Mid-tier miner, Afrimat’s success is underpinned by its diversified portfolio, but is there a threshold to the number of acquisitions to be made? According to CEO Andries van Heerden, although the company currently has a really good product split, there is definitely capacity for one or two more product lines to be added to the business. “Specific commodities that we do not have in the portfolio, yet.” By Nelendhre Moodley.
“We can still grow because our base is relatively small. Importantly, growth is a key part of Afrimat’s DNA and our intention is to continue to grow the business,” he explains.
In a recent turn of events, Afrimat announced the acquisition of Lafarge South Africa Holdings (LSA), including all its subsidiaries (LSA Group) for $6 million. The acquisition will be housed in Afrimat’s Construction Materials division, which together with its subsidiaries (the Afrimat Group) supply a wide variety of aggregates and concrete-based products to the market.
“A key focus of Afrimat is our conscious operational efficiency initiatives, which are aimed at expanding volumes, reducing costs, and developing the required skill levels across all staffing categories. This exciting deal forms part of the Afrimat Group’s ongoing diversification strategy and will increase Afrimat’s offering in the construction industry by expanding our quarry and readymix operations nationally, and allowing for Afrimat to enter the cement value chain competitively.”
Since its inception in 2006, Afrimat has made several acquisitions including, amongst others, the Demaneng iron-ore mine in 2016, Coza Mining which owned three mines namely Jenkins, Driehoekspan and Doornpan, in 2020, and the Nkomati anthracite mine in 2021.
Afrimat’s business consists of Construction Materials, Industrial Materials, Bulk Commodities and Future Materials and Metals segments with a strong portfolio of producing assets and a robust pipeline of future projects, which are in the early stages of development.
“We have a pipeline of existing business, such as Jenkins, to deliver growth for the short-to-medium term and our Future Minerals and Metals projects for the longer-term. This talks to a production line-up for today, tomorrow and the years ahead.”
Product demand
Afrimat’s Bulk Commodity division currently produces three key minerals, namely iron-ore and anthracite for which demand remains strong and manganese, for which demand is currently soft.
“Although the dollar price has come down from its highs of a year ago, the price of iron-ore remains reasonably high for both the international and domestic markets. We are also happy with the price of anthracite. The global demand for anthracite remains solid especially given that anthracite was largely sourced from Russia in the past. However, our biggest challenge remains ramping up our mine to reach its full potential and we are, in fact, in the final stages of bringing the Nkomati anthracite project into full production.”
For manganese, Afrimat is in the early stages of production; however, global demand for the commodity remains subdued.
“We have only just started producing manganese and I believe that there is an imbalance in the demand supply fundamentals for manganese globally, which resulted in demand for the product being rather soft.”
Afrimat produces just over 2 million tonnes per annum (mtpa) of iron-ore and has reached steady state production from its anthracite mine, which is designed to deliver 1.2 mtpa of run of mine material and between 700 000 - 800 000 tpa of saleable product while manganese is at early stages of production, with tonnages yet to be finalised.
“The manganese mine is a new deposit at the early stages of production – we will be able to advise on production rates at a later stage.”
Future Metals
Future Materials and Metals is the miners most recent addition to the group’s portfolio of assets with Glenover, which produces phosphate, vermiculite and rare earth elements, being the segment’s first project.
The Future Materials and Metals portfolio diversifies Afrimat’s exposure wider than ferrous metals and aligns it to global trends, such as the advancement of technology for decarbonisation (through rare earth minerals) and food security (through fertiliser products).
“Glenover is a greenfield project that started its first production during this year and is currently in the ramp-up phase. The project contains three essential businesses – fertiliser for agricultural applications; vermiculite for various applications from industrial to horticulture; and rare earth elements, supporting technological advancements such as high-strength permanent magnets and battery technology.”
Van Heerden explains that from the Future Materials and Metals business, the company has started producing high grade phosphate and is targeting the organic food production market.
“This is a new and emerging market for the environmentally conscious farmer and while this niche market is still in its infancy stage, it is growing by leaps and bounds. Although the market is relatively small in South Africa, internationally, it is a market that is expanding rather quickly. Our next step involves completing construction of a single super phosphate (SSP) plant, which is currently underway with commissioning scheduled for the second half of this year. We plan on ramping the plant to full production in a year from now.”
Afrimat will produce a total of 100 000 tpa of phosphate. Total capex for the phosphate project, which includes the purchase price of R550 million, and development of the SSP plant amounts to roughly R800 million.
According to Van Heerden, the company has a competitive advantage over most fertilizer companies as the JSE-listed entity owns the primary source of production.
Although the company is negotiating off-take agreements for its phosphate material, no agreements have as yet been inked. “Once we are producing phosphate, we will be in a position to provide material to potential clients to test, and only then will we be able to finalise any off-take agreements,” says Van Heerden.
Meanwhile, the ‘exciting’ rare earth elements segment is at infancy stage.
“We have banked the project on the phosphates and the vermiculite, with the rare earths portfolio really a cherry on top,” says Van Heerden.
The life of mine for phosphate and rare earths is pegged at more than 20 years while the rare earth elements have an estimated 10-year LOM.
The Future Materials and Metals segment generated revenue of R25,2 million, with start-up losses amounting to R11,4 million for the year ended 28 February 2023.
“Looking ahead, careful project implementation and the rollout of a well thought-through strategy for Glenover will be a top priority. This is expected to include vermiculite processing, optimisation of the high-grade phosphate project, and the implementation of the super single phosphate project. These product lines will add further volumes in future,” says Van Heerden.
Bulk Materials
Afrimat’s Bulk Commodity business remains the backbone of the company, consisting of Demaneng and Jenkins iron ore mines, and the Nkomati anthracite mine, which together contributed a whopping 81,9% to the Group’s operating profit.
“This excellent performance was largely due to increased volumes from Jenkins, the successful turnaround of Nkomati, and cost-saving initiatives.”
The Nkomati anthracite mine has turned the corner from initial start-up losses to profitability, contributing 23,1% to the segment’s revenue for the year. It produces a high-quality product sold into the local market, and is recognised as a consistent, reliable supplier of anthracite. During F2023, volumes at Nkomati amounted to 317 943 tonnes (F2022: 219 845 tonnes). Furthermore, an exciting new operational strategy is being implemented by the mine, which is expected to improve performance significantly in the near future.
Van Heerden explains that the long-term sustainable life of mine plan is being enhanced through the opening of two opencast pits and the continued development of the underground operations.
“The first anthracite from these developments was extracted early in the new financial year. These planned new sources will enhance the mine’s production capacity significantly.”
Afrimat also started the development of the underground entrance, which will allow the company to add new production. Moreover, the company has upgraded the washing plant and beneficiation blocks to handle additional product volumes.
The miner invested an estimated R500 million for the development of the open-cast pits, the underground entrances and upgrades to the washing plant and beneficiation blocks.
Afrimat is also gearing up to bring the Driehoekspan and Doornpan iron ore assets online, once Demaneng volumes begin to reduce. “This should be within the next three years.”
“We continue to focus on sustainable diversification in all five segments. In the new Future Materials and Metals segment, the priority is to ramp up the production of high-grade phosphate and to execute the next stages of the project as seamlessly as possible, while the Bulk Commodities segment has implemented an internal efficiency drive with new technology, which has proven to be highly successful,” concludes Van Heerden.
