Saleable coal production for the 12 months to June was 5.9 million tonnes, up 18.7% on 2005, due largely to the expansion of the Wambo open cut and a substantial increase in production from the second production unit at its Chain Valley mine.
The average dollar per tonne coal price increased 12% to $A85.74/t, however, operating cost pressures, mainly resulting from increased cost of fuel and supplies, led to a 12% increase in average cash costs of sales.
Excel’s only operating longwall, Metropolitan, performed well during the year, with saleable coal production steady at 1.5Mtpa.
The company said minor faults were managed without significant impact on production and an efficient longwall change was completed in December 2005. The mine faced increasing cost pressures with operating costs increasing by 12% for the year, excluding the impact of the higher New South Wales royalty rates.
Development at Excel’s North Wambo longwall project continued steadily during the year and remains on schedule to commence longwall production early 2007.
At Chain Valley, underground expansion into the Fassifern Seam progressed on track during the year, with two of the three inter-seam drifts completed and the third well advanced. The expansion will add 20 years to the mine’s life.
“Expansion benefits have more than offset cost pressures at Chain Valley, with operating costs falling by 13% compared with the previous year,” Excel said.
Excel ran into cost blow-outs at its Millennium coal handling and preparation plant project during the year. The final capital cost is now expected to hit $185 million, up from previous estimates of $161 million.
Excel attributed the cost blow-out to “ongoing difficulty in accurately estimating final steel and concrete quantities due to the late completion of detailed engineering and construction drawings by the CHPP contractor. Additional costs have also been incurred due to further delays caused by un-seasonal winter rain.”
The plant is expected to be completed during August with commissioning and first washed coal sales planned for September.
For the 2007 financial year, the headline price for established hard coking coal contracts was maintained by Excel at around $US115 per tonne, “but a wide range of prices have been settled for different coking coal brands”, the company said.
Excel’s long-standing Japanese thermal coal contracts have been maintained at benchmark pricing of around $US52.50/t.
The company has also obtained fixed prices for new European contracts at around $A70/t for between three and four years.
Looking ahead, Excel shareholders will decide the company’s fate in an extraordinary general meeting in early October when they vote will whether to accept Peabody Energy’s takeover offer.
In July, Excel entered into a merger implementation agreement with Peabody for the proposed acquisition by Peabody of all of the shares in Excel via a scheme of arrangement.
Under the Peabody proposal, Excel shareholders will receive $A8.50 cash per Excel share (in addition to the September 2006 dividend of 10.5 cents). The offer values Excel at $A1.83 billion.
