Daily Brief Energy/Materials: Allkem Ltd, Adbri, Indo Tambangraya Megah, Kloeckner Pentaplast GmbH, Crude Oil, Stora Enso OYJ, Standard Lithium and more

• The vote is tomorrow. It is slightly contested. Shareholder proxies have recommended approving. Some others say Allkem is going too cheap. 
• It probably should get done because of scale benefits, and if it breaks, it might be good for Allkem, which is “good risk arb risk”
• But the trade here is some combination of lithium rebound and index event, with index impact details here.

• Adbri (ABC AU) has disclosed a non-binding proposal from CRH (CRH LN) and Barro at A$3.20 per share, a 41.0% premium to the undisturbed price of A$2.27 (13 December).
• The offer is the best and final offer. The Board has granted an exclusive due diligence period, which ends on 28 February 2024. 
• The Board intends to recommend a binding proposal. The offer requires FIRB approval (ACCC approval is not mentioned). The offer is attractive vs. peer multiples and historical ranges.  

• Newcastle coal prices have normalized from the highs of USD 450/ton (in September 2022) to current levels of USD 145/ton (a 68% correction from the peak). 
• From profits of 100 mn USD/month, we are now down to 90-100 mn USD/quarter. Despite this, the stock trades at 4.5x PE with a 15% dividend yield. 
• An added buffer of 850 mn USD of net cash represents 50% of the market capitalization. 

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Klockner Pentaplast’s ESG as “Adequate”, in line with the Environmental, Social and Governance pillars. Controversies are “Immaterial” and Disclosure is “Strong”.

• Welcome to this week’s Energy Cable.
• We finally got stopped out of our crude oil trade at the beginning of last week, only to see crude rally at the end of the week on the back of the FOMC meeting and again today due to the supply chain.
• We also entered a long in utilities as advertised last week and we are already enjoying a healthy plus, also as a consequence of the FOMC.

• 2022 was an exceptional year for Stora Enso. The Company drove financial performance to an all-time high, strengthened its BS and delivered on strategic initiatives
• Ince then, the market environment has deteriorated further and has shaken the Company’s fundamentals. To that end, Stora is embarking on a restructuration program.
• The Company’s own actions will improve competitiveness. The self-help improvements focus on profitability turnaround and capital release.

• Standard Lithium (SLI) is advancing lithium extraction projects in Southern Arkansas and East Texas, which could position the company as a major domestic lithium supplier.
• A definitive feasibility study (DFS) or the company’s Phase 1A Project indicates a pre- tax NPV of US$772 million and a pre-tax IRR of 29.5%.
• A preliminary feasibility study (PFS) for the company’s South West Arkansas Project indicates a pre-tax NPV of US$4.5 billion and a pre-tax IRR of 41.3%.