The last few months have been tough for base metals miners, as prices for copper, zinc, lead or shares in Central Asia Metals (CAML) attest. First-half numbers for the Aim-traded group paint a more reassuring picture, in part because escalating trade war rhetoric only really made itself felt in commodity markets in June. But amid a deteriorating outlook, there were some bright spots.
First off, the miner has enough confidence in its current position to maintain the half-year dividend. Generous distributions have long driven CAML’s investment case, but paying out 43 per cent of free cash flow still requires a long-term view.
In the second half, with production guidance unchanged, weak prices look set to hit the top line. Management offered little detail on possible cost-cutting measures to mitigate this, although the depreciation of the Macedonian dinar and the Kazakh tenge should soften the blow to operating profits, given that some 70 per cent of on-mine costs are locally denominated.
And now, with the Sasa zinc-lead mine in Macedonia “largely complete”, the company is already “actively looking for additional growth opportunities”. Chief executive Nigel Robinson said acquisitions would have been a priority regardless of the recent market rout, but acknowledged that share price falls might affect his company’s ability to strike deals using paper, particularly with targets clinging to “fairly high” valuations.
On average, analysts expect adjusted earnings per share of 44¢ both this year and in 2019.
CENTRAL ASIA METALS (CAML) | ||||
ORD PRICE: | 225p | MARKET VALUE: | £395m | |
TOUCH: | 225-227p | 12-MONTH HIGH: | 346p | LOW: 205p |
DIVIDEND YIELD: | 7.3% | PE RATIO: | 9 | |
NET ASSET VALUE: | 189¢^ | NET DEBT: | 38% |
Half-year to 30 Jun | Turnover ($m)* | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
2017 | 38.6 | 20.7 | 13.8 | 6.5 |
2018 | 102 | 38.4 | 16.4 | 6.5 |
% change | +165 | +85 | +19 | - |
Ex-div: | 4 Oct | |||
Payment: | 26 Oct | |||
£1=$1.32. ^Includes intangible assets of $67m, or 38¢ a share. *Reported as gross revenue, before off-takes and silver purchases. |