CFO Pieter de Wit says Gravenhage acquisition will propel Afrimat to mid-tier miner
The acquisition of Gravenhage will increase Afrimat’s scale in the ferrous-metal value chain.
Afrimat’s recent acquisition of Gravenhage adds another commodity, manganese, to the open-pit mining company’s diversified bulk commodities offering and propels it into the mid-tier mining space.
This is according to CFO Pieter de Wit, who added that the Gravenhage manganese mining right and associated assets in the Northern Cape would make a significant contribution to profits when it is successfully developed and becomes operational.
“It would further increase Afrimat’s scale in the ferrous-metal value chain and provide further exposure to foreign currency denominated earnings,” he said.
The resource is well positioned within Afrimat operationally as it is not dissimilar to its existing operations, given the process, and is considered attractive in both size and quality.
Gravenhage is a long-life, near-development manganese resource situated in the northern part of the Kalahari manganese field, approximately 120km from Afrimat’s existing Demaneng iron ore mine.
Current studies show an extensive life of mine in excess of 20 years, with the technical and economic feasibility of the open cut project indicating potential for underground mining.
Afrimat has been able to successfully invest into commodities that generate a strong cash flow – cash that the group has in turn spent on making further strategic acquisitions to grow cash incrementally.
“We did see a significant positive impact on Afrimat’s earnings for the financial year ending 28 February 2021. In addition to the strong performance from our iron ore mine, our construction materials segment as well as our industrial minerals segment recovered well. Despite starting the year in the hard lockdown of Covid-19 we managed to achieve a growth of 47.5 percent in operating profit for the group,” Pieter said.
“Although we will only pay for the first tranche of the acquisition by the end of the year, the favourable trading conditions have enabled us to generate sufficient cash to fund the acquisition price,” he added.
Operational synergies with the Demaneng iron ore mine are expected to be realised, and a plan is in place to accommodate logistics to extract manganese product from Hotazel to ports for outbound international markets.
Afrimat is purchasing the Gravenhage manganese mining right and associated assets from Aquila Steel and Rakana Consolidated Mines for a total purchase consideration of roughly R650 million.
There are conditions precedent that include approval in terms of section 11 of the Mineral and Petroleum Resources Development Act, Competition Commission approval, the granting of a water use licence, and approval having been obtained by Aquila Steel from the Chinese state-owned Assets Supervision and Administration Commission of the State Council for the sale of the assets and the assumption of the assumed liabilities as contemplated in the agreement.