Even as environmental pressure mounts, coal — a cheap source of energy — is here for “some time to come”, says miner Thungela in its annual report.
Thungela Resources was spun off from Anglo American in 2021 and listed on the JSE in June 2021 with an opening share price of R25. The share closed more than 800% higher at R235,22 on Friday on the back of record coal prices.
The phenomenal stock price rise comes even as Thungela mined less thermal coal than planned due to port and rail constraints reducing export volumes.
Thermal coal is used widely around the world to produce low-cost electricity, essential for economies that wish to develop and reduce poverty.
According to the world nuclear association, burning coal is used to produce 37% of the world’s electricity each year while producing more than 1-billion tonnes of carbon dioxide that drives global warming.
“Thermal coal remains a key pillar of the global energy mix and demand for thermal coal is expected to be robust for some time to come, particularly in our key export markets,” writes Thungela chair Sango Ntsaluba in the annual report released on Friday.
Thungela, however, operates in an environment in which activists pressure banks not to lend to coal miners and pension funds are encouraged to divest from coal companies. The company says in its report it keeps billions in savings as it has "limited access to debt markets”.
Tracey Davies, executive director at Just Share, an NGO focused on good corporate governance and the energy transition, says in a Financial Mail op-ed that in demerging Thungela, "Anglo American deftly jettisoned a raft of lurking environmental and social liabilities”.
Thungela CEO July Ndlovu writes in the annual report that coal, a cheap and reliable source of power, drives development.
"The developing economies that constitute our key export markets, in Asia in particular, require large amounts of low-cost power as they develop, urbanise and industrialise.”
In addition, says Ndlovu, coal supports renewables by providing stability when the sun does not shine and the wind does not blow and is used to provide electricity needed for mining green metals.
"We need to ensure that we can continue to supply reliable energy.”
Thungela is benefiting from a global lack of investment in coal supply on the back of environmental concerns about its outsize contribution to global warming. This is driving a shortage of coal and raising its price.
Benchmark coal prices averaged $124 (R1,924) a tonne in 2021, up from the year before when they averaged $65 a tonne, as demand for energy increased as the global economy recovered from the pandemic.
Coal prices rose due to weather disruptions and logistical constraints in major coal basins in China, Russia and Indonesia, unrest in Colombia and geopolitical tensions between China and Australia.
Thungela addresses climate change in its environmental, social and governance report, describing its water use reduction targets, recycling and reuse of water and a plan to reduce its emissions produced in mining to zero by 2050.
Ndlovu challenges opponents who wish it to close all coal mines.
"There are many vocal opponents of coal who believe that closing mines would be the best solution. We invite them to visit coal mining communities to experience first hand the impact that the loss of mining would have on our people. Then they would realise the magnitude of our responsibility.”
Thungela says more needs to be invested in emission abatement technology, which it invests in while partnering with research institutions.
"We strongly believe that the coal debate needs to shift from phasing out of fossil fuels to the phasing in of all emission abatement technologies, including those relating to coal,” says Ndlovu.
These are new, expensive technologies that try to reduce the heat and emissions created from burning coal and thus negate its effect on climate change and global warming.
However, the expense of such technology and research undermines coal’s attraction as a cheap energy source.
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