TerraCom forecasts ‘significantly improved’ balance sheet for June quarter

Coal miner TerraCom (ASX: TER) is looking forward to a “significantly improved” balance sheet for the June quarter, with a forecast operating earnings before interest, tax, depreciation and amortisation (EBITDA) for the period of $224 million.

Underpinning the higher EBITDA forecast is the expectation that 640,000 tonnes of coal from TerraCom’s Blair Athol mine in Queensland will be delivered during the quarter.

Blair Athol alone is anticipated to generate EBITDA of $180 million for the quarter, while coal production in South Africa will contribute about $44 million.

Coal output from TerraCom’s mines is attracting current elevated prices and this is predicted to continue throughout June.

For the full year ending June 2022, operating EBITDA is forecast to reach $488 million, with Blair Athol on track to sell 2.3Mt of coal during the period.

Additional cash flow

As well as benefiting from the prevailing higher coal price, a US$20 million convertible bond that was issued to Madison Pacific Trust in 2019 will be converted to fully paid TerraCom shares.

The initial noteholder is OCP Asia and TerraCom will no longer have to repay the US$20 million. Following conversion of the bond, OCP Asia will hold about 5% of TerraCom.

TerraCom pointed out it will now have $27 million in additional cash flow, with executive chairman Craig Ransley adding the company’s balance sheet had also significant improved following the repayment of a US$167 million Euroclear Bond.

Dividend

With the strong balance sheet and the forecast June quarter EBITDA, Mr Ransley said the company will be able to recommence dividends to shareholders.

“Based on the forecast, the first dividend to be returned to shareholders is expected to be declared for the period ending 30 June 2022 and estimated to be paid during September 2022.”

He said the company expected to pay an initial unfranked dividend of $0.10 per share.