King of Coal burns bright: Anglo American spin-off soars

It won’t please the growing group of eco-investors who passionately support eco-friendly companies, but shares in Thungela Resources have been snatched up spectacularly thanks to the rise in coal prices.

Thungela is hardly a household name, but it was the top performer in the London market this year after emerging from FTSE100 mining giant Anglo American 18 months ago for a spot price of just £1.50 a share.

Since then, the stock has risen a whopping 600 percent, raising the company’s value from £210 million to £1.56 billion.

Ironically, Anglo wanted to distance itself from Thungela precisely because of its involvement in coal, now seen as a dirty fossil fuel.

Investors have been pushing Anglo for years with calls to go greener. It chose the worst possible moment to sever ties.

The split happened just before coal prices flared to record highs in the wake of the invasion of Ukraine, as countries scrambled to find alternative energy sources for Russian gas.

This was all an unwelcome development for the Square Mile, much of which had left coal for dead and moved on to more mentally friendly investments.

Investors in Thungela, which means “to ignite” in isiZulu, have seen their shares do just that, rising a whopping 1,100 percent since the spin-off.

These shareholders include hedge fund manager Crispin Odey and chief executive July Ndlovu, who has made a paper profit of around £12 million on his shares. Lately, however, the price has started to fall.

Thungela operates seven thermal coal mines in South Africa. These will be terminated in the next 12 years unless renewed.

The main stock exchange listing is in Johannesburg. This year, the stock is up 200 percent so far this year — far outperforming any company in the FTSE All-Share.

In the junior AIM market, it’s a similar story. Another coal company, MC Mining, is by far the largest outperformer on that index.

Because coal had fallen so out of favor in the city, Anglo “virtually gave away Thungela” with a “low” valuation, according to AJ Bell investment director Russ Mould.

He said: “It may have been Anglo’s intention to clearly demonstrate its virtues and determination to move away from fossil fuels, but it offered investors a bit of a bargain, it turns out – provided they were willing to focus on profit instead of principles.’

Bonanza: Thungela boss Juli Ndlovu

Tom Price, commodities specialist at Liberum, said, “You couldn’t have dreamed of a better time in coal history to do this launch.”

The half-year profit reported in August came in at £580 million amid the rise in the price of coal, from just £13 million the year before. Investors, including Anglo shareholders who received shares of Thungela in the spin-off, have reap huge dividends. The group is expected to return 90 percent or more of the money it does not need to run its day-to-day operations.

About a third of the electricity worldwide is generated by coal. But the rebound is expected to cool off as early as next year.

John Meyer, director of research at real estate SP Angel, said: ‘It will be decades before coal is completely removed from the energy supply chain.’

Benchmark South African coal prices rose above $300 (£255) per tonne over the summer, from $164 this time last year. Broker Liberum predicts they will drop back to $166 by next winter.

Shares of Thungela reached almost £18.60 in September, but have since fallen by more than a third.

A Thungela spokesman said money has been returned to investors and money has been put into a clearance fund in case the mines close.