Thungela Resources Limited (TGA) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Thungela CFO Pre-Close Statement for December 2024. [Operator Instructions] Please note that this call is being recorded. I would now like to turn the conference over to Hugo Nunes, Head of Investor Relations. Please go ahead.

Thank you very much. Good afternoon to all, and welcome to this afternoon's investor call following the release of the CFO Pre-Close earlier today. I'm Hugo Nunes, Thungela's Head of Investor Relations, and I'm joined on the call by our CFO, Deon Smith. Today's call will be done through both on audio webinar as well as a conference call facility. Deon will present an overview of the key elements in today's release. And thereafter, there will be a Q&A session. [Operator Instructions] Finally, a reminder that today's announcement is now available on Thungela's website, and today's session will be recorded, and the recording will be made available on the Thungela website from later this afternoon. With the logistics out of the way, please let me now hand over to Thungela's Chief Financial Operating -- Chief Financial Officer, Deon Smith.

Thank you, Hugo. Good afternoon, and thank you to everyone for making the time to join us in this pre-close call for the year ending 31 December 2024. So as you might have picked up in what we've announced in our previous results, safety is certainly our first priority and it's a strategic pillar of our business. We are accordingly very proud to report that we've seen a continued improvement in our safety performance. and that we have indeed been operating the fatality-free business for 21 consecutive months. Our operational financial performance is also expected to be strong into the full year, in particular, based on our performance up to 30 November 2024, we are pleased to report that we expect to exceed the full year export saleable production guidance in South Africa as well as in Australia. So export saleable production in SA is expected to be approximately 13.4 million tonnes, and that's higher than the guidance range of 11.5 million tonnes to 12.5 million tonnes and approximately 9% higher compared to last year that's in line with the improved mine productivity we've seen across our portfolio. But very importantly, also rail performance in the second half of the year. And I'll get back to this a bit later on. We expect export saleable production in Australia to be approximately 4 million tonnes, and that's to remind you on a 100% basis. And this is higher than our revised guidance of 3.5 million to 3.8 million tonnes that we spoke about in August. It's mainly also due to productivity efficiencies and better than what we anticipated to make progress through a couple of geological faults at Ensham. So export equity sales for SA is expected to be approximately 12.5 million tonnes for the full year, and that compares to the 11.9 million tonnes that we reported in the full year 2023. The year-on-year increase is mainly due to an improvement in rail performance in the second half of the year. And obviously, there's also an element of free on truck sales on top of that 12.5 million tonnes to get us through to our export saleable production in South Africa. Export equity sales for Ensham is expected to be around 4 million tonnes for the full year, and that's also on a 100% basis. So we're very pleased with that performance, but also with our past performance. So FOB cost per tonne -- free on board cost per tonne is expected to be below the guidance range in South Africa and also in Australia. And that's clearly reflective of a higher production denominator, but also our continued focus on a number of cost initiatives. These achievements reinforce that we are successfully executing against all of our operational targets, but it also demonstrates our continued focus on controlling what we can truly control in our business. So turning to Transnet. I mean, we're equally pleased with the second half performance of Transnet and we continue to be encouraged by the progress that Michelle Phillips and her team is making in that business. The various Transnet Freight Rail initiatives, which, obviously, the coal industry have supported have all enabled a step-up in the annualized run rate. So up to the 30th of November, we saw improved freights of approximately almost 52 million tonnes. And I mean this improved even further to 56 million tonnes. If you look at the measurement period post the July 2024 annualized or annual maintenance shut. So as a brief reminder, I mean, this performance is in stark contrast to the first half 2024 when we reported annualized run rate, it was around 47 million tonnes. So that's a 19% improvement in the run rate, albeit in the first half, as you might recall, there were 2 fairly significant derailments. So there's improved performance, in our view can be attributed to a number of factors, including with the fitment of all the critical locomotive spares that we spoke about before. And also the Transnet has introduced additional loco capacity on the North Corridor line. And then obviously, the ongoing line maintenance and enhancements that Transnet has spoken about in terms of signaling network in a couple of pinch points on that network. If we look at our market conditions that we operate in, and clearly, the energy markets remain impacted by the geopolitical tensions. And this now in Russia, Ukraine as well as the Middle East. And those conflicts clearly continue to lead to increased