South African coal miner Thungela Resources has stated its intention to continue its strategy of asset acquisition, despite struggling coal prices and transportation issues.
The company reported a profit of just R2bn ($160m) in the first half (H1) of 2023, less than a third of the H1 2022 total of R9.6bn. This was driven by a collapse in the price of thermal coal over time.
This drop in profits has been exacerbated by the “consistent underperformance” of South Africa’s mining transport rail system operator, Transnet, which has been plagued with operational issues.
Earlier this month, it was revealed that these transport issues prevented Thungela, the country’s largest thermal coal exporter, from exporting even as much as 300,00t of coal in H1 2023.
Despite this, Thungela CEO July Ndlovu stated in the company’s latest performance report that Thungela has set itself up to be “resilient to weaker short-term market conditions” such as low coal prices.
Ndlovu said: “We are confident that we have taken considered actions to enhance our resilience as a business to allow us to navigate the challenging market conditions, including softer coal prices, inflationary pressures, and the persistent underperformance of Transnet Freight Rail.
“We reduced the number of underground sections at some operations where we are facing increasingly complex geological conditions while ramping up production at [the Khwezela coal project]. Our focus to increase our competitiveness by improving productivity will produce superior results for our shareholders.”
In February, Thungela announced the acquisition of the Ensham coal mine in Australia for R4.1bn ($219m), and the company said it will continue its goals of geographical diversification.
Ndlovu told Reuters in an interview: “We are going to continue to look for assets and we have always said we wanted to grow our business. If you are in commodities, cycles come and go and the best commodity investors are those who invest throughout the cycles.”
The Ensham acquisition is set to be completed by the end of this month.