Thungela Resources Limited

Good day everyone and welcome to Tungela's 2026 interim results presentation. I'm Hugo Nunes, 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. Joining us on the call today is Moses Madondo, our Chief Executive Officer, and Dion Smith, our Chief Financial Officer. Moses will begin with an overview of the group's performance for the first half of 2026 and provide an update on market conditions and key industry drivers. Dion will then take you through the financial results for the period. Moses will conclude the presentation before we open the line for questions. Turning to Q&A. For those wishing to ask questions directly, we ask that you please join the session using the conference call facility 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 the 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 questions via text. Over to you, Moses.

Thank you, Hugo. Good afternoon and good morning to those joining us on the call today. June, 2026 marked five years of Tungela's existence as a standalone listed entity. In these five years, we have created and returned value to our shareholders and stakeholders. We have done this by reshaping the portfolio, advancing life extension projects, and maintaining the financial flexibility required to build resilience through the cycle. In this period, we returned just over 23 billion rand to shareholders through dividends and share buybacks, as well as approximately 2 billion rand to the community and employee trusts. This demonstrates our purpose to responsibly create value together for a shared future. As August began, I marked my first year with Tungela. I'm encouraged by the dedication of our employees and the continued support of our shareholders. I am proud of what we have achieved to date with a strong first half performance underpinned by consistent operational execution and financial discipline. We are focused on delivering the business of today that enables us to earn the right to build the Tungela of tomorrow. With that, let me start with one of our most important measures in the business, the safety of our people. Safety and health remain at the core of everything we do and is the foundation on which decisions are made. We have operated fatality-free for three and a half years. This reflects the continued focus across the group on getting the basics right, effective work management, and building a strong safety culture. The group's total recordable case frequency rate improved to 2.62 in the first half of the year, from 2.83 in 2025. NSHM's total recordable case frequency rate improved significantly to 5.52, displaying the alignment with Tungela's work practices. This includes the site's focus on visible threat leadership, hazard identification, and continuous safety improvement. In South Africa, we are pleased with the reduction in reported injuries. We did see a slight regression in the frequency rate because of the reduced number of worked hours following the closing of Hoodoo Warp, Isi Bonello, at the end of 2025. We remain unwavering in our commitment to keep our people safe and show that everyone returns from work safe and healthy each day. Now, moving on to business performance. Our first half performance demonstrates the resilience of the business and the benefits of disciplined execution. Adjusted EBITDA increased to 1.3 billion rand, supported by higher benchmark call prices, increased sales volumes, and lower operating costs. Earnings per share increased by 467% to R10.95. Cash generation was particularly strong, reflected in the net cash of R6.1 billion at the end of June 2026. Accordingly, the Board has declared an interim cash dividend of R5.50 per share. In addition, the Sisonke Employee Empowerment Scheme and the Ngulo Community Partnership Trust will also receive 57 million rand collectively. We are pleased that this is the 10th consecutive dividend that will be paid to shareholders since our listing in June 2021. These results demonstrate solid operational execution in South Africa and Australia There has now turned to operational performance. Operationally, the first half reflected a number of positive improvements. Group export saleable production increased by 6% to 8.5 million tons. Export equity sales increased by 7% to 8.9 million tons. This was supported by improved rail performance in South Africa and higher sales from NSHEAM. In South Africa, export saleable production was broadly in line with the prior period, despite Hoodoo of North ceasing operations at the end of 2025. Kwesela recorded a strong fair-south performance and was one million tons up on the prior period. At Zibulo, year-on-year production was lower. This was mainly due to challenges from underground infrastructure in the current mining footprint that will be retired as production shifts to Zibulo North Shaft. This feature is transient, and we therefore remain confident in the full-year production guidance. In Australia, NSHEM delivered a strong production uplift. with a resultant improvement in unit cost performance. Free on board cost per export time improved by 23% compared with the prior period. We invested R705 million in sustaining capital expenditure during the period. This spend focused on maintaining the long-term sustainability and reliability of our assets. Having delivered a strong operational performance, it is important to understand the market metrics that influence these results. 2026 started with prices at similar levels to 2025. Following the onset of the conflict in the Middle East, coal markets experienced volatility and coal prices strengthened. These price increases were on the back of energy security concerns that support global oil, gas, and coal prices. As a result, the average Richards Bay benchmark coal price increased by 15% for the first half of the year, and the average Newcastle benchmark coal price increased by 25%. The increase in Richard's Bay Benchmark was moderated by lower demand from North and South Asia. Another key feature of the period was a continuing strength of the South African rand. The US dollar has remained weak while positive sentiment for emerging markets and South Africa specific economic factors have kept the South African rand strong. A strong rent impacts the relative competitiveness of South African exporters. This reduces the benefit derived from translating U.S. dollar revenue into rent while most operating costs remain locally denominated. This places margin pressure and limits the currency-driven advantage South African producers traditionally enjoyed. Against that backdrop, improved rail performance allowed us to maximize the benefit of the stronger pricing environment. Rail performance improved during the first half of the year from the level of approximately 48 million tons Last observed in 2023, the North Corridor achieved an annualized run rate of 59.9 million tonnes, a 5.5% improvement compared to 2025. We are particularly pleased that these improvements have been achieved without significant capital investment by Transnet. Our view is that this performance is expected to remain at these levels in the near term with potential for further upside. The rail improvement reflects the collaboration between industry participants and Transnet, together with higher locomotive availability, security improvements, and operational enhancements. Export sales in South Africa increased to 7.4 million tons as we utilized additional rail where value accretive opportunities existed. Third party coal sales of 602,000 tons allowed the group to capture additional value in a stronger pricing environment. This demonstrates the value of our agility. In summary, the first half of 2026 demonstrates the resilience of Tungela's business model and benefits of forecast execution. We delivered improved safety performance, stronger export sales, higher earnings, robust cash generation, and balance sheet strength. With that, let me hand over to Dion to take you through the financial results in more detail.

