The production of 1.95 million tonnes of coal was the highest in five years and second only to 1997, when manning was 45% higher than the current level.

While production improved on 2001 it was still below budget after a localised zone of coal with a high carbon dioxide content required drilling and blasting, which reduced the rate of development.

Delays to the manufacture and commissioning of the new 12CM30 continuous miner required the continued use of older and less productive equipment for longer than planned.

Continued strong worldwide steel production underpinned by buoyant growth in mainland China provided a positive backdrop for the coking coal market in 2002.

"The outcome of our annual contract negotiations was a welcome highlight securing an average increase in coking coal price of 12%," Austral said in its annual report.

The impact of the price improvement was not fully reflected in 2002 revenue as lower production in 2001 and demand for coal resulted in a substantial carry over of lower-priced 2001 contract tonnage into the 2002 fiscal year.

Austral said plans to double the production capacity at Tahmoor in early 2004 were well advanced, with $26.8 million already invested in infrastructure, and a further $75 million committed for expenditure in 2003.

The company said it expects 2003 to be challenging for management with a continued focus on completing the upgrade works at Tahmoor North, which will provide continual disruption to routine operations through the year.

Austral was trading unchanged at 52c on the Australian Stock Exchange.