Value yet in Thungela shares as coal prices take Anglo offshoot to fresh record high

THERE is still value in the shares of Thungela Resources but investors can also participate in vaulting thermal coal prices by buying shares in Glencore and Anglo American.

Analysts at RMB Morgan Stanley are overweight Thungela on a target price of R290/share. It’s about R237/share at the time of writing – a new all-time record.

Thungela was listed in Johannesburg and London following the demerger by Anglo American of its South African thermal coal mines which are predominantly export focused. At first there was scepticism the company would fare well as UK investors had asked for Anglo to sell the assets owing to their carbon footprint.

However an increase in gas prices followed by Russia’s invasion of Ukraine which has resulted in sanctions on Russian fossil fuel exports has raised energy security concerns among European and Asian utilities.

The thermal coal price has increased about 56% since the beginning of the year and is 174% stronger year-on-year.

July Ndlovu, CEO of Thungela said the much feared flight of international investors from the company’s share register following its June listing never happened.

“We have picked up significantly far more shareholders from offshore than anyone assumed we would,” Ndlovu told the Financial Mail in an interview. In fact, about 50% of the stock is held by non South Africans.

Such is the international flavour of Thungela’s register that decisions are now being made in mind of it. Ndlovu said a share buy-back was being considered by the company – the share price appreciation notwithstanding – owing to withholding tax in South Africa which UK shareholders in particular don’t prefer.

Another option is Glencore. The company – much criticised in the past for retaining its thermal coal mines – estimated in February that about a third of 2022 EBITDA would be derived from thermal coal assuming a then spot price of $175/t. Given a spot price of nearly $100/t more so far this year, analysts are endorsing Glencore shares owing to the impact of energy price upside.

Goldman Sachs’ Jack O’Brien estimates that Glencore will generate $33bn in EBITDA in 2022, more than 50% higher than in 2021 owing to thermal coal price improvements. In fact, based on spot prices across its commodity deck, Glencore’s EBITDA would be $56bn, with the delta driven by thermal coal.

It’s not only thermal coal prices that are benefiting from the Ukraine crisis. The price of metallurgical coal – material used in the manufacture of carbon steel – has also appreciated given that Russia comprises about 15% of contestible seaborne supply. This assists Anglo American which produces the mineral.

O’Brien estimates Anglo will generate $22bn in EBITDA this year, 16% higher than the bank’s previous estimate. Included in the calculation is first production from Quellaveco, the group’s $5.3bn copper mine that commissions mid-year and perhaps – like Glencore – is a safer bet for investors who worry about pure play stocks like Thungela given energy market volatility.


  1. Anglo : Quellaveco in Peru is the new one Collahuasi in Chile started twenty years ago , Both good

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