Key message: Nkomati ramping up (with a minor delay) and will contribute approx. R500m to operating profit.
- Afrimat hosted a Pre-Close Update. We make minor updates to our model follow this update.
- Apart from the pending Lafarge acquisition (Competition Commission approval still pending), the ramp-up of the Nkomati mine is the catalyst for earning in the short-term. The new underground operation is ramping up well, although slightly behind schedule, with full production expected by October (two months later than originally planned). Given the complexity of the orebody and the building of essentially a new underground mine this is not a significant delay.
- Nkomati will add approx. R500m in operating profit (roughly half of the iron ore contribution) although at a fixed ZAR price so with less volatility.
- In the iron ore operations, Jenkins is fully on stream with sales volumes +20%. Production at Driehoekspan has started, with the product being blended with Demaneng ore. Transnet volumes are stable at present (not worse than last year), but still scope for improvement. The Transnet iron ore line is operating at 85-90% of capacity. AMSA has increased its offtake and the domestic freight rail link to AMSA has improved performance.
- The iron ore price averaged US$113 in 1H FY24.
- Work continues on Glenover, with Phase 1 up and running and the SSP plant to be commissioned by December 2023. Vermiculite test work is continuing, with design and plant construction planned for FY25.
- There has been a significant improvement in the Construction Materials division, with road projects progressing around the country. The Industrial Minerals division has been impacted by loadshedding.
- We adjust our FY24 and FY25 HEPS numbers down by 10% (mainly Nkomati delay) and 3%. We adjust our Target Price to R84 (from R92).