TerraCom (ASX:TER) – From debt to dividends
Tim McGowen: We speak today to Craig Ransley, who is the executive chairman of TerraCom (ASX:TER). Market capitalization of $595 million. Now, Craig, welcome to Australia. You have been abroad for some time.
Craig Ransley: Thanks Tim.
Tim McGowen: The stock price hit a 52-week high in what has been a volatile and lackluster market. We think there are sort of three factors here, one obviously being the price of thermal coal, the other being the stability of operations, and then we look at, obviously, paying down your debt. Do you agree that this has been the real key driver of the stock price?
Craig Ransley: Listen, I agree. The tight management structure, I suppose, of the company and the management of projects by Danny, he is first class. The coal market, well, we are all lucky to find ourselves in the coal market, but you have to be there to win. And the third being debt repayment, as we announced to the market, and obviously that wouldn’t have been possible without the first two, prudent operating performance and the market.
Tim McGowen: And you recently announced that you were going to withdraw from all your interests in Guinea. What is the longer term vision for TerraCom?
Craig Ransley: The long-term vision is to focus on our thermal coal assets. But, saying that, we’re currently in the middle of a strategic review of what that focus will be within the company. And of course, when the council has finished deliberating on this, we will announce it to the market.
Tim McGowen: What are your customers saying about the current global coal market? What is their opinion there?
Craig Ransley: Listen, our customers say the amount of coal they lock up and buy isn’t going to change any time soon. I think that optimism is shared by most people in our company right now and in our industry.
Tim McGowen: So when it comes to this strategic board review, where does dividends come in when it comes to the post-debt conversation?
Craig Ransley: Well, look, I mean, it’s our main goal on the board to pay dividends to shareholders and to maximize the amount of that return.
Tim McGowen: And, Craig, what role has the conflict between Russia and Ukraine played on the price of coal?
Craig Ransley: I think we’ve seen it have an impact, but I don’t think we’ve seen it have any real impact yet. I think, as most EU countries have now announced that in August, they will stop buying Russian coal. When that happens, it will put even more pressure on the market, which everyone predicts will see prices go even higher than they are right now.
Tim McGowen: And, Craig, you’ve had an incredible 12 months in terms of business. You’ve seen a lot of changes in the stock register, debt repayment. How has the business changed and what kind of steps do you envision for the future?
Craig Ransley: Oh listen, it’s been a remarkable team effort, and it’s been a remarkable shift across the stock ledger from market cap to operations. But the one factor no one has yet considered is that we haven’t completed our first full quarter of the new pricing regime, which the market won’t see until the end of the June quarter. We had a lot of old contracts to settle in the last quarter and we still achieved an EBIT above one hundred million. So the real operational performance will be delivered this quarter, and it will be significantly more than the last.