AFRIMAT is banking on lower-cost production from its newly acquired Doornfontein deposit to improve iron ore margins as weak prices, high freight costs, and soft Chinese demand continue to weigh on the market.
The comments came in Afrimat’s interim results for the six months to end-August 2026, which showed a sharp deterioration in the profitability of its iron ore and manganese business.
The group acquired Doornfontein during the six months to end-August 2026 and has started a full exploration programme at the deposit. It expects first iron ore in the final quarter of its 2027 financial year.
Doornfontein will replace the ageing Demaneng mine and will initially be mined as direct-shipping ore, which Afrimat says should lower overall mine costs.
Afrimat’s Northern Cape iron ore business began with the acquisition of Diro Iron Ore — now Demaneng — for about R400m in 2016.
Miningmx previously reported that Afrimat expanded its regional footprint in 2020 through the R300m acquisition of Coza Mining, which included the Jenkins, Driehoekspan and Doornpan projects.
The planned replacement of Demaneng with Doornfontein follows a difficult six months to end-August, when operating profit from Afrimat’s iron ore and manganese operations fell to R11.3m from R403.5m a year earlier. Revenue declined 7.9% to R1.2bn.
Afrimat attributed the fall to lower domestic iron ore sales, weaker realised export prices and higher mining costs, as well as lower-margin manganese sales.
Iron ore export revenue was also hit by a stronger rand and a 49.1% increase in shipping costs following disruption caused by the Iran conflict. Average mine-gate revenue per ton fell 16.4%.
That was despite a 29.9% increase in iron ore export volumes to 514,809 tons from 396,384 tons a year earlier. This included 110,140 tons exported through an allocation on Transnet’s General Freight Business rail line in July and August.
Afrimat said the higher exports helped it reduce excess inventory, but profitability was materially lower because of weaker realised prices, rising mining and processing costs at Demaneng and the low-margin nature of the additional rail volumes.
Global market
The wider iron ore market also remains under pressure.
Analysts at Swiss bank UBS said this week that supply remained strong while demand was weak. Shipments from traditional producers were up about 1% so far in 2026, while Chinese steel production fell about 3% in the first seven months of the year.
UBS also pointed to rising supply from Guinea’s Simandou project, where shipments increased in September to an annualised rate of about 39 million tons.
Afrimat’s domestic iron ore sales fell 36.5% to 527,696 tons after a customer drew down stockpiles previously bought from another supplier.
The company said volumes began recovering in the second quarter and that it expects domestic demand to stabilise at between 90,000 and 100,000 tons a month.
At group level, revenue fell 4.3% to R5.1bn and operating profit declined 32.8% to R255.2m. Afrimat reported a headline loss of 58 cents per share and did not declare an interim dividend as it focused on reducing debt and preserving cash.