Thungela Resources Limited

Good day, everyone, and welcome to Tungela's 2025 Annual Results Presentation. I'm Hugo Noons, Head of Investor Relations, and I'd like to take a couple of minutes to introduce today's agenda and to explain how the day will run. But first, allow me to draw your attention to a couple of disclaimers ahead of today's presentation. While you take a moment to read through the cautionary statement, we will start with the CEO, Moses Madondo. who will provide an update on the execution of our strategic priorities to get us 2025 highlights and a market update. Thereafter, the CFO, Dion Smith, will take us through the financial and operational results for 2025, and Moses will then conclude the presentation. This will be followed by a Q&A session, following which today's call will end. Turning to Q&A, for those wishing to ask questions directly, we ask that you please join the session using the conference call provided, as we can only take direct questions through this facility. In order to ask a question during the Q&A session, please dial star 1 on your keypad, and this will register your intention to ask a question. Once a Q&A session starts, the operator will then open your line and ask you to go ahead with your question. For those joining via the webinar, you will have the opportunity to submit you'll submit questions via text. Today, I'm pleased to introduce our new Chief Executive Officer, Moses Madondo, who brings deep operational experience and a strong track record in mining. Now, please allow me to hand over to Moses.

Thank you, Hugo, and good day to everyone on the call. Let me start with a matter that is affecting us all at Tungela, our concern for colleagues in Dubai. Events that have unfolded in the Middle East have understandably caused concern, not only because of the implications for the world economy, but primarily for the human impact. We are actively supporting our colleagues in Dubai, prioritizing their safety and well-being, and staying close to them every step of the way. Our stakeholders can be assured that as we continue to support our teams through this difficult time, we have the necessary business continuity plans in place and continue to closely monitor the situation. As the new CEO of Tungela, I am pleased to share with you the 2025 results. Reflecting on my time since joining Tungela, I am excited at the future prospects of the business. I've been inspired by the people, the business capabilities, and the strong culture within the organization Moving on to strategy execution, we have remained committed to the strategic objectives and have delivered a strong set of operational results. These strategic pillars have served us well and remain core to our purpose. As we look to build the future from the solid foundation already formed, I'm working with the board as we determine the next chapter for Tungela's journey. We are committed to the safety of our people. Safety remains at the core of everything we do, guided by a zero harm mindset, ensuring that our people return from work safe and healthy each day. I'm pleased to report that we have operated a fatality-free business for three consecutive years. We will continue to maximize value from our assets and derive value from the resource endowment. A number of steps have been taken to create a longer life business, and we have now completed two key life extension projects, the Aniya Colliery, previously known as the Elders Project, and Zibulo North Shaft, as well as increase the Tungela ownership of the ancient mine. in Australia, 200%. The capital allocation framework remains central to the strategy, and we will maintain this disciplined approach. I am pleased to announce that the board has declared a dividend for a ninth consecutive period, showcasing our focus on delivering returns to shareholders and creating long-term sustainable value for stakeholders. Let me now turn to the group highlights for 2025. The group recorded 17.8 million tons of export saleable production, exceeding the guidance range in South Africa, and landing at the upper end of the range at Anshim. This is on the back of a strong performance at Mafube, the ramp up at Ania, as well as overcoming the challenging geological conditions experienced in the first half of the year at Anshim. We achieved export equity sales of 17.8 million tons, up from 16.6 million tons in 2024, mainly as a result of high export saleable production in South Africa, which was further enabled by the improved TFR performance. The 2025 financial results were impacted by lower thermal coal prices in South Africa and Australia, where benchmark prices were significantly lower year on year, approximately 15% and 22% respectively. The financial results were further impacted by the effects of the weaker US dollar and a stronger rent. The group incurred a loss per share of 54 rand and 64 cents in 2025. This reflects the lower price exchange rate volatility and includes a non-cash impairment loss of 8.8 billion rand. The impairment loss is as a result of the lower benchmark call price assumptions and exchange rate forecasts. The group's dividend policy is to distribute a minimum of 30% of adjusted operating free cash flow. In the first half of the year, we generated adjusted operating free cash flow of R484 million. However, in the second half of the year, we incurred a negative adjusted operating free cash flow of R88 million. As a result, the board exercised discretion in determining an appropriate ordinary cash dividend. The board remains committed to prioritizing shareholder returns where the balance sheet allows for it and where the future prospects of the business remain supportive of a distribution. Accordingly, the board has approved a final dividend of two