President David Slater said, however, that costs seen now will likely lead to better financial days ahead.

“The substantial costs of Crossville’s start-up phase are reflected in the first quarter results, and they will impact the second quarter as well. However, the ramping up of production at the Crossville mine will continue through 2006, with the gains from that ramp-up expected to reflect particularly through the third and fourth quarters of 2006 and with full rate production anticipated to be achieved by early 2007.”

Hillsborough also noted its progress with other development projects, including the Horizon operations in northeast British Columbia, for which a feasibility study for openpit and underground mine planning is under way. Additionally, the company discussed its Northridge project group, for which a reserve report is currently being performed with a tentative completion later this year.

The company said last month it plans to raise up to $7 million in a private placement to fund exploration, development, expansion and operation of its North American mining and resource properties.

It currently operates two active thermal properties, the Quinsam underground operation near Campbell River, British Columbia, and Crossville mine, an underground mine located in Tennessee. The company is developing metallurgical coal operations including Tumbler Ridge in the northeast portion of British Columbia and Bingay Creek in BC’s Elk Valley region.