Thungela’s one year share price return is 750%. Those who bought shortly after the unbundling from Anglo American in early June 2021 have made an even bigger killing, sitting on a position that is over 10x more valuable than the entry price. Yes, just one week makes that much of a difference!

The coal mining group has released a pre-close update and trading statement for the six months ending June 2022. The share price fell 9.8% on the day, a significant drop even in the context of a horrible day in the markets.

Headline earnings per share (HEPS) for this period is expected to be at least R58.00, a massive increase vs. the comparable period of R3.05.

Thungela has benefitted from a high average benchmark coal price, part of the overall increase in energy costs that has swept the global market. Because doing business in South Africa is never easy, this benefit has been partially offset from the poor rail performance from Transnet Freight Rail. We can’t export coal if we can’t get it to the port.

The average benchmark coal price in this period has been $266/tonne vs. just $98/tonne in the comparable period. Thungela notes that prices have been extremely volatile with large daily fluctuations.

Export production is 14% lower than the comparable period, a direct result of a decision to curtail production in certain circumstances to mitigate the impact of an inconsistent rail performance. Dankie, Transnet.

The unit cost of production per tonne (excluding royalties) has jumped from R787 last year to R957 in this period, significantly higher than the full year 2022 guidance of R850 to R870. Guidance has not been restated as the increase in unit costs is largely due to the impact of lower export production.

The full year guidance assumes an improvement in export production in the second half of the year. This depends on Transnet improving its performance by around 9% over the remainder of 2022, which is right up there with believing in the Tooth Fairy as an adult.

I hope that I’ll be proven wrong.

Capital expenditure for this period is around R0.5 billion. The group has a net cash position of R15.3 billion, so there’s no shortage of money running around to fund this. A liquidity buffer at the upper end of the range of R5 billion to R6 billion is being maintained.

The resolution to authorise share buybacks was not passed at the AGM, so Thungela will return cash to shareholders via dividends. The targeted minimum pay-out ratio is 30% of adjusted operating free cash flow.

An interim dividend will be declared in August and there’s much speculation about how high it might be. I’ve seen guesses on Twitter of between R45 and R55 per share. With a closing price of R223 per share, that’s a rather gigantic potential dividend. Of course, we won’t know for sure until August.