Central Asia Metals Share Discussion Threads

[edjge2] 24/7/2018 13:50

Can but hope, gold to follow?

[mount teide] 24/7/2018 13:45

Copper has bounced 4.6% from the $2.67 low late last week up to $2.79 today.

[andyj] 24/7/2018 13:24

Oh dear that reminds me of the old days when one had to write to your broker with an order and wait for him, it was always a him, to write back telling you what price you were filled at. That was before hedge funds changed everything..

[mount teide] 24/7/2018 11:07

Lauders - best of luck - hope you got what you wanted!

[lauders] 24/7/2018 11:04

If I am lucky I was one of those "bottom feeders" MT! Out of my hands though. The order was submitted yesterday and now I am at the mercy of the portolio manager and it is all down to their "efficiency" as to whether I have yet bought or still haven't! Grrr.......

[mount teide] 24/7/2018 10:57

65K buy at 238p - looks like a few bottom feeders are starting to show their hand this morning !

[edjge2] 24/7/2018 10:40

coxsmm & amunro yes looks cheap, just awaiting more schmutter. 7% divi to boot!

[amunro] 23/7/2018 17:03

Me too. Noise from Trump does not mean the world does not need copper.

[coxsmn] 23/7/2018 12:36

I've added again here. I always look at the bigger picture.

[bogdan branislov] 23/7/2018 10:45

andyj - always easier to assume in these circumstances that there might be something underlying that is pulling the price back. The company would have been obliged to tell us by now if so. This is where the open and honest history of the company comes into play. If the company has a history of delaying bad news reporting and of over promising and under delivering then there would be concern. CAML has a very straight and honest record. Sometimes when a stock is highly undervalued, the price can still plunge in the short term, the short term plunge is quickly forgotten when the stock re-rates. I recall in 2010, Baratt was selling for less than half TBV, TBV for the land was well below value to market due to post 2008 compulsory value write downs. There was debt, but it was stable, the lenders were relaxed, the company was clearly moving back to profit in the next half year and full year earnings, the debt was projected to fall rapidly thereafter, all this info was in the open and widely accepted. I bought in at c£1 and the price promptly fell c30% to c70 pence. Other investors I knew sold at around 80 pence, I did not sell. The valuation went from compelling at £1 to insane at c70 pence. Insane valuations are my favourite, this is where we are now with CAML. The rest was history for Barratt and, whilst I am not calling the bottom of the price fall, similar order gains, are in time, highly likely for CAML also. Bogdan

[shieldbug] 22/7/2018 20:45

Caml is trading at prices close to what it traded at before the Sasa acquisition. While buying Sasa added shares and debt it has also diversified products and countries of operation and significantly increased revenue. I see this a positive development and one that reduces risk. As time passes the debt should reduce thus reducing risk further. It seems that some investors have a tendency to ignore the Sasa acquisition. Copper has a part to play in a couple of fashionable stories - electric vehicles and renewable energy, zinc and lead not so much - but still very useful metals. I just read that there is significant increasing demand in lead batteries from electric forklifts - which kind of makes sense when you think of shift to warehouse based eCommerce? Forklift batteries weigh between 800 and 4,000lb.

[push n run] 22/7/2018 18:14

The copper price doesn't worry me, but i'm really not sure about zinc and lead prices. MY understanding is that the zinc price is unlikely to get back to the January highs due to more supply coming online. Lead fundamentals are more difficult to find research on.

[bob_rjp] 22/7/2018 17:16

Well with the trump trade war heating up and likely hurting the metal prices and all producers in the process, personally I think that caution is in order. We don’t know how bad things are going to get. Might be nothing much, might be pretty bad – no way to know for sure. If things get really bad a small player like CAML could get hit significantly.

I can quite see why anyone who bought at less than ~200 would hold right now, they are still in profit after all with a good dividend in prospect. I can also see why anyone not currently holding might buy now with downside probably limited to perhaps 10-15% (pure guess ?) and a lot of potential upside plus the dividends.

For anyone else holding at a significant loss and with a decent chance of more losses to come I personally see it differently. Yes I could have averaged down, but I had done that once already and it just accelerated the losses. Wasn’t keen on doing that again, and anyway I was close to my single stock holding limit. So I have chosen to sell now aiming to buyback if the share price drops towards 200 rather than bear the loss if that happens while holding. No dividends are due till October which is a way away at this point. If it doesn’t drop and just recovers from here (always a possibility) then I will have done the wrong thing, but no biggie I will just invest elsewhere – lots of opportunities out there. I had never planned to have a big holding here anyway. Those playing for big bucks may well see it differently, and clearly do.

