Daily Brief Energy/Materials: Orecorp Ltd, Ecovyst, Vedanta Resources, Rayonier Advanced Materials and more

• Back on the 6 August, Western Australian-based miner OreCorp Ltd (ORR AU) signed a Scheme Implementation Deed with Canada’s Silvercorp Metals (SVM CN).
• OreCorp shareholders are offered A$0.15 in cash and 0.0967 new Silvercorp shares – or an implied value of A$0.60 – for each OreCorp share held.
• The Scheme Booklet is out with a shareholder vote on the 8 December. Implementation is the 22 December.

• The Orecorp Ltd (ORR AU) IE considers Silvercorp Metals (SVM US)’s A$0.15 cash per share and 0.0967 SVM shares per ORR share offer fair and reasonable. 
• The offer is subject to the Tanzanian Fair Competition Commission and shareholder approval. The offer is attractive compared to the adjusted exchange ratios and historical prices.
• While the offer has suffered from the steep SVM share price decline, there has been no visible dissent from major shareholders. At the last close, the gross spread was 12.1%. 

• ECVT has navigated a challenging 2023, marked by unforeseen external factors that have made accurate quarterly forecasting a formidable task
• As the year comes to a close, ECVT is seizing an opportunity during the seasonal refinery downtime to expedite its capital expenditure plans from 2024.
• ECVT reported third quarter sales of $173.3 million compared to our estimate of $171.3 million. The miss was the result of greater than expected slowdown in ecoservices segment

Vedanta Ltd (VEDL) has released puzzling Q2/23-24 results. The oil & gas segment recorded a huge y-o-y jump in earnings during the quarter, for no apparent reason. In our view, the lack of explanation and attribution for the unexpectedly large earnings jump is very strange, compounded by the timing of the call (on a weekend, when fewer analysts would have attended). It is unclear if VEDL has made an accounting error, or if this was an attempt to put itself in a more positive light to gain better access to capital. This is a crucial period for the group, with parent Vedanta Resources (VRL) facing significant debt maturities in the next two years (USD 3 bn, with the nearest being the USD 1 bn maturing in January 2024). The results have increased our scepticism of the group’s financial reporting.

We move our recommendation on the VEDLN notes to “Not Recommended” from “Hold”.

• Portfolio strength and market weakness. At a recently held Investor Day, RYAM management highlighted its cellulose product portfolio, the company’s biomaterials initiative, and the current state of the industry in the wake of the G-P closure announcement.
• RYAM also provided an update on 2023 guidance and a look at 2024 and 2027 EBITDA bridges.
• Asset evaluation proceeding to the next round. Following the Investor Day, RYAM announced that it engaged Houlihan Lokey as its financial advisor to explore the potential sale of its paperboard and high-yield pulp (HYP) assets located at its Temiscaming site, as it advances its initiative to expand into higher-growth, higher-margin specialty businesses and reduce its exposure to commodity cellulose markets.