Good day, ladies and gentlemen, and welcome to the Thungela CFO Pre-Close Statement for December 2025. All attendees will be in listen-only mode. There will be an opportunity to ask questions impromptu. If you should need assistance during the call, please signal an operator by keying in star and then 0. Please note that this event is being recorded. I will now hand over to your host, Hugo Nunes, Head of Investor Relations. Please go ahead.
Thank you. Good afternoon to all, and welcome to today's investor call following the release of the CFO Pre-close statement earlier today. I'm Hugo Nunes, Thungela's Head of Investor Relations, and I'm joined on the call by our CFO, Deon Smith. Today's call will be done through both an audio webinar as well as a conference call facility. Deon will present an overview of the key elements in today's release. This will be followed by a Q&A session, and thereafter we will close the call. Turning to Q&A, for those wishing to ask questions today, we ask that you join the session using the conference call facility provided, as we'll only be taking questions through this facility. In order to ask a question during the Q&A sessions, please dial star 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. To reiterate, we won't be taking typed questions submitted through the webinar platform today. It is possible to dial into the conference call facility only shortly before the Q&A session and directly from your computer. If you are planning to do this, I encourage you to register for the conference call in advance of the Q&A session, as you will need the link sent to you upon registration. Finally, a reminder that today's announcement is available on Thungela's website, and the recording from this session will be available on the Thungela website later today. With this out of the way, please allow me to hand over to Thungela's Chief Financial Officer, Deon Smith. Thanks, Deon.
Thank you very much, Hugo, and thank you to all online for making the time to dial into this pre-close call. And the data I'll be sharing with you, obviously, and that we shared today is for the year ending 31 December 2025. So clearly, we're very pleased to report that we remain a fatality-free business. We've now operated for around 33 months without a loss of life, and this is absolutely critical for us to maintain our production momentum and performance. And if you look at that performance, we're obviously very pleased that we're likely going to exceed our full-year production guidance. We issued guidance about 12.8-13.6 million tons, and we're likely to get to around 13.7 million tons of export saleable production when we announce our results for the full year 2025. This higher production is mainly due to a slightly more aggressive ramp-up at Annea .
You might recall that it was the Elders Production Replacement Project, which the colliery is now named Annea, but also strong performance from a number of other collieries, including Mafube. We're obviously in a period of transition as we've closed Goedehoop, closing Goedehoop at the end of this year, and clearly, we're still working on the handover of Zibulo North Shaft into the operation, but so far that has been very successful. At Ensham in Australia, we expect to report export saleable production of approximately 3.8 million tons, and this is within the guidance range of 3.7 to 4.1, and you might recall that this is a good result relative to what we reported in the first half, given that we had more challenging geology for most of the first half of the year, as we unpacked a bit more in our interim results.
Also pleasing is Transnet Freight Rail's performance, and we continue to be a beneficiary of that, and Transnet continues to benefit from the various industry collaborative initiatives, so if I look at the period from January 25 to end of November 2025, TFR ran at an annualized rate of about 56.6 million tons. That's almost a double-digit percentage improvement compared to 2024, where you might recall we reported Transnet for the calendar year doing around 51.9 million tons, and clearly, this improvement is a result of many initiatives, including the security initiative, the locomotive availability initiatives, and reliability issues that previously hampered us, but also a couple of significant projects on the line, so very pleasing momentum TFR may, along that, continue, well done to the Transnet team, and clearly, the beneficiaries are all of us, the economy in South Africa as a whole.
In terms of the markets, energy markets have been impacted and continue to be impacted by geopolitical risks and general economic sentiment, and we've seen volatility in the past year on concerns of the growth outlook, but also as a business, and as a South African export business, we have also been impacted by a much stronger Rand, and I think that has clearly impacted the competitiveness of all South African exports in the coal market in particular. During 2025, thermal coal prices declined, and we saw lows in the coal price about two, three months ago. We've seen a bit of a bounce back since then, and clearly, demand from China and India, so the largest importers of thermal coal, remained slightly below expectations for most of the year.