Thank you, Moses, and thank you to those online for making the time to dial into our interim results presentation. The first half of 2026 reflects a meaningful improvement in financial performance compared to 2025 first half results. A highly volatile market resulted in currency headwinds and coal price tailwinds. We were, however, fortunate to have benefited from much improved TFR rail performance in South Africa with access to markets we've last seen in 2020. Adjusted EBITDA increased 91% from June 2025 to R1.3 billion and net profit increased to R1.4 billion. Our cash generation for the first six months includes R1.1 billion in realized gains from foreign currency instruments. Adjusted operating free cash flow, which is essentially our cash flow from operations, was R1.9 billion, including those FX instrument gains. This measure of cash flow is also net of what we've spent on sustaining capital during the period under review. Headline earnings per share, which excludes the non-cash profit from the sale of the Klangkopi mining right of approximately R1 billion, increased to R4.80 per share. The business maintained a robust balance sheet with a net cash of R6.1 billion at the end of June 2026. Overall, the results demonstrate the benefits of the stronger operational performance, improved export sales volumes and disciplined cost management. As a result, we are returning R773 million to shareholders as an interim dividend. Let's look at the income statement in a bit more detail. So notwithstanding the closure of GURUA and ISIBUNELA at the end of 2025, our revenue still increased modestly to R15.2 billion, driven by stronger export sales volumes and higher benchmark coal prices. The impact of stronger coal prices was either offset by the stronger operating currencies against a generally weaker US dollar. Operating costs decreased compared to the first half of 2025. This is largely due to the structural changes following the end of life at Issy-Bunello as well as Godewa. Operating costs also benefited from the acquisition of the remaining 15% stake in Ensham in February 2025 as we no longer acquire 15% of the coal production at market prices. Our cost-efficiency efforts continue to deliver on our internal targets, but were offset by higher purchases of third-party coal and selling expenses related to increased export volumes. These factors supported adjusted EBITDA of 1.3 billion rand, with the South African operations generating an EBITDA margin of around 6%, and in Australia, an Enshima margin of around 16%. Below EBITDA, there are three important items to note. The first is the one billion rand non-cash profit, recognized on the disposal of Klang Kopi Mining Right. So this transaction became effective on the 15th of June and the profit mainly resulted from the de-recognition of the related environmental liabilities. Secondly, Our foreign exchange derivative gains continue to provide meaningful benefits, although lower than in a comparable period due to lower currency volatility. Thirdly, the effective tax rate increased mainly due to accounting treatment relating to preferred tax assets both in South Africa and in Australia. Together, these resulted in profit for the reporting period increasing to R1.4 billion. Revenue growth remained modest despite significantly higher benchmark prices, and that was largely due to the offset in currency impacts. If you look at higher export prices, which contributed around 2 billion rand in additional revenue, and that was mainly in South Africa, realised prices in Australia increased only marginally, given that last year in 2025 our revenue benefited from higher fixed price contracts in the first half. Increased export volumes added, close to 1 billion between South Africa and Australia. These benefits were offset by a stronger rand which reduced reported revenue by approximately 1.7 billion rand for the period. The average exchange rate reduced by almost 2 rand from the first half of 2025 to the first half of 26. That was from 18 rand 39 to 16 rand 41. Domestic revenue declined following the closure of Isabinerra and Goedewip at the end of 2025. So looking at our price realisation in a bit more detail, South Africa realised export prices increased to approximately US$89 per tonne compared to US$78 per tonne in the first half of 2025. The average realized discount of 15.7% widened therefore from the 14.9% as a greater portion of our sales book was in the mid-quality range in this period. We expect the full year discounts to remain within this range if not tighten a bit in SA. At Ensham, the realized price averaged approximately US$111 per tonne, reflecting a discount of 13.3% compared to US$109 per tonne, reflecting a premium of 6.6% in the prior year first half. The widening of this discount was as a result of our fixed price contracts which were concluded ahead of the price rally caused by the Middle East conflict. We expect the full year discount against Nuke Index to narrow slightly as we seek to conclude certain fixed price contracts which, if these were to have been concluded in the first half of the year, would have resulted in a narrower discount, around 12%, rather than 13.3%. Without the Forex headwind, revenue growth expressed in RAND would have been considerably stronger. Looking forward, the near-term dollar weakness is expected to continue, but we also expect coal prices to hold a higher floor as the Middle East situation remains highly unstable. Let's now turn to cost performance starting in South Africa. FOB costs, including royalties, increased to R1374 per tonne from R1264 per tonne. The main drivers