Central Asia Metals Share Discussion Threads

[shanklin] 23/8/2018 14:55

Mount Teide

Completely off topic but one of the major Japanese car manufacturers is looking at developing and selling hydrogen fuelled cars in the relatively near future, obviously with a battery included for energy recovery. Apparently, they can only see battery powered cars being practical for short distance runarounds. In contrast with petrol and diesel, there is zero pollution, which IMHO makes them far less polluting than electric vehicles with batteries charged overnight from our power stations.

Despite the very limited infrastructure currently available, in terms of fuelling hydrogen cars, they have already managed to drive one from Land's End to John O'Groats.

[garycook] 23/8/2018 14:42

n68,Now that would be very nice.

[novicetrade68] 23/8/2018 13:52

Back to 250p perhaps next week.

[danieldruff2] 23/8/2018 13:47

Back in after a long while away, undervalued once again.

[mount teide] 23/8/2018 11:18

Industrial metal demand - some interesting anecdotal experience from poster Mattjos on the JTC thread.

'Batteries now on longest lead time I've ever experienced in 19 years. VRLA, gel, industrial batteries now 18-week lead time ex-Germany OEM. Despite extra shifts at factory, completely unable to keep up with demand. Usual lead time is 2-3 weeks. Prices also near record highs.

DC motor/gearbox units .. Italian & Slovenian OEM's quoting 9-12 month lead times!!! usually 2 months. The large auto OEM's have hoovered all available supplies of specialist gearbox shafts and bearings for years ahead as the likes of BMW, Mercedes etc all push hard to bring new EV's to market asap. Prices all increasing.

On just these two items, have recently had to give 12-18 month forward blanket orders to try and ensure availability ... since start this year, these two component supply chains have got stretched and stretched and stretched. The drive to vehicle electrification is affecting everything even remotely connected & is much greater than most appreciate. All that said, I am reliably informed by Director of one of worlds largest Auto OEM's, if 'proper' accounting is used to measure EVs .. every single manufacturer (Tesla included) is losing money on every pure BEV out the door.

Barriers to entry for BEV are much, much lower than I/C engine autos .. the coming few years will see a huge shakeout amongst the OEM's. This shift in technology is re-setting the starting tape amongst participants & the route to profitable production is still unclear but, VW/Porsche have forever changed the landscape with diesel cheat software & Tesla also a big disruptor.

Fascinating space to keep watch as the large OEM's would actually rather not have you buy a car in the future .. they prefer that you rent/use on a SAAS model basis. What future for independent car dealerships?'

[novicetrade68] 22/8/2018 21:51

Prospects for lead seem pretty good too, does CAML sell refined lead? They seem to make decent margins on it as well after the SASA acq.

[bogdan branislov] 22/8/2018 20:56

Talking of stock screens, IC did their Alpha (limited access, extra cost) Quality screen. They used forward PE as one of several criteria which brought CAML into the frame. Of the 90 or so companies highlighted, CAML stood out by a long way. Interestingly, CAML is now a double 7 company, a real rarity is that - PE less than 7 (6) and dividend yield more than 7 (7.8). I have read about double 7 stocks before, but tend not to look too hard as they are so unusual. Generally a double 7, except at the very end of a bear market, is heading for some kind of value trap or operational cliff face of some sort. For CAML the only cliff face coming up is a favourable one unfolding copper supply shortages. The screen shows a huge earnings rise for the current year, misleading due to the reverse takeover and small negative earnings rise for the following year which they have clearly plucked out of the air. But actually, CAML is going to be far from a no growth company in 2019. Due to CAML's huge operating margins, even after the huge dividend has been paid, CAML's balance sheet equity, tangible balance sheet equity that is, will grow by at least 10% for that and every other year. This balance sheet equity growth through retained profits is actually more important than earnings growth, screens which include only earnings growth and not balance sheet equity growth, miss this key point. Bogdan

[warranty] 21/8/2018 21:26

I topped up the other day at 210p edjge2 another 30% of my holding and will add again if it drops much below 200p. I'm in for the solid yield so looking to hold long term as long as the story holds up.

[edjge2] 21/8/2018 16:15

Garycook sure we are not the only toppers

[mount teide] 21/8/2018 15:36

Hi Mas - indeed - copper after rising circa 80% from the lows in H1/2016 had probably earned a period of weakness.

The shipping market has already experienced three such 25% to 40% corrections since finally making a bottom also in H1/2016 - since the last correction in May it has risen to a near 5 year high. Some 550% above the lows but still 85% below the last shipping business cycle high in 2008.

In these long term, highly cyclical, boom and bust markets, volatility goes with the territory and is why they routinely attract the momentum traders.

