Central Asia Metals Share Discussion Threads

[warranty] 06/2/2018 18:46

MT, no advice requested but what are your thoughts on BMS. I am well under water as you can appreciate and have been surprised by its failure to improve but still have confidence over time that they will recover. They seem to be taking the opportunity to accumulate associated businesses to spread their capabilities more widely which I see as being positive over time. Apologies for being off topic.

[bluerunner] 06/2/2018 17:45

Same here @292p

[masurenguy] 06/2/2018 14:06

Made a modest top up @290.5 to take advantage of the current volatility.

[shanklin] 06/2/2018 12:54

Thank you MT

Between my post and yours I did check the CKN board which as you say is very quiet.

Best Regards, Martin

[mount teide] 06/2/2018 12:45

Shanklin - the CKN thread is a morgue - average 1 post a week over the last decade - rarely post there over the years as I would generally be talking to myself.

The latest shipping sector cycle bottomed in early 2016 about 18 years after the previous low. The Baltic Dry Index(rates ships are chartered out at) after crashing a staggering 98% is up about 400% from its lows but still over 90% below its 2008 peak.

I'm expecting the BDI to be at circa 3,500 by the end of 2019/early 2020, that's nearly 250% higher than today but still just 29.6% of the 2008 high of the last shipping cycle.


If someone said to me that you could either have £30k of Clarkson's shares today(with a 2024 lock up period) or £100k cash in 2024 the likely peak of the new shipping sector recovery/boom phase - it would not be a difficult decision - i'd take the £30k of Clarkson's shares in a heartbeat!

Why?, because Clarkson's ship-broking revenue is generated from a fixed percentage of a ship's charter contract. Most of the world's dry bulk/oil tanker/product tanker shipping fleet today is operating in the short term spot market - so as charter rates rise Clarkson's commission/revenue earned from each new ship charter rises in direct proportion.

The scale of the last shipping recession was totally without precedent in living memory - the shipping market is one of the few markets left that is not to a significant extent manipulated/controlled for political/commercial purposes.

In UK property market terms the waterfall drop of the BDI between 2008 and 2016 was equivalent to a property falling in price from £200,000 to under £5,000! Its the reason why ALL of the main market US quoted shipping companies were decimated - with valuation losses averaging 95%-99%. The German KG Pension Fund Industry and shipping banks were also similarly destroyed by going into shipping at the top of the markets - their combined losses were recently estimated in excess of 100 billion Euros.

There is a delicious irony in who turned out to be the only real winners from the collapse of the global shipping industry, as this nation is regularly lambasted by the Germans for its profligacy - it was the Greeks - they are a hugely experienced shipping Nation and know that the average return operating a vessel over the 15 to 20 year life is around 1% per annum - so the real money is made by selling ships at/close to the top of the market and buying/building at/close to the bottom.

In 2006/7/8 the Greeks sold off huge fleets of their vessels to US Quoted companies and the German KG Funds at/close to the top of the market and went from the World's largest to third largest owners.

Over the last few years Greeks owners have been quietly buying back many of these vessels from the distressed owners at around 20%-25% of the price they originally sold them for, and are now once again the World's largest ship owners!


No investment advice offered, intended or inferred.

AIMHO/DYOR

[shanklin] 06/2/2018 11:55

MT

Where do you see CKN ending up please and why, or should I be looking on the CKN thread for your thoughts on that?

Thank you, Martin

P.S. Recent entrant into CAML

[mount teide] 06/2/2018 11:30

Thanks for the comments guys - can't claim to have any great intellectual insight - its just knowledge gained from 30 years as a global shipping and ports industry professional.

For an experienced shipping industry executive with the recession scars of at least one shipping/commodity cycle on their back this should be basic knowledge, as it has such a devastating roller coaster impact on the commercial performance of the industry during the average 15 year business cycle.

Which unsurprisingly, just happens to be on average the commercial life expectancy of a modern dry bulk/container/tanker ship and close to the 10 to 15 years that a major mine of global scale takes to go from initial exploration through to first production or a new global scale port goes from initial site surveys to handling first cargo.

[scottishfield] 06/2/2018 10:05

Yes v much appreciate all yr posts MT, tks.

[masurenguy] 06/2/2018 10:03

Thanks for such an insightful post MT !

[mount teide] 06/2/2018 09:57

Thanks zho - it is very interesting to see the major US investment banks turn full circle on Industrial metals - until recently many were among the most bearish on the sector.

The cynic might suggest this was to load up prior to putting out a bullish signal on the sector.

