Tigers Realm Coal (ASX:TIG): Its making an awkward exit from Siberian coking coal, but what’s next?

Tigers Realm Coal (ASX:TIG) has been one of the few ASX stocks (if not the only ASX stock) with direct exposure to Russia, through coking coal operations in Siberia. The company has its principal office in Moscow, but a registered Australian office in the Melbourne suburb of Collingwood.

After listing in 2011 with a $37.5m market cap and a share price of 50c, Tigers Realm Coal now has a share price of 0.5 cents. Granted, its market price hasn’t changed that much, at $35.9m – that’s just the way it goes when you have over 13 billion shares on issue.

It has slid under the radar for the most part, until it was targeted by the Australian government for having operations in Russia.

How Tigers Realm Coal (ASX:TIG) caught the ire of authorities

In February 2022, Russia invaded Ukraine, and the world imposed sanctions on companies with operation in Russia left right and centre. Not many Australian companies were impacted because so few had anything to do with Russia. But Tigers Realm Coal was one. What was it to do? Turn to neighbouring China, and it worked if its financials are anything to go by. Its profit in 2022 was up 39% and its revenues were up 39%.

In April 2023, over a year after the invasion, it told investors the Department of Foreign Affairs and Trade advised that its operations were likely to be in breach of Australia’s sanctions law. The company fought to overturn the ruling, continuing its operations in 2023. Its revenues for that year were down 23% and its profit was down 13%, but both were ahead of 2021 levels. The company did not pay a dividend in either year.

After months of fighting, Tigers Realm Coal conceded defeat in the Federal Court at the start of April 2024. While the company had thought the fact that the coal was destined for export was the reason the sanctions did not apply, the court found that this was the reason sanctions would apply. Until now, no Australian company had been found in breach of the sanctions on Russia.

The company will not face criminal penalties because the court case was actually bought by the company, in an attempt to overrule the original assessment.

What will it do with its coking operations?

Tigers Realm Coal has told investors it would sell its operations to a Russian merchant – two coking coal mines and an export terminal to Russian businessman Mark Buzuk. The company will receive $49m and told investors Buzuk ‘ has a proven entrepreneurial track record in greenfield and brownfield remote area mining projects’.

Tigers Realm Coal is majority owned by non-executive director Bruce Gray who holds nearly 60%. In a former life, he was the boss of Sirtex Medical, an oncology company on the ASX that was taken over a few years ago. Russia’s state investment body owned nearly 8% while private equity firm Baring Vostok hold 18.2%. Another notable shareholder is Paul Little with a 5.6% stake.

Obviously they’ll all have to sign off on the deal at a formal shareholder vote, although they likely will given there’s little other choice. It remains to be seen if the Commonwealth opts to prosecute the company, although if a sale is completed, this may not happen. Ultimately, it is anyone’s guess.

So what does the future hold?

Tigers Realm Coal has told investors once the deal is done, it will return the capital to shareholders.

It will likely try to find another business, in coal or perhaps elsewhere. This may not necessarily be as an ASX listed company. Although its shares currently trading (as of April 16, 2024), shares will likely be suspended while management tries to find another business.

There are some sagas with ASX companies that are so intriguing, one cannot help but keep a sharp eye on such sagas, even if they do not own shares in such companies. Tigers Realm Coal remains one of them, at least while we don’t know what will happen once it choses to divest out of Siberia.

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