Contracting company Thiess, has been operating the mine since early 2001 on behalf of Gympie Gold. The initial operating contract was based on a schedule of payment rates for the extraction and development of longwall panels SL2 and SL3 and the development of SL4. Once this was completed, the parties had planned to move to an alliancing contract.

Gympie announced in its September 2002 quarter results that the alliancing contract has been brought forward to November 1.

Structuring contracts along alliancing principles has become more common with some contractors beginning to suggest that a "schedule of payment" contract is a poor way to structure contracts in underground coal mining which is typically subject to a multitude of uncontrollable variables.

Alliancing offers advantages, Gympie said, including full transparency in cost and performance measurement through an open-book approach; integration of the management teams of the owner and contractor; and minimisation of contractor's margin and administrative overheads.

Gympie added that alliancing would allow a joint focus on long-term planning. The project's main direction would be provided by the alliance leadership team headed by Southland Coal as the principal owner.

In other news during the September quarter, a longer than anticipated longwall move to block SL3 caused a shortfall in budgeted coal production at Southland. Localised ground conditions continued to adversely affect production during September. The main cause was low angle in-seam thrust faulting, exacerbated by the elevated abutment stress levels normally experienced at longwall panel startup.

At Southland such stress typically occurs until the longwall production unit has advanced about 220 metres (plus or minus 15%) along the panel. Gympie said the longwall had advanced some 200 metres into new longwall panel SL3 as at October 22.

"Poor ground conditions are expected to continue until December but measures have been taken to further mitigate risk and lift production," the company said.

Longwall operators are mining closer to the stone roof to improve the integrity of the roof and effecting speedier roof support at the face by bolting into stone rather than relying on injecting polyurethane adhesive into coal. The longwall cutting horizon has been reduced to increase face stability. To reduce the span of unsupported coal in front of the longwall, chocks are being advanced immediately after the shearer has passed. Operations have converted from a five-day to a continuous seven-day roster.

Gympie said these actions were proving successful with October's run-of-mine production up to October 22, totalling 67,000 tonnes, double what was achieved for the same period in September.

The planned installation of a higher-capacity DBT an EL1000 shearer in November, is expected to further tighten control of the seam-cutting horizon at the longwall face.

Gympie now expects to mine 1.4-1.7 million tonnes in 2002-03.