rand per share or 281 million rand. Together with the interim dividend of R281 million and the R139 million share buyback completed following the interim results, this brings the total shareholder returns relating to 2025 performance to R701 million, representing 177% of adjusted operating free cash flow for the year. Let me turn to safety. Our unwavering zero harm mindset is guided by three critical focus areas, effective risk and work management, doing the basics right, as well as driving a strong safety culture. The group's total recordable case frequency rate increased to 2.83, primarily due to the challenging operating environment during the production footprint transition. During the year, Hoodworp North ramped down and Issy-Bonella transitioned to care and maintenance. While we continue to ramp up efforts at ANEA and completed the Zebulon North Shafter project. Now, to improve our safety performance, we implemented targeted interventions for the increased risk areas and work crews through an innovative leading indicator safety HIPMED program. I'm happy with the improvements we have made. And yes, we still have work to do to further entrench the zero harm mindset in the business. Moving on to our ESG aspirations, we are committed to driving long lasting social impact, fostering community partnerships and responsible environmental stewardship. We are very pleased that we have achieved zero reportable environmental incidents in 2025, the first time since our listing in 2021. Socio-economic development investments remain integral to our purpose. The Tungela Education Initiative and the Enterprise Supplier Development Program to Tugani continue to deliver measurable and meaningful benefits to schools and suppliers within host communities. At schools, we are strengthening the school leadership, enhancing teaching, and providing learner support. Together, these programs demonstrate our dedication to creating long-term sustainable value for stakeholders and helping to build communities that thrive beyond the life of our minds. Now earlier I touched on TFR's performance. In 2025, TFR's rail performance increased by 9% to 56.8 million tons. This reflects the benefits of ongoing efforts to improve rolling stock availability and strengthen network reliability through various initiatives enabled by collaborative efforts by industry and TFR. Looking ahead, we expect further improvements in performance as these initiatives continue to bear fruit. We are encouraged by the Department of Transport's rail reform program and the facilitation of private sector participation to further improve logistics performance. Strengthening the coal logistics system benefits the broader industry, supporting both established producers and emerging participants while reinforcing Tungela's position in the global coal markets. The seaborne thermal coal market remained depressed for much of the year, largely due to weak demand in key coal consuming countries. In China and India, seaborne demand fell short of expectations as both countries continued to expand or sustain domestic production and accelerate investment in alternative energy sources. India and China's production grew modestly, while Japan, Korea and Taiwan increased their consumption of gas and nuclear power, which further reduced coal imports. On the supply side, The sustained production levels from Indonesia, Australia, and South Africa from late 2024 and throughout 2025 created an oversupply imbalance, which the market could not fully absorb. In recent months, however, restocking activity in the major import hubs, combined with a pickup in the Indian sponge iron market, has provided price support for the higher CV South African coal, which provides us with a competitive advantage. The weak market conditions, as well as the impact of linear discounts relating to the qualities we produced and sold, widened the discount in South Africa to 16.6%. While at Ensham, we achieved a marginal discount of 0.4%, primarily due to a higher proportion of fixed price agreements concluded on a favorable terms that mitigated the effect of declining prices over the period. We, however, remain confident in the long-term fundamentals of coal in the energy mix. In developing economies, the starting point is energy security. Without reliable, affordable energy, industrialization, job creation, and economic growth simply do not happen. Coal continues to provide firm and dependable baseload power at scale, which renewables cannot yet deliver reliably or affordably in most emerging markets. Coal also underpins critical industries, such as steel, cement, and manufacturing, which are foundational for infrastructure development and economic growth. From a socioeconomic perspective, coal supports millions of direct and indirect jobs, sustains local economies, and contributes materially to export revenues and fiscal stability. Therefore, companies with high quality coal operations like Tunggala have a significant structural advantage in this market. The medium-term outlook for thermal coal reflects a market transitioning into a structural plateau, largely due to the continuing shift in demand by emerging markets in Asia, coupled by potential supply-side interventions that we have seen from Indonesia. The recent escalation of the conflict in the Middle East provides evidence of how finely balanced the market is today. The disruptions in the flow of oil and gas in the region have again increased energy security fears and pushed up the prices of oil, gas, and coal. While coal's contribution to energy security remains evident, The outlook is increasingly influenced by volatile geopolitical conditions and evolving market pressures. Now let me hand over to Dion to cover the financial results for us.

