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The implications of Afrimat’s Glenover acquisition

What was originally a phosphate mine has a by-product of rare earths, together with a few other minerals and vermiculite: CEO Andries van Heerden.

 

SIMON BROWN: I’m chatting now with Andries van Heerden, CEO of Afrimat. A deal was announced last week – Afrimat acquiring Glenover phosphate mine. Andries, I appreciate the early morning, as always. Phosphate – what is being mined in Glenover and what is its target market?

ANDRIES VAN HEERDEN: Morning, Simon. It’s a beautiful day in Cape Town. Glenover is a very, very interesting deposit. It was originally a phosphate mine. The by-product is rare earths, together with a few other minerals, and then there’s also vermiculite. So it’s a very, very interesting geological formation of the three different mineral types, each obviously with its own market. The phosphates are for the fertiliser market. The rare earths is really a modern mineral. One of the big uses of those minerals is for magnets; that would be electric motors. And then the vermiculite is for the horticulture industry. Currently it’s a dormant mine so we have to get it back in production.

SIMON BROWN: The question around how to invest in rare-earth minerals has been probably the one I’ve been asked the longest over the last decade or so. You make a point in the announcement that this kind of reduces your exposure to ferrous metals. You’ve been building this multi-commodity business. I remember when Afrimat back in the day was aggregates. Basically that’s all the business was.

It has massively evolved over the process to the point where it how involves multiple commodities. You’ve done a bunch of acquisitions. Timelines on this one? You say it has to still ramp up to production. From the Sens, probably a year or so?

ANDRIES VAN HEERDEN: The interesting thing is you’ll see we did it in two phases. The first is the stockpiles on site that were manufactured many, many years ago – and they’re actually in a very, very good condition … so we have already started selling off those stockpiles. So the phosphate rock on the high-grade stockpile we’ve already found a market for it, and we’ve started earning some cash back.

But the real business, the stuff that we are really after, you’re right – it’s going to take us about a year to get that to production.

SIMON BROWN: Your Jenkins [mine] and Nkomati [Anthracite Mine] – I attended a presentation virtually that you did recently around [them] – those projects have been successfully implemented, bedded down and are operating at full steam?

ANDRIES VAN HEERDEN: Yes, Jenkins is an absolute jewel. We managed to get that because it’s a very shallow deposit and it’s direct shipping. Also there’s not a lot of plant and equipment necessary. It’s just mobile crushers that we moved in there. So literally two months after we paid for the business we managed to generate the revenue from there. So that one’s up and running very nicely and ramping up ahead of schedule.

And then NKomati has turned around, and November was the fifth month in a row that we made a very decent profit out of there. So yeah, that one’s turned as well.

SIMON BROWN: We’ve chatted before – I think it was about a year ago – around the philosophy of acquisitions at Afrimat. I’m on record as saying I think you and your team are perhaps the best deal makers on the JSE. You’ve done a lot of them recently, but are you seeing lots of opportunity out there? Are you turning away a lot, or are people sort of beating a path to your door with potential deals?

ANDRIES VAN HEERDEN: We have a focused business-development team whose job it is to find these opportunities. They do have a very good pipeline. Yeah, unfortunately your success rate or your hit rate is actually very, very low. There’s always something there that you find that makes you turn away. But to answer your question in short here, there are still many, many opportunities out there.

SIMON BROWN: I take your point about that. It’s probably more about turning away the right ones that wouldn’t have worked out than it is about signing up. That’s sort of the rush of blood – which is you want to do the deal. It’s spotting those problems which is a large part of the skill set.

ANDRIES VAN HEERDEN: Yes. That’s the big challenge. Every one of us, myself included, tends to fall in love with a project when you work on it a little bit. Over the years, we’ve developed a very nice diversity in the team where we look at all the different angles, whether market or operational, financial, whatever. We make sure that we look at all the angles and rather walk away. I have a saying: ‘I’ve never lost money on a deal I didn’t do’.

SIMON BROWN: I take your point on that. A quick last question. The manganese acquisition which you announced earlier this year – that’s obviously a process. There are water licences and a whole bunch [of things] that still need to happen there. Is that moving forward, albeit the timelines are stretching into next year?

ANDRIES VAN HEERDEN: Yeah, it is. We are quite excited. We’ve actually done a lot of very good work on it, optimised the business model a little bit. As we speak, we’ve got the drills back on site to do a little more exploration, because we think that there might be more in there than we initially thought.

SIMON BROWN: We’ll leave that there. That’s Andries van Heerden, CEO of Afrimat. Andries, I appreciate your early morning times.

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