THUNGELA Resources shares leapt 11.8 percent to close at R120 on Friday after an impressive trading update that reflected “blow-out earnings” for the full year to the end of December.
Formerly owned by Anglo American under its thermal coal business unit, Thungela was a top performer on the JSE on Friday, scaling to its highest share price.
This came as investors cheered the group’s earnings, with market watchers saying its valuation has shot up to more than $1 billion (R15.2bn) from an initial valuation of $253 million when it was bundled off Anglo American last year.
The company advised shareholders via a trading update that per share earnings for the year period to December 31, 2021 are expected to be between R60.32 and R61.27. This reflects a significant rise of between R65.63 and R66.58 per share on the R5.31 loss per share recorded for the previous year.
Headline earnings for the current period are also projected at between R6.9bn and R7bn, which contrasts to a headline loss of R0.3bn in the previous year.
The surge in earnings for Thungela has been attributed to a rise “in revenue driven by the strong price environment for thermal coal” during the year under review.
“This has been accompanied by improved cost efficiency across our operations, positively impacting the profitability of the group,” the company said in its trading update.
Coal prices averaged $123 a ton in 2021, while on Friday the commodity traded at around $190 a ton. As power deficits continue, it is likely that demand for thermal coal will be sustained, despite a push to move away from fossils as a source of energy by climate change campaigners.
“Earnings per share for FY21 (full year 2021) are expected to be plus-minus R60 a share equivalent to 60 percent yield. The price of seaborne thermal coal is likely to remain elevated, and this will set the stage for blow-out earnings for 1HY22 (first half 2022),” analysts at Capital One Partners said on Friday.
Thungela has recently said that studies for its crucial life expansion projects, which encompass the Elders and the Zibulo North shaft, are expected shortly. It is expected that the company will provide details on this when it presents its full year financials.
“We have, accordingly, concluded a strategic partnership agreement with Nasonti. Through the agreement, a beneficiation plant will be re-established at Goedehoop South.
“Resultantly, an attributable capital cost for Thungela will be around R200m. Thungela’s estimated effective share of steady-state production will shoot up to 1 million tons of low-cost saleable product a year for the next four years.”
BUSINESS REPORT ONLINE