The mining conditions and coal quality of the seam floor are expected to support full production, Gympie Gold said.

"About 3 million tonnes of coal is developed and ready to extract, worth some $174 million in revenue term," Gympie Gold managing director Harry Adams said.

"The delays in achieving full production are therefore particularly frustrating."

Southland produced 373,000t of run-of-mine coal during the December half, about 200,000t below profit break-even level.

Southland will contribute an operating loss before tax of $9 million to Gympie Gold's December half-year results revenue of $26 million.

Gympie said it has moved to reduce the risk of repeated poor production by bringing forward modernisation of the longwall face equipment, originally planned for 2006 and scheduled to cost more than $50 million.

A near-new longwall face has now been procured and replacement of the key half of the old longwall has been arranged for late 2003. Along with upgrades to the entire longwall the total package of works should cost under $10 million and should underpin production expansion to 1Mt per half year from then, Gympie said.

"Although the difficult mining conditions are expected to continue for the coming month, it is not hard to see that material success is near," Adams said.

"We now have in place a very large block of fully developed coal, mine development continues to improve, and more modern longwall supports will be introduced on the next block at a low cost."