I just wish it had been possible to trade the Baltic Dry Index directly - i would have sold up and gone ALL IN when it bottomed at circa 290 in Feb 2016 after it had fallen from circa 12,000 in 2008 - the BDI in Feb 2016 was not a once in a 15-20 year shipping cycle investment opportunity, but a once in a lifetime opportunity.

Why?
It was a one way bet at that level since the dry bulk shipping spot market had for circa 5 years been in a position where the daily revenue was up to 50% below its daily operating cost with nothing for ship maintenance or finance interest and capital payments on the general 80% of vessel cost financed via a bank loan. All of the shipping companies had run out of or were very close to running out of cash after subsidising the cargo owners for 5 years!

Its the reason why many large US quoted shipping companies seeked protection from their creditors by entering Chapter 11 proceedings and the rest like Dryships, a $7bn goliath in 2008, experienced equity losses averaging 99%.


AIMHO/DYOR

[garycook] 21/8/2018 13:40

M,Time to buy. Topped up myself.

[masurenguy] 21/8/2018 13:35

About time that this bottomed out and started a reversal - a 40% drop over the past few months is a considerable over reaction !

[mount teide] 21/8/2018 12:56

Since the $2.55 copper low last week encouraging to see that the spot price has since rebounded at 4 times the percentage rate the US$ index has weakened - circa +6.0% v -1.5%

[edjge2] 21/8/2018 12:04

eeza well that tipped the balance, crazy price over 7% yield and no reason to think CAML will reduce it. Cu recovery will change sentiment here.
Looks like some support here after precipitous drop.

[edjge2] 21/8/2018 12:03

eeza well that tipped the balance, crazy price over 7% yield and no reason to think CAML will reduce it. Cu recovery will change sentiment here.

[mount teide] 20/8/2018 20:13

eeza - thanks - reads well.

[coxsmn] 20/8/2018 19:34

eeza, i'm impressed by the Dailymail, a genuinely excellent tip and well timed.

[return_of_the_apeman] 20/8/2018 08:31

Thanks KS and MT

[mount teide] 19/8/2018 17:48

In spite of industrial metal and oil prices rising from the 2016 lows by 60%-140% and close to 200% respectively by Q1/2018, the big players are still to yet invest money in the mega-project arena.

The oil mix needs these long-cycle barrels as these wells tend to flow at many multiples of the rate of the unconventional shale plays that continue to soak up the lion’s share of new capex dollars. The copper market needs to address the rapidly declining head grades in the major mines(the largest 20 mines generate 40% of current global production).

Intuitively we know major long-cycle oil and copper production must return. But, as the EIA and Kitco supply graphs show, it is way past due if we are to have any hope of replacing barrels lost to the decline of fields currently on stream/falling head grades at the major mines, never mind keep up with the relentless 1.5%-4% annual growth in demand.

The good news is it is inevitable that it will happen as a result of market forces pushing up prices but such was the balance sheet impact of the depth and length of the last recession it may take another year or two before a meaningful return to higher capex levels is seen. And that is exactly why I believe there is another price super-spike in the offing. My guess is it’s 18-36 months out and will be the catalyst for the 9 year equity bull market to roll over and severely correct.

There is little doubt we are living on borrowed time in the area of oil and copper supply. There is a gap in the pipeline to replace these supplies that cannot be filled in the short run.

The oil, copper and shipping industries keep re-learning the same lessons. Which is good for investors in these sectors as once every 15-20 years it provides us with a recovery stage that is as close to a one way bet as the equity markets throw up, such is the scale of the boom and bust nature of these markets.

There are not many industries like quoted shipping companies(dry bulk/commodity/oil) that can can absorb the almost compete wipe out of their equity on global exchanges, as happened during 2008 to 2016, and still operate with the wider world in complete ignorance.


AIMHO/DYOR

[isaallowance] 19/8/2018 11:38

The Stockopedia quality rank is also hit, since ROCE is calculated based on the full cost of the SASA acquisition, but only has 2 months of SASA profit in the last results. I think we'll have to wait until the next final results with a full 12 months SASA contribution before the stockrank is fully aligned with the new post-SASA reality.

[cflather2000] 19/8/2018 11:30

I agree that the data is distorted. On stockopedia, for example, the Value rank appears based on projected earnings, but also past earnings. Last year's results obviously don't look great compared to current market cap, because the market cap includes sasa, but last year's earnings only included a couple of months' worth of sasa earnings

[mount teide] 19/8/2018 10:20

Its easy for even long-term investors to sometimes fall into the trap of thinking and investing like a short term trader, since that's how the majority of the market now 'invests' and is largely responsible for the huge increase in equity and commodity market volatility over the past decade.

CFD/Spreadbet Industry research tells us that more than 90% of short term traders lose money over the longer term. CAML share price research tells us that by employing a 15% trailing stop loss since first production in 2012 would have seen a CAML position stopped out on at least 15 occasions while, buying and holding would have seen 282% capital growth through to today, together with 120% of the original investment returned in dividends - a staggering performance when you consider that the majority of the returns were generated against the severe headwinds into 2016 of a brutal 6 year industrial metal market recession that brought most of the sector heavyweights to their knees.

