Afrimat’s commodity and industrial mineral diversification is paying dividends

Published May 20, 2022


AFRIMAT, the open-pit mining company, reported robust financial results for the year to February 28 due to high iron ore prices and a return to pre-Covid volumes in its construction materials and industrial minerals segment.

Revenue increased 26.7 percent to R4.7 billion. Operating profit increased by 25.1 percent to R1.1bn. A final dividend of 146 cents per share brought the total dividend for the year to 186c versus 148c in 2021. Headline earnings a share increased by 22.9 percent to 542.9c.

Group CEO Andries van Heerden said yesterday the fast turnaround of Nkomati Anthracite mine and the establishment of Jenkins mine also helped to generate strong cash flows.

The group’s record of augmenting acquisitions as part of its diversification strategy, and cost management and efficiency improvement initiatives, enabled it to continue delivering good growth, he said.

Future growth, sustainability and markets were enhanced by new long-life projects such as the recently announced Glenover phosphate, rare earth minerals and vermiculite project, and the Gravenhage manganese mine.

“The latter is due to contribute to the 2024 financial year, while Driehoekspan and Doornpan are iron ore reserves that will come online in the future to ensure the sustainability of our iron ore export business,” he said.

The net debt:equity ratio remained low, increasing to 12.1 percent from 3.8 percent because of the acquisition of Coza Mining, the Glenover transaction, and capital funding for the Nkomati and Jenkins mining assets.

Executive director Collin Ramukhubathi said they did not anticipate many acquisitions in the new financial year, as the Glenhove and Gravenhage projects would require about R2.7bn in funding, and the group aimed to keep debt to equity levels well within targeted levels.

This, however, would not stop the team from assessing opportunities that might arise, he added.

Van Heerden said the bulk commodities segment, consisting of the Demaneng and Jenkins iron ore mines, and the Nkomati anthracite mine, contributed 74 percent to group operating profit.

“Nkomati was loss-making for the first five months, but turned profitable from August 2021 onwards, recovering the biggest part of the losses of the first five months,” he said.

The industrial minerals businesses delivered returns comparable to pre-Covid-19 volumes across all regions, lifting operating profit 70.2 percent to R94.4 million.

The feed lime business (Agri Lime) acquisition strengthened Afrimat’s footprint in the agricultural lime market in support of deeper diversification in this segment.

Similarly, the construction materials segment experienced a return to pre-Covid-19 volumes, resulting in a significant 83.5 percent increase in its operating profit to R192.5m.

“This is primarily a result of general volumes recuperating to 2019 levels, rather than a rise in construction activity, as well as a strong focus on operational efficiencies,” he said.

Ramukhubathi said they were not optimistic about strong growth in this segment, as evidenced by the SA National Roads Authority’s cancelling last week of some R17bn of new roads projects.

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