THE BOTTOM LINE
With iron ore up and running, Afrimat eyes chrome and coal
Construction materials are in the doldrums, so miner has successfully diversified into bulk commodities
Afrimat feels vindicated that its diversification strategy, which has seen the company add bulk commodities to its product offering, is paying off.
Following the acquisition of Demaneng, a small iron ore mine in Kuruman, Northern Cape, Afrimat now exports iron ore through the export channel from Sishen to Saldanha Bay.
Demaneng, an asset that was placed in business rescue in June 2016 after its previous owners experienced financial problems, has become a beacon of hope for Afrimat. It validates the miner’s longstanding strategy to pursue growth diversification.
When it listed on the JSE in 2006, Afrimat’s core competence was in aggregate businesses. Over the years the company has diversified into industrial minerals, cement products and lime.
Companies diversify for a number of reasons which include the quest for a balanced and consistent income stream. In Afrimat’s case, a diverse portfolio is also a shield against economic volatility.
In the six months ended August 31, Afrimat’s construction materials business felt the brunt of the slowdown in the economy. The industrial minerals business is also susceptible to a slowdown in construction. The investment in the iron ore mine gives Afrimat access to hard currency earnings, providing a much-needed rand hedge.
With the work to turn around the Demaneng mine now complete, it is no surprise that Afrimat is talking about pursuing growth opportunities especially in chrome, manganese and coal. But CEO Andries van Heerden says the company is going to take its time in its search for new assets.