Located 70km north of Gunnedah and 25km south of Narrabri in New South Wales, Whitehaven's Narrabri thermal coal project will be developed in two stages.

The $A150 million Stage 1 of the project, with was granted approval in November, has now kicked off with construction of the intersection with the Kamilaroi highway beginning in January.

Weather permitting, the road work - which includes slip lanes off the highway and over the railway line onto the mine site - will be completed by the end of this month.

Also starting later this week is the construction of the access road onto the mine site.

While Stage 1 of the underground mine will use bord and pillar extraction methods, Whitehaven will first construct a box cut. Using its own team, the 34 metre deep box cut will be created using a hired excavator from one of the company's other open cut mines, and hired trucks especially for the project.

Once the box cut is completed by the middle of next year, local contractor LD Operations (LDO) will move onto site to drive drifts from the bottom of the box cut.

LDO will construct three drifts; one intake tunnel for the conveyor belt, one intake tunnel for the transport road, and one return tunnel with a fan on the surface.

While LDO construct the drift other subcontractors will be used to do surface work, including water and power.

Surface works have been cut down considerably as Stage 1 of the project will not require a coal handling and preparation plant due to the coal quality.

The 438Mt deposit is "just a beautiful piece of coal" in the words of managing director Keith Ross, with an average ash content of 9.2%.

This is combined with an extraction height of 4.2 metres from an 8-9 metre seam - meaning the roof will be coal with no contamination for a CHPP to remove.

The equipment contracts for Stage 1 have just been awarded with Joy Mining Machinery coming out the clear winner, securing the tender to supply three continuous miners, as well as shuttle cars and roof bolters.

Narrabri North expects first coal by mid 2009. Ross said Whitehaven had applied for a permit to produce up to 2.5Mtpa, but said realistically the mine during bord and pillar operations will produce 1.5Mtpa as it drives gateroads before developing a longwall under Stage 2 of the project.

The dimensions of pillars will vary with depth, with the deposit dipping to the west. While first coal will be extracted at 140m, at the leases' boundary overburden will measure 300-350 metres and the pillars will be widened.

The longwall blocks will be developed north to south, with panels extending 4km. With long panels and a 285m face, Narrabri under Stage 2 of its project will be able to extract 6 million tonnes per panel - equaling one longwall relocation per year.

Ross is confident the continuous miners will chew through the coal and roadway development rates will not be a problem.

"This mine is in the Hoskinson seam which historically has been very good mining conditions for our continuous miners," Ross said.

"Further south we used to mine the seam at our Gunnedah operation and the face conditions were excellent. Unfortunately at that operation there were intrusions and faulting which precluded longwall mining."

The longwall is expected to ramp up mid 2010 with Whitehaven expecting to lodge a development application later in the year.

While one longwall is certainly in the plans, Whitehaven has also hinted at a multiple longwall operation.

"The reserves we have in the Narrabri deposit will accommodate a multiple longwall. We are certainly thinking about a second longwall to follow the first - the problem at this stage is rail capacity. But you don't have to look too far ahead for when the rail capacity issue is resolved - and that certainly opens up an opportunity for multiple longwalls," Ross said.

The Narrabri North longwall has been laid out with a central set of roadways which can "nicely take a longwall on the north side and the south side", Ross said.

At the Narrabri South project Whitehaven has been able to convert a large part of the deposit to indicated status, with a mine plan yet to be drawn up.

Ross estimated the South project was about a year behind Narrabri North. "We've got 200 million tonnes of coal at South Narrabri - so at my age, that should keep me going for awhile!"

With work already going and big plans ahead, Whitehaven is working to assemble a full team for the project. Currently a team of 12 is working on the planning and construction.

"There are a group of core people coming in with the drift contractor - some of those will stay on with us to operate the mine later. Between ourselves and the drift contractor we are building up the team.

"We have never had any problem with getting open cut operators in the area. Being an agricultural area there are plenty of farmers who make good miners, however, underground work there is a slightly different skills base that is required.

"We operated underground in Gunnedah before and when we closed a lot of people went further down the valley but some of them stayed - and we would welcome them back."

Ross added Narrabri would have a "very active training program" to take on clean skins and teach then underground mining.

"We are excited about starting an underground mine in Narrabri. We think it is a great area - the council and people there have been very supportive. The mine provides tremendous opportunities around Narrabri for the community as well as for ourselves," Ross said.

One challenge the Narrabri project faces is the limited rail capacity in the region and the distance the project is from Newcastle Port. Whitehaven has tackled these issues through agreements to increase capacity and offset rail costs.

"We do have the costs of the increased distance but we have offset that with the rest of our costs - our productivity is high as it is with our existing mines, our quality is high - which reflects in the return you get for a tonne of coal."

Whitehaven has entered into agreements with both Australian Rail Track Corporation and Rail Infrastructure Corporation to upgrade the line to Narrabri.

Currently the rail capacity is restricted by the need to use 42 wagon trains with a payload of about 3100 tonnes. The capacity has been confined by the steep Liverpool Ranges and size of the passing loops north of the Range.

The agreement means that ARTC, RIC and Whitehaven will upgrade the length of the loops, allowing trains with 72 wagon trains with a payload of 5400 tonnes onto the track by April/May of this year.

Whitehaven is also a member of the Newcastle Coal Infrastructure Group. NCIG is building a third terminal at Newcastle Port that will add 30Mtpa capacity, with a future option to expand to 66Mtpa.

The big advantage of the terminal for Whitehaven is that it will have a dedicated stockpile allowing it to run regular trains and not be constrained by the arrival of ships or other port delays.