concerns on gas supply. And that, in turn, continues to provide a measure of support to coal prices. And then coal price support, we view despite challenging global economic growth environment and evidenced by some sluggish global steel sector and depressed oil prices. And what we've also seen is the premium Asian buyers continue to diversify their sourcing and reducing them for higher energy coals out of Australia. So we're seeing a couple of shifts in the market. But we also see the markets being broadly supportive into the medium term. And in the short term, we suspect a level of volatility will persist. If we look at our current period, the benchmark coal prices have softened in 2024 with Richards Bay Benchmark coal price averaging around $105 per tonne for the year-to-date, and that was compared to $121 a tonne approximately in 2023. And then the discount to the Richards Bay Benchmark coal price of around 13% for the year to date, you'll notice lower than 15% in the first half of 2024. And the main driver of that has been the end of that Anglo American marketing arrangement, which also saw a 1% commission leakage to Anglo coming to an end from midyear 2024. So the average realized export price for the product sold through Richards Bay was around $91 a tonne in this period compared to $104 a tonne in 2023. If you look at Australia, the Newcastle Benchmark coal price averaged around $136 per tonne for the year-to-date, and that is compared to last year's $173 a tonne. And then the discount achieved against Newcastle Benchmark coal price has resulted in realization of around 92% of that benchmark. So that's a discount of approximately 8% year-to-date. And the average realized export price -- product from our Ensham mine is around $124 a tonne currently compared to what we reported last year, albeit for a short period of time at about $156 a tonne. So capital expenditure for South African operations for the full year is expected to be around ZAR 2.7 billion, and that consists of ZAR 1 billion in sustained business capital, and that's in line with guidance. And then expansion CapEx of around ZAR 1.7 billion, and that mainly relates to Elders and Zibulo North Shaft project, which both sort of had a peak year in spending. But this was again in line with our guidance that we gave for the South African operations. We don't have any -- currently any expansion CapEx in Ensham, but our sustaining capital expenditure for full year is expected to be around ZAR 550 million. And remember, that's at an 85% consolidation level. And that's below the lower end of the guidance range. And the reason -- the reason for that is that we rephased some of the capital expenditure into 2025, in particular, land purchases around Ensham. In terms of capital allocation, always an important topic as we head to the end of the year. And to remind you, the capital allocation also is one of our key strategic cornerstones, and we will continue to prioritize shareholder returns through a combination of dividends and share buybacks where those make sense. The impact of our maiden share buyback which we completed in June 2024 is expected to enhance our EPS in the second half of this year. And then clearly, the most recent buyback which we completed recently is expected to impact EPS from 2025 as our weighted average numbers, off shares continue to decline. The Elders and Zibulo North Shaft life extension project, you might recall that was approved by the Board for -- in aggregate of around ZAR 4.2 billion, both remain on track and on budget. In August, we reported that cash of about ZAR 1.7 billion was reserved for the completion of these 2 projects. And by the end of the year, we expect total aggregate expansion in capital to have cumulated to around ZAR 3.4 billion on these 2 projects. That's since commencement, leaving a good ZAR 800-odd million stock to be spent when we get to the end of the year. We're pleased also with the ramp-up at Elders, which is progressing well. There's been deployment of 2 production sections. And so the mine is anticipated to eventually once in steady state, produce around 4 million tonnes run-of-mine per annum, and that will be from about 2026 onwards. So turning to our net cash at the end of December 2024. We expect to report a net cash balance, which as you know, we've defined as gross cash less what we hold included Sisonke trusts, et cetera, of about ZAR 8 billion up to ZAR 8.5 billion, which is a very healthy cash balance at the end of this year, driven by very strong operating free cash flows in the second half. Now clearly, we remain committed to our dividend policy, and that's to distribute a minimum of 50% of our adjusted operating free cash flow to shareholders. And clearly, we would like to maintain a level of balance sheet flexibility. And what we would do in the run-up to our year-end results is do what we typically do this time of the year to continue to review the appropriateness of our environmental provisions and cash collateral through our green funds as well as the cash required that I mentioned earlier to complete Elders and Zibulo North Shaft and then review particularly our cash buffer. And then we'll update the market on this when we get to our results announcement in March 2025. So I said part of it, and clearly, the pre-close statement that we've issued, there's a lot of information available in print. But let us pause and perhaps hand back to Hugo to facilitate some Q&A before we start wrapping up. Thank you, Hugo.

