Cumnock incurred a net loss of $75.3 million in the year to December 31, 2002, compared with a loss of $7.2 million the previous year. The shortfall was largely due to lower coal prices and an opportunity cost of $13.8 million associated with hedging.

The year’s loss was also significantly higher due to a one off write-down of the carrying value of assets costing $58.4 million, associated with the decision in January 2003 to discontinue underground mining operations at Cumnock NO.1.

The Hunter Valley mine has continued to be plagued by adverse geological conditions and exploration last year found mining of the eastern region to be unfeasible.

This year residual costs will continue to be incurred from the closure of underground operations, including retrenchment costs.

Cumnock Coal managing director Peter Coates told Asia Pulse last week that 50 employees were made redundant recently with a further 50 or 60 to lose positions later this year.

He said eventually just 24 of the 160 or so originally employed in the underground operations would remain employed at the company’s wash plant operation service to the open cut mine.

Coates told Asia Pulse last week Cumnock may repay substantial debt to its major shareholder with an equity raising.

Cumnock had obtained financial support from Xstrata Coal Australia, its 84% shareholder, late last year. Xstrata provided a $22 million facility to fund working capital in September 2002, which was drawn down to $10 million in April this year, and unless extended, will expire in March 2004.

“We may wish to replace that debt with equity at some stage, but we haven’t made that decision,” Cumnock told Asia Pulse.

Any capital raising would most probably be via a rights issue to existing shareholders.