Building materials and industrial minerals group Afrimat has bought Coza Mining for R300m, in an effort to grow its footprint in the Northern Cape.
Afrimat said it had been looking at a number of opportunities in the province to grow its business.
Coza’s principal activities are exploring and prospecting for iron ore and manganese in the Northern Cape, and it is focused on three properties, Jenkins, Driehoekspan and Doornpan.
Afrimat said the transaction allows it to secure high-quality iron ore close to its Demaneng operation and in proximity to other existing operations. The deal also includes possible manganese deposits Afrimat could explore in future and “possible expansion opportunities due to increased resource size at Driehoekspan and Doornpan”.
Steel group ArcelorMittal SA, through its subsidiary Oakwood, sold its 25% stake in Coza as part of the transaction.
ArcelorMittal said since 2018 it has indicated to shareholders that “a foundational element of its turnaround strategy is to diversify the supply and cost structure of its strategic raw material supply. This transaction is a contributor to that strategy.”
ArcelorMittal SA and Afrimat’s Demaneng have also signed a deal for the supply of direct shipping ore “on favourable terms for each party”.
As at the end of December 2018, Coza had a negative equity balance of R87.5m, which included an R80m loan owing to shareholders. Afrimat said an agreement has been entered into by the shareholders, whereby the loan will be settled as part of the price for acquiring the business.
Profit after tax attributable to Coza for the year ended December 2018 was R4.4m.
In July, Afrimat said it would be proceeding with a R116m dividend payment for its year to end-February, having recently delayed the decision due to Covid-19 uncertainty.
Higher iron-ore prices helped group profits to rise more than 50% in its year to end-February. The group said in May a ramp-up in infrastructure spending in SA could benefit its quarrying business, in which it is already experiencing an improvement in demand.
Afrimat benefited from rising iron ore prices in 2019. Its Demaneng mine, previously known as Diro Iron Ore and acquired in 2016 for R400m, produces high-grade ore.
Increased production and cost savings also helped profit for its year to end-February to rise 52.9% to R465.17m.
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