There was also a slightly softer demand out of China, sorry, out of Japan, Korea, and Taiwan, and that impacted Australian coal prices, which you may know recorded a four-year low of about $90 a tonne in September. So the supply discipline that I think everyone was expecting throughout the year didn't fully materialize until fairly recently. And then what we also saw following these low prices in September is that the major ports started restocking a bit, and clearly, that has led to a gradual recovery in coal prices, and we now see the forward curve being in contango, especially into 2026 and then even into 2027. So what has this meant for our business in terms of benchmark coal prices?
Richards Bay averaged up to end of November just below $90 a tonne, so $89.63, and if you compare this to a year ago, about $105 a tonne, while it doesn't look pronounced on the page, when clearly you look at our financial results, that swing is clearly a $15 a tonne margin swing for us. So that's quite significant at a top-line level. Newc, so Newcastle benchmark coal price in Australia averaged about $105 for the same period, so up to in November, and that compares to $135 for 2024. Discounts in South Africa, Richards Bay was around 15%, and it was about 13% last year, so slightly wider discounts that we're expecting for the full year 2025, and clearly, that has led down to an achieved price for South Africa of about $76 a tonne.
You compare that to $91 a tonne for last year, and clearly, our business has faced fairly significant operational margin fees during 2025. If I turn back to Australia for a second, the Newcastle coal price, we've achieved a discount of approximately 1% year to date, end of November, and that compares to the 8% discount in 2024 and you might recall that we had a premium to Newc in the first half of this year, owing mostly to the fixed price arrangements in Australia, and those have run out mainly towards the end of June, so slightly naked or less fixed in the second half of the year, which reverted us back to a discount of about 1%, so sort of if I can pause there for a second and just then reflect back again on the export saleable production.
In South Africa, I said it's 13.7 that we're expecting for the full year, and that compares to 13.6 for last year, so slightly up. FOB cost per tonne for 2025 in South Africa is expected to be below the guidance range, and that is mainly actually not only due to a fairly strong production outcome, but also due to a non-cash rehabilitation adjustment of about ZAR 45 approximately per tonne, and you'll see when I get a bit later on to what we're busy doing with our South African portfolio and some of the closing collieries that we have started exiting, you'll see the tailwind from that non-cash rehabilitation adjustment is likely to continue to support our liability reduction efforts in South Africa.
In terms of sales, we're expecting export equity sales for South Africa to be around 13.6 million tonnes for 2025, and that's very strong compared to 12.6 million for last year, so about a million tonnes higher, and clearly, that was enabled by not only our production number, but also an improved rail performance from Transnet. So export saleable production in Australia at Ensham for 2025 is expected to be around 3.8 million tonnes, so just for clarity, that's the saleable production, and that compares to the 4.1 that we achieved in 2024, and that was due to that challenging geology in the first half that I mentioned earlier. So free on board cost per export tonne at Ensham for 2025 is expected to be within the guidance range.
You might recall at the end of the first half, it was run above the guidance range, but we did flag to you at the time that we had uncrushed stocks that we mined and paid the cost for, but didn't recognize it as export saleable, and we predicted that most of that will be crushed and report into export saleable in the second half, and we also anticipated that our cost per tonne would therefore revert back into the range, which duly happened. In terms of sales, export equity sales in Australia is expected to be slightly higher than the production at about 3.9 million tonne sales compared to the 3.8 production.
In terms of CapEx for 2025, we're expecting it to be around ZAR 2.6 billion in South Africa, and that consists of about ZAR 1.4 billion of sustaining capital, and you might recall that's at the low end of the guidance range, plus then the expansion CapEx of ZAR 1.2 billion, which is the top end of that guidance range, and that ZAR 1.2 billion is mainly the final spend on the Elders Annea Colliery, as well as the continued spend on Zibulo North Shaft, and with that spend, we're now at the end of the CapEx expenditure for those two projects with approximately ZAR 100 million to be spent in expansion territory during 2026, and that's mainly on the Zibulo North Shaft project.
