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.

Thank you, Dion. Tungela remains committed to responsible stewardship, ensuring that the value we create delivers lasting benefits for our communities beyond the life of our operations. For the reporting period under review, there were no significant Level 3 to Level 5 environmental incidents. We have made significant progress in delivering on our social and labor plan commitments. The Ngulo Community Partnership Trust advances on its mandate to create a lasting and positive impact in host communities. Our investment in education infrastructure helps to create a safer, inclusive, and conducive learning environment. Tutugani and our enterprise and supplier development program continues to build local economic capacity. Since its inception in 2023, a total of 185 entrepreneurs have graduated from various programs and are now contributing to local communities and economies. I'm confident about the next chapter of our business, underpinned by a strong balance sheet, a portfolio of quality assets, and a strategy focused on resilience and growth. Following its review of the strategy, the board reaffirmed the company's strategy to grow earnings and build resilience through the cycle, with a focus on creating long-term value for shareholders. Our priorities remain clear, maximizing the value of our existing assets, building future optionality to support long-term growth, and pursuing selective growth opportunities where we can leverage our expertise. Underpinning these priorities is our focus on safety and ESG, the strength and capability of our people, technical and operational excellence, and disciplined capital allocation. Our capital allocation framework continues to prioritize returns to shareholders. That is after funding environmental obligations and investing in capital to sustain our business. As I conclude, let me reinforce the key priorities that guide our business and underpin our long-term value proposition. First and foremost, safety and health remain at the core of everything we do. Nothing is more important than ensuring that every employee and contractor return from work safe and healthy each day. Our commitment to an unwavering zero harm culture is not merely an operational objective. It is a fundamental value and shapes every decision we make across the organization. Secondly, despite ongoing market volatility, external challenges and external challenges, we remain focused on driving growth and operational excellence. We have maintained our full year guidance. This reflects our confidence in the resilience of the business and the quality of the asset base. At the same time, we advance life extension and Optimization Projects. This will further strengthen the competitiveness of our assets, enhance operational performance and sustain cash generation over the long term. Our third priority is portfolio optimization. We remain disciplined in allocating capital to opportunities that offer the greatest potential for value creation and support our strategic objectives. In South Africa, we continue to advance our portfolio optimization approach to position our assets to deliver attractive returns while strengthening the overall quality and resilience of the portfolio. Finally, our ability to execute our strategy is underpinned by the strength of our organization and our people. We will build leadership depth, Organizational capability and technical expertise to support our growth ambitions and deliver sustainable long-term value. Thank you. Let us now turn to questions, Hugo.

Thank you. Thank you very much, Moses. A reminder that if you wish to ask a question directly, please join the conference call facility using the link you would have received upon registration. Dialing star one will indicate to the operator that you would like to ask a question. For those who have submitted questions via the webinar platform, I'll be reading those out. Operator, please could I ask you to open the lines for the first question.

Thank you. First question comes from Sashi Shikhar of Citi. Please go ahead.

Hi, can you hear me? Yes, we can, Sashi.

Yeah, hi. So good afternoon and thank you very much for taking up my questions. I have two. The first one is on depreciation. So I was wondering why the number is so low compared to the last year. and what is the normalized level of depreciation we should estimate going forward? And my second question is on dividends. Well, you have a net cash position of around 6.1 billion rand and the thermal coal prices, they're also at decent levels. So why not a higher dividend compared to what you announced? Considering the cash buffer is around 5 billion Rand, so if we account that, you still have 1.1 billion Rand excess cash.

