Central Asia Metals fired up by growth plan

Copper producer signs up new project and nears development decision on another asset
Thursday 01 Dec 2016 Author: Daniel Coatsworth

The future is starting to look very interesting for copper producer Central Asia Metals (CAML:AIM).

Having essentially been a single asset business since joining the stock market in 2010, the £251m cap group now has two additional projects that could significantly enhance the amount of metal it produces in the medium term.

CAML - Flexible Chart

Central Asia Metals’ share price has recently been given a boost by a surge in the copper price. The commodity price improvement should result in higher free cash flow from its flagship Kounrad project in Kazakhstan.

New project

The company has announced a deal to buy 80% of an exploration project in Kazakhstan called Shuak. It is required to spend $2m on exploration over the next five years to gain ownership.

Central Asia Metals has run some material from trial mining by the previous owner through its processing plant at Kounrad. It has proved the material is good enough to be run through the same leaching process as used at Kounrad.

Shuak has been subject to significant amounts of exploration in the 1970s and 1980s, yet it is nowhere near ready to start production according to business development director Gavin Ferrar.

He says Central Asia Metals will undertake trenching and drilling in the near term with a view to publish a resource statement at the end of 2017. ‘We expect to undertake a study in two to three years’ time and then a construction decision can be made,’ adds Ferrar.

Searching far and wide

Central Asia Metals has been seeking growth projects for some time. Ferrar says the company has looked at many projects that could involve reprocessing mine waste, as per the set-up at Kounrad. ‘We’ve looked at waste dumps in Kazakhstan, Chile and Peru; none of them are nearly as attractive as Kounrad.’

The most advanced project under consideration is Copper Bay in Chile. Central Asia Metals should soon announce whether it will develop this project, in which it currently has a 75% stake.

A definitive feasibility study is expected to be finished next month with an announcement from the company likely in early 2017. Permitting could take another six to 12 months, says Ferrar.

The business did have a several Mongolia-based exploration projects when it floated six years ago but these gradually fizzled away.

Although the growth projects change its risk profile, we remain positive given the company’s solid track record. Buy at 224p.

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