TERRACOM LIMITED QUARTERLY REPORT
FOR THE QUARTER ENDED 31 MARCH 2016
TerraCom Limited ("TerraCom" or the "Company") (ASX: TER) is pleased to present its quarterly activities report for the period ended 31 March 2016.
HIGHLIGHTS
- 2015 Strategic Review implementation progressing across operational and corporate levels as summarised as follows:
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Balance Sheet Restructure
- Existing Note Holders Debt Rolled for 5 Years at a face value of approximately US$76 million.
- Secured a new loan of USD$5 million from its existing note holders.
- Existing working capital facility of US$41 million has been extended to 23 December 2016 and discussions underway to roll this into the 5 Year facility.
- US$13.2 million interest and deferral fees irrevocably waived.
- US$5 million CN converted from debt to equity.
- US$1.1 million outstanding interest paid by additional equity in TerraCom.
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Mongolia
- The Baruun Noyon Uul (BNU) coking coal mine in Mongolia continued its very impressive safety record of No Lost Time Injury (LTI) since inception. The project has now recorded 1.6 million man hours without an LTI.
- During February & March TerraCom's Mongolian subsidiary Terra Energy LLC has progressed rapidly on the installation of an alternative supply chain with a number 2 of key milestones already achieved. First coal is forecast to be washed in early April 2016.
- In the first quarter of 2016, TerraCom's Mongolian subsidiary Terra Energy LLC (Terra Energy) has been granted four new exploration licenses by the Minerals Resource Authority of Mongolia (MRAM).
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Business Development
- Positive progress made on potential acquisition of cashflow positive assets in Central Queensland and Indonesia to supplement cashflow and de-risk TerraCom from single mine company
CORPORATE STRATEGY AND OPERATING ENVIRONMENT
As a consequence of the continuing weak global market conditions during the Quarter, volatility in the resource market has become the norm. This is presenting significant economic and funding challenges for TerraCom.
In the face of these challenges, the Company has remained focused on delivering both the corporate and operational recommendations of the strategic review of the Company which was completed in early 2015.
RESTRUCTURE OF BALANCE SHEET
TerraCom, along with its advisors and principal financiers have worked tirelessly to restructure the Company's existing financing facilities; generate new finance opportunities; and generate additional share equity with investors. The Company has made a number of ASX announcements during the quarter which resulted in the completion of the Restructure of the Balance Sheet during Q1 2016. Binding term sheets have been executed, and long form documentation will be finalised during the coming quarter.
EXISTING NOTE HOLDERS DEBT ROLLED FOR 5 YEARS
Further to the binding term sheet executed on 23 December 2015, the Company is in the process of issuing secured unlisted bonds (the Bonds) with OCP with a face value of approximately US$76 million. The term of the Bonds is 5 years with no principal repayments throughout this period (a bullet repayment at the end of the term). Interest of 12.5% p.a. is payable on a semi-annual basis, of which the Company has the option to capitalize up to 50%. Bondholders are also entitled to a royalty payment of between 0.75% and 1.75% of adjusted mine gate revenue. The Bonds are to be repaid at face value upon maturity.
This transaction will result in the reclassification of US$ 63.4 million (AU$ equivalent at 31 December 2015 was $86.8 million) from current liability to non-current liability.
NEW LOAN SECURED
Secured a new loan of USD$5 million from its existing note holders, which will replace the previously envisaged AUD$7 million equity placement to SPG Investment Holdings Ltd (SPG). This not only provides the Company with important additional working capital, but also avoids the shareholder dilution that would have occurred had the placement to SPG gone ahead (583.3 million shares were to be issued to SPG representing circa 25% of the shares currently on issue).
The additional loan has been made available immediately on a short-term basis and will ultimately form part of the Bond described above.
EXISTING WORKING CAPITAL FACILITY REPAYMENT EXTENDED TO DECEMBER 2016
The working capital facility of US$ 41 million has been extended to 23 December 2016 in line with ongoing coal sales and supply chain program; this includes interest and principal payments deferred to this repayment date. The Company is in discussions to also roll this debt into the 5 year Bond facility and is working in parallel on other re-financing options and/ or a new working capital facility to further recalibrate this debt and match the broader plans of the Company.
