Central Asia Metals (CAML) - A quick review

Thursday, Aug 03 2017 by

Central Asia Metals (LON:CAML) is a copper producer. The company's main revenue driver is a plant in Kazakhstan that produces copper cathode. This product is then distributed to end customers, which are predominantly in Turkey. In addition to this plant, the group also has operations in Chile and is continuously evaluating other acquisition opportunities. In terms of strategy, the company aims to minimize debt and provide a dependable dividend to shareholders.

As with practically any metal producer the company's performance is largely determined by the underlying price of the metal, in this case copper.


As can be seen above, there has been a marked increase in copper prices over the last 2 years. (Copper at circa $2.90/lb versus $2.21/lb, 2016 average). The effect of this years price rises will be seen in the next prelims due in April 2018. However analysts have slowly been increasing their forecasts:


Well that's all well and good but what about costs? C1 costs are a standard metric used in copper mining as a reference point to denote the basic cash costs of running a mining operation to allow a comparison across the industry. 

CAML's costs are maintained firmly in the lowest quartile of the industry cash cost curve. 2016 C1 cash costs were $0.43 per pound (2015: $0.60 per pound) representing a 28% decrease year on year. This was due to several factors, with the most significant being the devaluation of the Kazakhstan Tenge in August 2015. So we need to look at currency:


So yes, can clearly see we have no worries there!

Next to look at is the debt situation. Well, good news there; last annual report stated the company had cash of US$40m at the end of 2016 and is debt free. 

What about those extraordinary dividends currently yielding north of 7%?  The Company's dividend policy is to return a minimum of 20% of the gross revenues generated from the Kounrad project to shareholders. Put another way, those dividends are set to stay and materially increase over the coming years.

The coming years... just how much more production capacity is there? Answer "producing low-cost copper for at least another 14 years."

Ahhh but what about capex? No point in having all the above if all the money has to be blown on capex due to moving operations etc? Good news there: Expansion was completed at $12.3M in 2016 (30% under budget)  and going forward there is only $2m planned expenditure each year.

And the Stockrank?


Hence is ranked as a Adventurous, Small Cap, Super Stock!

So you have low cost producer, P/E <10, Yield >7%, debt free, Very healthy gross, operating, EBIT margins. Sustainable and growing dividend...

Want to know more?

RNS's here

Company (Investors) website

Free analyst reports


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Central Asia Metals plc is a mining and exploration company. The Company's principal business activity is the production of copper cathode at its Kounrad operations in Kazakhstan. It also owns various exploration projects in Mongolia and holds interest in the copper tailings project in Chile. The Company operates through two segments, which consists of an SX-EW copper plant at Kounrad in Kazakhstan and the Copper Bay project in Chile. Its projects include Kounrad, which is an open-pit copper mine, located near the city of Balkhash in central Kazakhstan; Handgait molybdenum exploration project, which is situated in northern Mongolia; Ereen gold exploration project, which is situated approximately 130 kilometers north of Ulaanbaatar, in the center of Mongolia's historic mining district, and Chanaral Bay copper project, which is in the Atacama region of Chile, approximately 1,000 kilometers north of Santiago and over 120 kilometers northwest of the regional capital of Copiapo. more »

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17 Posts on this Thread show/hide all

nickwild 3rd Aug '17 1 of 17

I like this company and recently doubled my investment. Great yield and no negatives assuming political stability.
I recently highlighted the comprehensive review following an alayst site visit. See first analyst review in link provided by Carcosa above.

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JonBirdy 3rd Aug '17 2 of 17

I also have a position in Central Asia Metals (LON:CAML). Informative article here published on 1 August 2017


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crazycoops 3rd Aug '17 3 of 17

I believe it has also been tipped in tomorrow's IC. Great summary Carcosa. I hold, primarily for the dividend

Blog: Share Knowledge
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Carcosa 4th Aug '17 4 of 17

In reply to crazycoops, post #3

Indeed they have: Link here to their article Available to subscribers only.

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Carcosa 10th Aug '17 5 of 17

Glencore's CEO comments on demand upside for Copper, Nickel and Cobalt.


Yesterday, the copper price jumped to highest since 2014. All bodes very well for  Central Asia Metals (LON:CAML)

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tomg23 4th Sep '17 6 of 17

Hi All, can anyone shed light on the suspension of trading today regarding the reverse takeover?


