CAML turns to exploration

Central Asia Metals (CAML) is successful in its niche of well-run brownfield operations that were bought at good prices. Management is now adding a new string to its bow: exploration. The company has looked for a third project for years after adding the Sasa mine to its original asset Kounrad in 2017. 

It is keen to keep shareholders updated on this process, too, telling them about 22 acquisition options reviewed in the first half and three site visits. Finding a happy price for these assets is the trouble, given the strong outlook for metals like copper boosting prices and current cost of debt making them less affordable. 

The exploration effort will be focused on Kazakhstan, where Kounrad is located. 

The present operations generated Ebitda of $49mn (£39mn) in the first half, down a third on the first half of 2022. This was largely because of weaker prices but higher labour and power costs also contributed. CAML is also in the midst of a transition underground at the Sasa operation to a new mining method, where tailings are used back in the mine to reinforce workings. This comes after a tailings dam spill at the mine in 2020.   

CAML will sling over 80 per cent of its free cash flow to shareholders for the interim payout of 9p a share, double the proportion from last year above its 30-50 per cent payout policy, although the timing of tax payments knocked the free cash figure. The payout is 29 per cent ahead of RBC's forecast. 

The company’s yield is way up given its weak share price, which has underperformed its basket of metals (a 21 per cent drop against a 3 per cent drop for the metals). Investors also met the higher interim payout with a shrug. We would add at this price. Buy. 

Last IC View: Buy, 241p, 29 Mar 2023