Good day, everyone, and welcome to Thungela's 2024 Annual 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 explain how the day will run. First, allow me to draw your attention to a couple of disclaimers ahead of today's presentation. While you take a moment to read through the messages from our lawyers, we will start with our CEO, July Ndlovu, who will share Thungela's 2024 highlights and update on the execution of our strategic priorities and the market. Our CFO, Deon Smith, will then talk through the financial and operational performance for 2024, and after this, July will provide the 2025 guidance and conclude the presentation. This will be followed by a Q&A session, and we will then close the call at approximately 1:30 P.M.
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 one 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, which will then be read out during the Q&A session.
Before I hand over to July, I want to draw your attention to that, unless otherwise indicated in the presentation, operational and financial figures related to the Ensham Business in Australia in 2023 are based on Thungela's interest in Ensham for the four-month period between the acquisition date of August 31st, 2023 to December 31st, 2023. Now, please allow me to hand over to our CEO, July Ndlovu.
Thank you, Hugo, and good day to everyone on the call. Today, I'm pleased to share the 2024 Annual Results with you. These results demonstrate our continued operational excellence and disciplined execution of our strategy. Safety and remains our first value. We are unconditional about protecting the lives of our people. We are proud to report that we have been operating a fatality-free business for more than two years. We've also improved our Total Recordable Case Frequency rate to 1.93 for the group. Operationally, we demonstrated exceptional agility in responding to the improved rail performance in South Africa in the second half of the year. For the year, the group recorded 17.7 million tons of export saleable production, which exceeded our market guidance in South Africa and at Ensham.
While the impact of softer price environment across the Richards Bay and Newcastle benchmark coal prices continues to impact our financial results, the group recorded a net profit of ZAR 3.5 billion, with Ensham contributing ZAR 676 million, or 19%. Turning to capital expenditure, in 2024, we spent a total of ZAR 3.4 billion, with ZAR 1.7 billion spent on sustaining capital and another ZAR 1.7 billion spent on our two key life extension projects, Elders and Zibulo North Shaft. Both of these projects remain on schedule and within budget. We continue to reserve the cash required to complete these projects. The board considers it appropriate to maintain a cash buffer of ZAR 5.4 billion.
We are returning all excess cash above the buffer to shareholders and have declared a final ordinary cash dividend of ZAR 11 per share, or ZAR 1.5 billion in total, as well as a share buyback of up to ZAR 300 million. Let me spend a moment on an update on the execution of our strategy. We're making good progress across these five pillars. We'll discuss safety on the next slide, but suffice it to say that operating a fatality-free business is not just about the statistics. It is about truly caring about our people and their families and making sure that our people go home to their loved ones safely every day. In 2018, Thungela and our Black Economic Empowerment Partner established the Rietvlei Coal Mine with a view to supplying coal into the South African domestic market while ensuring direct benefit for the local communities.
With the mine now fully operational and a domestic contract in place, Thungela has sold its 34% interest in the Rietvlei Coal Mine to our partner. The transaction demonstrates economic inclusion. Our partners, together with the local communities, participate in the full economic benefits of the operation. Productivity improvements and cost efficiencies are key to ensuring that we remain competitive in the current price environment. This was demonstrated in the second half of the year when our South African operations were able to step up production in line with the improved rail performance. The increased productivity drove production growth for the first time in three years and enabled us to exceed our guidance for export sellable production. At Ensham, we remain pleased with the significant production improvements since we took operational control of the mine in September 2023.
You'll recall that the annualized run rate at the time was around 2.7 million tons, while in 2024, the mine achieved 4.1 million tons of export sellable production. Our two life extension projects, which improved the cost competitiveness of the business, remain on schedule and within budget. Construction is complete at Elders, which delivered its first coal in March 2024, and we are now progressing with the ramp-up activities. We have previously told you about our gas reserves in Limpopo. Recently, we obtained the necessary licenses to develop a demonstration plant at the Lephalale Coal Bed Methane Project. The aim of this plant is to prove the feasibility of the gas project. We plan to spend ZAR 400 million on the demonstration plant and related infrastructure in 2025.
