Construction of the dragline is underway at the open cut truck and shovel mine shared by 50:50 joint venture partners Aquila and Brazilian mining giant Vale.

While the mine achieved total thermal and metallurgical coal sales of 2.48Mt in the recent financial year, mining has centred in the north of the project area.

But the mine has approval to increase its run-of-mine production to 4Mtpa at Isaac Plains North where the dragline will start up.

Under phase two of the underway expansion, mining is due to start up at Isaac Plains South in July 2012.

The mining lease applications are lodged, the environmental impact statement is complete and Aquila said final approvals for the southern area are being negotiated.

While Isaac Plains is on track, Aquila and Vale have not shared the same luck over their shared Eagle Downs and Belvedere longwall projects in the state this year.

At Eagle Downs, the project management team for the 50:50 JV partners stitched up deals to secure 4 million tonnes per annum of port and associated rail capacity to export through Abbot Point in 2013, but Vale unexpectedly pulled out of the arrangements in January.

While Vale favours a port allocation from a proposed expansion of the Dalrymple Bay Coal Terminal, Aquila previously did not expect this additional capacity to be available until late 2016 at the earliest.

Consequently Aquila started legal proceedings in March and is seeking damages from Vale for the expected income from longwall mining at Eagle Downs from 2013.

But there is a possibility that infrastructure woes in the state might be overcome, and at the AGM Aquila noted that mine construction “may” start in 2011 with coal production in 2014.

At the Belvedere project, Vale started legal action against Aquila in September over the fair market valuation for Aquila’s 24.5% stake in this project.

Vale had paid $US92 million in June for private resources company AMCI’s 24.5% share of the project and was hoping to get a similar deal from Aquila.

But given the high acquisition figures in the Australian coal space this year, Aquila wants a higher price for its stake in the project, which holds 3.87 billion tonnes of resources.

Aquila said the matter was expected to come to trial in the September quarter of 2011 and the legal action deferred the appointment of a third “determining valuer” as set out under the project’s JV agreement.

Mine Life senior resources analyst Gavin Wendt provided an independent opinion on the issue to ILN in October.

He said it could be reasonable to expect a higher price than $92 million for Aquila’s stake in the Belvedere longwall project.

He was curious to know why AMCI sold its stake for this amount.

“It’s always interesting with these sorts of projects to work out why is somebody selling and why are they selling at that price,” he said.

Wendt said when the numbers are done on what are “seemingly comparable” projects, and when looking at what others are paying for tonnes of coal in the ground, AMCI seemed to have sold its stake at a significant discount.

“These guys aren’t panic sellers, surely.

“Sometimes you have to offload an asset quickly, but it’s a seller’s market – it’s an intriguing one.”

The Belvedere project is just 7 kilometres northeast of Moura and is close to established infrastructure including rail.

Wendt noted the importance of rail and port access in providing confidence on how much a coal project could be worth.

“Access to infrastructure is the real wild card and is the real variable,” he said.

The prefeasibility study in March confirmed the viability of a 3.5Mtpa coking coal operation for Belvedere, which will increase to 7Mtpa with a second longwall in 2020.

The Eagle Downs project is located immediately downdip from BHP Billiton Mitsubishi Alliance’s Peak Downs mine – which typically sets the premium benchmarks for hard coking coal.

The project also has the scope for a second longwall operation to lift total production to 8Mtpa.

Total resources were 948Mt including 577Mt in the measured category.

There were zero lost-time injuries across Aquila’s coal operations in the recent financial year with no accidents at Isaac Plains.

Aquila shares closed up 3.8% to $9.73 yesterday.