On January 8, Xstrata issued a letter to Resource Pacific shareholders with a three-pronged attack on Resource Pacific's stance to reject its $2.85 per share offer.
It stated Resource Pacific had "repeatedly failed" to meet its own forecasts, that its production forecasts for Newpac in New South Wales were not achievable, and that Resource Pacific's claims over Xstrata's existing mines' synergies with Newpac were "exaggerated".
Resource Pacific said yesterday Xstrata had made a number of misleading statements in the letter.
Xstrata distrusted Resource Pacific could reach its own production targets at Newpac of 8 million tonnes per annum. It held up other operations in Australia in comparison, with the average five-year ROM production rate for a mine with similar seam thickness to Newpac producing 2.5Mtpa.
But Resource Pacific said Xstrata had not taken into account the nature of the new Newpac operation.
Resource Pacific said Newpac should be compared to other modern longwall operations and that geological and geotechnical factors and the capacity of the coal clearance systems and supporting infrastructure needed to be taken into account.
"Whilst the specific nature of the coal seams to be mined and the size of the longwall must be considered, Newpac is a brand new mine, with new equipment including a high capacity coal clearance system," Resource Pacific said.
It said its expansion plans involving two longwalls were "robust and deliverable".
In its January 8 letter to shareholders, Xstrata pointed out there was no Australian precedent for operating two longwalls in a single mine. But Resource Pacific responded with a blunt, "yes you can".
Resource Pacific pointed to examples in the United States and historical examples in Australia such as South Bulli/Bellambi.
Resource Pacific said an independent geotechnical expert report by McCowan Consulting had already confirmed that a twin longwall operation in Newpac's seams was "feasible".
It also said it had not "conjured" up the twin longwall and 8Mtpa targets as a response to Xstrata's hostile takeover bid, but has had the plans in the pipeline since 2005.
Xstrata had also previously claimed that Resource Pacific "exaggerated" the synergies Newpac had with its existing operations and that they "do not have value". Resource Pacific hit back yesterday that "Xstrata must have a unique perspective on value".
"Xstrata has tried to dismiss the synergistic benefits only it can enjoy by owning Newpac. Of course it would - after all it is trying to buy your shares on the cheap," Resource Pacific said.
"Xstrata claims that it has plans to mine this coal [Xstrata's Cumnock lease] by open cut methods. Resource Pacific believes Xstrata should demonstrate to shareholders how this will be more valuable than immediately accessing the coal through the incremental extension of longwall blocks at Newpac."
Resource Pacific also hit back at jabs made by Xstrata on Resource Pacific's track record, saying the company had "persistently missed its own targets and forecasts - most recently there has been no longwall coal production for about six months".
Resource Pacific contended that it had met its major milestones on time and that the failure to meet targets on the start-up of its second longwall block was due to a number of elements.
"Commencement of the second longwall block has been a difficult but short-term issue for Newpac. A complication with roof bolting in the recovery of the first 10 of the remaining 40 longwall roof support (145 in total) has further delayed start up from that previously estimated.
"As the safety of our workers is paramount, we have had to slow down recovery of these supports to ensure that no injuries occur and that equipment damage is minimised.
"Except for these supports, all the remaining longwall equipment is in place and pre-commissioned for operations to commence."
Resource Pacific concluded Xstrata's price was too low and recommended shareholders reject the offer.
