The Thungela Resources share price is down 3% today after the company announced a production update for its fiscal year ended June 30, 2020. The company reported that it had produced 4.4 million tons of coal in the fiscal year, which was below its guidance of 4.6-5.0 million tons. This production shortfall was due to lower-than-expected yield at the company’s mines in South Africa and Australia.
While Thungela’s production fell short of expectations, its sales were in line with guidance at 4.7 million tons.
It’s been a tough few months for Thungela Resources (LSE: TGA), with the share price down by almost 30% since the beginning of October. However, there could be light at the end of the tunnel for this South African coal miner.
The company is due to release its full-year results on Wednesday and is expected to report a return to profitability.
This would be a major turnaround from last year when it reported a loss of over $200m.
Thungela’s share price has also been boosted by rumours that it could be a takeover target. There has been speculation that Anglo American (LSE: AAL) could make a move for its smaller rival as part of its own plans to boost production.
With Thungela’s share price still down by around 50% from its highs earlier this year, there could be more upside potential if these rumours prove to be true.
Thungela Share Price Chat
Thungela Resources is a South African coal company. The company was formerly known as Anglo American Inyosi Coal and was part of the Anglo American plc group. It was unbundled from Anglo American in April 2020 and listed on the Johannesburg Stock Exchange in May 2020.
The company’s principal asset is the New Clydesdale Colliery (NCC) in Mpumalanga Province, South Africa.
The Thungela share price has been volatile since its listing on the JSE in May 2020. The shares started trading at R17.50 and reached a high of R35.00 in June 2020.
However, the share price has fallen back to around R20.00 in recent months amid concerns about the outlook for global coal demand and prices.
Credit: www.cmcmarkets.com
Why is Thungela Share Price Going Down?
The JSE opened higher on Wednesday morning, but the Thungela share price was an exception, going down 2.85% to R18.40. This is despite the fact that the company reported a 14% increase in revenue to R9.4 billion for the year ended 31 March 2020. So, why is Thungela’s share price going down?
There are a few possible reasons:
1) The global economy is still in a recessionary phase and coal demand has been weak as a result. This has put pressure on prices and Thungela’s margins.
2) The rand has strengthened against the US dollar recently, which has made imported coal cheaper and put pressure on domestic producers like Thungela.
3) There is growing competition from renewable energy sources like solar and wind power, which are becoming increasingly cost-competitive with coal-fired power generation.
4) There are concerns about climate change and the environmental impact of burning coal, which could lead to stricter regulation or even an outright ban on its use in some jurisdictions in the future.
This would obviously have a negative impact on demand for Thungela’s products.
Is Thungela Part of Anglo?
Yes, Thungela is part of Anglo American plc, one of the world’s largest mining companies. Anglo American plc is a British multinational mining company headquartered in London, United Kingdom. It is the world’s largest producer of platinum, with around 40% of world output, and is also a major producer of diamonds, copper, nickel, iron ore and metallurgical and thermal coal.
The company has operations in Africa, Asia, Australia, Europe, North America and South America.
Should you buy Thungela Resources Shares?
Conclusion
Thungela Resources (AIM: THG) is a coal mining and development company operating in South Africa. The company’s flagship project is the Zibulo Colliery, located in the Mpumalanga Province. Thungela also has interests in the Eloff Mining Company and the Soutpansberg Coal Project.
Thungela Resources was admitted to trading on AIM on 31 October 2017. The Company raised gross proceeds of £32 million through a placing of new ordinary shares with institutional investors at a price of 70 pence per share (“Placing Price”).
