The outlook for coal

TerraCom Limited (ASX:TER) Executive Chairman Craig Ransley discusses drivers behind the company’s performance and share price over the previous year.

Tim McGowen: We’re talking today to Craig Ransley, who is the Executive Chairman of TerraCom (ASX:TER). Market cap of $595 million. Now, Craig, welcome back to Australia. You’ve been overseas for some time.

Craig Ransley: Thanks, Tim.

Tim McGowen: The share price hit a 52-week high in what has been a volatile and poor market. We think there’s kind of three factors there, one being obviously the thermal coal price, the other one being the stability of the operations, and then we’re looking at, obviously, your debt repayment. Do you agree that’s been the real key drivers of the share price?

Craig Ransley: Look, I agree. The, I suppose, tightened management structure of the company and Danny’s operating of the projects, he’s first-class. The coal market, well, we’re all lucky enough to find ourselves in the coal market, but you’ve got to be in it to win it. And the third one being debt repayments, as we’ve released to the market, and obviously that wouldn’t have been possible without the first two, prudent operational performance and the market.

Tim McGowen: And you recently announced that you’re going to withdraw from all your interests in Guinea. What’s the longer-term vision for TerraCom?

Craig Ransley: The long-term vision is to focus on our thermal coal assets. But, in saying that, we’re currently in the middle of a strategic review on what that focus will be inside the business. And obviously, when the board’s finished deliberating on that, we’ll announce it to the market.

Tim McGowen: What a re your customers saying in regards to the current global coal market? What’s their view out there?

Craig Ransley: Look, our customers are saying that there’s not going to change anytime soon by the amount of coal they’re locking up and buying. I think that optimism is shared by most of the people in our business at the moment and our sector.

Tim McGowen: So, in regards to that strategic review by the board, where does dividends come into in regards to the conversation post repayment of debt?

Craig Ransley: Well, look, I mean, it’s our primary focus of the board to deliver dividends back to the shareholders and maximise the amount of that return.

Tim McGowen: And, Craig, what role has kind of the conflict in Russia and Ukraine played on the coal price?

Craig Ransley: I think we’ve seen it have an impact, but I don’t think we’ve seen it have a real impact yet. I think that, as most EU countries have now announced that, August, they will stop buying Russian coal. When that happens, it’s going to put even more stress on the market, which everyone’s predicting prices will go even higher than what they are now.

Tim McGowen: And, Craig, you’ve had an incredible 12 months in terms of the business. You’ve seen a lot of change on the share registry, repayment of debt. How much has the company changed and what sort of milestones do you see looking forward?

Craig Ransley: Oh, look, it’s been a remarkable team effort, and it’s been a remarkable change right across the share register to the market cap to the operations. But the one factor that sort of no one’s considered yet is that we haven’t realised our first full quarter of the new pricing regime, which the market is only going to see at the end of the June quarter. We had a lot of old contracts to wind off last quarter and we still did an EBIT in excess of a hundred million. So, the true operational performance will be delivered this quarter, and that’ll be substantially more than the last.