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TerraCom refutes claims it cannot afford to operate Rio Tinto's Blair Athol coal mine

TerraComLtd. has hit back at claims that it was "financiallydistressed" and did not possess the experience to rehabilitate large-scaleopen cut coal mines.

Earlier in July, it was revealed that a wholly owned subsidiaryof TerraCom, Orion Mining PtyLtd., will acquire Rio Tinto's Blair Athol coal mine in Queensland, Australia for justA$1 and as part of the deal will receive A$80 million to cover therehabilitation liability.

TerraCom said July 15 that it has the financial capabilityto operate the mine after recently refinancing its debt and the A$80 millioncash is sufficient to cover the cost of rehabilitating the mine.

The Institute for Energy Economics and Financial Analysisreportedly estimatesthat rehabilitation costs could range from A$100 million to A$300 million.

"The Queensland government completed a full assessmentof the rehabilitation liability in November 2015. This is the basis for the[A]$80 million financial assurance," TerraCom said in response.

Anti-mining lobby Lock The Gate Alliance has written tothree state ministers calling on them to block the sale of the Blair Athol mineto TerraCom following a similar attempt by Rio Tinto to the mine to the now bankrupt Linc Energy Ltd. in 2013.

"TerraCom is in a distressed state financially due toits huge debt and is in a worse financial state than Linc was when thegovernment blocked that sale," Rick Humphries, coordinator of Lock theGate's Mine Rehabilitation Reform Campaign, said.

"In addition, Terracom has no demonstrated experienceor capacity to rehabilitate large scale open cut coal mines such as Blair Atholwhich is a complex, very high risk site."

However, TerraCom argued that its senior executive team hasin excess of 150 years of experience in the mining sector managing andoperating large coal mines around the world.

Once the Blair Athol mine acquisition is completed, TerraComplans to begin over 50 hectares of site rehabilitation while bringing the mineback into production.

Coal mining will start at a rate of 2 million tonnes perannum, with production forecast to begin in the final quarter of this year.

TerraCom is also investigating the potential acquisition ofa 500,000-tonne-per-annum hard coking coal mine in Kalimantan, Indonesia.