Gloucester chief executive Brendan McPherson said the company’s revenues for the six months to December rose by 65% to $227 million and it also suffered from the impact of torrential rains in northern New South Wales.

“The financial results of the company reflect a difficult and challenging period for the company,” he said.

“The various achievements of the company were, however, marred by a declining global coal market and production issues at both the Gloucester Basin and Donaldson minesites resulting in subdued earnings for the period.

“The first quarter of the 2011-12 financial year saw a gradual softening of overseas demand for export coal, in particular metallurgical coal.

“This situation deteriorated further in the second quarter.”

McPherson said the half year to December 31, 2011 was a period of transition for Gloucester Coal.

The acquisition and integration of the Donaldson and Monash businesses and the establishment of mining operations at Middlemount were significant achievements for the company during the period.

“The approval of the Duralie extension project, the significant increase in JORC resources at Monash, the early commissioning of Middlemount’s rail project and the commencement of the approvals processes for the Stratford and Tasman extensions were all critical milestones that provided the foundations to grow the company for decades to come,” he said.

Overall production increased compared to the previous corresponding period following the addition of Donaldson and Middlemount operations.

However, it remained below management targets.

Production at Gloucester Basin was impacted by wet weather events in June and July resulting in almost no coal mined during the first quarter from the newly developed Clareval pit.

A significant amount of advance stripping of waste was undertaken at the time.

Coal mining volumes returned to planned levels in the second quarter following the dewatering of the pit.

Performance at Donaldson underground operations was broadly in line with expectations, however, some challenging mining conditions combined with equipment reliability issues impacted production during the period.

The Donaldson open cut operations produced lower than expected volumes as a result of adverse weather conditions during the second quarter.

The overall free on board cash cost per tonne of coal (excluding Middlemount, royalties and interest) was $111.

The higher than expected FOB cash cost per tonne was primarily driven by lower production volumes and advance stripping of waste in the Gloucester Basin.

“The benefits of scale and diversity, following the acquisition of Donaldson, have proven to be extremely valuable in what has been a volatile period in the coal market as it allowed us to shift production more towards high-quality thermal coal to address the slowing market demand for metallurgical coal,” McPherson said.

“Following the acquisition of Donaldson and Monash, the company completed an assessment of the capital requirements of the business going forward.

“As part of this process a decision was made to explore opportunities to undertake a partial sell down of one or more of its assets in order to fund our future growth plans.

“This process was put on hold following the entering into a merger proposal deed with Yanzhou Coal.”