The recent annual report of Bathurst Resources reflects the “feet on the ground” attitude of executive director and chief executive, Richard Tacon, who has no illusions about the coal extraction industry.
However, he is not dropping down dead in the face of low prices.
Tacon says often – loudly and with conviction ¬– that it is not the price received from the sale of coal that is the most important factor, but the margin received by the producer on sale. He accepts it may be about three years from now before the export prices for coal rise, but that is no reason to do nothing.
Bathurst was unfortunate not to be able to benefit from the higher export prices for coal because it was tied up in what seemed interminable wrangles through the courts with so-called environmentalists. Not only did this hamper operations, it also cost Bathurst about $35 million in fees and costs. By the time all of these wrangles had been settled the export price had slumped to its present low levels.
At the recent AusIMM conference in Dunedin, Tacon told delegates, “The key to survival and growth is on-site efficiencies … get productivity right, focus on the margin, not the coal price.”
He told the conference he expected the price of export coal to remain down for the next three years, and his company would be ready when it rose. He emphasised that Bathurst has recorded its third consecutive cash positive quarter, debt having been reduced to $2.5 million and cutting administration costs in half, which included cutting his own salary! Having had a cash outflow of $16.7 million in the previous financial year, Tacon, who was appointed to the chief executive position this year, has turned that around to a $1 million profit in cash flow.
He says Bathurst has a 2016 target of producing 450,000 tonnes of domestic coal from its three South Island mines. While readying to lose West Coast cement maker Holcim as a customer next year, Tacon says he expects some “spot sales” will help offset the loss.