[zebbo] 22/7/2018 16:14

The investment case is compelling, having bought in at 264 & 234 recently. Although we might dip further the long term market fundamentals are sound. I will consider selling down other shares to buy more if we dip further. Shorts are chasing copper down to make a quick buck and this then reflects back through associated assets. Thus opening up an investment opportunity...happy days. Certainly would not be a seller at these levels

[andyj] 22/7/2018 15:11

The risk IMO is that there is some company specific news that has contributed to the fall. The risk is slight and the correlation to the copper price gives confidence. The further the fall and the tighter the correlation, the more that risk is outweighed by potential rewards. At the current price my feelings are that yes, there might be further downside, but for those with patience the rewards will be significant. I would not want to open a leveraged trade, but I think the potential upside now presents an opportunity with greatly reduced risk. I bought a small tranche at 260 and will now be adding in greater amounts.

[lauders] 22/7/2018 02:06

Thank you for all the dividend related replies provided. Pretty much align with my thoughts although seems I was off on the cover as that is what I found quoted online. Will see if I can join you all in CAML this week. Since this is part of a QROPS policy and I have to go through two parties to make any deals it isn't quite as easy as just buying in my own personal account. That is why I prefer to make the purchases long term. Less hassle that way!

[bogdan branislov] 22/7/2018 00:18

The charts do not say this, in fact the chart tells you nothing, if you could tell what charts were telling you you would make money from charting, which would be highly unusual. As Peter Lynch would say, if CAML was a buy at £3.39, why are you a seller at £2.30. Have the fundamentals changed both for CAML and for copper over the longer term? No they have not. The fundamental story and outlook is unchanged for CAML. I am down close to £100k now. Do I lose sleep over it? No. Why not? Because I am up c£1.2M over the past 9 years. The most important action in those gains is when to hold and when to sell. If the underlying buy case was no longer intact, I would sell without hesitation. But when events that will not affect the company's outlook going forward push the price down, thereby concentrating up the value in the holding to an even greater extent, it is imperative to be able to sit tight. To win big in investing you need the capacity to both be right and to sit tight when all the evidence points to your being right. To exit a compelling case just because of what the 'charts are telling you' is simply an individuals acknowledgement that they do not have the capacity to sit tight, most would be investors do not. A lot of good and useful info comes through this board, always appreciated, I am a regular reader. Best, Bogdan

[mount teide] 22/7/2018 00:17

spawny100 - you may well be right - although, as a high conviction long term investor i'm more interested in where the valuation is likely to be in 3-5 years than 3-5 months.

When considering that timeframe and the sector fundamentals i view the current share price as offering exceptional value.

The copper price was circa $2.50 last spring/summer when the share price briefly touched 205p - a level where circa 15% of global production would again be unprofitable as the sector approaches a near half decade deficit forecast.

As posted at the time, i tripled my holding at 207p last June/July(which has since earned a 7.9% dividend), and would likely sell down some other holdings to add further here were the market to present us with another opportunity at/close to that level.


AIMHO/DYOR

[spawny100] 21/7/2018 23:02

Appreciate your highly informative posts Mt Teide but the charts to me say that sure as eggs is eggs this will go back to £2 now. As per previous poster I'm on the sidelines for now.

[mount teide] 21/7/2018 22:24

BMO Capital Markets said in a new report "at the current price as much as 10% of global copper production is now unprofitable" - which at least in the short term could see a continuation of the decade low capital investment level of the past 5 years.

BMO expect the amount of copper needed for electrification combined with the slow build of new mine supply will lead to a widening of the supply gap as we enter the next decade that could continue to grow beyond 2025.

"While electric vehicles dominate growth conversations in metals and mining, renewable energy is significantly more important for copper, and expectations of solar and wind installations are continuing to increase. Globally, the number of solar and wind facilities is expected to grow 10-14% through 2025 (and at around 5-7% CAGR through 2040 thereafter),"

Solar is expected to add 2.5 million tonnes per annum to global demand by 2025 and wind 1.85Mtpa, and carmakers are forecast to need an extra 1.5Mtpa by then.

