Central Asia Metals Share Discussion Threads

[thevaluehunter] 28/4/2018 17:49

Having a good read through the annual report. Good news is that they are unhedged on commodity prices and a 1% increase in copper, zinc and lead price equates to $1.06m earnings increase.

[bubblingup] 28/4/2018 16:34

Bob, if I'm not mistaken it was me, over on the II/iii board, who pointed you in the direction of CAML. You were looking for ideas for shares with good dividend potential. I have been thinking about you over the last week, and wondering how you were feeling with the share price taking a turn for the worse.

It seems to me to be due to a number of factors - going XD, copper price fall, and just a lot of volatility around at the moment. (Too many herding algobots?) You will have secured a chunky dividend this week, and that always helps soothe the anxieties. A yield of 5.8% on an AIM share is not to be sniffed at!

I know you have an investment strategy that you feel comfortable with, and you should follow your instincts, as very often it works out better than all the well-meaning advice from others. (Not always in my case!)

For myself, I was in CAML just after the IPO back in 2010 at around 100p, but got out when the share price started falling. Having an admiration for the business plan i.e. to pay affordable dividends, I always kept a weather eye on it, and got back in last June at 218p, but naturally regretting having ever sold out. I have added several times since, as the news flow has been consistently good. The available research has also been extremely helpful, especially here on ADVFN, and I see you have had some great posts in answer to your questions. I have learned much, and have also taken an interest in ARS, another AIM copper miner, after reading comments here, although it may be some time before it becomes a dividend payer.

I really hope the share price will get back on track this week and ease your concerns, and for all our sakes.

BU

[mount teide] 28/4/2018 13:20

It is worth remembering the last industrial metals/shipping recession phase which bottomed in H1/2016 was longer and deeper than any previous commodity cycle in living memory.

It produced an estimated 75% drop in production development to preserve cash, the almost complete cessation of exploration, years of widespread industrial action at the major mines, and a highly material drop in ore grades at the principal global mines resulting in a huge increase in operating costs.

Since H1/2016, with Chinese demand remaining strong while the synchronized nature of growth in the rest of the world gathered pace, the metals industry business cycle has fallen behind the growth in demand and seen Zinc and Copper move into deficit with warehouse stocks regularly at/close to decade lows.

Objective assessment of the current market fundamentals (now supported by the consensus view of market analysts after 18 months of most forecasting further armageddon for the sector), suggests that although industrial metal pricing surged off the lows in 2016/17, the commodity cycle fundamentals/pricing power of the industry is likely to remain strong for the rest of the decade before slowly softening as this new commodity cycle approaches a peak perhaps in circa 2023-2026.

After a decade of low investment following the financial crisis many Western Nations like the USA are now actively involved in implementing huge capital expenditure programs to rebuild their crumbling infrastructure, while high population Nations like India and most of the fast growing African and emerging Nation economies are implementing and accelerating infrastructure and industrialisation development programmes similar to China in 2000-2008.

While China's spectacular growth may have softened from 10% to 6.5% over the last decade: it should not be forgotten that the 6.5% growth of China's now much larger economy will today generate considerably more annual demand for commodities in tonnage terms than the 10% growth at the last commodity market peak in circa 2008-2010.

Global GDP forecasts have been repeatedly uplifted by the IMF over the last year to nearly 4% for 2018 and 2019, while the US has announced a record programme of tax cuts; greater even than the Reagan era which produced an enormous decade long economic boost.

The rapidly growing demand for industrial metals from the materially important renewable energy and global electric vehicle sectors is likely to strongly underpin demand over the decade ahead, and long after this latest commodity cycle peaks.

The last industrial metals peak pricing in 2007(Zinc and Lead) and 2010(Copper), after inflation adjustment is 61%(Zinc), 89%(lead) and 69%(Copper) ABOVE current pricing!

As a result of low barriers to entry, the commodity and shipping markets have historically charted a remarkably reliable 15-20 year boom and bust life cycle over the last 70 years - as a consequence, investors only get 2 or 3 small windows of opportunity in an average lifetime to time an investment in the sector perfectly.

With the shipping, zinc, copper and oil shipping markets bottoming in 2016 after near decade long falls of 98%, 66%, 56% and 76% respectively, I strongly suspect this current early stage cyclical recovery phase still has a long way to run.

For a modestly priced mining company like CAML with a relatively low risk, highly predictable business/production model, exceptionally low and stable operating costs and extremely low future capital investment requirements, the outlook is outstanding at this stage of the new commodity cycle - particularly since CAML has proved since coming to AIM in 2010, that it can still generate exceptional levels of cash flows and profits and, continue to increase dividends throughout a recession so deep it brought most of the sector to it's knees and, saw at the nadir the price of Copper and Zinc fall not only well below the C3 Cash Cost of most of the industry but very close to the C1 Cash Cost of the major Chilean mines.


AIMHO/DYOR

[bob_rjp] 28/4/2018 10:55

Hi kenmitch,

Yes MT certainly seems to be well up to speed on CAML and its prospects. No problem with that.

