Gloucester said it would renegotiate coal contracts for the current financial year and expected to lock in current coking and thermal coal prices which would provide substantial increases to revenue over the coming year.

“Those [two thermal] contracts represent more than 20 percent of our annual total thermal coal volume and are indicative of the earnings uplift we anticipate from our thermal supply contract renegotiations," Gloucester said.

Like many other producers, Gloucester has assessed its coal mix and has increased coking coal volumes by 21% compared to the July to December period of 2006.

Gloucester this morning announced a half-year net profit to December of $A5.2 million.

While profit was in line with expectations, Gloucester was once again hit by congestion at Newcastle Port which reduced sales volumes by 19%.

Demurrage costs were also high at $A3.20 per tonne.

Supply chain issues losses were also compounded by the higher value of the Australian dollar.

Gloucester expects to produce 1.8 million tonnes for the full year after some operations were affected to a "significant degree" by recent heavy rain.

The company remains on track with the upgrade to its Stratford coal preparation plant – which will increase capacity from 3.2Mtpa to 4Mtpa – due to be completed in 2009-10.

Gloucester has also continued its exploration program and expects to announce an upgrade to resources and reserves in the current financial year.