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Afrimat secures R90 million contract at Medupi Power Station & entrenches lead in KZN

Capitalising on escalating demand in the country for coal, JSE construction materials supplier Afrimat has secured the R90 million contract to supply coarse and fine aggregate for phase 1 of the Medupi coal-fired power station in Lephalale, Limpopo.

The contract will take the group into new regional territory.

At the same time Afrimat has extended its existing foothold in KwaZulu-Natal, where it is the leading supplier of construction materials, through the R9 million acquisition of a quarry and readymix plant in Dundee.

Afrimat is listed on the Main Board JSE.

Chairman Matie von Wielligh says he is pleased with the successful execution of Afrimat’s growth strategy to date.

“We are achieving significant expansion in our existing markets as well as penetrating new markets, positioning Afrimat to capitalise on the extensive infrastructure development underway in South Africa.”

He adds that the group’s strong balance sheet means that capacity growth is sustainable.

In Limpopo Afrimat is partnering with local supplier Chobe Crushers to supply Mining & Aggregates for the construction of Medupi, one of the largest coal burning power stations in the Southern Hemisphere.

The contract requires 560 000 tonnes of crushed aggregate and approximately 250 000 tonnes of natural sand to be delivered over a 42 month period. Commencing in May 2008, the contract is well on track with the first delivery of Mining & Aggregates made in June.

The Medupi contract marks the group’s first foray into the Limpopo region. Afrimat operated historically in KwaZulu-Natal and the Western Cape but an active geographic expansion programme over the past two years has seen the group’s footprint extend to the Eastern Cape and Gauteng.

CEO Andries van Heerden says focus on further geographical expansion using its fleet of mobile crushers has allowed Afrimat to take advantage of infrastructure projects outside its traditional areas of operation, such as in Limpopo.

He explains that Afrimat has secured reliable sources of raw material in close proximity to the new power station, adding that the group has also invested in a new portable crushing plant for the project with a capacity of 400 tonnes per hour. Of the acquisition in Dundee he says it is a strategic move to complete Afrimat’s periphery in the region.

“Quarries generally have a regional advantage within a 50 to 100 kilometre radius and accordingly the market tends to be localised. The Dundee quarry is well situated to service the growing local market and can be competitive as far afield as Ladysmith and Newcastle. Geographically the new quarry extends Afrimat’s penetration in northern KwaZulu-Natal and eastern Free State, positioning the group to benefit from government spend on infrastructure and low-cost housing in these areas.”

Afrimat has had an established presence in the region since 1965 through subsidiary Lancaster, and is the leading supplier of Mining & Aggregates and concrete blocks and bricks for the low-cost housing market.

“In KwaZulu-Natal a precast concrete block used in low-cost housing has become synonymous with a ‘Lancast’, indicating the extent of our penetration in the region,” says Van Heerden.

He adds that another readymix plant in the region strengthens the group’s vertical integration – the majority of Afrimat’s raw materials is now supplied by the group’s own quarries.

Von Wielligh concludes: “Continued regional expansion and acquisitive growth are underway, facilitated by a newly-established business development team which will help in keeping strict focus on sustained growth in the year ahead.”

The team is tasked with identifying potential new projects, both organic and acquisitive, and fast-tracking them to maximise returns for stakeholders.

The share closed yesterday at R5,50 putting the company on a PE of 7,81.

Issued by: Envisage Communications
Nicole Katz (011) 325 5944 / 083 287 2771
Michèle Mackey (011 325 5944 / 082 497 9827

On behalf of: Afrimat Limited
Andries van Heerden, CEO
021 917 8840

Matie von Wielligh, Chairman
(021) 654 7747/ 083 264 6243
Sharecode: AFT

Issue date: 6 August 2008

Tanya Pretorius

Afrimat: Head of Communications

Vanessa Ingram

Keyter Rech Investor Solutions