money&investing MINING
Afrimat’s best deal yet? A tilt into rare earths and phosphates could be (another) game-changer for one of the JSE’s savvier deal-makers Marc Hasenfuss hasenfussm@fm.co.za
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December 16 - December 22, 2021
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ý Diversified minerals producer Afrimat has done some cracking deals over the past dozen years, mostly snapping up neglected or troubled assets and quickly turning these into reliable another R265m to get it going again. Demaneng, profit-spinners. albeit boosted by booming iron ore prices, But the group’s latest deal may well leave all churned operating profit of R454m in the halfthese previous transactions in the shade. year to end August. That is an astounding payAfter prudently sitting out the Soccer World back on what were distressed assets only five Cup infrastructure acquisition binge — which years ago. put a heap of building supplies counters into But, says Van Heerden, “Glenover is more trouble — Afrimat carefully, and with minimal valuable than Demaneng … this business is the execution and balance sheet risk, expanded its real game-changer for Afrimat”. portfolio from its traditional aggregates, cement, The latest deal is two-pronged. First, there is sand and clinker businesses into a diversified the right for Afrimat to “mine” the stockpile of minerals player that takes in dolomite, marble, phosphate rock located at the Glenover mine lime, iron ore and manganese. for R250m (a deal to be settled in R215m cash Afrimat can now add phosphates and rare and the balance in a share issue) and second, earths to its list of products after buying Glenthere is another R300m if the group takes up an over and its dormant operations for R550m. option to buy Glenover (to be settled by a 50:50 Afrimat CEO Andries van Heerden, who is a split in cash and equity). straight-talking execuFor the record, STAR PERFORMER tive not known for Glenover is about an hyperbole, reckons the Afrimat vs JSE industrial 25 index vs JSE resources hour outside Thaba10 index – weekly – based to 100 Glenover transaction zimbi and owns not could be the best deal only rights to mine 240 the group has ever phosphate and vermi220 JSE industrial 25 index done. culite but also rare JSE resources 10 index That’s not a stateearth elements. 200 Afrimat ment to be taken lightThe deal lends 180 ly, given that Afrimat’s some cutting edge to 160 acquisition of iron ore Afrimat’s operational and manganese proprofile, allowing the 140 ducer Diro (now called group to tilt at the 120 Demaneng) is already agricultural sector the stuff of legend. (phosphates are used 100 Afrimat bought the in fertilisers) and the 80 Demaneng assets out electric vehicle segof business rescue in ment (rare earths proJul Jul Jul 2016, when it forked vide magnets for elecout R175m, and spent tric vehicles). Source: Infront
Glenover is a fairly chunky deal by Afrimat’s standards, and some may question the purchase price, noting the assets’ dormant operation tag. The value of the stockpile assets, at the end of June last year, was just R27.7m and Glenover’s NAV only R38m. But Van Heerden stresses these figures are misleading, estimating that just the value of Glenover’s higher-grade phosphate stockpile alone could be more than the purchase price. He adds that there are plans to upgrade the medium- to low-grade phosphate deposits to higher-value single super phosphate grade, and then look to use new processes to extract the rare earth minerals from the stockpile. “We are still doing the research and development in the background, but we think that through our beneficiation process for rare earths we can have a project of very efficient scale. It is the most exciting project of my career,” Van Heerden says. Afrimat is expected to provide more granular detail on these projects when it issues an update on the Glenover business plan in the new year. Small Talk Daily analyst Anthony Clark estimates the total capital cost for Glenover at R1.2bn. “On early analysis, I estimate that Glenover’s profitability at full production of the deposit will be similar to the main iron ore site business within Afrimat, a sizable future earnings kicker,” he says. Glenover will be the largest project that Afrimat will have undertaken, he says. “I’m not that concerned over project execution, though the risk that a black swan event in global bulk