Moving on to the creation of future diversification options, we recently announced the acquisition of the remaining 15% in the Ensham mine from LXI for AUD 48 million. We also announced that we have entered into an agreement with Audley and Mayfair to acquire their 27.5% interest in Sungela Holdings for an upfront consideration of $1.7 million and deferred contingent consideration. Let me be clear. They put in their own money upfront, and what they are getting is slightly less than half of what they put in upfront. Upon completion of this transaction, the group will own 100% of the Ensham business. During 2024, we established the Thungela Marketing International business in Dubai. The team started marketing our Australian coal from late 2023 and coal from South Africa from July 2024. This was an important step as we seek to derive maximum value for our coal.
Our capital allocation framework remains the cornerstone of our strategy. When it comes to returns to shareholders, our approach acknowledges the diverse preferences of our shareholder base. This is why we commit to provide returns to our shareholders through a combination of dividends and share buybacks. Since listing, we've returned ZAR 21 billion to shareholders. Just as a reminder, our day-one market cap was ZAR 3 billion. The successful execution of our strategic priorities is testament to Thungela's ambition to build a sustainable, long-life, competitive business across multiple geographies, paving the way for the group to capitalize on the robust long-term fundamentals supporting coal globally. Let's turn to safety. Our Total Recordable Case Frequency Rate has improved to 1.93 compared to 2.8 in 2023.
In South Africa, we recorded a historic low rate of 1.07, while in Australia, we've made significant improvement, with Ensham recording a rate of 13.21, down from 22.63 in 2023. This improvement reflects our strong focus on improving workplace conditions, leadership visibility, and critical controls. We are on a safety journey and will continue to share best practices across the regions to ensure that our people are safe at the workplace. Considering rail performance, which normally is quite topical, it is encouraging to note the improvement in the performance of Transnet Freight Rail post the July 2024 annual maintenance shutdown. Transnet Freight Rail railed 51.9 million tons for the industry in 2024, an increase of 8.4% from 2023.
What was particularly pleasing was the improved run rate of 56.2 million tons in the second half of the year, up from 47.3 million tons in the first half of the year, easily the best semester since 2021. This improved rail performance reflects the collaborative efforts between Transnet Freight Rail, the coal industry, and the National Logistics Committee. We remain dedicated to supporting Transnet in addressing the critical challenges in order for the coal line to return to historical performance levels. We are also pleased to report that we have signed an extension to the long-term rail agreement between Thungela and Transnet until March 2028. This provides Transnet with the opportunity to implement the initiatives to improve the performance of the rail line until the contract is up for renewal.
2024 saw both the API 4 and Newcastle benchmark prices drop from 2023 on the back of high gas and coal inventories as countries built up stocks ahead of the winter season. In addition, the northern hemisphere winter was milder than expected, and coupled with the impact of low economic activity in the regions in which we sell our coal, this put pressure on prices. The energy markets also remain impacted by the geopolitical tensions between Russia and Ukraine, as well as in the Middle East. The conflicts in these regions have led to increased concerns around gas supply, which in turn provided support for coal prices in the second half of the year. The discount to API 4 has improved to 13.1% compared to 14.3% in 2023.
The discount in the second half of the year narrowed to 11.1%, mainly as a result of the 1% saving in commissions, as well as improved realized prices achieved through blend uplift and brand premiums realized by the newly established Thungela Marketing International team. In Australia, the discount of 8% to the benchmark price is a result of lower demand in the Asian markets due to low economic activity and buyers looking at other supply regions to purchase coal. We are therefore seeing an increase in buying on the spot as buyers look for the best price. As a reminder, the premium achieved in 2023 was attributed to a higher proportion of fixed price contracts at the time of the acquisition of Ensham. [crosstalk] Prices have continued to weaken since the start of the year.
China has high inventories as a result of aggressive buying to avoid a repeat of the energy shortages that plagued the economy in 2021 and 2022, with coal stocks up 21% year on year. The milder winter season and low economic activity in Asia has impacted the drawdown of the stocks, and as a result, there has been limited buying in the first quarter. We expect to see price support in the coming months as these stocks are inevitably run down and buying starts up again. Having said all that, we remain confident in the long-term fundamentals of the role of coal in the energy mix in support of the global energy demand. The International Energy Agency confirmed in its World Energy Outlook 2024 report published in October 2024 that the outlook for coal demand remains firm.
There's strong energy demand from emerging markets, with countries such as China and India continuing to invest in coal-fired power stations to meet their energy requirements. In addition, a number of Southeast Asian countries with expansive growth ambitions will require reliable and affordable energy sources to support their development. The energy required to power the growing AI industry is a topic of increasing focus due to the rapid expansion of AI technologies and their computational demands. Supply, on the other hand, as you see on the graph, is expected to continue to remain under pressure and reduce over time as investment in new coal mines continues to dry up. As a consequence, we've recently seen an increase in the consolidation of existing mines rather than investment in new mines.
