Central Asia Metals Share Discussion Threads

[coxsmn] 18/8/2018 09:34

MT, good observartion.

[mount teide] 18/8/2018 09:19

The significance of the announcement last week that production at Grasberg, Indonesia the world’s second-largest copper mine will fall by more than half next year, as its giant pits transition to underground operations, cutting over 300,000 metric tons of supply from a market entering deficit, has largely been lost behind the headline grabbing Trump/China trade war rhetoric and strike threat at Escondida the World's largest mine.

Last year a circa 40 day stoppage at Enscondida saw the price of copper rally strongly as a result of the lost production.

The planned production loss at Grasberg in 2019 and well into 2020 will see 1.4% of Global production taken out of the market - equivalent to a strike at Escondida next year lasting close to 3 months!

[mount teide] 17/8/2018 15:35

bogdan - 'My biggest concern here, and has been for some weeks, is a low ball bid a little above the highs of earlier this year. This would a profitable outcome but not what I want here.'

I agree and have expressed a similar sentiment here previously - as there are few, if any very low operating cost mid cap mining businesses that are throwing off cash remotely comparable to CAML.

Since it is not mining ore at Kounrad the circa 150% increase in the price of Brent during the last two years will have had little impact on CAML's operating cost compared to the large open pit global mines operated with huge fleets of extremely large, high powered vehicles and machinery.

Considering the long term industrial metal market fundamentals, if you take the view that the price of the copper, zinc and lead is likely to average similar to the current 2018 average over the remaining life of Kounrad(14 years) and SASA(20 years+); an offer in the range of £3.20 - £3.60 (8.5 times 2018 earnings) for CAML would be an akin to stealing the company.

CAML has been very unfortunate to be treated as anything but a high cash generating, low cost operator by the market during this recent period of industrial metal price weakness(following a very strong previous 18 months post the recession lows). I consider it a case of the market misunderstand CAML, which the Interims will correct.

[bogdan branislov] 17/8/2018 14:02

I am currently sitting on an average loss of about 18% for all of my CAML holdings. The questions that I always ask are: 1. Was I right to buy in when I did before the price fall? Yes, the case for CAML overall was compelling, the case for lead and zinc was adequate, the case for copper was also compelling. 2. Was the recent turmoil predictable? Not really if you sell your holdings at every threat of economic events, you will quickly end up as a news based trader, no way to invest. 3. What do I do now? Well the question is, has the outlook or fundamentals for CAML changed? No they have not, the case for CAML and copper remains fully intact. If I was a buyer at around £3, it makes no sense to be a seller at nearer £2. So I sit tight. My biggest concern here, and has been for some weeks, is a low ball bid a little above the highs of earlier this year. This would a profitable outcome but not what I want here. I still think my CAML holdings will multi-bag, i.e. triple or more, over the next 2 to 3 years if we can avoid a takeover. Bogdan

[mount teide] 17/8/2018 11:54

All evidence points to the copper market over the next 5-7 years facing a dearth of new production as a result of a waterfall drop in capex since 2013.

Decades of falling head grades at the major mines and continued development of new mines with much lower grade deposits, has produced an estimated long term copper price of $3.25 - $3.50 to trigger new global production likely to have much more than a token impact on the 5 million tonne deficit forecast for 2025, never mind getting close to eradicating it.

World population growth of 1 billion has been forecast for the next decade - for which there is scant evidence that much of this growth has been taken into serious consideration in the copper market deficit forecasts. Its probably fairly safe to assume most of these future citizens will not be living in African mud huts.

By way of example of how low the ore grades are at some of the few major global mines that have recently started production - First Quantum’s 320,000tpa Cobre Panama mine commenced ore production this year with a forecast life of mine average copper grade of just 0.4% copper; at an initial project capital cost of $5.8bn.

Declining copper ore grades - AME Research

[the deacon] 17/8/2018 09:52

Decided it was time to buy back here. Great post above MT.

[mount teide] 17/8/2018 09:23

2018 - Copper, Lead and Zinc Average Prices

Copper /lb

$2.80 - H2/2018 Average
$2.81 - Quoted Data CAML 2018 Model
$3.08 - 2018 Average year to date (+9.6% to QD Model)
$2.91 - Forecast 2018 Average Price if current spot $2.62 is averaged to year end

Production is on target to achieve 13,750t - 14,000t against Quoted Data model forecast of 13,150t

LME Copper Stocks are 62% down from the 5 year peak and are back close to the 5 year low.


