Key message: The medium-term investment case remains linked to the internally funded volume growth in iron ore, manganese and industrial minerals.

  • Afrimat released a Trading Statement for FY22. HEPS is expected to be between 526-570c (+19-29%).
  • This implies relatively flat 2H compared to 1H FY22. While this is lower than our previous forecast, some of the factors impacting the 2H performance are:
    • sales from the Jenkins iron ore mine to AMSA started but are still ramping up. We had assumed 2H FY22 would contribute more but the annual sales contract to AMSA runs from July 2021 to June 2022 and much of the stated 650kt to be delivered will run into 1H FY23.
    • Transnet issues impacted the 2H iron ore export performance
    • iron ore prices fell below US$100/t during 3Q FY22 with high shipping costs further impacting the net price
    • the above factors do not change our FY23 outlook and are linked to timing of the Jenkins ramp-up and iron ore price volatility
  • Gearing is expected to peak at R700-800m including the Glenover purchase. Approx. R750m capital outlay will be required for the Gravenhage/Glenover acquisition and development.
  • We pullback our FY22 HEPS forecast, mainly due to the Jenkins iron ore tonnage ramping up towards June 2022 (not the February 2022 YE) and what appears to be a greater impact from the iron ore price slump late last year.
  • However, we largely maintain our FY23 and FY24 forecasts. The medium-term investment case for Afrimat remains linked to the internally funded volume growth achievable through the iron ore and manganese operations – with iron ore volumes growing significantly in FY23 and the new manganese operation expected to contribute from FY24.
  • We maintain our Sum-of-the-Parts valuation at R110.

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