A HEFTY decline in coal export prices hit Thungela Resources hard in the 12 months ended December 31 resulting in an R8.8bn asset impairment.
The impact of this was in full evidence in the coal miner’s full year headline earnings, announced today, in which it slid to a loss of R6,47 per share for the period, a year-on-year decline of 125%.
South African export coal prices were 20% lower while Ensham, Thungela’s Australian coal mine, reported a 17% fall in prices. The weaker market was exacerbated by a strengthening in the rand and the Australian dollar against the US dollar during the period.
“The seaborne thermal coal market remained depressed for much of the year, largely
due to weak demand in key coal-consuming countries,” said Thungela in commentary to its results. Key markets China and India expanded domestic production and sourced more from renewable energy sources.
Operationally, Thungela performed solidly. It beat full year guidance as it mined 13,85 million tons of saleable coal from its South African assets, a 1.9% increase on 13.6Mt in 2024.
At Ensham, production totalled 3.99Mt, a two percent year-on-year decline. Moses Madondo, CEO of Thungela since November, said Ensham had overcome difficult geological problems experienced in the first half.
Thungela declared a R2 per share final dividend matching the interim payout despite running cash negative – -R88m – in the second half of the year. Thungela has a dividend policy of paying 30% of adjusted operating free cash flow.
Including a R139m share buy-back, completed just after its interim results in August, total shareholder payouts for the year was R701m representing 177% of adjusted operating free cash flow.
Shares in Thungela lost ground in early trade in Johannesburg but over the last month the company is valued 58% higher, underlining its leverage to thermal coal prices.
Deon Smith, CFO of Thungela said in a media conference call that the company had returned to positive cash generation this year buoyed by improved coal prices in Australia and South Africa amid energy security concerns caused by the US/Israel attacks on Iran.
“If we look at the screen today, API 4 [the South African export benchmark price] is around $112–$113 per ton – not yet as strong as we see in Australia where Newcastle [benchmark] is about $133/t,” said Smith.
Given South African all-in sustaining costs were about $100/t and $110–$115/t at Esham, Thungela was getting an operating margin of $13 and $18/t respectively. “”he business is in really healthy shape from a cash generation perspective,” he said.
Said Madondo: “In a market balanced like this, you get these extreme changes in price. Our job is to control the things we control and to make sure we are able to generate cash through the cycle. That is what we’re doing.”
Amid attacks from Iran, Thungela said it had evacuated 16 staff from its Dubai offices (Dubai Multi Commodity Centre Authority) where it had established a trading business in December 2023. All but three, who are nationals of the UAE, are working from their respective homes, the company said.
Portfolio flux
Thungela has guided to 2026 production of 3.9Mt to 4.2Mt for Ensham and 13Mt to 13.6Mt from South Africa. Production in 2027 is expected to be broadly in line with 2026.
Thungela’s South African portfolio is in flux currently amid a R4.2bn [to date] investment programme in new projects. These are the Annea Colliery (formerly the Elders Project) and Zibulo North which will replace production from Goedehoop North, sold last year and the Zibulo opencast mine which is scheduled to close this year.
Thungela has also agreed for the disposal of the Kleinkopje mining right at the Khwezela Colliery. It put the Isibonelo mine on care and maintenance in December.
Thungela is also progressing Lephalale Coal Bed Methane project which will provide gas to Annea and help reduce its reliance on Eskom power.
