Thungela brushes off share issue reverse at AGM

A "stop" sign stands covered with coal dust at the Richard's Bay coal terminal, in Richard's Bay, South Africa. Photographer: Nadine Hutton/Bloomberg via Getty Images

THUNGELA Resources brushed off a reverse in its annual general meeting last week in which shareholders voted down its resolution on issuing shares for cash.

Ordinary resolution 5 which gives the company’s officers general authority to allot and issue ordinary shares was opposed by 51.67% of voting shareholders.

Thungela said today the resolution was “very much a belts-and-braces approval to cover unforeseen contingencies”.

“The failure of ordinary resolution 5 to pass is thus not expected to impact the company adversely in any meaningful way.” All other resolutions were passed.

Thungela announced a surprise R500m share buy-back programme, taking total returns including dividends for the 2023 financial year to R1.9bn. This was despite a R4bn decline in cash on hand as of December 31 and a potentially large capex bill in the works.

The company is aggressively ramping up production from Ensham, a mine in Australia to between 3.2 to 3.5 million tons this year by dint of a capital expansion. This will help offset softer historic volumes from South Africa where Transnet Freight Rail’s (TFR’s) under-performance is still expected to dominate the news agenda.

Export production from Thungela’s South Africa mines last year totalled 12.2 million tons (Mt) which was 7.6% lower than in the 2022 financial year.

For 2024, the group has guided to export production from South Africa of between 11.5Mt and 12.5Mt “based on expected rail performance” of TFR. Thungela has capacity to export about 15Mt a year through Richards Bay.

In 2023, TFR railed 47.9Mt of thermal coal to the Richards Bay Coal Terminal (RBCT), marking a 4.8% decline compared to 2022.

There is also expansionary capital of R1.6bn to R1.9bn on the Zibulo South and Elders replacement projects in South Africa that has been earmarked against which Thungela has set aside R2.6bn. This is in addition to is now standard cash buffer, held for general purposes, of about R5bn.

In addition to cash, Thungela has undrawn credit facilities of about R3.2bn.

Thungela announced a 73% year-on-year decline in headline share earnings to R34,97/share in March. Shares in Thungela are 14.5% weaker year-to-date. The company is currently capitalised at R17.7bn. On a 12 month basis the stock is 9% weaker.