2868 HK) (BCL) holds a 65.72% stake, having secured majority control in Juda International, as BCG was then known, in November 2013. 
• BCG has been a forgettable stock since 4Q16. Expect a forthcoming Scheme from BCL, perhaps at ~HK$0.75/share.

• Personally, the key trading angle is Kum Yang’s exit, which could slash entry costs for the capital raise, with the review announcement dropping as stock rights trading starts.
• Along with the usual hit to the pricing from index trackers unloading for rebalancing, there’s a strong chance their sell orders might also include stock rights.
• From an entry cost perspective, this November review could trigger a sharp, short-term drop in costs due to stock rights dumping, similar to what we saw with CJ CGV.

• Devil is in the legal loophole. Issuing treasury shares to employees as bonuses is an exception that is not bound by the condition of ‘6 months after treasury shares acquisition.
• It would be nearly impossible for Korea Zinc to sell 2.4% of its treasury stock to an external friendly force and transform it into a friendly stake by February 2025.
• Although MBK/Young Poong Alliance has the advantage right now in this M&A battle for Korea Zinc, it is by no means over.

• Pilbara Minerals announced the establishment of a $1 billion debt facility with a banking syndicate.
• The company plans to use the facility to repay existing concessional debt and potentially make acquisitions.
• The new facility offers more flexibility in terms of leverage ratios compared to existing debt agreements.

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• Shell expects Q3 refining margins to drop 28.6% QoQ to USD 5.5/bbl, driven by a sharp decline in oil prices. However, improved chemical margins are anticipated to offer some relief.
• Between 2023 and 2025, Shell plans to invest USD 10 billion to USD 15 billion in low-carbon solutions globally, with a strategic emphasis on LNG.
• Shell projects LNG to account for 26% of energy sales by 2030, up from 22% in 2023, while oil products will decrease from 48% to 39%.

• TotalEnergies’ revenue is expected to fall 9.1% QoQ and 17.8% YoY in Q3, while its EPS is expected to rise 6.6% QoQ but fall 19.8% YoY. 
• TotalEnergies anticipates a decline in downstream profitability due to a 65.7% QoQ drop in European refining margins, though increased gas prices are expected to partially offset lower oil prices.
• TotalEnergies raised its annual oil and gas output growth forecast to 3% through 2030. Targets natural gas to comprise 50% of its total sales mix by 2030.

• HWKN has grown its water treatment business through acquisition leading to the segment becoming larger than the industrial business. The water treatment segment should become the largest sales generator.
• We believe this growth through inorganic means has resulted in HWKN’s stock trading at a premium to the market and to HWKN’s historic levels. 
• The seasonality the water treatment segment experiences should result in HWKN’s overall gross margin declining in the second half of fiscal 2025. 

• Short-term 20-day MA remained elevated through September to mid-October 2024  
• SIR20 traded at a discount to futures  
• Processors in Thailand and Indonesia faced more margin pressure due to high raw material costs  
• The forward curve shows October 2024 prices at their highest for the year

• Consumption declines by .3% to 356,000 tons in Q1 FY 25
• ATMA says April-Sept 2024 production 37% lower year on year
• ATMA asks Rubber Board to expedite data publishing

• BERRY (BERY) has had a challenging start to the year but recent market trends have created an interesting investment opportunity for the company.
• BERY had been in a strategic review process for its HH&S business, with expectations for a sale to improve their balance sheet, but instead announced a spin off with Glatfelter Corporation (GLT), causing a drop in stock price.
• The stock is now in a state of “DEAL PURGATORY” until the transaction is completed, leading to a selloff in the stock price and possible undervaluation for investors to consider.

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• Investment opportunity in BPT, a grantor trust with royalty interest in Prudhoe Bay
• Cash flow offset against increasing costs, risky but potentially lucrative
• Factors affecting profitability include production levels, WTI prices, costs, and taxes; predicted decrease in value over next 12 months

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• West Fraser’s Q2 2024 results present a nuanced profile, shaped by diverse business segments and market dynamics.
• The financial highlights and strategic movements of the company were thoroughly discussed during the earnings call hosted by Sean McLaren, President and CEO, alongside Senior Vice President and Chief Financial Officer Chris Virostek and other senior executives.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• Alpha Metallurgical Resources reported its financial results for the second quarter of 2024, delivering a performance that reflects both the resilience and challenges faced by the metallurgical coal industry.
• The company announced an adjusted EBITDA of $116 million and total shipments of 4.6 million tons during the quarter.
• Despite a decrease in adjusted EBITDA from $190 million in the previous quarter, the figures indicate strategic navigation through prevailing tough market conditions, characterized by weakened steel demand and subsequent impact on metallurgical coal markets.

