Central Asia Metals Limited (CAML) LON:CAML, the London-based mining company, operating in Kazakhstan and North Macedonia, published its full year results for the 12-months ending 31st December 2023, earlier this week (25th March).
2023 was a year of investment for CAML. Nigel Robinson, the miner’s chief executive, said in a statement: “It has […] been a busy year of development and investment in our business both at Sasa [North Macedonia] and Kounrad [Kazakhstan]. At Sasa we made significant strides towards the completion of our transition to paste fill mining, whilst at Kounrad we completed the construction of the solar power project.”
All-in, CAML invested USD27.8m into the business, which included USD14m transitioning its Sasa mine to paste fill mining; an underground mining technique which uses processed mine waste and tailings to backfill mined-out cavities to increase mine stability and dispose of wastes in an environmentally sustainable manner.
The AIM-listed company also invested USD3m in a solar power project in Kazakhstan.
Central Asia Metals hits production guidance despite slowdown
The investment that Central Asia Metals was making into its projects was against a backdrop of a global economic slowdown, and CAML, like many commodity producers was affected by the demand side of the economy. Robinson said: “… we have met our production guidance in a safe environment at both sites […] This performance has been achieved despite a challenging economic environment with metal prices deteriorating by an average of 10% across our base metal portfolio and ongoing inflationary cost pressures.”
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Despite this, CAML was pleased with the year with Robinson saying: “The company has performed well due to our low-cost operations and strong balance sheet.”
Central Asia Metals produces copper from its Kounrad mine and produces lead and zinc in North Macedonia. The company owns its own solvent extraction and electrowinning (using electricity to extract the metals from a solution) facilities in Kazakhstan and on listing on AIM in 2010, used the USD60m IPO proceeds to build the recovery plant.
The Kounrad plant was completed in 2012 (15% under budget) and copper production began in April 2012. Five years later CAML acquired Sasa for around USD400m. The company can produce up to 14,000 tonnes of copper a year as well as 22,000 tonnes of zinc and 29,000 tonnes of lead.
Last year Kounrad produced 13,816 tonnes of copper at USD0.74/lb, which in cost is at the lower end of global production values, and at Sasa mining operations yielded 20,338 tonnes of zinc concentrate and 27,794 tonnes of lead concentrate at USD0.68/lb.
However, one issue was global commodity prices which were subdued, with copper averaging around USD8,000/tonne for most of the year, after coming unto 2023 at USD9,331/tonne. Zinc finished 2023 strongly at USD2,600/tonne, but had started 2023 around USD3,500/tonne falling back to USD2,200/tonne at its lowest point in May down 24% year-on-year. Lead prices were more stable, valued at between USD2,100/tonne to USD2,337/tonne across the year.
Inflation didn’t help, forcing CAML to raise wages in both Kazakhstan and North Macedonia and pay more for inputs. Both the Kazakhstan Tenge and Macedonian Denar strengthened against the dollar in 2023 increasing the company’s costs and contributing to a forex loss of USD3.4m.
Revenue down but gross profit is up
With all this combined – lower metals pricing, higher wages, higher costs and strong local currency – Central Asia Metals gross revenue fell 11% year-on-year to USD207.4m. Earnings of USD96.5m were also down 27% y-o-y. That said, profit before tax was up 19% to USD65.1m mainly due to a non-cash impairment charge from 2022 and EPS was up 7.5%. Although it was a costly year, some of the damage was reduced by a 40% reduction on electricity prices, helped by the commissioning of the company’s solar farm.
Unlike many miners, CAML is cash rich with USD57.2m in the bank and has no debt (which is often not found in the same sentence as the words ‘mining company’). The company utilised some of that cash using GBP3m to buy a 28.7% shareholding in Aberdeen Minerals, a base metal exploration company exploring the Arthrath Project in Aberdeenshire, Scotland for copper, nickel, and cobalt. The investment will help Aberdeen fund a 10,000-metre drilling programme with a view to preparing a Mineral Resource Estimate statement for the project.
Management admits that its own share price disappointed in 2023. Central Asia Metals opened the week at 186p, down 25% on where it was this time last year and had been flat (give or take +1.2%) over the year-to-date. The company’s shares have ranged between 150.2p and 263p over a 52-week period. CAML has a market capitalization of GBP347.8m.
The share price has mirrored the current downbeat opinion on the wider market and reflects the depressed economic climate. In its favour, CAML is well-financed, operational and producing substantial amounts of metal to expectations. Copper pricing should improve this year, as globally less projects are coming into production, but with the transition to net zero theme, demand remains high. China will be a big player in this recovery. In the short-term zinc should also perform strongly, again as a reaction to stymied supply, however the picture is the opposite for lead where over the short-term prices may remain depressed, but over the long-term, demand, especially from the EV market, should drive prices up.
Central Asia Metals is a well run profitable operation and has engaging long-term prospects and may well, as The Armchair Trader reported in 2022 be in for more good news going forward.
