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Chief Financial Officer’s Pre-close statement for the financial year ending 31 December 2024
Thungela Resources Limited
(Incorporated in the Republic of South Africa)
Registration number: 2021/303811/06
JSE share code: TGA
LSE share code: TGA
ISIN: ZAE000296554
('Thungela' or the 'Company' and together with its affiliates, the 'Group')
Chief Financial Officer's Pre-close statement for the financial
year ending 31 December 2024
Operational excellence drives improved cash generation in the second half of the year
Dear Stakeholder
We are pleased to report that, based on our performance for the period 1 January 2024
to 30 November 2024 (the year to date1), we are confident that we will exceed the full
year export saleable production guidance in South Africa and Australia. Free-on-board
(FOB) cost per export tonne is expected to be below the guidance range, reflecting higher
production and a continued focus on cost efficiencies. Safety is our first priority and we
are also proud to report that we have been operating a fatality-free business for 21
consecutive months. These achievements further reinforces our well-established track
record of successfully executing against operational targets and demonstrates our single
minded focus on controlling the controllables.
Our geographic diversification strategy into Australia2 continues to enhance the Group's
production profile. We expect export saleable production in Australia to be approximately
4.0Mt (on a 100% basis), higher than the revised guidance range of 3.5Mt to 3.8Mt issued
in August 2024, mainly due to productivity efficiencies and better than anticipated
progress made in traversing geological features. Export saleable production in South
Africa is expected to be at approximately 13.4Mt, higher than the guidance range of
11.5Mt to 12.5Mt, and approximately 9% higher year-on-year. This is in line with the
improved mine productivity and rail performance in the second half of the year.
The various Transnet Freight Rail (TFR) initiatives, supported by the coal industry, have
allowed for the annualised run rate to 30 November 2024 to increase to approximately
52Mt, or 56Mt since the annual maintenance shutdown period which 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. In the first half of the year, we reported TFR performance at 47Mt
on an annualised industry basis, impacted by the two significant derailments, issues with
the locomotives and security matters related to the rail line.
Energy markets remain impacted by the geopolitical tensions between Russia and
Ukraine as well as in the Middle East. The conflicts in these regions have led to increased
concerns around gas supply, which in turn have provided support to coal prices. The coal
price support persists despite a challenging global macroeconomic environment,
evidenced by a sluggish global steel sector and depressed oil prices. Premium Asian
buyers continue to diversify their sourcing, reducing demand for high energy Australian
coals.
The following are the key insights into our performance for the year to date and our
expectations for the financial year ending 31 December 2024 (FY 2024 1).
• Benchmark coal prices have softened in 2024 with the Richards Bay Benchmark
coal price3 averaging USD105.21 per tonne for the year to date, compared to
USD121.00 per tonne for FY 2023. The Newcastle Benchmark coal price 4 has
averaged USD135.59 per tonne for the year to date, compared to USD172.79 per
tonne for FY 2023.
• Discount to the Richards Bay Benchmark coal price has resulted in price
realisation of 87% against the benchmark, resulting in a discount of approximately
13% for the year to date, compared to 14% for FY 2023 and 15% for H1 2024.
Discounts in the second half of the year narrowed mainly as a result of the 1%
saving in commission, previously paid to Anglo American Marketing Limited in
respect of the contractual marketing services. In addition, the improved price
realisation reflects the higher premiums and lower discounts achieved by Thungela
Marketing International, steered by its dedicated customer relationship
management approach and broader exposure to key markets. The average
realised export price for product sold through Richards Bay Coal Terminal for the
year to date is USD90.94 per tonne, compared to USD103.67 per tonne for FY
2023.
• Discount to the Newcastle Benchmark coal price has resulted in price
realisation of 92% against the benchmark, resulting in a discount of approximately
8% for the year to date, compared to an 11% premium achieved for the period 1
September 2023 to 31 December 2023, which at the time was driven by the
calendar year 2023 fixed price contracts post acquisition. In Australia, we are
seeing a greater disconnect between the Newcastle Benchmark coal price and the
export sales prices as a result of lower demand in the traditional Asian markets
due to the poor economic performance in countries such as China, Japan and
Taiwan, coupled with buyers sourcing greater volumes from new suppliers. The
average realised export price for product from Ensham is USD124.43 per tonne,
compared to USD155.85 per tonne for the period 1 September 2023 to 31
December 2023. As reported at interim results, we have subsequently settled the
Taipower price for the 2024 contract and expect to complete the refund of the
overpaid payments by the end of the year.
• Export saleable production relating to our South African operations is
expected to be approximately 13.4Mt for FY 2024, compared to 12.2Mt in FY 2023.
