Here is some ramblings by me, i send bits and pieces through to the [email protected] cc in [email protected]. (Would now and then get a generic response to basic question but then nothing to anything more serious, expected). Example, they replied to me asking if Nathan Boom was no longer working at the company (which was he left, Kevin Barlow, Executive General Manager Commercial commenced in early November 2023 in his position) but not to, was it because of the court case and why wasn't communication sent out to shareholders?. Anyway, if interested, feel free to read, and I apologise for any grammatical errors. Also, if any facts are incorrect, I'm not an expert, just a mum and dad investor who likes to keep an eye on what companies i've invested in are doing, this one I've been in for over 12 years and like others should of sold out during the boom. As I knew better with this lot.
For me, I don’t think Terracom's issue is about coal’s future or coal price. Yes, if the price rises to record amounts again, of course, the share price will go up in the hope that they pay dividends, and people will buy and sell on the rise of the share price during that coal price increase and vice versa. I believe coal-fired powerplants will be around for a long time yet, in 2019, there were companies testing coal-fired powerplants carbon capture systems, there are other methods of building coal-fired powerplants that emit less carbon, and the fact that coal-fired powerplants decrease in established countries the price of building a coal-fired powerplant will decrease and more 3rd world countries will jump on board to try to get themselves into a more established position cheaply.
To me, the problem as a long term investor is Terracoms ‘shop window’
Let's imagine Terracom as a storefront in a bustling shopping district. The window display, which serves as the company's public image and financial health, is not just a metaphor, but a tangible representation of the company's standing. It's this 'shop window' that has the power to attract or deter potential customers (investors).
Inconsistent Messaging: Analogy: Imagine a store window advertising a sale on summer clothes, but the signs inside show winter gear prices. This inconsistency confuses shoppers. Terracom's Reality: The company’s production targets for Blair Athol were inconsistent, with a revised target of 1.7 million tons but expecting a run rate of 1.8 million tons per annum. This inconsistency creates confusion and distrust among investors.
Financial Uncertainty: Analogy: A store boasting about high sales last year but now showing empty shelves and unclear price tags. Shoppers wonder if the store is going out of business. Terracom's Reality: Despite boasting about high dividends funded by a temporary coal price spike, Terracom now faces a substantial tax bill and declining cash reserves, with no clear explanation.
Boasting over 250 million in dividends paid since 2022, but nothing left in the companies ‘cash at bank/war chest’, imagine the shop window if they had kept 80-100 million in the bank. It would have opened the mind to:
Share buyback options
Acquisitions
Legacy tax bill after the company had almost 10 years of tax losses to offset against future tax.
Stagnant Projects: Analogy: Displaying numerous exciting products in the window but not available inside the store. Customers get frustrated and leave. Terracom's Reality: Key projects like Springsure, Eloff, and Berenice/Cygnus have seen no progress, and updates are scarce. Investors see potential but no follow-through.
Eloff – Shareholders were advised over a year ago that the mine is ready to go and just waiting for ‘final contract’. What is the update on this and why is it taking so long for Eskmon CSA award or other options to start earning from this mine?
Berenice/Cygnus was also ready to go, what has happened and where is this project at?
Springsure – A few years ago Terracom announced they were going to develop Springsure, but this went quiet. Terracom has Mining Development Licence (MDL) and a plan for the site already. There is already rail infrastructure close to the site. Two EPC connected to the MDL where further expansion can occur.
Did Terracom purchase opposite mine (Minerva by Sojitz Blue) equipment/rail equipment when it finished mining?
Clyde Park – Is there any update with this project?
Northern Galilee – Is there any update with this project?
What Management Needs to Do
Clear and Consistent Communication: Fix: Align external communication with internal realities. Clearly state production targets and stick to them. Update shareholders regularly and transparently if things change. Benefit: Restores confidence and clarity, making investors more likely to trust and invest.
Financial Transparency and Stability: Fix: Provide detailed explanations for financial changes, such as the drop in cash reserves. Address the tax liability clearly and outline steps to stabilise finances. Benefit: Reduces uncertainty and demonstrates responsible financial management, making the company more attractive to investors.
Progress and Updates on Projects: Fix: Actively develop and provide regular updates on key projects. Show tangible progress or realistic timelines for stalled projects like Springsure, Eloff and Berenice/Cygnus. Benefit: Demonstrates capability and commitment to growth, which can entice investors looking for potential.
Engage and Reassure Stakeholders: Fix: Engage with stakeholders through regular briefings and Q&A sessions. Address concerns directly and provide reassurance about the company's direction. Benefit: Builds a stronger relationship with current and potential investors, fostering loyalty and long-term investment.
Over the last 12 years, including the Guildford Coal label, the company has always communicated terribly. Either it’s full of we’re looking at developing Springsure, we’re looking at diversifying in iron ore, we’re looking at a Nickel company, Eloff is ready to go, Berenice/Cygnus is ready to go, or there’s no communication except the 1 year where the coal price was high, and it’s ‘look what we’re earning and doing’.
Given these persistent issues, it's evident that the current management needs a re-evaluation. I believe the problem isn't with the coal market but with how Terracom's management has handled its operations and communications, we are at the same share price as 2020 when we had $278 million debt but people had hope of the future the company was selling them, now everyone's caught on and the shop window is nearly bare. Therefore, I would advocate for the full board to be re-elected. This would provide an opportunity to bring fresh perspectives and leadership to address these issues effectively.
The ‘shop window’ can be transformed, but for me, not the way this management team is going. At the next Annual General Meeting (AGM), I will vote NO to the adoption of the company’s remuneration report in the hope we get a vote over 25% to give the company its second strike and leads to a company vote to see if all key management stand for re-election. At the moment, I am pretty confident this will happen.
Hope some people find this interesting and feel free to correct it, it's more about being open and informative on the company and our investments, for those who have bought in, we are all in the same boat together. Have a great day.
TER Price at posting:
21.3¢ Sentiment: Buy Disclosure: Held
(20min delay)