US$ 13.2 MILLION INTEREST AND DEFERRAL FEES IRREVOCABLY WAIVED
The Company has agreed to enter into a letter agreement with the trustee of the Amortising Notes and Convertible Notes whereby all interest and fees accrued but not yet due and payable or any unpaid interest and fees accrued on these instruments will be irrevocably waived. This transaction will significantly reduce current liability by US$ 13.2 million (equivalent at 31 December 2015 was AU$ 18.1 million).
US$5 MILLION CONVERTED FROM DEBT TO EQUITY
On 29 January 2016 50% of the convertible note holders elected to convert their debt to ordinary shares. The ordinary shares were issued at a conversion price of $0.0069 per share, and were issued to Rastas Limited, Acecrest Investments Limited and Island Sands Corporation. The convertible notes had a face value of US$5 million. Upon conversion 1,023,066,046 new ordinary shares were issued, reducing the Company's debt by a corresponding amount.
This transaction resulted in the reclassification of US$5.0 million (equivalent at 31 December 2015 was AU$ 6.8 million) from current liability to equity.
US$1.1 MILLION OUTSTANDING INTEREST PAID BY ADDITIONAL EQUITY IN TERRACOM
On 29 January 2016 the Company issued ordinary shares in satisfaction of US$1.1 million of unpaid interest and deferral fees in respect of the convertible notes owing to OL Master (Singapore) Limited. 221,489,379 ordinary shares were issued at a conversion price of $0.0065 per share.
ISSUE OF NEW DETACHABLE WARRANTS
At the Company's EGM held in October 2015 shareholders approved the issue of new detachable warrants (126,308,306 detachable warrants) to the holders of the Amortising Notes and Convertible Notes, as well as the cancellation of the previously issued detachable warrants (66,762,962 detachable warrants). During the quarter the long form documentation was finalised and lodged resulting in the issuing of the new, and cancellation of the old, detachable warrants.
The new detachable warrants expire 5 years from the earlier of 31 October 2015 or the date of additional capital raising, with a conversion price based on the trading price of the Company's shares for the first month of issuance.
EXTRAORDINARY GENERAL MEETING (EGM)
On 12 January 2016 the Company held an EGM whereby shareholders approved the private placement of shares to SPG Investment Holdings Ltd (SPG) and share issue to Morning Crest Capital Ltd (Morning) pursuant to the conversion of convertible notes.
Notwithstanding this, the Company was unable to satisfy the CP's prior to the conditions end date and accordingly SPG exercised its rights under the agreement to terminate the agreement and withdraw from the private placement. As a result of the SPG placement not going ahead Morning did not complete their acquisition of US$5 million of the convertible notes facility.
CHANGE IN COMPANY SECRETARY
During the quarter Nathan Boom replaced Tony Mooney as Company Secretary. Nathan started with the Company in July 2015 as Financial Controller and will also continue in this role.
POTENTIAL ASIAN STOCK EXCHANGE LISTING
TerraCom also continues to investigate the merits and mechanisms for a potential listing on an Asian stock exchange, a crucial recommendation of the strategic review. A regional hub in Singapore is providing logistics and marketing support to the Company.
OPERATIONS - MONGOLIA BNU
Terra Energy has established a world class high quality coking coal mine (BNU) in the South Gobi throughout 2015 & 2016.
The mine delivered staged volume increases to attain the production target of 125,000 tonne per month (1.5Mtpa annualised) in the last quarter of 2015. These volume increases placed stress on the third party trucking and washing capabilities, leading to a review of the capacity and suitability of the existing supply
TerraCom Limited issued this content on 02 May 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 01 May 2016 23:03:21 UTC. Original document available at http://terracomresources.com/wp-content/uploads/2016/05/16-03-31-Qrtly-Report-App-5B-v2.pdf |