Lead /lb

$0.98 - H2/2018 Average
$1.04 - QD CAML 2018 Model
$1.10 - 2018 Average year to date (+5.7% to QD Model)
$1.04 - Forecast 2018 Ave Price if current spot $0.91 is averaged to year end

Production was 2% above 2017 Actual/QD Model in H1/2018

LME Lead stocks are 49% down from the 5 year peak and close to the 5 year low.


Zinc /lb

$1.19 - H2/2018 Average
$1.46 - 2018 Average year to date (-1.3% to QD Model)
$1.49 - QD CAML 2018 Model
$1.33 - Forecast 2018 Ave Price if current spot $1.07 is averaged to year end.

Production was 2% below 2017 Actual/QD Model in H1/2018

LME stocks are 75% down from the 5 year high and close to the 5 year low.


If current spot pricing is maintained through to year end 2018, Quoted Data's model would generate circa $0.2m shortfall of profit to the $138.5m EBITDA forecast, broken down as:

The QD model conservatively assumes 13,150 tonnes of Copper production in 2018. Kounrad Copper production is on target to produce 13,750t - 14,000t in 2018. A 13,875t mid range performance would generate an additional $4.61m of EBITDA, while a top end 14,000t performance would see an additional $5.4m.

Copp +$2.89m - model assumes $2.81/lb
Copp +$4.61m - +750 tonnes to Model Production (mid range 13,875t)
Lead +$0.00m - model assumes $1.04/lb
Zinc -$7.70m - model assumes $1.49/lb


EBITDA of circa $138.3m (QD forecast less $0.2m) would put EPS at 51.6c(40.62p) at current exchange rate giving a forward PER of 5.14.


Declaration: Added a total of 20% of my existing holding during yesterday and this morning.

Based on H1/2018 average metal pricing and reported production figures I believe the H1/2018 Interims will be outstanding and, FWIW, would be very surprised if the year end figures were not significantly above the forecast in this post based on current spot pricing being averaged through to year end.


AIMHO/DYOR

[king suarez] 17/8/2018 09:08

Hi apeman,

SASA's zinc equivalent cash cost is stated as $0.39 per pound and expected production of 21,000 to 23,000 tonnes for 2018.

So taking the middle ground 48.5m lbs of zinc production forecast at current zinc price of $1.05 minus $0.39 cash costs = $32m profit over cash costs. Not sure what other costs need including and/or the profitability of lead or whether the lead produced is included in the zinc cash cost as by product?

KS

[return_of_the_apeman] 17/8/2018 08:24

Anyone know how profitable is sasa at the current price of zinc and lead?

Tia

[garycook] 17/8/2018 01:22

Monster dividends
Mid-cap Central Asia Metals (LSE: CAML) is a stock that’s been on my watchlist for some time.

Fortunately, I haven’t pulled the trigger yet. Had I done so in March, before all this trade rhetoric began, I’d be sitting on a loss of almost 40%.

So, what can Central Asia Metals offer that Kaz doesn’t? That’s easy — a decent dividend.

Actually, that’s something of an understatement. The stock is forecast to yield a stunning 7.5% in 2018, with the payout covered over twice by expected profits. That looks very reasonable compensation in return for a bit of patience. Contrast this return with today’s announcement from Kaz of its first dividend since 2012 (6 US cents per share) following the “successful delivery ” of its Bozshakol and Aktogat projects. An encouraging development, no doubt, but not in the same league as that offered by its peer. A cynic might even view it as a way of appeasing shareholders over Baimskaya as much as being an indication of management’s confidence in the company’s future.

Like Kaz, Central Asia Metals trades on a low valuation — just 6 times forecast earnings. While no one knows where the copper price will bottom, surely we must be entering oversold territory?

[bob_rjp] 16/8/2018 22:12

Copper, Zinc & Lead all up significantly today. Some Canadian miners (Trevali and Ascendant resources) up 13% and 10% this evening I see. China and Turkey panics subsiding. Must be time for this stock to break out of its downtrend sometime soon !.

