Our opinion on the current state of THUNGELA(TGA)

Thungela (TGA) is Anglo American's coal assets which have been unbundled into the hands of Anglo shareholders and separately listed on the JSE and the LSE because of Anglo's policy of moving away from carbon-based fossil fuels like coal. Anglo sold its last 8% of Thungela on 25th March 2022 for R1.67bn. Thungela is a major thermal coal exporter in South Africa. It has over 7,500 employees and exports coal to Asia, India, SEA, and East and North African countries. The company owns 50% of Phola, which operates a coal processing plant, and it has a 23.22% interest in the Richards Bay Coal Terminal (RBCT). The company has the capacity to produce over 90 million tons of coal per annum. The company operates 7 mines in South Africa, 4 open cast and 3 underground.

In its results for the year to 31st December 2023, the company reported a profit of R5bn, down from the previous year's profit of R18.2bn. Earnings per share (EPS) fell to 3766c, down from 12708c. The company paid out a dividend of R2.8bn and bought back R500m worth of its own shares. The company said, "Industry railed volume of 47.9Mtpa in 2023, deterioration of 5% from last year. Mutual cooperation agreement establishes framework for procurement of critical spares on behalf of TFR. Industry deployed additional security on coal line."

In a trading statement for the six months to 30th June 2024, the company estimated that HEPS would be between 700c and 1000c compared with 2246c in the previous period. Coal prices were down about 18%, and the free-on-board (FOB) cost per tonne is expected to be at the lower end of the range between R1170 and R1290.

The share began trading on the JSE on 7th June 2021 and immediately fell to 2190c from 2600c. It was originally estimated to be worth a minimum of 4400c but reached a high of 37752c on 16th September 2022. Since then, it has been moving sideways and downwards with lower coal prices and problems with Transnet. Obviously, it is also subject to the volatility of being a single commodity share and dependent on Transnet to get its product to port. The company has committed to paying out at least 30% of "adjusted operating free cash flow" in the form of a dividend.