Mining

money&investing

MINING Af r i m a t ’s best deal ye t ?

A tilt into rare earths and phosphates could be (another) game-changer for one of the JSE’s savvier deal-makers

Marc Hasenfuss h as e n f u ss m @ f m .co. z a

another R265m to get it going again. Demaneng, albeit boosted by booming iron ore prices, churned operating profit of R454m in the halfyear to end August. That is an astounding payback on what were distressed assets only five years ago.

But, says Van Heerden,“Glenover is more valuable than Demaneng …this business is the real game-changer for Afrimat”.

The latest deal is two-pronged. First,there is the right for Afrimat to “m i ne”the stockpile of phosphate rock located at the Glenover m i ne for R250m (a deal to be settled in R215m cash and the balance in a share issue) and s e co nd , there is another R300m if the group takes up an option to buy Glenover (to be settled by a 50:50 split in cash and equity). For the record, Glenover is about an hour outside Thabaz i m bi and owns not only rights to mine phosphate and vermiculite but also rare earth elements. The deal lends some cutting edge to Af r i m at ’s operational profile, allowing the group to tilt at the agricultural sector (phosphates are used in fertilisers) and the electric vehicle segment (rare earths provide magnets for electric vehicles).

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 Glenover is a fairly chunky deal by Afrimat’s p r o f it - s p i n ne r s . standards, and some may question the purchase

But the group’s latest deal may well leave all price, noting the assets’dormant operation tag. these previous transactions in the shade. The value of the stockpile assets, at the end of

After prudently sitting out theSoccer World June last year, was just R27.7m and Glenover’s Cup infrastructure acquisition binge —w h ic h NAV only R38m. put a heap of building supplies counters into But Van Heerden stresses these figures are trouble —Afrimat carefully, and with minimal misleading, estimating that just the value of execution and balance sheet risk,expanded its Gle no v e r ’s higher-grade phosphate stockpile portfolio from its traditional aggregates, cement, alone could be more than the purchase price. sand and clinker businesses into a diversified He adds that there are plans to upgrade the minerals player that takes in dolomite, marble, medium- to low-grade phosphate deposits to lime, iron ore and manganese. higher-value single super phosphategrade, and

Afrimat can now add phosphates and rare then look to use new processes to extract the earths to its list of products after buying Glen - rare earth minerals from the stockpile. over and its dormant operations for R550m. Afrimat CEO Andries van Heerden, who is a “We are still doing the research and develstraight-talking execu- opment in the background, but we think that tive not known for through our beneficiation process for rare hyperbole, reckons the earths we can have a project of very efficient Glenover transaction scale. It is the most exciting project of my could be the best deal c a r e e r ,”Van Heerden says. the group has ever Afrimat is expected to provide more granular do ne . detail on these projects when it issues an

Th at ’s not a state- update on the Glenover business plan in the ment to be taken light- new year. ly, given that Afrimat’s Small Talk Daily analyst Anthony Clark estiacquisition of iron ore mates the total capital cost for Glenover at and manganese pro- R1.2bn. “On early analysis, I estimate that Glenducer Diro(now called over’s profitability at full production of the Demaneng) is already deposit will be similar to the main iron ore site the stuff of legend. business within Afrimat, a sizable future earnAfrimat bought the ings kicker,”he says. Demaneng assets out Glenover will bethe largest project that of business rescue in Afrimat will have undertaken, he says. “I’m not 2016, when it forked that concerned over project execution, though out R175m, and spent the risk that a black swan event in global bulk

STAR PERFORMER Afrimat vs JSE industrial 25 index vs JSE resources 10 index – weekly – based to 100 240 220 JSE industrial 25 index 200 JSE resources 10 index Afrimat 180 160 140 120 100 80 2019 20212020 Jul Jul Jul Source: Infront