South Africa’s biggest export coal producer Thungela Resources is bullish about 2024, saying this week it will beat its full-year saleable production guidance, thanks to Transnet Freight Rail’s (TFR) better-than-expected recovery in the second half of the year.
Thungela, which was established in 2021 after Anglo American unbundled its local thermal coal assets, said it was encouraged by the progress at TFR, which delivered an annualised volume of almost 52Mt by the end of November.
Speaking during the group’s pre-close statement this week, CFO Deon Smith said that TFR had run 56Mt since the maintenance shutdown that ended in July.
He said the second-half performance was “in stark contrast” to the first half, when the annualised run rate was at about 47Mt.
Smith described Richards Bay Coal Terminal's (RBCT) improved performance in the second half as a case of doing the basics right and doing more of it right. “We are slightly surprised that we have seen an early uptick and a slightly stronger uptick from these initiatives,” he said.
TFR is mainly responsible for transporting coal to RBCT. It boosted capacity on the main coal line and enhanced its signalling systems to address constraints that have limited some of the biggest coal exporters — such as Thungela, Exxaro Resources and Glencore — from shipping more coal out of South Africa.
Smith told analysts TFR could meet its volume target of 60Mt even if the impasse with the state-owned China Railway Construction Corp (CRCC) over spare parts, which has seen locomotives idling for years at depots, was not resolved.
He said the 56Mt Transnet has achieved is already 19.8% higher than what it ran in the first half. “With a 20% step-up in that period of time, the question is whether another 10% odd step-up can get us to the 60Mt. We believe [it] is possible.”
Smith said the key question is whether TFR has the capacity, capability and capital required to prevent any sudden loss of momentum, run rate and slots. “Transnet certainly has demonstrated they are putting the right people and the right focus in place to achieve it,” he said.
Earlier this year, Transnet appointed Michelle Phillips as group CEO. She had been acting CEO after the exit of Portia Derby. Russell Baatjies was appointed CEO of TFR to replace Siza Mzimela.
Smith was upbeat, saying the group’s export saleable production in South Africa was expected to be about 13.4Mt, compared with the guidance range of 11.5Mt-12.5Mt, and about 9% higher than last year.
“That's in line with the improved mine productivity we've seen across our portfolio, but very importantly also rail performance in the second half of the year,” he said.
Saleable production at Ensham, its mine in Australia, is expected to be about 4Mt, against the revised guidance of 3.5Mt-3.8Mt forecast in August.
Last week Exxaro Resources also gave TFR a vote of confidence, saying it had railed 42.1Mt through RBCT between January and October, equivalent to an annualised tempo of 50.51Mt.
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