Asia Pacific Equity Research 07 November 2025 J P M O R G A N Nickel Dashboard Awaiting Indonesia's supply-side reforms LME nickel remained flat in October, averaging USD15,287/t (+0.01% m/m). At present, LME prices are trading closer to the crucial USD15k/t level, ~2.2% below the October peak of USD15,418/t, as persistent oversupply and uncertainty on future demand weighs on sentiment. Global visible inventory increased to ~279kmt (an addition of 27kmt q/q), with 20kmt flowing alone into LME warehouses in ...

Core Viewpoint - BHP has been ordered by Australia's Federal Court to compensate 85 coal mine workers for unlawfully requiring them to work during Christmas and Boxing Day holidays [1] Group 1: Legal and Regulatory Implications - The Federal Court's ruling highlights the legal obligations of companies regarding holiday work and employee rights [1] - The case emphasizes the importance of compliance with labor laws in the mining industry [1] Group 2: Impact on Workforce - The compensation order affects 85 workers employed by BHP's labor hire arm in Queensland, indicating potential financial implications for the company [1] - This ruling may influence BHP's labor practices and policies moving forward to avoid similar legal issues [1]

Core Insights - Prismo Metals Inc. has received an extension from Walnut Mines LLC for certain milestone obligations related to the Hot Breccia Project, providing the company with additional flexibility to assess strategic alternatives and prepare for drilling [1][2][3] Company Developments - The milestone date for completing exploration expenditures of $1,750,000 has been extended from January 31, 2026, to January 31, 2027 [2] - The milestone date for completing exploration expenditures of $2,000,000 has been extended from January 31, 2027, to January 31, 2028 [2] - The final cash payment of $275,000 to Walnut Mines LLC has been extended from January 31, 2026, to July 31, 2026 [2] Project Overview - The Hot Breccia Project is located in Arizona's Copper Belt, an area known for significant porphyry copper deposits [3][11] - Historical drilling in the 1970s by a Rio Tinto subsidiary intersected high-grade copper mineralization at depths of 640 to 830 meters [6][9] - The project area has geological features similar to BHP-Rio Tinto's Resolution copper deposit, which is considered one of the greatest copper discoveries in North America [8] Exploration Potential - Prismo's mineralization model is supported by historical drilling results, geophysical surveys, and an AI study, identifying an anomalous target area measuring 1,100 meters by 1,150 meters [7] - Historical drill holes have shown high-grade skarn mineralization, with notable intersections including 23 meters with 0.54% Cu at 640 meters depth [9] - The project consists of 1,420 hectares in 227 contiguous mining claims, featuring porphyry dikes and breccia pipes with copper-mineralized rock fragments [11][12]

Market Overview - The benchmark S&P/ASX 200 index closed down approximately 0.9%, finishing near 8813.7 after a previous close of 8894.8 [1][7] - The market session had a day range between 8801.9 and 8894.8 points, with liquidity remaining moderate [1][6] RBA Announcement - The Reserve Bank of Australia (RBA) maintained the cash rate at 3.6%, confirming monetary policy stability amid higher inflation concerns [1][7] Top Gainers - Droneshield Ltd surged 8.62% to close at AUD 4.16, with a remarkable 337.89% price increase over the past year and a market cap of AUD 3.6 billion [7] - NEXTDC Ltd rose 4.24% to AUD 16.49 [7] - Light & Wonder Inc advanced 3.54% to AUD 116.00 despite an 18.67% decline over the last 12 months [7] - Austal Ltd gained 2.66% to finish at AUD 6.96 [7] Notable Declines - Nexgen Energy (Canada) Ltd led losses with a 7.03% drop to AUD 14.03 [7] - SILEX Systems Ltd declined 6.02% to AUD 9.37 [7] - Eagers Automotive Ltd fell 5.43% to AUD 32.55 [7] - Brambles Ltd slipped 5.26% to AUD 23.41, despite a market cap of AUD 32 billion and a 25.66% rise over the year [7] Major Companies - BHP Group Limited saw a decline of approximately 1.91%, closing at AUD 42.54, with a 52-week high of AUD 44.55, indicating a current drop of around 3.04% from that peak [7] - Commonwealth Bank of Australia (CBA) closed at AUD 174.11, down by almost 0.82% on the day [5][7] Market Influences - The timing of the Melbourne Cup holiday period traditionally affects market trading volumes and participation [7] - Concerns about rising household costs and inflationary pressures are influencing cautious trading sentiments, particularly in consumer-dependent sectors [7]

