Darling said since March this year with the introduction of new operational techniques to mine thick-seam coal, production at Southland had been solid at 1.3m tonnes from March to October, some 200,000 tonnes above budget. With the positive production results and changes to equipment, techniques and practices, Southland look to be over many of the problems that plagued the operation earlier in the year.
“Importantly, in considering future production we are much more confident we can handle difficult ground conditions, if they occur. In fact the longwall has already been through ground that would have caused major problems a year ago without substantial loss of production,” said Darling.
A further milestone for the mine was the longwall move, over about 6 weeks, completed to plan in mid-October. In the course of this move, a modern 90 meter section was inserted into the 220 meter longwall to replace the most troublesome area of supports, and the control systems were upgraded to current technology.
The recent upgrades have occurred against a general background of strong demand for coking coal which is being driven by the 20% per annum growth of the Chinese steel industry.
“We have recently secured new long-term contracts into North Asia and Europe and we have a full order book for next year,” he said.
“A typical strengthening commodity market sees the value of the Australian dollar rising faster than the commodity prices in the early part of the cycle, with prices catching up as the cycle matures. The current situation fits that pattern fairly closely.”
“We have hedged the value of our production to early 2004 at 62.5 cents and have caps in place beyond that at between 71.50 and 73.50 to July 2004. The effect of the new coal price, which is expected to be a good increase, starts in April 2004.”
“As the growth in coal production strengthens working capital requirements have
risen. This is partly a function of higher volumes and partly due to some current
problems in the Hunter Valley rail and port systems.”
Looking to the future, Gympie has tagged an open cut project to mine about two million tonnes close to existing infrastructure, as one of its major developments.
Darling said the new mine would have a very small capital cost and contribute
coal at a low cost of production.
A larger opportunity on the cards is a feasibility study under way with a major Chinese coal company and an international engineering company to examine the applicability of new thick seam extraction technology to Southland that has the potential to double annual output and add substantially to the scale of reserves. The project could lead to a pilot program being introduced in 2005.