In Australia, you might recall we only have sustaining capital, and for the full year 2025, we're expecting that to come in at about ZAR 650 million, and that's below the guidance range of ZAR 700 million-ZAR 950 million. There's no impact on that business as a result of the lower spend. It's mainly a phasing of spend to put into 2026, so a positive outcome at Ensham in terms of capital. Now, clearly, we will undertake our annual assessment of the value of property, plant and equipment, so typically termed the impairment test as we now start finalizing our 2025 annual financial results.
That type of assessment requires very significant judgments of forward-looking information, and with the volatility we're seeing in the market, in particular the benchmark coal prices as well as foreign exchange rates, we believe this assessment will be very important for us in determining our earnings for 2025, albeit non-cash. But if I look at these benchmark coal prices and foreign exchange rates, they're currently at the level on the forward curve that does not support the carrying value of our PPE balances, so therefore we'll expect some level of impairment to have to be passed. Now, we'll update the market once we've completed this assessment, and we'll do so well before we issue our annual results.
To help you sort of reflect on sensitivity around those forward curve positions, a strong rand is clearly a very significant headwind to the valuation of our business, and if you look at a business like ours that receives about ZAR 1.5 billion in billion dollars, apologies, in revenue per annum, for every one rand that the rand strengthens relative to the dollar, mathematically, that's a ZAR 1.5 billion cash headwind for the business for every one rand that we have strength relative to the dollar, and on an NPV basis, clearly that ZAR 1.5 billion per annum is a fairly significant headwind, and we'll update you on that as we complete that work in the first quarter of next year. I mentioned our portfolio optimization activities a bit earlier on.
We've initiated a disposal program for a couple of our assets where we feel that the remaining resources and the infrastructure can be better utilized by different operators, so operating with strategic synergies or contingencies, and you might recall that we did a similar transaction which we announced last year during the LSE, and that transaction completed over the last week, which also contributed to the decreasing environmental liability and hence the non-cash tailwind in our FOB cost per tonne that I mentioned a bit earlier.
We also recently announced the sale of Goedehoop, and the details of that can be found in a separate SENS announcement to the market, and therefore it's also worth flagging that we've now finalized and entered into a sale agreement for Kleinkopje mining right, and Kleinkopje is part of the Khwezela Bokgoni mining complex, and that should also have a positive impact on our future liabilities. So these transactions, which mainly focus on the residual resources and the infrastructure, we'll also see the transfer of that liability to the purchasers once these transactions complete, and then we expect to see further reductions in our liabilities from about 2026 reporting period onwards when these transactions are completed, as you might recall, they're always subject to various regulatory conditions precedent.
In terms of capital allocation, I mean, clearly we continue to prioritize investments through the cycle, but also prioritize shareholder returns, and so in this current financial year 2025, if I just put a cash flow hat on through dividends and share buybacks, we returned about ZAR 2.1 billion to shareholders, and with the share buybacks we announced in March and August, it was completed for approximately in total ZAR 468 million, and that represents around 3.4% of our issued share capital. We continue to invest in our key projects, and we've now completed Elders, as I said earlier, and we're very close to completing the Zibulo North Shaft project.
Those two projects will give each of those mines 12-odd-year to 14-year life of mine without any further significant life expectancy on those two operations, and clearly we preserve optionality both in both of those mines on incremental production from 4 Seam. We've also made very good progress in our Lephalale Coalbed Methane project, and there we've started receiving some of the major equipment such as the generator, and we'll see the LNG plant arrive somewhere later this year before the end of this year. There are usually a number of financial transactions that happen in our business during December, and these are expected to have an impact on our reported net cash at the end of December 2025. Clearly, the first one is a Green Fund contribution, and they are the only one we're expecting this year is in Australia.
We're also expecting provisional tax payments in South Africa and Australia, and once we take these out of our current cash we're sitting with, our net cash that we're expecting to report at the end of December will probably range between ZAR 4.9 billion and ZAR 5.2 billion, and then for interest, obviously, that net cash balance includes approximately ZAR 1.2 billion, that's on a full year basis of cash that we have generated from our foreign exchange derivatives. In line with past years, the board obviously this morning confirmed its continued commitment to our dividend policy, and that's to distribute a minimum of around 30% of adjusted operating free cash flow to shareholders, and then clearly the board will consider an appropriate cash buffer, which provides the flexibility to continue to invest through the cycle, but also to prioritize shareholder returns through the cycle.