For myself I am not a trader. I buy and hold primarily for dividend income but taking profits if gains are significant. I am not looking to trade CAML and really dont want to sell it having not held it for all that long. But if it goes beyond my 10% loss threshold (and having reached my personal single stock investment limit) I almost certainly will sell if it goes lower, as I believe in cutting any losses early before they become significant and you get "locked in".

Fervently hoping that the share price will recover a bit and that I can just hold. Might give it a bit more leeway than I normally would, but not as much as 250 !!. ATB.

[kenmitch] 28/4/2018 09:23

bob.

Mount Teide’s posts on CAML are superb and his investment methods are similar to mine. Constantly trading in and out of shares worked far less well for me (but good for my broker with regular dealing charges) than buying and holding, sometimes for many years, good quality shares. We’ll rarely time our buying exactly.

I bought CAML a while ago at 176p and unless there is disappointing news am likely to continue to hold for years - or at least until general mining sector downturn .Mount Teide’s posts here explain why. The dividend at my buy price is 10% and this is another plus for long term hold ahead of trading. Dividends alone in time give big capital gains every year.

All shares go up and down, and when newsflow is good dips are buying or top up opportunities. Current CAML share price dip could well prove to be a good entry price. There are quality shares I sold years ago when I used to trade more, that are now massively higher and some now pay an annual dividend higher than my share buy price! I.e in time these shares guarantee investment success. John Lee, the first ISA millionaire, has held some of his shares for ages, with some of his paying 100% or more (and still growing!)dividends every year. If I could live my investment life again I would do it his way, and forget trading, and except for small punts, speculation high risk sh*t or bust shares.

[bob_rjp] 28/4/2018 08:46

Hi Again MT.

Well you obviously have a strong stomach for the large negative moves in this stock. Normally I operate a personal rule to always sell at roughly 10% down. I find this stops me accumulating large losses and not all of one’s stock picks can be winners. I don’t operate a concentrated portfolio but invest in a large number of different stocks/sectors so the occasional 10% loser is just par for the course.

Looking at the CAML chart I can see that there have been frequent major downward moves, but till now in a rising channel. But it looks to me like we just broke out of that channel ?. Already down ~17% from the high of 339. We are now back at roughly the January 2018 low and it may bounce from here, hopefully it will. If not then looks like we could be moving towards 250 ?. Personally I am not up for such a journey and will be watching movements in the next week very closely. Obviously ones tolerance to such events depends upon your initial entry point, you are clearly still well in profit so I can understand you hanging in there.

I agree that all fundamentals for this stock look very positive, everything I have read looks good, hopefully that will win out in the long term. But if we are going lower I would prefer to exit with the intention to re-enter later at a lower price or if that’s not possible just go elsewhere.

GLA Holders

[mount teide] 27/4/2018 21:16

bob - the shorttracker report is for notifiable short positions only - those of 0.5% and over.

If a group of small North London hedge funds work together and each build short positions of 0.49% in a company - collectively, they can effectively generate a large short position without it being picked up by the shorttracker report - as was the case last year in Savannah Petroleum where over 6% of the stock was quietly shorted in less than a month, without a single notifiable position being triggered(even the company investor relations officer was unaware of it!).

We knew this courtesy of Euroclear, who publishes a monthly stock on loan report, containing the aggregated statistics for all the short positions open on each stock regardless of size. For instance; the 2018 Euroclear Stock on Loan Stats for CAML are:

1.78% - March
1.89% - February
2.10% - January





Shareprice volatility is much greater today across all equity bourses - swings of 10%-15% are now commonplace in many stocks. After tripling my position in CAML at 207p last July, a 10% - 15% trailing stop loss would have been stopped out at least 7 times during the following 9 months.


Leading City Fund Manager Nick Train the long term 'buy and hold king' who manages the £4.8bn Lindsell Train Equity Fund is one of the highest conviction investors around - incredibly he has not sold a stock since 2002. His top 10 holdings account for nearly 80pc of the fund.

He has more than 9pc of his fund invested in each of consumer goods firm Unilever, alcoholic drinks producer Diageo, and information analytics company Relx.

He said: “Outperforming the index is a very challenging hurdle. The only way to beat it over time is to take risk. There are a variety of types of risk you might choose to take, but we have chosen the Warren Buffett approach: owning big positions in inherently predictable and reliable businesses."

Could't agree more - i follow a similar approach, holding big positions in a relatively small number of companies which i continuously research pre and post investment and where the most important investment consideration is the quality of the assets and the quality/previous track record of the management.

I consider Nick Clarke and the team at CAML and Tony Manini and his team at Asia Met as outstanding in this connection - among the best business managers i have come across.

[morph7] 27/4/2018 20:21

Come back in 12 months. We will be way past 300p a share, it's pretty much guaranteed just by looking at our cashflow.