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gus 1065 4th Sep '17 7 of 17

In reply to tomg23, post #6

RNS is not especially clear. I read it as saying Central Asia Metals (LON:CAML) has been approached by an unlisted third party looking to back into CAML's existing listing by way of a reverse takeover. However with a market cap of c.£280m, CAML is hardly a shell company so it's either a very large acquirer or possibly even CAML being solicited to do the acquiring. Either way it's a potentially material transaction (although not yet a done deal) hence the request by the company for a suspension of its shares. Hopefully more news sooner rather than later.


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nickwild 18th Sep '17 8 of 17


Post on ADFVN
carcosa18 Sep '17 - 11:20 - 950 of 950 2 0
Having contacted the company they advise that the interims will be published before end of September (legal requirement, apparently). The suspension is likely to remain in place for a few more weeks.

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mpjubb 18th Sep '17 9 of 17

Hi Nick,

Thanks for the update..

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gus 1065 22nd Sep '17 10 of 17

Details of the proposed transaction set out this morning via RNS. Central Asia Metals (LON:CAML) is acquiring Lynx (lead/zinc producer) for $402m by way of an underwritten book build placement of 36% of its own equity plus a fair chunk of new and assumed debt. Resumption of share trading scheduled for 25/9. Current CAML market cap at time of suspension c.£280m, so clearly a large chunk of new asset to buy and digest. Are they buying at the top of the cycle and how dilutive will the equity terms be for the (excluded) PI? Latest results and terms of the placement also released today via separate RNS.



22 September 2017

("CAML" or the "Company")

Proposed acquisition of Lynx Resources Limited for $402.5 million

Creation of a new, diversified, low-cost base metals producer

Central Asia Metals plc (AIM: CAML), is pleased to announce that it has conditionally agreed to purchase a 100 per cent. interest in Lynx Resources Limited ("Lynx"), the owner of the SASA zinc-lead mine in Macedonia, from Orion Co-Investments III L.P. ("Orion") and Fusion Capital AG for $402.5 million (the "Consideration").


● Transformational transaction for CAML, creating an AIM listed, diversified, low cost base metals producer

● Lynx operates the SASA underground zinc-lead mine, in northeast Macedonia

● SASA is a low cost operation with strong operating track record and a reserve base supporting production until at least 2032

● In 2016, SASA produced 783,000 tonnes of ore which generated 22,515 tonnes of zinc in concentrate and 28,955 tonnes of lead in concentrate

● SASA's H1 2017 C1 zinc equivalent cash cost of $0.39 per pound is at the lower end of the second quartile of the Wood MacKenzie 2017E zinc industry cost curve

● In the first six months of 2017, Lynx achieved an EBITDA margin of 61 per cent. (unaudited)


● The Transaction represents a compelling opportunity for CAML to expand and diversify with the addition of another cash generative asset in a highly prospective jurisdiction

● The combination of CAML and Lynx is expected to provide commodity, geographic and operational diversification, which should enable the Group to remain well positioned throughout the commodity cycle

● The Transaction is expected to be both earnings and cash flow per share accretive in the first full year, underpinning CAML's dividend profile


● Total Consideration of $402.5 million to be funded as follows:

● Debt financing:

o $120 million senior debt facility with Traxys (4.75% + LIBOR, 5 year term)

o Roll over of estimated $67 million of existing Lynx net debt (5% + LIBOR, 5 years remaining)

● Equity financing:

o $153.5 million in CAML ordinary shares via an Accelerated Book Build ("ABB") expected to be launched shortly

o $50 million in CAML ordinary shares to Orion via an equity subscription

● $12 million of deferred consideration

The Transaction

● The Transaction will be a reverse takeover under the AIM Rules and so will be subject to shareholder approval at a General Meeting scheduled for 11 October 2017, following the publication of an AIM Admission Document for the Enlarged Group

● The Independent CAML Directors unanimously recommend that shareholders vote in favour of the Transaction at an Extraordinary General Meeting

● The Company has received irrevocable undertakings from the Directors that they will vote in favour of the Resolutions at an Extraordinary General Meeting representing approximately 23.5 per cent. of the existing ordinary shares