Stringent regulatory requirements and widespread social and political opposition to the development of new coal mines provides companies like Thungela with well-established, high-quality coal operations and access to existing reserves, with a significant structural advantage. Let me now hand over to Deon for the financial results.
Thank you, July, and to those online for making the time to dial into our results presentation for the year-end of 31 December 2024. Let me start by saying that we are indeed pleased to report strong Full-Year performance. As we set out at the interims in August last year, the first half of 2024 presented various challenges across rail, our own operations, and indeed softer prices. Fortunately, the recovery in rail operational productivity and the prices in the second half of 2024 enabled a much-improved financial performance we are reporting on today.
As July said earlier, the group generated ZAR 6.3 billion in adjusted EBITDA for the Full Year and a net profit of ZAR 3.5 billion. Approximately ZAR 1.2 billion was generated in the first half and a balance of ZAR 2.3 billion in the second half, demonstrating a tale of two halves, which characterized our performance in 2024. Breaking down the net profit of ZAR 3.5 billion by geography, ZAR 676 million was generated in Australia and a balance of ZAR 2.9 billion from South Africa, which obviously includes the margin earned by our TMI, so the marketing business, as well as our treasury activities. Our earnings per share of ZAR 26.76 benefited from the effects of lower weighted average number of shares in issue as compared to the prior year, showing early results of our share buybacks.
We generated adjusted operating free cash flow of ZAR 3.6 billion for the full year, which resulted in a net cash position of ZAR 8.7 billion at year-end. I will talk through the detail of the dividend and share buyback a little later in the presentation, but important to highlight that when we consider the total dividend of ZAR 13 per share for the full year, so that's ZAR 2 at interims and ZAR 11 announced today, together with an interim buyback of ZAR 160 million and the further buyback of up to ZAR 300 million, we are returning a total of ZAR 2.3 billion. We returned 10% of adjusted operational flow to shares. We've had a very strong year operationally. Our South African operation delivered 13.6 million ton of export saleable production, an increase of almost 1.4 million ton compared to last year.
This performance was driven mainly by productivity improvements at Zibulo and Khwezela. It's important to bear in mind that this was achieved without reintroducing sections previously removed in response to the poor rail performance in 2023. In Australia, Ensham also exceeded expectations, producing 4.1 million tons on a 100% basis as the team was able to navigate fault zones more effectively than expected. The production performance across both geographies saw us beat the upper end of our production guidance. The strong production performance also drove a beat on unit cost performance, again across both South Africa and Australia. In terms of capital, we recorded a spend of ZAR 3.4 billion in 2024, with both sustaining and expansionary capex in line with guidance. Export saleable production in South Africa increased by 11% from 12.2 million tons in 2023 to 13.6 million tons in 2024.
This was a tale of two halves, mainly driven by the marked improvement in rail performance from Transnet Freight Rail, which enabled the realization of the productivity improvements across the mines during the second half of 2024. Export sales also improved in the second half of the year, but full stockpiles at certain operations required that we continue to sell lower quality coal into the domestic market, so coal Free on Truck sales on the slide. These sales, which do not fetch export parity prices, therefore hold further revenue enhancement opportunities should rail performance improve even further. The Ensham mine recorded a marked improvement of 52% in the production run rate from acquisition to full year 2024, following on the introduction of focused projects at that mine. As Hugo mentioned earlier, for the slides which follow, the 2023 comparatives include only four months of Ensham compared to 12 months in the 2024 figures.
This structural difference makes year-on-year analysis for Ensham a bit challenging, and accordingly, you'll see that we display Ensham separately and that the rest of the slide is focused on movements across the South African business. Let's move into some of the financial results, starting with revenue, where you'll see it's up by around ZAR 5 billion year-on-year, the biggest impact being the structural inclusion of Ensham for the full 12 months. The strong export sales performance in South Africa, as we shipped almost 700,000 tons more than in 2023, also had a positive impact on revenue. Of course, the most significant impact during the year was the lower price environment across both API 4 and Newcastle. Realized prices were down 12% year-on-year in South Africa and 20% in Australia.
