The TerraCom (ASX: TER) share price is soaring almost 19% today following the company’s release of an operational update. Here’s the lowdown.
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TerraCom is a resource company with a large portfolio of assets in Queensland as well as in South Africa. The business is currently undergoing a growth strategy to become a mid-tier player in the coal industry.
What’s driving the TerraCom share price?
The TerraCom share price is rocketing higher today, with investors clearly happy about the way the company is operating.
According to its release, TerraCom is continuing to deliver a robust performance at its Blair Athol coal mine in Australia.
Following the transition in July to become owner-operator of the mine, TerraCom highlighted that free on board (FOB) costs have significantly reduced. Original forecasts estimated that FOB costs would decrease by 17% to $59 per tonne. The company revealed that these savings have been achieved and maintained over the last four months. In perspective, this places the Blair Athol mine within the first quartile of seaborne export FOB operating costs per tonne.
TerraCom noted that the thermal coal market has experienced some challenges in recent times. In light of this, the company said its hard work to deliver cost savings has paid off as the demand and price for coal recovers. Since 1 July, the Newcastle thermal coal index has advanced by more than 45% to register at US$76 on Wednesday.
As a result of the improving conditions, TerraCom anticipates recording strong earnings before interest, tax, depreciation and amortisation (EBITDA) margins for Blair Athol.
Across the Pacific in South Africa, the company discussed its strategic acquisition of Universal Coal in June. TerraCom highlighted that the takeover allowed it to diversify its coal sales mix from the domestic market to international exports.
Furthermore, TerraCom is projecting its first full shipment of thermal coal from South Africa to an overseas buyer next month. The milestone achievement is expected to mark the beginning of increased export sales for the company.
What did the CEO say?
TerraCom CEO Mr Danny McCarthy commented on the company’s coal sales. He said:
The coal sales achieved year to date continue to be positive regardless of the ongoing market challenges. Based on an annualised assessment the Company is well positioned to achieve annual coal sales of approximately 9.9 Mt, consistent with FY2020.
With low-cost mining already implemented at Blair Athol, the Company is well positioned to deliver stronger EBITDA results as coal pricing continues to improve.
TerraCom share price summary
The TerraCom share price reached a 6-month high today, hitting the 20-cent mark in earlier trade. Despite this positive milestone, TerraCom shares remain almost 50% lower in year-to-date trading.
Based on the current TerraCom share price, the company has a market capitalisation of around $124 million.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.