[bob_rjp] 27/4/2018 19:54

Hi MT you appear to have a lot of knowledge on this stock. I've only been on board for about 4-5 weeks but its been a rough ride so far. Divi looks good and fundamentals excellent from what I have seen looking at the various reports. But seems to be going through a bad patch right now ?. Read somewhere that it was people shorting but I could find no record of shorts using shorttracker.co.uk so Im not sure about that.

Personally bought in above 300 and averaged down on XD but it has sunk further since then. These AIM stocks certainly are volatile. Hoping for a swift recovery to 300 plus.

ATB

bob_rjp

[cflather2000] 27/4/2018 16:04

Waterloo, my friend from Atym, have you bought in? Does this qualify as cheating on our Spanish friends? I think I'll be following you shortly

[arf dysg] 27/4/2018 13:56

d00monger (1618, i.e. yesterday) "This is definitely overbought, I've opened a short position"

...at 284p, it appears. And now the price is 289p.


Perhaps the purpose of your life is simply to serve as a warning to others.

[shanklin] 27/4/2018 10:19

Thank you MT

[mount teide] 27/4/2018 09:52

waterloo - 'Do you have a spreadsheet with all in C3 costs rather than cash C1?' No, had a brief look at it but found the level of information available insufficient to allow me to generate a reliable calculation.

A recent extremely useful report on Copper Industry Mining Costs complied by Jorge Cantallopts Director of Research and Policy Planning at the Chilean Copper Commission should be standard reading for all invested in the industry or are considering an investment in the sector.

Of particular interest is the first graph in Section 1 - a Comparison since 2000 (the last industry cycle low) of the development of net cash costs (C3) of the Chilean copper mining industry versus the rest of the world and in comparison to the refined Copper Price.

As a result of a huge drop in the production grades at the major mines over the last two decades and the continued trend of most new mines to have lower grades than historically, it is fairly safe to assume that to meet future supply demand the price of copper is almost certain to continue trending higher to make it commercially viable to develop the new production required.




Shanklin -Have you modelled how sensitive CAML's profits are to the (rising) price of oil please? No - found energy costs represented a relatively small percentage(less than 10%) of CAML's C1 very low cash cost

[edjge2] 27/4/2018 08:19

V11SLR expect newbies would like that info. I got caught out with a big divi decades ago. Took 3 months before broker paid up.
Feb 18 was a matching low so hopefully a bounce up is in order and not a lower low. We'll see.

[waterloo01] 27/4/2018 08:16

V11, thanks.

[shanklin] 27/4/2018 07:56

MT

Have you modelled how sensitive CAML's profits are to the (rising) price of oil please?

Thank you, Martin

[v11slr] 27/4/2018 07:54

Ex-dividend is always 2 days before the record date to give time for the share register to be updated. Anyone selling yesterday will receive the dividend, selling on Wednesday they won't. This is really basic knowledge that anyone involved in equities should know.

[waterloo01] 27/4/2018 07:47

Surely anyone selling yesterday would have missed the divi. Confused by trading yesterday (unless I'm wrong).

"These dividends equate to approximately 39% of the Kounrad gross revenue for the year and will be payable on 25 May 2018 to shareholders registered on 27 April 2018."

MT thanks for the research input. Do you have a spreadsheet with all in C3 costs rather than cash C1?

[edjge2] 27/4/2018 07:39

Hell of an exdiv drop. Got to be overdone but good luck anyone bought it in the nicest intention. Thanks MT for reasons to. Suppose 284p opening is equivalent to about 300p allowing for divi loss.

[mr.oz] 27/4/2018 07:15

Looks a very good appointment in a dynamic and growing company

[blueeyes13] 27/4/2018 05:43

Mount Teide I'm sure I speak for all the long investors on here when I say thank you for all our valued input and time. It is very much appreciated and your posts helped me along with a number of other sources to decide to invest in Caml. Don't worry, I'm a big boy and make my own decisions. )))Regards

[mount teide] 27/4/2018 01:09

blue - you're very welcome - compiled some spreadsheets late last year to help me monitor average metal pricing and its likely impact on CAML's 2018 earnings compared to QD's Forecast Model(a highly impressive piece of work).

The spreadsheets take less than 10 minutes to fully update - posting a summary of the information on here is little trouble.

The equity investment playing field is far from even and beating the market a tough challenge - sharing information and working together can often help to even up the playing field a little.

[thevaluehunter] 26/4/2018 23:18

Another 10-20% rally in the prices from here to year end and we could end up closer to $200m EBITDA

[thevaluehunter] 26/4/2018 23:13

Good stuff MT. So net debt at $138m would be less than 1x. Also that 2018 30-50% of free cashflow is going to look pretty decent for the dividend.

[bluerunner] 26/4/2018 22:28

MT - I very much appreciate you sharing this information on here.(And the investment of your time).The level of detail highlighting robust commodity pricing and outlook for this sector must be very reassuring for investors in CAML.Today's pullback on ex-div provides a great potential entry point / opportunity to add IMHO.