In H1/2016 after waiting nearly 8 years for the Baltic Dry Index(-98%) to finally make a bottom, Copper(-56%), Zinc(-66%) and oil(-76%) as expected, also made a bottom within a few months of the BDI - as 95% of all commodity production sees the bottom of a ships cargo hold at some stage between the mine and refiner/manufacturer.

This was the signal I had been waiting for to go in extremely heavily in the copper/zinc/oil/shipping sectors - and have continued to average up aggressively in 2017 by reversing out of long term positions in other sectors as the commodity sector cyclical recovery continues to gather pace.

This early stage industrial metals cyclical recovery is different from almost all previously - since a decade low Warehouse Inventory situation and deficit situation has developed within the first two years of recovery - something that took much, much longer in previous recovery phases. This occurred mainly as a consequence of a waterfall drop off in production development over the previous decade to preserve cash, almost complete cessation of any exploration and a drop off in ore grades/increase in operating costs at the major mature mines.

As the industrial metals/shipping sectors are highly cyclical over very long time periods - once the tide turns they are as close to a one way bet for years as the equity market throws up.

Baltic Dry Index
1985-1994 - Recovery/Boom
1995-1999 - Recession
2000-2008 - Recovery/Boom
2009-2016 - Recession
2017-2024/5?- Recovery/Boom

Predictably, the Copper chart has followed an almost identical pattern.

The good news is that we are still in the foothills regarding recovery of the BDI and Copper prices - they are still 90% and 42% below their previous cyclical highs. In the last recovery phase 2000-2008 Clarksons CKN went from £0.90 to nearly £10.00 - those who sold in 2001/2 after doubling their money missed out on a further 800% of their original investment.


AIMHO/DYOR

[bogdan branislov] 05/2/2018 13:56

arf dysg - yes, while we are all here for the fundamentals, when an undervalued stock holds its ground during a market fall, that has long been regarded as a very bullish near term indicator. Bogdan

[arf dysg] 05/2/2018 12:02

The FTSE 100 and FTSE mid 250 are definitively down today, but CAML is now up. CAML seems to be bucking the trend.

FTSE small company index is down ... so is AIM ... so is Eurozone index, emerging-market index and USA Standard & Poor small-company index.

No worries.

[mount teide] 04/2/2018 23:31

The IC Copper Market article is informative and well worth a read.

They suggest the consensus view is that the strong fundamentals continue to offer a very favourable outlook - 'Net futures contracts for the metal are currently at a multi-year high, exchange traded product inflows are surging, and the large diversified majors are all beefing up their production commitments for 2018 and beyond.'

IC View:
'The balance between dividends and attractive valuation metrics is sometimes overlooked when it comes to mining equities. Yet shareholder returns shouldn’t be ignored, particularly when so much cash is being generated. That explains our slight preference for the large diversified miners and Central Asia Metals, for whom the dividend has always been a priority. '

It would normally be highly unusual and extremely flattering for a £500m Aim miner to be mentioned in the same investment category as their FTSE 100 heavyweight peers but, considering the relative investment performance achieved since 2010, during one of the deepest and longest industry recessions in decades, it is surely well deserved.


AIMHO/DYOR

[mount teide] 04/2/2018 22:40

Mas - thanks - I think it is fair to say most copper market analyst price forecasts have been consistently behind the curve since the market bottomed in H1/2016.

From my notes, last year the consensus forecast 2017 LME cash copper price was $5,350/$2.43 - it actually averaged $6,204/$2.81, some 16% higher.

The overwhelming majority of analysts forecast falling prices in H2/2017 compared to H1/2017 - they were wrong, the price averaged 15.3% higher in H2.

CRU were one few analysts to correctly call the bottom in 2016 - and when many analysts were predicating weaker prices in 2017, were almost a lone voice in correctly forecasting a strong recovery in late 2016 and through 2017 - they are currently forecasting prices to continue trending higher through to 2021 as a result of a number of key drivers;


The business cycle is behind the growth in demand - the large wave of mine supply expected 2011-16 did not materialize.

Enormous renovation needs in developed countries.

Chinese demand to remain strong, as the synchronized nature of growth in the rest of the world gathers pace.

Costs increasing due to declining ore grades at most of the major mines and rising wage expectations.

“We expect pressure on costs to continue…but we see copper prices rising faster than operating costs, ensuring that profit margins increase."

"Many company's were badly hurt in the recession ...they will begin to invest again but much more cautiously.”



