Coal ‘evangelist’ July Ndlovu bows out

It’s been a rollercoaster for Thungela since listing on the JSE in June 2021. Spun out from parent Anglo American, little was expected from the coal firm. So little that a hedge fund called Boatman Capital argued the company was worthless, would be overwhelmed by environmental liabilities and would attract little investor interest at all.

Then, in 2022, Russia invaded Ukraine and coal prices went crazy. Thungela became the hottest stock on the market for a heady 18 months, before coal prices sank back to their long-term average of about $100 a tonne.

None of this has deterred its CEO July Ndlovu, who retires next month, age 60. The Zimbabwean national initially planned to become a doctor; after one semester in medical school he realised medicine wasn’t for him and switched to metallurgical engineering. It was the start of a 35-year career in mining across coal, gold, chrome and platinum group metals, mostly with Anglo American. He spoke to Currency.

Are you quite pleased to be exiting stage left now, with coal prices where they are? 

What happened to us is a fantastic story; I like being an underdog and being underestimated. But am I relieved to be leaving? At a personal level I’m somewhat anxious to leave the work fun, and I think the story of coal is yet to be written. 

How so? There’s such anti-coal sentiment, no-one wants to finance new coal mines … 

But that’s the point, isn’t it? When conventional wisdom says this is the absolute truth and there’s no other alternative, spaces emerge where those who are willing to look can generate enormous value.

I think what everyone tends to do, particularly those of us in the Western world if I include us at the tip of Africa, we look at developments in the global northwest and say: that’s what is happening in the rest of the world. There’s nothing further from the truth. If you look at emerging markets, they continue to build power stations that use coal.

What I find fascinating when everyone says coal is finished is that we’ve been saying that for a decade, that “this year is peak coal”. It’s not yet peaked. With such a young generation fleet of plants being built in emerging markets, I don’t see the retirement of power stations as quickly as everyone says.

To your point that capital is becoming very difficult in a market with very little investment going into supply, if you hold high-quality assets in this industry, I think you’ll make a lot of money for shareholders. 

But the coal industry did itself no favours by being such dirty polluters. Shouldn’t it have done much to make sure it didn’t attract such a backlash? 

I think that’s fair criticism, save to say that the coal value chain has done so much more than: 1) is acknowledged; and 2) we are prepared to say ourselves. And part of it is that geopolitically we tend to consume news from the West. When did you last read the South China News? 

Not in a long time, if ever. 

So when we say the coal industry hasn’t done enough we must acknowledge the source of our narrative. In nations building new power stations, look at these high-energy-efficient and low-emissions technologies that they are putting up and compare them to power stations that were built 20 years ago; these stations are up to 20% more efficient. If you converted these old stations to the latest high-efficiency, low-emissions technologies you could reduce carbon emissions by the equivalent of what India produced in the past year. 

So why don’t we? 

Because I think the debate has shifted to a binary one: you’re either for coal or you’re not. In fact the debate this week between Donald Trump and Elon Musk was quite instructive. We all tend to say: renewables are much cheaper than coal. There’s nothing further from the truth: these technologies have become what they are because they have subsidies. And yet everyone will tell me that carbon capture and sequestration is another competitive technology: why don’t we subsidise it so we can reduce emissions in a meaningful way?  

So you must feel South Africa and Eskom have erred in deciding to ditch coal rather than improve it? 

When I say South Africa is taking the wrong path, people will say: well what would you expect, he’s a coal guy. And yet your statement is correct. Go back a few years with Eskom, when the board and leadership were trying to run a company they didn’t have: they were talking about renewables every day yet they didn’t have renewables in their own portfolio. They ignored their own power stations until the new leadership came in and said: these are the assets we’ve got, we’ve got to make them work.

Are we ever going to build another coal-fired power station? I don’t know. I’m not even sure that’s a necessary debate because South Africa is well endowed with a natural resource called the sun and if we can access capital cheaper to build solar power plants, let’s do so. But I don’t advocate us stopping our power stations prematurely just because someone else says so. 

What’s your view on coal prices? They’re at a quarter of their 2022 peak. Has the coal market just become normal again? How should investors view it? 

I’ll tell you what I was told many years ago by my then mentor: the only truth about commodities is that they’re cyclical. They’ll go up, and come down. And you know that when they’re down, they’ll go up again. Anyone who tries to predict commodity cycles, there’s a 90% chance they’ll get it wrong. And if they get it right, they’re lucky. 

Including the mining bosses whose share options rest on this pure chance? 

My share options don’t rest on that pure chance; they rest on something that I control. Which is: if I can build a resilient portfolio, make the right investment in the right part of the cost curve, then when prices turn my share options will make a lot of money for me.

So our role as a coal company is to build a competitive business and not worry too much about what prices do. Growth is holding up in a declining supply, so expect the supply-demand dynamic to tighten. That should be price supportive.  

Why retire now if you’re just at the start of Thungela’s journey? 

Though our mandatory age is 60, that’s not the reason. I’m retiring because I think we are at an inflection point. We de-merged with assets that had a short life; a do-nothing scenario would have had mines with a seven-year life. I spent the past four years and a bit setting this up to be a competitive, long-life business; we invested in the life extension of Mafube, we’re ramping up Elders and the Zibulo north shaft; we bought a very competitive asset with a long life in Australia – Ensham. We are actually now a long-life business in the right part of the cost curve.

This business now needs to decide what it’s going to do in the next 10 years, so it looked like the right time for someone else to come in and write the blank pages.  

Mines minister Gwede Mantashe bangs on about a lack of transformation in the industry, but it seems to me that’s not the case any more – especially if you consider the bench of Black leaders and managers who are now taking on CEO roles. Isn’t it time for a different mindset from the government? He appears to be stuck in a time warp?

You’ve got to differentiate between a political leader espousing aspirations that are encoded in our constitution, and a business leader talking to what the reality is.

I think you’ve painted the polarity in a very cogent way. The elephant in the room is the debate around these positively discriminatory laws like BEE or the Employment Equity Act, or even the MPRDA [Mineral and Petroleum Resources Development Act] itself. When is it time to ditch those laws? I think that time will come; when, I don’t know, but I think what is good about us as South Africans is that we are already beginning to have that debate.

The challenge is not Gwede Mantashe: the challenge is the people we elect as citizens to make new laws. And I think it’s beginning to happen: the reason we no longer have one dominant party is to demonstrate that the 1990 dispensation is no longer relevant today.  

Because clearly we need to pull ourself out of our no-growth funk, somehow? 

My answer to that is quite a simple one: it’s not like we don’t know what to do; we do. We lack the will to do it. We all tend to forget that to ask a politician who you say is stuck in a time warp – they come from a particular dispensation formed by a certain set of circumstances. People say to me: we need to transform our labour laws and I say you forget that we come from the 1989 dispensation when unions became enormously strong and therefore became the vehicle through which we forced a change in the country.

If you look at a lot of the leaders, including the one which you’ve mentioned, you’re asking them to ditch what is a fundamental belief for them. It doesn’t change the aspirations that we started off with, which is that South Africa belongs to all who live in it. But what are those policies and strategies as a nation that we should be prioritising to create new means of livelihoods: it’s not the 1989 dispensation.