Julio Ndlovu, CEO of Thungela Resources.
- Thungela Resources will acquire the Ensham coal mine in Australia.
- The deal is part of the group’s strategy to diversify outside of South Africa.
- Thungela believes the asset’s purchase price is attractive and it will have a quick payback period.
- For more financial news, go to News24 Business Cover.
Thungela Resources has announced the acquisition of a majority stake in the Ensham coal mine in Australia for R4.1bn, as the coal miner moves to diversify out of South Africa.
Thungela said the AUD340 million (R4.1 billion) purchase consideration was attractive for a majority stake in what is a “highly cash-generating thermal coal asset with long-duration potential.”
Thungela will acquire an 85% stake in Ensham from Idemitsu Australia. The remaining 15% will continue to be owned by LX International (LXI).
The deal will see Thungela gain operational control of Ensham and, subject to certain existing agreements, it will also have the right to trade and sell its pro rata share of the coal produced by the Ensham colliery.
“This will give Thungela access to the Japanese and other Asian markets where demand remains strong” and “will better balance the group’s price exposure by providing access to Newcastle’s strong export coal price, complementing the group’s existing exposure. to the Richards Bay Benchmark Coal”. price,” the company said in a statement.
The deal comes 20 months after Thungela, South Africa’s largest export coal miner, spun off from Anglo American.
“This acquisition is in line with our strategy of seeking geographic diversification through a core product that we understand and have a right to earn on,” said Thungela CEO July Ndlovu. “Given the similarity in operating methodology between Ensham and our underground operations in South Africa, we can leverage our core skills to create value.”
Ndlovu said the deal would build resilience for Thundela, mitigating its exposure to just one country, South Africa. Thungela is pleased to enter Australia, a leading mining geography with a successful track record of metallurgical and thermal coal production and “well-established, reliable rail and port facilities,” he said.
While Transnet’s poor performance is hurting coal exporters like Thungela, Ndlovu told News24 the takeover would have happened regardless of Transnet’s problems. “It’s just a good business decision,” he said, noting that Thundela remained committed to its South African operations and would work closely with Transnet to help solve their challenges.
The high-margin mine is expected to increase value and earnings, with a short payback period of two to three years.
The asset produced approximately 3.2 million tonnes in 2022 and will provide scale for Thungela. It also has the potential to increase production in the future. Subject to the extension of existing mining approvals, the Ensham coal mine has a mine life until 2039.
Thungela said the mine will be acquired from a reputable and responsible mine owner. The asset meets all the requirements of the investment criteria. The group said the mine would be incorporated into its net-zero strategy as it works to decarbonise its portfolio.
Thungela share price of R220 was essentially flat in Friday morning trading.
