Horwood said the selling price was locked in for the first half of the year based on 2003 settlement levels and real gains from current strong market prices would not flow until later in the year.

“The poor financial results in the second half of 2003 are continuing. In the second half of this year, Coal & Allied will be able to take advantage of the higher prices now prevailing and will return to profitable trading,” he said.

Net profit after tax for 2003 was $100,000 compared with $159.7 million in 2002.

Regarding the New South Wales government’s recent coal royalty announcement, Horwood said the ad valorem system would hit the company hard.

“This new royalty impost will be a further impediment to the cost competitiveness of the New South Wales coal industry. It already sits at a disadvantage to Queensland and other producing regions by virtue of our longest distance to key markets,” he said.

“The higher royalty will ultimately render marginal mines unprofitable and hurt rural and regional New South Wales where the mines are located.”

He said comparison with the Queensland royalty scheme was unhelpful as Queensland mines were able to produce coal at a lower cost, were closer to Asian markets, and enjoyed price premiums of coking coal producers.

He said the 7% royalty figure for open cut mines would translate to a rise in the royalty rate for Coal & Allied of 45%.