Afrimat eyes acquisition of Glen Douglas dolomite mine

Oct. 13, 2010 - Afrimat believes there are a host of exciting acquisition opportunities available because of the depressed state of the market.
The company is also hopeful it will finally be able to put its R35 million acquisition of the entire share capital of Glen Douglas Dolomite from Exxaro Resources to bed next week.
This acquisition is Afrimat's first step in its expansion and diversification strategy into the industrial minerals sector.
Andries van Heerden, Afrimat's chief executive, said on Wednesday the Competition Commission had approved the Glen Douglas Dolomite transactions about three months ago and all other conditions of the transaction had been met with the exception of the approval of Mineral Resources Minister Susan Shabangu.
Van Heerden said it had been waiting for the past three months for the minister to approve the transfer of shares from one entity to another, which was a requirement if an entity had new order mining rights. He said the delay was frustrating but the department had indicated it would get the approval next week.
Van Heerden believed the cost base for Glen Douglas Dolomite was wrong because it was run according to a large mine model and a small mine approach needed to be adopted.
He said the volumes from the mine should be between 1.25 million and 1.5 million tons a year, which represented a 20 percent increase in Afrimat's volumes from its existing base. The selling price from the mine was also better than what Afrimat got from other areas.
Van Heerden was cautious in his comments about the potential impact of this on Afrimat's profits because it is in a closed period with its interim results due to be published early next month.
Afrimat said last week its headline earnings a share for the six months to August were expected to be 1 percent higher than the corresponding period last year but were diluted by its black economic empowerment transaction last year.
But Van Heerden said the growth in Afrimat's profit would hopefully exceed the growth in volumes because the margins it would achieve from Glen Douglas Dolomite would be better than what the group was achieving now.
Van Heerden said the diversification of the group was continuing. He said there were many distressed companies in the sector because of acquisitions that had been made with high gearing at the peak of the cycle and admitted there were "acquisition possibilities".
"We have identified a few exciting opportunities." Van Heerden added that its diversification into industrial minerals would mean it would not have to go far to get into base minerals.
He said Afrimat's history was tied up with the consolidation of the aggregates industry prior and subsequent to the group's listing and there were also a lot of smaller players in the limestone industry where a similar consolidation could take place.
Van Heerden said there were quarries for sale now that were acquired in the past five years but which were on the market for between 20 to 30 percent of their previous sale price.
He said it was nice to have a business where its competitors were battling but this was also negative for investors because they had to be convinced that Afrimat had a good business.