Anglo says R6.45bn rehabilitation provision for Thungela “over and above” regulations

ANGLO American said it had over-provisioned for rehabilitation charges likely to be incurred by Thungela Resources, the South African coal company that was today spun out of the UK listed mining group.

“The provision of R6.45bn on Thungela’s balance sheet is over and above the regulatory guidance for miners in South Africa, is in accordance with IFRS (International Financial Reporting Standards) and audited, and consistent with the provisioning norms within the industry,” said Anglo spokesman Sibusiso Tshabalala in a statement.

Anglo’s comment follows a report in the Sunday Telegraph over the weekend regarding statements attributed to Boatman Capital, a short-seller which said Thungela had under-estimated the cost of rehabilitating its mines and over-estimated future coal prices.

“To us, this looks like greenwashing: Anglo is claiming to be acting positively by reducing its greenhouse emissions while seemingly washing its hands of clean-up obligations,” said Boatman Capital in its report. “Thungela seems to have significantly under-estimated its environmental liabilities and therefore could have given investors a misleading impression of the company’s value,” it said.

Draft amendments to South Africa’s environmental legislation would call for much higher provisioning, said Boatman Capital in its report. However, Anglo responded that the draft regulations referred to by Boatman Capital “… simply does not accurately reflect the actual or likely sums needed to discharge such liabilities”.

The draft legislation, which is of the National Environmental Management Act (Nema), had been under review since 2015, said Anglo. “This is an industry-wide matter in South Africa, so the regulations on which the Boatman report apparently draws its conclusion are far from being finalised,” said Tshabalala.

Thungela, which debuted in Johannesburg and London today, traded at £1.18/share by midday, somewhat lower than the £2.30-£4.90/share valuation range applied by Liberum Capital last week in a report.

The performance is not entirely unexpected, however. “Anglo shareholders will receive 100% of the shares in Thungela, and given the disparity in size and commodity mix of the two companies, we expect significant turnover in the register,” said Liberum.

Anglo will inject R2.5bn into Thungela and said it would also continue to provide financial support to the company until end-2022 in the event rand-denominated thermal coal prices fell beneath a certain threshold.

Anglo American produced 16.5 million tons from its South African coal assets during its 2020 financial year, a 7% year-on-year reduction, producing a $15m underlying EBITDA loss, and taking EBITDA losses over two years to $20m.