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TerraCom looks beyond Mongolia

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World Coal,

ASX-listed operator of the Baruun Noyon Uul metallurgical coal mine in Mongolia, TerraCom, is considering options to expand its business through acquisitions in Australia and Indonesia, according to a recent company announcement.

“In order to support the growth and expansion of the company and to de-risk from a single mine and single country operators, TerraCom continues to evaluate cash generative assets for potential acquisition,” the company said.

The assets under consideration include a mature mining operations currently in care and maintenance in Queensland, Australia, and a coal mining operation in Indonesia capable of producing 500 000 5py of hard coking coal.

Supply chain optimisation

Meanwhile the company is working to optimise its supply chain in Mongolia, which it hopes will lead to “substantial improvements” in cash margins and profitability with benefits expected to be realised within 1H16. The work will see the company switch to processing coal onsite, saving on VAT and transport cost, as well as improving yield and product quality control.

Financial restructuring

The company also said that it has made “significant progress” in restructuring its balance sheet, reaching agreement with its existing note holders to invest in a new five-year interest-only bond that would require no cash payments until 23 December. It has also secured a new loan of US$5 million from its existing note holders that replaces a proposed AU$7 million equity placement to SPG Investment Holdings.

The new loan “not only provides the company with important additional working capital but also avoids the shareholder dilution that would have occurred had the placement to SPG gone ahead,” the company said.

In addition, the company has received conversion notices from holders of 50% of its convertible notes and issues corresponding shares to the converting parties, reducing the company’s total debt by US$5 million. The remaining holders of convertible notes will be incorporated into the new bond – extending the term of this debt and eliminating the prospect of shareholder.

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