The seven-month IMC study reported that development of Austral Coal's Tahmoor North and Bargo resources would double production to a maximum of 3.2 million tonnes per annum. The development would provide saleable reserves of 42Mt over 18 years – with extensive in situ reserves beyond that. Cash before interest and tax in excess of $500 million is expected.

Ugo Cario, Austral's managing director, said the IMC study had exceeded the company's own assessment of the expansion with potential financial returns placing Tahmoor amongst the most profitable underground longwall mines in Australia.

"A conservative assessment of financial returns by IMC has resulted in a net present value (NPV) of $163 million assuming a 12% discount rate," Cario said. "A discounted internal rate of return (IRR) of 41% is indicated, well above the hurdle rate for most mining investments."

Cario said $106 million would be spent on the Tahmoor mine over three years with $60 million earmarked for replacement of the existing longwall with a modern system in 2003.

"The capital cost to expand Tahmoor from 1.6Mtpa to 3.2Mtpa equates to $66 per tonne of incremental capacity - well below recent acquisitions and greenfield investments in both Queensland and NSW," he said.

Funding arrangements for the capital expenditure are progressing with a combination of debt and equity envisaged.

Cario said the feasibility study encompassed a thorough review of the company's extensive borehole exploration data accumulated over the last two decades. Access to this comprehensive database has enabled accurate projections to be made on geology, gas, mining conditions and expected coal seam thickness and coal quality enhancing the integrity of the study.

The major financial boost for the company will be driven by the ability to mine longwall panels of larger dimensions than currently mined. Panels in excess of 3km in length and 275m wide are envisaged.

Thicker coal seams averaging over 2m in Tahmoor North and close to 3m in Bargo with improved coal quality and a more benign gas regime will deliver enhanced economic returns compared to historical returns from recent operations where a thin coal seam (1.75m) and gas constraints have been encountered.

Cario said that the focus over the next three years would be to increase both underground coal haulage infrastructure and development performance to cater for increased productivity. Actions to achieve this outcome are already underway.

New capital equipment such as continuous miners and mobile bolters are already in the pipeline and together with the upgrading of the mobile equipment fleet undertaken in 2000, improved development rates will ensure the timeframe is met.

Scheduling of the expansion is well advanced. Gas drainage operations will begin in the June quarter this year and work will commence in the fourth quarter to refurbish and install a 3800 tph main trunk belt to service the Tahmoor North longwall panels. This major installation will be undertaken on a contract basis.

Development of the first longwall panel in the Tahmoor North area will begin in January 2002.