Based on coal producer Thungela Resources’ performance from January 1 to November 30, CFO Deon Smith has expressed confidence that the company will exceed its full-year export saleable production guidance in South Africa and Australia.

In a pre-close statement for the financial year ending December 31, issued on December 10, Smith confirmed that the free-on-board (FoB) cost per export tonne was expected to fall below the guidance range, reflecting higher production levels and a sustained focus on cost efficiencies.

He also highlighted the company’s strong safety performance, noting that Thungela had been fatality-free for 21 consecutive months.

He also noted that the company’s geographic diversification strategy in Australia continues to enhance its production profile.

Export saleable production in Australia was expected to reach four-million tonnes of coal on a 100% basis, exceeding the revised guidance range of 3.5-million to 3.8-million tonnes reported in August.

This increase was attributed to productivity efficiencies and better-than-expected geological progress.

In South Africa, export saleable production was projected to be 13.4-million tonnes, higher than the guidance range of 11.5-million to 12.5-million tonnes, and marking a 9% increase year-on-year. Improved mine productivity and enhanced rail performance in the second half of the year were significant contributors to these results, Smith said.

The performance of State-owned Transnet Freight Rail (TFR) has been critical to Thungela’s success, he explained. Supported by industry-backed initiatives, TFR achieved an annualised run rate of about 52-million tonnes by November 30 and 56-million tonnes since the maintenance shutdown in July.

The improvement was attributed to the installation of critical locomotive spares, the addition of locomotives on the North Corridor line, as well as ongoing maintenance and upgrades to the signalling network.

Earlier in the year, TFR faced challenges from derailments, locomotive shortages, and security issues, which limited performance to 47-million tonnes on an annualised basis during the first half of the year.

Smith noted, however, that geopolitical tensions, including conflicts in Ukraine and the Middle East, have continued to impact on global energy markets. He said these conflicts have heightened concerns about gas supply, providing support to coal prices despite a challenging macroeconomic environment marked by a sluggish global steel sector and low oil prices.

Demand for Australian high-energy coals has softened as premium Asian buyers diversify their sourcing, Smith added.

He pointed out that benchmark coal prices this year had declined compared with the previous year. The Richards Bay benchmark coal price averaged $105.21/t for the year to date, down from $121/t in 2023, while the Newcastle benchmark coal price averaged $135.59/t, compared with $172.79/t in 2023.

Smith said Thungela had achieved a price realisation of 87% against the Richards Bay benchmark, reflecting a discount of 13%, compared with 14% in 2023.

In Australia, price realisation against the Newcastle benchmark was 92%, with the average realised export price from Ensham reaching $124.43/t, down from $155.85/t during the same period in 2023.

Smith said these changes reflected lower demand in traditional Asian markets and increased competition from new suppliers.

Meanwhile, South African export equity sales for this year were expected to total about 12.5-million tonnes, up from 11.9-million tonnes in 2023. Smith said this included about 250 000 t of sales rolled over from December last year. Improved rail performance in the second half of the year contributed to the increase.

In Australia, export equity sales from the Ensham operations were also expected to reach four-million tonnes on a 100% basis.

Smith said FoB costs per export tonne, excluding royalties, were expected to fall below the lower end of the guidance range in both regions. In South Africa, these costs were expected to be marginally below the guidance range of R1 170/t to R1 290/t.

Including royalties, the costs were also expected to remain below the range of R1 180/t to R1 300/t.

In Australia, FoB costs per export tonne at Ensham were projected to fall below the guidance range of R1 590/t to R1 710/t, owing to higher production and better contractual rates. Including royalties, the costs were expected to remain below the range of R1 830/t to R1 950/t.

Smith said Thungela’s capital expenditure (capex) in South Africa for this year was forecast at R2.7-billion, with R1-billion allocated to sustaining capital and R1.7-billion to expansionary projects, including the Elders and Zibulo North Shaft projects.

In Australia, sustaining capex at Ensham was expected to total R550-million (on an 85% basis), below the guidance range owing to the rephasing of expenses into 2025.

Smith assured that Thungela remained committed to disciplined capital allocation, prioritising shareholder returns through dividends and share buybacks. The company completed a share buyback programme in August 2024, acquiring 1.2-million shares for R159.6-million, representing 0.9% of issued share capital.

Smith said the Elders and Zibulo North Shaft life extension projects remained on track, with an aggregate capex of R3.4-billion expected by year-end.

Looking ahead, Smith pointed out that, according to the International Energy Agency’s ‘World Energy Outlook 2024’, global coal demand for the year was expected to rise slightly compared with 2023, driven by strong energy demand in China and India, which would offset declining coal use in Europe.

Meanwhile, the northern hemisphere was well-stocked with gas and coal ahead of winter, and although rail performance in South Africa remained a constraint, recent TFR improvements were expected to continue in 2025.

Thungela projected its net cash position at December 31 to range between R8-billion and R8.5-billion.

Smith said the board had reaffirmed its commitment to a dividend policy that distributed at least 30% of adjusted operating free cash flow to shareholders, and that the company expected to report improved cash generation for the second half of the year.

Thungela will release its full-year results on March 17.