THUNGELA Resources has taken its foot off the diversification pedal telling analysts and investors last week that it was focusing on improving operational performance.
“Our main focus is on mining what we have today, safely and cost-effectively, and giving the market confidence that we can meet or exceed our guidance,” said Deon Smith, CFO of the JSE-listed coal miner in an update last week.
“That’s the primary focus for both management and the board — operating what we have well, rather than debating M&A,” he said when asked about the firm’s growth plans.
While Smith indicated Thungela will remain opportunistic regarding acquisitions, his comments may reflect recent history. In March, the group published its 2025 numbers in which it wrote down R8.8bn assets, partly related to its Ensham mine. Acquired in 2025 for R4.1bn, Ensham is a thermal coal mine in Australia. The write-down was a dent in Thungela’s previously polished operational and financial performance.
However, Stephen Friedman, an analyst for UBS said in a note last week Thungela may have no alternative but to return to dealmaking. “We believe the investment case is evolving from one centred on thermal coal prices and logistics recovery towards business quality and capital allocation,” he said.
“Improving Transnet Freight Rail performance should enhance export optionality and support stronger realised sales, but cannot fully offset the structural decline in Thungela’s production base as Greenside and Khwezela mature,” he said.
Thungela said last year it would consider adding metallurgical coal assets to its coal portfolio as there was a “natural adjacency” to its thermal coal production. “Metallurgical coal is an interesting aspect for us. The markets are something we understand and understand well,” the company said.
However, those were the words of July Ndlovu, the firm’s former CEO. The emphasis appears to have altered for new CEO Moses Madondo – although it’s worth pointing out there has been a major shift in the metallurgical coal market.
The metallurgical coal market is facing a supply emergency in the wake of a tragic accident in May at a Shanxi coal mine in China in which 82 people were killed and a further 120 injured. Between 15 and 20 million tons in metallurgical coal have been lost to the market while safety reviews at other mines has removed a further 50 to 55Mt.
“Restart risk and lower utilisation likely could lift the China domestic cost curve,” said Goldman Sachs analyst Matt Greene.
Smith could not resist saying Thungela kept its antenna at the ready, however. Pressed again on whether Thungela would look at deals, he said: “What I can tell you, consistent with what we’ve said before, is that when your neighbour’s house goes up for sale, we go and have a look on a Sunday afternoon.”
