Central Asia Metals Share Discussion Threads

[hiddendepths] 29/9/2017 11:59

A bit of indigestion was inevitable. How long it lasts depends on how much, if any, of the placing was taken up by institutional arm-twisting.

For those who don't know, brokers can persuade instis to take up placings that they don't want on the understanding they will be rewarded with a hefty allocation of a hot placing down the line. You scratch my back......

Not concerned about this holding!

[lord gnome] 29/9/2017 09:59

I think that you are seeing a ghost in the works apeman. I've tried to conjure up a H&S on that chart but can't do it whichever way I hold the screen.

[return_of_the_apeman] 29/9/2017 08:24

With the dividend to come this could form a h&s on the chart down to 205, but no need to panic as MT says commodities have rallied massively since last year

[mount teide] 28/9/2017 22:59

Zinc
Averaged $0.95/lb in 2016
Averaged £1.25/lb to date in 2017 (32% up)
Is currently trading at $1.40 (47.3% above 2016 average)

Lead
Averaged $0.85/lb in 2016
Averaged $1.02/lb to date in 2017 (20% up)
Is currently trading at $1.12 (31.7% above 2016 average)

Copper
Averaged $2.20/lb in 2016
Averaged $2.72/lb to date in 2017 (23.6% up)
Is currently trading at $2.98/lb (35.4% above 2016 average)

EBITDA
2016 - CAML $39m + Lynx $30m = $69m
2017 - H/1 CAML $24m + Lynx $34m = £58m

All three metals to date in H2/2017 are averaging higher prices than in H/1, much higher in the case of copper and Zinc.

So, if 2017 estimated production is hit, barring a dramatic collapse in metal pricing in Q4/2017, EBITDA for CAML and Lynx combined may top $120m in 2017 - this would represent an astonishing 74% increase in EBITDA over 2016 for the combined operation.


Source: Kitco and CAML 2017 Interims and Acquisition Presentation.

AIMHO/DYOR

[jacktrax] 28/9/2017 19:45

I know new shares at 230 placing are not getting the dividend. What surprises me is that the price is 228 now with a 6p divi to come . Suppose the shares will go up end of next week to buy shares which will be applicable to the dividend . Surely this is a great hold from here

[mount teide] 28/9/2017 14:46

'Note that the announcement of the suspension said that the company was in "advanced discussions", so it had been going on for some time. When the announcements were made last Friday (22/9/2017) the deals had all been done.'

That's true - but three weeks prior to the suspension CAML were trading at 220p or lower.

So, shareholders either have the run up in the price of copper to thank for getting the placing price up to 230p, or the II's were prepared to pay a small premium to the 207p to 220p share price range CAML was trading at when the 'advanced discussions' would have mostly been taking place.

[arf dysg] 28/9/2017 12:24

jacktrax, placing shares are not eligible for the dividend.

"raise 137 million in proposed placing within a few hours" - no, that's just smoke and mirrors. They were negotiating it, quietly, for many weeks and/or months until (apparently) a journalist twigged and asked the company a question, at which point trading in the shares was suspended. Note that the announcement of the suspension said that the company was in "advanced discussions", so it had been going on for some time. When the announcements were made last Friday (22/9/2017) the deals had all been done.

[jacktrax] 28/9/2017 12:00

If they can raise 137 million in proposed placing within a few hours then why are we trading below that price of 230, seems bonkers to me, also would the institutes be obliged to pay the 230 if they are lower. Plus you get a divi to boot before the 8 October, bonkers to me. I'm holding

[samdb] 28/9/2017 07:44

What kind of institution would buy shares in the placing and then sell them two weeks later at a loss?You won't see any placing shares sold until they've made 20% on them.

[carcosa] 28/9/2017 05:17

...and potentially further price weakness when the lock-in period expires in six months.

[gn100] 27/9/2017 23:12

We may see price weakness when the large volume of placing shares become tradeable about 12th October.

[edjge2] 27/9/2017 20:49

Seems to be a buy chance but depends on EX div drop

[mount teide] 27/9/2017 17:59

Why I'm happy with the Central Asia Metals acquisition



If I’m being completely honest then I have to admit that I was somewhat annoyed when an RNS from Central Asia Metals (CAML) initially landed to say that trading in the shares had been temporarily suspended pending the acquisition of a large asset. That annoyance though was largely driven by a shorter term view, as shares in the company had been doing very well and the price was increasing steadily in the run up to the financial results, which were expected to be good and with yet another high yielding dividend to be paid. Alongside that copper was flying and had just topped the $3.10/lb level.

My main worry was that not only would momentum be lost – I think the share price could well have tested the 300p area, given that it was trading at around 254p just prior to suspension – but also that the market might not like the acquisition, and given that it was going to be large enough to constitute a reverse takeover, it needed to be well received if the company was going to continue to do as well as it has been in recent years.

Part of that worry also related to the fact that the board had always been very careful in the past – having returned far more via dividends than the initial IPO, a real rarity amongst AIM resource stocks – and had managed to build up a tidy sum of cash in the bank and with no debt, which could all be about to change, given the sort of amounts that it would need to be paying for an asset in order to trigger a reverse takeover.

This week all was finally revealed, including details of the acquisition and how it was going to be financed, and as feared thus far the market hasn’t exactly warmed to the deal, with the share price having drifted back 10% or so to the current level of around 230p.

But having taken a bit of time to consider all of the info, I am still happy to be holding shares here for the longer term – albeit I’d have preferred it if the price hadn’t dropped back – and given that the £137 million in equity financing for the deal was raised at 230p, and the way the market tends to work these days, the current share price level probably shouldn’t come as any sort of surprise.

