THE ramp-up to annual production of 1.5 million tonnes of coking coal production was expected to be completed by TerraCom Limited by the end of 2015 at Baruun Noyon Uul (BNU) mine in the South Gobi region. Until recently TerraCom was known as Guildford Coal with the name change forming part of a strategic review of the ASX-listed company.

During the September quarter stripping of overburden was completed at BNU Pit 2 and mining of the coal in this pit has commenced.

The Mongolian team has been focusing on driving down total production costs with some impressive results. Unit Direct Cost for Total Material Movement achieved for the September quarter was US$1.89 per cubic metre.

The direct cash cost positive margin on hard coking coal product from BNU was forecast to be between US$9 and US$11/tonne during the December quarter.

Strong operational performance has maintained forecast margins despite continued weakness in coking coal markets. Lower product yield has been reviewed and alterations to the Ceke coal beneficiation plant configuration and process are being considered to sustain and improve product yield performance. This is critical to sustaining and improving the BNU mine forecast product margin.

The Terra Energy team in Mongolia has also managed the conversion of the adjoining Khar Servegen exploration licence into a mining licence which is expected to add value and increase the life of BNU operations. Detailed work for the staged development of this project is being completed including coal quality review, data analysis, model analysis and compliance review. Planning has been put in place to expedite mining.

Mining licences have also been sought for three other areas in the South Gobi.

As a consequence of continuing weak global market conditions, volatility in the resource market has become the norm, and is presenting significant economic and funding challenges for TerraCom, which has remained focused on delivering the recommendations of a strategic review completed in early 2015.

A critical aspect has been restructuring of finances to reduce the debt burden and exploring alternative funding options. The review also involved rebranding with the company believing the new name better reflects its strategic direction.

Other recommendations include a potential listing on an Asian stock exchange while the company’s Brisbane corporate office in Queensland was closed in July 2015 and relocated to Townsville, which resulted in a reduction in staffing levels.

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