Central Asia Metals plc (AIM: CAML) reported a Q1 2017 production update for the Kounrad dump leach, solvent extraction and electro-winning (“SX-EW”) copper recovery plant in Kazakhstan (“Kounrad”).
Kounrad Q1 2017 copper production of 3,357 tonnes is 4.7% higher than that achieved in Q1 2016. Copper sales during Q1 2017 were 2,839 tonnes (+11.3% vs. Q1 2016), and these sales were predominantly through the Company’s offtake partner, Traxys.
During the quarter, CAML carried out a piping modification that allowed the operation of a hybrid intermediate leaching circuit, enabling a higher overall recovery of copper from the covered winter blocks. The impact on the pregnant leach solution (“PLS”) grade into the SX-EW plant was positive and resulted in record copper output for the month of February of 1,074 tonnes, a 24% increase on February 2016 production.
Kounrad’s copper continued to be of a high quality, with the renewal of 850 cathodes in the EW facility as partial replacement of the circuit inventory undertaken during the quarter. A further 1,400 pieces are expected on site in July and will be fitted shortly thereafter, thus completing the first five year replacement programme of all anodes and cathodes.
Final preparations were undertaken on the Western Dumps pipeline and pumping system in readiness for commissioning of the Stage 2 Expansion in April 2017. Taking seasonal variations into account, the Company is on track to achieve its 2017 copper production guidance of between 13,000 and 14,000 tonnes.
“Central Asia Metals Ltd (LSE: CAML) operates a copper project in Kazakhstan. The company has an unusual problem. It’s too profitable. Almost any new project would dilute the rates of return the company generates from its ultra-low cost Kounrad project”, fool.co.uk commented.
In 2016, the firm’s copper production rose by 16% to 14,020 tonnes. Revenue of $66.7m generated an operating profit of $33.0m, giving a stunning operating margin of 48.7%. Shareholders will reap the benefit of this strong performance. As much as 31% of last year’s revenue will be returned to shareholders by way of a total dividend of 15.5p. This gives a yield of 6.7% at the current share price of 229p.
This isn’t a one-off performance. The company’s dividend policy is to return at least 20% of revenue from Kounrad to shareholders each year. Central Asia Metals floated in London in 2010. By September 2015, the group had already returned the entire amount it raised in the IPO to shareholders through dividends and share buybacks.
Although Kounrad won’t last forever, in 2016 the company completed the majority of an expansion project that should allow the mine to remain in operation beyond 2030.
“Central Asia’s shares trade on a 2017 forecast P/E of 10.2 with a prospective yield of 6.2%. Any downside risks from copper prices or exchange rates are limited, given the firm’s profitability and cash generation. I believe the stock remains an attractive buy”, fool.co.uk noted.