Hi Sashi, good to hear your voice. So in terms of the depreciation, clearly the big delta period on period has been the impairment. If you look at our PPE balance in the comparable period, from memory it was around 20 billion rand, it's come down by that impairment of more than 8 billion rand at year end, so therefore we have reset that level of depreciation. and if you reflect on what a forward-looking rate could be, currently what you're seeing is likely to be what we see into the future absent any other, obviously, material movements in our PPE balance. So the impairment is the single biggest reason behind that reduction. In terms of the dividend, you are correct that the board has a lot of flexibility. We have a minimum dividend policy of 30% return of adjusted operating free cash flow, but there isn't necessarily a maximum on that. and therefore it's very much a view that the board takes at a point in time how best to balance returns to shareholders through the cycle. And what you would have seen in this instance is that had we declared the absolute minimum dividend based on the 30% of adjusted operating free cash flow. Mathematically, that would have been around four rand per share dividend. The 550 therefore reflects a higher payout compared to the minimum policy, but is a balanced outcome relative to a number of forward-looking factors. Also playing into that clearly is one, the level of volatility in the market, not only in coal prices, but FX. but then two, also reflecting the fact that the board wants to retain a resilient balance sheet in order to also take advantages of any further growth opportunities, whether that might be investment in our gas project or other factors.

Thank you very much, very useful. Thank you.

The next question comes from Patrick Mann of Investec. Please go ahead.

Good day and thank you very much for the presentation. I think, I mean, you spent a bit of time explaining the realized price in Australia and it was flat year on year in dollars and in ZAR terms actually lower despite the sort of, well, because of the swing from a premium in the last year to a discount. So I understand it's a portion of the How should we think about your leverage to nuke prices and what sort of lag does it come through with? So I think, Dion, you said it goes from 13% to 12%, but is that on the updated or the higher benchmark price now into the second half of the year, for example? That's my first question. Thanks.

Hi Patrick, good to hear from you. Yes, so clearly what has happened in the Newcastle market is that the actual absolute market level increased much faster than what you would have seen in API 4. So I think Nuke was around 25% up compared to the prior year, whereas I think API 4 was only around 15% up compared to the prior year. In our Australian business there are a couple of features in that a large portion of our coal exports is under fixed price arrangement and one of those in particular only settled after the results announcement and that is for a couple of hundred thousand tons in the first half of 2026 where our coal deliveries were still being done at sort of around 110 prices and settlement with that fixed price contract is likely to be closer to the $130 a ton mark and therefore once that comes into the book clearly that 12% that I spoke about is the realization or discount rather than 13%. We do see a widened discount in that market and that is mainly as a result of a much higher nuke compared to in the prior period but also as a result of supply-demand dynamics in that market. So it's something that we expect to continue for the next number of months and hopefully in time moderate again.

Thanks. As a follow-up, and I've actually tied in very well to what I think you were just saying there. I mean, if I read your results, you don't, and correct me if I'm wrong, you don't sound particularly bullish on the outlook for coal, for thermal coal. So for South Africa, you're talking about India being price sensitive and the high freight rates that we're seeing. And then for Nuke or for your Australian business, you're saying that the exporters are not necessarily competitive versus the alternative supply in Northeast Asia. Whereas I think maybe versus the market, I think people are looking at gas levels, gas storage levels, what's happening in energy prices, and to be honest, scratching their heads as to why coal prices aren't higher. Can you maybe just elaborate a little bit more on those market dynamics that you're seeing? Because I think it's very interesting.

Absolutely, Patrick. I mean, just for absolute clarity, everybody on this side of the line are coal bulls. So we do believe in the medium to longer term fundamentals of coal. We appreciate the dislocation in the energy markets that we saw in March, the geopolitical impacts on it. We absolutely appreciate the low levels of gas storage at the moment in Europe. The continued uncertainty in the Strait of Hormuz and the energy challenges that that is likely to bring to the world. But I think we're moderate in our outlook because there are a number of other factors at play. Also, we're seeing increased domestic supply in both China and India. We're seeing a level of buy-at-home demand. Thank you very much. We've also seen reduced hydro energy off the base of weather and lower rainfalls and clearly we're expecting a post-monsoon recovery in India as temperatures increase post the rainy season. So obviously we see all the green shoots in the market but at the same time we want to be cautious Great, very interesting. Thank you so much.