Some of the major US Investment Banks broke ranks last week by coming out with significant upgrades to their 2018 forecasts:

$8,000/$3.60 - Goldman - by year end
$7,750/$3.52 - Bank of America - by mid year
£7,175/$3.26 - Citigroup - average for year


In mid-Jan Chile’s state copper commission Cochilco updated its 2018 copper price forecast to $6,750/$3.06. The reasons cited were the upcoming wage negotiations in Chile and Peru, as well as stricter environmental policies in China.

Cochilco believes that a deficit of 175,000t of refined copper on the global copper market is possible for 2018, compared with 67,000t in 2017.

AIMHO/DYOR

[bluerunner] 04/2/2018 18:43

Lord Gnome - You are correct in this case (though "Bogdan" was guilty of that on another board today) and I thought I had removed my comment from this thread. Apologies for distracting from an otherwise excellent board.

I am invested in CAML and look forward to reading credible, well-informed and legitimate posts - particularly from MT - with interest.

[lord gnome] 04/2/2018 17:43

Maybe they would bluerunner, but that's not it!

[bluerunner] 04/2/2018 15:41

I’m sure IC will be delighted with the copyright breach on a paid / subscription-based article.

[coxsmn] 03/2/2018 16:27

This weeks' IC has an article on copper miners and analysts think we are heading towards a supply deficit in 18 months time.

[bogdan branislov] 02/2/2018 13:33

IC Comment today:

Always a good source of ideas to look through in detail the bargain shares portfolio. U and I Group is a good inclusion. U and I Group is certainly one of the top two non-speculative buys available in terms of potential upside. The other one was not included, the mighty Central Asia Metals. A main market listing is being considered for later this year, CAML is currently in AIM, the share price is about at the point where CAML would go straight into the FTSE 250.

I can see why technical analysis would make Simon more comfortable with U and I than CAML. U and I is currently enjoying a near 2 year price break out as well as the shareholdings being dominated by large institutional holdings, who have significantly replaced impatient retail investors over the past 18 months. Whereas CAML has risen in price significantly already. As Peter Lynch pointed out though, sometimes the stock that has already risen in price is also the one to buy. CAML was highly profitable and a very large dividend payer even during the metal price slump of recent years. Such is CAML's still highly attractive valuation and low operating costs, that there is considerable downside protection even if metal prices slump.

But warehouse stocks are at long term lows, production investment has slumped in recent years, with little additional capacity coming on stream. On the demand side, it could not be more bullish. CAML looks to be heading for a 2018 PE in the mid single figures. There is a lot of expert comment of the main BB and listen to the IC podcast with CAML's CEO - tell me why I am wrong here.

Doug

[mount teide] 02/2/2018 08:11

Goldman all but says the mining supercycle is back - Mining.com today

“The environment for investing in commodities is the best since 2004-2008,” they wrote in a research note.....

Analysts Jeffrey Currie and Michael Hinds at the New York investment bank believe "rising commodity prices will create a virtuous circle, improving the balance sheets of producers and lenders, and expanding credit in emerging markets that will, in turn, reinforce global economic growth".....

.....Goldman sees copper enjoying double digit gains to top $8,000 a tonne ($3.63/lb) over the next 12 months. For copper that constitutes a 12% jump from today's price. The last time copper traded at $8,000 was at the beginning of 2013.

[mount teide] 02/2/2018 01:32

warranty - I think CAML will probably be pushing on an open door and be welcomed with open arms by many fund managers and II's were they to announce a move to the main market.

Why?

CAML is a very rare bird in the mining sector - an incredibly well managed, low operating cost, high cash generating, high dividend paying mining sector company which has demonstrated to the market it can make serious money even in the depths of the worst recession to hit the sector for decades - a recession so brutal it brought many main market mining sector titans to their knees - and saw Glencore lose 85%+ of its valuation, suspend the dividend and heavily dilute its shareholders with a huge placing to strengthen its balance sheet.

While all this was going on little CAML sailed serenely on and acted more like a dividend paying, safe haven, heavyweight FTSE company should act during a recession than ANY of the so called dividend paying, 'safe' haven FTSE heavyweights actually did!

Shareholders are very fortunate to have people of the calibre of Executive Chairman Nick Clarke and his team running CAML.

AIMHO/DYOR

[warranty] 01/2/2018 23:39

MT, as usual thanks for your intelligent and detailed analysis which is much appreciated. Do you think a move to the main market by CAML would be likely to increase the company's valuation and make it of more interest to fund managers and Institutional Investors generally?