Central Asia Metals has taken a tumble along with the price of copper. The firm, which does what it says on the tin — digs up copper in Kazakhstan, and zinc and lead in North Macedonia — has shed a third of its value in the past six months. Trading at close to £3 in February, the shares are now changing hands at about £1.80.
CAML enjoyed the upsides when its copper shone: the miner made a record $75 million (£59 million) cash profit last year as copper production also rose, hitting a record again at 14,254 tonnes. Higher costs and investment (including in a 4.8MW solar farm in Kazakhstan) have taken a bite since. Yet the conservatively run firm has low production costs overall as it extracts copper from waste dumps that retain material from mines previous owners have not processed.
CAML also has good cashflow, a strong balance sheet (with $50 million in cash and no debt) and decent dividends — and it’s on the acquisition trail. Copper prices, meanwhile, have been weaker but inventories are still fairly low and, long term, the metal has huge appeal, being a vital component in electric vehicles and other decarbonisation efforts. With CAML’s price to earnings ratio standing at 6.2, down from 7.6 a year ago, the miner looks like it’s been oversold.
Perhaps one reason for investors’ sniffiness is that its deal-making ambition has played out as a particularly difficult game of hide and seek. Chief executive Nigel Robinson took the helm in 2018, a year after CAML’s purchase of the Sasa zinc mine in North Macedonia, and has often said how it is “actively considering various business development opportunities”. Still, not having found them yet has made for juicy dividends: CAML has returned about £300 million to shareholders since its float in 2010. “We anticipate cash building up quickly on the balance sheet,” said Peter Mallin-Jones, an analyst at broker Peel Hunt. “Underpinning a highly appealing dividend, we see this cash also opening up options for management to make its next strategic move.”
The firm’s Kounrad mine in Kakazhstan is expected to be in production until at least 2034, with Sasa set to be productive until 2039.
Apart from having the cash for deal-making, CAML stands to benefit from strong future demand for its metals. Berenberg analyst Richard Hatch flags the miner as “among the lowest-risk, highest-yielding stocks of our coverage, yet it remains overlooked from a valuation standpoint. We would encourage investors to revisit the investment case of this quality name.” Buy.
