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Thungela: R1.4bn dividend, R2.4bn shaft capex, R156m to employees, community

Thungela CEO July Ndlovu.

Thungela CEO July Ndlovu.

21st August 2023

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – To navigate the considerably softer coal prices, as well as inflationary pressures and the underperformance of Transnet Freight Rail, export coal-mining company Thungela has enhanced its business resilience by reducing the number of geology-challenged underground sections and ramping up production at the opencast Khwezela colliery.

Khwezela, 22 km southwest of eMalahleni in Mpumalanga, was formed in 2016 through a merger of the mining operations of the Kleinkopje and Landau collieries.

Board approval has been obtained for the capital investment of R2.4-billion into the Zibulo North shaft, which is expected to extend the life of Thungela's flagship Zibulo operation by 10 to 12 years.

The anticipated completion of the Elders and Zibulo North Shaft projects, with R3.8-billion yet to be invested, is integral to uplifting portfolio quality and competitiveness and extending the business, Thungela stated in declaring a R10-a-share interim dividend worth R1.4-billion from 33% of operating free cash flow.

First coal from the Elders production replacement underground operation is expected in the first half of next year and the close of the acquisition of Australia’s Ensham coal mine for R4.1-billion is due on August 31.

“Our focus to increase our competitiveness by improving productivity will produce superior results for our shareholders,” Thungela CEO July Ndlovu predicted in a release to Mining Weekly.

The half-year profit of R3-billion was well down from R9.6-billion in the same period in 2022, owing to the sharp decrease in thermal coal prices. Net cash of R13.6-billion was on the balance sheet as of June 30.

A R156-million distribution is being made to employees through the Sisonke Employee Empowerment Scheme and Nkulo Community Partnership Trust. The company contributed R896-million to these trusts in 2022, with the total since listing approaching the R1.4-billion level.

FATALITY REPORTED

Although the total recordable case frequency rate safety measure improved in the half-year from 1.59 last year to 1.33 this year, a fatality was recorded in the period when Breeze Mahlangu passed away in February following complications from an accident in December.

The most notable external factor of the period was the sharp fall in the benchmark seaborne coal price as European buying slowed after a mild winter.

In addition, global inflation management resulted in slower growth and a related reduction in demand for energy.

Following a particularly poor first quarter, Transnet rail performance stabilised in the second quarter, notwithstanding two derailments that cost Thungela at least 340 000 t in rail capacity. Improvements in rail performance during the second quarter were the result of intensive collaboration between Transnet and the South African coal industry, including Thungela.

“A consistently performing and well-managed bulk rail infrastructure is critical to the coal mining industry and the South African economy,” said Ndlovu.

Through ongoing collaboration with Transnet, Thungela is dedicated to optimising the performance of this critical infrastructure, benefiting its own operations and those of the broader South African coal industry.

Based on first-half operations – and excluding Ensham until the transaction has been completed – the company’s operational outlook for 2023 for export saleable production for the year has been revised to between 11.5-million and 12.5-million tonnes.

The free-on-board cost per export tonne guidance for 2023 has also been revised. This cost, excluding royalties, is expected to be between R1 120/t and R1 200/t. Including royalties, the guidance range has been revised to between R1 170/t and R1 250/t, based on a forecast benchmark coal price of $100/t.

Together with industry, government and Transnet, Thungela is continuing what Ndlovu describes as a relentless journey to find sustainable solutions to the logistics challenges facing South Africa.

Ndlovu expressed confidence that strategy and resilience would enable the company to weather the challenging market conditions.

Edited by Creamer Media Reporter

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