Published Date: 2021-06-08 | Source: INCE|Community | Author: The Finance Ghost
Oil and coal, resources as old as time itself.
Both are firmly in the crosshairs of environmental activists, but the uncomfortable truth is that those activists probably drove in a petrol-powered car to get to the meeting and used electricity generated by coal to power their computers. Even driving an electric vehicle only addresses one of these problems and worsens the other one.
This isn't a comment on whether we should be trying to reduce our reliance on these fuels, which we absolutely should be doing. This is simply an observation that we are still consuming fossil fuels at a grand scale. It's all good and well to shout at banks for funding them, until the lights go out and our tanks are empty.
Investors now have the opportunity to invest in a pure-play coal business, as Thungela Resources started trading on the JSE and the London Stock Exchange yesterday. The company has been spun off by Anglo American which decided to shed its coal exposure.
Thungela produces thermal coal from seven collieries located in Mpumalanga, including underground and opencast mines. These operations are amongst the highest quality thermal coal mines in South Africa by calorific value.
I always thought calorific value was a measure of my Friday pizza, so we learn something new every day.
Each Anglo American shareholder received one Thungela share for every ten Anglo American shares held. Anglo injected R2.5bn in capital into Thungela and will provide further contingent capital support until the end of 2022, based on certain coal price thresholds. Importantly, the company will also market and sell Thungela's export products over the next three years to help the business get on its feet.
Thungela points out that South Africa is the fourth-largest producer of thermal coal globally, exporting to countries like India and other developing countries in South Asia and possibly the Middle East and North Africa. Naturally, the company also supplies coal in South Africa.
After opening at around R25 per share, Thungela closed at R21.90 per share. It's probably not a surprise that there was selling pressure today, with certain Anglo shareholders either not willing or not able to hold a pure-play coal asset.
Chances are good that Thungela will end up trading at a high dividend yield, appealing to those investors who aren't worried about cashing in on fossil fuels.