• ICL Group Ltd’s second quarter financial performance showcased both strength and areas of concern amid challenging external factors such as geopolitical tensions and evolving market dynamics.
• Let’s delve into the specifics of the recent financial outcomes and the implications for businesses and investors alike.
• Financial performance highlights included a notable uptick in sales which were recorded at $1,752 million, a consecutive increase for the second quarter.

On 14 October, Alkane released its Q125 quarterly activities report, showing almost all of its operating parameters in line with both guidance and our expectations for the full year. The exceptions were its head grade, which exceeded the upper end of the guidance range by 6.1%, and AISC, which improved upon the lower end of the guidance range by 9.1%. Most significant however was confirmation that AISC guidance reflects a one-off cost for decline development that is accounted as sustaining capital (rather than as an operating expense) and as a result we have increased our earnings estimates for FY25 by A$21.2m, or 85.8x (8,479%).

• Kinross Gold Corporation expressed a strong performance in the second quarter of 2024, which boosted the company’s financial and operational outlook.
• The company reported a substantial 20% growth in operating margins compared to the previous quarter, largely driven by optimal functioning at its major mines, notably Tasiast and Paracatu.
• The increase in gold prices positively impacted the profitability, enhancing free cash flow to $346 million for the quarter.

• Sonoco Products Company’s second quarter earnings call presented a mixed picture of the company’s financial performance and strategic direction.
• For the second quarter, Sonoco reported sales of $1.6 billion, reflecting a decrease from previous periods.
• The adjusted EBITDA stood at $262 million, with EBITDA margins maintaining strength at 16%.

• Mongolian Mining (975 HK) released its quarterly production update. While production remained flat QoQ, destocking led to 16.3% YoY sales growth in coal. 
• The resources at the gold mine (476,000 oz) did not change, but construction of the plant was 55% complete compared to 30% a quarter ago in June. 
• Trading at 5.6 PE, with opportunities for growth and future dividend payments due to repayment of the perpetual, this is an exciting idea to explore. 

• Dyna Mac Holdings (DMHL SP) disclosed a revised conditional offer from Hanwha Aerospace (012450 KS) and Hanwha Ocean (042660 KS) at S$0.67, an 11.7% premium to the initial S$0.60 offer.
• The Estate (largest shareholder) stated that the previous S$0.60 offer was not compelling. The final offer addresses most of the Estate’s valuation concerns.
• The Estate’s view and IFA opinion in the circular (despatched by 23 October) will be crucial to the acceptance rate. They are likely to support the final offer. 

• We discuss the next steps in the fight for the control of Korea Zinc, after the completion of the tender offer by the MBK Partners and Young Poong alliance. 
• After the tender offer, MBK and Young Poong’s stake in Korea Zinc increased from 33.13% to 38.47%, coming close to more than half of the voting rights.
• We continue to believe that at current stage, MBK/Young Poong alliance has the advantage in the fight for the control of Korea Zinc.

• The US oil and gas rig count rose by one to 586 for the week ending 11/Oct, marking an increase after falling for three consecutive weeks.
• The US oil rig count increased by two to 481. Meanwhile, gas rigs decreased by one to 101, after gaining six rigs over the last two weeks.
• For the week ending 11/Oct, US energy producers added six rigs in Texas and one in Oklahoma but cut two each in Pennsylvania, Louisiana, and New Mexico.

• SGX IO Futures declined by $1.94/ton over the week, closing at $106.21/ton on October 11th, with prices ranging between $103.05 and $115/ton.
• DCE premium over SGX surged to 10% on 8/Oct as DCE reopened after Golden Week, but the spread narrowed to 4.8% by 11/Oct. SGX underperformed DCE early in the week.
• Weekly options volume surged 188%, dominated by puts with a 1.04 put/call ratio, concentrated on November expiries and key strikes at 100 and 105.

• US natural gas prices fell 7.8% for the week ending 11/Oct, marking a second straight weekly decline as Hurricane Milton reduced electricity demand, driving down Henry Hub prices.
• Henry Hub Put/Call volume ratio fell to 0.69 (11/Oct) from 0.98 the previous week as put volumes fell by 27.3% WoW, while call volumes rose by 2.8%.
• Put OI increased for contracts expiring in November and April while call OI rose for expiries in December, January, February, and March.

