The Tatu mining project will provide a strong revenue base for the company and includes 10 million tonnes of thermal coal, low in ash and moisture with excellent heat content, at a seam height of 1.8m.

Bounty said it will operate one mobile underground production unit and have a production capacity of 500,000 tonnes per annum with production likely to commence early in financial year 2008.

Bounty managing director Mark Gray said one of the company’s key strategies is to secure long-term mining contracts to create annuity-style income streams.

“This way we create sustainable value for all of our investors. By targeting coal reserves which other people cannot mine, and taking control of the operation rather than just mining the coal, we can achieve significantly better margins,” Gray said.

“Other than putting some coal handling facilities in place, there is relatively little mine development work required. The coal seam is already exposed with access off the side of a hill, and the mine is close to rail facilities.”

He said the Tatu project – along with two production units of equipment at Aquila and the continued negotiations over the other contracts – is contributing to a solid portfolio of long-term projects.

“It is Bounty’s intention to forward-sell the coal on a fixed price contract for three to five years. This takes away the market risk and enables Bounty to lock in the price paid to it for the coal mined,” Gray said.

At present, power coal in New Zealand is imported from Indonesia and Australia, as there is limited supply of domestic coal.

This year Bounty started its first contract at Centennial Coal's Ivanhoe mine, which has now been terminated due to poor coal quality; has commenced long-term mining at Anglo Coal's Aquila Colliery; and has done longwall development work for Anglo's Bundoora Colliery.

Shares in Bounty were up 1c today, trading mid-morning at 22c.