THUNGELA Resources dived yesterday as it listed on the JSE and the London Stock Exchange after unbundling from Anglo American.
The thermal coal-mining group, which was valued at about R3.4 billion, fell 9.12 percent to R22.72 in midday trade before closing the day at R21.90.
Thungela’s issued share capital on the JSE consists of 136 million shares priced at R25 a share.
The shares would be held by Anglo American shareholders, who would each receive one Thungela share for every 10 Anglo American shares that they hold, Thungela said.
Thungela’s management team is led by July Ndlovu, as chief executive, and Deon Smith, as chief financial officer.
Ndlovu said: “We are excited to be listing Thungela today ... Our business consists of well-established, well-managed assets that produce high-quality thermal coal, with access to a world-class export infrastructure.
“Thungela has an enviable cash cost position and is poised to deliver attractive returns to shareholders.”
Global mining research and consultancy group Wood Mackenzie rates South Africa as the fourth-largest producer of thermal coal globally, catering for the growing demand from India and other developing countries in South Asia, and potentially the Middle East and North Africa.
Demand from these regions was expected to grow as power demand increased, Thungela said.
KPMG Analysis forecast an average price of $78.8 (R1 057) a ton for Newcastle thermal coal for this year.
“We expect our portfolio of assets to be cash generative throughout the life of our mines and well into the next decade, with the option for life extension opportunities. In addition to export markets, we produce thermal coal for domestic consumption in South Africa, which provides us with inherent operational flexibility in response to changes in demand and other external factors,” Ndlovu said.
As part of its commitment to enhancing environmental, social, and governance (ESG) factors, Thungela said it had established an employee partnership plan and a community partnership plan, which each hold a 5 percent interest in direct subsidiary, South Africa Coal Operations Proprietary Limited.
“Our ambition is to build Thungela into a highly sustainable and investable enterprise due to its strong cash flow generation, robust balance sheet, credible leadership, dedicated employees, and consistency in meeting and exceeding safety, ESG and production targets. We are igniting real change and are optimistic about a bright future,” Ndlovu said.
The listing of Thungela in the energy – oil, gas and coal – sector of the JSE increases the total number of listings in this sector to eight and brings the number of companies on the JSE to 331, with an overall market capitalisation of more than R18.98 trillion.
Valdene Reddy, a director of Capital Markets at the JSE, said: “This listing is part of a noticeable trend of corporate restructures and unbundlings in South Africa as companies seek to reposition themselves and unlock shareholder value. The JSE, as a capital raising platform, is well pointed to support these.”
Seleho Tsatsi, an investment analyst at Anchor Capital, said significant initial selling pressure on Thungela was expected for a couple of reasons.
“First, it is likely to represent a very small weight in portfolios for investors. If an Anglo American shareholder had, say, a 5 percent weight in Anglo coming into this spin-off, then the Thungela shares from the spin-off could be as small as a few basis points in their portfolio. Second, the thermal coal exposure will bring ESG concerns to the forefront for investors.
“We note that Thungela is likely generating significant cash at current thermal coal prices, which are elevated, but are cautious about the company’s earnings power if thermal coal prices correct to levels seen over the 2019/20 period,” he said.
Ian Woodley, an investment analyst at Old Mutual Investment Group, said Thungela’s listing would always be a difficult one initially as it had a small market cap. The large percent of shareholders were based outside of South Africa.”
He said that Thunglea formed such a small part of an international investor’s portfolio that they might decide to get out of it and the assumption was that the majority of shares would flow back and put it under pressure.
BUSINESS REPORT