TerraCom Faces South African Logistics Challenges Amid FY2025 Loss and Legal Settlement

Financial Performance and Adjusted Results

TerraCom Limited (ASX, TER) released its preliminary financial results for the year ended 30 June 2025, reporting a statutory operating loss after tax of A$33.7 million. This compares to a profit of A$25 million in the prior year, reflecting a challenging market environment marked by lower coal prices and reduced sales volumes. After adjusting for one-off items including an A$8.5 million ASIC settlement and impairments, the company’s normalised operating loss narrowed to A$8.6 million, offering a clearer view of underlying operational performance.

Operational Highlights, Australia and South Africa

TerraCom’s coal sales for FY2025 totalled 6.6 million tonnes, down from 7.2 million tonnes the previous year. The Australian flagship Blair Athol mine in Queensland produced 2.05 million tonnes of run-of-mine coal despite weather and logistics disruptions, maintaining steady operational efficiency. Meanwhile, South African operations, comprising the North Block Complex and New Clydesdale Colliery, faced significant logistics constraints that limited export sales. However, strong domestic demand, particularly from Eskom, supported a solid performance in the region.

Strategic Progress on Moorlands Thermal Coal Project

A key strategic development for TerraCom is the Moorlands Thermal Coal Project in Queensland, which the company is advancing in partnership with Wintime Energy Group, a Shanghai Stock Exchange-listed energy firm. The project is positioned to commence production in 2026, subject to federal approvals, with an initial run-of-mine capacity of 1.9 million tonnes per annum and potential expansion to 4 million tonnes. TerraCom will leverage existing infrastructure at Blair Athol to create an integrated dual-hub precinct, reducing capital intensity and extending the life of its Australian operations.

Financial Position and Capital Management

Despite the loss, TerraCom remains largely debt free, with only a small loan held by its South African subsidiary. The company generated positive operating cash flow of A$18.3 million, supported by coal prepayment contracts with major customers, which contributed A$39.3 million in deferred revenue at year-end. Dividends paid to shareholders declined to A$8 million from A$24 million in FY2024, reflecting the cautious capital management approach amid market uncertainties. The company’s franking account balance strengthened to A$76 million, underscoring its capacity to support future dividend payments.

Legal and Regulatory Developments

During the year, TerraCom resolved a legal case with the Australian Securities and Investments Commission (ASIC), resulting in a settlement reflected in the financial statements. The Federal Court dismissed claims against the Managing Director and former directors, removing a significant overhang for the company. This resolution provides a foundation for management to focus on operational execution and strategic growth.

Outlook and Risks

Looking ahead, TerraCom’s growth prospects hinge on the successful development of the Moorlands project and navigating ongoing challenges in South Africa, including logistics and coal supply agreements. Commodity price volatility, foreign exchange fluctuations, and regulatory approvals remain key risks. However, the company’s diversified asset base and strategic partnerships position it to capture value as market conditions evolve.