Core Viewpoint - Teck Resources' Quebrada Blanca mine in Chile is showing signs of recovery, which is crucial for its $53 billion merger with Anglo American, as it raises questions about the mine's viability and future role [1][5]. Group 1: Mine Performance and Recovery - Mill throughput and copper recoveries at Quebrada Blanca are now meeting expectations due to an action plan initiated in August [2]. - The "QB Action Plan" includes significant upgrades to tailings infrastructure, with 59% of the mine's cyclones replaced, and full replacement expected by the end of 2025 [3]. - The current mine plan utilizes only 15% of Quebrada Blanca's resource base, indicating potential for long-term growth [4]. Group 2: Merger and Integration - The turnaround at Quebrada Blanca coincides with the merger between Teck and Anglo American, which aims to create the world's largest copper mine by the early 2030s [5]. - The integration of Quebrada Blanca with Anglo's Collahuasi mine, located just 15 km away, is a central feature of the merger [6]. - The combined QB-Collahuasi complex is projected to yield around one million tonnes of copper annually, with a proposed conveyor system expected to add 175,000 tonnes of copper output per year between 2030 and 2049 [7]. Group 3: Financial Projections and Market Position - The integration of operations is anticipated to generate up to $1.4 billion in additional annual EBITDA and $800 million in pretax synergies through improved procurement and operations [8]. - Teck is valued at $10.8 billion on a post-tax, sum-of-the-parts basis, with $13.8 billion attributed to copper assets, excluding synergy gains from the merger [9]. - If completed, the merger would position Anglo-Teck among the top five global copper producers, with an output of 1.35 million tonnes annually, surpassing Escondida's projected output of 1.28 million tonnes in 2024 [9].

Report Summary 1. Investment Rating The report does not provide an industry investment rating. 2. Core Views - **Nickel Market**: On October 30, the main nickel contract on the Shanghai Futures Exchange opened high and closed low. The spot market had decent trading volume, and the basis premium widened. The nickel fundamentals are weak with inventory pressure, but the valuation is at a low level, so nickel prices are expected to fluctuate at a low level [1]. - **Stainless Steel Market**: On October 30, the main stainless - steel contract fluctuated downward. The spot market trading was weak, and the basis premium widened. The fundamentals are loose, and cost support is weakening, so the upside potential of stainless - steel prices is expected to be limited [1]. 3. Summary by Related Catalogs Nickel - **Price and Trading Volume Changes**: The closing prices of Shanghai nickel futures' near - month, consecutive - one, consecutive - two, and consecutive - three contracts decreased on October 30 compared to the previous day. The trading volume of the Shanghai nickel futures active contract was 99,113 hands (-10,149), and the open interest was 107,897 hands (-1,789). LME nickel prices also declined, with the LME 3 - month nickel official price down by $105 [2]. - **Supply - side Situation**: Nickel ore prices remained flat. Last week, the arrival volume of nickel ore at ports decreased, and port inventories decreased. Nickel - iron plants' losses deepened. In October, domestic and Indonesian nickel - iron production increased, and nickel - iron inventories decreased. Domestic electrolytic nickel production increased in October, and export profits expanded [1]. - **Demand - side Situation**: Ternary production increased, stainless - steel plants' production increased, and the demand for alloys and electroplating was stable [1]. - **Inventory Situation**: SHFE nickel inventories increased, LME nickel inventories decreased, social inventories increased, and bonded - area inventories decreased [1]. Stainless Steel - **Price and Trading Volume Changes**: The closing prices of Shanghai stainless - steel futures' near - month, consecutive - one, consecutive - two, and consecutive - three contracts decreased on October 30 compared to the previous day. The trading volume of the Shanghai stainless - steel futures active contract was 105,051 hands (+11,210), and the open interest was 89,093 hands (-9,130) [2]. - **Supply - side Situation**: In October, stainless - steel production increased, but the production of the 300 - series decreased [1]. - **Demand - side Situation**: Terminal demand was weak [1]. - **Cost - side Situation**: The prices of high - nickel pig iron and high - carbon ferrochrome remained flat [1]. - **Inventory Situation**: SHFE stainless - steel inventories remained flat. Last week, the social inventory of the 300 - series was 61,270 tons (-9,000) [1]. 4. Trading Strategies - **Nickel**: The recommended trading strategy is to wait and see [1]. - **Stainless Steel**: The recommended trading strategy is to short on rallies [1].

