Our opinion on the current state of AFRIMAT(AFT)

Afrimat, a prominent open-pit mining company in Southern Africa, provides a broad range of products including composites and construction materials. Until the end of 2015, it stood out as one of the JSE's top-performing shares, showcasing resilience and growth even through the COVID-19 pandemic. This growth trajectory saw the share price reach a peak of R76 on 6th April 2022. However, the end of the commodities cycle has since led to a decline in its share value.

A significant factor in Afrimat's sustained performance has been its strategic acquisition of the Demaneng iron mine in the Northern Cape. This move has not only buffered the company against the construction industry's volatility but also marked a pivot towards diversification into other base minerals like manganese, chrome, and coal. CEO Andries van Heerden highlighted Afrimat's reputation for successful acquisitions and indicated ongoing evaluations for potential growth opportunities.

In a strategic move to deepen its mining portfolio, on 26th May 2020, Afrimat proposed a non-binding expression of interest for Unicorn Capital Partners, targeting an anthracite mine and offering 1 Afrimat share for every 280 Unicorn shares. The company's timely acquisitions, bolstered by the surge in iron ore prices due to supply constraints and rising demand from China, underscore its strategic market positioning.

Further expansions include the purchase of Coza Mining in August 2020 for R300m, the acquisition of the Gravenhage manganese mine in May 2021 for a combined total of $45m and R15m, and the acquisition of Glenover Phosphate for R550m in December 2021. Reflecting its transition towards more diversified mining activities, Afrimat's listing was shifted to the General Mining sector in March 2022.

The acquisition spree continued with the purchase of Lafarge for $6m, as announced in June 2023, enhancing Afrimat's footprint in the construction materials sector. For the six months ending on 31st August 2023, the company reported a 9.6% increase in revenue and a 4.4% rise in headline earnings per share (HEPS). The net asset value (NAV) also saw a significant increase, with the company maintaining a strong balance sheet and a favorable debt-to-equity ratio.

Despite the downturn in commodity prices affecting the industry at large, Afrimat's diversified portfolio and low debt levels stand out as key factors underpinning its value proposition. The recent approval from the Competition Commission for the acquisition of Lafarge, announced on 10th April 2024, marks another milestone in Afrimat's expansion journey. With a price-to-earnings (P:E) ratio of 12.8, Afrimat presents itself as a reasonably priced investment in the mining sector, promising continued growth and stability.