Weather Disruptions Test TerraCom’s Coal Sales and Production Targets in Q2

Quarterly Performance Amid Weather Headwinds

TerraCom Limited (ASX: TER) has released its December 2024 quarterly results, demonstrating operational resilience despite adverse weather conditions. The company reported total coal sales of 1.6 million tonnes, with equity coal sales of 934,000 tonnes. While rainfall notably disrupted mining and logistics at the Blair Athol operation in Queensland, the company managed to maintain solid production volumes and improved average coal prices.

Blair Athol’s run-of-mine (ROM) production rose 4% quarter-on-quarter to 558,000 tonnes, with saleable coal at 402,000 tonnes. However, coal sales were constrained to 314,000 tonnes due to port congestion caused by late December rains. TerraCom noted that without these logistical delays, sales could have reached 408,000 tonnes, underscoring the operational challenges faced.

Cost Management and Market Demand

Despite the weather setbacks, TerraCom achieved an average coal price of A$162.4 per tonne at Blair Athol, a 9% increase from the previous quarter. FOB cash costs, excluding royalties, were reduced by 5% to $113 per tonne, with the company targeting an annual FOB cost range of $105 to $110 per tonne. This focus on cost containment is critical as TerraCom navigates inflationary pressures and revenue-linked costs.

Market demand remains robust, with 100% of Blair Athol’s coal sales for the March quarter already secured. Long-term customers from Japan, South Korea, and India continue to support TerraCom’s premium thermal coal product, reflecting steady seaborne thermal coal market fundamentals despite some price softening in late 2024.

South African Operations and Strategic Developments

TerraCom’s South African business unit also faced seasonal rainfall impacts but delivered combined coal sales of 1.3 million tonnes, a 6% decrease from the prior quarter. The New Clydesdale Colliery and North Block Complex remain key contributors, with export sales improving notably at North Block Complex.

On the strategic front, TerraCom is advancing its Cooperation Agreement with Wintime Energy Group Co., Ltd to develop the Moorlands Thermal Coal Project in Queensland. A joint steering committee has been established, and a dedicated Project Development Manager appointed, aiming for production commencement by June 2026. This partnership signals TerraCom’s commitment to expanding its asset base and enhancing future production capacity.

Financial Position and Outlook

TerraCom closed the quarter with $15.4 million in unrestricted cash and $61.3 million in restricted cash. The company is exploring initiatives to improve free cash flow by releasing security deposits held with third parties. A fully franked dividend of $0.01 per share was paid for the September quarter, reflecting confidence in the company’s cash generation capabilities.

Looking ahead, TerraCom remains focused on achieving its full-year production target of 1.8 million tonnes at Blair Athol and progressing the Moorlands Project. The company’s ability to manage costs and secure long-term contracts will be pivotal as it navigates market volatility and operational challenges.