Thungela Resources on track to exceed 2025 coal production targets

Thungela Resources' management are confident of producing about 13.7 million tons of export saleable production for the year to December 31, 2023, which is above the guidance range of 12.8Mt to 13.6Mt.

The coal mining group's chief financial officer Deon Smith said in a pre-close update that the production is in spite of the transition in its South Africa production profile, with the closure of Goedehoop and the successful ramp-up of Annea Colliery, as well as the hand-over of the Zibulo North Shaft project.

Production momentum also benefitted from "consistent rail performance" and improvements by Transnet Freight Rail (TFR), with an annualised 56.6Mt run-rate for the industry for the period ended November 30, 2023, which is a 9% improvement on the 51.9Mt delivered in 2022.

In Australia, export saleable production from Ensham was expected to be 3.8Mt, within the guidance range of between 3.7Mt to 4.1Mt.

At the end of the first half, there had been a higher stockpile of lower quality run-of-mine coal after more challenging geology was mined through at Ensham, but the Dubai marketing team successfully secured contracts for the coal, which resulted in improved sales and lower stockpiles.

Thungela's directors said seaborne thermal coal prices remain depressed due to weak demand caused mainly by uncertainty around the impact of tariffs and lower gas prices, while the supply discipline that was expected, has not yet fully materialised.

Demand from China and India, the largest importers of thermal coal, were below expectations for most of the year, as a result of increasing domestic production and support for the growth of alternative energy sources.

Indian steelmakers faced growing competition from lower-cost imported steel, which in turn reduced demand for South African coal and further impacted prices. Increased gas and nuclear power generation in Japan, Korea, and Taiwan further curtailed coal demand, which contributed to Newcastle coal prices recording a four-year low of about $90 per ton in September 2023.

"Following these low coal prices across South Africa and Australia, we have observed initial restocking at major import hubs and a gradual recovery in sentiment as reflected in the forward price curves which are now in contango (future prices higher than current prices) into 2024 and 2025," the group said.

The group had operated fatality free operations for the past three financial years. "Global economic activity remains uncertain and influenced by the effects of tariffs and persistent volatility surrounding international trade. These factors, such as inflationary pressures, global economic sentiment and financial market volatility, continue to weigh on overall growth.

The impact of the stronger South African rand was also affecting the competitiveness of South African exports," the group said.

The export saleable production relating to the South African operations was expected to be about 13.7Mt for the 2025 financial year, compared to 13.6Mt in the 2024 financial year.

This reflects the continued ramp-up at Annea, strong performance at Mafube, offset by lower volumes from Khwezela, which was impacted by abnormally high rainfall in the first half of the year. The free-on-board cost per export ton excluding royalties for South Africa, was expected to be below the guidance range of between R1 210 to R1 290 per ton, mainly due to a non-cash rehabilitation adjustment and strong production performance.

The export saleable production at Ensham was expected to be about 3.8Mt, compared to 4.1Mt in 2022. The decline was mainly due to more challenging geology experienced in the first half. The free-on-board cost per export ton excluding royalties at Ensham was expected to be within the guidance range of between R1 470 to R1 580 per ton.

The Elders life extension project was completed  for R1.8bn and total aggregate expansionary capital expenditure of R2.5bn is expected for the Zibulo North Shaft life extension project by the end of the year.

Productivity improvements across the portfolio, coupled with the improvements in TFR rail performance, had limited the production hiatus that had previously been expected from the closure of Goedehoop and ramp-up of Annea in 2024.

BUSINESS REPORT