Readymix concrete and open pit mining company Afrimat is evolving into a multiproduct company. CEO Andries van Heerden explained the company’s strategy in an interview with Moneyweb’s Simon Brown.
A deal was announced in early December whereby Afrimat was acquiring Glenover phosphate mine. The by-product is rare earths, together with a few other minerals, and vermiculite. The mine has an interesting geological formation of three different mineral types, each with its own market. The phosphates are for the fertiliser market; the rare earths are used for magnets in electric motors; and the vermiculite is for the horticulture industry.
“The interesting thing is you’ll see we did it in two phases. The first is the stockpiles on site that were manufactured many years ago – and are actually in a good condition. We have already started selling off those stockpiles. We have already found a market for the phosphate rock on the high-grade stockpile, and we’ve started earning some cash back.
“But the real business, the stuff that we are really after is going to take us about a year to get into production.”
On the philosophy of acquisitions at Afrimat, Van Heerden had the following to say: “We have a focused business-development team whose job it is to find these opportunities. They have a very good pipeline. Unfortunately, typically one’s success rate or your hit rate is actually low. There’s always something there that you find that makes you turn away. But there are still many, many opportunities out there.”
This is about turning away the ones that wouldn’t have worked out, which is a large part of the skills set. “Every one of us, myself included, tends to fall in love with a project when you work on it a little bit. Over the years, we’ve developed a very nice diversity in the team where we look at all the different angles, whether market, operational or financial. We make sure that we look at all the angles and rather walk away. I have a saying: ‘I’ve never lost money on a deal I didn’t do’.”
Afrimat acquired a manganese mine which was announced earlier this year – which is moving forward with timelines stretching into next year. “We have done a lot of good work on it and optimised the business model. As we speak, we’ve got the drills back on site to do a little more exploration, because we think that there might be more in there than we initially thought.”
These acquisitions reduce Afrimat’s exposure to ferrous metals, as it evolves into a multi-commodity business. It has come a long way from when Afrimat back in the day was just an aggregates business. This evolution has been achieved by a number of acquisitions.
Afrimat recently did a virtual presentation on its Jenkins mine and Nkomati Anthracite Mine in which it was mentioned that those projects had been successfully implemented, bedded down and are operating at full steam.
“Jenkins is an absolute jewel. We managed to get that because it’s a very shallow deposit and it’s direct shipping. Also there’s not a lot of plant and equipment necessary. It’s just mobile crushers that we moved in there. So literally two months after we paid for the business we managed to generate revenue from it. So that one’s up and running very nicely and ramping up ahead of schedule.
“And then Nkomati has turned around, and November was the fifth month in a row that we made a very decent profit out of there,” said Van Heerden.