At Quinsam, Hillsborough has amended the planned production for 2009 to 435,000 tonnes at $C72-75 per tonne free-on-board.

Deliveries for the year are expected to be in the range of 385,000-455,000t at $84-87/t based on current contracts, including 194,000-223,000t of international shipments at an average price of $106-110/t.

The company noted there were several cost-reduction initiatives on the cards for Quinsam, including a revision of the mine plan to maximise extraction from thick seams.

Hillsborough also anticipates a rise in the proportion of depillared coal this year versus 2008.

New mining equipment purchased last year is now fully in place at the mine and is leading to increased fleet availability and efficiency.

The company has also filed an updated NI 43-101 technical report on the Quinsam North project after completing eight additional holes that were drilled last year.

“The new study verifies the presence of 23.797 million tonnes of measured coal resources, with an additional inferred resource of 1.498Mt,” Hillsborough said.

“The additional drillholes confirmed that the Quinsam North coal resources correlate directly to the Quinsam No. 4 coal seam, which is the subject of detailed mine engineering and permitting at the company's 7 South deposit, an advanced stage development area within the present Quinsam mining block.

“At this time, management feels that focus should remain on developing the 7 South deposit due to its proximity to existing infrastructure.”

Hillsborough expects the quality of coal at 7 South to “greatly” contribute to the development of Quinsam North.

On the financial front, the Canadian producer has reached an in-principle agreement on revised terms in its 2008 contract with commodities trader Vitol.

The agreement outlines an additional 700,000t of Quinsam coal to be shipped at a base price of $C80/t ($US69.72/t) on top of the 68,294t delivered in January 2009 for $US130/t.

Hillsborough said price adjustments for quality had been revised to its favour.

Two more shipments totalling approximately 70,000t were still planned for this year, and the remaining tonnage included in the deal would be shipped between January 1, 2010, and December 31, 2012, under a tentative schedule of up to three shipments annually.

“In consideration of Hillsborough's acceptance of the revised contract terms, Vitol will cancel and forgive approximately $US16 million of debt owed by Hillsborough and its affiliates, pay to Hillsborough approximately $US3 million in cash and continue to provide Hillsborough with a line of credit in the amount of $C6 million,” the producer said.

Hillsborough noted the agreement was subject to its corporate restructuring as well as mandatory approvals.

Progress has also been made on the sale of Crossville Coal, for which Hillsborough signed a memorandum of understanding agreement last March with an undisclosed Tennessee contracting company.

The final agreement for the assets of Crossville was subject to the retainment of a fly ash disposal contract at the mine, with the first step of permitting for fly ash disposal already achieved.

“On June 15, 2009, the commissioners of Cumberland County, Tennessee, approved a resolution which clears the way for a company to seek a permit to use the minesite as a monofill site for coal fly ash,” Hillsborough said.

The agreement will see Hillsborough receive $US3.15 million of Crossville’s bond on the assumption of all past and future reclamation liability at the mine.

Finally, the Canadian producer has a 13.36% stake in Peace River Coal Limited Partnership, which it said is likely to be cash positive for the remainder of the year.

"With the accelerated cash receipts from Vitol, solid sales and projected improvements at the Quinsam mine, the forecast self-funding of the corporation's interest in Peace River Coal, and the anticipated sale of the Crossville mine, Hillsborough Resources expects improved financial performance for 2009," company president David Slater said.

"This positive outlook provides a foundation to continue our efforts to improve efficiencies and grow the company through expanding existing operations, developing current projects and pursuing opportunities such as acquisitions and partnerships."