The increase in production is mainly as a result of improved rail performance
enabling the material step-up in operational performance at Khwezela and Zibulo.
• FOB cost per export tonne excluding royalties for South Africa for FY 2024 is
expected to be marginally below the lower end of the guidance range of between
R1,170 to R1,290 per tonne, due to the higher export saleable production.
Including royalties, the FOB cost per export tonne is also expected to be below the
guidance range of R1,180 to R1,300 per tonne.
• Export equity sales for South Africa is expected to be approximately 12.5Mt for
FY 2024, compared to 11.9Mt for FY 2023. The increase is mainly due to the
improved rail performance in the second half of the year and includes
approximately 250kt of sales rolled over from December 2023.
• Export saleable production at Ensham5 for FY 2024 is expected to be
approximately 4.0Mt (on a 100% basis). This is primarily due to improved
productivity unlocked by the inclusion of a fault development crew in the second
half of the year which has allowed the remaining production sections to continue
to mine in better conditions.
• FOB cost per export tonne excluding royalties at Ensham for FY 2024 is
expected to be below the lower end of the guidance range of between R1,590 to
R1,710 per tonne, mainly as a result of the higher export saleable production and
better negotiated contractual rates, leading to improved cost in the second half of
the year. Including royalties, the FOB cost per export tonne is also expected to be
below the guidance range of R1,830 to R1,950 per tonne.
• Export equity sales for Ensham5 is expected to be approximately 4.0Mt for FY
2024, on a 100% basis.
• Capital expenditure for the South African operations for FY 2024 is expected
to be approximately R2,700 million. This consists of R1,000 million relating to
sustaining capital, in line with the guidance range of between R900 to R1,100
million, and expansionary capital of R1,700 million relating mainly to the Elders
and Zibulo North Shaft projects, in line with the guidance range of between R1,600
to R1,900 million.
• Sustaining capital expenditure at Ensham for FY 2024 is expected to be
approximately R550 million (on an 85% basis), which is below the lower end of the
guidance range of between R600 to R900 million, mainly due to rephasing of the
capital expenditure into the 2025 financial year.
Commitment to capital allocation framework
Disciplined capital allocation remains a cornerstone of Thungela's strategy, prioritising
shareholder returns through a combination of dividends and share buybacks. We have
completed the share buyback that was announced at our interim results in August 2024,
and have purchased 1,203,000 shares, representing 0.9% of issued share capital, for a
total consideration of R159.6 million. These shares will be held as treasury shares by a
subsidiary of the Group. 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.
The Elders and Zibulo North Shaft life extension projects, which the Board approved for
a total of R4.2 billion, remain on-track and on budget. In August 2024, we reported that,
cash of R1.7 billion was reserved for the completion of our life extension projects. By the
end of the year, we expect total aggregate expansionary capital expenditure to be R3.4
billion for these two projects since commencement. The ramp-up at Elders is progressing
well, with the deployment of two production sections to date. The mine is anticipated to
produce at a run rate of 4Mt of run of mine coal per annum, upon reaching steady state
in 2026.
In line with prior periods, several transactions that typically conclude in December 2024
are expected to impact our 31 December 2024 net cash 6 position. These include the
green fund contribution in Australia, provisional tax payments in South Africa and
Australia, and the final settlement of the Japanese Reference Price. Our net cash at 31
December 2024 is accordingly expected to range between R8.0 billion and R8.5 billion.
The board reaffirms its commitment to the dividend policy, which is to distribute a
minimum of 30% of adjusted operating free cash flow7 to shareholders, while maintaining
balance sheet flexibility, and this guides our capital allocation decisions. We will continue
to review the green funds in line with our environmental liabilities, cash required to
complete the Elders and Zibulo North Shaft projects and an appropriate cash buffer.
According to the report 'World Energy Outlook 2024', that was published by the
International Energy Agency in October 2024, global demand for coal in 2024 is expected
to be slightly higher than in 2023, as strong energy demand in China and India result in
higher coal demand, that more than offsets the decline in the use of coal in Europe.
Domestic in-country supply in key markets, for example in China and India, may impact
the seaborne market supply. The Northern Hemisphere remains well stocked on both gas
and coal ahead of the winter season. While rail performance remains constrained in South
Africa, it is encouraging to note the recent improved TFR performance and we expect
further improvements in 2025. Notwithstanding the underlying operating environment with
continued volatile market conditions and geopolitical headwinds, the Group expects, in
line with the net cash range set out above, to report an improved cash generation in the
second half of the year.
The Group expects to release its annual results on or about 17 March 2025.
