Investors in South Africa’s largest exporter of thermal coal are set to enjoy a bumper payday amid an extraordinary boom in prices for the highly polluting fossil fuel.
Thungela Resources, a spin-off from Anglo American, declared a dividend of R60 a share ($3.68) as profits for the six months to June surged more than 4,000 per cent on the back of record coal prices and premiums.
The payout is nearly three times higher than Thungela’s share price on its first day of trading 14 months ago and underscores the huge profits being generated from coal.
Glencore, the world’s biggest exporter of thermal coal, this month revealed earnings from its coal business had surged almost 900 per cent to $8.9bn in the first six months of the year. Chinese and Indian producers have also reported soaring profits.
The results are the latest evidence of a remarkable turnround for an industry that has been shunned by many investors and banks amid a global push towards cleaner fuels.
Thungela said demand for “affordable” energy sources had escalated following Russia’s invasion of Ukraine, which has sent shockwaves through global energy markets.
“Coupled with supply constraints in major coal-producing regions, this resulted in the price of thermal coal increasing to unprecedented levels,” chief executive July Ndlovu in a statement.
South African coal shipped from Richards Bay is trading at almost $320 a tonne, according to Argus Media, up from $140 this time a year ago.
A full ban on Russian coal shipments has just come into effect in Europe, boosting demand for alternative sources of supply. It comes as Germany fires up coal-fired power stations ahead of the winter after Russia cut gas supplies to the continent.
“We expect an even larger dividend of R67 per share at the full-year results, assuming there is no merger and acquisition activity,” said Ben Davis, analyst at Liberum.
In the six months to June, Thungela reported net income of R9.6bn ($578mn), up from R351mn in the same period a year ago on revenue up 160 per cent to R26.1bn
It also lowered guidance for shipments as rail constraints continue to hamper its ability to move coal from its mines to Richards Bay, one of the biggest coal terminals in the world.
Thungela expects to export 13mn-13.6mn tonnes of the fossil fuel this year, from an initial projection of 14mn-15mn.
The company also approved the R2bn Elders project, a proposed underground coal mine in Mpumalanga province, although Ndlovu said it would not add incremental tonnes to its production profile but replace production from another mine that was reaching the end of its life.
Thungela was demerged from Anglo American in June 2021, completing the FTSE 100 miner’s exit from South African coal. Thungela shares, which are also quoted in London, fell as low as R20 on the first day of trading as investors in the US and Europe dumped the stock.
Since then they have soared by almost 1,400 per cent and the company has an equity market value of $2.2bn.