Tunnelling of the Narrabri stage one access drifts has encountered unfavourably soft material, slowing progress.

Whitehaven estimates it will intersect the coal seam in late March but the timing remains subject to ground conditions.

The conglomerate immediately above the coal seam has been reached in two of the three drifts. The development team expects to be able to penetrate it with roadheaders, though it is possible drilling and blasting may be required.

The company said the setback in accessing the coal seam was likely to cause a delay in obtaining first longwall coal from the mine.

It has also blown out development costs. While all other aspects of stage one remain on budget, tunnelling has ballooned the budget to $A215 million. Stage two of the project is still expected to cost $300 million.

The Narrabri longwall, ordered in September last year, is due for delivery late this year with installation early 2011.

Recruitment has begun for an underground workforce of about 60 employees.

Whitehaven said the delay would not affect its ability to use its NCIG capacity with first coal to be shipped in March, ramping up to 2.5 million tonnes per annum by the end of this year.

The company said port capacity of 3.6Mtpa out of Port Waratah Coal Services left it constrained during the December quarter.

Whitehaven continued its open cut expansion in the December quarter with record run-of-mine coal production of 970,000t, up 41% year-on-year.

Record saleable coal production was 920,000t, up 36%.

Coal sales were 1.183Mt for the quarter, including 249,000t of purchased coal.

The Tarrawonga, Werris Creek, Rocglen and Sunnyside mines are on track to achieve target production levels of 5.5Mtpa of saleable coal.

During the quarter Whitehaven ordered new and second-hand mining equipment.

A new Hitachi EX3600 excavator and second-hand Cat 785 rear dump trucks were delivered to Werris Creek in late December. More equipment, including a drill, bulldozers, a grader and a front end loader will be delivered early this year.

A tender for the upgrade to 550Mtpa for the Gunnedah coal handling and preparation plant was issued in December.

Whitehaven was trading down 1.46% mid-morning today at $4.71.