4 May 2025
Ticker: CAML (AIM UK)
Share price: £1.53
Mkt Cap: £285mn ($379mn)
Net Cash: £50mn ($67mn)
EV: £235mn ($312mn)
Share price: £1.53
Mkt Cap: £285mn ($379mn)
Net Cash: £50mn ($67mn)
EV: £235mn ($312mn)
As part of my search for companies with high Net Cash positions, I recently came across a UK-listed Central Asian Metals (CAML).
A few points make it a highly compelling case, at first glance.
•Net cash of $67.1mn accounts for 18% of the company’s Mkt Cap (£288mn).
•The company generated $65.7mn (excluding growth capex), which amounts to 21% FCF yield (relative to EV of $316).
•CAML operates one of the lowest-cost copper assets, Kounrad. This operation involves the recovery of copper from waste dumps created by historical mining activities over many decades. This process requires less operations and energy than traditional mining, especially underground mining. As a result, Kounrad’s cash costs stand at $0.8/lb, which is ahead of c. 90% of all other current copper projects globally. An average cash cost is c. $2/lb, with the 10% highest-cost producers operating at over $3/lb.
•Peak Capex following the completion of a major investment project. The company went through an active 4-year investment phase. CAML invested c. $40mn in building the Dry Stack Tailings plant at its second asset (Zinc and Lead mining in Northern Macedonia). This project is mostly finished, with the remaining $3-4mn planned for 2025. From my experience, investing in companies at the end of their investment cycle usually leads to better shareholder returns. Such businesses enjoy an inflexion in their FCF profiles, benefiting from rising production volumes and/or higher efficiency and falling capital expenditure.
•The company has been a consistent dividend payer, with a formal policy of distributing 30-50% of FCF in dividends but often paying more. For 2024, the company announced a full-year dividend of 18p (12% yield), or 63% of annual FCF. CAML raised $60mn at its IPO in 2012 (and an additional $153.5mn in 2017 to fund the Macedonian acquisition). Since 2012, it has returned c. $380mn in dividends (188p per share) and paid back $266.6mn of debt. With copper prices rising this year, higher volumes in Northern Macedonia and lower capex, CAML will likely pay even higher dividends in 2025 in the absence of a significant M&A deal.
•Copper is a strategic commodity with a favourable long-term price outlook. It plays a critical role in electrification, and its production is concentrated in a handful of large deposits. As with many other commodities, there has been a period of low exploration and underinvestments. As the world is reducing carbon emissions, power generation, industrial processes, housing, and consumption patterns favour wider electricity use (especially low- and zero-carbon like nuclear and renewables). Copper is one of the best electricity conductors and hence plays a critical role in any energy transition. A standard EV, for example, requires 3-5x more copper than an ICE-based car. On top of this, western countries need to simply replace ageing grids (built over 50 years ago) to cope with higher electricity demand.
However, after spending a few days on deeper research and meeting with management at a group event earlier this week, I came to a slightly different conclusion. I am happy to keep the stock on my watchlist, but I am not ready to buy it now. If you are a Premium Subscriber, you can learn more about specific reasons that stop me from buying the stock today.
A few points make it a highly compelling case, at first glance.
•Net cash of $67.1mn accounts for 18% of the company’s Mkt Cap (£288mn).
•The company generated $65.7mn (excluding growth capex), which amounts to 21% FCF yield (relative to EV of $316).
•CAML operates one of the lowest-cost copper assets, Kounrad. This operation involves the recovery of copper from waste dumps created by historical mining activities over many decades. This process requires less operations and energy than traditional mining, especially underground mining. As a result, Kounrad’s cash costs stand at $0.8/lb, which is ahead of c. 90% of all other current copper projects globally. An average cash cost is c. $2/lb, with the 10% highest-cost producers operating at over $3/lb.
•Peak Capex following the completion of a major investment project. The company went through an active 4-year investment phase. CAML invested c. $40mn in building the Dry Stack Tailings plant at its second asset (Zinc and Lead mining in Northern Macedonia). This project is mostly finished, with the remaining $3-4mn planned for 2025. From my experience, investing in companies at the end of their investment cycle usually leads to better shareholder returns. Such businesses enjoy an inflexion in their FCF profiles, benefiting from rising production volumes and/or higher efficiency and falling capital expenditure.
•The company has been a consistent dividend payer, with a formal policy of distributing 30-50% of FCF in dividends but often paying more. For 2024, the company announced a full-year dividend of 18p (12% yield), or 63% of annual FCF. CAML raised $60mn at its IPO in 2012 (and an additional $153.5mn in 2017 to fund the Macedonian acquisition). Since 2012, it has returned c. $380mn in dividends (188p per share) and paid back $266.6mn of debt. With copper prices rising this year, higher volumes in Northern Macedonia and lower capex, CAML will likely pay even higher dividends in 2025 in the absence of a significant M&A deal.
•Copper is a strategic commodity with a favourable long-term price outlook. It plays a critical role in electrification, and its production is concentrated in a handful of large deposits. As with many other commodities, there has been a period of low exploration and underinvestments. As the world is reducing carbon emissions, power generation, industrial processes, housing, and consumption patterns favour wider electricity use (especially low- and zero-carbon like nuclear and renewables). Copper is one of the best electricity conductors and hence plays a critical role in any energy transition. A standard EV, for example, requires 3-5x more copper than an ICE-based car. On top of this, western countries need to simply replace ageing grids (built over 50 years ago) to cope with higher electricity demand.
However, after spending a few days on deeper research and meeting with management at a group event earlier this week, I came to a slightly different conclusion. I am happy to keep the stock on my watchlist, but I am not ready to buy it now. If you are a Premium Subscriber, you can learn more about specific reasons that stop me from buying the stock today.
