Central Asia Metals keen on earlier-stage acquisitions

From BHP (BHP) and Rio Tinto (RIO) to Central Asia Metals (CAML), miners across the spectrum are struggling to find new projects. But CAML is still looking for another purchase to “take it to the next level” in the words of chief executive Nigel Robinson, and has been on the hunt since before the pandemic. 

The company runs the Kounrad copper operation in Kazakhstan and the Sasa zinc and lead mine in North Macedonia, and has been on the hunt for another big deal for some years, after buying Sasa in 2017. Robinson said the priority was maintaining the dividend while also growing the company’s asset base. 

The company’s 2022 results showed its consistency, even as costs rose – cash profit for the year was $132mn, down 7 per cent on the year before, while the total dividend of 20p for the year was flat on the year before. Robinson said the company was now primarily looking at “earlier stage” projects where cash flow can be used for exploration and development costs, rather than borrowings or going to investors for further funding. 

The company is also spending $12mn this year as part of its shift to a new style of underground mining at Sasa. A review completed last year took the mine’s life out to 2039, although a higher discount rate and lower throughput forecast (the amount of ore fed into the processing plant) saw the company take a $55mn impairment, hitting the bottom line for 2022.  

Peel Hunt sees sales and profits falling back slightly in 2023, before a rebound in 2024. The prospect of an early-stage project coming onto the books could spark nervousness from investors but given management’s keenness to hold onto the dividend and the positive copper price outlook, we remain bullish. Buy. 

Last IC View: Buy, 236p, 14 Sep 2022