Daily Brief Energy/Materials: Sanil Electric, Iron Ore, Alpha Metallurgical Resources, Crude Oil, Kinross Gold Corp, Nanoco Group PLC, ICL Group , Sonoco Products Co, West Fraser Timber and more

• Sanil Electric (062040 KS), a Korean industrial transformer manufacturer, is seeking to raise up to US$165 million.
• We previously discussed the IPO in Sanil Electric IPO: The Bull Caseand Sanil Electric IPO: The Bear Case.
• We examine the syndicate’s valuation methodology. Our analysis suggests that Sanil is fully valued in the IPO price range. We would pass on the IPO.

• Iron ore has remained rangebound between 95 and 130 USD/ton for three years, with cost-curve support kicking in on the higher end of the cost curve at around 100 USD/ton. 
• Coking coal prices are expected to bounce due to the Anglo incident, and we believe the 65-62 spread will benefit, moving out of its mid-teens band. 
• We like iron condors (set up details in the insight) and high-grade ore producers Rio Tinto Ltd (RIO AU), Vale (VALE US).

• Alpha Metallurgical Resources recently disclosed its financial results for the first quarter of 2024, presenting mixed outcomes amidst challenging market conditions.
• The company announced an adjusted EBITDA of $190 million, a decline from the $266 million recorded in the previous quarter, citing the softening metallurgical coal market which deteriorated further after the quarter ended, setting a challenging environment for the upcoming quarter.
• Despite these complex market dynamics, Alpha Metallurgical Resources remains committed to maintaining operational excellence and cost-efficient practices.

• US crude oil inventory declined by 12.2 million barrels as of the week ending on 28/Jun, the biggest drawdown since July 2023.
• Henry Hub prices continued to decline from last week due to increased production and cooler weather forecasts.
• Saudi Aramco awarded over USD 25 billion in contracts for gas expansion. Goldman Sachs lowered its target price on Saudi Aramco but maintained its “Neutral” rating.

• Kinross Gold Corporation reported a financially robust first quarter for the year 2024, characterized by strong operational performance and strategic developmental advancements, despite the inherent challenges and complexities in the mining sector.
• During this quarter, Kinross Gold produced 527,000 ounces of gold, with its key operations at Tasiast, Paracau, and La Coipa contributing significantly to the output, demonstrating cost-effective production with an All-In Sustaining Cost (ASIC) below $1,000 per ounce.
• The favorable gold prices provided a financial tailwind, enhancing the company’s profitability margins.

Nanoco Group’s trading update flagged that, while its development work on second-generation materials continues to progress as expected, it does not expect to receive a follow-on order for commercial materials in FY24. These orders were expected to be low volume, hence the delay is not particularly material from a financial perspective, although it does remove an expected milestone to gauge Nanoco’s pathway to volume production. We have adjusted our estimates to reflect a more cautious scenario for the near-term ramp-up of volume material sales. Success will be defined by the extent to which Nanoco-based sensors are designed into handsets and other devices in the 2026/27 timeframe, when the infrared sensing market is expected to see an inflection. Nanoco and its lead partner hope to have more visibility on end-customers’ commercialisation pipelines by the time of the FY24 results in October.

• ICL recently shared financial results for the first quarter of 2024, marking a period of adaptation and resilience amidst enduring operational challenges, particularly due to the geopolitical situation in Israel.
• This quarter demonstrated a mixed financial performance, showcasing both progress and areas needing attention.
• ICL reported a total revenue of $1.735 billion for the quarter, which, while representing a sequential improvement of 3%, is lower compared to the same period in the previous year.

• Sonoco, a diversified global packaging company, displayed stable financial performance in its first quarter of 2024.
• With revenues hitting $1.6 billion and adjusted earnings per share at $1.12, the company’s resilience in managing operating costs and capital was transparent.
• A particularly strong note was the reported operating cash flow of $166 million, supported by effective working capital management.

• West Fraser presented its Q1 2024 financial performance, revealing mixed business outcomes and a nuanced path forward amidst shifting market dynamics.
• The company reported an adjusted EBITDA of $200 million with a 12% margin, demonstrating stable financial health, despite sectoral challenges.
• This performance marks a considerable improvement over the previous fiscal year’s EBITDA, largely buoyed by strategic acquisitions and capital investments that have enhanced operational efficacy and market reach.