The Gunnedah operation’s three drifts are sitting just 5 metres above the seam after soft conditions were encountered in January which slowed progress and increased costs to $A227 million.

Whitehaven has conducted an extensive review of its surface to in-seam gas drainage results, which show gas has been reduced to below required levels. Gas drainage and testing will continue ahead of the continuous miners being taken underground in June.

During the March quarter, Whitehaven received approval for construction of the Narrabri Stage 2 coal preparation plant, ventilation shaft and other ancillary works.

The company said Stage 2 approval for longwall mining was expected next month. The budget for Stage 2 remains at $300 million.

Most of the Stage 2 equipment and construction contracts, including the CHPP, have now been awarded.

The CHPP plant includes a dense medium cylone unit to allow the production of up to 40% of pulverised coal injection coal. Construction is expected to take one year.

The Narrabri longwall, which can be retrofitted for top coal caving, was ordered from Bucyrus in September last year for delivery late this year and installation will go ahead mid-2011.

Whitehaven continued its open cut expansion in the March quarter with saleable coal production hitting 963,000 tonnes, up 10% year-on-year.

Run-of-mine production was down 7%, affected by wet weather in January and the derailment of a grain train in the lower Hunter Valley in March.

Total coal sales for the quarter are up 4% and 18% year-to-date.

Whitehaven continued to be constrained by its port capacity at Port Waratah Coal Services, but sees light at the end of the tunnel with the opening of the new Newcastle Coal Infrastructure Group terminal.

Work has continued on the expansion of the company’s open cut mines and the Gunnedah CHPP to a capacity of 5.5 million tonnes per annum of saleable coal.

For the 2010 Japanese financial year, Whitehaven has secured contracts of $US166/t free-on-board for its PCI coal and $US98/t for its export thermal coal.

The company has been working on the expansion front with the purchase of the Vickery Coal project from Coal and Allied for $A31.5 million.

Whitehaven said the project was an important bolt-on acquisition and with focused exploration and evaluation, “substantial open cut and underground coal resources and reserves will be defined”

Whitehaven was trading down 5.32% mid-morning today at $5.34.