Southland Coal, a wholly owned subsidiary of listed company, Gympie Gold, retains 90% of the mine.
Thiess took over running the operation in March this year, after the collapse of former operator, Colrok. Thiess contracted to mine the first 3 million tonnes over the next two years, under a contract with guaranteed maximum cost per tonne of run-of-mine coal and per metre of development advance.
Subsequent to Thiess taking equity, the contractor has been awarded an additional eight-year contract to operate Southland after completing its current contract.
Since Thiess commenced at site it has substantially completed remediation work, and appointed new site management and other personnel under a new enterprise agreement.
Production has for the past few weeks been running at the annualized equivalent of 1.5 million tonnes and coal shipments have recommenced. Customer demand remains very strong and exceeds short term supply.
Thiess executive general manager NSW and Victoria, David Saxelby, said “the joint venture terms and the long-term operating arrangements reflected a strategic plan jointly developed over the past four months”
The joint venture project assumes a growth in production from 1.5Mtpa to 2.6Mtpa by 2004 and averaging 2.5Mtpa over the next 10 years, generating cash flows of around $300 million.
The partners plan to install a new automated longwall in the third year of operation, to be funded by long-term project finance.
Southland chief executive John Leach said the long-term mine operating contract reflects alliancing principles. These include open-book access to all data and costs, which is forecast to average $60 million per annum.
The partners have committed to a process of continuous improvement with annual resetting of key performance parameters and sharing of under/over-performance against
set parameters.
Managing director of Gympie Gold, Harry Adams said: “The Thiess alliance and the joint plans to expand Southland coincide with a major upturn in coal markets. Investment markets have also improved for the coal sector, with recent capital raisings and a current coal-company float implying values for Southland Coal in excess of $110 million.
“Returns for our shareholders can now be maximised by implementing the business plans jointly agreed with Thiess. The strength of the project economics, of the commitment from Thiess and of the operating alliance with Thiess provide a great opportunity for us to build a business worth over $200 million within three years”
