Despite the latest price improvements Austral’s share price has fallen 14.5% this year, a drop which has lead to under-appreciation according to some analysts and a label of "most undervalued stock in the sector" by Macquarie Equities.

The Financial Review reasoned the price drop could largely be due to Austral’s status as a single-commodity stock, their reliance on one project and its recent large capital investments.

The development plans at Tahmoor North recently received a major boost through the company’s commitment of an additional $13 million in capital expenditure, increasing planned production by 28% to 3.6 million tonne a year from 2005.

Austral initially commenced development of Tahmoor North in 2001 with a production scheduled for March 2004. Around $44 million of development funds has already been spent, with a further $25 million needed to achieve the increased capacity rate during the next six to 12 months.

"We anticipate earnings will increase from around $11 million in calendar 2003 to about $30 million by calendar 2005, driven by increased volumes as well as a significant reduction in unit costs," Macquarie told Financial Review.

"A key issue had been the funding of the $135 million expansion [over four years], which is now resolved following the recent $22 million convertible note issue.”