Thungela Resources, the coal miner that was hived off Anglo American less than two years ago and which was by far the best-performing stock on the JSE in 2022, has started the new year on a fairly downbeat note.
Like other miners, Thungela trades at the whim of commodity prices and has been affected by a fall in global coal prices. These have come off historic highs after Europe averted an energy crunch by securing sufficient natural gas supplies while the winter season in the region turned out to be warmer than expected.
The EU banned coal imports from Russia following its invasion of Ukraine, sparking a surge in coal prices in 2022 as the continent scrambled for alternative sources of energy. Thungela and Exxaro Resources were the notable beneficiaries in SA despite bottlenecks in the national rail network that prevented them from fully taking advantage of the boom in prices.
“It seems that the globe is finding it easier to breathe now that the gas supply shock from Russia has been partially resolved,” said Casparus Treurnicht, portfolio manager at Gryphon Asset Management.
“The stock market looks forward to what the coal price might be doing in future. I guess sellers over the past few weeks were telling themselves: ‘I need to sell before my neighbour does’. Sure, the stock appears to be very cheap, but that is not relevant — coal will always remain to be seen as dirty and there is a push to replace it with cleaner alternatives. In my opinion, this stock will continue to pay good dividends for many years to come.”
Thungela’s share price is down more than 23% since the start of the year, though the fall comes off the very high base of 2022, when it quadrupled. On Thursday, it settled 4.56% lower at R218.47 after falling as much as 8.2% in early trade.
International coal prices were at $354 a tonne on Thursday, down from a peak of $455 in September.
Led by CEO July Ndlovu, Thungela came to the market in June 2021 at R25 a share against a backdrop of much scepticism about the future of fossil fuels as the world changes to cleaner sources of energy.
Lending institutions have come under pressure from shareholders and environmental groups over the funding of new fossil fuel projects. But thermal coal in particular is still used widely around the world to produce low-cost electricity, essential for developing economies that are also trying to reduce poverty.
According to the World Nuclear Association, burning coal is used to produce 37% of the world’s electricity each year, and also more than 1-billion tonnes of carbon dioxide that drives global warming. In SA, more than 70% of electricity comes from coal-fired power stations.
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