Higher prices push TerraCom to truck thermal coal

TerraCom expects its Australian thermal coal exports to fall in the 2022-23 fiscal year to 30 June, but aims to increase exports from its South African operations as higher prices make it economic to truck coal to ports.

TerraCom expects to export 2.2mn t from its Blair Athol mine in Australia's Queensland in 2022-23, down from the 2.3mn t it shipped in 2021-22. It has fully sold all Blair Athol coal until October and has just 450,000t of unsold expected production for November-June, which it plans to sell on the spot market.

It received an average of A$402.90/t ($280/t) for the 624,000t in sold during April-June, which was up from the 612,000t it sold for January-March. The high received price allowed Terracom to report a cash margin of A$250/t for April-June based on cash costs of A$96.80/t, as inflation sweeps across Australia's mining sector. The firmer earnings have allowed TerraCom, which was facing refinancing problems a year ago, to pay down all debt and look to make an initial dividend.

The firm paid an average of A$26.40/t in royalties at Blair Athol during 2021-22, up from around $4.40/t the previous year. It faces further royalty increases this year after the Queensland government raised its rates.

TerraCom exported 1.51mn t of thermal coal from South Africa for 2021-22 and sold 5.15mn t domestically on a managed tonnes basis, which was roughly in line with the previous year.

It aims to increase export sales from South African but is struggling with supply chain constraints. It has begun hauling coal by truck to the port, with the higher costs offset by firmer seaborne prices. Domestic sales to South African state-owned utility Eskom have stabilised and TerraCom expects to deliver its contracted tonnage for 2022-23.

Argus last assessed the high-grade 6,000 kcal/kg NAR thermal coal at $409.27/t fob Newcastle on 22 July, up from $383.82/t on 1 July but below a peak of $425.90/t on 20 May. It assessed lower grade 5,500 kcal/kg NAR coal at $199.68/t fob Newcastle on 22 July, up from $188.73/t on 1 July but down from a peak of $287.15/t on 11 March.

TerraCom sells Blair Athol coal to Japanese and South Korean energy markets and the Indian sponge iron market.

By Jo Clarke

Australian thermal coal prices ($/t)