Deon Smith
Chief Financial Officer
Annexure A: Operational performance
Table 1: Export saleable production by operation
Export saleable 2023 2024 % change
production Actual Forecast(8)
Mt
(a) (b) (b-a)/a
South Africa
Underground 9.1 9.5 4%
Zibulo 4.2 4.9 17%
Greenside 1.9 2.3 21%
Goedehoop9 3.0 2.2 -27%
Elders 0.0 0.1 —
Opencast 3.1 3.9 26%
Khwezela 1.6 2.2 38%
Mafube 1.5 1.7 13%
Australia
Ensham (85%) 0.9 3.4 278%
Total 13.1 16.8 28%
Table 2: Export sales by segment
Export sales 2023 2024 % change
Mt Actual Forecast(8)
South Africa 11.9 12.5 5%
Underground 9.1 9.1 —
Opencast 2.8 3.4 21%
Australia
Ensham (100%) 0.9 4.0 344%
Underground 0.9 4.0 344%
Total 12.8 16.5 29%
Footnotes
1. "Year to date" refers to the period from 1 January 2024 to 30 November 2024.
FY 2024 refers to the period from 1 January 2024 to 31 December 2024.
FY 2023 refers to the period from 1 January 2023 to 31 December 2023.
2. For full details relating to the accounting treatment applied to the acquisition of the
Ensham Business in Australia, refer to note 2A of the Annual Financial Statements
for the year ended 31 December 2023.
3. Richards Bay Benchmark price reference for 6,000kcal/kg thermal coal exported
from the Richards Bay Coal Terminal.
4. Newcastle Benchmark price reference for 6,000kcal/kg coal exported from
Newcastle, Australia. The NEWC Index is the main price reference for physical
coal contracts in Asia and is the settlement price for a significant volume of index-
linked contracts.
5. Production at Ensham is crushed and screened before being sold into either the
export or Australian domestic market. Sales into the Australian domestic market
are at export parity prices and, as a result, all production at Ensham is considered
to be export saleable production.
6. Net cash, an alternative performance measure, is cash and cash equivalents less
cash held in the Nkulo Community Partnership Trust and the Sisonke Employee
Empowerment Scheme and loans and borrowings.
7. Adjusted operating free cash flow is net cash flows from operating activities less
sustaining capex.
8. Based on the latest available management forecasts. Final figures may differ by ±
5%.
9. Export saleable production for Goedehoop includes approximately 456kt (2023:
720kt) attributable to the Nasonti operation.
Review of Pre-close statement
The information in this Pre-close statement is the responsibility of the directors of
Thungela and has not been reviewed or reported on by the Group's independent external
auditor.
A trading statement will be released once the Company has reasonable certainty on the
expected ranges for earnings per share and headline earnings per share and to the extent
required by the JSE Listings Requirements.
Investor call details
A conference call and audio webinar relating to the details of this announcement will be
held at 13:00 SAST on Tuesday, 10 December 2024. A recording of the audio webinar
will be made available on the Thungela website from 17:00 SAST on the same date –
www.thungela.com/investors.
Conference call registration:
https://services.choruscall.za.com/DiamondPassRegistration/register?confirmationNum
ber=4239538&linkSecurityString=11861d67e2
Audio webinar registration:
https://themediaframe.com/mediaframe/webcast.html?webcastid=g3bZvNrt
Disclaimer
This announcement includes forward-looking statements. All statements other than
statements of historical facts contained in this announcement, including, without
limitation, those regarding Thungela's financial position, business, acquisition and
divestment strategy, dividend policy, plans and objectives of management for future
operations (including development plans and objectives relating to Thungela's products,
production forecasts and Reserve and Resource positions), are, or may be deemed to
be, forward-looking statements. By their nature, such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Thungela or industry results to be materially
different from any future results, performance or achievements expressed or implied by
such forward-looking statements. The Group assumes no responsibility to update
forward-looking statements in this announcement except as may be required by law.
The information contained in this announcement is deemed by the Company to constitute
inside information as stipulated under the market abuse regulation (EU) no. 596/2014 as
amended by the market abuse (amendment) (UK mar) regulations 2019. Upon the
publication of this announcement via the regulatory information service, this inside
information is now considered to be in the public domain.
Investor Relations
Hugo Nunes
Email: hugo.nunes@thungela.com
Shreshini Singh
Email: shreshini.singh@thungela.com
Media
Hulisani Rasivhaga
Email: hulisani.rasivhaga@thungela.com
UK Financial adviser and corporate broker
Panmure Liberum Capital Limited
Sponsor
Rand Merchant Bank (a division of FirstRand Bank Limited)
Rosebank
10 December 2024
Date: 10-12-2024 09:00:00
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