Summary of Iron Ore Market Analysis Industry Overview - The report focuses on the **iron ore market**, highlighting recent trends and forecasts for prices and production dynamics. Key Points and Arguments 1. **Market Tightness and Price Support** - The iron ore market has been tighter than expected, supported by resilient Chinese hot metal production, which kept iron ore port stocks flat throughout Q2 and Q3. The 62% Fe spot index is currently at **$106/t** [3][8][39]. 2. **Price Forecast Adjustment** - The average iron ore price forecast for **2026** has been raised to **$93/t** from a previous forecast of **$88/t**. However, a bearish outlook is maintained, expecting a decline to **$88/t** by Q4 2026 [3][4][8]. 3. **China's Steel Sector Dynamics** - The Chinese steel sector has returned to oversupply, with high inventory levels and declining margins. This is expected to lead to lower steel production in the coming months [3][9][15]. 4. **Declining Domestic Demand** - China's net steel exports are believed to have peaked, and a continued decline in domestic demand is anticipated, which will likely weigh on steel production next year [3][9][16]. 5. **Global Iron Ore Shipments** - Global iron ore shipments have increased by **15% YoY** in Q4, which is expected to exacerbate the seasonal build in port stocks and keep stocks rising throughout 2026 [3][9][30]. 6. **China's Steel Demand Forecast** - The demand growth forecast for **2025** has been revised down to **-6% YoY**, reflecting weaker infrastructure demand. A further **2% contraction** in steel demand is expected in **2026** [16][18]. 7. **Export Environment Challenges** - The export environment for Chinese steel is expected to face challenges due to increased global protectionism, with a forecasted **8% decline** in steel exports for **2026** [23][24]. 8. **Iron Ore Supply Dynamics** - Higher iron ore supply is expected to lead to increased port stocks in China throughout **2026**, with global seaborne iron ore shipments up **9% YoY** in October [30][52]. 9. **Macroeconomic Factors** - The report notes potential price support from macroeconomic drivers, particularly the appreciation of the Chinese Yuan (CNY) against the USD, which could boost iron ore prices by approximately **8%** [35]. 10. **Long-term Market Outlook** - The global iron ore market is expected to loosen in **2026** due to declining seaborne demand and new supply, with a projected decline in iron ore prices [36]. Additional Important Insights - The report emphasizes the structural decline in Chinese domestic steel demand and the implications for iron ore consumption, indicating that more iron ore is being consumed per tonne of steel produced due to changes in production methods [15][72]. - The analysis also highlights the shift in China's steel export strategy, focusing on semi-finished products in response to export barriers for flat steel products [22][23]. This comprehensive analysis provides a detailed outlook on the iron ore market, emphasizing the interplay between domestic demand, global supply dynamics, and macroeconomic factors influencing price movements.

Core Viewpoint - Freeport-McMoRan is a significant player in the mining industry, particularly in copper and gold production, despite facing operational challenges and competition from other major companies [1][3][5]. Group 1: Company Overview - Freeport-McMoRan operates globally with key assets such as the Grasberg mine in Indonesia [1]. - The company has a market capitalization of approximately $59.68 billion and has experienced significant stock price volatility over the past year, with a high of $49.21 and a low of $27.66 [5]. Group 2: Financial Performance - The company reported strong third-quarter results, driven by high copper and gold prices, despite production issues at the Grasberg mine impacting operations [3][6]. - Current stock price is $41.57, reflecting a slight increase of approximately 1.13% or $0.47, with a trading range between $40.50 and $41.95 [4]. Group 3: Future Outlook - Management anticipates a phased recovery, with the Grasberg Block Cave expected to resume operations in 2026, while implementing mitigation efforts to compensate for lost production [4]. - Orest Wowkodaw from Scotiabank has set a price target of $51 for FCX, indicating a potential upside of approximately 22.95% from its current trading price of $41.48 [2][6].

