THUNGELA Resources is forecast to undershoot production guidance for its 2021 financial year of 16 million tons (Mt) owing to a decline in rail availability.
However, the impact on earnings will be negligible.
The company, created from the demerger of Anglo American’s South African thermal coal assets, is expected to announce half year production of about 6.71Mt, according to a report by RMB Morgan Stanley.
The assessment is based on information released by Anglo American in its latest production report. Thungela produced 2.53Mt for 64 days from April to June 7 – the effective date of the demerger – which the bank extrapolates to 3.56Mt for the second quarter. Anglo American said in a first quarter report that its South African coal mines produced 3.15Mt.
“Following today’s release we think a reduction in full year guidance is likely, to closer to 14Mt to 15Mt, though we think it will have a limited impact on earnings,” RMB Morgan Stanley analysts said. This was owing to Thungela’s focus on exporting higher-margin primary coal especially given the rail constraints.
“Thungela’s export coal production exceeded sales by 6% in the period 1 January to 4 June, suggesting that the bottleneck is logistics, ” said the bank.
Transnet, the state-owned freight and logistics company, operated at an annualised ‘tempo’ of 53Mt against a normal rate of between 75Mt and 80Mt as a result of absenteeism related to Covid-19 and derailments caused by vandalism and cable theft.
This was the view of another South African coal producer, Exxaro Resources, which said recently that for the first six months of its financial year, rail volumes were significantly down year on year.
Commenting on the restoration of port and rail services this week following the interruptions in the previous week caused by looting and infrastructure damage, Transnet said that cable theft “… continued unabated”.
The state of the company’s freight logistics is under the spotlight after it said the continued derailments and infrastructure were unsustainable. It is investigating sabotage of its services by corrupt employees and contractors employed to fix the problems.
South32, the Perth-headquartered mining group, said in its fourth quarter production report earlier this week that it had used higher cost trucks to transport manganese ore from the Northern Cape province to Saldanha port owing to lower rail utilisation.