Dion. Thank you, Moses, and to those online for making the time to dial into our results presentation for the year ended 31 December 2025. While production and cost performance were solid, it has been a challenging year from a market perspective, with materially lower benchmark coal prices and a stronger rent placing pressure on both revenue and margins. Despite this, we continue to invest in the business in line with our capital allocation approach, and benefited from strong cash flows from operations. In the next couple of slides, I will cover the key financial metrics for the year, unpack the major drivers behind the year-on-year movements, and close with a net cash position, as well as share all their returns. Let's turn to the results. Adjusted EBITDA for the year was 1.2 billion rand, reflecting the impact of materially lower benchmark coal prices and the stronger rand against the US dollar. Despite these headwinds, the operations remained resilient with positive EBITDA contributions from both South Africa and Australia. We incurred a headline loss of 839 million rand, primarily driven by the lower pricing environment. After recognising non-cash impairment losses of 8.8 billion across operations in South Africa and Australia, the group reported net loss of 7.1 billion rand. These impairment losses reflect updated long-term assumptions on prices and exchange rate at the time of finalising the results, but do not affect liquidity or our ability to continue operating sustainably. Against this backdrop, the business continued to generate cash. The group generated 2.4 billion in operating free cash flows. After accounting for the sustaining capital spend of 2 billion, we arrive at adjusted operating free cash flow for the year of 396 million rand. We ended the year with a robust balance sheet holding $6.1 billion in cash and a net cash position of $5.1 billion after deducting funds held on behalf of the community and employee trusts. Our balance sheet structure provides resilience in the current market environment, preserving our ability to invest through the cycle and to continue to prioritize returns to shareholders. As a result, we are returning $281 million to shareholders as a final ordinary dividend. This, together with the interim dividend of R281 million and a share buyback of R139 million completed after the interim results, takes total shareholder returns relating to 2025 to R701 million. Taking a closer look at the income statement, revenue is down mainly due to weaker coal prices combined with relatively stronger producing currencies against the US dollar. Operating costs, excluding depreciation and amort, were approximately 900 million rand lower than last year. This is a function of actions taken to improve cost discipline and the impact of lower prices through reduced commodity purchases and royalties, offset by inflation and higher selling expenses. These revenue and cost figures resulted in adjusted EBITDA of 1.2 billion rand. Earnings were supported by net finance income of 2.7 billion rand, which includes 2.3 billion of gains from derivatives over foreign currency. The tailwinds from these derivatives, of which 1.3 billion has been realised in cash, became more pronounced as the rand continued to strengthen against the US dollar. We do not have the same level of currency protection in place for 2026 and currently do not expect the tailwind to be as pronounced in the current year. The impairment losses of 8.8 billion have been recognised across operations in South Africa and Australia and reflect weaker forecast benchmark coal prices and a stronger local currency against the dollar, contracting the projected margins over the life of our mines. Impairment losses are measured at a point in time, based on information available at 31 December, and changing market dynamics may have changed the outcome of the assessment if it was done at a different date. The impairment reflects mainly a write-off of historical capital, and the remaining PPE balance of around R12 billion is more reflective of the capital spent post our listing in 2021 than the cash spent on the acquisition of Ensham. Income tax for the year is a credit reflecting the impact of the net loss occurred in the year. Deferred tax assets of 1.1 billion have not been recognised based on the same factors contributing to the impairment losses. Turning now to operational performance for 2025, Export saleable production across the group remained resilient at 17.8 million tonnes, reflecting 13.9 from South Africa and 4 million tonnes from Ensham. FOB costs remained well controlled in a lower price environment. In South Africa, the FOB cost excluding royalties increased to 1,170 rand per tonne, while in Australia, the FOB cost excluding royalties was stable at 1,435 rand per tonne. Sustaining capex for the group was 2 billion rand. with $1.4 billion invested in South Africa and $600 million at Ensham, whilst expansionary capex of $1.1 billion was primarily directed towards the Zibuli North Shaft project and the Lepilale coal bed methane project. Overall, our operational delivery remained robust, with continued progress on productivity, logistics performance and disciplined cost control across both regions. Group revenue for the year declined by 17% to R29.6 billion. As shown in the graph, this was largely driven by materially lower benchmark coal prices and a stronger RAND. In South Africa, revenue reduced to R22.1 billion. The benchmark price was 15% lower year-on-year. And we also saw wider discounts as market conditions remained weak across most of the year. This impact was partially offset by higher export volumes. Domestic revenue was lower due to reduced