Thungela Resources, the prominent South African coal miner, is set to exceed its production targets for the year ending December 2024 on the back of notable improvements in Transnet Freight Rail’s (TFR) capacity following collaborative efforts within the industry.
Despite experiencing lower coal prices, the company yesterday said it was optimistic that it would “exceed the full year export saleable production guidance” in South Africa and Australia.
Thungela said export saleable production from Australia for the year to December was likely to be about 4 million tons. This surpasses the company’s revised guidance range of 3.5 million tons to 3.8 million tons issued in August.
The higher productivity for Thungela in Australia has been attributed to productivity efficiencies.
In South Africa, Thungela’s export saleable production is expected to top 13.4 million tons, higher than the guidance range of 11.5 million tons to 12.5 million tons.
“This is in line with the improved mine productivity and rail performance in the second half of the year,” said Deon Smith, Thungela’s chief financial officer.
Moreover, the free-on-board (FOB) cost per export tonne for the period is expected to be below the guidance range. This is reflective of the company’s higher production and continued focus on cost efficiencies.
Smith said Thungela’s prospects in South Africa had also been boosted by improvements in Transnet’s freight rail operations and capacity.
He said the various TFR initiatives, supported by the coal industry, had allowed for the annualised run rate to 30 November 2024 to increase to approximately 52 million tons, or 56 million tons since the annual maintenance shutdown period that ended in July 2024.
“TFR’s improving performance can be attributed to several factors, including the impact of the fitment of the critical locomotive spares, the introduction of additional locomotives on the North Corridor line, as well as the ongoing line maintenance with enhancements to the signalling network,” said Smith.
However, Greg Davies, the head of wealth at Cratos Capital said that “Thungela faces headwinds as coal prices soften” in 2024.
The Richards Bay Benchmark averaged $105.21 per ton compared to $121 per ton last year.
After completing a share buyback scheme for a total consideration of R159.6 million, Thungela is continuing with its disciplined capital allocation strategy.
Stock purchased under the share buyback will be held as treasury shares by a subsidiary of Thungela.
“The impact of the maiden share buyback completed in June 2024, is expected to enhance earnings per share (EPS) in the second half of the year while the most recent buyback is expected to impact EPS in 2025,” explained Smith.
In terms of capital projects, Thungela’s Elders and Zibulo North Shaft life extension projects, approved by the board for a total of R4.2 billion, “remain on-track” and on budget.
The company reported in August that it had reserved of R1.7bn in cash for the completion of its life extension projects. By the end of this year, Thungela expects total aggregate expansionary capital expenditure to be R3.4bn for the two projects.
The company’s net cash position for the year to December 2024 is expected to range between R8bn and R8.5bn.
BUSINESS REPORT