The Afrimat quarry in Greenbushes, Port Elizabeth Picture: DARYN WOOD
The Afrimat quarry in Greenbushes, Port Elizabeth Picture: DARYN WOOD

JSE-listed building materials and industrial minerals group Afrimat said on Wednesday that its headline earnings could double in the year to end-August, partly due to a healthy contribution from its Demaneng iron ore mine in the Northern Cape.

Headline earnings per share (HEPS) are expected to rise by between 80% and 100%, to a range of 168.5c-187.2c, the company said in a trading update.

Afrimat said earlier in the year that rising iron ore prices had turned Demaneng into a “star performer”. It said on Wednesday that it had also seen improved results from its construction materials segment. Afrimat acquired Demaneng, then known as Diro Iron Ore, in 2016 for R400m, which includes rehabilitation costs.

The results were boosted by a rising iron ore price. Afrimat’s interim profits may equal its full-year 2018 profits, said Small Talk Daily’s Anthony Clark. The iron ore price boomed on Chinese demand during the period, which saw the price run from $60 a tonne in February to a peak in July of $123 a tonne, said Clark.

Afrimat gains a premium for its ore due to its superior qualities, and while the price of iron ore is volatile, the company’s average production cost is about $30 a tonne, leaving a healthy margin given much higher volumes and production cost efficiencies, he said.

The group’s share jumped 6.22% to R31.75 as at 11.20am on Wednesday, having gained 13.39% so far in 2019. The company said on Wednesday that it would provide another trading update towards the end of September.

“Afrimat remains a well-managed, low-debt, cash generative company,” said Clark, adding that his price target for the share is R39.