I’ve been a fan of Central Asia Metals (CAML) for some time now, and although the share price isn’t much higher currently, I still see it ultimately growing into a bigger company. This miner is one of the few AIM listed outfits that actually makes a profit and has consistently been returning cash to shareholders, via dividends, over a number of years, and has a fairly attractive yield...
It started out as a copper miner in Kazakhstan with its Kounrad operation, before branching out into lead and zinc in Macedonia when it purchased the Sasa operation, and it has just released its first set of annual results where it was running both of these assets for the full year. Copper, zinc and lead all showed signs of weakness in the latter part of 2018, but have picked up again during the first few months of this year, and if that trend continues then it bodes well for the prospects of this company during the rest of 2019, and beyond.
Financially the company performed well, generating net revenue of $192 million, and that resulted in a net profit of $46.5 million, which is pretty decent on a PE basis for a mining company with a market cap of around £440 million. Previously it had been debt-free, but it took on some debt as part of the Sasa deal and that now stands at $145 million, having repaid $38.5 million during the year. At the end of 2018 it had $39 million in the bank, and total capex for 2019 is expected to be around $12 million. Guidance for Kounrad production during 2019 is slightly lower than last year at 12,500 to 13,500 tonnes (compared to actual production of 14,049 tonnes in 2018), but both lead and zinc production are expected to be comparable to last year, with guidance of 28,000 to 30,000, and 22,000 to 24,000 tonnes respectively. Cost of production will increase slightly, but not by enough to have a significant effect on the overall profitability of its operations. The recent drilling and updated mineral resource estimate at Sasa were also positive, with a minimum mine life of 19 years, and higher grades than originally predicted means that over an 18 month period the overall contained resources have only depleted by 6,000 tonnes of zinc and 7,000 tonnes of lead. So operationally it is hard to see anything not to like.
The dividend for 2018 was slightly lower, but with a final dividend of 8p, to add to the interim of 6.5p, an overall payout of 14.5p represents a decent payout, and once the debt that was taken on for Sasa is repaid then I would expect the dividend to increase. This isn’t a company where you can expect to get rich overnight, barring a surprise takeover offer coming out of the blue, but it is one where I see the chance of good growth over the longer term, and with relatively low risks, especially since the diversification into Macedonia. It is also a company where over a long period of time the management has proven that it can run profitable operations that return money to shareholders, so if you are bullish on copper, zinc and lead, and want an investment in a smaller miner with growth potential, then I see this as being a good choice, and it is why I still hold shares myself and will continue to do so. I can still see plenty of value from the current share price of around 250p.
Filed under: Central Asia Metals, Management Resource Solutions, Plus500, Tesla, AFC Energy, Venn Life Sciences
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