Thungela Coal: Update on the Ensham acquisition
Earlier this year, we announced the acquisition of the Ensham thermal coal mine in Queensland Australia, marking a significant milestone on our journey to geographic diversification, and we successfully completed the transaction on 31 August 2023.
It was imperative that the acquisition be value accretive for shareholders and the transaction was structured to enable Thungela to benefit from the economics of the Ensham Business from the lock-box date of 1 January 2023 through to completion.
Thungela reports that the Group has received R0.8 billion in cash through this mechanism, higher than initial estimates. Together with the final closing adjustments, this results in a reduction in the purchase price of the Ensham Business from the initial R4.1 billion, to approximately R3.2 billion.
The acquisition substantially increases Thungela’s coal resource base and provides access to new markets, notably Japan, as well as exposure to the Newcastle Benchmark coal price. The Ensham sales book consists of volumes sold against the Newcastle Benchmark coal price, the Japanese Reference Price as well as fixed price contracts with large utilities.
Thungela assumed control of the operations on 1 September 2023, resulting in an enhanced focus on productivity. We are confident that the mine should produce 2.9Mt (on a 100% basis) in 2023, higher than our initial expectation of 2.7Mt at the time of completion of the transaction.
The integration of Ensham into the Group has progressed well and Thungela completed the transition of all services from the previous owner on 30 November 2023. Key areas of judgement in relation to the acquisition of the Ensham Business, and the impact thereof on the financial results for the year, are in the process of being finalised.
