TIDMTGA
RNS Number : 3224C
Thungela Resources Limited
12 June 2023
Thungela Resources Limited
(Incorporated in the Republic of South Africa)
Registration number: 2021/303811/06
JSE share code: TGA
LSE share code: TGA
ISIN: ZAE000296554
('Thungela' or the 'Company' and together with its affiliates,
the 'Group')
Chief Financial Officer's Pre-Close and Trading Statement
for the six-months ending 30 June 2023
Dear Stakeholder
On the basis of the first five months of 2023, Thungela expects
to deliver positive earnings and cash generation for the six-month
period ending 30 June 2023, notwithstanding a sharp decline in coal
prices and continued rail underperformance by Transnet Freight Rail
(TFR).
Seaborne coal prices have receded from record highs in 2022 and
have fallen sharply since the start of the year. Following a milder
winter in Europe, coupled with softer gas prices, European coal and
gas stocks continued to be elevated, resulting in the redirection
of coal volumes to Asia. This added significant supply to Asian
markets which also showed signs of weaker demand, especially from
China. Russian coal also continued to flow into the region at
discounts. However, LNG prices are now starting to find support,
which could make coal more competitive as a fuel source towards the
end of the year as the European winter approaches. Other short term
price support factors include the impact of coal supply cuts,
including lower volumes of low grade South African export coal and
reduced export volumes from western Russia.
By early May 2023, TFR performance had stabilised at
approximately 48Mtpa for the industry following a very weak start
to the year. This stability was interrupted by two derailments in
May which resulted in the loss of approximately 300kt in railed
volumes for Thungela. For Thungela to achieve the upper end of our
export saleable production guidance range (i.e. 12.5Mt) we require
an industry run rate of 53Mtpa in the second half of the year.
Thungela and the industry continue to work closely with TFR on a
series of on-going interventions aimed at improving rail
performance.
Thungela is currently not materially affected by the challenges
relating to Eskom's inability to provide a consistent supply of
electricity, however this could become an area of concern in the
event that we see further deterioration in the supply of
electricity.
The following are the key insights into our performance for the
year to date(1) and our expectations for the six-months ending 30
June 2023 (H1 2023):
-- The Benchmark coal price(2) has averaged USD135.47 per tonne
for the year to date, compared to USD270.87 per tonne for FY
2022.
-- Discount to the Benchmark coal price has been approximately
17% for the year to date, compared to 15% for FY 2022. The average
realised export price for the year to date is USD112.40 per tonne,
compared to USD229.21 per tonne for FY 2022.
-- Export saleable production for H1 2023 is expected to be
5.8Mt, in line with the guidance range of 10.5Mt to 12.5Mt for the
full year issued in March 2023, and 5% lower than H1 2022 export
saleable production of 6.1Mt.
-- FOB cost per export tonne is expected to be R1,230 in H1
2023, compared to R1,093 per tonne in H1 2022. FOB cost per export
tonne excluding royalties for H1 2023 is expected to be R1,155, in
line with the full year guidance range of R1,047 to R1,180 per
tonne. This compares to R927 per tonne for H1 2022. The increase is
primarily attributable to lower production coupled with energy
input price escalation.
-- Export equity sales for H1 2023 are expected to be 6.2Mt,
compared to 6.5Mt in H1 2022, a decrease of 5%. This is a result of
the forecast rail performance of 6.0Mt in the first half of 2023
coupled with a draw down in port stocks.
-- Capital expenditure for H1 2023 is expected to be R0.7
billion . This consists of R0.4 billion in sustaining capital and
R0.3 billion in expansionary capital. Capital expenditure has
historically been weighted towards the second half of the year.
-- The Group had a net cash position of R14.0 billion on 31 May
2023. The Group expects to pay taxes and royalties of approximately
R1.0 billion relating to H1 2023 in June 2023.
-- Earnings per share ("EPS") (3) for H1 2023 is expected to be
between R17.00 and R23.00, thus between R44.23 and R50.23 lower
than the H1 2022 EPS of R67.23 per share - a decrease of between
66% and 75%.
-- Headline earnings per share ("HEPS") (3) for H1 2023 is
expected to be between R17.00 and R23.00, thus between R44.23 and
R50.23 lower than the H1 2022 HEPS of R67.23 per share - a decrease
of between 66% and 75%.
Thungela has continued to advance its strategic priorities. The
board has approved the Zibulo North Shaft life extension project at
a capital cost of R2.4 billion which, together with the investment
in the Elders production replacement project, will underpin the
cost competitiveness of our business into the future. The Group
also continues to make progress on fulfilling the conditions
precedent relating to the Ensham acquisition and we are confident
that the transaction will complete within the next three months.
The Ensham operation will further enhance the resilience of our
portfolio.