So with that, a bit of a mouthful, let me pause and let's test for Q&A on the line before we continue. Can I hand back to you?
Thank you very much. Yes. We'll now turn to Q&A. Just a reminder for those wishing to ask questions, we ask that you please join the conference call facility, as we'll only take questions through this facility today. In order to ask a question during the Q&A session, please dial star one on your keypad, and this will register your intention to ask a question. Operator, please reopen the line for the first question.
Thank you. Our first question comes from Brian Morgan of RMB Morgan Stanley. Please go ahead.
Thanks, Brian.
Thanks, Hugo. Just a question, sort of more medium-term question, if I may.
You've got Greenside rolling off in the next two years, and if I'm not mistaken, Khwezela in the next three years. So obviously, the production profile comes off, and I'm just wondering how, with Transnet's performance improving, what sort of filler material can we expect you to be putting into the mix in the next three years to make up? Is that all No. 4 Seam, or are there other projects that you might be able to pull in?
Thanks, Brian, for that question. Indeed, our primary focus at the moment is indeed on the No. 4 Seam from Elders and Zibulo North Shaft, or Zibulo as a complex in totality. Those volumes, as recalculated, could fill that gap left by Greenside and Khwezela.
You might also, when you look at our financials, see that both Greenside and Khwezela, while producing high-quality coal relative to foreseen, which is a lower energy content coal, the cost at some of those collieries, in particular Khwezela, is fairly high. So if the No. 4 Seam is margin enhancing, value accretive, the rail is certainly available, those would be the primary targets and options that we would consider in South Africa. Correct.
Thanks, Deon. Do you have a rough estimate of sort of CapEx required? Is it a couple of billion? Is it a couple of hundred million?
No, it's certainly not in the billions.
It is certainly hundreds of millions for each of those projects, but we haven't completed those studies, so difficult to give you an exact amount, but it's certainly not the shape and size of a new shaft like the Zibulo North Shaft nor the Elders or Annea Colliery Shaft. These are existing shafts that just require incremental development, so not nearly the level of capital intensity per ton than a new mine. So once we have a better estimate of that capital, we will certainly guide the market, but initial estimates are that these are certainly much smaller capital projects than the ones that we've recently developed.
Okay, cool.
And then just the last question, if I may, just on Annea and on Zibulo North, sort of replacing volumes, is it right to assume that there'll be sort of lower unit costs, but potentially also lower product qualities and maybe flat on a margin perspective, but just differences on costs and realizations?
Yeah, there are a number of differences in those replacement tonnes, and for example, Annea relative to Goedehoop. Annea, while slightly lower CV, the yield at Annea is certainly higher than the yield we experienced. You might recall Goedehoop, we had a yield of around somewhere in the 50% range, and at Elders, it'll be somewhere in the 60% range over its life of. So while some headwinds in quality, some tailwinds in yield, and overarching similar margin position for those businesses.
That's fantastic. That's all for me. Thanks, Deon.
Our next question comes from Thobela Bixa of Nedbank. Please go ahead.
Thank you so much, Operator, and good afternoon, Thungela team. Actually, my questions are quite similar to what Brian has asked, but I think perhaps I'll ask them differently. Just, I mean, we're seeing Transnet improve, not only that, but also Sasol's export capacity is also coming online, so it is coming to the market. And I guess the answer that you've given to Brian, at least for me where I stand, it doesn't give sort of some sense of confidence in Thungela being able to actually take advantage of that. So maybe if you could just comment around that, and maybe perhaps you spoke to, I guess, that you are looking into those projects which could effectively increase your volumes.
Perhaps when can we expect you to come back to the market to tell us by when you would make some of those investments? So that's my first question.
Thobela, same question, different positioning, but same answer in that we will study these projects. We've continued to study them the last year or two. They're not at the level of confidence that we can approve them just yet or put them to the board for approval. The studies will be completed in 2026. The projects will be developed in 2027 and should start ramping up from 2027 and be ramped up by 2028 so that they properly replace, from a production perspective, what we likely no longer have in Greenside and in Khwezela.
