Afrimat will be able to handle more falls in the price of iron ore and investors shouldn’t fear that it won’t be able to fund its capital projects.
Iron ore has been hitting highs in 2021 but the commodity is starting to lose momentum. The price of the metal fell 16% in the past week after analysts said the world’s biggest user of steel would cut back on demand.
The China International Capital Corporation (CICC) has warned that China’s domestic steel production will ease and that iron ore prices will linger below $200 a tonne.
This made some SA investors nervous and they voiced their worries at Afrimat’s annual general meeting on Wednesday. The price was at $181.01 an ounce on Wednesday evening. They had praised the company for a market-leading performance over the past few years, especially because of its well-played diversification. The group is something of an unsung hero, having outperformed sexy banking and media stocks.
Afrimat achieved annual compound growth including dividends of 32% in the past decade. In the same period, its share price climbed 1,103%. This is while Capitec and Naspers could only manage annual returns of 25% an 28%, respectively.
Afrimat on average exports 70,000 tonnes a month of lumpy, high-quality iron ore. Even if its iron ore export sales collapsed, its inland sales can keep the diversified group in a healthy position. Inland iron ore sales generate about R100m in cash a month. This will cover the company’s capital commitments.
With Afrimat’s share price up 41.83% at R60.55 year-to-date, it’s a darling on the JSE and should be able to ride this commodity prices boom.
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