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DJ Basic Materials Roundup: Market Talk

· 02/05/2021 04:20

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

0327 GMT - Petronas Chemicals Group could be a key beneficiary of stronger fertilizer demand, Citi says. It upgrades the stock to buy from sell and lifts its target price to MYR8.50 from MYR6.80, also citing faster earnings growth and rising urea prices. Urea is a white crystalline solid material often used in fertilizers. Citi forecasts the Ebitda of Petronas Chemicals' fertilizer-and-methanol segment to rise 40% in 2021, as it raises the 2021-2022 EPS estimates for the company by 23%-24% to reflect higher crude-oil prices. Shares rise 2.9% to MYR7.42. (yiwei.wong@wsj.com)

0311 GMT - China's restrictions on Australia's thermal coal may last longer than the curbs on its coking coal because Australian thermal coal is relatively easy to replace in the broader market, says CBA. "The same is not true for Australia's coking coal," it says. Australia is the world's No. 1 producer of coking coal, which is used to make steel. Russia and Indonesia have in the meantime stepped up to meet China's thermal-coal needs after Beijing halted Australian cargoes, the bank notes. "China's deal with Indonesia for $1.46 billion of thermal coal over the next three years also signals China's intent to solidify its relationship with Indonesia," CBA says. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

0149 GMT - Many investors would be anticipating a bounce in gold and silver after recent steep falls, including a 2% dive for both precious metals in the U.S. on Thursday, HSBC says. A lot will depend, however, on the greenback and how it and U.S. Treasury yields are affected by nonfarm payrolls. "Gold and silver may bounce but we suspect gains may be limited as bulls have been dealt losses and the steep yield curve can work against gold," HSBC says. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

1612 GMT - 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)

1551 GMT - 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)

1407 GMT - 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)

1353 GMT - 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)

1447 GMT - 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)

1344 GMT - 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)

(END) Dow Jones Newswires

February 05, 2021 04:20 ET (09:20 GMT)

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