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

  • Afrimat released FY22 results, with HEPS up 23% to 543c off a 27% and 24% increase in revenue and operating profit respectively. A total dividend of 186c was declared for the year.
  • Afrimat continues to have a strong volume growth profile, with the following operations adding to the forecast volumes:
    • the Jenkins iron ore mine should ramp up to 1mt for FY23 (from 444kt in FY22), taking the total iron ore volumes from 860kt in FY21 to almost 2mt in FY23.
    • the Gravenhage manganese mine is forecast to start production by the end of FY24.
    • the Nkomati anthracite mine should double volumes in FY23 as it reaches steady state operations.
    • sales from the Glenover phosphate stockpiles has started in a phased approach.
  • All of the above developments can be funded internally, with gearing is expected to peak at R700-800m. An approx. R750m capital outlay will be required for the Gravenhage/Glenover acquisition and development.
  • Afrimat continues to transform into a diversified mining company with long-term reserves that can support operations for at least 20 years. Further iron ore reserves (and export allocation) are being investigated.
  • Construction Materials: activity levels remain low, but volumes returned to pre-Covid levels.
  • Industrial Minerals: Efficiency gains boosted profits, with the AgriLime acquisition adding to diversification.
  • While volumes should grow into FY24, our HEPS is lower than FY23 purely down to a reversion of iron ore prices to long-term averages. Earnings remain sensitive to changes in the iron ore price, lump premiums and shipping rates.
  • With a more conservative growth profile to accommodate Transnet issues (export iron ore was down 12-15% as a result) our Sum-of-the-Parts valuation is R100 (from R110).

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