Central Asia Metals (LON:CAML) has reported Q1 2024 production results and as a result our full year forecasts are unchanged. Output across the three metals was down QoQ and YoY due to seasonal factors while management has highlighted that higher production at Sasa is due once construction is complete.
Copper output of 3.1kt was down 6% YoY and 9% QoQ with a combination of seasonal factors and a historically strong Q1 2023 highlighting the reduction. CAML is, however, on track for our target of 13.5kt which is within management guidance.
At Sasa lower throughput of 184kt, down 6% YoY and 12% QoQ, was the main driver of lower zinc and lead output as zinc grades of 3% maintained the recent higher grade trend while lead grades of 3.75% recovered from the dip in Q4 2023 to 3.59%. Recoveries also improved notably with lead rising to 94.7% from 93.3% and zinc to 85.9% from 85.7%. Zinc production of 4.7kt was down 4% YoY and 13% QoQ with our full year forecast of 20.5kt. Lead production of 6.5kt was down 1% YoY and 7% QoQ with our full year forecast of 27.9kt. Lower throughput was due to the final stages of the mine method transition work and management expect to make this up in the latter part of the year.
As highlighted at the recent results, Central Asia Metals has passed peak capital intensity for the Sasa mine method transition and we forecast a 40% increase in FCF YoY to US$70m as a result of lower capital spending, rising commodity prices and the inherently low cost base of the two operations. The stock is up 33% from the Q1 2024 low with the copper and zinc prices up 15% each to US$9,390/t and US$2,645/t but continues to trade on EV/EBITDA of 3.6x for 2024F. Our forecast dividend is at the top end of the policy range of 30-50% of FCF implying 7.5% yield, however, with the company debt free and in the absence of a transformational acquisition we believe management has flexibility for further above policy payouts. We also highlight that exploration is now planned for the UK and Kazakhstan brining new catalysts to the stock which have been missing in recent years.
We reiterate our Buy recommendation and 275p target price.
Central Asia Metals PLC (LON:CAML) is a copper, zinc and lead production and exploration company, with operations in Kazakhstan and North Macedonia.