• WTI futures rose by 1.6% for the week ending 11/Oct, as the simmering tensions in the Middle East outweighed persistent demand concerns.
• WTI options Put/Call volume ratio fell to 0.52 from 0.64 (04/Oct) as put volume dropped by 50.9% WoW while call volume fell by 39.8%.
• WTI OI PCR was unchanged at 0.76 compared to last week. Call OI rose by 5.7% WoW, while put OI grew by 5.8%.

• CTA Update Last week, the research division of UBS shared an update on the positioning of CTAs.
• Contrarian’ trades: bullish Energy, Cattle Feeder, Lme Lead and Lme Nickel, bearish Coffee, Cocoa, Platinum and Palladium
• Go with momentum’ trades: bullish Lme Tin, Copper, Gold and Lean Hogs, bearish Soybean, Soybean Meal, Wheat and Corn Hurricane Milton and Orange Juice Prices Orange juice futures rose as Hurricane Milton approached Florida throughout the week.

• LSB currently operates three downstream integrated ammonia production facilities.
• Behrman said key competitive advantages include a cost structure underpinned by access to low-cost US natural gas feedstock, strategic proximity with plants located in three states (OK, AK, and AL), and good logistics with access to waterways, truck, and rail.
• About half of LSB’s output is geared toward agricultural applications (fertilizers), while the remaining is geared toward various industrial applications.

• 10 Questions for CNMC Goldmine Holdings What is CNMC Goldmine’s business about and what are some of its key business segments? Our flagship project, the Sokor Gold Field, spans 10 square kilometers and has been producing gold for more than a decade.
• Given that a large portion of CNMC Goldmine’s revenue is tied to gold prices, how does the Group manage the potential volatility?.

• MBK officially disclosed that they scooped up 5.34% of the Korea Zinc (010130 KS) shares in the tender that wrapped up today.
• MBK scored a partial win by securing more voting rights than Choi, with unexpected backing from foreign and local institutions, likely due to proration risk over legal issues.
• Still, securing just 5.34% puts MBK in a tough position, requiring them to navigate minority shareholder votes while pushing hard on the legal front to block the buyback.

• Hugh Mackay provides insights into the future of iron ore, copper, and steel dynamics
• China’s recent stimulus announcement and its impact on global commodity markets
• Challenges faced by Chinese authorities in addressing deflation and household sector confidence.

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• Welspun Corp (WLCO IN) expanded from just SAW pipe company to DI Pipe, TMT Bars, Building solutions and PVC Pipes as well. 
• Company is known for reviving bankrupt companies, On the path to revive Sintex and ABG Shipyard.
• high growth from US, Saudi and India driving the growth with capex 

• On the 11th September, Hanwha Ocean (042660 KS) and Hanwha Aerospace (012450 KS), collectively holding 25.36%, made a S$0.60/share cash Offer for shares not owned, conditional on a 50% acceptance.
• The transaction stalled on the 24th September, when the estate of Dyna-Mac’s founding shareholder, Desmond Lim Tze Jong (holding ~35% currently) reckoned the Offer “does not adequately reflect” Dyna-Mac’s value.
• Hanwha Group has now bumped terms by 11.67% to S$0.67/share, best & final. That’s a 35.4% premium to undisturbed, and a decade high. No word, yet, from the Lim estate.

• In this short insight, we include our flow estimates for all additions and deletions taking place in the range of WisdomTree EM Funds at the rebalance this Wednesday (16 October).
• We show the top 40 buys and sells across DEM, XSOE and DGS.
• The top buys include Chc Resources (9930 TT) & Uchi Technologies (UCHI MK). The top sells include Impack Pratama Industri Tbk (IMPC IJ) and Hap Seng Consolidated (HAP MK).

• Recent significant clinker price hikes in Yangtze river region boost our confidence that 4Q will likely see the company’s earnings double Y/Y, ending 14 consecutive quarters of decline since 2Q21.
• Beijing’s bazooka stimulus package to lift the property market and revive economy also improve industry outlook in 2025.
• Consensus has been slow to adjust for the changes in industry dynamics. Our 2024 earnings is now 15% above consensus. We expect upward earnings revision will support P/B expansion.