Thank you, Deon. We'll now turn to Q&A. [Operator Instructions] Operator, please open the lines for the first question.

The first question we have is from Brian Morgan of RMB Morgan Stanley.

Deon, maybe looking at this improvement at Transnet, it's great. But maybe just help us to understand sort of what's next. Is there anything that you guys are looking at, any initiatives that Transnet is doing that can take volumes up further?

Brian, good to hear from you and thanks for your question. So clearly, what we highlighted earlier, there's actually nothing new other than perhaps an improved focus on some of the signaling the bottlenecks that Transnet experience. But all of the initiatives that Transnet has been focusing on, on initiatives that have actually been in focus by the industry and Transnet and obviously, [ T ] over the last year or two, if not more in some instances. So this is a case of doing the basics right and doing more of it right. And we've all sort of heard the installed capacity on the line is still very robust. But clearly, it requires continued effort, focus and capital to achieve the full run rate that Transnet has still envisaged, which is in short order, about 60 million tonnes. And we've seen those run rates being achieved in recent periods, which means they're doing more of the same things and the basics right around loco capacity and the right maintenance and ensuring that the parts are fitted and the work done that has been missing over some period of time. We'll continue to drive that turnaround. And I think as July mentioned when we reported results a couple of months ago, we really expect the full extent of those incremental improvements to take effect from 2025. So we're slightly surprised that we've seen an early uptick and a slightly stronger uptick from these initiatives. So Brian, to summarize, it's more of the same rather than 2 or 3 incremental silver bullets. It's doing those basics right, which will enable Transnet to get or should enable them to get to a 60 million tonne per annum run rate that they are targeting as the next level of performance.

Okay. And then let's assume they get to 60 million tonnes. Are you guys able to fulfill your allocation at that level? Will you have to restart some sections or sell down inventories?

Yes. So I mean, Brian, if you look at our numbers, we do 23.5 million tonnes of that. So assuming that they hit the run rate, that's just north of 14 million tonnes. If you look at our production that we've reported at about 13.4 million tonnes, it's not far off that type of number, a very, very limited stock drawdown would get us to that 14 million tonnes. But there are clearly a number of things that we could potentially do levers we could pull to get closer to that type of number without material capital. So that would be restarting and reintroducing sections and areas in our mines that we've previously constrained in order to save cost and avoid massive stockpile. So yes, we would be able to get to that. But clearly, we also require the ramp-ups to be executed as planned around Elders and the handover Zibulo North Shaft and the like.

The next question we have is from Tim Clark of SBG Securities.

I've got a couple of questions. Just the first one, can you remind us what the cash flow effect, not just the cost effect, but the cash flow effect was from settlement of the Newcastle contract amount in the second half, just so that maybe a realized cash price makes sense, if that makes sense as opposed to sales price, just to start off.

Yes. So Tim, the total volumes that we sold into those fixed price arrangements is up to about 800,000 tonnes in this full calendar year. There is an option for the buyers to call up to 1 million tonnes. And obviously, there's a couple of tonnage still to go in this year. The realized or achieved price on those tonnage was around $136 per tonne. And as a result of previously in the first half of the year, billing at a higher rate, which is last year's Japanese reference price about $199. In the first half of the year, and I'm just double checking the number, we received essentially what was a prepayment of a couple of hundred million -- sorry, a couple of million dollars. Can you quickly just double check the numbers. So around $63 million from memory. And that is largely extinguished already with a small bit to go before the end of the year. But all of that would be extinguished by end of the year, and therefore, the net cash that we are flagging to you is after having refunded all of that.

