The New South Wales producer managed to increase its raw coal production 13% year-on-year to 1.1 million tonnes in the December quarter, but this outcome was 650,000 tonnes short of expectations.

To meet fixed-price legacy contracts struck with trading companies back in 2005-06, Whitehaven lost $25 million through purchased coal and cash settlements.

The Gunnedah Basin miner said it purchased about 1.18Mt of thermal coal in the last half of calendar year 2010, while 715,000t of thermal contracts were cash settled.

The company expects around 0.8-1Mt of coal to be purchased or settled for the remaining life of the legacy contracts, with most of this to occur over the next few months.

Using a market price average of $US130/t for purchased coal, the average contract selling price of $US68/t for the legacy contracts means this shortfall could generate an additional $35-40 million loss after tax.

Whitehaven notched this up as a future loss provision for the half-year, and expects to post a net profit after tax and significant items of $7-17 million for this financial year.

The company’s four open cut mines lost about 3800 operating hours in the last six months of 2010, nearly four times more than the corresponding period of 2009.

Whitehaven also had to purchase premium thermal coal as the Werris Creek mine was most severely hit by the wet weather.

The low-ash thermal coal from this mine is usually blended with coal from Whitehaven’s other mines in the region.

Flooding in Queensland and general wet weather in the Hunter Valley of NSW compounded the difficulties by pushing up coal prices.

Narrabri development

Delivery of the Bucyrus longwall equipment is underway with first longwall coal slated for December.

Sedgman is building the coal handling and processing plant for the new mine which includes a dense medium cyclone to transform up to 40% of production into a higher-priced pulverised coal injection product.

A third continuous miner unit was commissioned underground in the fourth quarter with 44,000 tonnes run-of-mine produced.

Whitehaven is still facing difficulties in recruiting experienced underground miners.

“However, the situation is improving and manning levels are increasing,” the company said.

“A contract has now been awarded for mine services and the provision of a fully manned fourth continuous miner. This will supplement development during 2011 as Narrabri builds up its permanent workforce.”

Whitehaven is satisfied with its gas drainage model for the gassy mine and will continue surface to in-seam and underground in-seam drilling to drain gas from coal ahead of mining.

Vickery and NCIG update

Whitehaven’s Vickery semi-soft coking and thermal coal project holds 294.7Mt of resources with 272.7Mt suitable for open cut mining.

Work has begun to set a marketable reserve and the company is aiming to develop a 5Mt per annum mine for a life of 20 years.

Construction of the second stage of the Newcastle Coal Infrastructure Group terminal is underway and expected to be finished in mid-2012 for capacity of 53Mtpa.

Whitehaven said the final feasibility for the third-stage development was complete with construction to begin in mid-2011 to boost throughput to 66Mtpa in 2013.

But the terminal is still restricted to Panamax-size vessels.

BHP Billiton is expected to complete dredging work to accept larger Cape-size vessels “later in 2011”

Under Whitehaven’s production goals, its four NSW open cut mines are expected to achieve up to 5.5Mtpa of saleable production by 2013 while Narrabri is slated to reach about 6Mtpa.

Whitehaven shares closed up 4c to $7.04 yesterday.