Thermal coal exporter Thungela Resources says it delivered a resilient performance for the year ended December 31, 2023, which underpinned strong cash generation and a robust net cash position.

This supported total returns to shareholders of R3.3-billion for 2023, equivalent to 49% of adjusted operating free cash flow.

This constitutes, firstly, Thungela declaring a dividend of R10 apiece, bringing the total dividend for the year to R20 apiece, amounting to R2.8-billion in dividends for 2023.

Moreover, Thungela announced a share buyback of up to R500-million.

CEO July Ndlovu said on March 18 that the period was characterised by softening prices and challenges with State-owned Transnet Freight Rail (TFR).

Despite this, the company achieved a profit of R5-billion, which includes a R448-million contribution from Ensham, in Australia, for the four months since completion of the acquisition of that asset.

The strong cash generation and balance sheet position was maintained, with adjusted operating free cash flow of R6.8-billion and net cash of R10.2-billion.

“In 2023, Thungela experienced significant transformation with the acquisition of Ensham, a key milestone in the group’s geographical diversification pathway, the approval of an extension to the life of our flagship Zibulo Colliery and the continued execution of the Elders project. These advancements have set Thungela on a path towards a more competitive portfolio and a longer-life business.

“Our financial performance reflects agility in responding to market challenges, including weaker coal prices and continued rail underperformance. Despite these challenges, we have generated an adjusted earnings before interest, taxes, depreciation and amortisation of R8.5-billion, adjusted operating free cash flow of R6.8-billion, and ended the year with a net cash position of R10.2-billion,” Ndlovu avered.

He told Mining Weekly that, in terms of rail constraints, the company was negatively impacted on by having to move some domestic coal to road, as well as having to curtail production by almost one-million tonnes during the year.

Thungela continued to work closely with industry players and Transnet to remedy rail performance challenges, including on strengthening security and acquiring critical spare parts, which Ndlovu said was "gathering good momentum”.

The cost of the spares and security deployment is recovered by the coal exporting parties through the mutual cooperation agreement signed between TFR and the Richards Bay Coal Terminal.

The acquisition of a controlling interest in the Ensham business was highlighted as a notable step in Thungela’s geographic diversification strategy, extending its footprint beyond South Africa and enhancing its coal resource base by about one-billion tonnes.

This move is expected to open up new markets, including Japan and Malaysia; diversify the customer base; and provide exposure to the Newcastle benchmark coal price.

Thungela has further bolstered its international presence by establishing Thungela Marketing International in Dubai, aimed at marketing the coal produced by its South African and Australian assets and to give Thungela direct access to seaborne markets.

Maximising value from existing assets is also highlighted as key to shaping Thungela’s future business.

Through the Elders and Zibulo North Shaft projects, Thungela is changing into a long-life business.

OUTLOOK

The export saleable production for Thungela’s South African operations for this year is expected to be between 11.5-million and 12.5-million tonnes based on the expected rail performance.

Expansionary capital expenditure is expected to be between R1.6-billion and R1.9-billion on the Elders and Zibulo North Shaft projects.

For the Ensham business, export saleable production guidance for this year is set at between 3.2-million and 3.5-million tonnes (on a 100% basis) based on plans to ramp up production.

Looking ahead, despite near-term headwinds, Thungela said it remained committed to delivering on its strategic priorities to take advantage of the long-term fundamentals supporting coal demand and stronger coal prices in key markets.

In the short term, work to create a sustainable rail system in South Africa continues.

Ndlovu avers that Thungela is executing its strategy well, is still cash-generative and its competitiveness and diversification position it well for the future.

“We will continue to evaluate our portfolio with a focus on strengthening our competitiveness and optimising capital allocation to maximise shareholder returns,” he highlighted.