BMO analysts also forecast a 2025-2030 supply gap of at least 5 million tonnes per annum, but say prices should spike next year as the lack of new production bites.

"The current and highly probable copper pipeline is at the lowest level we have seen this century, both in terms of the number of projects and capacity,".

BMO Capital Markets upped its long-term copper price 7% to US$3.25 per pound after running the numbers on renewable energy and electric vehicle demand.

[bob_rjp] 21/7/2018 20:06

Well I sold my CAML on Friday and took the hit, I am not prepared to tolerate any further losses here. Losses are not a big deal really as I didn’t have a large holding, but then again I’m never happy selling at a loss. I suspect that in the short term it might well fall further. Not sure if it’s the trade war, copper price fall or short selling or some combination of all of those. I note that all commodity stocks have taken s hit lately to some extent, GLEN down 10%, ANTO down 7% etc.

I still think that CAML looks a good long term prospect. It has good earnings, solid mining assets, good dividends well covered by earnings etc. BUT it is a small company with only about 1000 employees and quite a lot of debt since the purchase of the Sasa mine last year. Debt repayments look to be well covered by earnings, but any time you have high debt (~£150M) in a small company there is always a significant risk I think. And AIM stocks are notoriously fickle !.

I have recently seen an estimate of the value of CAML at 296 a share, so at 230 that’s a substantial discount of 22% right now. But that 296 figure is a lot less than the mid 450s I have heard speculated about on this board.

Of course the shares will probably fly now I’ve sold out. I confess I would be interested in buying back in if they fall closer to 200, which TBH I don’t see as out of the question frankly given the way things are going. And no way I want to hold for such a journey….

Anyway GLA holders. I’m out for now….

[cshfool1] 21/7/2018 14:45

From the 2018 Annual report - produced after the 16th Nov. 2018 QD research note of course.

"Both Kounrad and Sasa are expected to
be highly cash generative and should
enable the Company to remain one of the
leading dividend payers in the sector.
From 2018, the CAML dividend policy is to
return to shareholders a target range of
between 30% and 50% of free cash flow,
defined as net cash generated from
operating activities less capital
expenditure. While we have made
changes to our dividend policy, we believe
that this policy, coupled with the
profitable nature of our two operations,
should ensure that our shareholders
continue to receive attractive dividends
from us."

So, what dividend should be forecast....under the changed, slightly apologetic perhaps, policy?

Well from the AR 2017 the latest CAML "Net cash generated from operating activities" -Nicks phrase, (ie after interest paid and corporate income tax paid) was $46m, SASA 2 months + Kounrad (page 66 AR, line 4) and for 2016 35.5m (Kounrad only).

Lets pro-rata it up (is that fair?) assuming the 2 months from SASA generated the year on year NCFOps difference of $10.4m (we know from Nick/AR it was about 14m EBITDA from SASA so this cash flow seems believable) (ie static Kounrad NCF output) so giving a group NCF from ops of $98.2m. (ie 6 x 2months $10.4m SASA + $35.5m Kounrad)=$98.2m.

Lets use the QD forecast capex of $12.5m (?) pg 39, so net cash from ops - capex = 98.2-12.5 = $85.7m NetFCF for investors as per annual report excerpt defn above.

Now take a mid value (30%-50%) of 40% available for investors = 0.4 x $85.7m = $34.3m/176m shares...gives $0.19 about (1.3 dollars/£) or 15p div, a small trim wrt the 16.5p paid this time. FWIW 16.5p div, or 17.9p div (QD 2018 forecast dividend) would still be within the 30-50% upper range of NCFops so both might also be feasible (up to 18.7p div would be payable at max 50%). So a good div looks there or thereabouts to me and all well covered within the new NetFCFops CAML board guidelines.

Of course it depends on what you assume for the forecast NCFops in particular and the capex. Anyway just my uneducated doodlings -other thoughts welcome.

Where does that leave the forecast dividend? Hard to say really but 15-17.9p looks well affordable to me, I'd be tempted to go for 17.5p? well covered by NCFops based on above hacked assumptions - mainly 2018 NCFops of 98.3m and Capex of 12.5m.

also reminder -

a hint from this is perhaps that the div will be at least maintained (ie "not going backwards")- thoughts?

csh


NB I've ignored Copper/Zinc/lead prices and mine metal production changes of course as it all seems about on target.