Mining and construction materials group Afrimat has signed a R550m deal to buy Glenover Phosphate in Limpopo, the latest in a string of deals for a cash-generative group that is looking to diversify its revenue.
The deal, if fully exercised, will see Afrimat add phosphate, rare-earth elements and vermiculite to its growing mining portfolio. It is the second-biggest deal announced by the group to date, after the R650m purchase earlier in 2021 of the Gravenhage mining right in the Northern Cape, a long-life, near-development manganese resource.
Afrimat CEO Andries van Heerden said the acquisitions would offer diversification in the ferrous metals value chain, widen the group’s footprint on international markets and serve as another buffer against cyclical commodity markets.
“The application of these minerals is vast,” Van Heerden said in a statement. Phosphates are the main ingredient in fertilisers and rare earth elements are used in many applications, including magnets in electric motors. “The international trend towards electric vehicles is expected to be a big demand driver for this application,” he said.
Vermiculite is used in the construction of fire-retardant partitioning boards, and in horticulture as a growth medium, as well as in animal feed and other industrial applications.
The deal consists of R250m for the assets and an option, at Afrimat’s sole discretion, to buy all of Glenover’s shares for R300m.
Afrimat’s R400m purchase of the Demangeng mine in 2016, then known as Diro iron ore, has paid off handsomely with the revenue it generates helping to fund acquisitions — including feedlime producer Agri Lime for R63m in November.
In 2020, the group bought full control of an anthracite mine in Mpumalanga, at a cost of R90m, and it also spent R300m in 2020 to buy Coza mining high-quality iron ore close to its Demaneng operation
Afrimat said on Thursday it is debt free, and experiencing strong operational cash flows. The group ended its half-year to end-August with a R111m net cash pile, and during the period favourable iron ore prices had helped net cash flows from operating activities surge 142% to R806.5m.
Small Talk Daily's Anthony Clark said Afrimat had proven itself a “consummate dealmaker” and had walked away from sizeable deals when the price wasn't right. The group had also proven its ability to restructure operations, reduce costs, and improve efficiencies to recoup acquisition costs, he said.
“I think Glenover is going to be one of the classic future cases, when people say, ‘you know what, Afrimat did it again’,” he said.
Afrimat shares were up 0.91% at R51.98 in afternoon trade on Thursday, having risen just over a fifth so far in 2021, and by 59% since the beginning of 2020.
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