Thungela Resources Limited: briefing ahead of AGM on 24 May 2022

Thungela Resources Limited’s (Thungela’s) first suite of annual reports contains a multitude of misleading claims relating to climate science, energy security and poverty alleviation, the viability and affordability of so-called “clean coal” and carbon capture and storage, and the company’s impacts on people and the environment.

Thungela has no Paris-aligned emission reduction strategy and has not reported in alignment with the recommendations of the Task Force on Climate-Related Financial Disclosures.

Over the past few months, as Thungela’s share price has soared on the back of the global commodity boom, asset managers who claim to integrate environmental, social and governance (ESG) factors into their investment decision-making, and to be taking climate risk seriously, have bought up stakes in this company despite the severe ESG-related risks that it represents.

We hope that these shareholders will be responsible in challenging Thungela on the misleading and inaccurate claims it makes in its first set of reports, and in applying pressure on the company to take climate risk seriously, and to urgently embark on a process of developing a robust, science-based climate strategy.

This briefing aims to assist the many South Africans whose savings are invested in Thungela to understand the dangers posed by its cavalier approach to climate risk – both to their own investments, and to our national efforts to achieve a just transition to a low-carbon economy.

Thungela is a “pure play” thermal coal company, i.e., the only product it produces is thermal coal, or coal that is used to generate electricity. Most of Thungela’s coal is exported to overseas markets.

Coal is the most carbon-intensive fossil fuel, and the biggest contributor to global climate change. The Intergovernmental Panel on Climate Change (IPCC) finds that, in order to stand a chance of limiting global heating to 1.5⁰C:

  • Global coal emissions should have peaked in 2020;
  • Global coal use in electricity generation must fall by 80% below 2010 levels by 2030;
  • OECD nations should end coal use entirely by 2030; and
  • All coal-fired power stations must be shut by 2040 at the latest.

The fact that the price of coal is currently at record highs does not alter climate science.

Key take-aways:

  • Thungela has not reported in alignment with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), the global best practice standard for climate risk disclosures. It says that it will do so, “as far as possible”, “during 2022”.
  • Thungela has not set any emission-reduction targets since its demerger from Anglo American in June 2021, when a target was set to reduce carbon emissions by 15% by 2025, off a 2016 baseline. The company states that it has achieved this target, with its 2021 emissions 17.3% lower than the 2016 baseline.
  • However, these reductions are due to external factors, not to proactive steps taken by the company to reduce emissions. Reductions were “driven partly by energy-saving initiatives, but also by lower-than-expected production volumes … COVID-19 and the impact of (Transnet Freight Rail’s) underperformance.” In fact, Thungela plans to expand its operations.
  • Thungela plans to set intermediate emission reduction targets and develop a “pathway to net-zero by 2050”, during the course of 2022. It identifies its first goal as the finalisation of “intermediate carbon reduction targets” by 2023.
  • Even Thungela’s commitment to “developing a pathway to achieve net-zero emissions by 2050” is “subject to the requirements of the countries in which we operate and the markets that we serve”.
  • A pure-play thermal coal company which has not reported in alignment with the TCFD, which has no science-based climate strategy or emission reduction targets, and which expresses its intention to expand its operations, should be a serious red flag for investors.
  • Thungela’s operations, and the legacy environmental liabilities it has inherited from Anglo American, represent a significant risk to the company and to the environment and people in its areas of operation. This is evidenced by more than one serious toxic spill of acid mine water in the last 6 months from inadequately-rehabilitated mine shafts for which the company is responsible.

Just Share’s responses to a selection of the most egregious of Thungela’s claims are set out in the briefing.

IMAGE: 123RF / parilovv

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