Thungela's H1 2026: Riding the Energy Security Wave While Reinforcing Its Own Runway
Coal rally and rail improvements power a 91% EBITDA jump, as the Nkulo and Zibulo North Shaft projects promise a structurally cheaper future.
TGA.JO · Earnings Call · 2026-08-17
A Breakout Quarter Built on Two Tailwinds
June 2026 marked five years since Thungela's listing, and the company chose the anniversary to report its strongest first half since the roller-coaster of the pandemic. “June 2026 marked 5 years of Thungela's existence as a stand-alone listed entity.” — Moses Madondo · 2026-08-17 Adjusted EBITDA surged 91% to ZAR 1.3 billion, net profit hit ZAR 1.4 billion, and the balance sheet swung to net cash of ZAR 6.1 billion. “Adjusted EBITDA increased 91% from June 2025 to ZAR 1.3 billion, and net profit increased to ZAR 1.4 billion.” — Deon Smith · 2026-08-17 The board declared an interim dividend of ZAR 5.50, the tenth consecutive payout since listing.
The earnings engine was a combination of two factors: a rally in thermal coal prices triggered by the conflict in the Middle East and a sustained improvement in South Africa's rail logistics. The company's own Energy Security – a term that has risen to prominence across the sector – has become a real pricing driver. As Deon Smith, CFO, put it: Absolutely, Patrick. I mean just for absolute clarity, everybody on this side of the line are coal bulls.
Indeed, the average Richards Bay benchmark price rose 15% and Newcastle 25% in the first half.
The second tailwind was operational. Rail performance on the North Corridor reached an annualized 59.9 million tonnes, the best since 2023, allowing Thungela to maximize sales volumes. Despite the closure of Goedehoop and Isibonelo, export saleable production grew 6% to 8.5 million tonnes.
Cost Discipline Meets the North Shaft Inflection
The most notable company-specific development was the rising importance of the North Shaft at Zibulo. The transition from the old shaft to Zibulo North was flagged as the cause of a temporary production dip in H1, but management is confident it will drive structural cost improvements as the mine consolidates. "We did see challenges in the first half of '26 at Zibulo on the back of the main shaft environment... we do expect an improved H2," said CEO Moses Madondo. “We are starting now to transition towards the North Shaft, so we're going to pull back some of that infrastructure and start to cut back in terms of the stretch for the team in that respect.” — Moses Madondo · 2026-08-17 This is a pivotal moment: the new shaft should lower average costs, partly offsetting the stronger rand and South African rand headwinds that squeezed margins.
Across the group, FOB costs rose in South Africa (ZAR 1,374/t vs ZAR 1,264/t) but fell sharply at Ensham in Australia (ZAR 1,466/t vs ZAR 1,904/t) on a 37% production uplift. The company's focus on FOB cost as a key metric has intensified – it was the top keyword in the previous quarter and remains a central lever.
Capital Returns and Optionality
The cash generation story was compelling. Cash generation – another recurring keyword – produced ZAR 1.9 billion of adjusted operating free cash flow, including ZAR 1.1 billion of realized FX gains. The company funded ZAR 705 million of sustaining capital and still increased net cash. The board's dividend policy remains disciplined: "We have a minimum dividend policy of 30% of adjusted operating free cash flow... The ZAR 5.50 reflects a higher payout compared to the minimum policy, but it is a balanced outcome relative to a number of forward-looking factors." “We have a minimum dividend policy of 30% of adjusted operating free cash flow, but there isn't necessarily a maximum on that.” — Deon Smith · 2026-08-17 The company also highlighted continued investment in life extension projects and the Lephalale gas project as optionality for future growth.
What Changed and Why It Matters
The key shift is that Thungela is no longer merely a commodity-price play; it is now executing on a portfolio that combines near-term price leverage with structural cost improvements. The North Shaft ramp-up, improving rail reliability, and a stronger balance sheet give the company options it did not have a year ago. As Moses concluded: “We remain focused on driving growth and operational excellence... We have maintained our full year guidance.” — Moses Madondo · 2026-08-17
The market context reinforces the timing. Global keywords in the most recent quarter include Tariff noise and conflict – but the energy security angle is Thungela's friend. The company is also seeing interest from Europe again as a result of the Middle East conflict, a theme echoed in the prior call: “The answer is always yes. We -- since -- in the last 2, 3 years, Bernard and his team has broadened the flow of our coals across many jurisdictions, ranging from Europe, Middle East, Far East, Southeast Asia.” — Deon Smith, CFO · 2026-03-23 And from the prior year, the company reiterated its productivity push: “We said we would drive our productivity improvements across our mines.” — July Ndlovu, Chief Financial Officer · 2025-03-17 These themes are now coming together.
The credibility of the story hinges on execution. If the North Shaft transition delivers the promised cost reduction, and rail keeps improving, the company enters 2027 with a materially lower cost curve and a cash pile to fund further growth or increase distributions. That is the kind of shift that deserves investor attention.