Looking at the other items on the waterfall, we had less domestic revenue in South Africa, largely due to the fact that Rietvlei volumes were significantly lower given the mine was on care and maintenance until prior to or shortly before we sold it. We also recorded incremental revenue from the third-party traded volumes. Moving to cost, we can again see the impact of including Ensham cost for the full 12-month period. A reminder that the balance of the bars in this graph pertain to South Africa only. Inflation continues to be high. The increase in commodity prices or purchases you'll see relates to the cost of third-party volumes. The incremental volumes produced in 2024 also came with a proportional increase in variable costs compared to 2023.
Inventory movement reflects the impact of the movement in stockpiles, as well as a lower production cost per ton, resulting in the moderation of the inventory balance at year-end. As previously flagged, stock deterioration remains a risk where production is not sold for a prolonged period of time due to rail constraints. The other smaller movements include an increase in the environmental provision, a small movement in FX revaluations, and a smaller year-on-year contribution to the trusts in 2024 compared to 2023, in line with a lower declared dividends as compared to the 2022 dividends that resulted in that high cost in 2023. Royalties are lower in line with lower revenue driven again by the softer price environment. As I mentioned earlier, the year-on-year operating cost increase at Ensham is mainly due to the number of operating months included in our accounts.
The operating cost incurred by Ensham in the year amounted to ZAR 8.2 billion. The on-mine cash costs were ZAR 4.8 billion, of which ZAR 2.7 billion is spent on employee-related costs. Royalties for the year on a per-ton basis amounted to approximately AUD 20 per ton. Total logistics costs reduced from approximately AUD 28 per ton in the first half of the year to the full year cost of around AUD 22 per ton, following the successful price negotiations with the rail operator. Looking at costs at Ensham, we are making good progress on identifying a number of contracts where we have been able to negotiate better rates. These benefits have started filtering through in the numbers and contributed to the beat relative to guidance. In South Africa, cost per ton, excluding royalties, increased by 4.2%.
As mentioned on a previous slide, inflation in SA remained pronounced with a 6.5% increase on cash costs, but the impact of inflation and other smaller increases was offset to a significant degree by the higher production volumes. This resulted in a total FOB cost per ton, excluding royalties, of ZAR 1,130 per ton. Adjusted EBITDA is a function of revenue and operating cost movements, excluding impacts of depreciation tax, obviously. We covered on the previous two slides. When we look at the EBITDA margin of 18% this year compared to 28% in 2023, it is clear that weaker prices result in significant margin compression year-on-year. The slide on the screen seeks to explain the movement in net cash since December 2023. You recall that at December 31st, 2023, the net cash balance was about ZAR 10.2 billion.
For clarity, this balance excludes cash held on behalf of employee and community trusts, as well as balance sheet investments such as the Green Fund and self-insurance structures on the balance sheet. We've paid ZAR 1.6 billion to investors in dividends, which comprises the final dividend of 2023 of ZAR 10 per share and the 2024 interim dividend of ZAR 2 per share. Furthermore, we spent ZAR 601 million on the share buybacks executed during the year. We generated ZAR 5.3 billion of net cash from operating activities. We continue to invest in the business and have spent approximately ZAR 1.7 billion on sustaining capex and a further ZAR 1.7 billion on the Elders and Zibulo North Shaft life extension projects during the 2024 year.
In addition, we made a significant contribution of ZAR 970 million as cash collateral against the environmental guarantees in Australia, with a further ZAR 204 million contributed to the Green Fund in South Africa, as required by the providers of our environmental guarantees. Notwithstanding these cash movements, the net cash balance at 31 December 2024 was a healthy ZAR 8.7 billion. Our capital allocation framework remains the cornerstone of our strategy and prioritizes returns to our shareholders. Our approach is guided by the funding needs of our projects, and accordingly, as July mentioned earlier, the board considers appropriate to continue to reserve ZAR 100 million for the completion of Elders, ZAR 800 million for the completion of the Zibulo North Shaft project, and then we also reserve ZAR 400 million for the gas project.
We've declared a final dividend of ZAR 1.5 billion and a share buyback of up to ZAR 300 million. The trusts will also receive ZAR 172 million in relation to the performance in the second half of 2024. This results in a net cash buffer of ZAR 5.4 billion. In addition, we also have access to ZAR 3.2 billion in undrawn facilities. With that, let me now hand back to July to talk us through the 2025 guidance. Thanks for that, Deon. Let's pause and look ahead to 2025. In South Africa, we plan to produce between 12.8-13.6 million tons of export saleable production. This guidance is informed by continued productivity improvements and improved Transnet rail performance.