Okay. Super. That really helps a lot. My second one is just on Ensham. If I remember correctly, at the half year results, you spoke about costs being a little elevated in the second half because of an environmental or an environmental provision, which is noncash. Can you give us an idea of how much that was now that it's passed?

Yes. So Tim, we flagged a concern that we might need to increase the environmental liabilities at Ensham because this year is the first year that we are doing the work ourselves. We also then flagged that, that cost per tonne would be a noncash item had we -- in the event that we had to take that provision. So whilst we'll give you more detail when we report results in March, we have now completed that work mostly. We're busy with our final reviews on that. And we are pleased that there isn't a material increase required. And therefore, the cost per tonne anxiety that we had when we shared results with you in August, and we flagged this potential noncash headwind has not materialized, and that's why we're confident now to flag to you that full year, Ensham will also be below that guidance range and fairly well below the guidance range.

That's very helpful. That really -- and a great outcome. So well done on Ensham's production. I think it's fantastic to see that 4 million tonne number. So well done. And then just my last one, just a reminder for us all on the call, on the buffer, you've got ZAR 800 million of CapEx remaining on the growth project. Remind us how much you would want to ideally or in principle, I know the Board has to decide on any capital returns or dividends. But in principle, what kind of comfort level of additional buffer beyond the ZAR 800 million you would want to keep?

Yes. So Tim, obviously, as you pointed out, those deliberations will still land during the next month or two before we come to the market with and the shareholders with a view on it. But to remind you, just to take you back in history, we've historically said that we're comfortable around a cash buffer of ZAR 5 billion and then we would retain a level of cash to complete our lifex projects. A couple of months ago, when we reported interim results, we drew down on that buffer down to around ZAR 4.5 billion from memory. And that was in order to preserve our returns to shareholders. at the time, seeing that we made a fairly elevated cash payment in the environmental collateral in Australia at the time. So clearly, that historic ZAR 5 billion number and preserving cash for lifex projects has been the previous guidance that we've given on this. And clearly, that would be up for debate and discussion over the next month or two.

And then just I suppose maybe just a second kind of consequence to that is, are there any big projects that are -- or projects that are starting to materialize in the investment committee, which you're starting to sort of prepare yourself for spend on? It feels to me like the Waterberg projects are far away. You've done now Zibulo and you've done -- you're near the Ensham, you've done Elders. Is there anything else that you're preparing for or thinking about?

So Tim, if we sort of take the crystal ball out and rub it a bit, you'll see that you're right on the gas project, that is something that we continue to consider. We've opted for a very conservative approach by implementing a demonstration plant, liquefaction plant to start off with. And that capital is likely to be in the region of ZAR 350-odd million will be included in the guidance we give next year. That's not a very material number. At Ensham, our work around potential resource development plan options continue. We have not yet identified the appropriate pathway and what capital that could mean. And clearly, that would have to pay for itself. So it's a bit hazy to give you any view, but clearly, there would be rather opportunity at Ensham than obligation if that's the right terminology. But in terms of our South African portfolio, you're absolutely right. Those lifex projects that are now coming to an end should galvanize our future life of mine across our core operations for more than a decade. And therefore, once we're through this spend period, which next year will be our final lifex spend period in SA on our thermal coal mines, then clearly, we -- our free cash flow will not sort of have to be deployed into any of those type of lifex projects that we've seen over the last 3 years.

That's all for me. Congratulations, a very positive set of news flow items today on production and costs and CapEx and so other.

[Operator Instructions] The next question we have is from Jon Ogden of Eastern Value Limited.

Great job there. I'll just give you my questions, a whole lot in one go, just to save time. So you mentioned your crystal ball there Deon. So how about we look at your outlook for coal prices in 2025? I mean, obviously, you can throw a lot of things in there like China stimulus, Trump tariffs. But maybe the 2 items might be interesting to think about is I think Russian supply is looking a bit constrained due to rail issues, which might sound familiar. So that's one thing. And the other one is Indian demand, which is very key for your products. So that's one question. Second one, anything brewing at all, if you can tell us on M&A? Or is that very quiet? Third one is any news on the minority partners of Ensham if -- because we're coming towards, I think, February next year is the resolution of that one way or the other, if they're going to stick around? And then finally, what's the kind of maintenance CapEx per year if we're kind of through these -- the heavy items, as you mentioned?