• USTR clamping 50% duty on Chinese gloves from Jan comes in handy
• Over 35% Malaysian rubber glove exports directed to the US
• Malaysia’s rubber and products exports rise to RM15.5 bn in H1 2024

• Valvoline Inc. reported its third-quarter fiscal year 2024 results, featuring a strong performance with significant top-line growth and operational enhancements.
• For this quarter, which ended June 30, 2024, the company reported a system-wide store sales growth of 12.4%, reaching $809 million.
• This consistent growth across the company’s franchise and owned stores contributed to a same-store sales increase of 6.5%.

• Iron ore prices dropped below $105/ton on 8 Oct after China’s NDRC failed to announce new stimulus measures, tempering bullish sentiment from earlier liquidity injections.
• Chinese portside inventories grew by 590k tons, reaching 147.84 million tons by 11 Oct, driven by higher arrivals and slower post-holiday consumption.
• While RSI signals bullish momentum, MACD shows a fading rally. Prices approach the critical 200-day moving average at $110/ton, posing a potential resistance point.

• China’s largest post-pandemic stimulus package, freeing 1 trillion yuan in liquidity, spurred a 4% silver rally, boosting both industrial demand and consumer spending.
• U.S.-Listed silver ETFs saw $942 million in inflows since July, with $400 million added after the Fed’s rate cut, as lower rates increase demand for non-yielding assets like silver.
• Global solar installations are up 29% year-over-year, driving silver demand, with forecasts raised after China’s mid-year reversal of installation restrictions.

• If NPS and passive funds each tender half, it could hit 24%, pushing investors to consider both sides. The market’s eyeing a ratio of about MBK 3 to Choi 7.
• This tight vote could drag out the event longer than expected, and MBK might scoop up more shares if they miss their minimum target.
• MBK will likely go for open market buys against Korea Zinc’s buyback. Consider tendering to MBK Monday and spread trading futures, or push Korea Zinc to raise their buyback offer.

• Another play is spread trading Korea Zinc single-stock futures: go long on the front-month and short on the farther-out contract to profit from price convergence.
• The key is when longer-dated futures’ volume will rise and if the basis difference with front-month futures will create arbitrage opportunities. November’s volume seems more for hedging than arbitrage.
• MBK is likely to launch a second tender offer, potentially extending the spread trading timeline and giving us more chances to hit sweet spots.

• Korea Zinc raised the share buyback and tender offer price from 830,000 won to 890,000 won. Korea Zinc’s share price closed up by only 0.6% today to 794,000 won. 
• As a result, the amount of capital involved in this share buyback and tender offer would increase from 2.7 trillion won to 3.2 trillion won.
• Despite higher share buyback/tender offer of Korea Zinc by Choi family, we believe that this fight for the control of Korea Zinc is increasingly in favor of MBK/Jang family.

• Delay in EUDR to lead to renegotiation of premium
• Talks of removal of Ivorian cup lump ban

• In my latest portfolio update, I discussed the potential of investing in cyclical businesses and how shifts in a company’s business model or balance sheet can often go unnoticed by the market, creating compelling investment opportunities.
• Today, I present Mattr Corp, a company that not only revamped its business model and balance sheet without receiving due recognition but also strategically repositioned itself within new end markets. This transformation aligns perfectly with all three of my key criteria for identifying attractive investments in cyclical stocks.
• Mattr Corp., a Canadian industrial conglomerate, is undergoing a strategic transformation into an advanced engineering company by leveraging its extensive expertise and decades of experience in materials science for industrial applications.

• The Spanish government has approved Esseco’s bid for Ercros, after previously approving Bondalti’s offer in June, signaling a significant step in the ongoing takeover battle for the chemical company.
• The next step lies with the CNMV, Spain’s stock market regulator, which must first approve Bondalti’s bid before considering Esseco’s. However, both bids have opposition from shareholders holding 27%.
• Ercros is trading in line with comparables, but there’s potential for bidders to improve their offers, which is likely. Gross spread to Esseco’s offer is 2%. Reiterate long.