The low end of the guidance of 12.8 will require a rail rate of approximately 54 million tons, while the upper end of 13.6 million tons requires approximately 58 million tons. FOB cost per export saleable ton is expected to be between ZAR 1,220 per ton and ZAR 1,300 per ton, including royalties. Sustaining capital is expected to be between ZAR 1.4 billion and ZAR 1.7 billion, with expansionary capex expected to be between ZAR 1.1 billion and ZAR 1.2 billion, as the remaining capital at Elders is spent and will progress with the Zibulo North Shaft project. Expansionary capex also includes the ZAR 400 million for the gas project that I mentioned earlier. Ensham is guided at export saleable production of between 3.7 million tons and 4.1 million tons, while cost per export ton is expected between ZAR 1,650 per ton and ZAR 1,780 per ton, and this includes royalties.
Sustaining CapEx at Ensham is expected to be between ZAR 700 million and ZAR 950 million, and includes one-off capital of approximately ZAR 250 million to secure outstanding licenses. As I conclude, our purpose remains our lodge that for every decision and every action we take. Our commitment to safety is unconditional, and eliminating fatalities and injuries from our business is front and center of everything we do. We remain focused on controlling the controllables, navigating through the current market environment, ensuring that we remain productive and cost-efficient as we build a sustainable long-life business which delivers value for all our stakeholders. Lastly, I would like to send a word of appreciation and thank you to the thousands of our employees for their passion and dedication and commitment to delivering the kind of results I'm reporting today.
More importantly, to you, our investors, for trusting us to be stewards of your capital as we continue to chart the path forward. Thank you very much, and let me hand back to Hugo for Q&A.
Thank you very much, July. We will now move to Q&A. 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 line for our first question?
The first question we have comes from Ephrem Ravi of Citigroup. Please go ahead.
Thank you. Two questions from my side. Firstly, the guidance you said basically assumes the top end assumes about 54 million tons on TFR performance. Did I hear that number correct? If I did, given that your second-half rate has been higher than that on TFR, does this kind of imply some degree of conservatism on coal mines kind of not being profitable at current sort of low coal prices? That's the first question. Secondly, on the TFR performance itself, can you kind of give us some color onto any changes you have made to the contract extension till 2028 in terms of increased performance metrics or kind of incentives for on-time delivery, things like that? Thank you.
Thanks so much. Let me just make sure you heard the guidance correctly. The guidance we've given of 12.8-13.6 corresponds to the following numbers. On the lower end of the guidance, it equates to 54 million tons, right? That's more or less the number. If you take last year's performance of 51.9, 54 is an improvement on that. I accept that that doesn't equate to what we saw in H2. However, the guidance for the upper end, the 13.6, equates to 58 million tons, which is higher than what they achieved in the second half of the year. What we actually say is we expect Transnet to continue to improve. There's no real conservatism in the guidance that we've given.
We've tried to make that as realistic as possible. On your second question on the long-term agreement, the long-term agreement has been extended on the same terms and conditions as the current agreement, save one number, which is, if you remember, the old agreement was on 71 million tons, per annum. That number has been reduced, as we reported in 2023, was reduced to 60 million tons, 63 million tons. That's the only change. The change is between 71 and 63 is the contracted number for the industry. Otherwise, the terms are the same as the current agreement.
Thank you, so. The next question we have comes from Brian Morgan of RMB Morgan Stanley. Please go ahead.
Hi guys. Thanks very much for the Q&A time. A couple of questions from our side, but can we get started on Ensham? It looks like it'll be losing quite a lot of money at spot. I think one of the mitigating factors might be the contract prices, at least in the short term. Could you just give us a bit of a color on what percentage is contracted at what pricing?
Hi there, Brian. Yes, spot has been fairly volatile. Safe to say that the forward curve is in contango, so we should see a slight improvement and uptick on new costs or prices. At the moment, the book is a combination of, and I'm looking at about 20-odd % on fixed prices, with the rest being floating with a combination of fixed dollar discounts and percentage to new discounts. On balance, we're looking at a fairly similar discount to what we achieved last year, slightly wider in the short term, as you can imagine. Some of our prices that we set at a fixed dollar discount to the benchmark would be a bit wider than a fixed percentage discount in the short term.
Okay. If we're looking at 8% discount last year, then it'll be similar at spot?
