Daily Brief Energy/Materials: Alumina Ltd, Shougang Fushan Resources, Gevo, Granite Ridge Resources , Metarock, Nanoco Group PLC and more

• Alumina Ltd (AWC AU) has entered a scheme implementation deed with Alcoa (AA US) at 0.02854 Alcoa shares per Alumina share. The scheme meeting is targeted for 3Q.
• While the offer is not a knockout bid, the 15% increase in Alcoa shares lowers the headcount risk from retail opposition and lowers the bump potential. 
• Regulatory approvals are a formality, and Citic Resources Holdings (1205 HK) lack of support reflects HKEx listing requirements. At the last close, the gross spread was 3.4%.

• We preview Shougang Fushan Resources (639 HK) earnings for FY23. We expect revenue /profit growth of -15%/12% YoY with H2FY23 revenue/profit -1.7%/2.3% YoY due to lower coking coal prices.
• We expect the company to pay an FY23 dividend of 36 HKD cents, implying an 11.3% yield. At the current spot price, the implied yield is 11.3%. 
• The company’s balance sheet is rich in cash, with more than a billion USD (~50% of market capitalization). However, we are skeptical that the company will pay big special dividends. 

• GEVO sold 90,666 MMBtu of RNG in 4Q23, up from 81,271 MMBtu in the previous quarter, which translates to 91% of capacity on an annualized basis, while generating standalone cash EBITDA of $1.3 million, down from $1.7 million in 3Q23.
• The RNG division is expected to achieve $12-16 million in cash EBITDA once the company receives the CARB CI score in 2024.
• This is further expected to increase to $30-38 million if California Low Carbon Fuel Standard (LCFS) prices recover to $200 per metric ton.

• During 2023, Granite Ridge executed its portfolio management strategy to grow the asset base and enhance its organic development growth opportunities.
• FY23 production increased 23% Y/Y, far ahead of management’s initial expectations.
• 4Q23 production averaged 26,036 BOE/d, including 12,283 b/d of oil.

• Metarock Group Ltd (ASX:MYE) is a specialist underground mining contractor across both metallurgical coal and metalliferous hard rock mining, working with most tier-1 operators in the respective spaces.
• Following a difficult 18 months dealing with legacy contracts that required an equity injection, asset sales and ATO payment plan, MYE appears to be coming out the other side, posting an adjusted $49.1m EBITDA over the 12 months to December 31, and reducing net debt to $62.8m which includes $30m of invoice financing.
• Applying H1 FY24 annualised depreciation and interest charges we calculate EBITA of $22.8m for the last 12 months, implying CY23 EV/EBITA of ~4.9x.

Following receipt of the £58.8m second tranche from the Samsung litigation on 24 January, Nanoco plans to return £30m to shareholders via a tender offer (c 38.5% of outstanding shares), alongside a £3m share buyback. After completing this £33m return and repaying c £5m outstanding debt, Nanoco expects to have c £23m cash to accelerate commercial production of nanomaterials at scale. With its validated technology, robust pipeline and strong financial position, we believe the group is positioned to drive long-term shareholder value creation. With Nanoco only valued marginally higher than the second tranche proceeds, we believe the market is undervaluing the group’s several commercial opportunities and intellectual property (IP) despite recent progress.