Liquidity Boost for TerraCom Follows Half-Year Loss and Production Challenges

Financial Performance Under Pressure

TerraCom Limited (ASX: TER), an Australian coal mining company with operations spanning Australia and South Africa, has reported a challenging half-year financial performance for the six months ended 31 December 2025. Revenue fell 11% to $98.6 million, driven by a 21% decline in average coal prices despite a modest 13% increase in sales volumes. The company swung to an EBITDA loss of $7.0 million, a sharp reversal from a $15.2 million profit in the prior corresponding period.

The net loss after tax attributable to TerraCom shareholders was $13.8 million, compared to a profit of $3.1 million a year earlier. This downturn reflects the combined impact of lower commodity prices, supply chain disruptions, and a shift in production mix towards bypass coal, which affected overall margins.

Operational Highlights and Challenges

Coal production declined by 16% to 4.2 million tonnes on a total basis, with South African operations particularly impacted. Despite the production drop, coal sales remained relatively stable at 3.2 million tonnes, supported by long-term contracts and steady demand from key customers such as Eskom in South Africa.

The Blair Athol Coal Mine in Queensland, a core asset for TerraCom, continues to operate with a remaining mine life of approximately eight years. The company is advancing the Moorlands development project in partnership with Wintime Energy Group, aiming to leverage Blair Athol as a processing hub. However, operational disruptions and lower thermal coal prices have weighed on near-term performance.

Capital Raising to Strengthen Liquidity

In response to the financial pressures, TerraCom undertook a partially underwritten renounceable rights entitlement offer in late 2025, raising gross proceeds of approximately $60 million. The equity raising was completed in January 2026, issuing around 1 billion new shares and netting $56.3 million after costs. This infusion has significantly bolstered the company’s liquidity and working capital, addressing outstanding creditor obligations and supporting ongoing operations.

No dividends were declared for the half-year, reflecting the company’s focus on preserving cash amid the challenging market environment. Cash and cash equivalents stood at $6.4 million at period end, supplemented by restricted cash of $54.5 million.

Outlook and Strategic Positioning

TerraCom’s management remains cautiously optimistic, maintaining the going concern basis for financial reporting supported by the capital raise and a cash flow forecast extending to March 2027. The company plans to ramp up production in the second half of the fiscal year to normal levels, aligning costs with forecast coal sales.

While no impairments were recorded despite some indicators, the company continues to monitor commodity price trends and operational risks closely. Safety metrics showed a slight deterioration, with lost time injury frequency rates increasing marginally, underscoring the ongoing focus on workforce wellbeing.

Strategic partnerships, including the Moorlands project with Wintime Energy Group, remain central to TerraCom’s growth ambitions, aiming to enhance processing capabilities and extend asset life. However, the company faces headwinds from global coal market volatility and supply chain constraints that will require careful navigation.