Thungela Resources navigates coal production hurdles amid global economic challenges

IOL News

2 days ago

Thungela Resources, the thermal coal-mining group said its Goedehoop and Isibonelo mines are approaching the end of their life of mine. As a result, a restructuring process had started at these operations during the six months to June 30, 2025.
Image: Bloomberg
Thungela Resources management on Thursday said coal production in South Africa during the six months to June 30 was bolstered by incremental underground production.
However, the opencast operations, primarily at Isibonelo and Khwezela, were impacted by higher-than-expected rainfall, the chief financial officer Deon Smith said in a pre-close statement.
In Australia, production and export saleable product qualities in the first half were affected by challenging geology. Smith said Thursday that production is expected to improve in the second half of the year.
The share price fell by 4.81% on the JSE to R82.91 in the afternoon, continuing a decline from R111.46 a year ago.
Smith said they remained disciplined in executing strategy amid a challenging operating environment, characterised by volatile coal prices and fluctuating foreign exchange rates.
In South Africa, the Elders project began to produce export saleable production, while the Zibulo North Shaft project was on budget and on schedule for completion in 2026.
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In Australia, the remaining stake in Ensham was acquired from co-investors.
Transnet Freight Rail (TFR) performance continued to benefit from industry collaborative efforts. Rail performance from January 2025 to May 2025 was 55.5 million tons for the industry, reflecting a 17% improvement on the first half of 2024.
'The improved performance is mainly due to fewer security-related issues and improved locomotive availability and reliability, largely thanks to the additional locomotives introduced onto the North Corridor coal line. The signaling project is expected to commence in the second half, which should further enhance rail performance in 2026,' management stated.
The threat of higher tariffs and resultant instability in global trade had caused disruptions among the largest economies, constraining global economic growth and impacting energy markets. Conflicts in Eastern Europe and the Middle East were disrupting supply chains and contributing to commodity price volatility.
Thermal coal prices had declined since the latter part of 2024, reflecting shifts in demand and supply. Demand had slowed due to the global economic downturn, coupled with big stockpiles across major export hubs, particularly in India and China. Imports into these regions are further impacted by increases in domestic coal production for power generation and industrial use.
Export saleable production in South Africa was expected to be approximately 6.4 million tons for the first half of 2025, compared to 6.2 million tons in the first half of 2024. The increase in production is mainly due to improved rail performance and incremental production at the group's underground operations.
Full-year production guidance remained appropriate, with further improvements expected in the second half. Export saleable production at Ensham was anticipated to be about 1.6 million tons (on a 100% basis), compared to 2.1 million tons (on a 100% basis) in the first half of 2024, as a result of developments through more challenging geological conditions in the first half of the year.
The share buyback announced in March 2025 was completed for a total of R328m, and dividends of R1.4 billion were distributed to shareholders in the first half of 2025.
'We expect to continue to reserve about R800m at the end of June for the completion of our life extension projects, as well as the Lephalale Coal Bed Methane project. The capital allocation framework also seeks to cash collateralise our environmental liabilities over time; we have contributed a further R188m to the green fund in South Africa,' Smith stated.
Net cash at 30 June 2025, excluding cash pertaining to the Ensham fixed price contracts yet to be finalised, was expected to range between R5.9bn and R6.1bn. Additionally, there were undrawn facilities of R3.2bn.
Goedehoop and Isibonelo mines were approaching the end of their life of mine. As a result, a restructuring had begun at these operations. The interim results are anticipated to be released on 18 August 2025.
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