So in terms of the comment or the question about fully utilizing the upside of incremental rail, clearly there are a number of levers that we have pulled in the past year to get to a level of production higher than what we originally guided. You might also recall that previously when we spoke, we thought that 2026 production could be a million tonnes lower than 2025. We've managed to find the necessary tonnes to arrest that million tonne per annum decline to about a height of 500,000 tonnes for 2026, and we'll continue to look for those opportunities to close the production relative to the available rail. But clearly, we'll only do so if they're margin accretive, sustainable through the cycle margin accretive type tonnages.
Clearly, there are no very material opportunities to fully utilize the rail that might become available should all of the positive tailwinds on TFR that you've modeled in and possibly other producers stopping production or stopping export materialize. Then clearly, there's even more upside in the market, and historically, we've done well in finding third-party volume and trading that for an incremental margin also. So we remain excited about the opportunity. More rail is good for everyone.
Okay. Now, thanks for that, Deon. Then my second one, also similar to what Brian asked, it's around the quality of the Elders which you spoke to versus Goedehoop.
Maybe, I guess what I'm trying to figure out is, given that the quality of the coal that you've been putting to the market is less quality versus what you have shut down, should we expect further pressure on your realized pricing, or perhaps are there other levers that you're likely to pull in order to be able to, I guess, maintain your discount at around about that 15% level?
Yeah, it's a good question, Thobela, so the quality that we wash to is a choice, partially and partially in-situ coal quality. And what I mean by the choice is that we have the ability to wash to a 5,700 CV or a 5,500 CV, and clearly, the yield loss between the two relative to the differentiated price is what determines from time to time what we will wash to.
So when I say that it will be slightly lower quality that we put into the market, it's as a result of Annea's wash curve that dictates that a slightly lower quality might be able to give us incremental volumes and incremental revenue that more than makes up for the slightly lower quality. So just to sort of answer it therefore in a similar fashion, the margin that we're expecting to earn from that export saleable production is fairly consistent to the product that we have discontinued at Goedehoop , and that's as a result of a slightly higher yield, so the total margin, not necessarily the margin per tonne, yes? So therefore, you shouldn't look at this as a direct correlation to the discount, but rather volume and a discount story.
Next, though, if you run down the volume, your discount should be consistent at the 15% if you adjust for the slightly higher volume.
Okay. Okay. No, thanks. My last question is on your long-term thermal coal price that you use, especially for the SA assets. Could you just talk us through that? And the reason I ask is, I mean, you specifically mentioned in the results that you're looking at the assets which, given where the thermal coal prices are, some of those carrying values might have to be readjusted. So could you just take us through how you guys think about your long-term coal price?
Yes, certainly, and I have to caveat this that we have not yet landed on that view for 2025 impairment purposes, and that clearly that's an ongoing discussion with the audit committee and our external auditors.
So I'll only be able to give you specifics sometime early next year. But at this stage, it's fair to say that when we look at most analysts in the market, the predictions are very short-term based on prompt extrapolated into a year or a year and a half view. It's quite often very difficult for us to even determine whether any of those forecasts are nominal or real, and therefore we don't pay much attention to analysts views on prices. We look a bit broader to the likes of Woodmac and Argus and the like, but more so Woodmac, and their view on the price in medium- to long-term continues to hover between $90-$100 a tonne at this point in time.
So certainly, that's what we'll be looking at more so than the short-term views, which as of two weeks ago, I think spot was around $82 and then jumped to $92 within a period of a week. So the short-term price doesn't have too much of an impact on what we're looking at either. It's the fundamental project-by-project analysis and power station-by-power station analysis that very few observers actually go through, but Woodmac is one that we've found historically to be most reliable in the medium to longer term.
Thobela, does that conclude the questions? Going on to the next question, which comes from Tim Clark of SBG Securities. Please go ahead.
Thanks. Good afternoon. Congratulations on the strong production result out of South Africa, particularly. I just want my question, I've got a couple of questions. Just the first one is just looking forward to the year ahead.
