TerraCom in trading halt as it races to refinance loans

TerraCom’s main Australian asset is the Blair Athol Coal Mine in Queensland that is considered a strong performer in the sector.

BHP’s sale of its Colombian mine to Glencore and Emeco’s successful bond raising last week are expected to be welcome news for distressed coal miner TerraCom, which is racing against time to refinance its loans.

TerraCom was placed in a trading halt on Monday for up to two days as it tries to convince its lenders, Hong Kong-based commodity trader Noble Group and OCP Asia, to extend Wednesday’s debt repayment deadline.

The situation is typical of coal companies in the current climate where they are unable to gain funding from mainstream Australian banks due to concerns about the impact of the commodity on the environment.

This is despite the fact that thermal coal and metallurgical coal prices are soaring, now at about $US132 and $US172 a tonne, respectively.

Earlier, special situation funds Oaktree Capital Management, Anchorage Capital, Carlyle and Apollo were considering a refinancing deal, along with a strategic investor, but it is thought that they are no longer at the negotiating table.

However, two positives for TerraCom is that BHP announced on Monday that it had found a buyer for its 33.3 per cent stake in South American coal mine Cerrejon, with existing owner Glencore scooping up the interest for $US294m ($387m) while also buying an interest of the same size from Anglo American, which was advised by Standard Chartered.

BHP was believed to be working with JPMorgan on the sale and will take an $US80m impairment on the divestment for the second half of the 2021 financial year.

Also good news for TerraCom is that Emeco, which generates 43 per cent of its mining services revenue from the coal sector, was met with overwhelming demand last week when it tapped the Australian bond market for $250m, pricing senior secured notes at 6.25 per cent.

TerraCom has operating assets in Australia and South Africa and is looking to refinance debt worth $220m. Its main Australian asset is the Blair Athol Coal Mine in Queensland that is considered a strong performer in the sector, given that the mine has the lowest production costs in the country.

It is understood that OCP had earlier been prepared to roll over about $80m of the debt, but Noble has challenges elsewhere and is believed to be keen to move on from TerraCom.

The Blair Athol mine produces 2.7 million tonnes per annum of high-quality thermal coal that is exported to markets including Japan and Korea.

TerraCom also owns Universal Coal in South Africa that holds a portfolio of producing, development and exploration assets across South Africa’s major coal fields.

TerraCom’s market value is $83m. Its shares last traded at 11c. Overall, the company generated a $52.3m loss for the six months to December.

Meanwhile, coal company New Hope is believed to have been let back into the contest for BHP’s Australian coal assets after it earlier did not make it through to the second round. It joins Elliott Management and Indonesia’s BUMA and Sinar Mas.

Final bids are due shortly for the Mt Arthur thermal coal mine in NSW and metallurgical coal mines it owns in Queensland as part of an alliance agreement with Mitsui Coal known as BMC.