Thungela Resources did not just “shoot the lights” out in the six months to June – it
nuked them – through increasing earnings per share by more than 2,000% and
declaring an interim dividend of R60 a share which by itself amounts to a 21,7%
yield on last week’s closing share price of R276.8.
Thungela – which was created through the demerger and separate listing in June
last year of Anglo American’s former export coal mines – has since generated a
total return for shareholders of 1,138% to the end of June this year.
The group has paid dividends totalling R78 while the share price has taken off
from levels around R20 when Thungela was first listed to current levels around
Thungela CEO July Ndlovu points out the bottom-line reason for this incredible
performance is that the “demand for affordable energy sources such as thermal
coal escalated amid the energy crisis which was exacerbated by the escalation of
the Russia – Ukraine crisis.
“Coupled with supply constraints in major coal producing regions this resulted in
the price of thermal coal increasing to unprecedented levels. Ukraine will reset the
geopolitics of energy and we will see how this affects fossil fuels in general and
coal in particular.”
Coal prices FOB (free on board) Richards Bay have surged over the past year from
around $70/to levels above $300/t greatly exceeding price predictions made
towards the end of 2021..
Thungela has capitalised further on this development through exporting higher
quality coal which sells at a premium price to benchmark levels.
Totting it all up the group more than doubled revenue to R26.2bn (six months to
end-June 2021 – R10bn) which sent profit rocketing to R9.6bn (R351m) with
headline earnings hitting R67.2 a share (305c a share).
The only “fly in the ointment” in this situation is the continuing underperformance
by Transnet Freight Rail (TFR) which is unable to move the contracted volumes of
coal from the export mines to the Richards Bay Coal Terminal.
The missing export volumes cost Thungela some R2.5bn in potential revenues in
the six months to June but the group managed to “claw back” an unspecified
amount of that “opportunity cost” through the export of higher grade coal.
Ndlovu is not expecting much improvement in the second half of 2022 and has
reduced Thungela’s guidance on export volumes.
This has been dropped to between 13Mt and 13.6Mt for the full year from previous
guidance of between 14Mt and 15Mt at a higher FOB cost of between R1,025/t and
R1,065/t compared with the previous guidance of between R870/t and R890/t.
As part of its attempts to cope with the TFR situation Thungela has started trucking
volumes of coal between its seven operating load-out sites “in order to further
optimise stockpile management and train distribution patterns.”
The group is also looking at the viability of “trucking coal volumes to ports as an
alternative to rail transport” but Ndlovu said he could not provide much detail on
this strategy at this stage.
He said the ports being looked at included Maputo and the general port facilities at
Thungela’s other actions to cope with the TFR situation include continuing to
export high-grade coal while stockpiling lower grade/low margin coal and
curtailing some mining operations where possible.
Ndlovu commented that “the real constraint in TFR is that they need a capital
injection to catch up on maintenance. So there is a need to re-capitalise TFR but
that’s going to take time.”