Thungela Resources (LSE:TGA) Ltd, the spin-off created by Anglo American PLC (LSE:AAL)’s South African thermal coal assets, is likely to benefit from buoyant coal prices as funding for thermal coal projects dries up, said Liberum Capital.
Liberum initiated its coverage with a ‘buy’ recommendation and price target of 305p and said the company offers pure, undervalued coal exposure.
“The most unpopular commodity under our coverage, for our investor group, is thermal coal," said Liberum analysts. "Evolving investor mandates increasingly reject this source of carbon emissions.”
“On-going decarbonisation of the global economy has prompted a collapse in the funding of coal supply growth. While we embrace the principle that has delivered this outcome, the fact remains that coal will be a critical input for global power.”
“The problem here is that a third of the world’s power-generating capacity is coal-fired. It will take decades to switch power sources for these economies. Until the Age of Coal passes, expect product prices to remain buoyant, given how total supply is already shrinking on a lack of funding.”
In late morning trading, shares in Thungela were up 2.3% at 220.8p.