Afrimat’s equity raise brings in R680m

Company says funds raised will be used for its long-term growth plans and to support balance sheet flexibility.
Afrimat says it remains well-positioned to pursue growth in its operations, this despite commodity prices coming off their almost two-year peak. Image: Supplied

JSE-listed open pit mining company Afrimat has managed to raise R680 million through an equity raise it announced late Wednesday afternoon. The group says the capital raised will fund the growth of its newly acquired projects at the Gravenhage manganese mine and the Glenover phosphate mine.

The equity raise – which was implemented through an accelerated bookbuild and lasted for less than 24 hours – represents approximately 8.5% of the company’s current market capitalisation.

Afrimat originally planned to only raise the equivalent of 5% of its market capitalisation, however the company says “following strong demand” it elected to increase the size of the bookbuild.

The equity raise remained oversubscribed at close of the process.

Afrimat’s R680 million of new equity will see the group issuing around 13.3 million shares for the issue price of R50.82, a 7.2% discount to its share’s closing price at market close on Wednesday.

The group’s share price was trading over 4% weaker in midday trade (around R52.49 a share) following the news on Thursday.

Afrimat share price

Facilitating growth

In its announcement of the equity raise on Wednesday, the miner said the capital raised through the process will assist in supporting growth of its two long-life projects – the Gravenhage manganese mine and the Glenover mine – which are currently underway.

Afrimat announced its plans to acquires 100% of the Gravenhage manganese mine rights as well as its associated assets in May 2021, however it is yet to finalise the transaction. The project is estimated to cost the company R1.5 billion, with the mine expected to only start generating returns in 2024.

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In December of the same year, the miner announced its purchase of certain assets and rights to mine select deposits at the Glenover phosphate mine in Limpopo for R550 million.

According to Afrimat, the group is looking at the possibility of acquiring full control of the phosphate mine, but before it can consider doing so it needs to conduct and finalise a feasibility study into Glenover’s operations – an undertaking that will cost Afrimat up to R1.5 billion – to gain board approval for the transaction before the 10 November 2022 deadline.

“The equity raise will both partly fund the described growth projects in combination with existing cash flows, and allow for additional balance sheet flexibility,” Afrimat says.

Outlook

Afrimat says it remains well-positioned to pursue growth in its operations, this despite commodity prices coming off their almost two-year peak.

“Afrimat has a strong balance sheet, is currently ungeared and continues to generate substantial cash, enabling the group to respond to opportunities and finance capital requirements efficiently.”

The group further added that it expects its iron ore operations to stay profitable, even in the face of a declining iron ore price. Further noting its plans to actively manage rising input costs in order to weather the current inflationary environment.

Listen: The Implications of Afrimat’s Glenover acquisition

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