You've had this $1.2 billion benefit from hedges, but you've also had higher CapEx, which is going to roll off, right? You've had $1.2 billion of additional CapEx, and there's only $100 million left to spend. So I guess the first question I've got is, is that a sort of fair offset? I mean, the average—I would imagine that the average round is higher than spot round, so I would imagine that there's a sort of net cash at sort of today's levels, negative, maybe offset by slightly higher production. Maybe the easy way of asking that question is, are we round about cash break even right now, or are we maybe just a little bit in the cash on average at the moment?
Yeah, it's a good question, Tim.
If I look at a measure that we've historically reported as an alternative performance measure, which is adjusted operating free cash flow, you might recall that in the first half, we reported that to be around ZAR 484 million from memory. In the second half of the year, I'm expecting that number to come in at between ZAR 400 million and ZAR 600 million. And so what does that mean? That means it's operating free cash flow, less sustaining capital, which isn't this ZAR 1.2 billion expansion that you're talking about. It's rather just the sustaining capital.
After sustaining capital, we've continued to be cash positive for the full year, but as you've rightfully pointed out, if I add up that 400 and 600, that gets you to $1 billion-$1.1 billion for the full year, and of that $1.1 billion, $1.2 billion is cash as a result of the hedges. Your statement that at the current prices that we've observed after paying our capital bills, our sustaining capital bills, we are cash neutral, is therefore a fairly accurate statement if I look back over the last year with the prices that we've realized, yes.
Thanks. That's helpful.
And then if I think back to when you first introduced your thoughts to us on the buffer, if I remember correctly, you said at the time that the best thing to do would be to have a strong buffer when prices were high, and then when prices were low and sort of the drawdown was happening, perhaps to roll the buffer down a little bit or to reduce the buffer a little bit. I mean, I know it's difficult to share the board's thinking on this until the board has thought, but is that a fairly reasonable thought process for us to follow, or has your capital commitment seemed to be rolling off now, or is that too aggressive in that there's too much uncertainty in the market on pricing and demand and cash flow to risk and bank available creditors, obviously difficult for coal companies, etc.?
Yeah, Tim, it sounds like you're going through the exact same debate that we will likely go through in early next year, and therefore difficult to comment before we've not had the debate. But I can just point to historic facts also to help color in the answer. You might recall about a year and a half or ago we drew down the buffer to about ZAR 4.4 billion, a theoretical buffer at our mid-year or interim results. So the board was quite comfortable to draw down at that point in time to accelerate returns to shareholders through a buyback. And clearly, that option remains available to the board. So we are not hard and fast about the ZAR 5 billion buffer, and you are correct that we'll maintain a stronger buffer during stronger price conditions.
And then to enable us to invest through the cycle and return cash to shareholders through the cycle, we might opt to reduce that cash buffer to somewhere below five, which is what we've demonstrated before. So the board clearly has that luxury, one, and then two, clearly also will take into consideration all the factors you've mentioned, but there are further points, which is what's the capital intensity of the No. 4 Seam projects and the optionality around Ensham for a similar brownfield projects around Ensham. Those thoughts would also come into the board's purview as it determines the most appropriate balance sheet flexibility to maintain over the next two, three years. So yes, early days to give an answer on that, unfortunately, on today's call. Apologies for not being able to answer, but rather coloring in the exam question.
It's very helpful. Thank you very much.
Just my last question, quick one. You've got various asset sales that you've announced and are announcing. Is there anything you can share for us on cash flow, the sort of working cost, the monthly cost that might be saved from these asset sales that we should take into account in our unit cost outlook? Not so much the proceeds, so much as the net sort of benefit, the opposite cost.
Yes, some of those, they're very difficult to predict at this point in time because the factors that determine that quantum is more the timing term. So it depends on certain regulatory approvals and the timing of achieving those, which would then hand over effective economic interest in some of these assets at a different date. If that were to happen in January and February next year, then clearly the benefit is very, very material for next year.
If it were to happen end of next year, the impact for next year is muted, if not zero. So very difficult to give you the answer today, but safe to say that it should have a tailwind of approximately ZAR 100 million a year in some of our cash costs that we typically incur.
