Thungela Resources Ltd., the spinoff holding Anglo American Plc’s South African coal mines, was valued at about R3.09 billion ($229 million) on its debut in Johannesburg, below the expectations of some analysts.
The coal miner could be worth $440 million to $950 million, according to Liberum Capital. SBG Securities said in a June 4 note that Thungela has a value of about 4.4 billion rand.
“It was always going to be tough because of the known sellers,” said Ben Davis, an analyst at Liberum. “It will take time to shake out that ratio. No one’s going to jump in with both feet on day one.”
Anglo Chief Executive Officer Mark Cutifani has previously acknowledged that the company probably missed the best opportunity to get the highest price for its coal assets. Instead, he said the focus was on handing over the mines in a responsible way.
The spinoff comes as coal surges, with a spike in demand coinciding with production problems at several major miners. That offers the potential for windfall profits for investors still prepared to invest in miners such as Thungela.
Thungela opened at 25 rand a share in Johannesburg, where the company has its primary listing, before dropping to 22.70 rand as of 12:15 p.m. local time. The stock opened at 150 pence in London, before declining 21%.
Short-seller Boatman Capital said Thungela is worthless because of the projected environmental clean-up costs when its mines are closed over the next decade. Responding to Boatman’s research report, Anglo said the provision on Thungela’s balance sheet is “over and above the regulatory guidance applicable to miners in South Africa.”
The spinoff of South Africa’s largest coal exporter to existing Anglo shareholders is the latest in a series of deals as international resource companies curb their exposure to the country’s coal business.
Anglo still owns a coal mine in Colombia and coking coal assets in Australia.