It might be at spot, it might be a bit wider because some of the contracts that we have are fixed dollar discounts that would have been struck in Q3, Q4. Mathematically, they would be wider at spot at the moment. Obviously, if the contango, the forward curve realizes, they would then improve. As I said, some of the, let's say, the 20-odd % in the book, that's fixed prices drive then a more narrow. It depends on exactly where NEWC runs to, what the discount would do. Around the levels that we had last year, slightly wider is probably a realistic outcome for Q1 this year.
Okay, cool. Thanks, Deon. Can you just run us through the tolerance for cash burn at Ensham? At what point do you pull the plug?
Yes. I don't think we're in that type of discussion at the minute around pulling plugs or anything of that nature. We've seen, as you can imagine, some supply discipline already creep in. Ensham's sitting in a Q3-type position in Australia, so there's a lot of pain on the cost curve above us. We'll see what the, if the forward curve looks in contango, whether that plays out or not, which should arrest any cash losses there in the short to medium term.
Okay, cool.
I mean, there's no tolerance for cash burn. Our absolute focus is to drive productivity, reduce our costs, and what you should expect to see is continued improvement in both of those levers on a go-forward basis to ensure that the asset continues to be cash generative.
Okay, cool. Thanks, July. Can I move on to South Africa? Just in terms of the theme of the reporting season's been the upcoming RFI coming out of the DOT for rail concessions. Just trying to get your angle on that and whether you think this is a meaningful thing and whether you'll be participating.
Look, we continue to monitor the introduction of third parties on the rail infrastructure. Clearly, we would need to understand the cost structure associated with those third parties and how that compares to what I'd call our baseline volume with the current service provider. Already, as you can imagine, we have signed a three-year contract, which gives us some certainty. It would have to be one that we are clear-eyed about in terms of cost competitiveness and providing security of capacity. At this stage, we haven't seen anything that has got us excited just yet.
Okay, thanks, July. If I may just squeeze one last one in. Sasol said that they're no longer going to be exporting coal. Presume that allocation will be available for lease. Is that something you'll be looking at?
Look, I prefer not to comment on what other producers do or don't do. Safe to say that if there is capacity on the market that we can secure either for our own volume or for traded volumes, and we can do that at a marginal creative rate, we would seriously consider it.
That's all from my side. Thank you.
Thank you. The next question we have comes from Tim Clark of SBG Securities. Please go ahead.
Thank you very much. My question just relates to your comment about expected faulted areas at Ensham for the year ahead and then also the sort of transition period at Zibulo and Elders. I suppose what I'm asking is, for 2026 then, would you expect a bit of an improvement for both of those as the projects ramp up and as you move through those fault areas, or is this just mining as it is in the ore bodies at this stage?
Tim, thanks for that question. It's a bit of both of what you just said. Firstly, I mean, faults and fault development is a feature of mining, as you know. At Ensham, however, one of the changes we've made to that mine is to introduce what we call a fault development crew, which is fairly standard practice in underground mining, if you will. That should allow us to go through the faults whilst keeping the productive sections in good ground and therefore maintaining our productivity. However, this year particularly, we have more faults than we ordinarily would have wanted to plan.
That is purely a consequence of how the mine was planned. You'd recall that after we took over, we got the approval for zone two and three. Without those, we actually got the mine constrained for pit room. We have to unconstrain the mine, particularly this year. In South Africa, you raise the issue of the transition over the next two years, two and a half years. Elders is in ramp-up, and therefore you expect that as we ramp down GH and we redeploy those sections to Elders, there is kind of a hiatus before that mine gets to steady state in 2026. Yes, there will be a slight hiatus, but my teams are doing exceptional work to minimize the impact of that hiatus.
Similarly, the Zibulo North Shaft, as it ramps up, in fact, Zibulo North Shaft is unlikely to have a similar hiatus because what we're doing, Tim, is we're sinking the new shaft, developing towards the old shaft, at the same time mining from the old shaft towards the new shaft. If we can get our plans correctly, we shouldn't see a productive impact other than in the normal cost of mining.
Thanks, July. That's very helpful. Just my second question. You've obviously elevated the importance of the Lephalale Gas Project this morning. I wonder if you could give us some feedback or sense of timeframes around this. How long will the pilot plant take for testing? Does it, you know, the feasibility? What kind of timeframe should we be thinking on this project?
