Hunter harvest

THE seeds were planted in the infancy of the coal boom, and it is just now that a new crop of underground mines are beginning to harvest the fruits of their toil. By Angie Bahr

Angie Tomlinson

This year has seen the growth of new underground coal mines in the Hunter Valley. Interestingly, the majority of the mines have been developed by juniors, which during the early stages of the coal boom saw the merit in the commodity and began exploring and developing their tenements.

The new crop of juniors have also brought in foreign investors - all keen to shore up their coal supply for the years ahead. Investors, primarily steel corporations from Korea, are taking stakes in mines, or in one case going at it alone, effectively injecting millions of dollars into the Hunter region.

One of the first to begin reaping the rewards of their foresight is Resource Pacific with its Newpac longwall mine, located 18km northwest of Singleton. The single mine producer has just begun to "unlock the substantial value" of its Newpac mine, according to managing director Paul Jury, with the company reporting a $5 million after-tax profit for the 2007 financial year.

Run of mine production from the Newpac longwall was 1.6 million tonnes, while revenue from coal sales reached $71.1 million for the year.

Since the mine ramped up in January, Jury says the focus has shifted to accelerating the development of underground roadways to allow extraction from subsequent blocks.

Following completion of the first block, Newpac now has infrastructure in place to support a larger-scale mining operation, and production rates are expected to increase in subsequent longwall blocks, Jury said.

The plan is to produce 3.7Mt in 2008 and 4.1Mt in 2009. The mine is currently completing a longwall move - taking its time doing so over three months due to equipment delays. It will ramp back up again in mid-October.

Resource Pacific has been one of a host of juniors that have taken advantage of a cash injection from foreign investors. This year a $30 million joint venture was made with POSCO, giving the South Korean steelmaker a 10% stake in the mine and locking it in to buy 400,000t of Newpac coal from April 1, 2007, and 500,000tpa thereafter as long as the JV continues.

Looking forward, future acquisitions are on the cards for Resource Pacific to mitigate the risk of being a single mine company. "We are very conscious of the 'single mine' risk and it is a strategic objective of the company to expand its operations into a multi-mine environment: we are seeking out opportunities that we believe we can add value to," Jury told sister-publication in June. Whether these too will exploit the wealth of the Hunter Valley is not yet known.

Another junior, which is rapidly turning itself into a mid-tier player, is Felix Resources, which produced its first "crop" of coal in the June quarter.

The Ashton longwall mine, located 14km northwest of Singleton, is an expansion off current opencut operations. Construction and development of the longwall began in December 2005, and in the 2007 June quarter, Felix produced 322,000t of semi-soft coking coal - the first step in its target of 3 million tonnes per annum over a mine life of 20 years.

The measured resource for underground operations is 67.4Mt based on recovery of four seams. Felix said its intention is to mine the three uppermost seams over 13 years to produce 38.4Mt, then to extend mine life for a further four to five years if the fourth seam can be mined.

With its faith that the good times will continue for coal, Felix is in the throes of expanding beyond its operating Yarrabee and Ashton open cuts and its newly started Ashton underground mine with the Moolarben project.

Tagged "the best undeveloped coal property in Australia" by Felix managing director Brian Flannery last year, the Moolarben property in the upper Hunter Valley (30km north of Mudgee) will be an opencut and underground operation.

The complex has planned for sales of about 9Mtpa with future underground expansion capable of adding 4Mtpa. The open cut is expected to produce first coal by the end of 2008.

The development of a longwall is also planned to commence within three years of the opencut commissioning. The opencut mine will provide approximately 222 direct jobs during the 16-month construction period and a further 317 jobs during operation of the opencut and underground mines.

Like Resource Pacific, Felix has also sought outside investors to help develop its projects. In July this year Felix signed a deal with Japanese trading house Sojitz to pay $90 million for a 10% stake, as well as contributing to the capital cost of developing the mine.

Another project in the wings, and this time with 100% foreign investment, is the Wallarah 2 longwall project near Wyong. To date Korea Resources Corporation (Kores) has made a preliminary application but has been met with widespread environmental opposition.

Currently an independent inquiry into the development, ordered by the New South Wales Department of Planning, is underway. The inquiry will examine the potential impact of mining in the surrounding Dooralong and Yarramalong valleys.

The proposed longwall mine will have an annual coal production of 4 - 5Mt of export quality thermal coal per year, over 42 years, with initial development coal expected to be produced in 2009 and longwall coal in 2010.

Joining the ranks as a producing mine just recently is Peabody Energy's North Wambo mine, located 15km west of Singleton. Peabody has continued the development of North Wambo, which its previous owner Excel Coal committed to in August 2005. North Wambo is expected to produce 3Mtpa.

In a conference presentation during late August, Peabody Energy Australia strategic planning and projects general manager Dr Julie Bebby said Peabody had great faith in the Hunter Valley.

"Peabody has a vision for further organic expansion in the NSW coal sector, but infrastructure and availability of skilled employees remain a challenge," she said.

"Peabody's long-term outlook for global coal markets is outstanding with strengthening thermal coal prices in every major seaborne region in the past year, China becoming a net importer of coal and demand for coal in India rising. All of this has long-term implications for Peabody's fast growing Australian portfolio, especially in the NSW Hunter Valley and other emerging major NSW coal regions."

In all, it looks like there will be plenty more coal companies tending to their seedlings and looking forward to a bountiful Hunter harvest in the future.

Published in the September 2007 Australia's Mining Monthly