South Africa’s Thungela Resources (TGAJ.J) is gearing up to capitalize on the decline of new coal investments globally, as CEO July Ndlovu expressed optimism about the company’s future, driven by strong demand in Asia that could sustain high coal prices. Since its spin-off from Anglo American in 2021, Thungela has firmly aligned its strategy with coal, despite some investors viewing the fossil fuel as increasingly burdensome in the global push toward decarbonization.
In a virtual interview from Australia, Ndlovu pointed out that the lack of new coal mines is primarily due to a scarcity of capital and mining licenses. He highlighted that production at the Ensham mine, acquired a year ago, has surged by a third and is on track to meet its target of 4 million tonnes by 2026. “Long-life, competitive, low-cost assets will be very valuable,” he stated, indicating that the company does not plan any new acquisitions at this time.
After experiencing a temporary spike in coal demand following Russia’s invasion of Ukraine in 2022, which led to gas supply interruptions, many developed countries have significantly reduced their coal consumption to comply with the 2015 Paris Agreement. This reduction, alongside economic difficulties in major coal-consuming China, has pressured coal prices, although they remain substantially higher than levels seen prior to the Ukraine conflict. Ndlovu noted that robust demand in Asia is helping to offset declines in other regions.
Looking to the future, Ndlovu expects coal demand to experience flat to modest growth in the short to medium term, primarily driven by Asian markets. However, he acknowledged that logistical challenges at South Africa’s state-owned ports and rail operator, Transnet, have affected coal shipments, impacting the earnings of Thungela and other producers like Exxaro Resources (EXXJ.J) and Glencore (GLEN.L). Fortunately, these logistical issues are beginning to improve.
Despite the emphasis from climate scientists on the urgent need to transition away from coal to limit global warming to well below 2 degrees Celsius by 2050, Ndlovu has criticized these viewpoints as unrealistic and premature. He remarked, “I have not seen a scenario that allows for zero coal. If that ever becomes a reality, we’ll be the ones delivering the last tonne.”