Jon, thank you very much for your kind words at the front end and for your questions. Unfortunately, that the crystal ball is certainly not very clear when it gets to predicting future prices. But I can give you our thoughts as a business. So clearly, firstly, and most importantly for us, our business is about being competitive and doing whatever we must do to keep our cost per tonne as competitive as possible for the energy that we produce. All mines globally become more difficult over time with geological challenges, declining in situ coal qualities, CVs and the like, and our mines suffer from similar consequence. And therefore, our continued drive for productivity improvements is all aimed at outpacing our competitors and keeping our portfolio as efficient and competitive as possible. So what is that number that we typically internally aim for? Clearly, we want our costs to get to double digits, and we want price at 3 digits to put it simply. When we look at all of the factors that you point to, China stimulus and Russian supply on rail and Indian aspirations in terms of their growth and even if we look at market commentators around those, everybody seems to agree that there's broadly a constructive medium-term story for thermal coal prices. And clearly, we don't want to necessarily become too complacent with that supportive story on the medium term for sort of a 3-digit U.S. dollar number. We also get clearly very much impacted on an exchange rate, Jon. So that is our ZAR and Australia are 2 producing currencies relative to the currency we sell it which is U.S. dollar. So we really also look at a ZAR and an Australian dollar achieved price. So broadly speaking, in U.S. dollars, we still believe that a 3-digit number is appropriate. It's some of these geopolitical shifts and country growth aspirations for India, for example, that we think might provide positive support and shocks to the upside. But clearly, there's always downside risk also. And that's why we do think that there might be a level of volatility as some of these news flow items that you're talking about drive sentiment more than what it drives actual supply and demand. Earlier today, you might have seen news flow that notwithstanding many commentators calling an end to coal over the last decade and for every year that we've yet again forecasters believe 2024 will be another peak for coal, just like '23 was and just like 2022 was. And that is notwithstanding a record build program of renewable energy sources across every single continent and more so in China than anywhere else. So we think that the market is broadly constructive. We're positive about the outlook. But at the same time, we're cautious about our own position in the seaborne market. So apologies for not being able to give you to the nearest decimal, but sort of broadly constructive. In terms of M&A, I mean, Jon, we continue to look and we kick a lot of tires. But we -- as we've done and demonstrated historically, we absolutely prefer returning cash to shareholders where we are not convinced that we are able to prosecute an M&A transaction with fairly low risk and high probability of upside. And so therefore, we will continue to look at those type of opportunities. Minorities in all of our assets is clearly something that we continue to have on our radar. Given that we know those assets well, they come with no diligence risk. and we have a clear pathway to understand the opportunities for those assets. So that's something we will always look at, and we have continued to look at. You might recall 2 years ago, we extinguished minorities in the South African business that we have and took 100% of Zibulo, Elders and the like. So acquired 27% of that business. And so we will continue to look at taking up more of the assets we already own if the opportunity obviously presents itself to do so. In terms of your last question of maintenance capital or SIB CapEx, we are busy doing a bit of work to ensure that we optimize that number, whilst from a lifex perspective, we've clearly last year and the year before spent quite a bit. We didn't spend as much on lifex over the -- sorry, on our sustaining capital over the last 2 or 3 years. So we do think there's a bit more required into 2025. We will clearly flag that to the market and the quantum of that when we come to results in March. And I shouldn't scare you, it's broadly in line with what we spent before, possibly 20%, 30% maintenance CapEx higher in SA, similar in Australia. And the reason for it in Australia is a bit of a deferral of some of our SIB that we would have spent this year, and that is on land purchases and the like that we've moved into 2025 and a little bit of spend that we need to catch up on the maintenance side in our South African portfolio. But as I said, not a big number in the greater scheme of things, but slightly higher than what we've seen in the last year.

