THUNGELA Resources is to market its coal production from Dubai after establishing a sales company with the emirate’s Dubai Multi Commodity Centre Authority.
The move gives further momentum to the Johannesburg-listed firm’s plans to diversify internationally. Last year, the company completed the R4.1bn acquisition of Ensham, a mine in Australia’s Queensland.
The Dubai office would operate under Thungela Marketing International (TMI), effective December 15 It is responsible for “a broad range of marketing functions catering to both the South African and Australian assets,” the company said on Thursday.
“This is a key milestone towards fulfilling one of our strategic objectives – to create future diversification options,” said July Ndlovu, CEO of Thungela.
“TMI gives us direct access to seaborne markets and helps us to strengthen relationships with our customers. Our presence in Dubai is testament of the steps we are taking to realise geographic diversification and becoming a key player in the international market.”
Thungela’s acquisition of Ensham has proved timely for the company amid deteriorating infrastructural and logistical problems in South Africa which have reduced export volumes amid a declining thermal coal price.
Export coal sales through Richards Bay Coal Terminal, South Africa’s largest coal handling facility, were just over 50 million tons (Mt) last year. While this equalled 2022 it’s still a poor number, the lowest in three decades. Exports were 76.5Mt as recently as 2017.
Analysts say however that Thungela is strongly leverage to an improvement in South African volumes. A return to pre-2021 exports would see more than a 50% positive revision to Thungela’s share earnings, said Morgan Stanley.
“While steps are underway to liberalise the rail sector in South Africa, we are concerned about the timing and the continuing deterioration in Transnet’s performance,” it said. “Nevertheless there have been a few weeks of slightly better performance recently.”
According to a report by banking group UBS this month, thermal coal exports from South Africa showed a surprising recovery in December with volumes up 44% compared to November, equal to a run-rate of 61Mt for the first time in two years.