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Baralaba Coal Mine

 (MLs 5580, 5581, 5590 and 5605, MDL 184 and MLA 80157)

 

The Company's Baralaba coal mine comprises MLs 5580, 5581, 5590 and 5605, MDL184 and MLA 80157 which are held by the Company's 62.5% owned subsidiary, Baralaba Coal Pty Limited ('Baralaba'), which was acquired by the Company on 12 December 2008.  The Baralaba mine is located near the town of Baralaba in south eastern limb of the Bowen Basin, Queensland, which comprises the Rangal coal measures and is contiguous with the Company's existing Bowen Basin projects.

 

In addition to the Company's equity interest in Baralaba, the Company refinanced debt totalling $52.5 million which will be repaid by Baralaba from cash flows from the Baralaba mine prior to any equity distributions.

 

3.1           Baralaba Mine Production

 

Production of coal for the September quarter was 144,166 tonnes, approximately 97% higher than the September 2008 quarterly production and 28% higher than the June 2009 quarterly production.  Production has maintained recent gains over the course of the quarter as operational techniques are refined.  The overburden strip ration has also shown a significant improvement in the September quarter due to localised and periodic coal extraction conditions. 

 

 

As the Company's production is derived from a single, and relatively small mine, periodic fluctuations in both the level of production and overburden strip ratios are expected.  However, when analysed on a longer term basis, the significantly improved geological understanding is expected to improve consistency.  The Company aims to have ongoing production at an average strip ratio of 10:1.

 

In August 2009, the Company introduced Huddy’s Mining Services, a subsidiary of ASX-listed Industrea Limited, as a new mining contractor for overburden removal and coal extraction at the Baralaba mine.  Huddy’s Mining Services was awarded the contract for mining operations for an 18 month term after a rigorous tender and evaluation process.  Based on the smoothness of the operational transition from the previous mining contractor, the minimal down-time experienced in the commencement of mining operations and initial encouraging results, significant operational benefits are expected to flow from the change of contractors.

 

As discussed below, following the acquisition of the Company's interest in the Baralaba mine and the change of operational management on 12 December 2008, the Company has completed an extensive drilling program within the Baralaba mine tenements and, utilising this drilling information, is currently developing a mine plan designed to extend the mine's operations to the north of the existing pit area.  As part of this mine plan, a mine lease application (MLA 80157) for the extension to the northern end of the mine was lodged with the DME and EPA in January 2009.  This Application has been formally received for processing by the Department of Mines and a Certificate of Application issued by the Mining Registrar.

 

The Company's plans are to immediately further define the geology in the Baralaba mine tenements to assist in a revised mine plan to produce a more consistent output from the mine. 

 

3.2           Baralaba Mine Coal Sales

 

Recovery in demand from north Asian steel markets saw shipments of PCI coal for steel production resume in the September quarter.  Deliveries of PCI coal included the first trial cargo of Baralaba PCI coal supplied to a major North Asian steel mill against a new contract previously advised.

 

Sales of thermal coal were delivered to a new customer in the north Asian utility market, as well as some spot sales to traded coal markets.