One income stock I’ve had my eye on for a while is Central Asia Metals (LSE: CAML). In fact, if I had £500 to invest right now, I could buy 241 shares at a price of £2.07 per share.
I’ll break down the investment case below.
Copper miner
The business is a base metals producer, with its main focus on copper, as well as lead and zinc. Its primary copper operations are in Kazakhstan, with its Kounrad mine. In North Macedonia, it owns and operates its Sasa lead-zinc mine.
Commodities stocks often come under pressure during times of macroeconomic uncertainty. So I’m not surprised to see Central shares down 13% over a 12-month period. At this time last year, they were trading for 239p, compared to current levels of 207p.
I’m not concerned about this drop. In fact, I view it as a potential opportunity to buy cheaper shares.
The bull and bear case
Central Asia Metals’ fundamentals and financial position are attractive, in my view. The shares look good value for money on a forward price-to-earnings ratio of just over nine. Furthermore, a dividend yield of 8.5% is attractive. However, I’m conscious that dividends are never guaranteed.
It’s worth mentioning the business has absolutely zero debt on its books, and a very healthy balance sheet. This excites me as it means that the business can reward shareholders, plus, it can reinvest profits to drive future growth and performance.
Demand for copper should remain robust, which is good news for the FTSE AIM incumbent. This is linked to the construction, automobile, and electronics industries. As the global population increases, demand for these industries should only rise. This could help Central boost performance and returns. In 2024 alone, its Kounrad mine is set to produce 13,000 to 14,000 tonnes of copper.
From a bearish view, I’m wary of two things. Firstly, continued economic shocks hurting demand. A prime example of this is the struggling Chinese economy, which is usually a huge consumer of copper. Continued turbulence, and falling demand in one of the largest economies in the world could hurt Central Asia’s performance and returns.
The other issue is that of geopolitical tensions hurting the firm’s operations and output. Operating in regions and countries where the geopolitical picture isn’t always the easiest, comes with challenges. I’ll keep an eye on this front.
Final thoughts
The trick to investing in commodity stocks is to be prepared for a bit of a roller-coaster ride. There are definitely plus points, including soaring demand, heightened prices leading to boosted performance, and growth opportunities. However, there are also the cyclical shocks that come with investing in stocks in the industry.
As a seasoned investor, I’m prepared for the ride. I reckon Central Asia Metals is a great stock to help me boost my wealth. With its excellent fundamentals, and future prospects, I’ll be looking to buy some shares as soon as I can.
