The Rio Tinto subsidiary is aiming for 5-6 million tonnes per annum run of mine, with low-cost development to start from a highwall in the South Pit.

In a presentation made by Coal & Allied managing director Bill Champion this morning, he noted that an order of magnitude study was complete and that the underground mining option would increase semi-soft coking coal production, plus extend the MTW mine life.

More exploration is underway to upgrade the existing underground resources into the categories required for a feasibility study.

Coal & Allied will need to gain a new development consent and mining lease for this underground project, and intends to start up an environmental assessment for this plan in 2011.

The company anticipates it could start prefeasibility studies in early 2012.

Coal & Allied’s Warkworth extension project is currently under assessment by the New South Wales government, but some details about the underground options were revealed during the consultation process for this open cut project.

In a response to submissions report prepared by EMGA Mitchell McLennan and released in August, the consultancy revealed the total in situ resource within the proposed Warkworth open cut extension area which could be mined by underground methods.

The Woodlands Hill, Bowfield and Mount Arthur seams totalled 39.9Mt and the product yield from longwall mining of this resource is expected to be 20.1Mt.

“In adjacent mines, such as Beltana Underground, the Whybrow seam has been mined by longwall methods,” the consultancy said.

“However, this seam is only developed in the western parts of Warkworth mine, has a high inherent ash content and is split into several seams with individual splits generally less than 1.5-metres thick.

“Likewise, the Blakefield seam [also extracted at Beltana Underground] consists of several split seams interbedded with clay bands. The splits of the Blakefield seam range in thickness from 0.4 metres to 1.9-metres thick at Warkworth mine.”

In the environmental assessment for the project, the consultancy said there was also potential for underground mining outside of the Warkworth extension area but this was subject to further investigations.

The Warkworth extension aims to provide a further 21 years of mine life.

Importantly, land in the lease area is owned by the mine and not used for agricultural purposes.

Coal & Allied had long complained about capacity constraints at Newcastle, but the shift to a long-term contractual framework has opened up expansion opportunities for its dragline operations.

Coal & Allied owns 80% of the Mount Thorley mine while steelmaker Posco owns 20%.

The company owns 55.57% of the Warkworth joint venture through two subsidiaries.

Mitsubishi Development owns 28.9%, Nippon Steel owns 9.53% and Mitsubishi Materials owns 6% of this JV.

Coal & Allied shares are up 6c to $11.052 this morning.