• Pure nickel play PT Vale Indonesia, a leading global producer, could transform significantly over the next few years with plans to take stakes in projects more than doubling current output
• However, we see risks of a lull into 2025 as production is near capacity, the nickel price could potentially remain pressured from major global oversupply and operating costs could rise   
• Given the weak consensus 2025E ROE of 5%, a 1.6x P/B is not particularly inexpensive, although for longer-term investors considering the expansion potential this could be an entry point  

• Element Solutions Inc’s second quarter of 2024 showcased a commendable performance with notable strides in organic growth and margin expansion, reflecting efficient strategic execution despite broader market softness in consumer electronics and industrial segments.
• The company reported a revenue increase of over 20% in their Circuitry Solutions, primarily fuelled by robust demand in high-performance computing, artificial intelligence, electric vehicles, and certain mobile markets.
• This growth was somewhat moderated by weaker demand in power electronics and electronics assembly materials within some electric vehicle sectors.

• Rio Tinto recommended a price of $5.85 on the US stock and $8.60 on the CDIs, totaling about AU$10 billion or US$6.7 billion, with a 90% premium to the undisturbed price
• The deal is all cash and is expected to close in mid-2025, pending various approvals including shareholder and board approval
• Rio Tinto’s acquisition of Arcadium is seen as a countercyclical move, paying for optionality and long-term potential rather than immediate returns, reflecting a shift in their M&A strategy.

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• Axalta Coating Systems recently disclosed its financial performance for the second quarter of 2024, showcasing record-breaking results in the face of challenging market conditions.
• The company reported a 4% rise in net sales, reaching $1.35 billion, with a significant boost in volumes across all end markets.
• Additionally, adjusted EBITDA increased notably by $64 million year-over-year to $291 million, reflecting a 400 basis-point improvement in margins to 21.5%.

• ISA staying the course.
• The July meetings of the ISA featured the first reading of the consolidated text of the deep-sea mining code, which paves the way for formal comment to be submitted by member states to be incorporated into the second reading scheduled for the November 2024 meetings.
• The election of Leticia Carvalho as the new Secretary-General of the ISA should not pose an obstacle to further progress on the mining code, as she reiterated her intention to work toward adoption of the final version of the code at the ISA’s 30th meeting, scheduled for early 2025, in line with TMC’s intended timetable of submitting its exploitation application to the ISA by the end of this year.

• Rio Tinto Ltd (RIO AU) has reached an agreement to buy Arcadium Lithium (LTM AU)/(ALTM US) for US$5.85/share (~A$8.70/share), a ~90% premium to the October 4th closing price of $US3.08/share.
• Terms remain below where Arcadium was trading back in January of this year. But it is perhaps disingenuous to call the Offer Price opportunistic. More a counter-cyclical move.
• The Scheme Offer is subject to a 75% shareholder vote and minimal regulatory approvals. The transaction is expected to close in mid-2025. The long stop is the 9th October 2025.

• Embattled Kiwi building materials giant announced emergency fundraise in September
• Accounting quality has deteriorated significantly in recent years, AI tool shows
• Share price is a quarter of its 2007 peak, company leadership is in flux

• Rubber Board new and replanting subsidy program starts rolling  
• RRII, IOCL sign MoU to boost research in process oils  
• Rubber Board stalls Kerala Govt move to shut Central Nursery 

• Rubber Board new and replanting subsidy program starts rolling  
• RRII, IOCL sign MoU to boost research in process oils  
• Rubber Board stalls Kerala Govt move to shut Central Nursery 

• For the week ending 04/Oct, US crude inventories rose by 5.8m barrels, exceeding expectations of a 2m barrel build. However, gasoline and distillate stockpiles fell more than expected.
• US natural gas inventories rose by 82 Bcf for the week ending 04/Oct, higher than analyst expectations of a 73 Bcf buildup. Inventories are 5.1% above the 5-year seasonal average.
• Chevron and Shell experienced target price upgrades, while Schlumberger and Occidental’s target prices were cut. Notably, BNP Paribas downgraded Exxon to Underperform from Neutral.

• Boise Cascade’s second quarter 2024 earnings reflected a complex but strategically navigated economic landscape, manifesting both strengths and areas of concerns.
• The company reported a year-on-year decrease in net income from $146.3 million in Q2 2023 to $112.3 million in Q2 2024, alongside a slight decline in consolidated sales reaching $1.8 billion, down by 1% from the previous year.
• Despite a softer market environment characterized by elevated mortgage rates and broader economic uncertainties, the firm has pushed forward with essential growth projects and sustained its shareholder capital return strategy.

