Central Asia Metals (LON:CAML)
Central Asia Metals (LON:CAML) has delivered another quarter of strong production with QoQ increases in copper, lead and zinc production of 11%, 3% and 5% respectively and annual increases of 3% and 8% for copper and zinc while lead production was marginally lower YoY by -3%. With Q3 2019 production of 4kt of copper, 6.2kt of zinc and 7.4kt of lead CAML is well on track to meet the initial guidance and our production estimates for the full year 2019.
At Kounrad, nine-month production of 10.6kt is broadly unchanged YoY while sales of 10.1kt were lower due to a delay in the timing of sales in Q3. We expect this to be resolved over the balance of 2019. Our forecast of 13.4kt for the full year now appears conservative given that CAML has now produced 79% of our estimate, however, company guidance remains unchanged at 13-13.5kt of copper and there is typically a seasonal impact in Q4 due to the winter and therefore we maintain our forecast. We also note that CAML completed preparations increasing flow capacity at Kounrad with increased pipeline diameter on certain sections as well improvements to the collector trenches around the dumps.
At Sasa ore mined of 207kt was up 2.3% QoQ and 0.3% YoY while plant feed was also up 3% QoQ and 2% YoY to 210.2kt. As we have forecast, the initial changes to operating practices which are already being implemented due to the life of mine review which is currently underway. Zinc grades of 3.37 % were up in the quarter having averaged 3.31% YTD while recoveries further improved to 87.3% having averaged 86.9% YTD. This is also likely a result of the life of mine review improvements to the flow sheet and the successful integration of a stirred media detritor into the circuit. Lead grades were marginally lower at 3.71% compared to 3.74% YTD while lead recoveries were maintained through Q3 at 94.4%. CAML has now produced 77% of our zinc forecast of 22.9kt and 75% of our lead forecast of 28.9kt and we therefore leave our estimates unchanged.
Having delivered a further period of robust operating performance we continue to expect CAML to deliver strong earnings performance through the balance of 2018 while trading on a dividend yield of 7% and on a one yr forward EV/EBITDA multiple of 4.6x we continue to believe there is significant upside potential in the shares.
We reiterate our Buy recommendation and 292p target price which implies 44% upside and 51% on a total return basis.