Financial Data and Key Metrics Changes - POSCO Holdings recorded consolidated revenue of 17.3 trillion and operating profit of 640 billion, showing improvement in operating profit for three consecutive quarters despite losses at POSCO E&C [1][2] - The operating profit margin for the quarter was 6.6%, driven by increased sales volume and proactive cost-cutting efforts [1][8] - Operating profit for POSCO improved from 322 billion in Q4 of last year to 585 billion in Q3 of this year, despite a 1.7% drop in revenue due to declining sales prices [7][8] Business Line Data and Key Metrics Changes - In the steel sector, production volume increased by 4.9%, but the average selling price dropped, leading to a decrease in revenue [8] - In rechargeable battery materials, losses narrowed sharply quarter-over-quarter due to increased cathode sales volume and a price rebound in lithium operations [2][10] - POSCO E&C faced significant one-time costs of 288.1 billion due to the Shenzhen incident, with an additional 230 billion expected in Q4 [10][64] Market Data and Key Metrics Changes - The domestic steel market demand is slowing, with imports flooding the market prior to the AD ruling, impacting sales prices [8][20] - Overseas steel profits are expected to decline moderately due to poor performance in Mexico and India, while steady performance is anticipated in Indonesia and Vietnam [9][10] - The lithium market is projected to see increased demand, with expectations of 14 million EVs next year, leading to a potential increase in lithium prices [51][52] Company Strategy and Development Direction - POSCO Group is focused on creating a safe workplace through comprehensive safety management innovations and plans to establish a safety master plan [3][6] - The company aims to ramp up new plants and improve process efficiency in lithium operations while ensuring disciplined execution to avoid additional costs [2][31] - Future investments will prioritize environmental projects and overseas capacity additions, particularly in high-growth markets like the U.S. and India [30][31] Management Comments on Operating Environment and Future Outlook - Management acknowledged the complexities of external uncertainties affecting the operating environment and expressed optimism for a recovery in steel profits in 2026 [1][9] - The company is preparing for the implementation of the EU's Carbon Border Adjustment Mechanism and is actively developing strategies to mitigate its impact [21][22] - Management expects to return to normal profitability levels in POSCO E&C by next year after accounting for one-time losses [10][64] Other Important Information - POSCO Group has restructured seven projects, generating 400 billion in cash, and completed 63 projects since early 2024, generating 1.4 trillion in cash [7] - The company is committed to enhancing safety measures and has launched a task force to improve workplace safety [4][5] Q&A Session Summary Question: Steel market outlook for Q4 and anti-dumping effects - Management indicated that the impact of anti-dumping measures would be difficult to assess immediately, but they expect some positive effects from the real estate market in late Q4 [19][20] Question: Response to carbon-related costs and EU regulations - Management acknowledged the potential increase in costs due to the EU's Carbon Border Adjustment Mechanism and emphasized ongoing communication with the EU to address uncertainties [21][22] Question: Update on Alaska LNG project and its impact - The project is under review, and if realized, it could supply about 300,000 tons of steel, with operations expected between 2026 and 2028 [24] Question: Mid to long-term steel strategies - Management confirmed plans to increase overseas capacity and shut down non-competitive domestic facilities while focusing on new growth areas [28][30] Question: Update on lithium operations and market demand - Management reported that ramp-up for lithium operations is expected to be completed by early next year, with anticipated increases in lithium prices and demand [55][59]

Core Insights - Finder Energy has reported significant increases in gross rock volume (GRV) at the Krill and Squilla oil discoveries in the Timor Sea, following the interpretation of reprocessed Ikan 3D seismic data, which improved image quality and resolved previous geological complexities [1][5] Exploration Well Data - The latest interpretations indicate that the original Krill-1 exploration well has an updip appraisal potential of approximately 90 meters within the Krill structure, enhancing the prospects for further exploration [3] - The Squilla exploration well, drilled in a down-dip position, intersected a fault that affected reservoir quality; however, new data suggests potential appraisal locations away from these faults [4] Contingent Resource Estimates - Seismic reprocessing has led to a GRV increase of over 60% at Krill and more than 243% at Squilla, prompting Finder to revise its contingent resource estimates and reassess appraisal well locations [5] - Each field will require an appraisal well to confirm the commercial viability of resources for potential tie-back to existing developments or to establish a new production hub in the southern section of PSC 19-11 [5] Future Steps - Finder plans to integrate new interpretations with geological analyses of well data to enhance understanding of reservoir parameters at Krill and Squilla, including detailed petrophysical studies and oil property reviews [6]