Key message: The depth of the management team is apparent, with strong growth prospects in internally funded new projects. The portfolio is moving to a revenue mix of annuity (fixed price: 40-50%) and cyclical (commodity price: 35-70%).

  • Afrimat hosted an Investor Day. We update our model and forecasts based on the details provided. The Investor Day provided good exposure to the executive and operational management team – Afrimat is proving that the depth and experience of the management team is impressive.
  • The key features to our forecast are:
    • Allowing a 10% Transnet shortfall to allocated tonnage in iron ore exports in FY23 as rail issues persist. the Jenkins iron ore mine should ramp up to almost 1mt for FY23 (from 444kt in FY22), taking the total iron ore volumes from 1.19mt in FY22 to 1.68mt in FY23. Full capacity is over 2mt.
    • New operations: the Gravenhage manganese mine is forecast to start production in FY25, the Nkomati anthracite mine should double volumes in FY23 as it reaches steady state operations, sales of HG Phosphate from the Glenover stockpiles have started in a phased approach with SSG and vermiculite sales starting in late FY23.
  • All of the above developments can be funded internally, although with Gravenhage and Glenover development costs coinciding management does not rule out a capital raise (this will most likely depend on iron ore price movements).
  • The acquisition and development cost for Gravenhage (R1.5bn) and Glenover (R640m) is just over R2bn. We expect borrowing to peak at R800m-R1bn.
  • Afrimat continues to transform into a diversified mining company with long-term reserves that can support operations for at least 20 years. The portfolio is moving to a revenue mix of annuity (fixed price: 40-50%) and cyclical (commodity price: 35-70%).
  • External issues (Transnet) and iron ore forecast adjustments result in our Sum-of-the-Parts valuation adjusting to R90 (from R100).

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