Actually, just one other quick question for you. Just now you've got your hands on the sort of marketing. So do you have more of an idea of your split geographically and how important India is? And then within India, how important is thermal power versus things like pig iron, which I think you probably -- your product will go into as well. So I don't know if you got more of a split you could give us on usage of your products from South Africa?

Yes. So Jon, I mean, we are gradually getting much better insights into the use of our products. But at the same time, Bernard and his teams, our Executive Head of Marketing, is actively pursuing a broader use and distribution pattern of our coals into premium markets, so markets that value the particular attributes and qualities of our coal as well as the sustainability of being supplied coal by a miner that has now access to a number of operations and regions to essentially reduce the risk on the buyer at the same time. So whilst India is important, and it's a tug of war between energy and the blend uplift from our coals coupled with high moisture India coals, clearly, the iron, steel industries are capable and able historically to have paid a slight premium relative to the energy markets. But with the current pressures in that market, you would have observed clearly that those premium disappeared in India, but our team has been able to secure commensurate and if not better premiums in other markets in further East and Southeast Asia. So to us, this is very much about a global balance and looking for those constant opportunities to optimize the value that we get for every tonne that we produce and to optimize that. So we're encouraged by early signs. Bernard and team have not only been running that marketing office since mid 2024. And already, we're starting to see very, very positive signals about our ability to optimize our realized prices. And it's about looking at each of those markets and how they develop and the value and use to the end user, which is not a constant answer. Jon, it's an evolving answer, but making sure we stay in the market and on top of getting the best value for our coal.

Excellent. That's really good to hear.

[Operator Instructions] We have a question from Thobela Bixa of Nedbank.

Well done on a good set of results. I just have a couple of questions, 2 related to Transnet. So the first one is, could you just remind us as to how much you believe TFR performance could improve by excluding the resolution of that CRR contract? And perhaps maybe if I ask this differently, is to say, do you believe that 60 million tonnes sort of target that I think they've put out? And then related to that is, do you think TFR's performance, especially post that shutdown that it is repeatable. If yes, what are you seeing that gives you confidence that we can repeat those sorts of run rates into next year? I'll pause there and then I'll ask my final one later.

Good to hear from you. Hopefully, your final one doesn't trump me in terms of how I answer these first 2, but I'll be at your mercy. The TFR has over the last 3 or 4 years, been on a very, very challenging journey, as we all know, in South Africa and having sort of followed news flow. And there's a very clear lead time to all of the initiatives other than arguably the safety and security initiatives. And what I mean by that is that when you take the security initiatives off the line, the impact is almost immediate. Whereas if you introduce new initiatives around spares, it's a gradual improvement that we've seen rather than a sudden and immediate improvement. So most of the initiatives around spare parts signaling additional locos taken time to take effect. I said earlier, July always looked at his crystal ball and said that he felt that those improvements are most likely to be observed during 2025. And we've now really started to see some of them come to the fore. But some of these initiatives, you might recall, we spoke about spare parts 2 or 3 years ago and spoke about locos and needing to solve the China challenge a couple of years ago. So some of these initiatives have only recently received sufficient traction and therefore, resulted in improved run rates. But as I said earlier, it demonstrated that the capacity to run at those rates are there and maybe not yet repetitive and sustainable to use your terminology about repeatable over a long run because we haven't observed it yet. But for weeks on end since the shut, we've seen Transnet run at 56 million tonnes, which is 20% or 19.x percent higher than what they ran in the first half of this year. So with a 20% step-up in that period of time, the question is can another 10-odd percent step-up to get us to the 60 million tonnes be achieved and be sustainable. So let me start with the 10% before we go to repeatable and sustainable. We believe that the 10% is possible to 60 million tonnes even absent a China resolution. And the reason we say that is because the installed capacity today has run at 60 million tonnes absent China. So therefore, the key exam question is the capacity and capability and capital required to galvanize the current infrastructure against any sudden loss of momentum run rate in slots. Transnet certainly has demonstrated they are putting the right people and the right focus in place to achieve it. But as we know, every business has its complexities and has its headwinds and sometimes tailwinds. So it's difficult for me to give you with absolute certainty that they would be able to repeat and maintain a 60 million tonne run rate beyond the couple of weeks they've demonstrated of late. But one thing I do know is that all the ingredients are in place and have been put in place by Transnet and its leadership to get to that outcome. So we remain cautiously optimistic. And that doesn't mean that we'll plan our business on a certainty of a 60 million tonne run rate for next year, but we'll certainly preserve a level of flexibility in our business so that if that run rate improves or continues to improve, we're able to take advantage of that. And that was a bit of a both answer, but I just want to give you a full color on that.

