Our opinion on the current state of AFT

Afrimat (AFT) is an open-pit mining company that supplies composites, construction materials and other commodities to a range of industries in Southern Africa. Until the end of 2015, Afrimat was one of the best performing shares on the JSE. The share broke up out of a 3-year sideways pattern which included the COVID-19 crisis. It rose to a peak of R76 on 6th April 2022, but has been declining since then as the commodities cycle came to an end. The acquisition of the Demaneng iron mine in the Northern Cape has insulated Afrimat against the difficulties in the construction industry. The company is also looking to diversify into other base minerals like manganese, chrome, and coal. The CEO, Andries van Heerden, said that Afrimat was known for its success in acquisitions and was still evaluating potential acquisitions. On 26th May 2020, the company announced that it had submitted a non-binding expression of interest to Unicorn Capital Partners (in which it already owns 27%) which runs an anthracite mine. The offer is for 1 Afrimat share for 280 Unicorn shares. The company benefited from rising iron ore prices due to supply constraints in Brazil and rising demand from China. On 17th August 2020, the company announced that it had bought a mining exploration company (Coza Mining) involved in looking for iron and manganese in the Northern Cape for R300m. On 21st May 2021 the company announced the purchase of a manganese mine, Gravenhage, in the Kalahari Manganese Field, 50km from Hotazel for $45m plus R15m. On 10th December 2021 the company announced the acquisition of Glenover Phosphate for R550m. On 20th March 2022 the company announced that its listing had been moved from Basic Materials Construction and Materials to the General Mining sector which better reflected its business. On 20th June 2023 the company announced that it had acquired 100% of construction materials company, Lafarge, for $6m, less any amounts categorised as leakage under the Share Purchase Agreement. In its results for the six months to 31st August 2023 the company reported revenue up 9,6% and headline earnings per share (HEPS) up 4,4%. The company's net asset value (NAV) rose 10,8% to 2750c per share. The company said, "The balance sheet of the Group remains strong with a net cash balance of R278,7 million. Net cash from operating activities of R577,5 million was generated. The debt:equity position remains favourable at 6,2% (February 2023: 4,7%)". Like all commodity companies, Afrimat's shares have declined with the drop in commodity prices, but this company is well diversified and has very low debt levels making it good value. On a P:E of 11,3 it seems reasonably priced to us.