were inflation, lower production volumes and higher selling costs associated with increased rail and export sales volumes. The closure of Isi Benilla and Goedwerp had a positive impact on FOB cost per tonne. Although first half costs were higher than the comparable period, performance remains within guidance and we expect costs to further moderate towards the end of 2026 and this is as production run rates improve during the second half in line with what we've observed in prior periods. While South African costs increased, Ensham delivered particularly strong production performance which benefited unit costs. Ensham's performance continues to highlight to us the value of diversification within our portfolio, with FOB costs, and this is the measure including royalties, reducing significantly from R1,904 per tonne to R1,466 per tonne. The largest contributor was a 37% increase in production, which improved operating leverage and lowered unit costs. Improved operational efficiency and disciplined cost control contributed further to the lower unit cost number, which also benefited from the stronger South African Rand, which reduced the translated cost base on consolidation. The FOB cost of 1,466 per tonne was below the lower end of the guidance range for the first half of 2026. Moving from cost to cash and capital allocation, let's turn to our cash generation for the period. Adjusted operating free cash flow for the period increased substantially to 1.9 billion rand from 484 million rand in the first half of 2025. This was driven by stronger adjusted EBITDA, material foreign currency gains, those are from derivative instruments, and a working capital release of about R500 million based on the timing of sales and payments from customers. After funding, sustaining capital, paying taxes and meeting environmental funding commitments in the period, the group still generated substantial free cash flow. Let me now turn to that cash evolution for the period. So the group generated healthy cash flows in the first half as cash from operations was supported by improved earnings as well as realized cash inflows from the foreign derivative settlements. We funded R705 million of sustaining capital expenditure and R104 million of expansionary capital in the period. We also contributed R100 million to the Green Fund in South Africa and established an investment arrangement of around R180 million linked to life of mine property access at Ensham in Australia. Importantly, despite these investments and commitments, the balance sheet strengthened during the period and our net cash increased to 6.1 billion rand. A strong balance sheet remains a central component of our capital allocation framework. Our framework continues to balance three fundamental objectives. First, maintaining balance sheet resilience and liquidity. Second, funding sustaining capital and our environmental obligations. And then thirdly, returning capital to shareholders whilst retaining flexibility to pursue opportunities to grow in a manner that further enhances our ability to prioritise returns to shareholders over time. Maintaining balance sheet flexibility rather than only focusing on the minimum cash buffer alongside the investment evaluation criteria remains a cornerstone of our disciplined capital allocation approach as we selectively evaluate opportunities to grow or extend the life of our business. At period end, the group not only held 6.1 billion in cash but also had 3.2 billion rand of undrawn facilities. The Board has determined that maintaining a strong liquidity position is appropriate, given current uncertain market conditions and potential opportunities available to the Group. The Board has declared an interim dividend of R5.50 per share, reflecting a distribution of R773 million, or over 40% of adjusted operating free cash flow generated in the first half of 2026. The underlying principle remains unchanged. Discipline, capital allocation, long term value creation for shareholders. Having covered earnings, cash generation, and capital allocation, let me conclude with our outlook for the remainder of 2026. Starting in South Africa with export saleable production, the year-to-date export saleable run rate would bring us to below the bottom end of that full year range. We either consider the production challenges at our underground operations to be transient, as Moses said earlier, We are accordingly expecting a stronger second half in line with past periods and remain confident that we will deliver on our full year guidance. FOB cost per tonne is already within the guidance and with the production step up in the second half we expect to remain within range for the full year. The range for sustaining capital also remains appropriate as capital spend is typically weighted towards the second half of the year. At Ensham, export saleable production is trending above the upper end of the range. However, Current operating plans continue to support delivery within that guidance range for the full year. FAB cost per tonne for the first half is well below the bottom end of the guidance range. That also contributed to the translation benefit of reporting currency on consolidation, unit costs, and the operating currency remain on plan and considering the uncertainty of exchange rate movements, we believe that the cost guidance remain appropriate at the stated exchange rate. Sustaining capital at Ensham is expected to come within the range of 500 to 700 million rand. Overall, current operating plans support delivery within our full year guidance ranges. With that, let me hand back to Moses for concluding comments.