[coxsmn] 16/8/2018 18:44

Copper up 2.2% today.

[mount teide] 16/8/2018 18:26

For only the second time since mid June the closing auction price was above the offer price at the close, such has been the determination over the last few months by the algorithmic traders to drive the share-price down into the close and lower still in the closing auction each day.

[mount teide] 16/8/2018 16:29

Highly cyclical shipping/commodity markets are characterised by high volatility compared to most if not all other sectors.

Employing a 15% trailing stop loss since first production in 2012 would have seen a CAML position stopped out on at least 15 occasions. Buying and holding would have seen 282% capital growth through to today, together with 120% of the original investment returned in dividends.

That the majority of that performance was generated against the headwinds of a brutal 6 year recession that brought most of the sector heavyweights to their knees is testament to the robustness of CAML's low cost production model and excellent management.

With recovery phase stern breezes pushing the industrial metals markets along since H1/2016, the fundamentals and commodity market history strongly point towards CAML over a 3-5 year outlook outperforming what it achieved during the recession years, and by some margin.


AIMHO/DYOR

[shieldbug] 16/8/2018 15:41

Added a few today. Look forward to the H1 results on 19th September.

[pughman] 16/8/2018 15:06

Topaz, I wish you had been posting on this forum 3 months ago. Maybe I wouldn't be sitting on a 25% loss now. Can't argue with the investor knowledge here, but as for investing nous I'm not so sure.

[andyj] 16/8/2018 13:03

You have been reading too many conspiracy theories topaz frenzy. Come out here to the Far East and see the truth for yourself.

[coxsmn] 16/8/2018 12:31

H1 2018 results due 19th September. These results will include upgraded profits from the Sasa zinc and lead mine in Macedonia acquired in Nov 2017.

[topazfrenzy] 16/8/2018 11:57

yes perhaps but the China ship is about to enter A&E, taking the mining sector with it, it's sort of there already

[extrader] 16/8/2018 10:10

Hi topazfrenzy,

Your 2061

Hard to give much credit to an article that headlines 'China is a bigger contagion risk than Turkey ' and then includes in the body

..."China is a completely different situation from Turkey. In Turkey there is a significant current account deficit and there are large borrowings in dollars. In China there is a current account surplus and massive dollar reserves...."

ATB

[amunro] 16/8/2018 10:03

UK markets have been asleep while everyone is on holidays; come cooler weather and rain and folks will back behind their computers.

[mount teide] 16/8/2018 09:46

It may provide a little comfort to know that the considerably more volatile Baltic Dry Index (used to measure the charter rates of dry bulk commodity carriers) which made a long term cyclical bottom in H1/2016 along with industrial metals and oil, has since experienced 3 major pullbacks of 25%+ and is currently at/close to a 4 year high.

The only concern I currently have with this recent sector weakness from the perspective of a long term CAML investor, is the risk it could generate an acquisitive move, of a relatively low ball offer for CAML by one of the cash rich larger players.

I mention this from observation of L2 and recent behaviour of the automatic trading programmes that generate most of the transaction volume through 'churning' activity - they have been able to significantly lower the market valuation over the last few months without generating large transaction volumes.

This is surprising, since as a very low cost operator generating high levels of cash even at the H1/2016 recession low point, the volatility of CAML's valuation should not be as large on a downside move in the price of copper as most of the higher cost operators, and vice versa on upside moves.

There again it may be nothing more than very modest net selling pressure in the quieter transaction months of July and August having a disproportionate effect on the downside - worth keeping an eye on.

[arf dysg] 16/8/2018 09:20

I admit that Chinese local officials may not tell the EXACT literal truth to central government, so getting real Chinese growth numbers is tricky, however:


topaz frenzy (2080): "China is about to enter A&E"

Ha haha haaa haaa ha ha hha haa haa haha haha haaaaaaaaaaa!

[topazfrenzy] 16/8/2018 09:08

Kaz offering less than one percent dividend with next leg down to take it under £2, game over folks, the bull market is done, anyone with sense would get out now, the signs have been there for a month now, China is about to enter A&E and take the whole commodities sector with it.

What will they do this time? Build more ghost cities with zillion worth's of debt?

[topazfrenzy] 16/8/2018 09:05

Ok, fiddle while Rome burns lol