● It is currently anticipated that the AIM admission document will be posted to shareholders, and trading of CAML shares will recommence, on 25 September 2017

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Logic 22nd Sep '17 11 of 17

Initial thoughts:

1. They say the costs to extract are low which is important both to margin and, in case of future deterioration in zinc prices, viability. It would also fit with the CAML profile as a low-cost miner.
2. Macedonia is a relatively stable region (relatively being a key word, perhaps). If one is happy to hold CAML shares, I think one should be happy with the risk profile of Macedonia.
3. Diversification of income may be beneficial but diversification into different businesses may be disadvantageous. Although I have never worked in the sector, I would think that copper and zinc are similar enough that it will not be a drag on management.

It appears that CAML is sensible in considering the deal, but has anyone had a look at whether they are paying an appropriate amount, and whether their debt level will remain acceptable?

For transparency: I hold a small number of CAML shares.

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Carcosa 22nd Sep '17 12 of 17

In reply to Logic, post #11

"whether their debt level will remain acceptable?"

Am reading this on my mobile in the middle of a shopping centre in Kuala Lumpur and having a beer or two... so take everything below with a pinch of salt as I may well have got my numbers massively wrong, in which case please correct.

Generally speaking net debt should be no more than x3 operating profit.

CAML Interims show $20.4m Op profit, so maybe 45m for full year? No net debt.

Lynx op 37.5m so total is 82.5m

New debt will be around $200m (is that right??)

So 200/82.5= c2.5x Op profit. So that's ok

Certainly willing to have the above pulled apart.

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gus 1065 22nd Sep '17 13 of 17

In reply to Carcosa, post #12

Hi Carcosa.

I think your Q&D on the debt quantum is on the money and I agree the proposed financing package is reasonably conservative. Given the shares are still suspended until Monday, however, hard to gauge overall market view on the transaction.

I note the majority of the Central Asia Metals (LON:CAML) board are onside (with the exception of one NED who looks to be selling half of his 20m holding into the placement) although that could be as much down to their enthusiasm for empire building as a considered take on the merits of the deal for existing shareholders.

At this stage, I am a bit sceptical about the provenance of the transaction (Board seem to be reacting to an approach from Lynx shareholders and advisers rather than taking their own initiative) - it may be we're being sold a pup and haven't seen through it during due diligence. Likewise, I am also wary of how the placement will pan out. PIs are being excluded from this process and given the deal is being offered on an U/W basis, I fear it will be heavily discounted to get it away. (As a reference point, I hold Sirius Minerals (LON:SXX) . A company at a very different stage of development but the same underwriter, JP Morgan, was involved there and the equity placement was made at 20p/share when the market price was about 38p/share). Potentially, this may turn out to be a great deal for the company but a poor one for the PI.

As ever, time will tell. Not sure we currently have sufficient information to judge. Watching with interest (and a reasonable holding).


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gus 1065 22nd Sep '17 14 of 17

A few thoughts on the results of the placing as set out in the attached RNS.


Looks as though the offer found a home at 230p, about a 9% discount to the last pricing point. Given these new shares are not eligible for the 6.5p dividend, the effective discount is about 7%. I see this as a very positive outcome given the size of the offer (>40% of the company including the NED's additional shares) suggesting those privy to more information on the transaction are supportive of it. Should bode well for the share price when it opens on Monday, although there may some short term volatility as loose holders are shaken out. Longer term I think it will be a challenge to tie together the two businesses and there are the usual risks associated with commodity markets in general but Central Asia Metals (LON:CAML) management have been pretty successful in the past so I intend to stay with it and possibly add to my position. Roll on Monday ....


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Logic 23rd Sep '17 15 of 17

In reply to gus 1065, post #13

While I am often cautious when it comes to board views on mergers (as board members interests may not be those of shareholders), in the case of CAML the board members own significant amount of stock and are therefore likely to have similar interests to shareholders.

Regarding the slightly unusual case of the board being approached by Lynx, I would hope that this translates into a CAML acquiring Lynx resources at good value.

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Carcosa 9th Nov '17 16 of 17

Good video here with Nick Clarke, Executive Chairman  discussing the recent purchase of Lynx Resources, dividend expectations and future acquisition plans.

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kokpond 9th Feb 17 of 17

Central Asia Metals (LON:CAML)director selling out?

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