Although precluded from divulging any specific financial information during a pre-close briefing held on August 26, JSE-listed midtier construction materials, industrial minerals and bulk commodities mining company Afrimat CEO Andries van Heerden said the group’s financial situation was “very strong” despite a dramatic drop in iron-ore prices over the six-month period ending August 31.

“I can tell you I'm sleeping well at night. It is a different scenario to where we were last year when we were exceptionally good iron-ore prices but it has been offset by a few things. All in all, the business is in a good state and I’m actually really excited about where things are heading,” he said.

Last year, Afrimat delivered exceptional results on the back of favourable iron-ore prices, which translated into strong operating cash flows.

“We've seen the iron-ore price pull back from the peaks of last year. We said at the time that was great to have that. It gave us a hell of a cash boost, but we did say that we didn't think that $220/t plus was sustainable. It has come back to what we think is a more sustainable level, which is about $100/t,” Van Heerden said.

He noted several factors that would offset the lowered iron-ore price.

The group’s Jenkins iron-ore mine, in the Northern Cape, was ramped up to full capacity during the period, thereby contributing more significantly to the company’s results.

“Operationally, we're very proud of what the guys did there. What they did in a very short space of time and in how they are continuously improving that business by bringing down costs – it’s quite a significant improvement that they have achieved over the last year,” Van Heerden said.

Moreover, the group’s Nkomati anthracite mine was turned around during the period to start making a profit. Van Heerden said the mine was still in the ramp-up phase but that it held significant potential.

Afrimat’s Demaneng iron-ore mine was also said to have performed better than in 2021 in terms of tonnes shipped owing to slightly better availability of rail stock from State-owned rail operator Transnet.

“We saw about a 10% improvement compared to the same period last year and we are quite bullish about the potential in that system,” Van Heerden said.

Afrimat has an export allocation of 870 000 t/y on the Demaneng line, which underperformed last year by 15% owing to Transnet’s capacity constraints. Van Heerden said the group might come close to achieving the line’s full allocation before the end of the current financial year.

In terms of the group’s construction materials business, he said it remained affected by the unhealthy state of the local construction industry.

“Right now there's not a lot of activity in government infrastructure spend, at least not close to what we were used to. The commercial building sector is really very slow at this stage – almost non-existent. But there's good activity still in the residential building space, which is keeping that business alive but it's definitely not showing any signs of growth in terms of volume compared to last year,” Van Heerden explained.

In terms of Afrimat’s industrial minerals business, he noted that the market remained strong, although there was a slowdown early in the year, which had since improved. He noted that volumes were comparable with those of last year.

Van Heerden highlighted the addition of agricultural lime producing company Agri Lime to the group’s portfolio.

“We are busy incorporating Agri Lime now, which will probably give us a bit of a boost in the second half of this year,” he noted.

Van Heerden noted that the group’s project focus was now on Glenover, which is located 90 km northwest of Thabazimbi, in Limpopo.

“We are in production with the high-grade phosphate, which is the first project in a pipeline of five projects in total for that business,” he explained.

He noted that the business had already turned profitable, although the contribution to Afrimat’s results was not significant yet.

We are growing that business. We are so excited about that market. It’s a market that we underestimated when we motivated the project. The prices are exceptionally good and the market is unsaturable,” he said, noting the high demand and lack of supply in South Africa.

According to Afrimat’s investor calendar, the interim results for the period will be released in November.