In February this year, the company began a strategic review of a number of its mining assets to evaluate their full sale, partial sale or retention and restructure viability and invited indicative bids from a number of parties interested in acquiring the mines.

Centennial said today that after completing the review, the internal options available to the company are of greater value than the offers received.

The key elements to the impending restructure are as follows:

• Newstan will complete longwalls 23 and 24 and cease longwall operations in mid-2008;
• Mandalong will accelerate expansion activities by utilising Newstan’s plant and equipment, labour and infrastructure;
• Awaba and Mannering will cease operations in 2008; and
• Myuna will undergo expansion.

Centennial Coal managing director Bob Cameron said the restructure will enable the company to accelerate expansion of the successful Mandalong mine while stemming losses at Newstan, thereby improving cash flow and profitability.

“Following the restructure, Centennial will have a substantially refocused business enabling a greater emphasis on the world-class Anvil Hill opencut project, developing the full potential of the Tahmoor coking coal mine and enhancing the group’s strongly performing Western assets,” he said.

Explaining the reasoning behind Newstan’s imminent demise, Cameron said the mine had continued to experience difficult and variable mining conditions resulting in a significant increase in operating and development costs associated with methane levels, nitrogen inertisation in goaf areas and geological conditions.

“The combined effect has led Centennial to determine that it is no longer economically viable to continue longwall operations in the current area and that Newstan’s equipment can be better utilised at other group mines, in particular Mandalong.”

The first of Newstan’s development units will be moved to Mandalong immediately to accelerate its expansion.

Centennial said it would continue to explore options for Newstan, including “rebirthing” it as a continuous miner operation, as successfully achieved at Clarence, and targeting higher quality coal areas within the reserve.

Mandalong, Centennial’s newest operation, has coal reserves in excess of 107 million tonnes, but is currently development constrained.

During July 2006, the mine produced in excess of 500,000 tonnes for the month, which demonstrated its productive capability.

In April 2007, the mine is expanding the width of its longwall blocks from 115m to 150m.

The revised mine plan for Mandalong involves the additional development unit from Newstan to step up production to in excess of 5Mtpa.

A new link road will also be constructed to join the existing Newstan-Eraring haul road and connect the mine to Newstan’s coal preparation plant and rail loading facility, to allow production from this mine to be exported.

Looking forward, Centennial said the restructuring plan would allow its workforce to be redeployed to the remaining expanded operations following the closure of Newstan, Awaba and Mannering.

“By the end of calendar 2008, Centennial will be operating two less underground mines on the Central Coast with a greater focus on the productive capability of the three remaining underground mines,” the company said.

Shares in Centennial were down 90c or 23.4% to $2.95 in afternoon trade today after earlier reaching a low of $2.81. The company's market capitalisation has now slipped below $1 billion to $893 million.

Just over a year ago, Centennial was trading at more than $5 a share.