Key message: Afrimat has another side to it – incredibly strong community and government relationships. This may actually be their greatest asset.
- Afrimat hosted a site visit to the Nkomati Anthracite Mine in Mpumalanga. The mine has two open pits and an underground mine in development, due to be fully operational in 2Q CY23.
- The base case production plan for the complex is to get to 100ktpm of ROM product to the plant.
- The initial plan was 65ktpm, this has been increased as it has turned out to be relatively cheap and easy to plan for 100ktpm.
- The yield is 50-58% to get to sellable product.
- Management expects to get to 70ktpm in the next few months and then push to 100ktpm (our base case for FY25).
- However, Afrimat is not only a mining story (and they are very good at mining – the site visit confirmed the potential of the mine and the high-quality operational management, much like the other operations).
- Probably more importantly, mining in South Africa requires a social licence. Afrimat has highlighted in the last two site visits (iron ore, anthracite) the quality and depth of the Community Managers.
- The Nkomati mine is surrounded by communities and deals with three tribal trusts who own the surface rights (and soon 16% of the mining right). Prior to Afrimat purchasing the operation, community unrest was common and caused by broken promises by previous owners.
- Afrimat’s Community Managers are empowered to deal with local communities and may well be the greatest asset Afrimat has. Community relations have improved substantially and the threat of unrest is relatively low.
- This further applies to relationships with the myriad of government departments a mining company has to deal with to remain in operation.
- This strength cannot be highlighted enough – no mining company can be successful without a social license, and those who do this well will get more opportunities and less frequent disturbances.
- From a financial perspective, FY23 is a year of preparing Nkomati for production and logistics issues in iron ore. HEPS will likely decline, but the recovery into FY24 looks to be substantial.