Thungela Exceeds Production Guidance Amid Depressed Coal Prices

Thungela beats production guidance while prices slump: what today’s pre-close tells investors

Thungela’s CFO has set out a clear picture for 2025: volumes are up, costs are behaving, but coal prices have been a grind. The standouts are South African production coming in above guidance and continued balance sheet strength, offset by a likely impairment review and a tough pricing backdrop.

Safety first: the group notes nearly three years without a fatality – a core cultural point and a practical positive for operational stability.

Stronger output, better rail – South Africa outperforms

Export saleable production in South Africa is expected to reach approximately 13.7Mt for FY 2025, nudging above the 12.8Mt to 13.6Mt guidance range and slightly ahead of 13.6Mt in FY 2024. “Export saleable” refers to tonnes that meet specification for export markets after processing.

This is a tidy outcome given mine transitions: Goedehoop is closing, Annea Colliery (formerly Elders) is ramping up, and Zibulo North Shaft has been handed to operations. Better rail helped too – Transnet Freight Rail’s industry run-rate improved to 56.6Mt annualised to 30 November 2025, up 9% from 51.9Mt delivered in 2024. That unlocks sales and reduces stockpiles.

Australia stabilises after a sticky first half

At Ensham, geology hurt quality in H1, but marketing contracts for lower quality coal have cleared inventories. FY 2025 export saleable production is expected at approximately 3.8Mt (within the 3.7Mt to 4.1Mt guidance range), versus 4.1Mt in FY 2024. Note that from 28 February 2025 Thungela reports Ensham at 100%.

Coal prices: weak spot the whole year

Benchmark prices stayed under pressure as China and India leaned on domestic supply and alternative energy, while Japan, Korea and Taiwan upped gas and nuclear. Newcastle touched a four-year low around USD90/t in September.

• Richards Bay Benchmark averaged USD89.63/t year to date (to 30 November), down from USD105.30/t in FY 2024.
• Newcastle Benchmark averaged USD105.11/t YTD, down from USD134.85/t in FY 2024.
• South Africa realisation was USD75.89/t YTD with a roughly 15% discount to Richards Bay (wider than 13.1% in FY 2024).
• Australia realisation was USD104.82/t YTD with about a 1% discount to Newcastle (better than the 8.0% discount in FY 2024).

The tighter discount in Australia is a bright spot; the wider discount in South Africa reflects mix and quality effects during the transition. The forward curve has moved into contango – prices for 2026 and 2027 are higher than spot – signalling some restocking and improving sentiment.

Costs, cash and capex: disciplined through the cycle

FOB cost per export tonne (free on board – mine-to-port cost excluding ocean freight) in South Africa for FY 2025 is expected to be below the guidance range of R1,210 to R1,290 per tonne, helped by a non-cash rehabilitation adjustment and stronger production. Including royalties, FOB cost is also expected to land below the R1,220 to R1,300 per tonne guidance.

At Ensham, FY 2025 FOB cost excluding royalties should be within R1,470 to R1,580 per tonne; including royalties, in the lower half of R1,650 to R1,780 per tonne. That is sensible cost control given lower prices.

Export equity sales in South Africa are expected around 13.6Mt (vs 12.6Mt in FY 2024) thanks to the production beat and rail improvement. Ensham export equity sales are set at approximately 3.9Mt (100% basis), down from 4.1Mt.

Investing and returning cash

South African capex for FY 2025 is expected at approximately R2,600 million: sustaining R1,400 million (lower end of guidance) and expansionary R1,200 million (upper end), mainly Elders and Zibulo North Shaft. Ensham sustaining capex is approximately R650 million (100% basis), marginally below guidance.

Projects are moving: Elders was completed in 2025 for R1.8 billion and Zibulo North Shaft is expected to total R2.5 billion by year end, with R100 million to go in H1 2026. The Lephalale Coal Bed Methane project has progressed – major kit has begun to arrive and civil works are complete.

Shareholder returns remain a focus. In 2025 Thungela returned R2.1 billion via dividends and buybacks. Buybacks totalled 4,858,231 shares, 3.4% of issued share capital, for approximately R468 million; shares are held in treasury.

Balance sheet: still strong, but watch December cash flows

Year-end cash will dip as usual with seasonal items. The group expects net cash at 31 December 2025 of R4.9 billion to R5.2 billion, including approximately R1.2 billion of cash generated relating from foreign-exchange derivatives on a full-year basis. December outflows include the Australian green fund contribution and provisional tax in South Africa and Australia.

Dividend policy is unchanged – at least 30% of adjusted operating free cash flow. Management also flags the need for a prudent cash buffer in a low price environment.

Potential impairments: a key watch item for results

Thungela will assess the carrying value of property, plant and equipment for the 2025 results. Management notes that current market assumptions for coal prices and FX “do not support” the existing carrying values. Translation: an impairment is possible, depending on the final assumptions. Impairments are non-cash, but they can dent reported earnings and investor sentiment.

Portfolio reshaping and rehabilitation transfers

South Africa is in transition as certain operations reach end-of-life. Thungela has initiated disposals where remaining resources and infrastructure have more value in other hands. The group has announced the sale of Goedehoop North and finalised a similar agreement at Khwezela’s Kleinkopje mining right. Importantly, rehabilitation liabilities tied to those areas will transfer to the buyers upon completion – a positive for future balance sheet de-risking.

Outlook: small dip in 2026 volumes; long-term thesis intact

Thanks to productivity improvements and better rail, the production pause once expected for 2026 looks limited. Export saleable production in 2026 is expected to be approximately 0.5Mt lower than FY 2025 actuals. Management remains constructive on long-term coal fundamentals, citing persistent underinvestment and depletion of existing supply.

My take: steady execution in a tough market

• Positive – Operations: Beating South African volume guidance and running below cost guidance is solid execution. The rail uptick is material for cash generation.
• Mixed – Pricing: Realised prices are meaningfully lower year on year, but Australia’s discount improvement is encouraging and the forward curve offers hope.
• Risk – Impairment: With price and FX assumptions where they are, an impairment at results is a real possibility. It would be non-cash, but it matters for headline numbers.
• Supportive – Balance sheet and returns: Net cash of R4.9 billion to R5.2 billion gives flexibility. The dividend policy remains intact, with buybacks already executed.

Net-net, this is a competent update: operational momentum and cost discipline are offsetting a weak coal tape. If the contango holds and rail keeps improving, 2026 could look better than today’s spot would suggest.

Quick reference: 2025 key numbers from the RNS

Jargon buster

• FOB cost: cost to get coal to the ship’s rail at port, excluding sea freight. Often used to compare mine competitiveness.
• Contango: when forward prices are above spot, often signalling expectations of tighter markets later.
• Rehabilitation adjustment: accounting change to the provision for mine closure and environmental restoration; it is non-cash but can affect reported costs.

Thungela expects to release full-year results on or about 23 March 2026. I’ll be watching the impairment outcome, rail delivery into Q1, and whether the pricing contango translates into better realised prices.