The company has just announced an interim dividend of 6.5p – payable on October 27 – which compares favourably to the 5.5p one which it paid the previous year, and taking that into account (the new shares don’t qualify for the dividend), the placing was carried out at a 7.8% discount to the share price prior to that.

Central Asia is to acquire zinc and lead miner Lynx Resources for $402.5 million from owners Orion Co-investments and Fusion Capital, with that sum being made up of $153.5 million from the placing; $120 million senior debt facility at 4.75% plus LIBOR; $67 million in existing Lynx debt facility at 5% plus LIBOR; $50 million worth of shares to Orion via an equity subscription.

Lynx Resources operates the SASA mine in Macedonia, and during 2016 produced over 22,500 tonnes of zinc and nearly 29,000 of lead, which was broadly in line with production figures over the past eight years or so, and with a mine life expectancy up until 2032, there is plenty more to come along with the potential to extend that. The mine is among the lower cost producers, at $0.39/lb for zinc and $0.29/lb for lead, and with zinc currently around $1.4/lb and lead at $1.12/lb, both have been performing quite strongly of late.

Looking at the financials for Lynx, it generated revenue of $66.7 million for 2016, resulting in an operating profit of $33 million and a net profit of $26.1 million, so I suspect that Central Asia has paid close to the going market price for the acquisition. It is always hard to predict what commodity prices are going to do in the future, but the signs are quite bullish at the moment for both metals, with increased demand, especially in countries such as China, the US and India, and that would of course benefit the company.

This has also made the company into one of the few diversified producers listed on the AIM market – although I would expect a main market listing moving forwards – and I believe that it has also reduced some of the risk which was associated with the company previously.

Whilst there haven’t been any problems for it at its Kounrad copper operation in Kazakhstan, in these sort of countries you never quite know when things can change, especially when it comes to mining rights and laws, so some geographical diversity is a good thing I think. It has also previously been totally reliant on copper and specifically Kounrad – although the other recent acquisition at Shuak has plenty of potential – and this acquisition at least allows it to diversify the risk to other metals as well.

It is still very early days and it remains to be seen how well the new business is integrated into the current one – assuming of course that the acquisition is approved at the EGM on October 11 – but given the way that the management has been running the business, I would expect it to do well longer term.

The latest set of financials for the company, the interims up to June 30 2017, had been strong, with higher levels of production, EBITDA up 41% on the same period in 2016 at $24 million, and a net profit of a little over $15 million, plus cash in the bank having grown to $41.7 million.

Should we see the share price dip any lower then I will be very tempted to add more, as not only is there plenty of potential for growth, but I would still expect a decent dividend to be paid, as per the policy of the management thus far when it comes to returning some of the profits to investors.

[edjge2] 27/9/2017 13:36

surprised at the divi here.

[mount teide] 27/9/2017 09:51

Some feedback from CAML Investor Relations ref: SASA mine infrastructure and future sustaining capital costs:

A huge amount of infrastructure capital investment was put into the SASA mine by Solway, with National Government assistance, prior to Lynx purchasing the mine - this was one of a number of major attractions of the mine to CAML's Board.

It included development to all main levels of the mine and multiple access via two adits and new shaft.

The growth potential from the significant inferred mineral resources is accessible from the existing infrastructure.

Capital Investment of $5m has recently been made providing additional tailings facilities - this takes the mine through to 2023 before additional tailings capacity at a similar capital cost will be required.

Sustaining capital cost for the mine is estimated at $9m/annum.


AIMHO/DYOR

[pugugly] 26/9/2017 14:58

Offer price now below placing L2 - MM's do not seem to want to buy - WINS AT 225 PEEL AT 226 - PIs/II,s offering ot buy at 229 and sell at 229.25 - OK if a buyer can take the divi for an effeictive price of sub 224p - Looking soggy (imo) due to uncertaity - Declaration watching but now on the side.

[mount teide] 26/9/2017 10:56

Holding off on that XLM 10,000 sell trade of yesterday as a result of what the L2 data was suggesting, would by this morning have generated additional profit equivalent to 3.5 years of L2 fees!

[basem1] 26/9/2017 09:43

So ex D on the 5th. So you can buy upto the 4th October at 16.30 hours.

[tightfist] 26/9/2017 09:40

The CAML Board has declared an interim dividend for the period of 6.5 pence per ordinary share. The interim dividend equates to approximately 24% of the gross revenue for the period and will be payable on 27 October 2017 to shareholders registered on 6 October 2017.From Interims, Part 1.

[jacktrax] 26/9/2017 09:34

Anyone answer dividend question please, I know the new shares ,should the placing go through, will not be able to receive the dividend. What is the latest date you can buy shares here to be eligible for the dividend in October

[tightfist] 26/9/2017 09:19

MT,Many thanks for your updated CAML perspective, especially in post 1018, and also L2 insight where I have dithered for years.Good luck with your investments, tightfist

[samdb] 26/9/2017 07:46

Only accounts for half the business now but copper looking strong again.

[topazfrenzy] 26/9/2017 07:45

Yes I am being generous and did mention North Korea last time round, could still go to £1.50 after divi and if copper tanks more

[mount teide] 25/9/2017 19:49

'This could open 40% down when/if it comes back with copper heading to the bin'

Lol - things must be looking up, that's 50p a share more than the valuation you were predicating only last week!

[topazfrenzy] 25/9/2017 18:49

Worth buying around £2 here