That's very helpful. Thanks so much, Deon. And congrats on the results and all the best with the holidays. Thanks very much.
Thanks, Tim.
Our next question comes from Duncan Hay of Panmure. Please go ahead.
Yeah, thank you, Deon. Just a quick one on the coalbed methane project. What are you thinking capital spend for next year there? I think you mentioned it was ZAR 300 million in the mid-year, but have you spent, presumably you spent some of that this year?
So yeah, how much for next year and what stage do you hope to be by the end of the year with that?
Yeah, hi, Duncan. Good to hear from you also. So we've spent most of the capital that we were planning to spend on that coalbed methane project. You might recall we said we'll spend in total around ZAR 400 million. Most of that's been spent, and that has, one, preserved the optionality of a broader development in that it has secured our legal tenure. Two, that has set us up very well to now submit a production right application. And the production right application clearly will determine the shape and size of a potential development.
To put all of these factors into perspective, the ZAR 400 million has bought a generator, a liquefaction plant, and enabled us to hydraulically stimulate and produce from own use from 19 holes. A broader project could be up to 380 holes, given the size of the resource in the initial stages. Clearly, while we haven't guided on the total potential capital number, in that we continue to study it, we are very pleased that we have that optionality in our portfolio. The market that we will target will determine eventually the shape and size of that capital, in that how you develop it and how you liquefy it and how you transport it all are very material considerations as one determines the shape and size of that project.
Where we are today, it's upside and opportunity, but we don't have the detail to tell you exactly shape and size of the capital as yet.
Yeah, okay, thanks. So. And it's in sort of approval. Is the, when you say production right application, so is there a, what is that? Do you scope a project and then look for approval, or is it more preliminary than that?
Yeah, it's more a regulatory application process. So at the moment, we have a own use permit, so we are able to produce gas and utilize it for our own use. And that's what we're doing through that electricity generator that we fired up. We're firing up, apologies, with our own gas from that project.
But the production right application, apologies for the ambiguity, is merely a regulatory term whereby once we've secured a production right, we are then able to produce gas for sale to third parties, whether into the industrial gas market, the electricity market, or otherwise. So it's too early and too indicative to necessarily provide either potential future revenue margin or capital at this stage. We're just going through the regulatory hurdles that will give us the authority to then complete that study.
Yeah, great. Okay, thank you.
Ladies and gentlemen, with no further questions in the question queue, we have reached the end of the Q&A session. I will now hand back for closing remarks.
Thank you very much for that. Go ahead.
Apologies, you go.
So clearly, as we conclude this call today, we recognize that the current pricing environment and the various sort of macroeconomic factors, such as the rand dollar that I spoke to a bit earlier, necessitates a very careful view of our cash spend, both OpEx and CapEx, in order to ensure that we remain as competitive as possible in the current market conditions. When we look at our CapEx spend, as sort of Tim pointed out, our expansion CapEx is now mostly behind us. And we'll turn our focus to our sustaining CapEx to ensure that we can preserve the sustainability of our operations, but do so in the most efficient manner possible. Yes, we believe the productivity improvements across our portfolio, coupled with some of the improvements we've seen in Transnet, has enabled us to arrest some of the previously cited production hiatus.
As I said earlier, I think we'll probably get to a 500,000-ton hiatus in 2026 relative to the 1 million tons we expected before, if you look at 2025, the base. And then we'll continue to work from there to find the right productivity levers in order to optimize the use of the available rail into the future. Now, while our market conditions remain fairly challenging in the short term, we clearly remain confident in the longer-term fundamentals of not only the coal market, but also our role in the export market out of South Africa. And clearly, for us, we'll give you a bit more color as to how we see this play out when we announce our results. And next time we'll speak is probably on the 23rd of March 2026.
With all of that, I wish all of you, in particular those who won't be speaking to later today, a restful and a safe festive season. Thank you very much for your continued support throughout 2025. I appreciate the robust engagement. Thank you all. Back to you, Hugo.
Thank you very much. With that, we'll end today's call. Thank you.
Thank you. Ladies and gentlemen, that concludes today's event. Thank you for joining us. Anyway, now disconnect your lines.