SA coal miners to post impressive 2022 earnings but signs are price bonanza is over

THE logistical nightmare that is Transnet Freight Rail couldn’t keep listed Thungela Resources and Exxaro Resources down last year with both coal producers set to post strong year-on-year earnings improvements.

Thungela said in a trading statement share earnings for the 12 months ended December would more than double to R125 and R129 a share compared to R61.08/share for the 2021 financial year, its first after listing in July 2021.

Exxaro said headline earnings for 2022 would be between 20% and 34% higher compared to 2021. “This is mainly due to the exceptional performance of our coal business driven by higher export and domestic sales prices,” the company said in a trading statement. Costs had been controlled “despite the ongoing logistical challenges”.

A lower contribution from the energy business due to persistent low wind conditions during the year would take the edge off its coal performance, however. There would also be lower income from its 20% stake in Sishen Iron Ore Company, controlled by Kumba Iron Ore.

Kumba cut its dividend to 80% of headline earnings which were 46% lower at R56.19/share – just below stated guidance.

The Minerals Council estimated in January that logistical problems at TFR, a unit of the state-owned rail and ports company Transnet resulted in a R30bn opportunity loss in coal exports. It had earlier demanded the resignation of Transnet CEO, Portia Derby.

The mining sector and Transnet have since agreed to negotiate efficiency improvements which may see the introduction of private sector management and investment in Transnet’s affairs. There has been no update on the discussions, which started in December, to date.

Despite the strong earnings notices, shares in both Thungela and Exxaro have been under pressure since the beginning of the year, falling 19% and 10% respectively – the latter just hovering above its 12 month low of R178,64/share.

This is in part owing to a deterioration in the seaborne coal price. “The global seaborne thermal coal market is likely to remain softer (though elevated versus historical standards) as the peak coal demand season is behind us,” said Citi in a report last year.

Commenting in January, Deutsche Bank said the Newcastle forward coal price would ease to about $300/t from the second quarter compared to a high of just below $450/t in the last quarter of 2022.