JSE-listed Thungela Resources has entered into agreements to acquire a controlling interest in the Ensham coal mine, an operating thermal coal asset, in Queensland, Australia.
Thungela has, subject to regulatory approvals, entered into an agreement with Audley Energy and Mayfair Corporations Group, for its wholly owned subsidiary Thungela Resources Australia to acquire a majority shareholding in Sungela Holdings.
Sungela Holdings will, in turn, through its wholly owned subsidiary Sungela, acquire an 85% interest in the Ensham Business from Idemitsu Australia and its subsidiary, Bligh Coal. The Ensham Business’ primary asset is the Ensham coal mine.
Thungela says the transaction is in line with its commitment to deliver superior returns to shareholders.
“It delivers on Thungela’s geographic diversification strategy through a highly cash-generative thermal coal asset with long-life potential at an attractive valuation. Furthermore, it allows Thungela to capitalise on the current strong Newcastle coal price environment,” the company states.
As a result of the acquisition Thungela will have operational control of Ensham coal mine and, subject to certain existing arrangements, will also have the right to market and sell its proportional share of the coal produced at the Ensham mine.
This will provide Thungela with access to the Japanese and other Asian markets, where demand remains strong, and allow it to better balance the group’s price exposure by providing access to the strong Newcastle export coal price, complementing the group’s existing exposure to the Richards Bay benchmark coal price, it notes.
The transaction is expected to be earnings and cash flow accretive, with strong potential for a short payback period.
About two-thirds of the Ensham mine’s budgeted production for 2023 have been forward sold at attractive prices. Based on the current market observed forward curve for Newcastle thermal coal, the payback period of the transaction is potentially within two to three years.
Moreover, the mine occupies a favourable position on the global seaborne margin curve, Thungela avers.
It adds that Ensham is being acquired from a responsible and reputable owner and the acquisition meets Thungela’s environmental, social and governance criteria.
Taking a controlling interest in a mining asset already in production means that Thungela will be able to extend the life of its business without creating new carbon units on a global basis, it points out.
Following completion of the transaction, the Ensham mine will be incorporated into Thungela’s plan to reduce carbon intensity at existing operations and considered in its intermediate emissions reduction targets.
“This acquisition delivers on our strategy to pursue geographic diversification through a commodity we understand and in which we have a right to win. Given the similarity in operating methodology between Ensham and our South African underground operations, we can leverage our core skills to create value.
“We are pleased to be entering Australia, a leading mining geography with a successful record of thermal and metallurgical coal production and reliable, well-established port and rail facilities,” comments Thungela CEO July Ndlovu.
He says the acquisition aligns to the company’s strategy of providing geographic diversification, while also providing an efficient entry into Australia.
The Ensham coal mine produced about 3.2-million tonnes of high-quality, low-ash and low-sulphur thermal coal in 2022, and has the potential to increase production in the future.
Subject to extension of the existing mining approvals, the Ensham mine has a life-of-mine to about 2039.
It produces high-quality coal that does not require beneficiation.
Edited by: Chanel de Bruyn
Creamer Media Senior Deputy Editor Online
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