Coal miner Thungela Resources announced on Friday that it will expand its operations beyond SA’s shores by acquiring a controlling share in an Australian thermal coal mine.
Through a new company, Sungela Holdings, Thungela will acquire an 85% interest in the Ensham coal mine in Queensland at a purchase consideration of about R4.1bn.
The deal, Thungela said in a statement, would deliver on the company’s geographic diversification strategy “through a highly cash-generative thermal coal asset, with long-life potential, at an attractive valuation”.
The miner said it would also allow it to capitalise on the current strong Newcastle coal price environment.
“Given the similarity in operating methodology between Ensham and our South African underground operations, we can leverage our core skills to create value. We are pleased to be entering Australia, a leading mining geography with a successful track record of thermal and metallurgical coal production and reliable, well-established port and rail facilities,” said Thungela CEO July Ndlovu.
As a result of the acquisition Thungela will have operational control of Ensham coal mine and, subject to certain existing arrangements, will also have the right to market and sell its proportional share of the coal produced by Ensham coal mine providing it access to the Japanese and other Asian markets where demand remains strong.
The group said that about two thirds of Ensham coal mine's 2023 budgeted production had been forward sold at attractive prices. Based on the current market observed forward curve for Newcastle thermal coal, the payback period of the transaction was potentially two to three years.
The mine is now 85% owned by Idemitsu (from which Thungela will acquire its stake), with the remaining 15% owned by LX International. The underground coal mine produced about 3.2-million tonnes of “high-quality, low-ash and low-sulphur thermal coal in 2022”, and has the potential for increased production in the future.
Subject to extension of the existing mining approvals, the Ensham coal mine has a life of mine through to 2039, Thungela said.
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