Shareholders in Thungela Resources (Thungela) are set for a hefty windfall as rising coal prices strengthen its balance sheet.
The South-African coal producer, which is spun out of Anglo American, has enjoyed a 15.4 per cent rise in its share price on the FTSE Main Market on Monday afternoon.
Shares have picked up nearly 25 per cent over the past month – as the company expects sales to come in at 13.7m tonnes for the financial year.
Meanwhile, discount to the benchmark price has narrowed substantially to 17 per cent for the year to date, compared to 26 per cent at the same time last year.
The improvement in realised prices was driven by both a focus on higher margin products in the face of on-going rail challenges, market conditions which resulted in premiums on benchmark coal products, and a new marketing agreement with Anglo American,
Thungela is a recent arrival to both the Johannesburg and London stock exchanges, listing in June after its demerger.
The group, listed in London and South Africa, has a cash position of approximately $500m (R8bn) at the end of November.
This is R3bn more than Thungela, which has a market value of R10bn, considers necessary to maintain during periods of high coal prices.
Coal prices have surged this year as big economies have powered up after the pandemic – despite pledges from major economies at the COP26 climate summit in Glasgow to phase down production.
China, the world’s biggest coal consumer, recently ordered its miners to increase production and end power outages.
Worldwide, demand for thermal coal has only continued to improve even as international supply from major basins was disrupted by logistical constraints in China, Russia and Indonesia, and on-going geopolitical tensions between China and Australia.
The company has also benefitted from demand for South African coal remaining firm.
In its trading statement on the London Stock Exchange, the company said: “We are in a sound financial position and the group has adequate resources to deliver on our strategic capital allocation objectives,” the company reports.
With this in mind, Thungela expects to progress the studies of its key life extension projects, including Elders and the Zibulo North shaft.over the coming months.
It hopes to be in a position to provide more detailed feedback at the full-year annual results presentation.
Thungela will also pay its maiden dividend for the six months ending December 31.
The dividend will be declared following the announcement of its full-year results.