INDICATIVE TERMS — SUBJECT TO FINAL TERMSHEET
This is a marketing communication prepared by LFA SA, a SEC-registered investment adviser. It is a summary only and does not constitute personalized investment advice — please see the important disclosures and full Key Risks at the end of this document, and refer to the final termsheet and offering documents, before making any investment decision.
Electrification and Supply Constraints Continue to Support Industrial Metals
Copper and aluminum have appreciated significantly as investors have increasingly recognized that electrification is not simply a renewable-energy story. The expansion of power grids, data centers, electric vehicles, charging infrastructure and industrial automation requires substantial volumes of conductive metals, making both commodities increasingly strategic to the global economy.
Copper remains particularly exposed to the development of electricity networks. Its superior conductivity makes it essential in cables, transformers, motors, substations and high-performance electrical systems. Aluminum performs a complementary role, especially in overhead transmission lines, solar infrastructure, transportation and applications where weight and cost are critical.
The demand outlook remains constructive. The International Energy Agency estimates that annual global investment in electricity grids must rise by approximately 50% from current levels to support expected electricity demand through 2030.
This investment cycle is being reinforced by the rapid expansion of data centers, whose electricity requirements are increasing the urgency of grid upgrades and new generation capacity.
Supply conditions provide an additional source of support. Copper mine production has struggled to keep pace with nominal capacity growth, reflecting operational disruptions, declining ore grades, water constraints and lengthy permitting processes. According to the International Copper Study Group, global mine capacity utilization declined from approximately 83% in 2022 to 76.6% during the first five months of 2026.
The refined copper market is not currently experiencing an acute global shortage, as production has recently exceeded reported consumption. However, the limited margin between supply and demand leaves prices sensitive to disruptions, inventory changes and stronger-than-expected industrial activity. Over the longer term, the IEA estimates that copper demand could increase by approximately seven million tonnes by 2040 and that announced projects may still leave primary supply materially below requirements in 2035.
Aluminum faces a different but equally relevant constraint. Primary aluminum production is highly energy-intensive, making smelter output sensitive to electricity prices, power rationing and geopolitical disruption. At the same time, aluminum demand continues to expand across electricity transmission, transportation, construction, packaging and renewable-energy infrastructure.
What Will Drive Copper and Aluminum From Here
Both metals, particularly copper, had risen sharply and are close to the upper end of their five-year range in July 2026.
This elevated starting point represents the principal short-term risk. A slowdown in global manufacturing, weaker Chinese demand, a stronger US dollar or an improvement in mine and smelter output could lead to consolidation or a correction.
Nevertheless, the medium-term backdrop remains constructive. Further grid investment, Chinese infrastructure support, accelerating data-center construction and renewed supply disruptions could sustain demand and prices. Aluminum could also benefit from substitution where high copper prices encourage the use of lower-cost conductive materials in applications where technical specifications permit it.
In other words, the investment case does not depend on copper and aluminum being inexpensive. It rests on the view that structural demand growth, limited supply responsiveness and the strategic importance of electricity infrastructure can continue to support both metals, even after their recent appreciation.
Investment Idea
The current backdrop may offer an attractive opportunity for investors seeking exposure to copper and aluminum with partial capital protection.
The structured note provides two potential sources of return. First, if both aluminum and copper are at least 5% above their initial prices after 7 months, the Notes will be automatically redeemed at 120% of principal, generating a 20% return. This scenario is illustrative and not a guarantee; it should be read together with the potential for loss of principal described under “Key Risks” below.
If the early-redemption condition is not met, the product remains outstanding until the end date. At maturity, investors receive 100% participation in the performance of the worst-performing metal. If the worst-performing underlying is positive, investors participate fully in its appreciation. If it is negative, the loss is reflected one-for-one down to –10%, while the redemption amount is floored at 90% of principal for any decline beyond that level.
The structure may therefore be suitable for investors who expect both metals to remain supported but wish to limit the effect of a potentially substantial commodity correction.
Interested? Please contact your Advisor at LFA or write to Massimo Borghesi, CIO borghesi@lfa.ch for more information.
Key Risks: This product carries material risks that investors should carefully consider before investing: (i) both metals must be at least 5% above their respective initial prices on the single early-redemption observation date; strong performance by one metal does not offset weakness in the other; (ii) if the product is not called, the investor’s return depends entirely on the worst-performing underlying; (iii) copper and aluminum are volatile and sensitive to Chinese demand, global industrial activity, energy prices, inventories, currency movements and supply disruptions; (iv) the 90% capital protection applies only at maturity and not if the product is sold earlier; (v) the Notes pay no periodic coupon; and (vi) investors are exposed to the credit and potential bail-in risk of the issuer.
This communication is for informational purposes only and does not constitute investment advice, an offer or solicitation to buy or sell any security. References to specific securities are for illustrative purposes only and should not be construed as personalized investment advice. The views expressed are those of LFA SA and are subject to change without notice. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal. LFA SA is an SEC-registered investment adviser. Please refer to our Form ADV for a full description of our advisory services and associated risks. With respect to this specific product: the redemption scenarios described above (early redemption at 120% of principal; participation in the worst-performing underlying; the 90% floor) are hypothetical and illustrate the Notes’ payout mechanics only; they are not projections and do not account for fees, taxes, or your individual financial situation.
