- Anglo American plans to unbundle its local thermal coal assets into a separate company, Thungela Resources.
- Thungela will be listed on the JSE and in London, with an expected market value of between R18 billion and R20 billion, one analyst says.
- This will make it a third of the size of fellow coal miner Exxaro.
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The JSE will probably get a new listing in June, which is helpful given the steady exodus of companies – including Afrox, Mazor and more than a dozen others – in recent months.
Thungela Resources is being unbundled out of Anglo American, and will hold the company’s thermal coal assets in South Africa. Anglo wants to get rid of its coal interests, as the company plans to be carbon neutral by 2040. Investors worldwide are increasingly putting pressure on companies to offload environmentally unfriendly assets, and coal producers are some of the world’s biggest polluters.
Thermal coal represented around 4% of Anglo’s revenue over the past year.
Anglo has already sold some of its local coal mines, and currently only produces thermal coal in South Africa for the export market.
Thungela will own Anglo’s three local mines near Witbank in Mpumalanga – Goedehoop, Greenside and Khwezela – as well as a majority stake in the Zibulo mine near Ogies in Mpumalanga. It will also hold a 50% stake in the Mafube colliery in Mpumalanga, Anglo’s joint venture with Exxaro. On top of that, Thungela will hold Anglo’s 23% stake in the Richards Bay Coal Terminal. All of its coal is exported via the terminal.
Anglo currently produces 16.5 million tonnes coal for the export market in South Africa, which earned revenue of almost $1.7 billion (R25 billion) in the past year. But the local thermal coal unit suffered a $15 million loss (before interest, taxes, depreciation and amortisation) for the past year as the pandemic hit its operations, export sales and coal prices. In the previous year, its loss came to $5 million. As part of the unbundling, Anglo will inject R2.5 billion in cash into the new company.
If shareholders approve the transaction, they will get one share in Thungela for every ten Anglo shares. They will have to wait until the listing on 7 June (on the JSE and in London) to see how much these shares will be worth, when the market ultimately values the company.
Chantal Marx, investment research and content head for FNB Wealth and Investment, estimates that, based on competitor Exxaro’s market ratings, Thungela may have a market capitalisation of between R18 billion and R20 billion.
This will make it roughly a third the size of fellow coal miner Exxaro Resources, which has a market cap of around R60 billion.
If Thungela can show a profit this year– on par with what was achieved in 2018 by the thermal coal unit – the company could have a market value of around R20 billion, based on Exxaro’s current forward price to earnings ratio of 5 times, she said.
With 134 million shares in issue, the shares could trade between R134 if the market cap is R18 billion and R149 a share, if it is R20 billion, she said.
But Drikus Combrinck, founder and CEO of Capicraft, is downcast about Thungela’s prospects.
“The market is expecting some value unlock to happen, but the problem is that it’s a hated sector,” he said. “It’s not ESG [Environmental, Social, and Corporate Governance] friendly because a lot of investors are exiting it.”