Yes. And then just on the final one, we've seen you just exceed your guidance with regards to Ensham and just outperform on that asset, especially on the volume side. I mean, are you being conservative here in terms of your guidance? Or you are surprising yourself as well on the upside?

I think it's fair to say that when you get your feet under the desk on a new asset, you can see the opportunities to run it harder. And at Ensham, we knew what the opportunities were, and there were a number of opportunities, and there still are certain opportunities. But at the same time, you don't always have true visibility of all of the headwinds. So when we plan, we plan at a level of confidence that we have a degree of confidence that we would achieve it, and that clearly informs our guidance. That does not mean that we do not continue to work the opportunities hard. And if we are able to deliver on that ahead of our own time and schedule that we are able to outperform what we plan to achieve with a level of confidence. So therefore, in Ensham's case, pleased to say that we surprised and the team at Ensham surprised all of us slightly to the upside and may that continue into the future.

Yes. And maybe if I may put in just the last one related to Ensham, Deon. I think previously, you've spoken about, I think, Ensham's capacity being at around about 4.2 million tonnes. Could you just confirm that and perhaps just elaborate whether you think you are closer to maximizing the full capacity of that mine?

Just clarity, I think the 4.2 million tonnes that we might have flagged before was a level of rail commitment that we have at that sort of early to mid 4 million tonnes. So we have no rail constraints up to that point. And beyond that, we clearly need to do a bit of homework and footwork if we find the right expansion options -- footprint expansion options at Ensham. Then clearly, it's a typical process of permits, licenses, infrastructure, et cetera, to port and so forth to ensure that we get all of that in place. So the resource at Ensham is very significant, as you know, sort of close to 1 billion tonnes of resource. So that the limitation certainly is a resource. It is whether the capital required and the returns that we can get on the capital of whatever further footprint enhancements which we want to do, plus the achievability of permits and licenses to do it. So there's a number of unknowns as to what the true capacity of Ensham might be medium to longer term. That remains a bit of work in progress. We're working through options. But clearly, it's fairly complex to get to that perfect answer.

We have no further questions at this time. And I would like to hand back to Hugo for any closing remarks.

Thank you. If you do have any further questions, please feel free to get in touch with me or Shreshini Singh via e-mail by e-mailing us at [email protected] and [email protected] and we will get back to you. With that, please allow me to hand back to Deon to close out the call.

Thank you very much, Hugo, and to the Thungela people, family and team that have worked really, really hard this year to achieve the results that we've started to highlight to you. And we look forward to giving you a bit more detail when we come to the market in March. As I said earlier, so we're excited about our business, the World Energy Outlook 2024 report that was published by the International Energy Agency recently in October against global coal demand in 2024 is expected to be at an all-time high. And we're excited about the demand for our product globally. Our operational performance momentum in South Africa and also as we just spoke about in Australia, in our mind, is very encouraging, and we will do our best to maintain and build on this as we look to continue to control what we can control. And whilst the rail performance remains an overarching constraint for our country and our business, we're very encouraged by the recent improvements that the Transnet leadership team has been able to report. And we're cautiously optimistic about further improvements in 2025, building on the good work that we've seen from Transnet already. And then notwithstanding some of the continued volatility in the market and geopolitical news flows and wins, we're excited about being able to report improved cash generation in the second half of 2024. And clearly, longer term, remain positive about our prospects as we endeavor to responsibly create value together for a shared future, which is really our purpose. So with that, I wish all of you a peaceful and restful and above all, a safe festive season. Thank you for dialing in.

Thank you very much. Bye-bye.

That concludes today's conference. Thank you for joining us. You may now disconnect your lines.