Ghost Bites (Afrimat | Ellies | MC Mining | Tharisa)

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Afrimat goes large with Lafarge (JSE: AFT)

The Competition Tribunal has approved the deal

Afrimat has a strong track record of value creation, with acquisitions having significantly boosted shareholder returns over the years. The market always pays attention when Afrimat announces new deals.

The acquisition of 100% of Lafarge South Africa was first announced in mid-2023. These things take time, particularly due to the regulatory approvals required along the way. It’s very important news that the Competition Tribunal has now approved the transaction, which makes the deal unconditional with a closing date of 24 April.

This is a significant step in the construction materials strategy, expanding the quarry and ready-mix operations nationally. There are various other strategic opportunities available to Afrimat from this deal, including entry into new value chains. Most of all, Afrimat will look to drive efficiency in the business and achieve a positive operating profit contribution.

CFO Pieter de Wit has been appointed as full-time Integration Manager for this process.

Farewell, Ellies (JSE: ELI)

Bad strategy leads to even worse outcomes

Sadly, when a company allows technological progress to overtake it, things can go wrong. Ellies (JSE: ELI) has been going from bad to worse and the final attempt to save the company was a renewable energy acquisition that failed to be completed. In any event, it did look as though they were going to overpay for the asset, which is why the funding couldn’t be raised. Even if the deal had gone ahead, there’s no guarantee that shareholders would’ve done well from it.

With the group having entered business rescue in early 2024, there weren’t many options available to the company. All hope has now been lost, with the company confirming that it will be liquidated. This is because there is “no reasonable prospect” of the group being rescued.

It’s always a sad day when a company goes to zero, especially a listed company that has been a household name.

The independent board at MC Mining throws in the towel (JSE: MCZ)

Goldway has achieved quite the victory here

After many back-and-forth announcements, Goldway has won the battle against the MC Mining independent board. It’s been quite a thing to witness, with Goldway using provocative language and trying hard to create doubt in the minds of shareholders over what the MC Mining board has been saying.

It worked, with enough acceptances of the Goldway offer to be able to declare it unconditional. This has driven a complete turnaround in approach by the MC Mining independent board, with a recommendation to shareholders to accept the offer due to the limited liquidity in the stock (assuming it remains listed) and the practically zero likelihood of an alternative bid on more favourable terms. The board also notes that if the offer isn’t accepted, there’s a chance of shareholders being stuck in an unlisted entity.

Kudos to Goldway. It’s been quite the masterclass in M&A strategy.

Tharisa achieves consistent PGM output (JSE: THA)

Chrome output is down from the previous quarter’s record production

Tharisa has released its production update for the second quarter of FY24, which covers the three months to March 2024.

PGM output was pretty consistent at 35.3koz vs. 35.7koz in the first quarter. The PGM basket price was also remarkably flat for the quarter, coming in at $1,343/oz vs. $1,344/oz in the first quarter. For sure, up is better than sideways, but consistent execution is a big part of building a successful mining group.

Chrome output came in at 402.7kt, which is well down on 462.8koz in the first quarter – admittedly a record quarter. Chrome prices were fairly steady at $286/t vs. $291/t in the first quarter.

Across both commodities, production guidance has been maintained for the full year.

Although debt came down a bit in the past three months, the drop in cash was larger. This means that net cash reduced from $94.9 million at the end of December 2024 to $70.6 million at the end of March. The management team remains confident though, with a $5 million share repurchased announced in March.

The Karo Platinum Project development is focusing on smaller work packages to limit the amount of capital required, while the company works on putting together the necessary third-party financing to deliver the first phase into production. If PGM prices keep improving, then I think there’s a good chance that they will put the hammer down on the project and accelerate it.

Finally, the group officially launched Redox One at the Africa Energy Indaba. This is an initiative to develop long-term energy storage solutions utilising the commodities mined by Tharisa. They cleverly call this a “mine-to-megawatt” strategy.

Little Bites:

• Director dealings:
  • A director of a major subsidiary of OUTsurance (JSE: OUT) has bought shares in the company worth R583k.

• After 13 years on the board and 5 as Chairman, Abiel Mngomezulu will retire from the board of Merafe (JSE: MRF). Ditshebo Stephen Phiri will take the role of Chairman after the 2024 AGM.

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