Central Asia Metals Share Discussion Threads

[mount teide] 13/8/2018 09:37

Following the recent weakness in industrial metal pricing, apart from a few notable exceptions with specific issues like Anglo American, the short interest across the mining industry (major/mid/small-cap) is now at/close to multi year lows:

5.96% - Antofagasta
2.58% - Glencore
2.21% - Kaz Minerals
1.42% - CAML
0.10% - Antalaya
0.00% - Asia Met

[bob_rjp] 11/8/2018 16:36

Still tend to think this might drop some more, Copper/Lead/Zinc prices all down on Friday. Also I believe that CAML has links with Turkey for delivering its output, that has at least the potential to cause problems given the current political climate. Hope they arent getting paid in Turkish lira.... Most of the the big miners were down on Friday. KAZ looks to have fallen off a cliff since August 1st (putin tax ?).

Still see this as a good long term bet though, just waiting for the right time to re-enter that's all. Given all the uncertainty I fear that there is potential for an AIM stock like this to move quite a bit in the wrong direction.

Am watching developments closely.

[coxsmn] 11/8/2018 16:29

Current caml mkt cap ~£400M and the Lynx purchase last year alone cost over £300M.

[mount teide] 11/8/2018 14:49

As mentioned previously its wise to carefully monitor Chinese Customs import data because it usually offers a more helpful guide as to the health of the Chinese economy than Chinese Government economic statements.

July, like June and May has seen record levels of Chinese copper imports with tonnages not seen since 2000-2002, at the height of the construction boom, as the Chinese took advantage of the recent pull back in pricing. Where, it was recently revealed the copper price was helped on its way down by a Chinese investment house unwinding a huge Copper long trading position into it, that was greater in size than the next 19 largest long positions in the market - all as Chinese interests were busy buying Copper at decade long record levels!

Chinese copper imports surged 16% y-o-y in July; while copper ore and concentrates soared by 31.8%. China imported 452,000 tonnes of unwrought copper and copper products in July, up from 390,000 tonnes a year earlier. Only May 2018 with a record 475,000 tonnes of copper imports has seen a higher monthly figure in the last 15 years.

[mount teide] 11/8/2018 09:32

CAML has an off-take agreement with metals trader Traxys through to 2022 covering the production at Kounrad and SASA.

Additionally, to fund the the acquisition of SASA, CAML received $120 million in debt financing from Traxys.

Metals merchants like Traxys and private equity are the vehicles many mid cap miners are now using to finance new projects - traders such as Traxys are increasingly filling the void left by major banks such as JP Morgan, Morgan Stanley, RBS and Deutsche Bank who have largely departed the industrial commodities and shipping sectors after an appalling decade, mostly as a result of their own poor judgement.

In the shipping sector, during the last recession phase of the commodity/shipping cycle(2008-2016) the banks and German Pension funds were decimated as a result of financing the building of thousands of commodity carriers at top of the market prices during 2004-2008. Research carried out by Lloyd's List Intelligence suggests the shipping banks and German pension funds were hit by hundreds of $billions of still yet to be fully realised loses.

The Greeks proved to be the big and largely only winners in the shipping/commodity markets since the financial crisis sent the sector spiralling down into a near decade long recession - during which technically bankrupt Greece became the worlds largest shipowning nation again, by value of ships owned, followed by Japan and China.

Until the global economic downturn of 2008, the demand for new shipping was relatively high, but as the effects of the financial crisis became more widely felt commodity freight rates turned savagely down. Many shipping companies soon found themselves seriously exposed, after foolishly building up huge fleets of ships and large orders of newbuildings contracted at market high rates for delivery years ahead.

The subsequent effect on ship operating revenues was entirely predictable - a waterfall drop off - as no industry can go on increasing its capacity by an average of 10% a year for nearly a decade when the growth in demand for global shipping averaged 3% a year.

Independent Greek shipowners that mostly pay no tax, courtesy of 'special industry exemptions' from their corrupt friends in Government, sold huge numbers of vessels in the run up to the top of the shipping market in 2008 to ignorant US investors and German Pension Funds who bought on the advice of their respective bankers, brokers and other intermediaries - hundreds of billions of dollars were thrown at shipping, regardless of the experience, quality or reputation of the shipping company or its principals.

After economic reality set in, spot market ship charter rates eventually dropped by an astonishing 98% at the nadir in Q1/2016, Surprisingly, Germany has come out as the country with by far the worst shipping portfolio. Gross mismanagement of the once-revered KG pension investment system has seen their funds almost completely wiped out at an estimated cost of up to $140bn dollars of bank debt and investor capital.

