Afrimat is WhyAfrica’s Pick of the week

Afrimat has recently diversified their portfolio into commodities like iron ore. Image credit: Afrimat

By Leon Louw founder and editor of WhyAfrica

29 May 2021 – Afrimat started off as an aggregate producer in South Africa. The company’s growth over the last few years has been phenomenal. Afrimat’s latest results are impressive, and with new acquisitions, they are diversifying into several other exciting commodities. Afrimat is WhyAfrica’s Pick of the Week.     

Strong performance drives Afrimat to new highs

Afrimat delivered resilient results despite the effects of the sudden and unexpected global Covid-19 pandemic and the hard lockdown levels imposed during the first half of its financial year.

Revenue increased by 11,8% from R3,3-billion to R3,7- billion and operating profit rose an impressive 47,5% from R601,0-million to R886,3-million. Headline earnings per share grew by 27,0% from 347,7 cents to 441,7 cents, while net cash from operating activities was up 13,4% to R767,6 million, resulting in an improvement of the net debt:equity ratio from 8,2% in the prior year to 3,8% in the current year.

According to Group CEO, Andries van Heerden, the disruptions caused by the pandemic had been swiftly countered by Afrimat’s hands-on management team, who implemented proactive measures to manage and minimise the impact.

“Our strategy of conscious diversification definitely came to the fore during this time, supporting our overall profitability and ability to generate cash. Fortunately, both the Construction Materials and Industrial Minerals segments returned to profitability once lockdown levels were lifted, continuing to deliver good results for the second half of the financial year,” says van Heerden.

Diversification entrenched with more acquisitions

In 2020, Afrimat purchased the remaining shares in Unicorn Capital Partners, with the ultimate result of this process leaving Afrimat with 100% of Nkomati Anthracite. In addition, the company is in the final stages of getting the Jenkins iron ore mine, part of the Coza acquisition in the Northern Cape, up and running, with the mining license having recently been approved. Van Heerden says that Jenkins will contribute to the group in the second half of the coming financial year. Product from this iron ore mine will initially be for the inland market.

Last week, Afrimat announced their biggest deal to date, the R650- million acquisition of the Gravenhage manganese mining right and associated assets, also in the Northern Cape.

In a statement at the time of the announcement, van Heerden said that there are many positives to the acquisition, the first being that Afrimat will be adding another commodity namely manganese, to its diversification strategy within the Bulk Commodities segment, and the second being that this acquisition would propel Afrimat into the mid-tier mining space.

He added that the successful development of Gravenhage would increase the group’s scale in the ferrous-metal value chain and provide further exposure to foreign currency denominated earnings.

Gravenhage is a long-life, near-development manganese resource situated in the northern part of the Kalahari Manganese field approximately 120km from Afrimat’s existing Demaneng iron ore mine. Current studies show an extensive Life of Mine of more than 20 years. A Definitive Feasibility Study was finalised confirming the technical and economic feasibility of the Gravenhage Manganese Project based on an initial open cut operation with the potential for subsequent underground mining.

The resource and its significant potential have been well defined by continued exploration drilling. “The successful development of Gravenhage will increase our scale in the ferrous-metal value chain and provide further exposure to foreign currency denominated earnings,” says van Heerden.

Operational synergies with the Demaneng iron ore mine are expected to be realised, and a plan is in place to accommodate logistics to extract manganese product from Hotazel to ports for outbound international markets. Afrimat already has an excellent working relationship with Transnet through Demaneng and it is envisaged that the further co-operation of Transnet as a partner to enable new entrants like Afrimat into the manganese sector, will be forthcoming.

Van Heerden makes it clear that Afrimat is passionate about the longer-term contribution it will be able to make to the immediate local community, the Northern Cape province and in turn the South African economy through its dedication to job creation and skills development and transfer.

Van Heerden says that the manganese price has lagged other commodity prices, such as iron ore. “We will ensure from the outset that the mine will remain profitable even at the bottom end of a commodity cycle,” he says.

Afrimat purchased Gravenhage and associated assets from Aquila Steel and Rakana Consolidated Mines for a total purchase consideration of about R650-million.

Van Heerden says that Afrimat remains well positioned to capitalise on strategic initiatives and future opportunities.

“Our future growth will still be driven by the successful execution of our proven strategy, our recent acquisitions and by bringing a wider product offering to the market.”

“While our pipeline of possible future opportunities is exciting, we remain fully cognisant of operational efficiency initiatives that are aimed at expanding volumes, reducing costs and developing the required skill levels across all employees, which remains a key focus for us.”

“Our mines and quarries are established as efficient low-cost operators, which serve as a hedge against volatility and economic impacts, and this coupled with a high-quality product and thoughtful execution will ensure that we continue to take advantage when the cycle is high and bank cash to grow further,” van Heerden concludes.

Leon Louw is the founder and editor of WhyAfrica. He specialises in natural resources and African affairs.        

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