TerraCom share price rallies as dividends return

What's driving the resource company's shares higher on Friday?

Key points
  • TerraCom shares shot up 11% in early trading on Friday before partially retreating
  • The company provided a couple of positive announcements to the market regarding sales targets and bonds issuance
  • Following a strong financial performance, the board looks set to resume its dividend payments

The TerraCom Ltd (ASX: TER) share price is roaring higher today despite the broader ASX market plummeting.

At the time of writing, the resource company's shares are swapping hands at 80.5 cents, up 2.55%, having earlier risen 10.83% to 87 cents. This means its shares have now gained around 37% in the past month.

For context, the All Ordinaries Index (ASX: XAO) is today in the red by 1.2% to 7,153.8 points.

a man sits on his sofa loong at his phone and raises a fist to the air in happy celebration.

Image source: Getty Images

TerraCom on track to hit sales targets

The TerraCom share price is climbing on Friday following a couple of positive announcements made by the company.

According to its release, TerraCom is on track to meet its June 2022 quarterly forecast.

As such, 640,000 tonnes of coal from the company's wholly-owned Blair Athol (BA) coal mine in Central Queensland will be delivered. This represents 27% of the 2.3 million tonnes of coal sales to be achieved in FY22.

Furthermore, management is forecasting an operating earnings before interest, taxes, depreciation, and amortisation (EBITDA) for BA of approximately $180 million in the June quarter. Combined with the prior nine months, TerraCom is hoping to achieve an operating EBITDA of $360 million for FY22.

At its South Africa operations, operating EBITDA is expected to be around $44 million for the June quarter. This will total roughly $128 million for FY22 when including the previous $84 million attained from July 2021 to March 2022.

On a separate note, TerraCom issued a convertible bond to Madison Pacific Trust Limited for US$20 million. The conversion price stood at A$0.696, with the bonds expiring on 24 December 2022.

However, OCP Asia informed TerraCom that it wishes to convert the full amount of the bonds into fully-paid ordinary shares.

Based on the conversion rate, this will equate to around 39.91 million TerraCom shares to OCP Asia. This represents approximately 5% of the entire company's issued capital.

Lastly, management stated that it will be looking to restart its dividend policy in the coming weeks.

Management commentary

In regards to the dividends, TerraCom executive chair Craig Ransley said:

The Company's balance sheet has significantly improved following the repayment of the US$167 million Euroclear Bond.

The Board looks forward to being able to recommence dividends to shareholders following strong financial performance continuing to be achieved.

Based on forecast, the first dividend to be returned to shareholders is expected to be declared for the period ending 30 June 2022 and estimated to be paid during September 2022. The dividend is forecast to be an initial unfranked dividend of 10 cents per share.

TerraCom share price summary

Strong investor sentiment has led the TerraCom share price to accelerate over the past 12 months, reaching gains of 600%.

Year-to-date, the company's shares have also performed admirably, up 345%.

TerraCom presides a market capitalisation of around $591.58 million.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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