• • Zephyr has decided to extend the State 36-2R well in the Paradox basin by drilling a 5,500 ft lateral on the well.
• • We are not surprised by this decision given that the acid job performed on the existing 130 ft interval was very successful with peak test production of >2,100 boe/d.
• • Zephyr believes that the ultimate recovery of the extended well could reach 2 mmboe, which is well above what would have been recovered from the 130 ft interval.

• 3Q24 production was 33,215 boe/d with production in Colombia still impacted by downtime and blockades (we expected 34.6 mboe/d).
• Production at Llanos-34 continues to decline. Production in Brazil remains shut-in. GeoPark had highlighted these downside risks in August.
• This was partially offset by (1) high production of 1,581 boe/d from Llanos Exploration (Llanos 87 and 123), mainly driven by the Toritos 2 and the Toritos Norte wells and (2) increasing production in Ecuador (1,786 boe/d).

• MBK’s strategy is clear: they believe they have the upper hand with the current price level and are optimistic about a favorable ruling on the second injunction.
• All eyes are on Choi to raise the price by this Friday, the 11th, before the deadline, especially with the FSS’s scrutiny looming.
• If that happens, MBK will likely go all-in on the second injunction whose hearing is on the 18th. Choi raising the price this Friday won’t significantly boost Korea Zinc’s stock.

• Arcadium Lithium (LTM AU) has disclosed a binding offer from Rio Tinto PLC (RIO LN) at US$5.85 per share, a 90% premium to the undisturbed price of US$3.08 (4 October).
• The offer is attractive compared to analyst price targets and peer multiples but unattractive compared to cyclical low timing and precedent transactions.
• The shareholder structure requires an activist to disrupt the vote. The long-dated offer provides optionality on a bump if lithium prices materially re-rates. 

• Late last evening, Rio Tinto Ltd (RIO AU) and Arcadium Lithium (LTM AU) announced a definitive agreement where Rio will acquire Arcadium for US$5.85/share in cash.
• Arcadium Lithium (ALTM US) closed nearly 31% higher at US$5.55/share and Arcadium Lithium (LTM AU) should follow when the stock opens.
• Arcadium Lithium (LTM AU) could move around 40% higher today to catch up with Arcadium Lithium (ALTM US) – that would still leave a 5.4% spread to the offer price.

• On October 9, Rio Tinto agreed to acquire Arcadium Lithium through a Jersey scheme of arrangement for $5.85/share, a 90% premium, valuing Arcadium’s diluted share capital at $6.7 billion.
• As of October 4, Arcadium shares on the NYSE had fallen by approximately 54.1% since listing. Rio Tinto is taking advantage of low lithium prices to acquire high-quality lithium assets.
• The offer price is generous: 17.3x 25e EBITDA vs. closest comparable Albemarle Corp (ALB US) at 12.2x 25e EBITDA. Gross spread is 5.1%. I set my PT at $5.85. Long.

• Huaqing Petroleum to set up plant worth US$1.39 billion in Hunan
• Linglong commences serial production at its Serbia plant 
• ZC Rubber Group cements network for supply to Nordic countries

• Vishnu Chemicals (VCL IN)  is now backward integrated with the soda ash, CO2 Gas plant and ore requirement to overcome the challenge of raw material price volatility. 
• Company operated in niche & specialty chemical segment and will launch detailed  capex plan in Q2 for forward integration. 
• Management aims to consolidate EBITDA margins around 17.5%-18% by year-end, with a target of achieving consistent margins at 20% over the next 2-3 years.

• Shiva Pharmachem Limited (9155347Z IN) is looking to raise around US$110m in its India IPO.
• It is a manufacturer in the Indian specialty chemicals business and was the largest manufacturer of acid and alkyl chlorides by volume in CY22 in India, as per Frost&Sullivan .
• In this note, we talk about the company’s historical performance.

• 3Q24 production was 15,160 bbl/d. This is well above expectations of 13 mbbl/d.
• While the river levels were at record lows, PetroTal has maximized the barge fleet capacity during the quarter.
• Production during the first week of October was 10.7 mbbl/d. With the end of the dry season in sight, production is expected to return to capacity by mid-November, 

• Qarbotech, a Malaysian startup that enhances photosynthesis via advanced carbon quantum dots material, has raised US$1.5 million in funding from 500 Global, Better Bite Ventures, ID Capital, EQT Foundation, and Epic Angels Limited.
• The seed extension round will enable Qarbotech to scale its operations in Malaysia, Indonesia, Thailand, and Vietnam, where demand for advanced agritech solutions is surging. 
• “This investment will allow us to ramp up production and bring our patented solutions to more farmers across the region, empowering them to produce more with less environmental impact,” said Amirul Merican, COO of Qarbotech.

