TerraCom will be playing catch-up to meet FY27 guidance as a slow start to the year’s production at the Blair Athol coal mine leaves it looking at ways to tackle a cash crunch.

Seasonal illness striking workers was among the factors blamed for the operation performing below what was planned, along with recruitment, equipment availability, water management and lower-than-expected coal preparation plant yields.

‘Recently delivered mining equipment, the commencement in July of operations in a new pit and other operational initiatives are intended to increase productivity and operating efficiency,’ the company said in an update to the ASX.

‘As a result, TerraCom maintains its FY2027 production guidance of between 2.0 and 2.2 million tonnes at this time.’

The company said the lower production performance at Blair Athol in the June quarter had resulted in the deferral of some coal deliveries and reduced sales volumes during the period.

This has put pressure on the company’s near-term working capital position.

‘To address this, the company is progressing a number of initiatives designed to provide necessary liquidity and working capital flexibility while it works to overcome its recent operational challenges,’ the company said.

‘The initiatives the company is pursuing include a further coal prepayment arrangement, additional cost reductions and other capital management measures.

‘Discussions in relation to a possible prepayment arrangement, which, if entered into, is anticipated to alleviate near-term liquidity challenges (assuming production returns to planned levels), are well advanced, with term sheets expected imminently.’

TerraCom (ASX:TER) said it would need to explore additional funding solutions to supplement any prepayment arrangement that may be entered into in order to strengthen its balance sheet and reduce liquidity risks.

‘Management remains focused on restoring Blair Athol’s operating performance, improving productivity and maintaining appropriate financial flexibility as production builds through FY2027,’ the company said.

TerraCom was debt-free at the time of the announcement (excluding lease commitments), having fully repaid a coal prepayment arrangement entered into in April 2025.

Blair Athol produces high-quality, low-impurity thermal coal exported mainly to Japan and South Korea for power generation and to India’s sponge iron market.

The mine is coming out of a difficult year in FY26, when coal sales came in at about 1.45 million tonnes – below the prior year (1.54Mt) and the 1.6Mt sales guidance maintained through the year.

The March 2026 quarter was the weakest, with sales falling to 253,000 tonnes as heavy Central Queensland rainfall disrupted mining and rail.

While the June quarter recovered to 390,000 tonnes, equipment and workforce availability continued to constrain output.

A third 350-tonne excavator is now on site, operating in a dedicated pit to complete pre-strip work, supporting FY27 coal sales guidance of 2.0 to 2.2 million tonnes.

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