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(Alliance News) - Shares in Thungela Resources Ltd have underperformed in their Monday debut in London and Johannesburg, following claims from a short seller that the company is worthless due to being riddled with environmental liabilities.
Shares in Thungela Resources were at 117.52 pence in London on Tuesday midday, a 21% drop from its opening price of 150.00p. In Johannesburg, the coal miner's shares were 9.9% lower at ZAR22.52 from its opening quote of ZAR25.00.
Thungela's listing on the London Main Market and primary listing in Johannesburg marks the completion of Anglo American PLC's demerger of its thermal coal business in South Africa, including seven collieries in Mpumalanga, South Africa.
However, Boatman Capital Research on Sunday claimed that Thungela has underestimated its environmental liabilities associated with closing its mines, which all have five to 11 years of expected life left.
Thungela has recognised a provision of ZAR6.45 billion, around USD468 million, for end-of-life mine rehabilitation costs, based on regulations from the South African Department of Mineral Resources & Energy, known as MPRDA.
Boatman noted however that new rules, known as NEMA 2015, have been proposed which will impose tougher and more expensive environmental standards on miners in South Africa. The new rules are set to take effect in June 2022, delayed from the original date of June 19, 2021.
Calculating the costs that will stem from Thungela meeting the new rules, including the costs of water treatment and dump covers, Boatman has estimated that the company's total end-of-life environmental costs could rise to a maximum of ZAR18.81 billion, nearly tripled from Thungela's own provisions and more than its own book value.
To compare, Boatman stated that in its competent person's reports, SRK Consulting had given Thungela an overall valuation of ZAR10.08 billion. However, after adding its own adjustments, including the price of coal at USD68 long term, the liabilities and central costs, Boatman give its own valuation for Thungela at zero.
"We anticipate that the company may be able to pay some dividends initially thanks to Anglo's price support and dowry, but we believe beyond that point the dividends will be unsustainable and the true value of the company will become obvious," the short seller stated.
"We expect there to be immediate pressure on Thungela's share price when the company lists on June 7 as many institutional investors will not want to hold a pure thermal coal producer. We also think that as the scale of Thungela's likely environmental liabilities become apparent, investors will see little to attract them to this stock, Boatman added.
Anglo American on Sunday had responded to the claims by Boatman in a written response to Mining Weekly.
"The basis for provisioning under South Africa's draft NEMA regulations simply does not accurately reflect the actual or likely sums needed to discharge such liabilities. It is precisely because these sums are considered to be artificial, and arbitrarily inflated, that the draft has remained under review since 2015. This is an industry-wide matter in South Africa, so the regulations on which the Boatman report apparently draws its conclusion are far from being finalised," said Anglo head of Coroporate Communications James Wyatt-Tilby.
https://www.miningweekly.com/print-version/anglo-american-responds-to-dossier-on-coal-demerging-2021-06-06
Anglo American's shares were down 1.8% at 3,195.00 in London, while its Johannesburg shares were 2.0% lower at ZAR609.23.
By Dayo Laniyan; dayolaniyan@alliancenews.com
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