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DJ Basic Materials Roundup: Market Talk

· 02/04/2021 16:50

The latest Market Talks covering Basic Materials. Published exclusively on Dow Jones Newswires at 4:20 ET, 12:20 ET and 16:50 ET.

1112 ET - If a bid for KAZ Minerals fails, the miner will be left with a significant challenge of financing the expensive Russian flagship Baimskaya project, Liberum says. If the 780-pence a share bid by Nova Resources fails, the company will need to raise more credit on top of the current $3.1 billion to fund the $8 billion project. "Dividends are very likely to be cut for the next eight years--starting at the full year results at the end of February--and there is every chance that management opt for a large rights issue to de-risk the debt profile," the brokerage says. Liberum has a hold rating on the stock but raises its target price to 780 pence. (adriano.marchese@wsj.com)

1051 ET - The new offer of 780 pence a share for KAZ Minerals makes perfect sense, since shares likely won't trade off net present value, according to Credit Suisse. The miner's flagship Baimskaya project in Russia is still a ways away from being completed, with first production now slated for 2027, and capex increasing to $7 billion from $5.5 billion. "We have long argued that shares will not trade off NPV in the coming years, so we do see this offer price as close to where shares would be trading today without the offer," says the bank. "Taking KAZ private makes perfect sense to us," it adds. Credit Suisse maintains a neutral rating on the stock with a target price of 640 pence. (adriano.marchese@wsj.com)

1007 ET - Iron-ore mining giant Vale SA's $7B settlement agreement with prosecutors in the Brazilian state of Minas Gerais is good for victims of the 2019 Brumadinho dam disaster and for the company, according to Marcelo Gandelman, a Rio de Janeiro-based lawyer who specializes in corporate conflict resolution. Vale and prosecutors announced the agreement Thursday, though prosecutors said criminal cases against former Vale employees will continue. By settling, instead of fighting it out in court, victims of the deadly disaster and the region will get financial help more quickly, and the company avoided the possibility of a bigger penalty imposed by a court ruling, Gandelman said. (jeffrey.lewis@wsj.com)

0953 ET - Corteva has projected a big increase in profits this year as agricultural markets improve, but CEO Jim Collins--targeted last month for replacement by activist investor Starboard Value --tells investors that he understands any frustration over the company's slow growth up to this point. "While I am pleased with our progress, I am not satisfied with our relatively flat earnings over the past three years," Collins says on an earnings call. Collins says Corteva's board and management team agree on the company's strategy, and "we're always open to perspectives that benefit all our shareholders." (jacob.bunge@wsj.com; @jacobbunge)

0947 ET - The increased offer for FTSE 250 miner KAZ Minerals by Nova Resources worth GBP3.7 billion has a reasonable probability of succeeding, according to RBC. "Although long-term fair value is probably higher than the new 780-pence bid, today's cash offer is a fair reflection of the long-dated negative free cash flow and therefore has a reasonable probability of succeeding," it says. The brokerage says that the new offer reflects higher copper prices which rose 16% since the last October bid, and the FTSE 350 Mining Index which has risen 34%. Shares are up 3.1% at 797.6 pence. (adriano.marchese@wsj.com)

0944 ET - The last few months' rallies in corn, soybeans and other crop prices have US farmers looking for ways to expand their farms and sow bigger crops this spring, say executives of seed and pesticide maker Corteva. The Delaware company, formed from the merger of Dow and DuPont's agricultural businesses, anticipates a 5M to 8M increase for combined corn and soybean acreage in the US, which executives say likely will be skewed toward soybeans. Heavy agricultural imports from China, coupled with dry conditions in some South American growing regions, have propelled farm commodity prices sharply higher since last summer. (jacob.bunge@wsj.com; @jacobbunge)

0328 ET - Zijin Mining's earnings outlook seems more bullish thanks to the company's plans to double its production volume for mined copper and gold by 2025, UOB Kay Hian says. The brokerage raises its 2021-2022 earnings estimates for the miner by 29% and 63% respectively, and also increases its production and price estimates. The Chinese company is looking to become one of the top five global mining groups by 2030 by ramping up production and taking on more M&A, UOB says. It raises the stock's target price to HK$12.00 from HK$8.20. Zijin Mining's shares fall 4.2% to HK$9.49. (yiwei.wong@wsj.com)

2109 ET - The potential relisting of ARA Asset Management could be a positive catalyst for Straits Trading Co. in 2021-2022, DBS says, while initiating coverage on the stock at buy and a target price of S$3.50. The company, with its portfolio of quality commercial and logistics assets, is currently trading at a discount at 0.6x its price to net asset value, the Singaporean bank says. Straits Trading also seems to be on track to grow its assets under management to S$2.4 billion by 2022, DBS adds, estimating the initial yield from its real-estate portfolio to be around 6.5%. Shares rise 3.4% to S$2.41. (yiwei.wong@wsj.com)

1836 ET - While Macquarie expects BHP to record strong 1H earnings on booming iron-ore prices, the bank doesn't expect capital management beyond an "attractive" regular interim dividend when BHP reports half-year results on Feb. 16. That's because net debt is likely still within BHP's US$12 billion-US$17 billion target range, albeit possibly at the lower end. Macquarie is forecasting an interim dividend of US$0.80/share, up 23% on year and a 63% payout ratio. That's worth roughly US$4.0 billion, leaving headroom of US$1.0 billion--or US$0.20/share--to top up the dividend, however it's more likely BHP will look to pledge a special dividend or buy back alongside FY earnings in August, says Macquarie. BHP is up 0.5% in Sydney at A$44.33/share. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

(END) Dow Jones Newswires

February 04, 2021 16:50 ET (21:50 GMT)

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