I was hoping not to elevate it more than it needs to be elevated, Tim. I think realistically, as you can imagine, I mean, you should expect us to run this for the next two and a half years, collect all the data, develop the business case, and at that point in time, we'll then decide what is the most optimal way to extract this valuable resource and at what economics. I would say, you know, don't look for an answer. You know, it's easy for me to say what I'm just about to say, given that I'll be retired then. Don't look for an answer before two years are up.
Thank you very much, July.
Thank you. The next question we have comes from Thobela Bixa of Nedbank. Please go ahead.
Great rest. July, just on your last comment, actually, I was hoping to elevate that coal methane project there. You previously operated about five wells in that project. Could you just tell us as to what have been the learnings so far been? I guess, you know, what are you over and above to build in the plant? What are you hoping to achieve with the $400 million investment into the project? Thank you. That's the first set of questions.
Without converting this into a detailed technical discussion, yes, we probably over a decade, Leslie, if I'm right, we have been extracting from those five wells here, right? We actually understand the permeability, we understand the geology, we understand the quality of the gas. We also understand the geotechnical characteristics of hydraulic stimulation or fracking, if you will. It's one thing to do that on five wells, and it's quite another to do it on the kind of scale that we're trying to do.
We still want to gather that kind of technical detail, that technical data at a slightly higher scale, that you can scale it up to a significant production scale if you need to. That's the first thing. The second thing that, as we have said, was always where is the market and how do we get to the market? What is that route to the market and in what form? One of the things that we want to do is to liquefy this gas. Granted, we would have preferred to market this to the commercial market, but the nature of our license is such that this is a bulk sample. For now, we're going to utilize that to generate our own power using a gas generator. We have done the numbers. It more than washes itself.
That is really to prove the technical and cost feasibility of liquefying gas in Lephalale and bringing it into what is probably the key market, which is around Hotazel. That will give us all the data we require to put together a bankable feasibility study for a full exploitation of that endowment.
Thank you for that answer, July. Deon, could you just expand on the investments that you're currently making into the various funds, whether in South Africa or Australia? Sort of what are the targets for these funds and when do you expect to meet those targets, if any?
Good morning, Thobela. In the last year, you would have seen in South Africa, we made a contribution of about ZAR 204 million. That is roughly in the order of 5-odd % of the environmental guarantees that we have in issue in South Africa. The arrangement with those guarantee providers is that we'll continue topping up that green fund, or so-called green fund, by that 5% per year. Now, clearly, as we spend actual cash flows, reducing that footprint in the environmental liability footprint in South Africa, that number is likely to come down in time. For the foreseeable future, that's roughly the order of contribution annually in South Africa.
In Australia, we're in a slightly more unique position. There, we've had to put in place a number of guarantees, and therefore, we've increased that contribution to the ZAR 970 million you saw last year. This 2025 number, we're expecting to be about half of that. Our discussions with the Treasury and the Queensland Treasury team will continue this year because clearly, one of our aims has always been to get acceptance for Ensham into that Queensland financial provisioning scheme. Once we've done that, it arguably takes the need for a regulatory type cash collateral away. It just potentially, therefore, reduces the requirement for any further contributions in Australia. So 970 last year, probably half of that in 2025. If we're then in the pool, that disappears or those contributions disappear.
Thanks for that. My last question is just on the markets. Looking at the spot prices or sort of your assumed prices for Australia as well as South Africa, your assumed prices are sort of ahead of where spot is. Could you just give us some sort of color as to when you expect the prices to recover and what you think is likely to drive the price recovery in 2025?
Yeah. Obviously, we don't have a perfect crystal ball to predict the short-term volatility that we've seen. Needless to say, Thobela, that there's been a lot of geopolitical news flow baked into the price. The U.S. government's narrative that they will solve the conflict between Ukraine and Russia has clearly put some level of pressure, a downward pressure on the price. Yet, if we look at our analysis, a lot of the Russian coal continues to be loss-making at these prices. There's probably a lot of noise in the price. I'm just using that as one example. There are a number of other examples around Japan's recent plans to increase nuclear over the next 20-30 years as a proportion, whatever, from 8% to 16% or even 20% of their energy mix.
Those are all noisy factors rather than necessarily fundamental supply demand. When we look at the forward curve that remains in contango, whereas last year and the year before, when we spoke, the prices were always in backwardation, yes, and that backwardation seems to have played out. Currently, it's in contango. If we see a recovery in prices, it'll be gradually during this year if the forward curve is anything to go by.
Yeah. Okay. Thank you so much, Deon, for that. And July, all the best with your future endeavors. Thank you.