We are focused on controlling the controllables and we are
working to eliminate costs where we have curtailed production as a
result of rail underperformance, coupled with driving productivity
where production has not been curtailed. We will also continue to
closely monitor the thermal coal prices and rail performance, the
likely trajectory of improvements and the impact this may have on
our future portfolio.
Thungela remains focused on disciplined capital allocation and
committed to our stated dividend policy, which is to target a
minimum payout of 30% of adjusted operating free cash flow(4) . In
this context, the Group's balance sheet remains robust and together
with the actions we are taking to further bolster the resilience of
our business, we are confident that we will be able to navigate the
current headwinds and to continue delivering superior returns for
our shareholders over the long-term.
Deon Smith
Chief Financial Officer
Annexure A: Operational Performance
Table 1: Export saleable production by operation
Export saleable H1 2022 H1 2023 % change
production Actual Forecast(5)
Mt (a) (b)
(b-a)/a
Underground 4.5 4.3 -4%
------------------------- -------- ------------
Zibulo 2.3 2.0 -13%
------------------------- -------- ------------
Greenside 1.2 0.9 -25%
------------------------- -------- ------------
Goedehoop(6) 1.0 1.4 40%
------------------------- -------- ------------
Opencast 1.6 1.5 -6%
------------------------- -------- ------------
Khwezela 0.6 0.8 33%
------------------------- -------- ------------
Mafube 1.0 0.7 -30%
------------------------- -------- ------------
TOTAL 6.1 5.8 -5%
------------------------- -------- ------------
Table 2: Export sales by segment
Export sales H1 2022 H1 2023 % change
Mt Actual Forecast(5)
Equity sales 6.5 6.2 -5%
------------------ ------- ------------
Underground 4.8 4.7 -2%
------------------ ------- ------------
Opencast 1.7 1.5 -12%
------------------ ------- ------------
Third party sales 0.0 0.0 -
------------------ ------- ------------
TOTAL 6.5 6.2 -5%
------------------ ------- ------------
Footnotes
1. All references in this document to "year to date" refer to
the period from 1 January 2023 to 31 May 2023.
2. Benchmark price reference for 6,000kcal/kg thermal coal
exported from the Richards Bay Coal Terminal.
3. Expected EPS and HEPS for H1 2023 is based on a WANOS of
approximately 137.2 million shares. EPS and HEPS for H1 2022 is
based on a WANOS of approximately 133.3 million shares. The lower
end of the forecast EPS and HEPS ranges are calculated at an
average exchange rate of USD:ZAR R18.00 for the month of June
2023.
4. Adjusted operating free cash flow is net cash flows from
operating activities less sustaining capex.
5. Based on the latest available management forecasts. Final figures may differ by +/- 5%.
6. Export saleable production for Goedehoop includes
approximately 300kt attributable to the Nasonti operation.
Review of Pre-Close and Trading Statement
The information in this Pre-Close and Trading Statement is the
responsibility of the directors of Thungela and has not been
reviewed or reported on by the Group's independent external
auditors.
The Group expects to release its interim results on or about 21
August 2023.
Investor Call Details
A conference call and audio webinar relating to the details of
this announcement will be held at 11:00 SAST on Monday 12 June
2023. A recording of the audio webinar will be made available on
the Thungela website from 15:00 SAST on the same date.
Conference Call registration:
https://services.choruscall.za.com/DiamondPassRegistration/register?confirmationNumber=8399487&linkSecurityString=1556933ae1
Audio webinar registration:
https://services.themediaframe.com/links/thungela10044564.html
Disclaimer
This document includes forward-looking statements. All
statements other than statements of historical facts included in
this document, including, without limitation, those regarding
Thungela's financial position, business, acquisition and divestment
strategy, dividend policy, plans and objectives of management for
future operations (including development plans and objectives
relating to Thungela's products, production forecasts and Reserve
and Resource positions), are, or may be deemed to be,
forward-looking statements. By their nature, such forward-looking
statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or
achievements of Thungela or industry results to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements. The Group
assumes no responsibility to update forward-looking statements in
this announcement except as may be required by law.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the market abuse regulation (EU) no. 596/2014 as amended by the
market abuse (amendment) (UK mar) regulations 2019. Upon the
publication of this announcement via the regulatory information
service, this inside information is now considered to be in the
public domain.
Investor Relations
Ryan Africa
Email: ryan.africa@thungela.com
Media Contacts
Tarryn Genis
Email: tarryn.genis@thungela.com
UK Financial adviser and corporate broker
Liberum Capital Limited
Tel: +44 20 3100 2000
Sponsor
Rand Merchant Bank
(a division of FirstRand Bank Limited)
Rosebank
12 June 2023
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END
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