Thungela aims to its 2023 guidance despite continued rail challenges

Operational agility sees Thungela confirm its full year 2023 guidance despite continued rail challenges, while also achieving higher than expected production at Ensham.

Based on the Group’s performance for the period 1 January 2023 to 30 November 2023 (“the year to date”(1)), Thungela Resources is set to achieve the full-year guidance metrics as outlined in its 2023 interim results released in August 2023.

The following are the key insights into its performance for the year to date and its expectations for the financial year ending 31 December 2023.

Energy demand reduced in Europe, China and much of Asia following the milder 2023 Northern Hemisphere winter. This reduction in demand was further exacerbated by already high coal and gas stock levels in key import hubs. Inventory levels in the main coal supply hubs increased due to the low demand in Europe, with more producers shifting their focus to the Asian-Pacific market. Energy prices, including the price of coal, remain volatile and susceptible to ongoing geopolitical tensions.

Benchmark coal prices softened markedly in 2023 following the record levels observed in 2022. The Richards Bay Benchmark coal price(2) has averaged USD122.88/tonne for the year to date, compared to USD270.87/tonne for FY 2022. The Newcastle Benchmark coal price(3) has averaged USD175.15/tonne for the year to date, compared to USD360.19/tonne for FY 2022.

•   Discount to the Richards Bay Benchmark coal price has been approximately 15% for the year to date, compared to 15% for FY 2022 and 18% for H1 2023. Discounts in the second half of the year narrowed as prices retracted. The average realised export price for product sold ex-Richards Bay Coal Terminal (“RBCT”) for the year to date is USD104.85/tonne, compared to USD229.21/tonne for FY 2022.

•   The premium achieved by Ensham to the Newcastle Benchmark coal price has been approximately 10.4% from completion of the acquisition on 31 August 2023 through to 30 November 2023. This premium is due primarily to the composition of the Ensham sales book which includes volumes sold at fixed prices. The average realised price for product from Ensham is USD153.44/tonne for the same period.

•   Export saleable production relating to its South African operations is expected to be 12.1Mt for FY 2023, marginally higher than the mid-point of the guidance range of 11.5Mt to 12.5Mt issued in August 2023. The removal of three underground sections in response to poor rail performance resulted in a decrease of 7.6% compared to the prior year (FY 2022: 13.1Mt).

•   Export saleable production at Ensham(4) for FY 2023 is expected to be 2.9Mt (on a 100% basis), higher than the expectation of 2.7Mt that prevailed upon completion of the acquisition – this increase is primarily due to an enhanced focus on productivity. The attributable export saleable production from Ensham for the Group in FY 2023 is expected to be 0.8Mt – this represents 85% of the total production for the four months from completion of the acquisition to the end of the year (refer to Annexure A).

Capital expenditure for the South African operations for FY 2023 is expected to be R3.0 billion, at the lower end of the guidance range. This consists of R1.4 billion relating to sustaining capital and R1.6 billion relating to expansionary capital for the Elders and Zibulo North Shaft projects.

Capital expenditure at Ensham for FY 2023 is expected to be R1.0 billion (on a 100% basis) – this relates to sustaining capex only. The Group is expected to recognise R0.3 billion which represents the attributable capital expenditure incurred in the period from completion through to the end of the year on an 85% basis (refer to Annexure A).