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Afrimat Limited is a leading black empowered open pit mining company that recently increased its interests in the mining field by purchasing a manganese mine. Andries van Heerden, the CEO of Afrimat, joined the BizNews Power Hour to discuss Afrimat’s latest acquisition and detailed the sequence of events that made Afrimat the success story that it is today. With over twenty years of experience in the industry, van Heerden is sure to take Afrimat to even greater heights. – Nadya Swart
Andries van Heerden on how Afrimat started:
It’s a long story. I joined the industry 20 years ago in a little quarrying company called Prima Klipbrekers in Worcester. In 2003, we saw a major change in the industry with a lot of legislation and BEE and all those things, and I came up with the idea of consolidating the industry. And initially, we ran with the idea and then my shareholders at the time – my bosses – got very nervous about this really crazy idea. And they got advice from a very clever lawyer that told them to rather fire the guy and carry on with their lives – which they then did. They fired me in 2005.
And I then went and I bought – together with partners – a little company called Lancaster Quarries in KZN. Fantastic little business. And I moved to Vryheid in KZN and John Wearne of WG Wearne then listed his quarrying business and proved to my ex-colleagues that the idea is not so stupid. And then – and I’m cutting a lot of detail out now – we got together again. It was a bit difficult for me emotionally, but eventually we got over it. We got together and we merged the two companies, Lancaster and Prima, in 2006 and listed it under the name Afrimat. It came from African materials. And since then we’ve been acquiring a couple of quarrying businesses, doing the consolidation that we planned initially. It worked extremely well.
And then the 2008 crisis hit and we got a little nervous about the construction sector and we decided that we could use our skills elsewhere. And we went on and we bought a few industrial minerals businesses, the first of which was a mine called Glen Douglas that belonged to Exxaro. And that’s where you came in, Alec, because in 2012 – you actually chose Afrimat as your share early in January. And that really kick started our share price, because our share price was really taking a hammering up until that point. You can actually see on the graph on what night you chose it and there our share price changed its direction. And it’s been on an upward curve; our share price was trading, if I remember correctly, at about R2,00 at the time and tonight it closed at R50,00. So, it was an interesting choice of yours. I think you helped us a lot there at that stage.
On Afrimat’s acquisitions since 2012:
We bought a few limestone and dolomite mines since 2012. And we’ve specialised in trying to find those assets that had huge potential and were not fully reaching their potential at the time. So we did a few acquisitions like that. And then in 2016, we bought an iron ore mine in the Northern Cape. At the time, the iron ore price was $55 and the Rand was trading at R12,00 to the dollar and even Anglo American thought that iron ore was dead at the time. And we were very fortunate – things worked well for us.
And since then we’ve acquired a few more iron ore reserves in the Northern Cape -we’ve bulked that up. We recently also bought an anthracite mine in Mpumalanga that was also in deep distress and we’re busy with the turnaround of that. And now we’ve just announced that hopefully a year from now we’ll be able to start mining manganese.
On Afrimat’s decision to walk away from a deal in Australia:
It actually wasn’t an Australian company. It was listed in Oz, but it was South African coal assets. It’s a good business, and the CEO that it had at the time – I actually really respected him, I think he is a very, very good guy. But given the realities of the mine, we would run into a cash flow pit just about six months after the acquisition, because they would get to the end of life in one of the mines and spend capital to open up a new mine.
So it was a relatively easy decision, because after spending what – at that time – would have been 50% of our market cap that we would have spent on an acquisition, and then just six months later, to spend another 30% of your market cap and cash to open up the mine… You know, the sums just didn’t work. So it was a relatively easy sum, but there was nothing wrong with the business. It’s just that, for us, the sums just didn’t work.
On Afrimat’s recent (around R700 million) acquisition of a manganese mine:
The reserve is one of the last remaining really large reserves in the Kalahari manganese field. It is a relatively shallow reserve. We can mine it open-pit for the first (probably) 10 to 15 years, I think probably 15 years at least, that we can mine open-pit. And it’s a really good quality – 39% plus manganese, which is a very good quality for manganese. This is one of the best quality reserves. It’s a very large reserve and it is relatively easily mineable and very close to the technology that we know.
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