Miner delivers ‘exceptional’ 2022

5th May 2023

JSE-listed thermal coal exporter Thungela has delivered exceptional financial performance and solid operations, and continued to create value for stakeholders in 2022. The company achieved a significant increase in its adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) to R29.5-billion and in net profit to R18.2-billion, while executing its strategic priorities across several fronts.

Thungela’s operations include the Zibulo Colliery, Greenside Colliery, Goedehoop Colliery, Khwezela Colliery, Mafube Colliery, Isibonelo Colliery and Rietvlei Colliery.

The Zibulo Colliery consists of both underground and opencast operations while the Greenside colliery and Goedehoop Colliery are underground thermal coal mines. The Khwezela Colliery, Mafube Colliery, Isibonelo Colliery and the Rietvlei Colliery are opencast mines.

Thungela generated adjusted operating free cash flow of R18.1-billion, compared to R3.9-billion last year. Despite losing close to 3-million tonnes of export saleable production volumes as a direct result of poor Transnet Freight Rail (TFR) performance, the company achieved a more than four-fold increase in cash generation.

While the acquisition of the Ensham Business will be paid for from cash on hand at year-end, it will materially change the overall structure of the group. Accordingly, the company has secured access to R3.2-billion in credit facilities with leading South African banks to reflect this change, as well as to bolster Thungela’s resilience against continued poor rail performance by maintaining a sufficient level of liquidity.

The outstanding results and solid liquidity position enabled Thungela to declare a final ordinary cash dividend of R40 a share. This final dividend represents an overall return to shareholders of R5.68-billion. Combined with the 2022 interim dividend of R60 a share, this amounts to a total dividend declared for the full year of R100 a share and brings the total returns to Thungela shareholders to R13.8-billion, representing 76% of adjusted operating free cashflow of R18.1-billion for the year.

“In 2022 we continued to deliver on our purpose of responsibly creating a shared future. Our outstanding performance in this reporting period is largely due to strong coal prices but it is also testament to the agility and the resilience of our people in operating in a severely constrained rail environment,” says Thungela CEO July Ndlovu.

Driving ESG Aspirations

The Sisonke Employee Empowerment Scheme and Nkulo Community Partnership Trust will receive a combined contribution of R396-million in addition to the R500-million contributed with respect to the first half of the year, delivering on Thungela’s aspiration to “spike” on the social aspect of environmental, social and corporate governance (ESG).

In addition, Thungela contributed R8.5-billion in income taxes and royalties to the South African fiscus in 2022.

“In line with the commitment we made last year, we have completed a full review of our intermediate emissions reduction opportunities and commit to reducing our Scope 1 and 2 emissions by 30% by 2030 (using 2021 emissions as a baseline) and reaching net zero by 2050.”

Effectively Executing on Strategic Priorities

Thungela has also made significant progress in executing its strategy announced in 2022. Aligned to its strategic priority of maximising the full potential of existing assets, the board approved the development of the Elders production replacement project, an integral part of Thungela’s equity story.

The company will continue to progress on the feasibility study for the Zibulo North Shaft life extension project and expect to submit this for board consideration this year.

Thungela is also evaluating potential development options for its significant gas resources in Limpopo.

On the optimisation of capital allocation, in November 2022, Thungela acquired the remaining 27% shareholding in Anglo American Inyosi Coal, the entity which holds Zibulo and Elders. This transaction will allow the company to benefit from the full economics of the cash generative assets in its portfolio, resulting in an increase in earnings attributable to equity shareholders of Thungela.

“The creation of diversification options remains an important focus for our business as we plan for the future. In February 2023, we announced the acquisition of a controlling shareholding in the Ensham thermal coal business in Australia.”

This transaction, funded from Thungela’s cash on hand at year-end, is expected to conclude by mid-2023, marking an important milestone in the company’s journey, as it will deliver geographic diversification through a highly cash-generative thermal coal asset with long-life potential.

Thungela explains that looking ahead, although thermal coal prices have softened in early 2023, the fundamentals remain firmly in place.

Prices can be expected to remain robust. Over the longer term, Thungela anticipates continued strong coal demand from emerging markets, especially those in Asia, where coal is likely to remain part of the energy mix for at least the next two decades.

“I look ahead with a sense of caution in the short term, yet confidence in the longer term. In the short term, fixing the rail network is a matter of critical importance to South Africa as the mining industry delivers far-reaching benefits such as sustained jobs and livelihoods in our communities, and it contributes significantly to the economy.

“We will continue working with Transnet to resolve the issues plaguing the rail performance and call on government to support these efforts to ensure that the mining industry can continue to create value together for South Africa and its people,” Ndlovu concludes.