Daily Brief Energy/Materials: Ecopro Co Ltd, Genesis Minerals, Merdeka Battery Materials, Gold, Chevron Corp, Treatt PLC, KEFI Minerals PLC, Phillips 66, Riley Exploration Permian and more

• The review period for the price cutoff for the MSCI May Quarterly Comprehensive Index Review (QCIR) starts today. MSCI should choose a day from this week to compute market cap.
• The most changes (especially adds) are expected in mainland China following an expansion of the universe for inclusion of stocks in Northbound Stock Connect.
• There are stocks in India where there will be FIF changes triggering large flows and there are things to watch on some stocks in Korea and China.

• Gold miner St Barbara Ltd (SBM AU)’s reverse merger with Genesis Minerals (GMD AU) always had a whiff of biting off more than they could chew. That’s now validated.
• St Barbara has confirmed it will sell its flagship Leonora gold project to Genesis for $600mn (in cash and GMD scrip). The reverse merger has been cancelled.
• Post transaction, St Barbara will hold up to ~19.5%,  and be left with no debt and ~$197m in cash. Genesis will emerge with no debt, and ~$175mn cash (pre-transaction costs). 

• Merdeka Battery Materials (2012725D IJ) raised around US$591m in its Indonesian IPO.
• It has the largest resource globally in terms of contained nickel at the Konawe Nickel Mine (the SCM Mine), according to Wood Mackenzie. 
• In this note, we will talk about the trading dynamics and valuation.

• USDA on Tuesday pegged the 2022-2023 U.S. orange crop at 62.25 million boxes (2.57 million tonnes), an 86-year low and down 23% on the year.
• That is less than 20% of U.S. output in the record 1997-1998 season.
• Florida, which has previously accounted for more than 80% of the annual U.S. orange crop, is seen producing an 87-year low of 16.1 million boxes, down 61% on the year.

• Chevron had a decent year in 2022, with improved financial performance, increased production of traditional energy, and progress in developing lower carbon businesses.
• The company had a mixed result in the last quarter as it surpassed the revenue expectations of Wall Street but delivered lower-than-expected earnings.
• The company generated decent free cash flows, surpassing its previous high in 2021 by over $15 billion, resulting in a strong dividend increase and a buyback of almost 4% of its shares.

After the usual slower start to the year, Treatt has had a strong Q2; H123 sales growth was 8.5% at constant currency. Momentum is expected to continue into H2, with current sales growth mainly skewed to price as Treatt continues to recover increased costs, though there was also a small contribution from an improvement in mix. Citrus continued to perform strongly as Treatt pursues its strategy of moving away from the lower-margin products. We raise our FY23 sales forecasts to reflect the strong revenue growth but leave our profit forecasts broadly unchanged at this stage, though we see upside risk to forecasts.

Notwithstanding the trials and tribulations that it has had to deal with in Ethiopia in recent years, KEFI believes that it is finally nearing the end of its approvals odyssey. Being first mover and also traversing the country’s turbulent swing to democracy has cost the company unpredictability, time and money. However, the new mining minister is reported to be serious – to the point of being enthusiastic – about developing KEFI’s Tulu Kapi project and the three substantive pre-conditions for final approval (the two banks having equal protections in the country, government installation of elevated security and the right for KEFI to administer its own banking and capital servicing arrangements) have been met or (in the case of the third) appear in the process of formalisation. With respect to security, KEFI reports that a disciplined formation of the Ethiopian Federal military has been deployed to secure mine sites throughout the country, including Tulu Kapi. In the meantime, the company has continued to upgrade and develop its assets in Saudi Arabia.

• Phillips 66 had a disappointing quarter failing to meet Wall Street expectations in terms of revenues as well as earnings.
• The management managed to strengthen their financial position by retiring debt and resuming their share repurchase program with their cash flow production.
• After completion, the management anticipates having an 87% economic interest in DCP Midstream by the second quarter of 2023.

• Riley is well-positioned to execute its strategy that aims to drive shareholder returns through a combination of growth in production and proved reserves from reinvesting a portion of cash flow into the asset base and using the balance to maintain a conservative balance sheet and return cash to shareholders.
• The recent $330 million acquisition of assets in New Mexico’s Yeso Trend added a second core area and provides management greater flexibility to allocate capital to maximize operational efficiency.
• The Yeso Trend produces from conventional reservoirs that have similar drilling and completion characteristics to the San Andres formation in Riley’s legacy Champions assets.