Thungela Resources Limited "Near-term support, medium-term trade-offs" (Neutral)

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Thungela Resources Limited "Near-term support, medium-term trade-offs" (Neutral)

Thungela Resources Limited UBS Research

UBS Research THESIS MAP Thesisa guideMapto our thinking and what´s where in this report

Pivotal Questions Q: Can thermal coal prices remain supportive for longer than the market expects?

Yes, although primarily over the next 12–18 months. We expect thermal coal prices to remain above

historical cost support through 2026, underpinned by tight seaborne balances, constrained supply,

resilient seasonal demand, Indonesian policy intervention, delayed LNG normalisation and a higher

seaborne cost curve, with the 90th percentile at ~US$110/t. However, these drivers are not structural.

As LNG supply grows and demand moderates amid intensifying decarbonisation pressures, we

expect prices to trend back towards the cost curve over the medium term.

Q: Can Thungela sustain attractive shareholder returns over the medium term?

Yes, but through a more balanced capital allocation framework. Thungela’s returns should remain

attractive, supported by strong cash generation, but increasingly balanced against rehabilitation,

replacement projects and strategic investment. While distributions should stay above sector

averages, we do not expect a repeat of the post-IPO period

Q: Can improving logistics offset declining asset quality?

Partially. Improving rail performance increases export optionality and supports ~15mt exports over

the medium term. However, logistics cannot fully offset structural production declines as Greenside

and Khwezela mature. Replacement projects are largely sustaining, not growth, leaving future export

growth increasingly dependent on corridor performance and third-party throughput.