Thungela lowers production guidance owing to deteriorating rail performance

18th October 2021 By: Tasneem Bulbulia - Creamer Media Reporter

Thungela lowers production guidance owing to deteriorating rail performance

JSE-listed coal exporter Thungela Resources says that, following an initial recovery in the performance of Transnet Freight Rail (TFR) subsequent to the yearly maintenance shutdown in July, rail performance has continued to deteriorate in the second half of the year.

Thungela consequently implemented actions to mitigate the impact on its business. Third-party sales, which use the rail entitlement of Thungela, have been reduced from 926 000 t in the first half of the year to an anticipated 25 000 t for the second half of the year.

The group has also optimised its export equity sales mix, prioritising the railing of lower volumes of higher-margin products, recognising continued rail constraints, it adds.

Moreover, it notes that the coal industry has assisted TFR to implement improved security measures, which are expected to contribute to an improvement in rail performance.

This follows several instances of cable theft and related rail interruptions.

The coal industry continues to engage TFR on opportunities for further improvement.

Notwithstanding the actions already taken by Thungela and TFR, given the current and expected rail performance levels, some of its operations may become constrained as a result of reaching stockpile capacities from November.

Thungela says it continues to monitor rail performance and its potential impact on its operations and to explore further actions that could be required to mitigate such impacts.

Full-year export saleable production guidance is accordingly moderated to 14.8-million to 15.2-million tonnes, from the 15-million to 16-million tonnes previously guided.

Unless there is an improvement in rail performance, Thungela is expected to build additional export inventory stock levels of about 1.3-million tonnes during the period.

Thungela says it continues to work with the rest of the South African coal industry and TFR to improve the levels of infrastructure availability and performance.

Thungela’s share price on the JSE fell by more than 4% on Monday morning.