Daily Brief Energy/Materials: Newcrest Mining, Vedanta Resources, Crude Oil and more

• On the 11 April, Newmont Mining (NEM US) bumped the all-scrip terms for Newcrest Mining (NCM AU) to 0.400 Newmont shares – from 0.380 – for each Newcrest share held. 
• Exclusive due diligence was granted and now a firm Offer, by way of a Scheme, has been agreed.
• The Offer permits Newcrest to pay a special franked dividend of up to $US1.10/share on top of the Offer terms. 

• Newcrest Mining (NCM AU) has entered a SID with Newmont Mining (NEM US) at 0.400 Newmont shares per Newcrest share + US$1.10 special dividend + ordinary dividends (FY2023 dividend of US$0.20).
• The proposal is subject to shareholder approval from both sets of shareholders along with regulatory approvals (FIRB, US, Canada, Papua New Guinea).
• The offer is attractive in terms of historical prices and VWAP exchange ratios but carries the volatility risk around Newmont shares and FX rates.  

Vedanta Ltd has released disappointing Q4/22-23 results. Revenue fell 4.75% y-o-y while reported EBITDA decreased 30%, mainly due to lower prices of metals and minerals, along with higher costs. Production was weak. However, leverage ratios are acceptable, with Pro-forma Gross Debt/EBITDA and Net Debt/EBITDA of 3.5x and 2.9x, respectively, in April 2023.

Production guidance is essentially flattish, with no significant growth projected in the key segments that contribute the most to EBITDA, namely zinc, oil & gas and aluminium. Refinancing risk over the next one year remains the key risk.

• The Silver euphoria is over In the past two weeks, I have spoken to many people who are euphoric about silver.
• Many charts on Fintwit also predict that now is the time to jump back on the silver bandwagon.
• I believe that the next bubble could soon run out of steam, and this is not only true for gold.