During 2014-2016 savvy Greek shipowners were quietly buying back the fleets of vessels they once sold to the now insolvent German KG Funds and quoted US shipping companies, mostly at firesale prices(20-30% of what they sold them for), and are quietly laughing all the way to the bank at the sheer incompetence of their so-called German and US shipping industry peers, as they built back up their fleets for the commencement of the recovery stage of the new shipping/commodity cycle - for which their timing has been impeccable.

At the peak of the last commodity/shipping cycle - Cape-size commodity carriers attracted charter rates of $240,000 a day (at this rate the annual revenue equalled the cost of building a new vessel!) - by February 2016 the same vessels where getting chartered out for $4,000 a day. Current rates some 2 years into the new commodity cycle have risen circa 6 fold to $26-30,000 as vessel supply/demand slowly comes back close to balance for the first time in a decade.

[coxsmn] 11/8/2018 09:28

Push, this shouldn't affect caml. There's a World wide market for copper including wire manufactured in Turkey.

[briggs1209] 11/8/2018 06:44

You would think the supply to Turkey would be a problem. The supply is made through a third party so there is little detail on the kind of deal. However, you would think finding different buyers in the market for raw product would not be too tricky.

[push n run] 10/8/2018 22:41

Thanks MT.

Does anyone think the economic news out of Turkey will impact CAML? Their copper sales largely end up in Turkey I believe.

[mount teide] 10/8/2018 21:52

The dollar index has traded in a range between 90 and 100 for the past 4 years. During periods of dollar strength the price of raw materials tends to rise in other currencies. Vice versa when the dollar falls.

The dollar moved off the bottom of that trading range by circa 6-7% during the last three months to stand at 96.2 - this currency move is equivalent to circa $0.20 off the price of a pound of copper.

Without the recent strength of the dollar, copper would probably be trading around $3.00/lb today.

[push n run] 10/8/2018 21:01

You'd think the strong $ would be good news?

[coxsmn] 10/8/2018 19:56

Mount, agreed, all bodes well.

[mount teide] 10/8/2018 18:56

Good to see Asia Met broker Optiva Securities in a recent note on the company include some Copper market research worthy of the name.

“We see further gains in the copper price, as the structural deficit starts to bite in 2019"

“We anticipate the potent mix of declining mine production, limited new supply, strikes at major operations, and declining warehouse inventories continuing over the next few years.'

[mount teide] 10/8/2018 16:46

Euroclear's stock out on loan July report for CAML, continues the previous trend with a further fall in the headline figure from 1.54% to 1.42%

[coxsmn] 10/8/2018 13:52

Added more, great opportunity for capital gains and even larger future dividends.

[eeza] 10/8/2018 09:11

A parasite always keeps on feeding until it kills its host.

[mount teide] 10/8/2018 09:04

The observant will have noticed from the previous post that although Brent oil today is still priced at less than 50% of its inflation unadjusted previous cycle peak - the price of a litre of petrol/diesel today is already well above what it was then when Brent was $147 a barrel - showing just how much our Government has stealthily stolen from us!

[mount teide] 10/8/2018 08:37

Thought it might be worth putting into perspective the scale of the recent recovery stage pullback in industrial metal and oil pricing with respect to the previous commodity cycle - which like previous cycles going back 70 years, was routinely characterised by large peak to trough to peak moves and plenty of short term volatility.

Oil fell 80% peak to 2016 trough in the last downturn/recession stage of the commodity cycle while Copper, Lead and Zinc fell 56%, 60% and 68% respectively.

Since then we have seen the following performance:

Oil
$28.55 - 2016 Commodity Cycle Low
$80.20 - 2018 High (+157%)
$72.10 - 2018 Aug (-10.1% from 2018 high / +150% from 2016 low)
$147.00 - Peak of last commodity cycle

Copper
$4,363/t - $1.98/lb - 2016 Commodity Cycle Low
$7,273/t - $3.30/lb - 2018 Feb - New cycle high (+67% from 2016 Low)
$6,150/t - $2.79/lb - 2018 Aug - (-15.5% from Feb 2018 / +41% from 2016 Low)
$9,918/t - $4.50/lb - Peak price of last commodity cycle(2010)

Lead
$1,586/t - $0.72/lb - 2016 Commodity Cycle low
$2,689/t - $1.22/lb - 2018 Jan - New cycle high (+69% from 2016 low)
$2,094/t - $0.95/lb - 2018 Aug (-22.2% from Jan 2018 / +31.9% from 2016 low)
$3,898/t - $1.81/lb - Peak Price of last commodity cycle(2007)

Zinc
$1,454/t - $0.66/lb - 2016 Commodity Cycle Low
$3,592/t - $1.63/lb - 2018 Jan - New cycle peak
$2,667/t - $1.21/lb - 2018 Aug (-25.8% from Jan 2018 / +83.3% from 2016 low)
$4,518/t - $2.05/lb - Peak price of last commodity cycle(2007)

In the view of this investor, when considering the market fundamentals and pricing moves since the 2016 recession lows together with previous commodity cycle history - the current oil and industrial metal recovery/boom stage is still largely in its infancy with probably at least 3-7 years left to run before a peak for this latest commodity cycle is charted.

