Thungela (TGA): Hidden Value or Value Trap?
When coal prices ripped in recent years, you wanted some TGA in your portfolio, but is it a buy now?
Thungela is a pure-play thermal coal miner that exports about 2/3 of its high-cv thermal production from South Africa (SA) and the remainder from the Ensham underground mine in Queensland, Australia. The company was formed in a demerger from Anglo American in 2021, and management made the decision to diversify geographically into the Australian coal business in 2023 due to logistics challenges with exporting from SA.
The stock, dual-listed in London and Johannesburg with the ticker TGA, has been floundering over the YTD. For the first half of this calendar year the stock price largely fell alongside the Richards Bay coal thermal coal price index (AFRU2025) and the Newcastle high-cv thermal coal price index (NCFV2025). However, while Richards Bay and Newcastle prices bottomed and made a modest move higher since May of this year, Thungela has been stuck moving sideways around the 400 pence/sh level (~US$5.40/sh).
Source: TradingView as of 1 September.
At face value, Thungela appears to be a cheaply-valued stock and that makes it alluring (more on that later). What really gets people interested in Thungela is that just when folks left it for dead in 2021 after the Anglo American demerger, the stock absolutely ripped to astronomical levels well above peer mining companies, before falling back to earth. The chart below shows you how well you would have done owning some TGA in 2022. It was a wild ride!
Source: TradingView as of 1 September.
But with thermal coal prices languishing, especially in South Africa, Thungela has been underperforming the other large, international coal miners. The comps aren’t perfect as Whitehaven (WHC) and Yancoal (YAL) both have some met coal exposure (which TGA doesn’t have) and New Hope (NHC) is developing Malabar, which will unlock some met coal resources. But you can pretty clearly see the picture of how TGA has been performing compared to peers.
Source: TradingView as of 1 September.
Side note: Whitehaven sells the highest cv thermal coal of the bunch (and high-quality hard coking coal), plus it has the clearest capital allocation plan of them all, with dividends and buybacks clearly articulated. It’s up there with Yancoal as my favorite thermal coal stock to talk about and write about. See the latest on WHC here.
Thungela 2025 Performance
Thungela Resources' half-year profit fell 80% due to weaker prices for thermal coal. You can see below from the company’s 1H 25 results that saleable production from South Africa held up fairly well on a y/y basis considering rail issues with Transnet Freight Rail (TFR). But revenues fell 12% y/y due to lower coal prices.
Source: Thungela Interim Results Announcement 30 June 2025
Thungela does impress on a few metrics though. First of all, the balance sheet is in very good shape. Second, the company is doing a good job returning cash to shareholders. In 1H 25, 87% of adjusted operating free cash flow went to shareholders through dividends and buybacks. 30% of that represented the dividend, and the rest was a R140 million buyback (note: R= South African Rand terms).
On the other hand, costs rocketed higher at the Ensham mine in Australia (see below) as the mine encountered some “challenging geology” and had some “quality variations” that caused run-of-mine production to be unmarketable. Apparently that coal can be sold in 2H 25, but I don’t know if it needs some beneficiation/washing to make it saleable, so that raises some questions. In sum, the results from Ensham weren’t great (more on Ensham’s competitiveness later).
Continuing to look at the 1H 25 results, despite rising costs in both Australia and South Africa and depressed coal prices, Thungela still managed to generate half a billion Rand in adjusted operating FCF. Let’s dig into that a bit more.