Thank you. At this stage, there are no further questions on the conference call.
Thank you very much. I'll read some questions, July, these two for you before we move over to Deon. Nkateko from Investec. What is your experience with logistics and rail operators in Australia that will be strongly considered as you evaluate your options on private participation in South Africa?
I don't really think that it's got any relevance other than to say our experience has been pretty good, and that's why you don't hear us comment on logistics. If you know anything, the contract that we've got is very good. We've been able to renegotiate the rates lower. It performs. We are quite pleased with that. Are those lessons necessarily translatable to South Africa? To a large extent, that is probably a question best addressed to the presidents through the NLCC and the Department of Transport.
Thank you. The next question is, you achieved a 13.6 million ton export saleable production in South Africa in 2024 at a lower TFR run rate than what you are expecting in 2025. Please give us a bit more color.
I think it's important to remind all of you our investors what we said all along. We said we'll drive our productivity improvements across our mines. If we do end up producing significantly more than we're able to rail, we'll sell what we call free-on-track sales. It's nothing other than we sell it at the mine gate. You'll see through our numbers that we sold 1.1 million tons at the mine gate. If the rail performance were to improve, that 1.1 million tons would be on rail at a better net back than we'd get by selling at the mine gate. Why did we sell at mine gate? It's still a very good cash contribution margin. It makes sense to do it that way, but we would make more money if we put it on rail.
Thanks. Deon, a couple of questions from Sashi at Citi. What are the levers you can pull to control costs, especially at the Australian operations if thermal coal prices fall further? What is the break-even price for Ensham?
Yeah. If we take that one first, clearly, we've seen the softening of the prices over the last number of months, and the team in Australia has developed a cash cost optimization plan that cuts across OpEx as well as capital. Capital is slightly elevated in 2025. As you might have seen, we came in significantly under guidance in 2024. What we didn't spend in 2024, some of that is quite critical to spend in 2025.
Whilst we will look at some capital austerity, our usual cost optimization programs, which is not one big lever, it is a number of levers across various contracts and areas of spend, will continue to be a focus area in Australia over the next number of months. At current Australian dollar-US dollar spot, the all-in sustaining cost for Ensham is around $103 a ton. With Australian currency reverting back to the last couple of years in exchange rate terms, that probably increases that $103 to about $108 a ton. That type of range between $103 and $108, given the FX, is what their current NEWC level break-even all-in sustaining OpEx-CapEx position is. Clearly, there are a couple of opportunities to reduce that slightly, and we will continue to work it throughout this year.
Thanks, Deon. Another question from Sashi is, sustaining CapEx guidance for South Africa in 2025 is circa 50% higher versus 2024. Just wanted to understand the reasons behind this. Is this a level of sustaining CapEx, the new normal going forward?
Absolutely not the new normal, Sashi. What we've seen is that, again, like in Australia, we came in at the low end of our capital guidance last year. There are a couple of items that are quite critical and one-off that we need to get done. A piece of work around the MRD at Mafube, some mineral residue deposit facilities at Mafube, Box Cut C at Khwezela, etc. A couple of one-off projects that are critical and have moved into 2025. We expect that SIB to moderate again after those projects have been executed in SIB territory.
Thanks, Deon. July, a question for you is just the purpose around the Dubai office.
We opened our Thungela Marketing International, which is we needed to market our own coal post the agreement we had with our former parent. The only next question was, where do we locate that office? We chose to locate it in a region which is supportive of fossil fuels, as you can imagine, and that is the Middle East. Secondly, it is a region that is close to our markets, close to our customers. That is the only reason why we located it in Dubai.
Very much. Operator, any other questions online?
At this stage, there are no questions.
I think we are ready to wrap up then. Thank you, everyone. Unfortunately, I am going to have to wrap up the Q&A session here. If you are not able to get to your question today, if we were not able to get to your question today, please do get in touch with myself or Shreshini via email. Our email addresses are at the bottom of the SENS and RNS announcements released earlier today. With that, please allow me to hand back to July to close out today.
Thanks very much, Hugo. Let me thank all of you for attending our call. What we have shared with you is a very strong set of results. I am sure you now accept that this is probably our reputation. We deliver on our promises to you, our shareholders. We're absolutely obsessed on controlling the controllables, and even in this softer environment, we will do this by making sure that we operate safely and we drive productivity and reduce our costs so that we can generate value for you, our shareholders. We'll do that at the same time whilst building a resilient, long-life business. Thank you so much.