Australian Coal Mine Bought for Under $1 Gearing Up for Full Production

ASX-listed junior miner TerraCom has reopened the coal mine it purchased from Rio Tinto last year.

terracom

Last year, junior miner TerraCom (ASX:TER) made world headlines when it purchased the Blair Athol thermal coal mine in Australia for less than a dollar.

After months of rehabilitation, the mine has reopened and is on track to reach full production by the end of 2017. The Queensland-based mine was closed in 2012 by former owner Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO) after 30 years of production.

Despite its efforts to offload the mine to focus mostly on copper, it wasn’t until last year that Rio Tinto was able to sell Blair Athol for AU$1, around US$0.79. As part of the transaction, the company also gave TerraCom AU$80 million to meet rehabilitation expenses at the site.

“Mining and rehabilitation activities have progressed on schedule to meet the first coal sale timeline,” TerraCom said in a statement on Tuesday (July 18). 

TerraCom subsidiary Orion Mining is on track to deliver first sales as soon as August, the company added. Orion will rapidly ramp up to a 2-million-tonne-per-annum annualized rate in early Q4 2017.

Assuming current prices, up to $80 million in taxes and royalties are expected to flow from the reopened mine, TerraCom board member and Orion Mining chairman Jim Soorley previously said.

“Over the next seven years, we plan to export $1.2 billion in product, assuming current prices, delivering enormous value to TerraCom shareholders,” Soorley addedThe company has also said there will be 150 direct positions at the mine and a further 450 flow-on jobs in the region.

Blair Athol was Queensland’s second coal mine to sell for AU$1 in less than two years. In 2015, the Isaac Plains coking coal mine was sold by Vale (NYSE:VALE) and Sumitomo (TSE:8053) to Stanmore Coal (ASX:SMR) due to low coal prices.

But Australian spot coal prices have been surging since January on the back of supply fears and Chinese demand. In July, prices hit AU$84.20 per tonne, their strongest level since April.

TerraCom’s share price is up 3.57 percent year-to-date and is currently trading at AU$0.02.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

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