Moral of the story? The secret of investment success in highly cyclical long term commodity markets is to always keep short term moves in long term perspective!


Comparison of QD's Metal Pricing Model Forecast for 2018 compared to 2016 and 2017 Actual Average Pricing, H1/2018 Actual average to date, and last Commodity Cycle high and low.

Copper
$4,363/t - $1.98/lb - 2016 Commodity Cycle Low
$4,871/t - $2.21/lb - 2016 Average Price
$6,193/t - $2.81/lb - 2017 Average Price
$6,193/t - $2.81/lb - QD CAML Model Forecast for 2018
$6,942/t - $3.15/lb - H1/2018 Average price (+12.0% above QD model)

$7,273/t - $3.30/lb - 2018 Feb - New cycle high (+67% from 2016 Low)
$6,150/t - $2.79/lb - 2018 Aug - (-15.5% from Feb 2018 / +41% from 2016 Low)

$9,918/t - $4.50/lb - Peak price of last commodity cycle(2010)


Lead
$1,586/t - $0.72/lb - 2016 Commodity Cycle low
$1,873/t - $0.85/lb - 2016 Average Price
$2,292/t - $1.04/lb - QD CAML Model Forecast for 2018
$2,325/t - $1.05/lb - 2017 Average Price
$2,491/t - $1.13/lb - H1/2018 Average price (+9.4% above QD model)

$2,689/t - $1.22/lb - 2018 Jan - New cycle high (+69% from 2016 low)
$2,094/t - $0.95/lb - 2018 Aug (-22.2% from Jan 2018 / +31.9% from 2016 low)

$3,898/t - $1.81/lb - Peak Price of last commodity cycle(2007)


Zinc
$1,454/t - $0.66/lb - 2016 Commodity Cycle Low
$2,093/t - $0.95/lb - 2016 Average Price
$2,909/t - $1.32/lb - 2017 Average Price
$3,283/t - $1.49/lb - QD CAML Model Forecast for 2018
$3,372/t - $1.53/lb - H1/2018 Average price (+3.5% above QD Model)

$3,592/t - $1.63/lb - 2018 Jan - New cycle peak
$2,667/t - $1.21/lb - 2018 Aug (-25.8% from Jan 2018 / +83.3% from 2016 low)

$4,518/t - $2.05/lb - Peak price of last commodity cycle(2007)



AIMHO/DYOR

[mount teide] 09/8/2018 21:44

Thanks AISHAH - reads well - as it should, CAML has a great, low cost, high cash flow story to tell!

[aishah] 09/8/2018 18:20

Great article in Mining Journal:

Kazakhstan cash machine buttresses Central Asia earnings
The talk is of escalating trade wars amid fears that global economic growth will falter. Others fret about cost pressures, citing among other things, a strengthened oil price. Against this backdrop, base metals prices have weakened significantly since the start of the year. And yet, none of this unsettles veteran miner Nick Clarke, chairman of AIM-listed Central Asia Metals (CAML).

[lauders] 09/8/2018 15:06

Think the Cu and Zn prices say it all here:





Once the metals recover so will CAML and ARS and other miners. Matter of waiting until that happens I suppose.

[bogdan branislov] 09/8/2018 14:59

MT, whilst one can never be certain, I am inclined to agree. The forward under supply for copper is such that it will be hard to shake out many more holders, both for copper and for CAML. Bogdan

[shieldbug] 08/8/2018 19:08

Second largest copper mine (Grasberg in Indonesia) to reduce production over the next 2 years as it transitions from open cast to underground. According to the Bloomberg article this could take 1.5% of global copper supply out in 2019 and 2020.

[scottishfield] 08/8/2018 14:48

Hope you're right MT

[cflather2000] 08/8/2018 14:19

Copper, zinc and lead all up today

[mount teide] 08/8/2018 12:59

I'm going to stick my neck out and suggest today has probably marked the bottom of this sector and company pullback.