Excel Coal entered two separate agreements with the Conarco Group, an association of private investors which holds various coal exploration permits in Queensland. The tenements, covering 670,000 hectares, border mining leases within the Bowen Basin which host major coal mines and established infrastructure.

The agreements involve Excel Coal earning a 75% interest in each of the two areas over the next three to four years by the staged spending of up to $A7 million per area.

Excel said today’s deal gives it “large exploration prospects in the world’s premier coking coal producing region”

The first 20,000ha area is east of the Blair Athol mine and the Clermont Project. The second 470,000ha area wraps around the northern end of the Bowen Basin and extends down its northeastern flank.

Should any development projects be identified in the areas, Excel said there were various ways in which Conarco could choose to fund its share of development, including drawing upon Excel for non-recourse loans or the conversion of its equity into a royalty.

In its 2006 March quarter results also released today, Excel recorded saleable coal production of 1.46Mt, up almost 52% on the previous corresponding period. The lift was attributed to the expansion of its Wambo opencut and a substantial contribution from the second production unit at Chain Valley.

Saleable production at Metropolitan was also substantially higher than the previous corresponding period, due to the timing of longwall changes.

March quarter coal sales were 30.6% above the previous corresponding period, reflecting the increased production and a heavy shipping schedule from all mines.

Expected to further impact negatively on Excel’s performance is the completion of the Millennium coal preparation and handling plant (CHPP) contract, which has been delayed a further 4-6 weeks before commissioning.

Following the previously reported restructuring of the CHPP contract in January, the CHPP contractor, Australian Coal Technology, was placed into voluntary administration in early March. The company said this caused some further disruption, along with wet weather over Easter when some 250mm of rain fell on the construction site.

Sedgman has now been contracted to commission the CHPP and to operate it following commissioning.

While final erection and commissioning of the plant is now likely to continue beyond June, coal sales from Millennium are expected to commence early in the new financial year and Excel expects to meet its sales target of 1.5Mt in financial year 2007.

In more positive news, the new Wambo rail loadout facility was commissioned during the March quarter and the new, 15km Wambo rail spur and loop carried its first coal train on April 24. Regular railing of coal from Wambo to the port of Newcastle will commence from the first week of May.

Development of the North Wambo underground mine progressed well during the quarter and remains on schedule to commence longwall production early in 2007.