Market observation/research suggests thinking and 'investing' like a short term trader is highly likely to mirror their investment return performance and the huge mental stress that goes with the territory.

The fact of the matter is that despite the price of copper falling circa 30% over the 6 years since CAML commenced production and, circa 50% by the 2016 recession low, anyone putting £100k into CAML in 2012 and then switching off their computer until today would have found by relying on the passage of time, CAML's very low cost business model, the commodity market cycle and the management skills of Nick Clarke and his team, they would have a big smile on their face because the investment would now be worth £403k, even without re-investing the dividends. By comparison, a similar investment in sector heavyweight Glencore in 2012 would now be worth £63k without re-investing the dividends.

Its also worth putting into perspective the current period of copper market weakness - the first since the market bottomed following 6 years of price falls into Feb 2016:

+73% - H1/2016 low - Q1/2018
-19% - Q1/2018 high - to today

+40% - since H1/2016 low - to a price today that is still 70% below the inflation unadjusted peak of the last copper market cycle high.


If like me, you strongly believe the strengthening copper market fundamentals and demand growth trend of 2%-4% annually over many decades, are highly likely to be the key factors to drive the copper price over the next 3-5 years of this new commodity market recovery stage - and 70 years of market data adds a lot of weight to this view - then history suggests that market weakness during the commodity market recovery stage should be given serious consideration as a potential opportunity to put new investment to work - as this has proved not only to be a winning strategy at CAML since the start of production(up 403% inc dividends) and from commencement of this latest commodity market cycle where it is up 76% to date(inc dividends) but, generally for commodity stocks during the much longer recovery phases of the previous three long term market cycles.

Since markets are forward looking they will likely start pricing in the full impact of Grasberg's 2019/20 production cuts during Q4/2018 when the Trump/China trade war spat will probably be mostly in the rear view mirror, and the business media focus has moved on to the million barrel a day supply disruption to Iranian crude exports from US sanctions scheduled for implementation in early November.

FWIW - Following an initial investment in near term copper producer/explorer Asia Mat in early 2016, I was underwater into early 2017. I used share price weakness to follow the Directors lead of taking ALL their fees in incentivised share options since 2015 to continue adding at prices up to 5 times my 2016 average price as the investment case strengthened.

This is a strategy that served me well with investments in industrial metals, oil and the shipping sector during the 2000-2008 recovery stage of the previous shipping/commodity cycle.

I refused to break a habit of an investment lifetime to short a quoted company during the 2008/10-2016 shipping /commodity cycle decline/death stage where prices fell heavily as new production/shipping overwhelmed the annual 2%-4% increase in demand. Considering that most quoted dry bulk and oil tanker ship owners like sector leader DryShips($7bn market cap in 2008) saw their market valuation drop by circa 99% between 2008 and 2016, that industrial metal heavyweights like Glencore lost 85% and saw its dividend suspended, and Royal Dutch Shell's valuation still dropped 50% despite maintaining its 7.5% dividend at the nadir - as in 1993-1999 the decline/death stages of shipping/commodity cycles once again proved a very reliable and rich vein to mine for those less principled to shorting like hedge funds that put a lot of money to work during 2010-2016 shorting shipping and commodity stocks.




AIMHO/DYOR

[bogdan branislov] 19/8/2018 02:02

MT. Interesting points, as always. What you say about the interims is very true. On data screens for IC and other data sources we have CAML data based on last year's earnings, only a couple of months pre-acquisition, so effectively pre-acquisition earnings, but with post acquisition shares issued within the data. This means that PE, PEG, Neff ratio, dividend cover are all distorted heavily, all to the negative. If the data was appropriately shown, CAML at current valuation would be making very regular appearances in IC's various stock screens. CAML has been all but absent from these screens since the acquisition. This won't be fully addressed until the full year results of course, but the interims will certainly help. I don't want to overplay this point, clearly metal price falls and sector volatility are the primary cause of CAML's price falls, but clarity on the data from the interims for those observing CAML from more of a distance who are not fully aware of the value on offer will certainly be a good thing. Bogdan

[carcosa] 18/8/2018 14:48

Couple of tweets today:

From CAML:
"Meeting with Macedonia Prime Minister, Mr Zoran Zaev - CAML CEO Nigel Robinson, CAML Chairman Nick Clarke and Sasa General Director Oleg Telno"

Followed by a tweet from Macedonia Prime Minister / @Zoran_Zaev


"Successful investments are an additional incentive to improve the conditions and stimulate larger and new ventures. At today's meeting with the management of "SASA", we talked about the future sustainable development of the country's largest mining complex." (translated)