REG - Thungela Resources - Pre-Close and Trading Statement

Thungela ResourcesAnnouncement

12/06/2023 07:00

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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 production  H1 2022 Actual  H1 2023 Forecast(5)  % change

 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
(https://protect-za.mimecast.com/s/FK1qCY6Bv8HDzBjIrR3qP?domain=us-west-2.protection.sophos.com)

 

Audio webinar registration:

https://services.themediaframe.com/links/thungela10044564.html
(https://protect-za.mimecast.com/s/Uc3rCWnz7Vt6AoNfB2rXQ?domain=us-west-2.protection.sophos.com)

 

 

 

 

 

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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