• Arcadia’s share price soared by 47% following news of potential deal with Rio Tinto
• Rio Tinto confirmed talks with Arcadia for a deal worth $4-6 billion, causing speculation and excitement in the market
• Arcadia, with ten operating sites and diverse lithium operations, is a key player in the lithium industry with significant growth potential.

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• Change in HIL Ltd (HIL IN) started after the appointment of professional CEO Mr. Akshat Seth. 
• HIL is turning around its acquisition of Parador and Topline, which were Loss making. The company was not performing due to lower demand in US, EU etc. 
• Aiming for 14-16% Revenue growth and 2-3% EBITDA Margin improvement due to distribution growth, Parador Turnaround and high demand in real estate segment.

• Merdeka Copper Gold (MDKA IJ) provides a well-rounded exposure to gold and copper, where it has significant expansion plans in place for both metals through developing new assets. 
• The company has exposure to the EV battery ecosystem through Merdeka Battery Materials, which has one of the world’s largest nickel deposits at its SCM mine, developed by Rio Tinto.
• Merdeka Battery Materials is developing multiple HPAL processing plants in partnership with leading battery material companies. Valuations for FY2025E and FY2026E look interesting as new projects start to kick in. 

• We are initiating coverage of Sable Offshore (SOC) with a Sell Rating and $6 target.   
• SOC is attempting to restart oil production off the coast of Santa Barbara, California that is unlikely to gain the necessary regulatory approvals to move forward.   
• The offshore oil platforms, previously owned by XOM, have been shut down since 2015. SOC acquired the assets on the expectation it could win approval to restart production. 

• ExxonMobil’s Q3 revenue is expected to rise 6.3% YoY and 3.7% QoQ but its EPS is anticipated to fall 11% YoY and 5.6% QoQ.
• Management expects upstream earnings to decline by USD 0.6-1 billion due to falling crude oil prices. Earnings from the energy products segment are also projected to drop significantly.
• Exxon expects production in 2024 to be around 4.3 Moebd, with 1.2 Moebd coming from the Permian. The total capex for the year is estimated at USD 28 billion.

•  A chemical used in tire manufacture has been causing controversy since 2020.  
•  The United States Tire Manufacturers Association (USTMA) is investigating a series of potential alternatives, following new legislation from California that requires any company selling tires in California to either declare that they do not contain 6PPD, or demonstrate that they are seriously seeking alternatives.  
• As of now, no major fines have been imposed on tire manufacturers specifically for 6PPD use, but there is growing regulatory scrutiny, particularly in regions like the Pacific Northwest where environmental harm has been documented.

• US natural gas prices fell by 1.65% for the week ending 04/Oct, ending a streak of five straight weekly gains. The decline was due to expectations of softening demand.  
• Henry Hub Put/Call volume ratio fell to 0.98 (04/Oct) from 1.03 the previous week as put volumes fell by 20.2% WoW, while call volumes declined by 16.7%.
• Put OI increased for contracts expiring in October and November, while call OI rose for expiries in December, January, February, and March.

• WTI futures rose by 9.1% for the week ending 04/Oct, its strongest weekly gain since October 2022. The surge was led by escalating tensions between Israel and Iran.
• WTI options Put/Call volume ratio fell to 0.64 (04/Oct) from 0.76 (27/Sep) as call volume jumped by 120% WoW while put volume grew by 86.6%.
• WTI OI PCR fell to 0.76 for the week ending 04/Oct from 0.77 last week. Call OI rose by 11.4% WoW, while put OI grew by 10.4%.

• What you need to know: • TM announced several high-grade copper and silver intercepts near shaft 1 at its Kombat mine in Namibia.
• • The holes reported today lie close to existing workings and planned developments, allowing for easy integration into the mine plan.
• • The highlight hole was hole KWO-217 which intersected 11.21% Cu and 117.9 g/t Ag over 5m.

• 10 Questions for Dyna-Mac What is Dyna-Mac’s business about and what are some key business divisions? Dyna-Mac is a global multi-disciplinary contractor specialising in engineering, procurement, fabrication, construction, and onshore pre-commissioning and commissioning of offshore topside modules and facilities.
• Through these Q&As, management will discuss current business objectives, key revenue drivers as well as the industry landscape.