The next question comes from Tim Clark of SVG Securities. Please go ahead.

Thanks. Can you hear me? Yes, we can, Tim.

Perfect. Thank you very much. I've got a couple of questions. Let's start off with just Zabula, the challenges of Zabula. I fully appreciate that you're transitioning to the North Shaft. I just wonder if you could give us a little bit more color on timing. Should we anticipate a similar type of scenario for the second half of this year or how long does it last? Maybe that's the first question.

Tim, thank you for the question. Yes, we did see challenges in the first half of 26 at Zebulo. In the back of the main shaft environment where the team has really been pushing to the boundaries and limits of the mine as we Repub. Thank you very much. Thank you and then sort of an optimal level what in the first half of next year or maybe the second half of next year?

So a pathway towards that.

So we do expect that Zabula should be performing at this level in the second half of the year. We've already seen some of the improvements to come through in Zabula.

Thank you very much. My second question, Dion, just on derivatives, can you just, you spoke to us in In June, just about what you've got outstanding now, what the forward-looking derivative position is. I wonder if you could give us a reminder on that or an update?

Tim, I must confess I can't remember exactly where we were when we spoke last, but I can tell you where we are now in that we continue to place instruments into the future to convert, obviously, our dollar revenue into the best possible RAND number that we can find. And at the moment, for the second half of 2026, we're fairly confident, and there's a detailed note in the financials that you can unpack to see where I get this from, but we're fairly confident in the conversion of about $390 million of FX in H2 at just below 18 rand. In 2027, what you might not see in the note is that we have about $120 million at 18, a conversion of 18. And then in 2028, in the first half, we probably have about $60 million to convert confidently at around 1853, roughly. So that's our forward positions at the moment.

Oh, that's super helpful. Thanks so much, Daniel. Just maybe my third question, and I'll make this the last one so someone else gets a turn. Just on your rehab, you spoke about being fully covered once North goes out. And you've built up quite a strong green fund and rehab position. You've been working down the rehab. You've sold some of the rehab. Are we at a sort of inflection point now where some of these costs and cash outflows for rehab are going to slow down? or do you anticipate that they're still, you know, we should, I'm just wondering if as we reach that full cover point if there's an inflection.

I think it's a very good question, Tim, in the context of the broader capital allocation framework. We're not at that 100% coverage in SA yet. We expect to potentially get there by end of the year on the basis of asset growth and moderating our liability. But yes, we will certainly be at that inflection point in early 2027. Correct. Does that mean that

Post that point, you might put cash into the green fund and bring the rehab down. Or does that decision still sort of sit there, or does that mean that that's done and dusted? Sorry, I'm not enough of a rehab specialist, I understand.

Yes, so no, it is a good question. It very much depends on where our assessments come out at the end of this year. So as you might recall, once a year we have a very comprehensive assessment to establish our full extent of our liability. That work lands about in November. And then when we get to talk to you about full year results, we'll have a good sense as to what our best estimate is of our forward-looking liabilities. We also then take a legal view on what the NEMA, the likely NEMA outcomes would be relative to the department, the minimum regulatory provisions. And as you'll see, there's a very big delta between those two. But all of that work will happen around year end and we'll be able to answer some of your following questions, which I no doubt will come early next year more confidently than what we can do so today.

Thank you very much.

The next question comes from Brian Morgan of RMB Morgan Sternly. Please go ahead.

Hi guys, thanks very much. Dion, could you help us just bridge out the NSHM cost guidance 1306 Rand in the first half and then lower end of the guidance was 1480 in the second half. It suggests a big lift in the second half. You haven't changed the guidance. So just what's driving that?

