Australian regulator broadens coal quality probe into TerraCom, ALS

MELBOURNE, May 27 (Reuters) - Australia’s financial services regulator has broadened a probe into miner TerraCom and assayer ALS Ltd over inflating coal quality in export documentation, information provided to an Australian Senate committee showed.

The alleged fraud first came to light as part of an unfair dismissal suit lodged by a former TerraCom employee, who said that the miner had worked with ALS to falsify export certification to increase the quality of its coal exports.

That sparked an internal review by ALS, one of the world’s biggest assayers, which found that about half the certificates it provided for coal export samples over the past decade had been altered to improve the quality.

Australia is the world’s biggest coal exporter, and the scandal has cast a pall over the A$28 billion ($21.69 billion) industry.

After ALS released its findings last year, South Korean utility Korea South-East Power banned ALS from certifying its coal tenders.

The investigation into TerraCom has been widened to include possible contravention of a regulation protecting whistleblowers, according to information provided by the Australian Securities Investments Commission (ASIC) to the Senate Economics Legislation Committee.

That information also showed ASIC was investigating ALS for possible criminal fraud.

TerraCom executives did not respond to telephone calls and an email requesting comment but it has previously said it was cooperating with authorities in what was an industry-wide probe.

ALS declined to comment but has said it terminated the employment of those involved, and has overhauled its practices.

ASIC declined to provide information around whether it was investigating any other companies as part of the probe.

The watchdog has also lengthened the period of its review for TerraCom to more than three years, and for ALS to 12-1/2 years from an initial period of 17 months.

ASIC searched TerraCom’s offices with police assistance in March.

TerraCom, which has repayments on $200 million of debt falling due at the end of June, said in April that it was close to reaching a refinancing deal with two parties.

Terracom has operations in South Africa and Australia, where it has one mine - the Blair Athol coal mine purchased from Rio Tinto for A$1 in 2017.

$1 = 1.2910 Australian dollars Reporting by Melanie Burton; Editing by Simon Cameron-Moore