Thungela Resources H1 Earnings Call Highlights

Key Points

• Strong first-half financial performance: Adjusted EBITDA nearly doubled to ZAR 1.3 billion, adjusted operating free cash flow rose to ZAR 1.9 billion, and net cash reached ZAR 6.1 billion. Thungela declared an interim dividend of ZAR 5.50 per share.
• Higher production and improved logistics supported results: Export sellable production increased 6% to 8.5 million tons and equity sales rose 7% to 8.9 million tons, aided by better South African rail performance and a 37% production increase at Australia’s Ensham mine.
• Guidance maintained despite risks: Management kept its full-year production, cost and sustaining-capital guidance, while noting South African production was tracking below its annual range and Ensham above it. Near-term risks include currency volatility, increased Chinese and Indian coal supply, freight costs and uncertain coal-market conditions.

Thungela Resources LON: TGA reported higher first-half earnings and cash generation for 2026, supported by improved export volumes, stronger benchmark coal prices and lower operating costs, while management retained its full-year operating guidance amid market and currency uncertainty.

Chief Executive Officer Moses Madondo said adjusted EBITDA rose to ZAR 1.3 billion in the six months ended June, while the group ended the period with net cash of ZAR 6.1 billion. The board declared an interim cash dividend of ZAR 5.50 per share, representing a ZAR 773 million distribution to shareholders.

Madondo said the dividend was the company’s 10th consecutive shareholder payout since its June 2021 listing. He added that the Sisonke Employee Empowerment Scheme and Nkulo Community Partnership Trust would collectively receive ZAR 57 million.

Production, sales and rail improvement

Group export sellable production increased 6% year over year to 8.5 million tons, while export equity sales rose 7% to 8.9 million tons. The company attributed the gains to improved rail performance in South Africa and higher sales from its Ensham operation in Australia.

In South Africa, export sellable production was broadly unchanged from the prior-year period despite the closure of Goedehoop North at the end of 2025. Khwezela’s first-half production was 1 million tons above the prior period, while Zibulo production declined because of underground infrastructure challenges in the mine’s current footprint.

Madondo described the Zibulo issues as temporary, saying the mine was transitioning toward the Zibulo North Shaft. During the question-and-answer session, he said the company had already seen some improvements and expected Zibulo to perform at current improved levels during the second half.

At Ensham, production increased 37%, contributing to lower unit costs. Chief Financial Officer Deon Smith said Ensham’s FOB cost, including royalties, declined to ZAR 1,466 per export ton from ZAR 1,904 per ton in the first half of 2025. The company said the reduction reflected higher production, improved operating leverage, efficiency measures and the stronger rand’s effect on translated costs.

South African rail performance also improved. Madondo said the North Corridor reached an annualized run rate of 59.9 million tons, up 5.5% from 2025 and above the approximately 48 million-ton level last seen in 2023. The improvement was driven by industry collaboration with Transnet, increased locomotive availability, security measures and operating enhancements, he said.

South African export sales rose to 7.4 million tons, including 602,000 tons of third-party coal sales. Madondo said the company used additional rail capacity where opportunities were value accretive.

Prices and currency shaped revenue

Coal benchmarks strengthened during the first half following volatility linked to conflict in the Middle East and energy-security concerns. The average Richards Bay benchmark coal price increased 15% from the prior-year period, while the average Newcastle benchmark price rose 25%.

However, a stronger South African rand reduced the benefit of higher dollar-denominated coal prices for the company’s South African operations. Smith said the average exchange rate moved to ZAR 16.41 per U.S. dollar from ZAR 18.39 in the first half of 2025, reducing reported revenue by approximately ZAR 1.7 billion.

Revenue nonetheless increased modestly to ZAR 15.2 billion, as higher export prices contributed about ZAR 2 billion in additional revenue and increased export volumes added close to ZAR 1 billion, according to Smith. Domestic revenue declined following the closure of Isibonelo and Goedehoop.

South African realized export prices increased to about $89 per ton from $78 per ton. The realized discount widened to 15.7% from 14.9%, as a greater share of sales came from mid-quality coal. Smith said the full-year South African discount was expected to remain near that level or tighten slightly.

At Ensham, realized prices averaged about $111 per ton, compared with $109 per ton a year earlier. The operation moved to a 13.3% discount against the Newcastle benchmark from a 6.6% premium in the prior-year period, partly because fixed-price contracts had been agreed before the price rally. Smith said the full-year discount could narrow slightly as certain contracts are settled.

Profit, cash flow and capital allocation

Smith said adjusted EBITDA increased 91% year over year to ZAR 1.3 billion, while profit for the reporting period rose to ZAR 1.4 billion. The period included a ZAR 1 billion non-cash gain from the disposal of the Kleinkopje mining right, which became effective June 15 and primarily reflected derecognition of related environmental liabilities.

Smith said headline earnings per share, excluding the non-cash Kleinkopje gain, increased to ZAR 4.80 per share. Madondo separately cited headline earnings per share of ZAR 10.95, a 467% increase.

Adjusted operating free cash flow rose to ZAR 1.9 billion from ZAR 484 million in the first half of 2025. The figure included ZAR 1.1 billion in realized gains from foreign-currency instruments and about ZAR 500 million of working-capital release.

The company spent ZAR 705 million on sustaining capital expenditure and ZAR 104 million on expansionary capital. It also contributed ZAR 100 million to its South African Green Fund and established an approximately ZAR 180 million investment arrangement related to life-of-mine property access at Ensham.

Smith said the company held ZAR 3.2 billion of undrawn facilities in addition to its ZAR 6.1 billion net cash position. He said the board’s dividend policy sets a minimum payout of 30% of adjusted operating free cash flow, but does not impose a maximum. The ZAR 5.50-per-share payout represented 41% of first-half adjusted operating free cash flow.

Outlook and longer-term priorities

Thungela maintained its full-year guidance for production, costs and sustaining capital. Smith said South African production was tracking below the bottom end of its annual range based on the year-to-date run rate, but management expects a stronger second half as underground production challenges ease.

Ensham production was trending above the upper end of its guidance range, though the company maintained its stated full-year range. Ensham sustaining capital expenditure is expected to be between ZAR 500 million and ZAR 700 million.

Management said it remained constructive on medium- and long-term coal fundamentals but cautious about near-term conditions. Smith cited increased domestic coal supply in China and India, purchasing preferences in those markets, freight costs and uncertainty in currency markets. He said management expected U.S. dollar weakness to continue in the near term, while coal prices could retain a higher floor because of instability in the Middle East.

Madondo said the company would continue to focus on safety, asset optimization, life-extension projects, selective growth opportunities and disciplined capital allocation. Thungela operated without a fatality for 3.5 years and reported an improved group total recordable case frequency rate of 2.62, compared with 2.83 in 2025.

About Thungela Resources (LON:TGA)

Thungela Resources Limited engages in the mining and production of thermal coal in South Africa and Australia. It owns interests in and produces its thermal coal from mining operations, consisting of underground and open cast mines in the Mpumalanga province of South Africa, including including Goedehoop colliery, Greenside colliery, Isibonelo colliery, Khwezela colliery, Zibulo colliery, Mafube colliery, and Rietvlei colliery. It also holds 85% of the Ensham Mine located in Queensland, Australia.

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