Hi, Brian. Good to hear from you also. I think a similar question was actually asked online also and happy to answer both in the same breath. On balance, our FOB cost guidance for Australia is probably fairly conservative relative to what we have achieved and what we're likely to achieve in the second half. But having said that, typically many of the increases in that part of the world occur mid-year, so therefore we are expecting higher cost run rate. But then an important feature, Brian, is that in the first half of the year, we've had a particular impact in that the translation from the Australian dollar cost per tonne into rand benefited clearly the rand result relative to our guidance. and very difficult to see what the Australian dollar does relative to the rain for the second half of the year. And therefore, balance remained fairly conservative in not updating that guidance to a lower number at this stage.

Okay, cool. Thanks, Johan. And then the second question is with ANIA and Zimbabwe North ramping up. Could you just give us a steer on... and the sort of SA portfolio FAB costs and, you know, they're going to be higher or lower once those two are in. And then if you can also maybe just couple that with your expectations around discounts, you know, once those two mines are in.

Absolutely. So if I can start with the FOB cost per tonne. If you look at the current run rate in South Africa and what the resultant FOB cost per tonne was, you'll recognise that as a result of being slightly less than optimal in our SA portfolio, and this is much to do with what Moses just referred to you to in that Zubulu is operating a very wide footprint currently and that as that old shaft comes to its end and most of the production units move to the new north shaft we should see a contracting footprint, a contracting absolute cost spend and with a higher denominator we should see that The structural improvement in the FOB cost per ton. So our view is that the SA portfolio should be able to consume inflation over the next year or two. So therefore, in real terms, we should see a slight reduction in our cost per ton over the next number of years. That's as Nia and Zubulu ramps up to its nameplate capacity. If I then cast back to discounts, As you can appreciate, it's almost like forecasting the actual coal price a year or two out. So very difficult for us to reflect on what the coal prices would do a year or two out. But in terms of contained energy, clearly Zbulu has, with the North Shaft coming online, shifted its average quality level significantly. and many more. and Nia is very similar to what we retired at Hulweb, so we're not seeing a portfolio shift in quality as a result of Nia.

Okay, that's cool. Thank you, Dion. That's all from me.

Thank you. At this stage, we have no further questions from the telephone lines.

Thank you. We'll move to some questions online. Moses, Herbert from APSA asks around Transnet, what is your full allocation on rail? What is the current delta to actual availability? And will this trigger an adjustment to our mine plans to take advantage of the current improved rail performance?

Abed, thank you for that question. So our location is based on RBCT at 23.5%. At about 60 million tons, we were 13 and a half, 14, 13 and a half, 14 million tons would be our location. and as you would have seen, our operations were able to respond to that run rate and deliver to the challenges in our RBC team. So we do expect, of course, that any other increase gives us an opportunity to take more advantage of whatever capacity we can still get out of our operations. And of course, where opportunity allows, you'd have seen some of the third-party call also come through as we take advantage of that opportunity in the market. In the longer term, we do have projects that you would have heard us refer to in the past, opportunities on our four-seam opportunities in Ania and Cebulo. So we do have opportunity to continue to build on our Deliver it to the market.

Great, thank you. Dion, a question from Yandre Petersen from Tombow Wealth. What do you expect in terms of working capital in the second half of the year?

Yes, Yandre, obviously there are two elements that are very difficult to predict, which is the price and the FX. and those two have a direct impact on accounts receivable. So if I put accounts receivable to one side, which is very difficult to anticipate or predict, we're expecting our inventory to rebuild slightly in the second half. So you might recall that at the end of last year, we had about 1.6 million tonnes or over 1.6 million tonnes. At the end of June, we have about 1.5. Thank you very much. and in accounts payable we expect a fairly consistent number so no real surprises on working capital but then obviously as I said it very much depends on December prices and FX and sales which difficult to predict at this point as to where accounts receivable will land at the end of December. Thanks Dion.

Any more questions online?

Thank you, Sarah. I've got no questions on the telephone lines.

Thank you. With that, we'll wrap up the Q&A. If we were not able to get to your question today, please do get in touch with myself or Shreshni via email. Thank you, everyone, for making the time to join our results presentation today, and we wish you a pleasant afternoon further.