production at Issy-Banello, softer industrial demand and the sale of Ritvla in late 2024. Revenue from Australia decreased to R7.5 billion consistent with a 22% decline in the Newcastle benchmark coal price. Importantly, Ensham's discount remained very narrow, with realized prices at 99.6% of the benchmark. Finally, the stronger average RAND relative to the US dollar also weighed on ported revenue, given that export sales are denominated in dollars. Turning to unit costs in South Africa, FOB costs, excluding royalties, increased significantly. to 1,170 rand per tonne from 1,130 rand per tonne in 2024. The key drivers of the increase were inflationary pressures in the mining value chain, low domestic revenue offsets, and high selling expenses associated with increased rail activity. These pressures were partly offset by stronger export production, lower underlying production costs and a lower non-cash charge related to the environmental provisions year on year, reflecting updated assessments of future rehabilitation requirements. Together, these factors helped us contain unit cost inflation below typical mining inflation levels in what remains a challenging environment for margins. Including royalties, which were lower due to realised prices, FOB cost increased by only 2.2% to R1,176 per export time. At Ensham, the FOB cost performance remained stable year on year. Excluding royalties, the FOB cost was R1,435 per export tonne, broadly in line with the prior year's R1,433 per tonne. This stability reflects a reduction in the non-cash charge related to environmental provisions, which helped to offset inflationary pressures and higher selling expenses. The increase in selling expenses was driven by above inflation rate adjustments and additional rail capacity that we secured to support our sales commitments in the second half of the year. When including royalties, the FOB cost reduced from 1,674 per tonne last year to 1,598 per tonne in 2025. This reduction is consistent with the lower realised coal prices given the progressive royalty regime in Queensland. We'd like to pause for a moment on the evolution of our capital spend in South Africa. On the slide, we show total capex spend, the sum of sustaining capital from 2022 through to 2025, and as expected in 2026, based on the upper end of the guidance we issued today. In 2022, the total capex of 1.9 billion was largely spent on sustaining capex, reflecting a focus on asset integrity and business continuity following the demerger. In 2023 and 2024, capex peaked at close to 3 billion rand as a result of expansionary capex spent to build Elders and Zabulu North Shaft projects. The successful execution of these projects has transformed Tungela from a short-life business at the time of listing into one with longer-life assets that should generate attractive returns through the commodity price cycle. In 2025, total capex stepped down to $2.5 billion as the LIFX projects neared completion. Expansionary capex in 2025 also included spin on the gas project. Looking to 2026, we expect a reduced CapEx spend rate. Total CapEx is expected to reduce by 56% year-on-year to 1.1 billion at the upper end of guidance, as expansionary CapEx is largely being spent and sustaining CapEx moves into a lower run rate. This reflects the group's commitment to disciplined capital allocation, investing through the cycle and now transitioning the South African business into a lower CapEx phase. Looking at the movement in net cash for the year, we started the year with 8.7 billion rand in cash. We paid 2.2 billion to shell this through the 2024 final dividend and buyback, and the 2025 interim dividend and buyback. We generated 2.4 billion in cash from operating activities, and that includes the 1.3 billion rand in inflows from the settlement of derivative currency instruments. We invested 1.1 billion in extending the life of the business through the Cebu North Shaft and gas projects, and a further 2 billion in sustaining CAPEX. In addition, we contributed 478 million rand into the green funds in South Africa and Australia, as required by the providers of environmental guarantees in those jurisdictions. We acquired the additional interest in Incheon for a total of 511 million rand. Together with other smaller movements, this leaves us with a total of 5.1 billion rand in net cash at the end of the year. Reflecting on what that means for shareholder returns, you'll be aware that the group's dividend policy is to distribute a minimum of 30% of adjusted operating free cash flow in the preceding period to shareholders. The group generated adjusted operating cash flows of 396 million rand for the year, which in itself does not necessitate a further distribution in terms of the dividend policy, recognising the interim dividend of 281% is well above the minimum of 30%. Notwithstanding this, the Board remains committed to prioritising Shell the returns where the balance sheet allows for it, and to the extent that the future prospects of the group are supportive of such. Accordingly, the Board has declared a final ordinary dividend of 2 rand per share, reflecting distribution of 281 million rand pertaining to the final 2025 dividend declaration. Together with the interim dividend and the share buyback completed after our interim results, we are returning a total of 701 million rand to shareholders, or 177% of adjusted operating fee cash flow generated in 2025. The trusts will also receive a further 31 million rand. This leaves the group with a cash buffer of approximately 4.7 billion rand, which the board considers to be appropriate in the current market circumstances. With that, let me hand back to Moses for concluding comments.